News Details

2013 EstimatedResults (1)

U.S. Cellular (2)

TDS Telecom

TDS (2)(6)

Previous

Current

Previous

Current

Previous

Current

(Dollars in millions)

Adjusted operating

revenues (3)

$3,615-$3,715

$3,590-$3,640

$890-$930

$920-$960

$4,550-$4,690

$4,555-$4,645

Adjusted income before

income taxes (4)

$600-$700

Unchanged

$230-$260

Unchanged

$830-$960

Unchanged

Capital expenditures

$735

Unchanged

$165

Unchanged

$910

Unchanged

(1)

These estimates are based on TDS' current plans, which include an expansion of the multi-year deployment of 4G LTE technology; such expansion includes deployment on 700 MHz in additional markets as well as deployment on the 850 MHz band to provide additional capacity for future growth in data usage, enable potential future 4G LTE roaming, and support the sale of Apple products. The financial impacts of selling Apple products in 2013 consist of the following:

These estimates also reflect the impacts of the deconsolidation of certain partnerships as of April 2013 at U.S. Cellular. These estimates do not include (i) the reported gain on sale of business and other exit costs, net (ii) the reported gain on investments, or (iii) the actual or expected gains from spectrum license divestitures. In addition, the estimates reflect the impacts of the acquisition of Baja Broadband, LLC as of August 1, 2013 and MSN Communications, Inc. as of October 4, 2013, and of a multi-year deployment of IPTV at TDS Telecom. New developments or changing conditions (such as, but not limited to, regulatory developments, customer net growth, customer demand for data services, costs to deploy, agreements for content or franchises, or possible acquisitions, dispositions or exchanges) could affect TDS' plans and, therefore, its 2013 estimated results.

(2)

These estimates reflect U.S. Cellular's consolidated results for 2013. Estimated results reflecting U.S. Cellular's Divestiture Markets and Core Markets are shown in the table below:

2013 Estimated Results

U.S. Cellular Core

Markets (5)

U.S. Cellular Divestiture

Markets (5)

U.S. Cellular

Consolidated (5)

Previous

Current

Previous

Current

Previous

Current

(Dollars in millions)

Adjusted operating

revenues (3)

$3,475-$3,575

$3,450-$3,500

$140

Unchanged

$3,615-$3,715

$3,590-$3,640

Adjusted income before

income taxes (4)

$560-$660

Unchanged

$40

Unchanged

$600-$700

Unchanged

Capital expenditures

$730

Unchanged

$5

Unchanged

$735

Unchanged

These estimates reflect the Divestiture Transaction which closed on May 16, 2013.

(3)

Adjusted operating revenues is a non-GAAP financial measure defined as Operating revenues excluding U.S. Cellular Equipment sales revenues. U.S. Cellular Equipment sales revenues are excluded from Adjusted operating revenues since U.S. Cellular equipment is generally sold at a net loss, and such net loss that results from U.S. Cellular Equipment sales revenues less U.S. Cellular Cost of equipment sold is viewed as a cost of earning service revenues for purposes of assessing business results. For purposes of developing this guidance, TDS does not calculate an estimate of U.S. Cellular Equipment sales revenues. TDS believes this measure provides useful information to investors regarding TDS' results of operations. Adjusted operating revenues is not a measure of financial performance under GAAP and should not be considered as an alternative to Operating revenues as an indicator of the Company's operating performance.

(4)

Adjusted income before income taxes is a non-GAAP financial measure defined as Income before income taxes, adjusted for the items set forth in the reconciliation below. Adjusted income before income taxes excludes these items in order to show operating results on a more comparable basis from period to period. In addition, TDS may also exclude other items from adjusted income before income taxes if such items help reflect operating results on a more comparable basis. TDS does not intend to imply that any such amounts that are excluded are non-recurring, infrequent or unusual; such amounts may occur in the future. Adjusted income before income taxes is not a measure of financial performance under GAAP and should not be considered as an alternative to Income before income taxes as an indicator of the Company's operating performance or as an alternative to Cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows or as a measure of liquidity. TDS believes Adjusted income before income taxes is a useful measure of TDS' operating results before significant recurring non-cash charges, discrete gains and losses and financing charges (Interest expense). The following tables provide a reconciliation of Income (loss) before income taxes to Adjusted income before income taxes for 2013 Estimated Results, nine months ended September 30, 2013 actual results, and 2012 actual results:

2013 Current Estimated Results

U.S. Cellular Core

Markets (5)

U.S. Cellular Divestiture Markets (2)(5)

U.S. Cellular Consolidated (5)

TDS

Telecom

TDS (6)

(Dollars in millions)

Income (loss) before income taxes

$315-$415

$35

$350-$450

$25-$55

$360-$490

Depreciation, amortization and

accretion expense (7)

$540

$250

$790

$205

$1,005

(Gain) loss on sale of business and

other exit costs, net

—

($245)

($245)

—

($300)

(Gain) loss from spectrum license

divestitures

($325)

—

($325)

—

($325)

(Gain) loss on investments

($20)

—

($20)

—

($15)

