Prepared remarks
Good morning, and thank you for joining us. We want to make you all aware of the presentation we have prepared to accompany our comments this morning, which you can find on the Investor Relations section of the TDS and Array websites. With me today in offering prepared comments are from TDS, Walter Carlson, President and Chief Executive Officer; Vicki Villacrez, Executive Vice President and Chief Financial Officer; from Array Digital Infrastructure, Doug Chambers, Interim President and CEO; from TDS Telecom, Kris Bothfeld, Vice President of Finance and Chief Financial Officer. This call is being simultaneously webcast on the TDS and Array Investor Relations website. Please see the websites for slides referred to on this call, including non-GAAP reconciliations. TDS and Array filed their SEC Forms 8-K, including the press releases and our 10-Qs earlier this morning. As shown on Slide 2, the information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the safe harbor paragraphs in our press releases and the extended version included in our SEC filings. And with that, I will now turn the call over to Walter Carlson. Walter?
Thank you, Colleen, and good morning, everyone. We'll start on Slide 3 and review the progress that we've made on our priorities for 2025. As we announced on August 1, we are very pleased that we closed on the sale of UScellular wireless business and certain spectrum assets to T-Mobile. The teams at UScellular and TDS worked tirelessly over the last several years to negotiate and complete the $4.3 billion transaction. I also want to thank T-Mobile for their partnership in this transaction and throughout the integration process. This transaction unlocks significant value for shareholders and strengthens the balance sheets at both Array and TDS, as Vicki will discuss shortly. Equally important, completion of this sale will enable us to focus on our tower and fiber businesses, where we believe we are well positioned to win. Looking ahead, I am excited for a new chapter in the company's history. Going forward, we like the towers business and are operating under a new name, Array Digital Infrastructure, Inc. We believe Array has many opportunities. Array holds valuable assets, towers, spectrum and equity method investment interests, all of which are the product of significant work and investment over the prior 40 years. Our towers business at Array has an outstanding management team led by Doug Chambers. We believe Array is uniquely and attractively positioned, and we look forward to running a tower company. With approximately 4,400 towers, Array has the strength and stability of the new master license agreement with T-Mobile. And with increasing demand for data and communication services in the United States, we believe we have a great opportunity to grow colocations and margins over time. Turning to TDS Telecom. In June, we were pleased to announce Ken Dixon had joined us as the new CEO of TDS Telecom to lead that business going forward. Ken comes to us with decades of telecom and fiber experience. Ken has hit the ground running and his deep knowledge and expertise in sales, marketing, customer satisfaction and operations are already making a difference. I'm looking forward to you hearing from Ken on our next earnings call. Kris Bothfeld will report to you today on the progress that TDS Telecom made on our fiber business during the second quarter. Turning to the fourth item on our set of objectives. Throughout the year, we have made significant progress in strengthening our capital structure. This increases our financial flexibility and positions us to take advantage of opportunities as they present themselves. Vicki will highlight those accomplishments shortly. And lastly, with all of the changes in the organization, we remain focused on our culture and TDS' culture is one of its greatest strengths. I want to thank all of the teams across the TDS enterprise for their contributions and these accomplishments, and I'm excited about what lies ahead. I will now turn the call over to Vicki.
