Exhibit 13
Telephone and Data Systems, Inc.
IndexPage No.



Table of Contents
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Telephone and Data Systems, Inc.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Executive Overview
The following Management’s Discussion and Analysis (MD&A) should be read in conjunction with the audited consolidated financial statements and notes of Telephone and Data Systems, Inc. (TDS) for the year ended December 31, 2020, and with the description of TDS’ business included herein. Certain numbers included herein are rounded to millions for ease of presentation; however, certain calculated amounts and percentages are determined using the unrounded numbers.
This report contains statements that are not based on historical facts, including the words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions. These statements constitute and represent “forward looking statements” as this term is defined in the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward looking statements. See Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement for additional information.
TDS uses certain “non-GAAP financial measures” and each such measure is identified in the MD&A. A discussion of the reason TDS determines these metrics to be useful and reconciliations of these measures to their most directly comparable measures determined in accordance with accounting principles generally accepted in the United States of America (GAAP) are included in the Supplemental Information Relating to Non-GAAP Financial Measures section within the MD&A of this Form 10-K Report.

The following MD&A omits discussion of 2019 compared to 2018. Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations in TDS' Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 25, 2020, for that discussion.

General
TDS is a diversified telecommunications company that provides high-quality communications services to approximately 6 million connections nationwide. TDS provides wireless services through its 82%-owned subsidiary, United States Cellular Corporation (UScellular). TDS also provides wireline and cable services, through its wholly-owned subsidiary, TDS Telecommunications LLC (TDS Telecom). TDS operates entirely in the United States. See Note 19 — Business Segment Information in the Notes to Consolidated Financial Statements for additional information about TDS’ segments.
The impact of the global spread of the coronavirus disease (COVID-19) on TDS' future operations is uncertain. There are many factors, including the severity and duration of the outbreak, as well as other direct and indirect impacts, that could impact TDS.
See the following areas within this MD&A for additional discussion of the direct and indirect impacts of COVID-19:
Results of Operations — Income tax expense
Business Overview — UScellular
Operational Overview — UScellular
Financial Overview — UScellular
Business Overview — TDS Telecom

Also see the "Risk Factors" in TDS' Form 10-K for the year ended December 31, 2020 for risks related to COVID-19.

2020 Operating Revenues by Segment
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TDS Mission and Strategy
TDS’ mission is to provide outstanding communications services to its customers and meet the needs of its shareholders, its people, and its communities. In pursuing this mission, TDS seeks to grow its businesses, create opportunities for its associates and employees, support the communities it serves, and build value over the long term for its shareholders. Across all of its businesses, TDS is focused on providing exceptional customer experiences through best-in-class services and products and superior customer service.
TDS’ long-term strategy calls for the majority of its operating capital to be reinvested in its businesses to strengthen their competitive positions and financial performance, while also returning value to TDS shareholders primarily through the payment of a regular quarterly cash dividend.
In 2020, TDS continued to focus on investing in the networks that are the backbone of its commitment to provide outstanding communications services to its customers. TDS believes these investments strengthen its competitive position and improve operating performance. TDS expects to continue to execute on its strategies to build strong, competitive businesses providing high-quality, data-focused services and products.
During 2020, TDS paid $78 million in regular quarterly cash dividends. TDS increased the dividend per share paid to its investors by 3% in 2020 which marks the 46th consecutive year of dividend increases and in February 2021, TDS increased its quarterly dividend per share from $0.170 to $0.175. During 2020, TDS repurchased 879,409 Common Shares for $14 million at an average cost per share of $15.53. As of December 31, 2020, the maximum dollar value of TDS Common Shares that may yet be purchased under TDS' program was $185 million. There is no assurance that TDS will continue to increase the dividend rate or pay dividends and no assurance that TDS or UScellular will make any significant amount of share repurchases in the future.
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Terms Used by TDS
The following is a list of definitions of certain industry terms that are used throughout this document:
4G LTE – fourth generation Long-Term Evolution, which is a wireless technology that enables more network capacity for more data per user as well as faster access to data compared to third generation (3G) technology.
5G – fifth generation wireless technology that helps address customers’ growing demand for data services and creates opportunities for new services requiring high speed and reliability as well as low latency.
Account – represents an individual or business financially responsible for one or multiple associated connections. An account may include a variety of types of connections such as handsets and connected devices.
Alternative Connect America Cost Model (A-CAM) – a USF support mechanism for rate-of-return carriers, which provides revenue support through 2028. This support comes with an obligation to build defined broadband speeds to a certain number of locations.
Auctions 101, 102, 103, 105 and 107 – Auction 101 was an FCC auction of 28 GHz wireless spectrum licenses that started in November 2018 and concluded in January 2019. Auction 102 was an FCC auction of 24 GHz wireless spectrum licenses that started in March 2019 and concluded in May 2019. Auction 103 was an FCC auction of 37, 39, and 47 GHz wireless spectrum licenses that started in December 2019 and concluded in March 2020. 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 is an FCC auction of 3.7-3.98 GHz wireless spectrum licenses that started in December 2020 and is not complete as of the date of this report.
Broadband Connections – refers to the number of Wireline customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies or the Cable billable number of lines into a building for high-speed data services.
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.
Connected Devices – non-handset devices that connect directly to the UScellular network. Connected devices include products such as tablets, wearables, modems, and hotspots.
Coronavirus Aid, Relief, and Economic Security (CARES) Act – economic relief package signed into law on March 27, 2020 to address the public health and economic impacts of COVID-19, including a variety of tax provisions.
DOCSIS – Data Over Cable Service Interface Specification is an international telecommunications standard that permits the addition of high-bandwidth data transfer to an existing cable TV (CATV) system. DOCSIS 3.1 is a system specification that increases data transmission rates.
EBITDA – refers to earnings before interest, taxes, depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted EBITDA throughout this document. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
Eligible Telecommunications Carrier (ETC) – designation by states for providing specified services in “high cost” areas which enables participation in universal service support mechanisms.
Fiber Out-of-Territory Builds – represents construction of facilities-based market expansions outside of TDS' incumbent local exchange carrier (ILEC) and Cable footprint.
Free Cash Flow – non-GAAP metric defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
Gross Additions – represents the total number of new connections added during the period, without regard to connections that were terminated during that period.
IPTV – internet protocol television.
Keep Americans Connected Pledge – voluntary FCC initiative, through June 30, 2020, in response to the COVID-19 pandemic to ensure that Americans do not lose their broadband or telephone connectivity as a result of the exceptional circumstance.
ManagedIP Connections – refers to the number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.
Net Additions (Losses) – represents the total number of new connections added during the period, net of connections that were terminated during that period.
OIBDA – refers to operating income before depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted OIBDA throughout this document. See Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for additional information.
Postpaid Average Revenue per Account (Postpaid ARPA) – metric which is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.
Postpaid Average Revenue per User (Postpaid ARPU) – metric which is calculated by dividing total postpaid service revenues by the average number of postpaid connections and by the number of months in the period.
Retail Connections – the sum of UScellular postpaid connections and UScellular prepaid connections.
Tax Act – refers to comprehensive federal tax legislation enacted on December 22, 2017, which made broad changes to the U.S. tax code. Now titled H.R.1, the Tax Act was originally identified as the Tax Cuts and Jobs Act of 2017.
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.
UScellular Connections – individual lines of service associated with each device activated by a customer. Connections include all types of devices that connect directly to the UScellular network.
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Video Connections – represents the number of Wireline customers provided video services. For Cable, generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or a hotel, connections are counted based on the number of units/rooms within the building receiving service.
Voice Connections – refers to the individual circuits connecting a customer to Wireline’s central office facilities that provide voice services or the Cable billable number of lines into a building for voice services. 
VoLTE – Voice over Long-Term Evolution is a technology specification that defines the standards and procedures for delivering voice communications and related services over 4G LTE networks.
Wireline Residential Revenue per Connection – metric which is calculated by dividing total Wireline residential revenue by the average number of Wireline residential connections and by the number of months in the period.
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Results of Operations — TDS Consolidated
Year Ended December 31,202020192020 vs. 2019
(Dollars in millions)
Operating revenues   
UScellular$4,037 $4,022 
TDS Telecom976 930 %
All other1
212 224 (6)%
Total operating revenues5,225 5,176 %
Operating expenses   
UScellular3,864 3,910 (1)%
TDS Telecom866 823 %
All other1
236 264 (11)%
Total operating expenses4,966 4,997 (1)%
Operating income (loss)
   
UScellular173 112 54 %
TDS Telecom110 107 %
All other1
(24)(40)41 %
Total operating income259 179 45 %
Investment and other income (expense)   
Equity in earnings of unconsolidated entities181 168 %
Interest and dividend income15 29 (49)%
Gain (loss) on investments2 — N/M
Interest expense(168)(165)(2)%
Other, net(1)— N/M
Total investment and other income29 32 (10)%
Income before income taxes288 211 36 %
Income tax expense19 64 (71)%
Net income269 147 83 %
Less: Net income attributable to noncontrolling interests, net of tax43 26 70 %
Net income attributable to TDS shareholders$226 $121 86 %
Adjusted OIBDA (Non-GAAP)2
$1,190 $1,122 %
Adjusted EBITDA (Non-GAAP)2
$1,385 $1,319 %
Capital expenditures3
$1,317 $1,032 28 %
N/M - Percentage change not meaningful
1    Consists of corporate and other operations and intercompany eliminations.
2    Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
3    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.

