Presentation

Operator

Hello and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the TDS and UScellular fourth quarter 2024 operating results conference call. (Operator Instructions)
I would now like to turn the conference over to Colleen Thompson, Vice President of Corporate Relations. Please go ahead.

Good morning and thank you for joining us. We want to make you all aware of the presentation we have prepared to accompany our comments this morning, which you can find on the Investor Relations sections of the TDS and UScellular websites. With me today in offering prepared comments are from TDS, Vicki Villacrez, Executive Vice President and Chief Financial Officer; Walter Carlson, President and Chief Executive Officer. From UScellular, LT Therivel, President and Chief Executive Officer; Doug Chambers, Executive Vice President, Chief Financial Officer and Treasurer. And from TDS Telecom, Kris Bothfeld, Vice President of Finance and Chief Financial Officer. This call is being simultaneously webcast on the TDS and UScellular investor relations websites.
Please see the websites for slides referred to on this call, including non-GAAP reconciliations. TDS and UScellular filed their SEC Form 8-K, including the press releases and our 10Ks earlier this morning. As shown on slide 2, the information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the Safe Harbor paragraphs in our press releases and the extended version included in our SEC filings.
And with that, I will now turn the call over to Vicki Villacrez.

Okay. Thank you, Colleen, and hello, everyone. This morning, we'll take a quick look back at last year and also share with you our 2025 priorities and goals. 2024 was a significant year for the organization, and I'm very pleased with our accomplishments.
First, to position the company for long term success, we look to optimize our portfolio to focus on where we can grow and win. As evidenced by multiple announcements related to the strategic review of alternatives at UScellular, along with the sale of OneNeck IT solutions and several small copper eyelet and cable companies at TDS Telecom.
As you will hear today, both of our businesses made significant investments in 2024 to improve their competitive positions and enhance the customer experience with the 5G mid-band deployment at UScellular and the fiber program at TDS Telecom, where we have increased our footprint nearly 30% over the past three years. These investments were made with financial discipline as capital expenditures were down 24% for the full year on a consolidated level, contributing to an increase in free cash flow in 2024.
Also in 2024, both businesses maintained their rigorous cost reduction programs, resulting in expanded margins and adjusted EBITDA being up 7% for the full year on a consolidated basis. We further strengthened our balance sheet at UScellular, which paid down over $200 million in debt. We were also free cash flow positive and consistently drove year-over-year improvements in our bank leverage ratios, operating below 3 times in the second half of the year at both companies.
We ended the year unlocking significant value for our shareholders, and I'm pleased with the progress we've made to position us for the future. I now want to introduce Walter Carlson, TDS Board Chair, who was recently named TDS President and CEO. Walter, it's a pleasure to have you join us this morning.

Thank you, Vicky, and good morning. I'm pleased to be with you today. I joined the TDS management team earlier this month, and I am honored to succeeded in this role. I thought it was important to be on this call to share with you our priorities for 2025. We have important priorities this year, as you can see on slide 4. Accomplishing these objectives is critical, and our entire team is focused on them to position the enterprise for a very bright future.
Our first priority is to close the T-Mobile transaction. You will hear much more from LT on this, but closing this transaction is the first step in the company's transformation. And following the closing of the T-Mobile transaction, we will focus on closing the other announced spectrum transactions.
Our second priority is to make sure the assets remaining at UScellular are highly successful. Foremost among these are UScellular's owned towers, and we expect to take steps to further strengthen and solidify that business.
Third, we intend for our telecom business to remain focused on its fiber strategy. As you will hear from Kris, we have increased our projected capital spend at telecom to pursue highly desirable fiber opportunities.
Our fourth priority is to wisely use the proceeds from the T-Mobile and other transactions to optimize the company's capital structure and to free up capital while striking the right balance between reinvestment in core businesses and shareholder returns.
And finally, last but far from least, we will prioritize the culture of TDS. TDS is dedicated to serving its customers, associates, communities, and shareholders. We will continue to do so in 2025 and going forward. We are focused on optimizing the right assets, the right talent, and the right capital structure to best position the enterprise going forward.
Now, it's time to hear from our business units.