Good morning, everyone. Closing the T-Mobile transaction earlier this month was a significant move to enhance shareholder value and bolster our businesses, concentrating on our strengths. We have taken several measures that will provide us with the financial stability necessary for business growth. In summary, T-Mobile assumed $1.7 billion in debt through an exchange offer, leaving around $364 million on the Array's balance sheet. We extended the credit facilities for both TDS and Array and amended several term loans to ensure liquidity after the transaction while we work on establishing a more permanent capital structure. On August 1, the Array Board declared a special dividend of $23 per share to be paid on August 19, with TDS set to receive its proportional share of about $1.63 billion. After the dividend payout at TDS, we intend to redeem approximately $1.1 billion in debt with an average interest rate of 7.5%. These steps will lead to about $80 million in annual interest savings, lowering TDS's average cost of debt to just over 6%, including preferred stock. We plan to retain the perpetual preferred Series UU and Series BV stock as they provide essential capital for our fiber program, and we currently have no intention of redeeming them. Previously, we provided expected cash tax ranges related to the T-Mobile transaction. Due to the new One Big Beautiful Bill, TDS anticipates a benefit that can offset taxes at the consolidated level, reducing the transaction tax estimate to $150 million. The sale of our wireless operations has streamlined the TDS portfolio and enhanced our financial flexibility, allowing us to focus on our expanding broadband and tower businesses while delivering substantial value to shareholders. TDS has a long-standing commitment to disciplined financial practices and a conservative balance sheet. With a considerable portion of our debt repaid, we aim to achieve a 3x bank leverage ratio at Array, equating to $700 million in debt. We expect TDS's leverage to stay below 1.5x in the short term as we assess our next actions and strategic opportunities in our fiber and tower sectors. Looking ahead, we expect Array to receive $2 billion from previously announced spectrum sales, with some proceeds anticipated to arrive later this year, contingent on regulatory and customary approvals. Additionally, we will work to monetize the remaining spectrum at Array. Principally, we do not intend to hold excess cash on the balance sheet for extended periods without utilizing it. Therefore, we expect Array to implement a regular dividend following the completion of the spectrum transactions. We are crafting an allocation strategy across three primary categories, which we will further refine and communicate to our investors in the future. First, fiber. We recognize we have substantial opportunities for incremental organic investments in fiber that offer attractive returns exceeding our cost of capital. We see an immediate chance to pursue these investments in areas lacking a fiber provider. With Ken Dixon joining us, we are assessing these investments. Second, M&A. We are currently exploring this area to identify opportunities that may allow us to accelerate growth at the right price, particularly for the fiber program. Third, shareholder returns. Once we have quantified our growth opportunities, we will seek ways to enhance returns for our shareholders. Before handing the call over to Doug for more details, I want to note that on August 1, S&P upgraded TDS's credit rating to BBB- from BB and removed it from credit watch. We are very pleased with this rating, which reflects our strong balance sheet, valuable assets, and positive growth outlook for our business moving forward. I will now turn the call over to Doug.
Thanks, Vicki. Good morning. I would like to start off by thanking the Board for placing its confidence in me to lead Array during this interim period, and I would also like to thank LT and the UScellular leadership team that have guided us through the process to the successful close of the T-Mobile transaction. Slide 6 summarizes the proceeds received from the T-Mobile transaction, along with various transaction-related costs and other items that impacted our cash available for distribution. We are pleased to return these funds to shareholders through the special dividend previously mentioned by Vicki. Further, as we have discussed previously, the sale of our wireless operations to T-Mobile is a win for our customers and for our associates. Our customers will have the enhanced connectivity with the combined networks of the 2 companies and access to lower prices and more features, and a significant number of our associates accepted positions with T-Mobile. We are very pleased that our customers and associates are in great hands as part of the T-Mobile family. Further, the sale of portions of our spectrum to T-Mobile, along with the pending spectrum sales to AT&T and Verizon are wins for rural America as this spectrum will be deployed to serve customers across our nation, and we look forward to opportunistically monetizing our remaining spectrum to ensure this spectrum can also be put to use to serve customers across America. With that, I am excited to discuss our business going forward, Array Digital Infrastructure. Slides 7 and 8 summarize the status of our efforts to opportunistically monetize our spectrum. As previously announced, we have reached agreements to monetize approximately 70% of Array's total spectrum holdings, including the T-Mobile transaction and agreements with AT&T and Verizon. The AT&T and Verizon transactions will result in additional gross proceeds of $2.0 billion. We expect cash taxes on the AT&T and Verizon transactions of approximately $125 million and in the range of $200 million to $250 million, respectively. Further, we expect the AT&T and Verizon transactions to close in the second half of 2025 and the third quarter of 2026, respectively, subject to regulatory approval and other closing conditions. Also, following the closing of each of the AT&T and Verizon transactions, we anticipate that the Array Board will declare special dividends to distribute a substantial