Interest expense

$50

—

$50

—

$105

Adjusted income before

income taxes

$560-$660

$40

$600-$700

$230-$260

$830-$960

Actual Results

Nine Months Ended September 30, 2013

Year Ended December 31, 2012

U.S. Cellular Consolidated (5)

TDS

Telecom

TDS (6)

U.S. Cellular Consolidated (5)

TDS

Telecom

TDS (6)

(Dollars in millions)

Income before income taxes

$

266

$

36

$

304

$

205

$

45

$

196

Depreciation, amortization and

accretion expense (7)

593

150

752

609

193

814

(Gain) loss on sale of business

and other exit costs, net

(244)

—

(298)

21

—

21

(Gain) loss from spectrum license

divestitures

—

—

—

—

—

—

(Gain) loss on investments

(18)

(1)

(15)

4

—

4

Interest expense

33

(2)

74

42

(1)

87

Adjusted income before

income taxes

$

630

$

183

$

817

$

881

$

237

$

1,122

(5)

The U.S. Cellular Consolidated amounts represent GAAP financial measures and include the results of both the Core Markets and the Divestiture Markets. The amounts for Core Markets and Divestiture Markets represent non-GAAP financial measures. TDS believes that the amounts for the Core Markets and Divestiture Markets may be useful to investors and other users of its financial information in evaluating the separate results for the Core Markets. Divestiture Markets are comprised of U.S. Cellular's Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets. Core Markets are comprised of all other markets in which U.S. Cellular conducts business including Peoria, Rockford and certain other areas in Illinois, and in Columbia, Joplin, Jefferson City and certain other areas in Missouri. Core Markets as defined also includes any other income or expenses due to U.S. Cellular's direct or indirect ownership interests in other spectrum in the Divestiture Markets which was not included in the sale and other retained assets from the Divestiture Markets.

(6)

The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments, all of which are not presented above.

(7)

The 2013 estimated amount for Depreciation, amortization and accretion expense in the U.S. Cellular Divestiture Markets includes approximately $171 million of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction. Actual results for the nine months ended September 30, 2013 and the year ended December 31, 2012 include $134 million and $20 million, respectively, of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction.

Repurchase Period

# Shares

Cost (in millions)

2013 (third quarter)

204,548

$5.8

United States Cellular Corporation

Total Markets Summary Operating Data (Unaudited)

Quarter Ended

9/30/2013

6/30/2013

3/31/2013

12/31/2012

9/30/2012

Retail Customers

Postpaid

Total at end of period

4,343,000

4,412,000

5,060,000

5,134,000

5,175,000

Gross additions

165,000

165,000

191,000

241,000

230,000

Net additions (losses)

(60,000)

(120,000)

(74,000)

(41,000)

(38,000)

ARPU (1)

$

54.64

$

54.18

$

54.85

$

54.56

$

54.34

Churn rate (2)

1.7%

2.0%

1.7%

1.8%

1.7%

Smartphone penetration (3) (4)

47.1%

45.5%

43.5%

41.8%

38.6%

Prepaid

Total at end of period

370,000

381,000

446,000

423,000

386,000

Gross additions

65,000

77,000

104,000

107,000

120,000

Net additions (losses)

(11,000)

(7,000)

23,000

37,000

57,000

ARPU (1)

$

28.72

$

31.69

$

33.31

$

33.56

$

32.97

Churn rate (2)

6.8%

6.8%

6.2%

5.8%

5.9%

Total customers at end of period

4,875,000

4,968,000

5,736,000

5,798,000

5,808,000

Billed ARPU (1)

$

50.92

$

50.60

$

51.13

$

50.94

$

50.83

Service revenue ARPU (1)

$

58.36

$

57.45

$

57.63

$

58.00

$

59.57

Smartphones sold as a percent of total

devices sold

65.2%

66.0%

61.7%

62.9%

53.0%

Total population

Consolidated markets (5)

84,025,000

84,025,000

93,943,000

93,244,000

92,996,000

Consolidated operating markets (5)

31,822,000

31,822,000

47,440,000

46,966,000

46,966,000

Market penetration at end of period

Consolidated markets (6)

5.8%

5.9%

6.1%

6.2%

6.2%

Consolidated operating markets (6)

15.3%

15.6%

12.1%

12.3%

12.4%

Capital expenditures (000s)

$

242,500

$

168,500

$

118,400

$

253,100

$

199,100

Total cell sites in service

7,687

7,748

8,027

8,028

7,984

Owned towers in service

4,422

4,411

4,411

4,408

4,377

United States Cellular Corporation

Core Markets Summary Operating Data (Unaudited)

Excludes NY1 & NY2

Quarter Ended

9/30/2013

6/30/2013

3/31/2013

12/31/2012

9/30/2012

Retail Customers

Postpaid

Total at end of period

4,343,000

4,412,000

4,463,000

4,496,000

4,515,000

Gross additions

165,000

165,000

176,000

208,000

196,000

Net additions (losses)

(60,000)

(53,000)

(33,000)

(19,000)

(23,000)

ARPU (1)

$

54.64

$

54.44

$

54.21

$

53.91

$

53.67

Churn rate (2)