Equity in earnings of unconsolidated entities
Equity in earnings of unconsolidated entities represents TDS’ share of net income from entities in which it has a noncontrolling interest and that are accounted for using the equity method. TDS’ investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed pre-tax income of $82 million and $78 million in 2020 and 2019, respectively.
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Income tax expense
The effective tax rate on Income before income taxes for 2020 was 6.4%. The effective tax rate includes the impact of federal and state tax, and is reduced significantly in 2020 due to the tax benefits of the CARES Act enacted on March 27, 2020.
The CARES Act provides retroactive eligibility of bonus depreciation on qualified improvement property put into service after December 31, 2017 and a 5-year carryback of net operating losses generated in years 2018-2020. As the statutory federal tax rate applicable to certain years within the carryback period is 35%, carryback to those years provides a tax benefit in excess of the current federal statutory rate of 21%, resulting in a reduction of income tax expense for the year ended December 31, 2020, and a projected cash refund in 2021 of taxes paid in prior years.
TDS’ effective tax rate on Income before income taxes for 2019 was 30.3%. The effective tax rate included the impact of federal and state tax, as well as other increases due primarily to nondeductible interest expense.
See Note 5 — Income Taxes in the Notes to Consolidated Financial Statements for additional information.
Net income attributable to noncontrolling interests, net of tax
Year Ended December 31,20202019
(Dollars in millions)  
UScellular noncontrolling public shareholders’$40 $23 
Noncontrolling shareholders’ or partners’3 
Net income attributable to noncontrolling interests, net of tax$43 $26 
 
Net income attributable to noncontrolling interests, net of tax includes the noncontrolling public shareholders’ share of UScellular’s net income, the noncontrolling shareholders’ or partners’ share of certain UScellular subsidiaries’ net income and other TDS noncontrolling interests.
Earnings
(Dollars in millions)
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Net income increased in 2020 due primarily to higher revenues, lower operating expenses and the impact of the CARES Act reducing income tax expense. Adjusted EBITDA increased in 2020 due primarily to higher revenues and lower operating expenses.

*Represents a non-GAAP financial measure. Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
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UScellular OPERATIONS
Business Overview
UScellular owns, operates, and invests in wireless markets throughout the United States. UScellular is an 82%-owned subsidiary of TDS. UScellular’s strategy is to attract and retain wireless customers through a value proposition comprised of a high-quality network, outstanding customer service, and competitive devices, plans, and pricing - all provided with a community focus.
OPERATIONS
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Serves customers with 5.0 million connections including 4.4 million postpaid, 0.5 million prepaid and 0.1 million reseller and other connections
Operates in 21 states
Employs approximately 5,300 associates
4,271 owned towers
6,797 cell sites in service
 
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COVID-19 considerations
COVID-19 impacts on UScellular's business for 2020 include a reduction in certain components of service revenues and equipment sales, a reduction in advertising and sales promotion costs and a reduction in handset subscriber gross additions and defections. The impacts of COVID-19 could negatively affect UScellular’s results of operations, cash flows and financial position in future periods. The extent and duration of these impacts are uncertain due to many factors and could be material. Certain impacts on and actions by UScellular related to COVID-19 include, but are not limited to, the following:
Taking action to keep associates safe, including implementing a work-from-home strategy for employees whose jobs can be performed remotely. In addition, to keep associates, customers, and communities safe, UScellular performs enhanced cleanings and provides associates with personal protective equipment to be worn during customer interactions. UScellular has also implemented a daily health check process for associates and requires social distancing and mask wearing in all company facilities, including stores. Throughout this period of change, UScellular has continued serving its customers and ensuring its wireless network remains fully operational.
Participation in the FCC Keep Americans Connected Pledge, through June 30, 2020, to not turn-off service or charge late fees due to a customer’s inability to pay their bill due to circumstances related to COVID-19. This resulted in a reduction in non-pay defections, as well as reduced service revenues for the year ended December 31, 2020. During the third and fourth quarter of 2020, certain accounts that were part of the Pledge were terminated due to non-payment. Many of the remaining accounts that were on the Pledge are on payment arrangements of varying durations, and UScellular expects additional terminations due to non-payment in future periods.
Waiving overage charges and certain other charges. This resulted in reduced service revenues for the year ended December 31, 2020.
Supporting the communities in which UScellular operates. Through UScellular’s partnership with Boys & Girls Clubs, UScellular has contributed to the Boys & Girls Clubs’ COVID-19 Relief Fund to support children, families and communities. These funds are dispersed directly to more than 50 clubs in UScellular’s service regions to support the most immediate needs of youth in areas of importance such as providing food for children who rely on their Boys & Girls Clubs for their dinner, care for children of essential workers and first responders, and digital learning resources. UScellular also began exploring ways to leverage its assets, brand, partnerships, and resources to begin to close the digital divide and ensure all youth in its markets have reliable and fast internet access in school and at home.
Recognizing income tax benefits associated with the enactment of the CARES Act. This legislation resulted in a reduction to income tax expense for the year ended December 31, 2020 and a projected cash refund in 2021 of taxes paid in prior years.
Monitoring its supply chain to assess impacts to availability and costs of device inventory and network equipment and services, including monitoring the dependency on third parties to continue network related projects. At this time, UScellular expects to be able to meet customer demand for devices and services and to be able to continue its 4G LTE network modernization and 5G deployment with no significant disruptions.
UScellular is tracking customer usage and, at this time, believes network capacity is sufficient to accommodate expected usage.
Monitoring roaming behaviors. Both inbound and outbound roaming traffic have been dampened by COVID-19 as wireless customers are reducing travel. The extent to which roaming traffic will be impacted by the pandemic in the future will depend upon governmental mandates and customer behavior in response to the outbreak.
UScellular Mission and Strategy
UScellular’s mission is to provide 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.
UScellular’s strategy is to attract and retain customers through a value proposition comprising a high-quality network, outstanding customer service, and competitive devices, plans and pricing - all provided with a 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 accessories and device protection plans and from new services such as home internet. In addition, UScellular is focused on expanding its solutions available to business and government customers.
UScellular continues to devote efforts to enhance its network capabilities. UScellular has completed its deployment of VoLTE technology. VoLTE technology allows customers to utilize a 4G LTE network for both voice and data services and offers enhanced services such as high definition voice and simultaneous voice and data sessions.
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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 5G deployment is initially focused on mobility services using its low band spectrum. UScellular has acquired high band spectrum, which it will deploy in the future to further enable the delivery of 5G services. UScellular has launched commercial 5G services in portions of California, Illinois, Iowa, Kansas, Maine, Maryland, Missouri, Nebraska, New Hampshire, North Carolina, Oklahoma, Oregon, Tennessee, Texas, Virginia, Washington, West Virginia and Wisconsin and will continue to launch in additional areas in the coming years. In addition to the deployment of 5G technology, UScellular is also modernizing its 4G LTE network to further enhance 4G LTE speeds.
UScellular assesses its existing wireless interests on an ongoing basis with a goal of improving the competitiveness of its operations and maximizing its long-term return on capital. As part of this strategy, UScellular actively seeks attractive opportunities to acquire wireless spectrum, including pursuant to FCC auctions such as Auctions 103, 105 and 107.
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Operational Overview
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As of December 31,20202019
Retail Connections – End of Period
Postpaid4,412,0004,383,000
Prepaid499,000506,000
Total4,911,0004,889,000