portion of the resulting net proceeds. The large majority of the remaining spectrum is C-band spectrum, and we believe these licenses are attractive beachfront spectrum for 5G, and there's an existing infrastructure ecosystem so carriers can easily put this C-band spectrum to use. And although there are build-out requirements associated with this band, the first one does not apply until 2029. So there's plenty of time for us to monetize this spectrum. Turning to Slide 9. Following the close of the T-Mobile transactions and divestiture of our wireless operations, our going-forward business has 3 components: the fifth largest U.S. tower business with 4,400 owned towers, noncontrolling investment interest, which primarily consists of investments in wireless operating companies managed by Verizon and AT&T, and the retained spectrum. Turning to Slide 10. I would like to discuss the strategic priorities of Array to position the business for continued success. Two key priorities will be to close the pending spectrum transactions with AT&T and Verizon and to continue to opportunistically monetize the remaining spectrum. Focusing on the tower business, now that we are set up as an independent tower company and have the strong team in place from our existing business, we have 2 key strategic priorities going forward. Ground lease optimization has been and remains a key priority as we seek to expand our long-term ownership, easement and lease agreements with our ground lessors. The other key priority of the tower business is continued strong revenue growth, which we have been achieving through robust new colocations and will be further bolstered by the new T-Mobile master license agreement or MLA, which commenced on August 1 upon the close of the larger transaction. Turning to Slide 11. Implementation of the new MLA between T-Mobile and Array will be a significant near-term focus as T-Mobile has committed to 2,015 colocation sites for a period of 15 years beginning August 1 and has also extended the term on 600 existing colocations by 15 years from the same August 1 date. Also effective August 1, T-Mobile will have interim leases on 1,800 sites for a period of 30 months, which they may cancel at their discretion during this period. We expect this MLA with T-Mobile to significantly strengthen our tower business with substantial increases in long-term revenue and profitability. Turning to our tower operations and results on Slides 12 and 13. Third-party tower revenues increased by 12% and the number of third-party colocations increased by 6% year-over-year. One area that we believe will continue to drive momentum is our decision in the fourth quarter of 2024 to bring our sales function in-house. We have built strong sales leadership and have hired an outstanding sales team that we believe will position us well for future revenue growth. We also benefit from MLAs with all 3 major U.S. carriers, which provide for compelling pricing and ease of doing business with Array that benefit both Array and our large carrier tenants. In addition, as we have discussed in the past, 1/3 of our towers have no competing tower structure within a 2-mile radius, and we believe this attribute positions our tower portfolio well for future colocation growth. Going forward, upon divestiture of our wireless operations, Array will lose UScellular as a tenant on every owned tower as reported historically in our tower segment and gain T-Mobile as a tenant on a significant amount of incremental towers subject to the MLA. As a result, Array's reported tenancy rate will decline from a reported amount of 1.57 at June 30, 2025, to approximately 1.0 at August 1 upon close of the T-Mobile transaction and commencement of the related MLA. This 1.0 tenancy rate excludes T-Mobile interim tower sites. Further, intercompany revenues allocated to the Tower segment from UScellular's wireless business will be reduced to 0 in future periods, and this will be partially offset by incremental revenues from the T-Mobile MLA. Shifting to our equity method investments, distributions from our noncontrolling investment interest increased from $58 million to $77 million in the second quarter of 2024 and 2025, respectively. Of this increase, approximately $23 million was related to nonrecurring distributions from Verizon wireless partnerships related to their tower transaction with Vertical Bridge that closed in December 2024. As we have indicated previously, we are not providing guidance on Array's expected operational and financial results for 2025. We expect to incur additional wind-down costs for the remainder of 2025 and into 2026 as the business transforms from primarily a wireless service provider to an independent tower company, and we expect these wind-down expenses to negatively impact profitability and adjusted EBITDA during this period. We expect to provide additional tower-related financial and operational metrics in the third quarter of 2025, which will represent our initial quarter reporting as an independent tower company. Regulatory approvals on the sale of the wireless operations occurred in the third quarter. Therefore, discontinued operations reporting will be applicable and presented in the third quarter filings. Lastly, the details of the T-Mobile transaction are discussed in the subsequent events footnote in our second quarter Form 10-Q. I would like to convey my deepest appreciation and gratitude to all of the UScellular associates who have provided many years of dedicated service to carry out our mission of connecting our customers to what matters most. We would not be here today without your outstanding service, dedication, determination, and enthusiasm. UScellular is a special carrier with special people for many years, and we will all remember UScellular proudly and fondly. I would like to also express my thanks to the Array employees that are operating the tower business. They have worked extremely hard and have made our transition to an independent tower company a success. These are exciting times, and I look forward to working with this talented team to continue to drive success in our tower business. I will now turn the call over to Kris Bothfeld.