Thank you, Walter. Good morning, everyone. As I reflect on 2024, it was certainly a momentous year at UScellular.
We were able to improve subscriber results and drive strong financials while we also executed a strategic review of the business. We established a series of transactions that unlocks significant value for our stakeholders and puts the business that remains in a strong position moving forward.
The agreement to sell the wireless business to T-Mobile that we entered into in the second quarter combined with the various spectrum transactions that we announced in the fourth quarter should deliver substantial proceeds.
And as we mentioned when we announced the deal, we anticipate being in a position to return capital to shareholders. Naturally, any decisions around that will be made by the Board of Directors in due course.
The spectrum transactions reflect sales prices that are in excess of both the praised value and book value of their respective licenses. That further demonstrates the licenses and the bandwidth they provide of significant value to other carriers, which in turn, will allow those carriers to provide an improved experience to their customers.
With regard to the T-Mobile transaction and our two large spectrum transactions, all three are progressing as expected. We're having ongoing interactions with the regulators to respond to their requests and importantly, we still believe we're on track for a mid-2025 close for the T-Mobile transaction. And this is important because the spectrum deals that we announced in the fourth quarter are contingent upon the close of that transaction, as well as a number of other factors.
As a quick reminder, I want to touch on what the remaining business at UScellular will look like after the close of the announced transactions. And let's start with the tower business.
Today we have about 4,400 owned towers with 2,444 co-locators. And with the new MLA that we put in place with T-Mobile, we'll be adding at least another 2,015 incremental co-locations on our towers that further strengthens that business. We remain bullish on the long-term outlook for our tower business as the long-term capacity needs of the industry will likely require further densification and drive demand for towers.
One other thing to keep in mind is we will likely not have a clear line of sight on which additional towers T-Mobile will choose to locate on until up to 30 months after the transaction closes. Therefore, it'll take some time before we know exactly how many towers we have with no co-locators, and what we choose to do with these naked towers, retain them, decommission them, sell them, or transfer them to third parties.
Now, also remaining will be our equity method investment interests in various partnerships, and those produce attractive cash flows. For context, there were $169 million of cash distributions from our unconsolidated entities in 2024.
And lastly, we'll have our remaining spectrum portfolio, and that represents about 30% of our existing spectrum portfolio today, of which the vast majority is C-Band spectrum. We believe the attributes of these C-Band licenses are attractive.
C-Band is beachfront, mid-band spectrum for 5G, and there's an existing infrastructure ecosystem, so carriers are easily able to put that spectrum to use. And although there are build out requirements associated with this band, the first one doesn't apply to these licenses until 2029, so there's plenty of time for us to opportunistically monetize the spectrum.
Turning to our 2024 results, given the industry environment, UScellular had a very solid year of financial and operating results. We executed on our plan to improve our subscriber trajectory and advance our mid-band deployment while remaining financially disciplined.
We delivered on the guidance that we set at the beginning of the year, and we made meaningful year-over-year progress in retail subscriber results. That includes nice growth and fixed wireless, which as you may have seen earlier this week, surpassed 150,000 customers.
I'm especially pleased with the improvements in the year-over-year postpaid handset results in the second half of 2024. Doug's going to touch on that in a few minutes.
However, despite those improvements, net retail subscriber ads were still negative, and the challenges of the competitive environment coupled with the size and lack of scale of our business still remain. That's why we feel the transaction with T-Mobile is the best path forward for our customers and for the business overall.
For the full year, all cash expense categories were down, and that's despite increased data usage by customers, which rose 37% year over year. As of yearend, we've rolled out mid-band to sites which cover close to 50% of our data traffic.
Now, looking forward to 2025, our operational priorities are not changing. We'll continue to invest in our customers both through retention activities, that includes the continuation of us days and acquisition strategies. As a reminder, us days are periods where highly attractive promotional offers are made available to our existing customers. We will also continue to invest in our built for us brand that focuses on a subject that matters to customers' healthy and responsible use of technology.
And finally, we'll continue rolling out mid-band spectrum across our footprint, expanding capacity and speed, and enhancing our customers' overall 5G experience, and that rollout's working. Last month, UScellular ranked first in the North Central region, according to JD Power 2025 US Wireless Network Quality Performance Study.
Financially, during 2024, we increased both profitability and free cash flow. We strengthened our balance sheet by paying down over $200 million in debt. This is an excellent result given the significant strategic actions that were affected throughout the year.
Our focus this year will be to diligently work to close those pending transactions while remaining laser focused on operating and investing in our business, our customers, and our associates. Speaking of associates, I want to provide a huge thank you to our team for their unrelenting focus on our customers and our business.
Now, let me turn it over to Doug to talk through the results in a little bit more detail.