Year Ended December 31,202020192020 vs. 2019
Postpaid Activity and Churn
Gross Additions
Handsets397,000458,000(13)%
Connected Devices203,000148,00037 %
Total Gross Additions600,000606,000(1)%
Net Additions (Losses)
Handsets(13,000)(24,000)46 %
Connected Devices39,000(65,000)N/M
Total Net Additions (Losses)26,000(89,000)N/M
Churn
Handsets0.89 %1.04 %
Connected Devices2.58 %3.24 %
Total Churn1.09 %1.31 %
N/M - Percentage change not meaningful
Total postpaid handset net losses decreased in 2020 due primarily to lower handset defections as a result of lower consumer switching activity related to COVID-19, as well as a reduction in non-pay defections. Partially offsetting the decrease in defections were lower gross additions resulting from lower consumer switching activity.
Total postpaid connected device net additions increased in 2020 due primarily to (i) an increase in gross additions due to higher demand for internet related products given a need for remote connectivity related to COVID-19 and (ii) a decrease in tablet defections.
Postpaid Revenue
Year Ended December 31,2020 2019 2020 vs. 2019
Average Revenue Per User (ARPU)$47.01 $46.01 2%
Average Revenue Per Account (ARPA)$122.93 $119.80 3%
Postpaid ARPU and Postpaid ARPA increased in 2020, due primarily to (i) an increase in device protection plan revenues, (ii) an increase in regulatory recovery revenues, and (iii) having proportionately fewer tablet connections, which on a per-unit basis contribute less revenue than other connected devices and smartphones. These increases were partially offset by the impact of waiving overage charges and late payment and related fees, measures UScellular took to assist customers during 2020 related to the COVID-19 pandemic.
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Financial Overview — UScellular
Year Ended December 31,
202020192020 vs. 2019
(Dollars in millions)   
Retail service$2,686 $2,650 %
Inbound roaming152 174 (13)%
Other229 211 %
Service revenues3,067 3,035 %
Equipment sales970 987 (2)%
Total operating revenues4,037 4,022 
System operations (excluding Depreciation, amortization and accretion reported below)
782 756 %
Cost of equipment sold1,011 1,028 (2)%
Selling, general and administrative1,368 1,406 (3)%
Depreciation, amortization and accretion683 702 (3)%
(Gain) loss on asset disposals, net25 19 36 %
(Gain) loss on sale of business and other exit costs, net (1)N/M
(Gain) loss on license sales and exchanges, net(5)— N/M
Total operating expenses3,864 3,910 (1)%
Operating income$173 $112 54 %
Net income$233 $133 76 %
Adjusted OIBDA (Non-GAAP)1
$876 $832 %
Adjusted EBITDA (Non-GAAP)1
$1,063 $1,015 %
Capital expenditures2
$940 $710 32 %
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.
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Operating Revenues
(Dollars in millions)
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Service revenues consist of: 
Retail Service – Charges for voice, data and value added services and recovery of regulatory costs
Inbound Roaming – Charges to other wireless carriers whose customers use UScellular’s wireless systems when roaming
Other Service – Amounts received from the Federal USF, tower rental revenues, and miscellaneous other service revenues
Equipment revenues consist of:
Sales of wireless devices and related accessories to new and existing customers, agents, and third-party distributors
Key components of changes in the statement of operations line items were as follows:
Total operating revenues
Retail service revenues increased in 2020, primarily as a result of an increase in Postpaid ARPU as previously discussed in the Operational Overview section, partially offset by a decline in the average number of postpaid subscribers.
Inbound roaming revenues decreased in 2020, primarily driven by lower data revenues, with lower rates partially offset by higher usage. UScellular expects inbound roaming revenues to continue to decline as a result of a decrease in rates, and the merger of Sprint and T-Mobile.
Other service revenues increased in 2020, resulting from increases in tower rental revenues and miscellaneous other service revenues.
Equipment sales revenues decreased in 2020, due primarily to a decrease in new smartphone and accessory sales, partially offset by an increase in used smartphone sales.
System operations expenses
System operations expenses increased in 2020, due to increased cell site rent expense, non-capitalizable costs to add network capacity and costs to decommission network assets.
Cost of equipment sold
Cost of equipment sold decreased in 2020, due primarily to a decrease in new smartphone and accessory sales, partially offset by an increase in used smartphone and connected device sales.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased in 2020, due primarily to decreases in (i) bad debts expense driven by fewer non-pay customers as a result of better credit mix and improved customer payment behavior and (ii) advertising expense due to reduced sponsorship expense from cancelled events related to COVID-19.
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Depreciation, amortization and accretion
Depreciation, amortization, and accretion decreased in 2020, due to certain billing system assets reaching their end of life, partially offset by higher depreciation due to increased capital expenditures and accelerated depreciation of certain assets due to changes in network technology.
(Gain) loss on asset disposals, net
Loss on asset disposals, net increased in 2020 due primarily to higher disposal of used equipment.
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TDS TELECOM OPERATIONS
Business Overview
TDS Telecom provides a wide range of communications services to residential and commercial customers. TDS Telecom operates in two segments: Wireline, which includes a fiber-to-the-home program in new markets, and Cable. 
TDS Telecom has a common strategy across all its businesses to provide high-speed broadband services bundled with video and voice services. Services are provided to residential, commercial, and wholesale customers in a mix of rural, suburban and metropolitan communities, with the largest concentration of its customers in the Upper Midwest and the Southeast. TDS Telecom seeks to be the leading provider of broadband services in the markets it serves by investing into high-quality networks and providing excellent customer service.

On December 31, 2019, TDS acquired substantially all of the assets of MI Connection Communications System, dba Continuum. Continuum is a cable company that passes approximately 40,000 service addresses in North Carolina and offers complementary broadband, video and voice services.
OPERATIONS
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Serves 1.2 million connections in 32 states.
Employs approximately 2,900 employees.
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COVID-19 considerations
The future impacts of COVID-19 are uncertain due to many factors and could be material to TDS Telecom's results of operations, cash flows and financial position. Certain impacts on and actions by TDS Telecom related to COVID-19 include, but are not limited to, the following:
Taking action to keep employees safe, including implementing a work-from-home policy for employees whose jobs can be performed remotely. In addition, to keep employees, customers, and communities safe, TDS Telecom closed certain retail stores and temporarily ceased door-to-door selling. Retail stores that remain open have implemented social distancing and enhanced cleaning measures. In addition, TDS Telecom has expanded safety protocols for front line workers, such as field service technicians and direct salesforce employees as they returned to door-to-door selling in the second quarter. Throughout this period of change, TDS Telecom has continued serving its customers and ensuring its network remains fully operational.
Participation in the FCC Keep Americans Connected Pledge, through June 30, 2020, to not turn-off service or charge late fees due to a customer's inability to pay their bill due to circumstances related to COVID-19. TDS Telecom is complying with certain states that have extended no-disconnect orders past the expiration of the FCC Pledge. These actions did not have a significant financial impact for the year ended December 31, 2020.
Supporting the communities in which TDS Telecom operates. TDS Telecom has donated to food pantries and other organizations that are serving the needs of the communities in which it operates.
Offering 60 days of free broadband service to new customers who are low-income and/or families with children or college age students through April 2020, with free services ending in June 2020.
Recognizing income tax benefits associated with the enactment of the CARES Act. This legislation resulted in a reduction to income tax expense for 2020 and a cash refund of taxes paid in prior years.
Tracking increased customer demand for broadband services. The demand may fluctuate depending on the severity and duration of the pandemic. At this time, TDS Telecom's network capacity has been sufficient for increased usage.
Door-to-door sales activities in out-of-territory markets were initially impacted by the pandemic leading to a broadened approach that uses increasing online sales and marketing activities. A significant reduction in pre-sales activity could result in a slowing of construction activity.
Monitoring its supply chain to assess impacts to availability of network equipment. At this time, TDS Telecom expects to be able to meet customer demand for on-premise equipment, and to maintain its expected investment levels in fiber and other broadband deployments.
Monitoring the dependency on third parties to continue work on out-of-territory market construction. Various state municipal and vendor restrictions related to COVID-19 could cause delays in municipal permitting, pole access, and other contractor work that could slow down construction plans.
TDS Telecom Mission and Strategy
TDS Telecom's mission is to provide outstanding communications services to delight its customers, champion economic development by investing in infrastructure, and to grow rapidly.
TDS Telecom's strategic efforts include:
TDS Telecom strives to be the preferred broadband provider in its markets with the ability to provide value-added bundling services with video and voice service options. TDS Telecom continues to focus on driving growth in its broadband services by investing in fiber deployment in TDS' new out-of-territory markets and in existing markets.
TDS Telecom may also seek to grow its operations through the acquisition of businesses that support and complement its existing markets or create entirely new clusters of markets where TDS Telecom can succeed. TDS Telecom intends to avoid markets served by other fiber overbuilders or municipalities which have constructed their own networks with fiber to the home.
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Financial Overview — TDS Telecom
Year Ended December 31,202020192020 vs. 2019
(Dollars in millions)   
Operating revenues   
Wireline$685 $683 
Cable292 247 18 %
TDS Telecom operating revenues1
976 930 %
Operating expenses   
Wireline593 587 %
Cable274 236 16 %
TDS Telecom operating expenses1
866 823 %
TDS Telecom operating income$110 $107 %
Net income$100 $92 %
Adjusted OIBDA (Non-GAAP)2
$314 $300 %
Adjusted EBITDA (Non-GAAP)2
$317 $313 %
Capital expenditures3
$368 $316 16 %
Numbers may not foot due to rounding.
1    Includes eliminations between the Wireline and Cable segments.
2    Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.
3    Refer to Liquidity and Capital Resources within this MD&A for additional information on Capital expenditures.
Operating Revenues
(Dollars in millions)
tds-20201231_g14.jpg






Operating revenues increased in 2020 due primarily to the acquisition of Continuum, Wireline and Cable broadband growth and Wireline video growth which were partially offset by declines in Wireline residential voice and commercial revenues.
Total operating expenses
Operating expenses increased in 2020 due primarily to expenses related to the addition of Continuum, increases in building and maintenance costs, higher video programming costs, and a gain on the sale of assets in 2019, partially offset by a decrease related to the change in accounting to capitalize modems.
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WIRELINE OPERATIONS
Operational Overview
 
Residential Connections
As of December 31,
tds-20201231_g15.jpg
Total residential connections increased 4% as growth in broadband and video connections grew 9% and 8%, respectively, partially offset by a 2% decline in voice connections.

Residential Broadband Connections by Speeds1
As of December 31,
tds-20201231_g16.jpg
Residential broadband customers continue to choose higher speeds with 75% taking speeds of 10 Mbps or greater and 40% choosing speeds of 100 Mbps or greater.
1    Includes ILEC and out-of-territory

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Residential Revenue per Connection
For the year ended December 31,
tds-20201231_g17.jpg


Residential revenue per connection increased 4% due to growth in broadband and video connections, which are priced higher than declining voice services, and price increases. Video and broadband services also have tiered pricing depending on the packages and speeds the customer selects.
Commercial Connections
As of December 31,
tds-20201231_g18.jpg
Total commercial connections decreased by 8% due primarily to declines in connections in competitive local exchange carrier (CLEC) markets.
 