Thank you, Doug. Good morning, everyone. Turning to Slide 15. As Walter mentioned, Ken Dixon recently joined the telecom team as CEO, and the organization is energized and excited for what's ahead under his leadership. Turning to the quarter. We delivered 27,000 new fiber service addresses and remain confident in achieving our goal of 150,000 fiber addresses this year. We are pleased that E-ACAM construction kicked off at the end of the first quarter and is now underway in multiple states. During the second quarter, we began bringing E-ACAM customers online, an exciting milestone for the program. As a reminder, over the next several years, E-ACAM is expected to contribute approximately 300,000 additional addresses to our fiber footprint. As our E-ACAM builds continue to ramp over the second half of the year, we expect service address growth in fiber net adds to follow. In the quarter, we also generated 10,300 fiber net additions, leading to 19% growth in total fiber connections since last year. Lastly, we closed on the sale of our Colorado ILEC markets on June 2 and recently announced the pending sale of our ILEC companies in Oklahoma. Although these transactions impact short-term results, they are a key part of our strategy to optimize our portfolio and exit copper markets where there is not an economic path to fiber. Turning to Slide 16. You can see our progress towards the long-term fiber goals we shared earlier this year. We are targeting 1.8 million marketable fiber service addresses. We ended the quarter at 968,000. We are also targeting 80% of total addresses to be served by fiber. We ended the quarter at 53%. And finally, we expect to offer speeds of 1 gig or higher to at least 95% of our footprint, and we finished the quarter with 75% at gig speeds. To reach this target, we will use a combination of fiber and coax technologies. Our goal is to reduce the number of addresses served by copper to less than 5% over time. Turning to Slide 17. The graph on the left shows the significant growth in our total footprint, up 27% over the last 3 years, driven by our fiber investments. The graph on the right shows the most recent 5 quarters of fiber service address delivery. This quarter is flat compared to the prior year. Our service address growth generally ramps throughout the year, which is consistent with our expectations for this year. We've added 41,000 addresses through the second quarter and plan to hit 150,000 new fiber addresses this year as we continue to increase the number of construction crews. We are also on track to hit an exciting milestone in the back half of the year, 1 million marketable fiber service addresses. It will be a big achievement for the company and a reflection of the momentum behind our growing fiber program. Turning to Slide 18. The graph on the left highlights our residential fiber connection growth. Connections have nearly doubled over the past 3 years, driven by our expansion efforts and the ongoing conversion of copper customers to fiber products in our incumbent markets. As we invest in fiber, we expect residential broadband connection growth to continue. The graph on the right shows the last 5 quarters of residential fiber net additions. We delivered 10,300 this quarter, comparable to the same period last year. On Slide 19, we grew total service addresses 5% year-over-year. On the right side of the slide, we see increased demand for higher broadband speeds with 83% of our residential broadband customers taking 100 meg or higher and 26% taking 1 gig or higher at the end of the quarter. When looking at new customers that we added in the quarter, 56% took speeds of 1 gig or higher. Demand for faster speeds remains strong. On Slide 20, average residential revenue per connection was up 1% year-over-year due primarily to price increases. As reflected in our guidance, we expect more modest growth in residential revenue per connection this year as we focus on driving penetration. The chart on the right shows our revenue comparison year-over-year. Overall revenue is down 1%. As a reminder, divested markets accounted for a $4 million decrease in revenues compared to the prior year. We'll talk more about revenues on the next