Thanks, LT. Good morning.
Turning to postpaid subscriber results in slide 9, we ended 2024 on a high note. Postpaid handset gross additions increased year over year by 16%, and postpaid handset churn decreased 14 basis points, primarily driven by a decrease in voluntary churn. Although postpaid handset net ads are still negative, we believe the efforts that we are making in caring for our customers, investing in our network, and offering compelling promotions to both new and existing customers are all helping to drive improvements in postpaid handset results.
Moving to consolidated financial results starting on slide 12. For the fourth quarter, service revenues declined 2%, primarily driven by declines in the average retail subscriber base.
Loss on equipment for equipment sales plus cost of equipment sold, increased $13 million in the fourth quarter, primarily driven by increased promotional expenses as we maintained attractive acquisition and retention offers throughout the fourth quarter of 2024, which drove favorable year-over-year retail subscriber results. As a result, adjusted operating income before depreciation and amortization declined 14%, and adjusted EBITDA, which incorporates the earnings from our equity method investments along with interest and dividend income, declined 11%.
For the full year, despite a 2% decline in service revenues driven by decreases in average retail subscribers, adjusted OIBDA and adjusted EIA both increased 3% or $27 million and $32 million respectively. This profitability improvement resulted from the impact of our shutdown of the CDMA network in the first quarter of 2024 and the favorable impacts of our cost optimization initiatives.
As it relates to capital expenditures and 5G deployment, we largely completed our 5G coverage build in 2022. And in 2023 and 2024, dedicated a substantial majority of our 5G related capital expenditures to the deployment of our mid-band network to enhance speed and capacity. In 2025, we expect our 5G investments to continue to be dedicated to mid-band deployment, and we expect total capital expenditures to decline relative to 2024 levels as we progress further into our 5G deployment cycle.
Free cash flow in 2024 was $280 million, an $88 million increase over 2023, primarily attributable to the profitability improvement, a decrease in capital expenditures, and an increase in distributions from our equity method investments.
As mentioned, the pending transaction related to the sale of our wireless operations and select spectrum to T-Mobile is subject to regulatory approvals and other closing conditions and therefore close of this transaction is not a certainty. However, as LT mentioned, we still expect to obtain such regulatory approvals and meet such closing conditions in mid-2025 and complete the sale transaction with T-Mobile at that time. Accordingly, we are not issuing financial guidance for UScellular for 2025.
Slides 15 and 16 provide perspective on expected cash proceeds from the pending transactions and factors which may impact such proceeds. Of course, the stated transaction price is 4.4 billion, and $100 million of this purchase price is contingent upon UScellular achieving certain operating and financial targets prior to close.
Also, $400 million of the purchase price is related to spectrum owned by two of our partners whose interest we have agreed to purchase. Transfers of these interests are pending regulatory approval, and the transfers of the underlying licenses to T-Mobile are contingent upon the receipt of such regulatory approval.
Upon transaction closed, T-Mobile will conduct a debt exchange offer pursuant to which holders of UScellular unsecured senior notes with a total principal balance of $2.044 billion at December 31, 2024 will be offered to exchange their UScellular debt for T-Mobile debt. The amount of debt the respective holders elect to exchange will correspondingly reduce transaction proceeds.
In addition, UScellular is expected to repay its term loans, export credit financing agreement, receivable securitization agreement, and revolving line of credit. At December 31, 2024, the cumulative principal amount of this debt that requires repayment upon close was $875 million.
As it relates to employee liabilities, UScellular expects the following cash obligations. First, T-Mobile has agreed to make offers to a significant number of UScellular employees upon close. For these employees that are ultimately hired by T-Mobile, upon close, UScellular is obligated to pay these employees accrued wages, bonuses, and other benefits that were earned prior to the close date.
Second, UScellular expects to have severance obligations for employees that are neither employed by T-Mobile nor retained by the remaining UScellular business. These obligations are expected to include cash obligations of severance, accrued bonus, and other benefits, and may include cash obligations to settle the accelerated vesting of certain stock-based awards. UScellular also expects to incur cash income tax obligations related to the gain on sale in the T-Mobile transaction in the range of $225 million to $325 million.
The spectrum transactions with Verizon and AT&T are contingent upon the close of the sale of the wireless business and select spectrum to T-Mobile, regulatory approval, and other closing conditions. The spectrum transaction with AT&T has a similar contingency related to one of UScellular's designated entities with $232 million of the spectrum in this deal subject to UScellular's purchase of its partners' ownership interests, which as noted previously, is pending regulatory approval. Further, UScellular expects to incur cash income tax obligations related to the gain on sale of spectrum in these transactions with Verizon and AT&T in the range of $325 million to $375 million.
Lastly, UScellular expects to incur additional legal advisory and investment banking fees in 2025 and 2026 at and through the respective close dates of the T-Mobile and Spectrum transactions. In addition, as discussed by LT, in periods after the close of the T-Mobile transaction, UScellular expects to incur decommissioning costs related to certain naked towers.
UScellular is still evaluating the targeted capital structure for the remaining UScellular business, which is also expected to impact cash available at UScellular after close of the respective transactions. Again, this is a summary of the significant factors that are expected to impact net proceeds from the pending transactions, along with various dependencies and contingencies.
I will now turn the call over to Kris Bothfeld.