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Financial Overview — Wireline
Year Ended December 31,202020192020 vs. 2019
(Dollars in millions)   
Residential$349 $328 %
Commercial152 168 (9)%
Wholesale182 186 (2)%
Service revenues684 682 
Equipment and product sales1 (31)%
Total operating revenues685 683 
Cost of services (excluding Depreciation, amortization and accretion reported below)269 263 %
Cost of equipment and products1 (36)%
Selling, general and administrative199 199 
Depreciation, amortization and accretion124 132 (6)%
(Gain) loss on asset disposals, net (8)N/M
Total operating expenses593 587 %
Operating income$92 $96 (4)%
Income before income taxes$99 $110 (10)%
Adjusted OIBDA (Non-GAAP)1
$217 $220 (1)%
Adjusted EBITDA (Non-GAAP)1
$220 $231 (5)%
Capital expenditures2
$293 $243 20 %
Numbers may not foot due to rounding.
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.
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Operating Revenues
(Dollars in millions)
tds-20201231_g19.jpg


Residential revenues consist of:
Broadband services, including fiber- and copper-based high-speed internet, security and support services
Video services, including IPTV and satellite offerings
Voice services

Commercial revenues consist of:
High-speed and dedicated business internet services
Video services
Voice services

Wholesale revenues consist of:
Network access services primarily to interexchange and wireless carriers for carrying data and voice traffic on TDS Telecom’s network
Federal and state USF support, including A-CAM
 
Key components of changes in the statement of operations items were as follows:
Total operating revenues
Residential revenues increased in 2020 due primarily to growth in broadband and video connections, as well as price increases, partially offset by a decline in voice connections.
Commercial revenues decreased in 2020 due primarily to declining connections in CLEC markets.
Wholesale revenues decreased in 2020 due primarily to decreased access revenues.
Cost of services
Cost of services increased slightly in 2020 due primarily to increases in building and maintenance costs, higher video programming costs, partially offset by a decrease in expenses related to the capitalization of new modems. Effective January 1, 2020, the cost of modems, along with associated installation costs, is being capitalized.
Selling, general and administrative
Selling, general and administrative expenses remained flat in 2020 due primarily to lower legal and consulting costs, offset by increases in advertising costs in the out-of-territory markets.
Depreciation, amortization and accretion
Depreciation, amortization and accretion decreased in 2020 due primarily to certain assets becoming fully depreciated and extended useful lives assumptions, partially offset by depreciation on new fiber assets.
(Gain) loss on asset disposals, net
Gain on asset disposals decreased in 2020 due to the sale of fiber assets in certain CLEC markets during 2019.
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CABLE OPERATIONS
Operational Overview
 
Residential Connections
As of December 31,
tds-20201231_g20.jpg
Total residential connections grew 3% in 2020 due to a 8% increase in broadband connections, partially offset by a 6% decline in video connections and a 3% decline in voice connections.
Commercial Connections
As of December 31,
tds-20201231_g21.jpg
Total commercial connections decreased 2% in 2020 due to declining voice and video connections, partially offset by an increase in broadband and managedIP connections.
 
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Financial Overview — Cable
Year Ended December 31,202020192020 vs. 2019
(Dollars in millions)   
Residential$245 $205 20 %
Commercial47 43 10 %
Total operating revenues292 247 18 %
Cost of services (excluding Depreciation, amortization and accretion reported below)123 105 17 %
Selling, general and administrative72 62 16 %
Depreciation, amortization and accretion78 68 15 %
(Gain) loss on asset disposals, net1 (26)%
Total operating expenses274 236 16 %
Operating income (loss)$18 $11 60 %
Income (loss) before income taxes$18 $13 43 %
Adjusted OIBDA (Non-GAAP)1
$97 $80 21 %
Adjusted EBITDA (Non-GAAP)1
$97 $82 19 %
Capital expenditures2
$75 $73 %
Numbers may not foot due to rounding.
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.
 
Operating Revenues
(Dollars in millions)
tds-20201231_g22.jpg





Residential and Commercial revenues consist of:
Broadband services, including high-speed internet, security and support services
Video services, including IPTV and traditional cable programming
Voice services




 
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Key components of changes in the statement of operations items were as follows:
Total operating revenues
Residential and commercial revenues increased in 2020 due primarily to the acquisition of Continuum ($22 million) as well as growth in broadband connections and price increases.
Cost of services
Cost of services increased in 2020 due primarily to the acquisition of Continuum ($13 million) and increases in employee-related expenses.
Selling, general and administrative
Selling, general and administrative expenses increased in 2020 due primarily to increases in employee-related expenses and the acquisition of Continuum ($2 million).
Depreciation, amortization and accretion
Depreciation, amortization and accretion increased in 2020 due primarily to the acquisition of Continuum ($11 million).
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Liquidity and Capital Resources
Sources of Liquidity
TDS and its subsidiaries operate capital-intensive businesses. In the past, TDS’ existing cash and investment balances, funds available under its revolving credit and receivables securitization agreements, funds from other financing sources, including term loans and other long-term debt, and cash flows from operating and certain investing and financing activities, including sales of assets or businesses, provided sufficient liquidity and financial flexibility for TDS to meet its normal day-to-day operating needs and debt service requirements, to finance the build-out and enhancement of markets and to fund acquisitions. There is no assurance that this will be the case in the future. See Market Risk for additional information regarding maturities of long-term debt.
TDS has incurred negative free cash flow at times in the past and this could occur in the future. However, TDS believes that existing cash and investment balances, funds available under its revolving credit, term loan and receivables securitization agreements, expected future tax refunds and expected cash flows from operating and investing activities will provide sufficient liquidity for TDS to meet its normal day-to-day operating needs and debt service requirements for the coming years. TDS will continue to monitor the rapidly changing business and market conditions and plans to take appropriate actions, as necessary, to meet its liquidity needs.
TDS may require substantial additional capital for, among other uses, funding day-to-day operating needs including working capital, acquisitions of providers of cable, wireless or wireline telecommunications services, IT services or other businesses, wireless spectrum license or system acquisitions, capital expenditures, agreements to purchase goods or services, leases, debt service requirements, the repurchase of shares, the payment of dividends, or making additional investments, including new technologies and out-of-territory fiber builds. It may be necessary from time to time to increase the size of the existing revolving credit agreements, to put in place new credit agreements, or to obtain other forms of financing in order to fund potential expenditures. 
Cash and Cash Equivalents
Cash and cash equivalents include cash and money market investments. The primary objective of TDS’ Cash and cash equivalents investment activities is to preserve principal. TDS does not have direct access to UScellular cash.
Cash and Cash Equivalents
(Dollars in millions)
tds-20201231_g23.jpg