slide. On Slide 21, I'll touch on the financials. Total operating revenues were down 1% in the second quarter compared to the prior year. Excluding the impact of divestitures, revenue increased 1%, driven by growth in fiber subscribers and higher residential revenue per connection. This growth was partially offset by continued declines in our legacy cable and copper markets. Cash expenses increased 1% or $2 million year-over-year. As we discussed last quarter, this increase in expense aligns with our 2025 priorities, which include investments in sales and marketing and advancing our transformation efforts. We're also continuing to staff our internal construction crews to drive more cost-effective address growth when compared to external contractors. Capital expenditures were higher than the same period last year, primarily due to spending on the E-ACAM program. We expect both CapEx and service address delivery to continue to increase in the back half of the year as we accelerate construction to deliver 150,000 new fiber service addresses in 2025. Over 80% of our full year capital expenditures will be focused on fiber. Slide 22 shows our revised 2025 guidance. We have updated the ranges for revenue, adjusted EBITDA and adjusted OIBDA to reflect the divestiture of our Oklahoma ILEC market, which was not included in our previous guidance as well as ongoing declines in our cable and copper markets. We are now projecting revenues to be in the range of $1.03 billion to $1.05 billion. Adjusted EBITDA is expected to be $320 million to $350 million. Adjusted OIBDA is expected to be $310 million to $340 million, and our CapEx guidance remains unchanged. Before closing, I want to recognize the entire TDS Telecom team for their outstanding commitment and hard work. We have a lot in flight, and I'm confident in the team's ability to execute. We're building momentum as we head into the second half of the year, and I'm excited about the company's future. I will now turn the call back over to Walter.
Thank you, Kris. Before opening it up for questions, I want to share a few concluding thoughts. We are pleased to have closed the T-Mobile transaction and are pleased to be able to use the proceeds to improve our balance sheet and to fund our fiber program. We also look forward to closing the AT&T and Verizon spectrum sales and to thoughtfully deploying those proceeds back into the business and into returns to shareholders. TDS is in a strong financial position and has excellent operating businesses in both towers and broadband. We look forward to continuing to delight our customers and to build our businesses. Now operator, Janine, let's open it up to questions.
Questions and answers
Our first question comes from the line of Ric Prentiss from Raymond James.
Nice to get the T-Mobile deal over the finish line. I want to start on the TDS Telecom side. Obviously, there's definitely an incentive to race to plant the fiber flag. I know Dixon just started recently. But can you give us an idea of when you can update us on would you expand and accelerate the 1.8 million service addresses?
Rick, this is Kris Bothfeld. Yes, we are super excited that Ken Dixon joined. He brings a lot of enthusiasm, momentum. And right now, we do think that there's a significant opportunity for Edge-Outs in our footprint to further expand our fiber footprint, and we're currently sizing those opportunities, and we expect to share more in the upcoming quarters. But I will say that we intentionally chose specific markets to flag plant that we thought had great Edge-Out and clustering abilities. So again, I just want to reinforce that we think there's significant opportunity, but we're just not quite yet ready to share exactly what that looks like.
Thank you, Kris. Ric, I want to emphasize that this is an important step in our future capital allocation strategy. With Ken joining us, we are genuinely excited about the insights he has on the business and the opportunities ahead. We will provide more updates soon.
Okay. And Vicki, I think you mentioned TDS would keep leverage under 1.5 turns while you evaluate that. Where do you see leverage at the TDS Telecom side kind of stabilizing at longer term?