Thank you, Doug. Good morning, everyone. I'm happy to be here today to share TDS Telecom's 2024 accomplishments shown on slide 19.
Over the past year, we've made significant progress, executing on a number of initiatives that support our long-term vision and goals. We've advanced our fiber strategy, growing the number of fiber service addresses by 129,000 in 2024, surpassing our goal of 125,000. We now have more than 50% of our addresses served by fiber, and we plan to significantly increase that number as you'll see in a few slides.
Our fiber strategy is working. In 2024, we increased residential revenues by 6% as we saw growth in both broadband connections and average revenue per connection. The growth in broadband connections was driven by investments in our fiber markets. This top line growth coupled with continued cost management drove a 23% increase in adjusted EBITDA year over year.
And lastly, we spent 2024 planning and engineering for enhanced E-ACAM, which is a multi-year program with construction starting in 2025. This will bring faster broadband speeds to our customers and further reduce our reliance on copper technology.
Turning to slide 20. Throughout 2024, as we delivered new fiber service addresses, the teams were focused on ramping up sales and marketing to drive increased penetration to those newly launched addresses. We made progress in increasing the number of door-to-door sales reps, which has helped improve net ads. Our fourth quarter was the strongest quarter of the year, adding 7,900 residential broadband net ads.
On slide 21, you can see we grew total service addresses 6% year over year.
Shown on the right side of the slide, we are seeing increased take rates for higher broadband speeds, with 81% of residential broadband customers taking 100 meg or higher, and 22% taking 1GB or higher at the end of the quarter. When looking at new customers that we added in the quarter, 52% took speeds of 1GB or higher. Demand for faster speeds remains strong. Our broadband investments are producing positive results.
As shown on slide 22, average residential revenue per connection was up 5% year over year, due primarily to price increases. Looking at the chart on the right, we grew residential revenues 6% year over year, with expansion markets generating $114 million compared to $75 million last year.
On slide 23, I'll touch on the financial highlights.
Total operating revenues increased 1% in the fourth quarter and 3% for the full year, driven by price increases and growth in broadband connections, partially offset by declining commercial revenue and declines in residential video and voice connections, which have accelerated over the last year.
Cash expenses increased 1% in the quarter while decreasing 4% for the full year. In the fourth quarter, we started to invest more in sales and marketing to improve broadband penetration rates as previously discussed. As a result, adjusted EBITDA growth moderated in the fourth quarter compared to the full year. We remain very focused on discipline cost management, which contributed to the full year adjusted EBITDA improvement of 23%. Full year capital expenditures of $324 million were down as planned as we focused on driving broadband penetration and paced our spending commensurate with our financial capacity.
Turning to slide 24, I'm very pleased to share with you our new long-term fiber goals.
We've updated our goals to reflect our ongoing fiber expansion and E-ACAM programs. As a reminder, with the E-ACAM program, we will receive approximately $90 million of annual regulatory revenue for 15 years in exchange for bringing higher speeds to some of the most rural geographies in our footprint. Our latest engineering plans estimate bringing fiber to approximately 300,000 addresses, including those funded by the E-ACAM program and those passed along the road.
We are now targeting 1.8 million marketable fiber service addresses, a 50% increase from our previous target of 1.2 million. We ended the year at 928,000 fiber service addresses. We are also targeting 80% of total addresses to be served by fiber, up from our previous goal of 60%. We ended 2024 with 52% fiber.
And finally, we are expecting to offer speeds of 1GB or higher to at least 95% of our footprint. Yes, that is 95% of our footprint, up from our previous goal of 80%. We finished 2024 with 74% at GB speeds. We will use a combination of fiber and coax technologies to achieve this goal.
On the right side of the slide, you can see the service address mix at year end and the projected service address mix once these goals are met. We are planning to reduce the addresses served by copper in our footprint to just 5% over time.
On the next slide, you can see our 2025 priorities that support our vision of becoming a fiber centric company.
First is continuing our fiber program. As you can see, we are targeting to deliver 150,000 fiber service addresses in 2025. We expect to use our internal construction crews for approximately 1/3 of fiber service address delivery in 2025. We estimate cost savings as high as 30% from using our internal crews versus external contractors, and there are also intangible benefits related to these associates being part of our culture and living and working in our communities.
The teams will also be focused on sales execution. During 2025, we will invest heavily in sales and marketing programs to drive increased penetration in our fiber markets, including staffing up our door-to-door sales teams, both internally as well as augmenting with third party vendors. We expect penetration to continue to grow as we sell into the markets we've previously launched.
Also supporting sales in the fourth quarter, we launched TDS Mobile, our MVNO product, in limited markets. During 2025, we intend to fully launch TDS Mobile across our entire footprint. We believe that adding mobile to our product portfolio is complementary to our broadband offering and enables us to offer a full suite of competitive products and services to our customers.
And lastly, a top priority for 2025 is to execute on our transformation efforts. We've been transforming into a fiber company in a meaningful way for several years now. We're now also focused on streamlining our operations to enhance elements of our customer experience and further improve our margins and cost structure in the future.
On slide 26, we have provided guidance for 2025.
We are forecasting total telecom revenues of $1.03 billion to $1.07 billion. This reflects top line growth where we have made fiber investments, offset by industry-wide pressures in video, voice, and wholesale revenues, along with the full year impact from divestitures. Additionally, we expect average residential revenue per connection growth to moderate in 2025.
Adjusted EBITDA is projected to be between $320 million and $360 million in 2025. Our 2025 priorities, along with the recent divestitures will put pressure on adjusted EBITDA this year. We are investing in ramping up our sales and marketing efforts as well as fully staffing and scaling our internal construction teams. Additionally, we are investing in transformation initiatives to drive future cost savings and efficiencies.
In 2025, we plan to deliver 150,000 fiber service addresses, up from what we delivered in 2024, and we expect capital expenditures to be in the range of $375 million to $425 million, up from the $324 million in 2024. The increased spend is primarily related to E-ACAM, which will bring fiber deeper into our markets.
One more note on 2025 guidance, the [ilike] and cable divestitures completed in 2024 affect year-over-year comparisons. In aggregate, the companies that were divested contributed $16 million in annual revenues. Going forward, we will continue to look for opportunities to optimize our portfolio, especially in copper markets where there's not an economic path to fiber.
Before turning over the call, I want to thank the entire TDS Telecom team. Thanks to all your efforts, we ended the year strong with a lot of momentum. We are excited about 2025 and the opportunities ahead.
I'll now turn the call back to Walter for closing remarks.