The majority of TDS’ Cash and cash equivalents are held in bank deposit accounts and in money market funds that purchase only debt issued by the U.S. Treasury or U.S. government agencies.
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Financing
Revolving Credit Agreements
In March 2020, TDS entered into a new $400 million unsecured revolving credit agreement with certain lenders and other parties and UScellular entered into a new $300 million unsecured revolving credit agreement with certain lenders and other parties. Amounts under the new revolving credit agreements may be borrowed, repaid and reborrowed from time to time until maturity in March 2025. As a result of the new agreements, TDS' and UScellular's previous revolving credit agreements due to expire in May 2023 were terminated. As of December 31, 2020, there were no outstanding borrowings under the revolving credit agreements, except for letters of credit, and TDS and UScellular’s unused borrowing capacity was $399 million and $298 million, respectively.
Term Loan Agreements
In January 2020, TDS entered into an unsecured $200 million senior term loan credit agreement. In March 2020, TDS amended the agreement to conform the agreement with its revolving credit agreement. The term loan may be drawn in one or more advances by the one-year anniversary of the date of the agreement; amounts not drawn by that time will cease to be available. The maturity date of the term loan is in January 2027. As of December 31, 2020, the outstanding borrowings under the agreement were $125 million and the unused borrowing capacity was $75 million. In January 2021, TDS borrowed an additional $75 million under the senior term loan credit agreement.
In March 2020, UScellular amended its unsecured senior term loan credit agreement in order to conform the agreement with its revolving credit agreement. In June 2020, UScellular amended and restated the agreement and increased its borrowing capacity to $300 million. The term loan may be drawn in one or more advances by the one-year anniversary of the date of the agreement; amounts not drawn by that time will cease to be available. The maturity date of the term loan is in June 2027. As of December 31, 2020, the outstanding borrowings under the agreement were $83 million and the unused borrowing capacity was $217 million.
Receivables Securitization Agreement
In April 2020, UScellular borrowed $125 million under its receivables securitization agreement. In October 2020, UScellular amended and restated its agreement to increase its total borrowing capacity to $300 million. Amounts under the receivables securitization agreement may be borrowed, repaid and reborrowed from time to time until maturity in December 2022, which may be extended from time to time as specified therein. In December 2020, UScellular repaid $100 million of the outstanding borrowing. As of December 31, 2020, the outstanding borrowings under the agreement were $25 million and the unused capacity was $275 million, subject to sufficient collateral to satisfy the asset borrowing base provisions of the agreement. 
Financial Covenants
The TDS and UScellular revolving credit agreements, senior term loan agreements and the UScellular receivables securitization agreement require TDS or UScellular, as applicable, to comply with certain affirmative and negative covenants, which include certain financial covenants. In particular, under these agreements, TDS and UScellular are required to maintain the Consolidated Interest Coverage Ratio at a level not lower than 3.00 to 1.00 as of the end of any fiscal quarter. TDS and UScellular also were required to maintain the Consolidated Leverage Ratio at a level not to exceed 3.25 to 1.00 as of the end of any fiscal quarter. TDS and UScellular believe they were in compliance as of December 31, 2020 with all such financial covenants. 
Other Long-Term Financing
In August 2020, UScellular issued $500 million of 6.25% Senior Notes due in 2069 and in December 2020, UScellular issued $500 million of 5.5% Senior Notes due in 2070. The proceeds from both issuances will be used for general corporate purposes, which may include the repayment of other debt, the purchase of additional spectrum and the funding of capital expenditures, including in connection with 5G buildout projects.
TDS and UScellular each have an effective shelf registration statement on Form S-3 to issue senior or subordinated debt securities. The proceeds from any such issuances may be used for general corporate purposes, including the possible reduction of other short-term or long-term debt; spectrum purchases; capital expenditures; acquisition, construction and development programs; working capital; additional investments in subsidiaries; or the repurchase of shares. The TDS shelf registration permits TDS to issue at any time and from time to time senior or subordinated debt securities in one or more offerings in an indeterminate amount. The UScellular shelf registration statement permits UScellular to issue at any time and from time to time senior or subordinated debt securities in one or more offerings, up to the amount registered, which is currently $500 million. The ability of TDS or UScellular to complete an offering pursuant to such shelf registration statements is subject to market conditions and other factors at the time.
TDS believes that it and/or its subsidiaries were in compliance as of December 31, 2020, with all covenants and other requirements set forth in the TDS and UScellular long-term debt indentures. TDS and UScellular have not failed to make nor do they expect to fail to make any scheduled payment of principal or interest under such indentures.
Refer to Market Risk — Long-Term Debt for additional information regarding required principal payments and the weighted average interest rates related to TDS’ Long-term debt.
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TDS and UScellular, at their discretion, may from time to time seek to retire or purchase their outstanding debt through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
See Note 12 — Debt in the Notes to Consolidated Financial Statements for additional information regarding the revolving credit agreements, senior term loan agreements, UScellular's receivables securitization agreement, UScellular's Senior Notes and other long-term financing.
Credit Ratings
In certain circumstances, TDS’ and UScellular’s interest cost on their various agreements may be subject to increase if their current credit ratings from nationally recognized credit rating agencies are lowered, and may be subject to decrease if the ratings are raised. The agreements do not cease to be available nor do the maturity dates accelerate solely as a result of a downgrade in TDS’ or UScellular’s credit rating. However, downgrades in TDS’ or UScellular’s credit rating could adversely affect their ability to renew the agreements or obtain access to other credit agreements in the future.
TDS and UScellular are rated at sub-investment grade. TDS and UScellular’s credit ratings as of December 31, 2020, and the dates such ratings were re-affirmed were as follows:
Rating AgencyRatingOutlook
Moody's (TDS) (re-affirmed October 2020)Ba2stable outlook
Moody's (UScellular) (re-affirmed October 2020)Ba1stable outlook
Standard & Poor's (re-affirmed October 2020)BBstable outlook
Fitch Ratings (re-affirmed June 2020)BB+stable outlook
Capital Requirements
The discussion below is intended to highlight some of the significant cash outlays expected during 2021 and beyond and to highlight the spending incurred in prior years for these items. This discussion does not include cash required to fund normal operations, and is not a comprehensive list of capital requirements. Significant cash requirements that are not routine or in the normal course of business could arise from time to time.
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Capital Expenditures
TDS makes substantial investments to acquire, construct and upgrade 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 in the Wireless business and fiber in the Wireline business) have required substantial investments in potentially revenue-enhancing and cost-saving upgrades to TDS’ networks to remain competitive; this is expected to continue in 2021 and future years with the continued deployment of 5G technology in the Wireless business, and the continued deployment of fiber in the Wireline business.
Capital expenditures (i.e., additions to property, plant and equipment and system development expenditures; excludes wireless spectrum license additions), which include the effects of accruals and capitalized interest, in 2020 and 2019 were as follows:

Capital Expenditures
(Dollars in millions)
tds-20201231_g24.jpg




UScellular’s capital expenditures in 2020 were $940 million compared to $710 million in 2019. In 2020, UScellular's capital expenditures were used for the following purposes:

Enhance and maintain UScellular's network coverage, including continuing deployment of VoLTE technology and providing additional speed and capacity to accommodate increased data usage by current customers;
Continue network modernization and 5G deployment; and
Invest in information technology to support existing and new services and products.

Capital expenditures for 2021 are expected to be between $775 million and $875 million. UScellular will continue to incur spend in 2021 related to its multi-year 5G deployment and network modernization initiatives.
TDS Telecom’s capital expenditures in 2020 were $368 million compared to $316 million in 2019. In 2020, these capital expenditures were used for the following purposes:
Continue to expand fiber deployment inside and outside of current footprint;
Maintain and enhance existing infrastructure including build-out requirements to meet state broadband and A-CAM programs;
Upgrade broadband capacity and speeds;
Support success-based spending for broadband and video growth; and
Deploy TDS TV+, a cloud-based video platform.