Well, TDS Telecom is certainly consolidated and a wholly owned subsidiary of TDS. So I'm looking at it collectively. As you know, we're putting in place leverage at the Array balance sheet at 3x. We expect when we complete our spectrum transactions that we could put in place if the Array Board of Directors would approve a more regular dividend and that would provide funding on a longer-term basis. So when I'm looking at our opportunities at TDS Telecom and on the TDS consolidated basis, we're going to have significant proceeds that will help fund our opportunities, which is why we're looking right now to put a more rigorous and defined capital allocation strategy in place. So we haven't quantified it yet, but we'll come back and share that with you. But for right now, we expect to stay at 1.5x, which is really all the debt is paid off at the TDS level and with leaving the preferreds in place and then we have an option on our export credit with the $150 million on whether we keep that in place or pay that off in the near term.
Continuing on the TDS Telecom side. Interesting to hear you brought the construction crew in or some construction crew in-house. We've been hearing about there could be some labor issues, material issues, particularly as the One Big Beautiful Bill kind of has ramped people's homes passed service addresses pass thing. So can you talk a little bit just about access to getting the build plan done?
Yes, Rick, we remain very confident in our ability to reach our goal of 150,000 service addresses for the year. To provide a bit more detail, we were slightly delayed in finalizing all of our E-ACAM contracts, but those are now executed, and our crews are really ramping up. We're encouraged by what we are seeing. We expect to see significant progress in E-ACAM construction and address delivery during the second half of the year. We're also significantly increasing our internal and external construction crews to accelerate these expansion projects. I want to remind you that it is typical for us to experience a surge in address delivery in the second half of the year, often with about 70% of our annual address delivery occurring during this time. We are very happy with the current momentum; June was our strongest month for address delivery this year, and we surpassed that in July. We feel very confident that we will meet our goal of 150,000 addresses for the year.
I have one last question about TDS Telecom, which I have discussed quite a bit, and then a quick question about Array. It would be helpful to see some cohort analysis regarding your deployments in 2022 and 2023, as the industry is changing quickly. I'm trying to understand the ultimate penetration goals, including market share and margins. Do you have any plans to provide cohort analysis in the future? Also, what are your views on the ultimate penetration rates in your fiber markets?
Yes, Rick, we're beginning to report on this internally and plan to share it externally very soon. To remind you about our expectations for expansion markets, we anticipate achieving around 25% to 30% penetration by month 12. This is due to our aggressive presales model, where we start engaging with potential customers 60 days before new address delivery. This strategy results in high presales penetration at launch, providing a strong starting point for month 12. By year 5, we expect to see a steady-state penetration of 40% in these expansion markets. Some markets may take longer to reach this level, while others might get there faster, and we are focusing on those slower markets. Additionally, we have our E-ACAM fiber markets, which exhibit favorable competitive dynamics since any E-ACAM-eligible location lacks gig-capable competition. These areas make up roughly 30% of our ILEC footprint, and we anticipate achieving a penetration rate of 65% to 75% in these markets.
Yes, that's really good background, Kris. And to answer your question, Rick, we have cohort penetration reporting in place internally that we've been reviewing with Ken Dixon on board, and we intend to share that. I think those are critical proof points that are the underpinning of our investments that we're making as we go forward. So we will bring that to investors.
That's really great news. I appreciate that, and I know the market will appreciate that. Quickly for Ken. Tower reporting, good to hear that's coming as well. I'm getting my Christmas list early this year. The dividend sizing, would that be kind of sized on AFFO, so we can kind of see a payout ratio? And the other quick one to tag to that is time to close AT&T, you're saying second half. Are you thinking that's like a 3-month process post T-Mobile closing? Or is that kind of closer to year-end? Just trying to think through dividend timing.
Yes, regarding AFFO reporting dividends per share, all that information will be available in the third quarter. As I mentioned, our first quarter reporting as an independent tower company will be in the third quarter. We will provide all that reporting then. Concerning the AT&T spectrum closing, it requires FCC approval, which is beyond our control. Our best estimate for that is the second half of 2025, but we cannot be more precise at this time.
Our next question comes from the line of Sebastiano Petti from JPMorgan.