As you just heard from the business units, we have an extraordinarily busy and exciting year ahead of us. I am proud to be part of this talented team.
I do want to recognize and thank Ted for his 40 years of service to this organization as CEO. And as many of you know, Ted will continue on with the enterprise as Vice Chair. Ted's contributions to the company over the past 51 years are remarkable, and I'm very pleased to be working side by side with him through this transformation of TDS.
With that, I'll turn it back over to Colleen for Q&A.

Okay. Regina, we are now ready for the first question.

Question and Answer Session

Operator

Ric Prentiss, Raymond James.

Couple of quick ones for you, Walter. Why was now the right time to take on the role and obviously, thanks for those top priorities, but what changes with you at the helm? So why now and what changes then I'll have one for UScellular and TDS.

So why now? I think that the TDS Board has been engaged in a succession planning review over a number of years. And as you've heard in this call, we are a truly transformative time with the sale of the wireless operations and spectrum to T-Mobile and to the other entities that are buying that spectrum, so this is a transformative time. And I think the Board felt that with this transformation, now is the right time to make a change at the executive level. And as I mentioned, Ted's not going away, he's staying on as Vice Chair, and he will have important roles.
So, to the second part of the question what changes, I think that there will be great continuity, Ric, in terms of the mission and the businesses that we will own post these transactions. So, we own two what I believe to be very outstanding businesses, the fiber business and the tower business, and I don't view that so much as a change, but as a course correction as we exit the wireless operations.

Speaking of towers, LT and Doug, I've pushed for a long time to tower reporting, so we appreciate that. And also, thanks for that slide detailing the cash costs around the transactions. That's very helpful. But on the tower side, there's a next step that we look at since we've covered the tower space since January of '99. Straight-line adjustment, amortization of prepaid rent, and moving possibly to a re-style AFFO reporting. Is that something still on the path as you guys move through this transformative time?

It is in our plans. It's something that post close the T-Mobile transaction. We would plan to provide AFFO reporting, and it will become important and we'll have a significant straight line GAAP adjustments in revenue that we'll need to show those adjustments. And it is our intention to move to AFFO reporting post T-Mobile close.