Capital expenditures for 2021 are expected to be between $425 million and $475 million. These expenditures are expected to be used for similar purposes as those listed above.
TDS intends to finance its capital expenditures for 2021 using primarily Cash flows from operating activities, existing cash balances and, if required, additional debt financing from its receivables securitization agreement, senior term loan credit agreements, revolving credit agreements and/or other forms of financing. 
Acquisitions, Divestitures and Exchanges
TDS may be engaged from time to time in negotiations (subject to all applicable regulations) relating to the acquisition, divestiture or exchange of companies, properties, wireless spectrum licenses (including pursuant to FCC auctions) and other possible businesses. In general, TDS may not disclose such transactions until there is a definitive agreement.
Subsequent to December 31, 2020, UScellular committed to purchase wireless spectrum licenses for approximately $1,460 million inclusive of associated costs, subject to regulatory approval. UScellular believes its cash balances, existing debt facilities, and other financing sources as described above are sufficient to meet this commitment.
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Other Obligations
TDS will require capital for future spending on existing contractual obligations, including long-term debt obligations; operating lease and finance lease commitments; commitments for device purchases, network facilities and transport services; agreements for software licensing; long-term marketing programs; and other agreements to purchase goods or services.
Variable Interest Entities
TDS consolidates certain “variable interest entities” as defined under GAAP. See Note 15 — Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information related to these variable interest entities. TDS may elect to make additional capital contributions and/or advances to these variable interest entities in future periods in order to fund their operations. 
Common Share Repurchase Programs
During 2020, TDS repurchased 879,409 Common Shares for $14 million at an average cost per share of $15.53. As of December 31, 2020, the maximum dollar value of TDS Common Shares that may yet be purchased under TDS' program was $185 million.
During 2020, UScellular repurchased 803,836 Common Shares for $23 million at an average cost per share of $29.00. At December 31, 2020, the total cumulative amount of UScellular Common Shares authorized to be purchased is 4,507,000.
Depending on its future financial performance, construction, development and acquisition programs, and available sources of financing, TDS and UScellular may not have sufficient liquidity or capital resources to make share repurchases. Therefore, there is no assurance that TDS and UScellular will make any share repurchases in the future. 
For additional information related to the current TDS and UScellular repurchase authorizations, see Note 17 — Common Shareholders’ Equity in the Notes to Consolidated Financial Statements.
Off-Balance Sheet Arrangements
TDS had no transactions, agreements or other contractual arrangements with unconsolidated entities involving “off-balance sheet arrangements,” as defined by SEC rules, that had or are reasonably likely to have a material current or future effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources.
Dividends
TDS paid quarterly dividends per outstanding share of $0.170 in 2020 and $0.165 in 2019. TDS increased the dividend per share to $0.175 in the first quarter of 2021. TDS has no current plans to change its policy of paying dividends.
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Consolidated Cash Flow Analysis
TDS operates a capital-intensive business. TDS makes substantial investments to acquire wireless spectrum licenses and properties and to construct and upgrade communications networks and facilities as a basis for 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 TDS’ networks. Cash flows may fluctuate from quarter to quarter and year to year due to seasonality, the timing of acquisitions and divestitures, capital expenditures and other factors. The following discussion summarizes TDS’ cash flow activities in 2020 and 2019.
2020 Commentary
TDS’ Cash, cash equivalents and restricted cash increased $978 million. Net cash provided by operating activities was $1,532 million due primarily to net income of $269 million adjusted for non-cash items of $1,071 million and distributions received from unconsolidated entities of $189 million, including $89 million in distributions from the LA Partnership.
Cash flows used for investing activities were $1,511 million. Cash paid for additions to property, plant and equipment totaled $1,338 million. Cash payments for wireless spectrum license acquisitions, including advanced payments, were $201 million.
Cash flows provided by financing activities were $957 million, reflecting the issuance of $500 million of 5.50% UScellular Senior Notes, $500 million of 6.25% UScellular Senior Notes, $125 million borrowed under the UScellular receivables securitization agreement, and $125 million borrowed under the TDS term loan. These were partially offset by a $100 million repayment on the UScellular receivables securitization agreement, the payment of dividends totaling $78 million, the payment of debt issuance costs of $41 million, and the repurchase of TDS and UScellular Common Shares.
2019 Commentary
TDS’ Cash, cash equivalents and restricted cash decreased $453 million. Net cash provided by operating activities was $1,016 million due to net income of $147 million plus non-cash items of $984 million and distributions received from unconsolidated entities of $162 million, including $75 million in distributions from the LA Partnership. This was offset by changes in working capital items which decreased net cash by $277 million. The more significant working capital changes were increases in accounts receivables and equipment installment plan receivables and a decrease in accounts payable.
Cash flows used for investing activities were $1,249 million. Cash paid for additions to property, plant and equipment totaled $957 million and Cash paid for acquisitions and licenses totaled $346 million. This was partially offset by cash received from the redemption of short-term Treasury bills of $29 million and Cash received from divestitures and exchanges of $41 million.
Cash flows used for financing activities were $220 million, reflecting a $100 million principal prepayment on the UScellular senior term loan, the repurchase of $21 million of UScellular Common Shares and ordinary activity such as the payment of dividends and the scheduled repayments of debt.
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Consolidated Balance Sheet Analysis
The following discussion addresses certain captions in the consolidated balance sheet and changes therein. This discussion is intended to highlight the significant changes and is not intended to fully reconcile the changes. Changes in financial condition during 2020 were as follows:
Income taxes receivable
Income taxes receivable increased $151 million primarily reflecting future tax refunds attributable to the carryback of 2020 net operating losses, as allowed under the CARES Act which was enacted in March 2020. See Note 5 — Income Taxes in the Notes to Consolidated Financial Statements for additional information.
Accounts payable
Accounts payable increased $134 million due primarily to software license and network equipment spending.
Accrued taxes
Accrued taxes increased $28 million due primarily to an increase in accrued payroll taxes.
Deferred income tax liability, net
Deferred income tax liability, net increased $187 million due primarily to full deductibility for tax purposes of qualified property placed in service during 2020. See Note 5 — Income Taxes in the Notes to Consolidated Financial Statements for additional information.
Long-term debt, net
Long-term debt, net increased $1,108 million due primarily to UScellular's issuance of $500 million of 5.50% Senior Notes and $500 million of 6.25% Senior Notes, and $125 million borrowed under the TDS term loan. See Note 12 — Debt in the Notes to Consolidated Financial Statements for additional information.
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Application of Critical Accounting Policies and Estimates
TDS prepares its consolidated financial statements in accordance with GAAP. TDS’ significant accounting policies are discussed in detail in Note 1 — Summary of Significant Accounting Policies and Recent Accounting Pronouncements, Note 2 — Revenue Recognition and Note 10 — Leases in the Notes to Consolidated Financial Statements.
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 TDS’ consolidated financial statements.
Intangible Asset Impairment
Licenses and Goodwill represent a significant component of TDS’ consolidated assets. These assets are considered to be indefinite-lived assets and, therefore, are not amortized but rather are tested at least annually for impairment. TDS performs annual impairment testing of Licenses and Goodwill as of November 1 of each year, or more frequently if triggering events occur. Significant negative events, such as changes in any of the assumptions described below or decreases in forecasted cash flows, could result in an impairment in future periods. Licenses are tested for impairment at the level of reporting referred to as a unit of accounting. Goodwill is tested for impairment at the level of reporting referred to as a reporting unit.
See Note 7 — Intangible Assets in the Notes to Consolidated Financial Statements for information related to Licenses and Goodwill activity in 2020 and 2019.
Wireless Spectrum Licenses – UScellular
For purposes of its impairment testing, UScellular separates its FCC wireless spectrum licenses into eight units of accounting, which consist of one unit of accounting for developed operating market wireless spectrum licenses (built wireless spectrum licenses) and seven geographic non-operating market wireless spectrum licenses (unbuilt wireless spectrum licenses). UScellular performed a qualitative impairment assessment in 2020 and a quantitative impairment assessment in 2019 to determine whether an impairment existed. 
In 2020, UScellular considered several qualitative factors, including analyst estimates of wireless spectrum license values which contemplated recent spectrum auction results, recent UScellular and other market participant transactions and other industry and market factors. Based on this assessment, UScellular concluded that it was more likely than not that the fair value of the wireless spectrum licenses in each unit of accounting exceeded their respective carrying values. Therefore, no quantitative impairment evaluation was completed.
In 2019, a market approach was used to value the wireless spectrum license portfolio. Within each unit of accounting, the wireless spectrum licenses were pooled by type and by geographic area. The market approach calculates estimated market values using observable pricing multiples from wireless spectrum license purchase and auction transactions to estimate fair value for each pool of wireless spectrum licenses. The sum of the fair values of each of the pools represents the estimated fair value of UScellular's wireless spectrum licenses. The most significant assumption made in this process was the pricing multiples which are units of value expressed in relation to the bandwidth and population covered by a wireless spectrum license. Based on the assessment, the fair values of the wireless spectrum license units of accounting exceeded their respective carrying values by amounts ranging from 39% to greater than 100%. It was determined that the carrying value of wireless spectrum licenses acquired through Auction 101 and 102 approximated fair value based on the recency of the auctions. Therefore, no impairment of wireless spectrum licenses existed.
Goodwill – TDS Telecom
TDS Telecom has recorded Goodwill as a result of past acquisitions of wireline and cable businesses. For purposes of the 2020 and 2019 Goodwill impairment tests, TDS Telecom had two reporting units: Wireline and Cable. 
Based on the results of TDS Telecom's annual Goodwill impairment assessment performed as of November 1, 2020, the fair values of the Wireline and Cable reporting units exceeded their carrying values. Therefore, no impairment of Goodwill was recorded for these reporting units. 
The discounted cash flow approach and guideline public company method were used to value the Wireline and Cable reporting units. The discounted cash flow approach develops an indication of fair value using various inputs and considers current economic factors as well as risks specific to the industry and the reporting unit. The most significant assumptions made in this process were the revenue growth rate (shown as a compound annual growth rate in the table below), the terminal growth rate and the discount rate. The guideline public company method develops an indication of fair value by calculating average market pricing multiples for selected publicly-traded companies. The developed multiples were applied to applicable financial measures of the respective reporting unit to determine an estimated fair value. The discounted cash flow approach and guideline public company method were weighted to arrive at the total fair value used for impairment testing. The weighting of methods was consistently applied in both 2020 and 2019.
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For purposes of the discounted cash flow approach, the following table represents key assumptions used in estimating the fair value of the Wireline and Cable reporting units as of November 1, 2020. Except for the revenue growth rate at the Wireline reporting unit, the other key assumptions used in the 2020 annual impairment assessment did not change significantly from the key assumptions used in the 2019 annual impairment assessment. The Wireline reporting unit's revenue growth rate increased year over year due primarily to the growth and inclusion of TDS Telecom's fiber deployments in new out-of-territory markets in the discounted cash flow model. There are uncertainties associated with these key assumptions and potential events and/or circumstances that could have a negative effect on the key assumptions described below.
Key AssumptionsWirelineCable
Revenue growth rate1
6.2 %5.5 %
Terminal growth rate1
0.0 %2.0 %
Discount rate2
6.5 %7.5 %
1    There are risks that could negatively impact the projected revenue and terminal growth rates, including but not limited to macroeconomic and industry factors. 
2    The discount rate is derived based on a set of guideline public companies and is an indicator of the cost of capital for a market participant in TDS Telecom's industries. The discount rate may increase if borrowing costs rise, market participants weight more of their capital structure towards equity vs. debt, long-term risk free interest rates increase, Wireline's or Cable's risk in relation to its peers increases, or other elements affecting the estimated cost of equity or debt increase.
Provided all other assumptions remained the same, the Wireline and Cable discount rates would have to increase to approximately 10% and 17%, respectively, to yield estimated fair values equal to their respective carrying values at November 1, 2020. Further, provided all other assumptions remained the same, the Wireline and Cable terminal growth rate assumptions would need to decrease to approximately negative 4% and negative 15%, respectively, to yield an estimate of fair value equal to the carrying value of the respective reporting units at November 1, 2020.
The Goodwill balances of the reporting units tested for impairment as of November 1, 2020, and the percentage by which the estimated fair value of the corresponding reporting units exceeded their carrying values, as a percentage of carrying value, was as follows:
Reporting unitGoodwill balanceExcess of estimated Fair Value over Carrying Value
(Dollars in millions)  
Wireline$409 47 %
Cable$138 85 %
Income Taxes
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 TDS’ financial condition and results of operations.
The preparation of the consolidated financial statements requires TDS to calculate a provision for income taxes. This process involves estimating the actual current income tax liability together with assessing temporary differences resulting from the different treatment of items for tax purposes. These temporary differences result in deferred income tax assets and liabilities which are included on a net basis in TDS’ Consolidated Balance Sheet. TDS must then assess the likelihood that deferred income tax assets will be realized based on future taxable income and, to the extent management believes that realization is not likely, establish a valuation allowance. Management’s judgment is required in determining the provision for income taxes, deferred income tax assets and liabilities and any valuation allowance that is established for deferred income tax assets.
TDS recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on management’s judgment as to the possible outcome that has a greater than 50% cumulative likelihood of being realized upon ultimate resolution.
See Note 5 — Income Taxes in the Notes to Consolidated Financial Statements for additional information.
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Regulatory Matters
5G Fund
On October 27, 2020, the FCC adopted rules creating the 5G Fund for Rural America, which will distribute up to $9 billion over ten years to bring 5G wireless broadband connectivity to rural America. The 5G Fund will be implemented through a two-phase competitive process, using multi-round auctions to award support. The winning bidders will be required to meet certain minimum speed requirements and interim and final deployment milestones. The order provides that the 5G Fund be in lieu of the previously proposed fund (the Phase II Connect America Mobility Fund) for the development of 4G LTE. The order also provides that over time a growing percentage of the legacy support a carrier receives must be used for 5G deployment.
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.
FCC Rulemaking – Restoring Internet Freedom
In December 2017, the FCC approved rules reversing or revising decisions made in the FCC’s 2015 Open Internet and Title II Order (Restoring Internet Freedom). The 2017 action reversed the FCC’s 2015 decision to reclassify Broadband Internet Access Services as telecommunications services subject to regulation under Title II of the Telecommunications Act. The 2017 action also reversed the FCC’s 2015 restrictions on blocking, throttling and paid prioritization, and modified transparency rules relating to such practices. Several parties filed suit in federal court challenging the 2017 actions. On October 1, 2019, the Court of Appeals for the D.C. Circuit issued an order reaffirming the FCC in most respects, but limiting the FCC's ability to preempt state and local net neutrality laws. On February 19, 2020, the FCC issued a Public Notice seeking comment on three issues under further consideration by the FCC based on a recent D.C. Circuit decision. On October 27, 2020, the FCC adopted an Order on Remand in response to the U.S. Court of Appeals for the D.C. Circuit’s remand on the three issues under further consideration by the FCC and found no basis to alter the FCC’s conclusions in the Restoring Internet Freedom Order.
A number of states, including certain states in which TDS operates, have adopted or considered laws intended to reinstate aspects of the foregoing net neutrality regulations that were reversed or revised by the FCC in 2017. To the extent such laws are enacted, it is expected that legal proceedings will be pursued challenging such laws, subject now to the DC Circuit ruling limiting the FCC's preemptive authority in this matter. The new administration may also conduct rulemaking proceedings that may reinstate in some form net neutrality rules. TDS cannot predict the outcome of any of these proceedings or the impact on its business.
Spectrum Auctions
On July 11, 2019, the FCC released a Public Notice establishing procedures for an auction offering wireless spectrum licenses in the 37, 39 and 47 GHz bands (Auction 103). On March 12, 2020, the FCC announced by public notice that UScellular was the provisional winning bidder for 237 wireless spectrum licenses for a purchase price of $146 million. In June 2020, the wireless spectrum licenses from Auction 103 were granted by the FCC.
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 public notice that UScellular was the provisional winning bidder for 243 wireless spectrum licenses for a purchase price of $14 million. The wireless spectrum licenses are expected to be granted by the FCC in 2021.
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). UScellular filed an application to participate in Auction 107 on September 21, 2020. Bidding in Auction 107 commenced on December 8, 2020. The initial phase of this auction closed on January 15, 2021 and the assignment phase commenced on February 8, 2021.
Rural Digital Opportunity Fund
On January 30, 2020, the FCC adopted the Rural Digital Opportunity Fund Report and Order, which establishes the framework for the Rural Digital Opportunity Fund (Auction 904). Auction 904 was a reverse auction to provide funding for high speed fixed broadband service in underserved rural areas. On July 15, 2020, UScellular filed an application to participate in Auction 904. Auction 904 began on October 29, 2020 and concluded on November 25, 2020. UScellular was not a winning bidder in Auction 904.
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Private Securities Litigation Reform Act of 1995
Safe Harbor Cautionary Statement
This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Annual Report contain statements that are not based on historical facts and represent forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, that address activities, events or developments that TDS intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify these forward‑looking statements, but are not the exclusive means of identifying them. Such forward‑looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward‑looking statements. Such risks, uncertainties and other factors include, but are not limited to, those set forth below. See “Risk Factors” in TDS’ Annual Report on Form 10-K for the year ended December 31, 2020, for a further discussion of these risks. Each of the following risks could have a material adverse effect on TDS’ business, financial condition or results of operations. However, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document. Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements. TDS undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. Readers should evaluate any statements in light of these important factors.
Operational Risk Factors
Intense competition involving products, services, pricing, and network speed and technologies could adversely affect TDS’ revenues or increase its costs to compete.
Changes in roaming practices or other factors could cause TDS’ roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact TDS’ ability to service its customers in geographic areas where TDS does not have its own network, which could have an adverse effect on TDS’ business, financial condition or results of operations.
A failure by TDS 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 TDS’ 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 TDS' business, financial condition or results of operations.
TDS’ smaller scale relative to larger competitors that may have greater financial and other resources than TDS could cause TDS 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 TDS’ business, financial condition or results of operations.
Advances or changes in technology could render certain technologies used by TDS obsolete, could put TDS at a competitive disadvantage, could reduce TDS’ revenues or could increase its costs of doing business.
Complexities associated with deploying new technologies present substantial risk and TDS’ investments in unproven technologies may not produce the benefits that TDS expects.
Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of TDS’ businesses could have an adverse effect on TDS’ business, financial condition or results of operations.
A failure by TDS 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 TDS does business, including changes in TDS’ relationships with or financial or operational difficulties of key suppliers or independent agents and third party national retailers who market TDS’ services, could adversely affect TDS’ business, financial condition or results of operations.
A failure by TDS to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, could have an adverse effect on TDS’ business, financial condition or results of operations.
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Financial Risk Factors
Uncertainty in TDS’ future cash flow and liquidity or the inability to access capital, deterioration in the capital markets, other changes in TDS’ performance or market conditions, changes in TDS’ credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its construction, development or acquisition programs, reduce the amount of wireless spectrum licenses acquired, and/or reduce or cease share repurchases and/or the payment of dividends.
TDS 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.
TDS’ assets and revenue are concentrated primarily in the U.S. telecommunications industry. Consequently, its operating results may fluctuate based on factors related primarily to conditions in this industry.
TDS has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on TDS’ financial condition or results of operations.
Regulatory, Legal and Governance Risk Factors
Failure by TDS to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect TDS’ business, financial condition or results of operations.
TDS 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 TDS’ 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 TDS’ business, financial condition or results of operations.
The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices such as pacemakers, could have an adverse effect on TDS’ wireless business, financial condition or results of operations.
Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDS from using necessary technology to provide products or services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS’ business, financial condition or results of operations.
Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of TDS or have other consequences.
General Risk Factors
TDS has experienced, and in the future expects to experience, cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on TDS' business, financial condition or results of operations.
Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede TDS’ access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on TDS’ business, financial condition or results of operations.
The impact of public health emergencies, such as the COVID-19 pandemic, on TDS' business is uncertain, but depending on duration and severity could have a material adverse effect on TDS' business, financial condition or results of operations.
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Market Risk
Long-Term Debt
As of December 31, 2020, the majority of TDS’ long-term debt was in the form of fixed-rate notes with remaining maturities ranging up to 50 years. Fluctuations in market interest rates can lead to significant fluctuations in the fair value of these fixed-rate notes.
The following chart presents the scheduled principal payments on long-term debt by maturity dates at December 31, 2020:
tds-20201231_g25.jpg
The following table presents the scheduled principal payments on long-term debt, finance lease obligations, and other installment arrangements, and the related weighted average interest rates by maturity dates at December 31, 2020:
 Principal Payments Due by Period
 
