Market reaction
Array Digital Infrastructure Inc (NYSE:AD) declined 5.7% on Monday after Raymond James reduced its rating on the shares from Outperform to Market Perform. Telephone and Data Systems Inc (NYSE:TDS) also moved lower, down 3%, after receiving the same downgrade from analyst Ric Prentiss.
Analyst rationale and valuation view
Prentiss said the downgrades were prompted by both companies' announcements of a proposed collapse of their two-stock capital structures and by the view that the stocks are currently fairly valued despite ongoing strategic actions. In the case of Array Digital, the analyst noted the company posted a solid beat in first quarter 2026 earnings but suggested that much of the previously hidden value has now been unlocked.
Array Digital operational focus and spectrum monetization
Array Digital is concentrating on improving tower cash flow margins through targeted actions including ground lease optimization, selective land purchases and reductions in maintenance costs. The company is also progressing on spectrum monetization. The firm has obtained FCC approval and completed the closing of certain 700 MHz licenses to T-Mobile. Additional 600 MHz and AWS sales are expected to close in the second quarter, while transactions involving Verizon are anticipated in the second and third quarters pending regulatory approvals.
Remaining T-Mobile transactions are expected to close partly in May with the balance scheduled by year-end 2026. Management has indicated it will continue to pursue opportunistic monetization of retained spectrum, with C-band identified as the primary focus.
TDS operational update and outlook
For Telephone and Data Systems, Prentiss pointed to what he described as a "light start" to 2026. TDS Telecom reported delivery of 40,000 marketable fiber addresses and roughly 11,000 residential fiber net adds, representing a 32% year-over-year increase. Management attributed the fiber growth to higher construction capacity, stronger door-to-door and digital sales, and an ongoing copper-to-fiber migration.
Despite fiber strength - with fiber revenue growing 13% year-over-year - TDS continues to face pressure on copper and coax cable revenues. As a result, total revenue for 2026 is now expected to land in the bottom half of the previously given guidance range. The company also announced an agreement to acquire Granite State Communications, a fully fiber asset with approximately 11,000 service addresses, with the transaction expected to close in the third quarter.
Clear summary
Both Array Digital and TDS were downgraded by Raymond James after announcing plans to collapse two-stock structures. The analyst concluded that recent strategic actions and operational results leave the stocks fairly valued, prompting the change in recommendation and contributing to share price declines.
Key points
- Array Digital fell 5.7% after a downgrade to Market Perform despite a strong Q1 2026 earnings beat; the firm is focused on tower margin improvement and spectrum monetization.
- TDS declined 3% after a downgrade; TDS Telecom reported 40,000 marketable fiber addresses and about 11,000 residential fiber net adds, up 32% YoY, while facing continued pressure in copper and coax revenues.
- Both companies are pursuing structural and strategic changes - including spectrum and asset monetization and a proposed collapse of two-stock structures - that inform near-term valuation considerations and investor expectations.
Risks and uncertainties
- Regulatory and approval risk - several spectrum and transaction closings are contingent on FCC or other approvals, affecting expected timing of monetization proceeds and cash flow.
- Revenue pressure in legacy products - ongoing declines in copper and coax revenues at TDS may continue to weigh on total revenue, which is now guided to the lower half of its range for 2026.
- Execution risk on monetization and margin plans - Array Digital's plans to improve tower cash flow margins rely on ground lease optimization, selective land purchases and lower maintenance costs, outcomes that may vary in practice.