Let me just clarify as well. You asked about the REIT structure, right? I mean, there's a variety of different hurdles that you have to cross in order to be able to structure your tower business as a REIT right now from a corporate governance, corporate organization, enterprise organization perspective. We're not in a place to structure ourselves as a REIT. That doesn't mean I can't change in the future, but I just wonder when Doug said that isn't our plans, I want to make sure I clarify. Reporting AFFO is organizing ourselves as a REIT, is not right now on the road.

Makes sense because they have a roadmap. And then on TDS Telecom side, obviously a significant increase in the service addresses target, 50% up $1.2 million to $1.8 million. Give us a sense of what is the definition of longtime, long term? How many years are we thinking about, what's the pacing of it, and why not $2 million or why not $2.5 million? Why is $1.8 million the right number?

We are extremely excited about these new goals. And really, what these goals represent is two big programs, big fiber build programs at Telecom. One being E-ACAM, which we said is 300,000 addresses and reaching our most rural parts of our geographies. The second is our ongoing fiber expansion program. So as you recall, we launched fiber services in nearly 100 communities prior to the end of 2023. We're still building out those communities. So really what these goals represent is largely completing those two programs, our expansion programs and building out to those 100 communities, as well as the E-ACAM programs. And we're going to continue to pace our spending commensurate with our financial capacity and objectives.

So long term could be the end of the decade or what are we thinking the long-term path is?

We -- this is doubling down on our commitment to the community builds we already have in progress and depending on the pacing of the bill on a per-market basis, some of those finish up in 2 years, some of those finish up in 3 years. Some of these finish up, have a longer build, the larger communities might have larger builds, so it is commensurate with our construction schedules. And also, as we see progress going forward and are able to fund with our capacity, so I would say over the next 5 years is really a reasonable long term goal.

Operator

Sebastiano Petti, J.P. Morgan.

Just appreciate the color on the TDS EBITDA for the year will be a little bit burdened by some of the investments that you're making in the sales force to drive penetration as well as some of the difficult coms from some of the divestitures that you did announce. But not asking for 2026 guidance and beyond, but should we anticipate that these are now more ongoing run rate costs within the system and trying to drive this increased penetration, or should we see perhaps a recovery for lack of a better term as we extrapolate forward beyond 2025? That's on the TDS side.
And then I guess on the USM side, just thinking about C-Band or just thinking about your wireless portfolio overall, as maybe for LT or Doug, as you're thinking about quote unquote opportunistically monetizing the remainder of your spectrum, predominantly C-Band, you do have some time before those build out requirements are needed. But in any way, are you thinking about the FCC potential changes to the spectrum cap coming out of the out of the FCC and maybe does that factor into your view of potential monetization of the C-Bank or the timing given that it maybe it opens up the bidding process to additional parties just any color you might think about that would be helpful.

I'll take the first one regarding TDS Telecom guidance for 2025 and kind of outlook beyond that.
So first, I want to say that we're very pleased with our growth in 2024. As you saw, it was 23% adjusted EBITDA growth year over year. This beat even our own internal expectations, and I do want to acknowledge that some of that growth in 2024 was due to spending that was deferred from '24 to '25, so that is affecting year-over-year comparisons.
Also, you heard me say that we're investing in a few key areas to support our 2025 priorities. One is sales and marketing to drive penetration. Another is internal construction crews to drive more addresses at the same amount of capital, for lower capital costs. And lastly is the transformation efforts we're investing to drive future margin improvement and expansion as well as improve our customer experience. So all of these put pressure on adjusted EBITDA in the near term, but they're all to drive future growth. And so yes, we don't give guidance beyond 2025, but all the investments we're making are to drive future growth.

I'll tackle question too. This is LT.
So, I mean, certainly what you talked about with the spectrum cap could adjust the way potential acquires think about our spectrum. But there's an implication of your question that I want to make sure I clarify, which is, hey, did you wait to sell the spectrum in order to have that spectrum cap or adjustments to that spectrum cap come in place, and the answer is no. And it doesn't necessarily change the way we're thinking about monetization of that spectrum.
When we reached out to start the spectrum sale process, we were in discussions with over 20 companies, and most of those companies have absolutely no problem at all with the spectrum cap. We sold some of our spectrum to those companies that have no problems with the spectrum cap, and so that wasn't what drove our decision making, and it won't be what drives our decision making moving forward. What will drive it is do we get good value for our spectrum.
What you saw was we -- the spectrum that we sold was sold for over book and over market. We're pleased with how we did that. We think we're still sitting on a very valuable spectrum, and opportunistic does not mean waiting for the spectrum cap. Opportunistic means waiting for what we believe to be a fair offer and a good opportunity to sell it.
I will briefly talk about the spectrum cap, which is that I am encouraged by some of the conversations from Chairman [Carr] and from the rest of the FCC when it comes to how they are thinking about spectrum, how they're thinking about spectrum transactions, and how they're thinking about freeing up more spectrum for use by industry. This is an FCC that appears to understand the importance of investment and investment in the private sector, putting money behind spectrum, putting money behind radios, and putting capital to work to connect people.
And so, I'm encouraged by the moves. I certainly think they're the right things to do to encourage investment, but no, that's not driving our decision making when it comes to monetizing it.