Congratulations on closing the T-Mobile transaction. Following up on Rick's comments, I'd like to discuss the fiber backdrop. Kris, it's great to hear that you're confident about the delivery locations for this year, targeting 150,000. How should we consider the trajectory of overall fiber broadband additions for the year? Should we expect higher fiber additions year-on-year, given that you’re still on track for the 150,000? Additionally, related to Rick's points on cohort analysis, investors are curious about the growth from your expansion markets. With the large build-out programs, is this reducing the white space opportunity? Could you provide some context around the confidence in net additions and any changes in the competitive environment? I have a follow-up for Doug.
Sebastiano. To address your question about fiber net additions, we are still aiming for a year-over-year improvement in this area. I previously mentioned this with Ric, but our sales model relies heavily on delivering new fiber addresses, as we aggressively presell new addresses 60 days prior to their launch. When we experience slower delivery of addresses at the beginning of the year, we tend to see a corresponding decline in net additions. However, as I mentioned earlier, we anticipate a significant increase in address delivery during the second half of the year due to the ramp-up of our E-ACAM builds and the addition of more construction crews. Therefore, we expect net additions to align with that address delivery. Additionally, we are focused on those areas launched several years ago that still lack TDS fiber service. Ken Dixon has implemented extra strategies to ensure we aggressively target these locations and enhance our penetration there. With these strategies and our fully staffed door-to-door team heading into the second half of the year, we remain confident in improving our net additions for the entire year compared to last year. Regarding competition and our expansion markets, we specifically selected nearly 100 communities based on favorable competitive and growth characteristics. We intentionally focused on Tier 2 and Tier 3 communities, as we believed they were lower priorities for ILECs to upgrade. This expectation has proven accurate. We are still very confident and satisfied with the competitive landscape in our expansion markets.
Sebastiano. And so the nice thing with the C-band spectrum is, one, it's deployable now, and it's very desirable mid-band spectrum, as you know. The other thing I mentioned in my script is that our first build deadline is until 2029. Second build deadline is 2031. So we have the luxury of time to be opportunistic about the sale of the spectrum. Certainly, supply and demand of spectrum and what's coming available through FCC auction and DISH and what happens there is a factor. We're considering that. And our goal is to maximize the value, and we have time to do it. And our strategy is to take the time we need to make sure we're realizing the best value, and we'll be gauging interest in doing our marketing in the future.
Our next question comes from Vikash Harlalka at New Street Research.
A couple of questions on the business side at TDS Telecom and then just a broader question on M&A. On the business side, can you just provide us an update on your mobile launch? If I remember correctly, you've done some test markets. Where are you in terms of launching it nationwide?
So an update on our MVNO is we launched in select markets in the fourth quarter of 2024. We're calling our MVNO product, TDS Mobile. We just launched in the second quarter to all markets across our footprint. We have been taking a very phased methodical approach as we're trying to work out all the kinks and ensure a great customer experience. But we are very excited because now we'll be able to offer the same products as our competitors. And in some markets, this will actually be a differentiator against our competition. It's also allowing us to offer the products that our customers want and should help us attract and retain customers over time. So we're very pleased, and we're just getting kind of fully launched, and we expect to see a lot more growth in the future.
And then my second question was about your pricing. I saw that recently you launched a gig product for $49.99. That's a very aggressive pricing. What kind of step-up should customers see and over what time frame on that?
Yes. Our pricing strategy is influenced by the competitive landscape in each market, and we aim to eliminate barriers to entry. Our entry-level pricing is typically as competitive as other gig-capable providers. To ensure our economics remain viable, if we set a very aggressive entry-level price, we usually implement a price increase after two years, typically around a $20 increase to the full retail rate. However, we are currently experimenting with various pricing strategies and, in some cases, we are offering prices without that step-up. We're in a test and learn phase to determine the best optimization.
Yes. And with the bringing in-house of the proceeds from the T-Mobile transaction and the expected proceeds from the AT&T and Verizon transactions, I'd say we are at the beginning point of considering what M&A opportunities would make sense. And in particular, we are focused on fiber opportunities and fiber opportunities that would be synergistic with our existing properties and footprint. So it's just at the beginning of that analysis and more to come in the future.