Long-Term Debt Obligations1
Weighted-Avg. Interest Rates on Long-Term Debt Obligations2
(Dollars in millions)  
2021$2.8 %
202230 1.6 %
20232.5 %
20242.5 %
20252.5 %
Thereafter3,488 6.3 %
Total$3,538 6.3 %
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 and unamortized discounts related to UScellular's 6.7% Senior Notes. See Note 12 — Debt in the Notes to Consolidated Financial Statements for additional information.
2    Represents the weighted average stated interest rates at December 31, 2020, for debt maturing in the respective periods.
Fair Value of Long-Term Debt
At December 31, 2020 and 2019, the estimated fair value of long-term debt obligations, excluding finance lease obligations, other installment arrangements, the current portion of such long-term debt and debt financing costs, was $3,746 million and $2,474 million, respectively. See Note 3 — Fair Value Measurements in the Notes to Consolidated Financial Statements for additional information.
Other Market Risk Sensitive Instruments
The substantial majority of TDS’ other market risk sensitive instruments (as defined in Item 305 of SEC Regulation S-K) are short-term, including Cash and cash equivalents. Accordingly, TDS believes that a significant change in interest rates would not have a material effect on such other market risk sensitive instruments.
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Supplemental Information Relating to Non-GAAP Financial Measures
TDS sometimes uses information derived from consolidated financial information but not presented in its financial statements prepared in accordance with GAAP to evaluate the performance of its business. Certain of these measures are considered “non-GAAP financial measures” under U.S. Securities and Exchange Commission Rules. Specifically, TDS has referred to the following measures in this Form 10-K Report:
EBITDA
Adjusted EBITDA
Adjusted OIBDA
Free cash flow