Operator

Sergey Dluzhevskiy, GAMCO Investors.

My first question is for Walter, congratulations again on assuming the CEO position. You talked a little bit about the company's 2025 priorities. Maybe if you could share your medium-term vision for the company, where do you see TDS companies in 3 to 5 years?

I did want to set out the 2025 priorities very clearly and spend my time in the prepared remarks on that. Those are, in my mind, the predicates to what I believe the 3-to-5-year and longer time horizon should be. If we make these steps in 2025, we will be positioned extremely well for longer term growth in both our towers and our fiber business. And I think that TDS has a history of being opportunistic, looking to grow, looking to leverage its skills and talents of its individuals in its areas of concentration, and we will remain focused on the lighting our customers in the field of communications, and I think 3 to 5 years you'll see much more of that.

LT, if you could share your initial thoughts on the capital allocation priorities for (inaudible), I understand that it might be a little bit early for that, but just high-level thoughts and do you see potentially this is a dividend paying company giving the predictable cash flows from the power business and wireless partnerships. And also, how you guys are thinking about CapEx requirements and how aggressive potentially you could be on the new power bills once the spectrum transactions close?

I mean, it's certainly premature to provide any specific guidance. I can give you some high-level thoughts kind of how I see the company progressing. And let me just kind of give you a little bit of color on why we can't be more specific. A big driver, as Doug mentioned, is we still have a pretty huge swing when it comes to understanding which towers T-Mobile is going to select to be on. If they end up being on towers that have a large number of existing co-locators, well, that means that we have highly profitable towers, but we have a larger number of naked towers since we've got to think through decommissioning and so on. That could have a pretty significant impact on 2025, 2026, even 2027 because they've got 30 months to make that decision. That could have a significant impact on the financials for those years.
Conversely, let's say that they end up on mostly towers where we do not have current co-locators, that means our co-location rate will be lower, right, because we'll have more towers with just one co-locator on it, but we'll have less naked towers to decommission and so we'll have less one-time hits in those years. And so, that's why we're being why we can't necessarily be more specific about our approach to the capital structure.
Now that being said, either way, regardless of which towers or which collection of towers T-Mobile ends up being on, the tower business generates very attractive cash flows. The equity partnerships create attractive cash flows, and so, we certainly will have available cash at UScellular.
You mentioned new tower builds. I'm not potentially bullish. I'm not particularly bullish on the build to suit business. I don't think that's a great use of capital. However, we're going to be opportunistic. And so if there are carrier customers, those will be our primary customers moving forward right if they are carrier customers who want to invest with us to expand their network. It's certainly something we'll be open to. We'll certainly be open to inorganic growth. So if there's opportunities to buy new tower portfolios, something that we'll look at.
And so, do I think that we'll be in a position to return capital from the transaction back to shareholders? Absolutely, I do. I want to be really clear that still requires board approval, so that's not a decided factor. But yes, I think that we'll be in a place to send cash from the transaction back.
The remaining business will be generating really attractive cash flows. And to me, we'll then have a decision to make if we find great ways to invest those cash flows, whether it's M&A or whether it's some kind of a new build to suit model that has better economics than what the current models prompt, we'll invest there. If not, I could see us being in a position to establish a more regular dividend moving forward. But again, that's a decision for the Board at that time, and we're probably a couple of years away from making that decision.

And my last question is for Kris, obviously, you're planning to pass another 150,000 locations this fiber in 2025 and you're making efforts to improve your sales marketing activities and making those investments. Considering where you are in your fiber build and looking at the results for the fourth quarter, how do you feel about the level of net additions that you're getting in terms of conversion of passing into paying customers? What has been working well for you lately and what still needs to be improved during 2025 to achieve a better conversion?

So really, you saw this in 2024 where we really -- we had slower net ads than we thought in our expansion markets in Q2 and Q3, and we really diagnosed that problem with not having enough salespeople and door-to-door sales folks. And historically, we've always staffed our own internal teams, and we realized that we just couldn't do that anymore. We needed to bring in external parties to help augment that sales force, and we started to do that in Q4, and we started to see that nice ramp in our net ads. And so, that is we are hyper focused on ensuring that we have the right sales and marketing programs, including staff, fully staffing up our door-to-door sales teams to continue that momentum into 2025 and beyond.