Our last question comes from the line of Sergey Dluzhevskiy from Gabelli.
My first question is for Doug. Doug, maybe you could talk a little bit about the main building blocks of your growth strategy for the tower business and the key steps that you're taking already to accelerate third-party colocations and what else on that front you expect to do maybe over the next 12 to 24 months? What you would be doing differently potentially as an independent provider? And what parts of your tower business you view as generally underappreciated by investors in your opinion?
Okay, Sergey. In the fourth quarter of 2024, we brought our sales team and intake operations in-house from an outsourced provider and hired a head of sales, which has yielded great results. Our new colo applications in the first half of 2025 increased by over 100% compared to the first quarter of 2024. The team is doing an excellent job, fully staffed, and we are very pleased with their progress. The 12% quarter-over-quarter revenue increase includes application fees received in 2025 that we did not receive in 2024. Even without those, we saw a 7% quarter-over-quarter increase. Additionally, we have strong MLAs with all three carriers, which have attractive pricing and are well-received by the carriers. This arrangement is beneficial for us with good economics and ease of implementation. We believe this aspect supports our growth, and the new MLA with T-Mobile serves as a positive factor. Moreover, having Array as a standalone brand enhances our focus and strengthens our identity as a dedicated tower company. We anticipate a supportive environment from carrier investments over the next three years, so we are very optimistic about our sales growth. We are dedicated to implementing the T-Mobile MLA, which is a major focus for our organization, and we are confident we will succeed in this effort.
Sergey, so what I'll say, over the next several years, we do have a handful of top strategic priorities that we're marching toward. First and foremost, like you said, is executing on the build plan and expanding our fiber footprint. We have a few large programs in place. E-ACAM, which we're very excited about to bring fiber to more rural areas. We have our expansion program, which is continuing to build to the 100 communities and hopefully even accelerate those. You also heard Vicki and I talk about Edge-Out opportunities. So we're going to continue to look at even expanding the fiber footprint further. That's one. Number two is executing our sales and marketing and driving revenue and driving penetration. And so there's a lot of different efforts in place. This is where Ken Dixon and his background is great because this is his sweet spot. And so there's a lot of initiatives in place to ensure that we hit our targeted penetration curves as we deliver those addresses. And then lastly is the executing on our business transformation. So last quarter, I talked about how we've been transforming into a fiber company in a meaningful way over the last few years. But now we're also focused on streamlining our operations, enhancing elements of the customer experience, all to make sure we're driving margin improvement, OCF expansion over the next several years. So those are really our top 3 priorities as we look over the next few years.
Sergey, thank you. Obviously, we've been focused immensely on the very near term in terms of the T-Mobile transaction, the AT&T and Verizon transactions. Over the intermediate horizon or near to intermediate horizon, we do have the additional spectrum that you spoke to, and we do believe we will be successful in monetizing that for many of the reasons that Doug stated. That frees up a lot of capital. And you're right that a tower business, which we believe will be very successful, is different in concept perhaps than a largely consumer or small business-focused fiber business. So they are different in concept, but they're in the same industry and the financial power that the tower business can bring to the enterprise is very significant. So from my perspective, I view the combined power of these 2 businesses as we improve the execution that we have. And I think there will be a lot of value unlocked through improved execution, as Doug and Kris have each indicated. And that will redound greatly to shareholder value. In terms of longer-term ideas with respect to other ways to unlock value, those will be considered. They're not the nearest-term priority, but they are very much on our mind, and we will continue to report to you as we go forward. I do think there are synergies between the type of thinking that goes into building a tower business and making it successful as well as the type of thinking that goes into making the fiber business successful. So they are different, but they are related in good ways that are productive.
Thank you. This concludes our Q&A session. I will now turn the call over back to Colleen Thompson for closing remarks.
Okay. Thanks, everyone, for joining us today. Please reach out to Investor Relations with any additional questions, and have a great week. Operator we can sign off.
This concludes today's conference. You may now disconnect.