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. TDS 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 their 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. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS’ operating results before significant recurring non-cash charges, gains and losses, and other items as presented below as they provide additional relevant and useful information to investors and other users of TDS’ financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, 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 or Income before income taxes and Operating income. Income tax expense is not provided at the individual segment level for Wireline and Cable. TDS calculates income tax expense (benefit) for TDS Telecom in total.
TDS - CONSOLIDATED20202019
(Dollars in millions)  
Net income (GAAP)$269 $147 
Add back or deduct:
Income tax expense19 64 
Interest expense168 165 
Depreciation, amortization and accretion909 932 
EBITDA (Non-GAAP)1,365 1,308 
Add back or deduct:
(Gain) loss on asset disposals, net27 12 
(Gain) loss on sale of business and other exit costs, net (1)
(Gain) loss on license sales and exchanges, net(5)— 
(Gain) loss on investments(2)— 
Adjusted EBITDA (Non-GAAP)1,385 1,319 
Deduct:
Equity in earnings of unconsolidated entities181 168 
Interest and dividend income15 29 
Other, net(1)— 
Adjusted OIBDA (Non-GAAP)1,190 1,122 
Deduct:
Depreciation, amortization and accretion909 932 
(Gain) loss on asset disposals, net27 12 
(Gain) loss on sale of business and other exit costs, net (1)
(Gain) loss on license sales and exchanges, net(5)— 
Operating income (GAAP)$259 $179 
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UScellular2020 2019
(Dollars in millions)  
Net income (GAAP)$233 $133 
Add back or deduct:
Income tax expense17 52 
Interest expense112 110 
Depreciation, amortization and accretion683 702 
EBITDA (Non-GAAP)1,045 997 
Add back or deduct:
(Gain) loss on asset disposals, net25 19 
(Gain) loss on sale of business and other exit costs, net (1)
(Gain) loss on license sales and exchanges, net(5)— 
(Gain) loss on investments(2)— 
Adjusted EBITDA (Non-GAAP)1,063 1,015 
Deduct:
Equity in earnings of unconsolidated entities179 166 
Interest and dividend income8 17 
Adjusted OIBDA (Non-GAAP)876 832 
Deduct:
Depreciation, amortization and accretion683 702 
(Gain) loss on asset disposals, net25 19 
(Gain) loss on sale of business and other exit costs, net (1)
(Gain) loss on license sales and exchanges, net(5)— 
Operating income (GAAP)$173 $112 
TDS TELECOM20202019
(Dollars in millions)  
Net income (GAAP)$100 $92 
Add back or deduct:
Income tax expense18 30 
Interest expense(4)(3)
Depreciation, amortization and accretion203 200 
EBITDA (Non-GAAP)316 320 
Add back or deduct:
(Gain) loss on asset disposals, net1 (7)
Adjusted EBITDA (Non-GAAP)317 313 
Deduct:  
Interest and dividend income5 12 
Other, net(1)— 
Adjusted OIBDA (Non-GAAP)314 300 
Deduct:
Depreciation, amortization and accretion203 200 
(Gain) loss on asset disposals, net1 (7)
Operating income (GAAP)$110 $107 
Numbers may not foot due to rounding.
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WIRELINE20202019
(Dollars in millions)  
Income before income taxes (GAAP)$99 $110 
Add back or deduct:
Interest expense(4)(3)
Depreciation, amortization and accretion124 132 
EBITDA (Non-GAAP)219 239 
Add back or deduct:  
(Gain) loss on asset disposals, net (8)
Adjusted EBITDA (Non-GAAP)220 231 
Deduct:  
Interest and dividend income4 10 
Other, net(1)— 
Adjusted OIBDA (Non-GAAP)217 220 
Deduct:  
Depreciation, amortization and accretion124 132 
(Gain) loss on asset disposals, net (8)
Operating income (GAAP)$92 $96 
Numbers may not foot due to rounding. 
CABLE2020 2019
(Dollars in millions)  
Income before income taxes (GAAP)$18 $13 
Add back:  
Depreciation, amortization and accretion78 68 
EBITDA (Non-GAAP)97 81 
Add back or deduct:  
(Gain) loss on asset disposals, net1 
Adjusted EBITDA (Non-GAAP)97 82 
Deduct:  
Interest and dividend income1 
Adjusted OIBDA (Non-GAAP)97 80 
Deduct:  
Depreciation, amortization and accretion78 68 
(Gain) loss on asset disposals, net1 
Operating income (GAAP)$18 $11 
Numbers may not foot due to rounding.
Free Cash Flow
The following table presents Free cash flow, which is defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure which TDS 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.
 20202019
(Dollars in millions)
Cash flows from operating activities (GAAP)$1,532 $1,016 
Less: Cash paid for additions to property, plant and equipment1,338 957 
Free cash flow (Non-GAAP)$194 $59 

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Financial Statements
Telephone and Data Systems, Inc.
Consolidated Statement of Operations
 
Year Ended December 31,202020192018
(Dollars and shares in millions, except per share amounts)   
Operating revenues   
Service$4,136 $4,059 $3,999 
Equipment and product sales1,089 1,117 1,110 
Total operating revenues5,225 5,176 5,109 
Operating expenses
Cost of services (excluding Depreciation, amortization and accretion reported below)1,244 1,202 1,206 
Cost of equipment and products1,110 1,135 1,130 
Selling, general and administrative1,681 1,717 1,694 
Depreciation, amortization and accretion909 932 883 
(Gain) loss on asset disposals, net27 12 9 
(Gain) loss on sale of business and other exit costs, net (1) 
(Gain) loss on license sales and exchanges, net(5) (18)
Total operating expenses4,966 4,997 4,904 
Operating income259 179 205 
Investment and other income (expense)
Equity in earnings of unconsolidated entities181 168 160 
Interest and dividend income15 29 26 
Gain (loss) on investments2   
Interest expense(168)(165)(172)
Other, net(1) 2 
Total investment and other income29 32 16 
Income before income taxes288 211 221 
Income tax expense19 64 46 
Net income269 147 175 
Less: Net income attributable to noncontrolling interests, net of tax43 26 40 
Net income attributable to TDS shareholders$226 $121 $135 
Basic weighted average shares outstanding114 114 112 
Basic earnings per share attributable to TDS shareholders$1.97 $1.06 $1.20 
Diluted weighted average shares outstanding115 116 114 
Diluted earnings per share attributable to TDS shareholders$1.93 $1.03 $1.17 
The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Statement of Comprehensive Income
 
Year Ended December 31,202020192018
(Dollars in millions)   
Net income$269 $147 $175 
Net change in accumulated other comprehensive income
Change related to retirement plan
Amounts included in net periodic benefit cost for the period
Net actuarial gains3 1  
Prior service cost  (10)
Amortization of prior service cost3 1 (1)
 6 2 (11)
Change in deferred income taxes(1)(1)3 
Change related to retirement plan, net of tax5 1 (8)
Net change in accumulated other comprehensive income5 1 (8)
Comprehensive income274 148 167 
Less: Net income attributable to noncontrolling interests, net of tax43 26 40 
Comprehensive income attributable to TDS shareholders$231 $122 $127 
The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
Year Ended December 31,202020192018
(Dollars in millions)   
Cash flows from operating activities   
Net income$269 $147 $175 
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
Depreciation, amortization and accretion909 932 883 
Bad debts expense77 112 101 
Stock-based compensation expense53 59 54 
Deferred income taxes, net190 34 33 
Equity in earnings of unconsolidated entities(181)(168)(160)
Distributions from unconsolidated entities189 162 153 
(Gain) loss on asset disposals, net27 12 9 
(Gain) loss on sale of business and other exit costs, net (1) 
(Gain) loss on license sales and exchanges, net(5) (18)
(Gain) loss on investments(2)  
Other operating activities3 4 4 
Changes in assets and liabilities from operations
Accounts receivable(16)(49)(39)
Equipment installment plans receivable(54)(97)(149)
Inventory12 (19)(5)
Accounts payable173 (60)2 
Customer deposits and deferred revenues4 (9)8 
Accrued taxes(120)(17)(29)
Other assets and liabilities4 (26)(5)
Net cash provided by operating activities1,532 1,016 1,017 
Cash flows from investing activities
Cash paid for additions to property, plant and equipment(1,338)(957)(776)
Cash paid for acquisitions and licenses(172)(346)(16)
Cash received from investments1 29 100 
Cash paid for investments(3)(11)(17)
Cash received from divestitures and exchanges26 41 29 
Advance payments for license acquisitions(30)(5)(2)
Other investing activities5  2 
Net cash used in investing activities(1,511)(1,249)(680)
Cash flows from financing activities
Issuance of long-term debt1,250   
Repayment of long-term debt(110)(118)(20)
TDS Common Shares reissued for benefit plans, net of tax payments(3)(6)42 
UScellular Common Shares reissued for benefit plans, net of tax payments(11)(9)18 
Repurchase of TDS Common Shares(14)  
Repurchase of UScellular Common Shares(23)(21) 
Dividends paid to TDS shareholders(78)(75)(72)
Payment of debt issuance costs(41)(1)(2)
Distributions to noncontrolling interests(2)(4)(6)
Payments to acquire additional interest in subsidiaries(11)  
Other financing activities 14 8 
Net cash provided by (used in) financing activities957 (220)(32)
Net increase (decrease) in cash, cash equivalents and restricted cash978 (453)305 
Cash, cash equivalents and restricted cash
Beginning of period474 927 622 
End of period$1,452 $474 $927 
The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Balance Sheet — Assets
December 31,20202019
(Dollars in millions)  
Current assets  
Cash and cash equivalents$1,429 $465 
Short-term investments3  
Accounts receivable
Customers and agents, less allowances of $67 and $74, respectively
1,004 1,005 
Other, less allowances of $2 and $2, respectively
108 119 
Inventory, net154 169 
Prepaid expenses105 98 
Income taxes receivable187 36 
Other current assets36 29 
Total current assets3,026 1,921 
Assets held for sale2  
Licenses2,638 2,480 
Goodwill547 547 
Other intangible assets, net of accumulated amortization of $71 and $65, respectively1
213 239 
Investments in unconsolidated entities477 488 
Property, plant and equipment
In service and under construction13,659 12,864 
Less: Accumulated depreciation and amortization9,687 9,337 
Property, plant and equipment, net3,972 3,527 
Operating lease right-of-use assets998 972 
Other assets and deferred charges652 607 
Total assets2
$12,525 $10,781 

The accompanying notes are an integral part of these consolidated financial statements.
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Telephone and Data Systems, Inc.
Consolidated Balance Sheet — Liabilities and Equity
December 31,20202019
(Dollars and shares in millions, except per share amounts)  
Current liabilities  
Current portion of long-term debt$5 $10 
Accounts payable508 374 
Customer deposits and deferred revenues193 189 
Accrued interest16 11 
Accrued taxes69 41 
Accrued compensation132 121 
Short-term operating lease liabilities129 116 
Other current liabilities101 100 
Total current liabilities1,153 962 
Liabilities held for sale1