Operator

Vikash Harlalka, New Street Research.

First on TDS, my back of the envelope map suggests that you need to expand your current footprint by about 400,000 to 500,000 locations. And then you mentioned that you're building about 300,000 locations for E-ACAM. Are most of those E-ACAM locations part of these expansions, or are only -- is only a small part of the E-ACAM location in these additional locations?

Yes, so your math is exactly right. So, there's two pieces of the program. One is the ongoing fiber expansion program; those are additional incremental addresses that add to our footprint. And you're right in the ballpark, we've tended to pace around 100,000 a year historically. And then the second part of the program is our enhanced E-ACAM program. This is bringing fiber into our eyelet copper markets, so it's converting copper addresses to fiber addresses. So it's not adding incremental footprint, but adding more fiber addresses and bringing higher speeds to some of our most rural geographies. So, we're very excited about these programs.

And so my question on this is these additional locations that you're building outside of E-ACAM, the additional organic fiber locations, are these locations mostly on the edge of your current footprint or are you looking to go beyond? And then what is the profile of these locations that you're looking to build as and like who are the main competitors in that footprint? And lastly on this, what would it cost to build these locations and how are you looking to fund it?

Yes, so back a few years ago, when we first really started this fiber expansion program, we hand selected nearly 100 communities for various characteristics. One of them was being favorable competitive landscape where there was very little le incumbent fiber. Another was very high growth percentages like household formation and growth opportunities. Another was clustering opportunities. And so really if you look at where we've been building, it's largely in Wisconsin and the Pacific Northwest, in various clusters and so, we're just continuing to build out in those communities that we hand selected. We initially planted the flags at the end of 2023 and we're continuing to build those out, but these are all outside of our incumbent footprint and are all expansion territories. So that's kind of the types of markets and we still feel very good about the competitive landscape in those areas and our ability to win in those markets.
In terms of build costs, that's something that we don't share, but what I will say is that our teams are extremely dedicated to keep our build costs as low as possible. That's one of the reasons why we've invested in internal construction crews, as you heard me say, that's going to account for a third of our address delivery in 2025. And we see as high as 30% savings versus external contractors where we use ICCs, internal construction crews, which we call ICCs, versus external contractors. We're also very innovative with our build designs and constantly thinking of new ways to build high-quality networks with lower input costs, so lower labor and materials costs.

These bills that Kris is discussing really is in our greenfield expansion, new markets, and this is part of our total footprint expansion that I spoke to that we've seen a 30% footprint expansion over the last three years. So, new communities, good profile in growth in new homes so that's great.
In terms of funding, again, the pacing of this program and the completion of these builds is always dependent on a number of different factors in every market. It also is dependent on our growth, in EBITDA over time and the pacing of the capital spending, but I would tell you that we do anticipate with the deals that we have on the table, that is our number one priority that we're focused on right now to get those closed. We expect multiple closings and any use of proceeds at the TDS level would certainly be an opportunity to continue funding and perhaps accelerating our program over time.

And then on the USM side, just a couple of quick ones. We expected the wireless partnerships to happen, the transaction related to the partnerships to happen around the same time as you did the deals with AT&T and Verizon. What stopped you from cleaning up those partnerships? Is that something that you wanted to do or is that not on the table?

You mentioned clean up, I don't feel the need to clean up anything that generates really attractive cash flows on an ongoing basis that we don't have to put hardly any operational energy behind. We view these as very attractive financial assets. We're always open to a transaction if the post-tax returns are better than the long-term returns that we're modeling, but I'm not sure I agree with your phrase clean up, right? I don't see anything that needs cleaning that we feel pretty good about those assets.

And last question, why didn't sort of sell in one of these one of the transactions, given that all three carriers are (inaudible) in the network?

It really comes down to value. As you can see from the transactions that we announced, we received bids, and we accepted bids that were ahead of our book value and ahead of our market value. And as you can sense from my statement, we did not receive those bids and see it. It doesn't mean there wasn't interest, there were plenty of conversations. We still feel very confident that we're going to be able to monetize that in the future, but it came down to the value that we were offered and what we're looking for for that spectrum in the long run.

Operator

And that will conclude our question-and answer-session, and I'll hand the call back over to Colleen Thompson for any closing remarks.

Okay. Thanks, everyone, for your time today. Please reach out to IR with additional questions. Have a great weekend.

Operator

This will conclude today's meeting. Thank you all for joining. You may now disconnect.