1.7%

1.6%

1.6%

1.7%

1.6%

Smartphone penetration (3) (4)

47.1%

45.5%

43.0%

41.1%

37.8%

Prepaid

Total at end of period

370,000

381,000

373,000

342,000

305,000

Gross additions

65,000

76,000

91,000

87,000

99,000

Net additions (losses)

(11,000)

8,000

31,000

37,000

59,000

ARPU (1)

$

28.72

$

31.65

$

32.92

$

33.21

$

32.97

Churn rate (2)

6.8%

6.0%

5.6%

5.1%

4.8%

Total customers at end of period

4,875,000

4,968,000

5,005,000

5,022,000

5,012,000

Billed ARPU (1)

$

50.92

$

50.98

$

50.93

$

50.71

$

50.59

Service revenue ARPU (1)

$

58.36

$

57.88

$

57.14

$

57.67

$

59.34

Smartphones sold as a percent of total

devices sold

65.2%

66.1%

62.1%

62.9%

53.0%

Total population

Consolidated markets (5)

84,025,000

84,025,000

84,025,000

83,384,000

82,595,000

Consolidated operating markets (5)

31,822,000

31,822,000

31,822,000

31,445,000

31,110,000

Market penetration at end of period

Consolidated markets (6)

5.8%

5.9%

6.0%

6.0%

6.1%

Consolidated operating markets (6)

15.3%

15.6%

15.7%

16.0%

16.1%

Capital expenditures (000s)

$

239,300

$

171,200

$

113,300

$

241,400

$

184,100

Total cell sites in service

6,127

6,113

6,113

6,130

6,089

Owned towers in service

3,859

3,844

3,846

3,847

3,818

(1)

ARPU metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period. These revenue bases and customer populations are shown below:

a.

Postpaid ARPU consists of total postpaid service revenues and postpaid customers.

b.

Prepaid ARPU consists of total prepaid service revenues and prepaid customers.

c.

Billed ARPU consists of total postpaid, prepaid, and reseller service revenues and postpaid, prepaid and reseller customers.

d.

Service revenue ARPU consists of total retail service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(2)

Churn metrics represent the percentage of the postpaid or prepaid customers that disconnect service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.

(3)

Smartphones represent wireless devices which run on an Android^TM, BlackBerry® or Windows Mobile® operating system, excluding tablets.

(4)

Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(5)

Used only to calculate market penetration of consolidated and core markets and consolidated and core operating markets, respectively. See footnote (6) below.

(6)

Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated and core markets and consolidated and core operating markets, respectively, as estimated by Claritas®.

TDS Telecom

Summary Operating Data (Unaudited)

Quarter Ended

9/30/2013

6/30/2013

3/31/2013

12/31/2012

9/30/2012

TDS Telecom

Wireline Connections:

Residential

Voice

358,200

364,000

368,600

374,700

382,000

Broadband

229,500

231,700

229,500

229,900

232,000

IPTV

12,200

10,500

9,000

7,900

6,700

Wireline residential connections

599,900

606,200

607,100

612,500

620,700

Commercial

Voice

223,800

229,100

235,600

243,100

250,100

Broadband

27,600

28,300

28,800

29,600

30,500

managedIP

121,000

112,000

103,400

94,600

84,500

Wireline commercial connections

372,400

369,400

367,800

367,300

365,100

Total Wireline connections

972,300

975,600

974,900

979,800

985,800

Cable Connections:

Video

70,300

—

—

—

—

Broadband

59,800

—

—

—

—

Voice

16,800

—

—

—

—

Cable connections

146,900

—

—

—

—

Total Wireline and Cable Customer Connections

1,119,200

975,600

974,900

979,800

985,800

TDS Telecom

Capital Expenditures (000s)

Quarter Ended

9/30/2013

6/30/2013

3/31/2013

12/31/2012

9/30/2012

Wireline

$

32,800

$

33,300

$

27,900

$

49,500

$

39,100

Cable

1,400

—

—

—

—

HMS

2,400

2,300

2,600

2,300

4,400

$

36,600

$

35,600

$

30,500

$

51,800

$

43,500

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Three Months Ended September 30,

(Unaudited, dollars and shares in thousands, except per share amounts)

Increase/ (Decrease)

2013

2012

Amount

Percent

Operating revenues

U.S. Cellular

$

939,236

$

1,140,357

$

(201,121)

(18%)

TDS Telecom

234,543

220,417

14,126

6%

All Other (1)

7,201

9,334

(2,133)

(23%)

1,180,980

1,370,108

(189,128)

(14%)

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

781,291

935,800

(154,509)

(17%)

Depreciation, amortization and accretion

200,985

145,151

55,834

38%

Loss on asset disposals, net

1,701

11,262

(9,561)

(85%)

(Gain) loss on sale of business and other exit costs, net

(1,534)

65

(1,599)

>(100%)

982,443

1,092,278

(109,835)

(10%)

TDS Telecom

Expenses excluding depreciation, amortization and accretion

170,650

161,515

9,135

6%

Depreciation, amortization and accretion

51,305

48,251

3,054

6%

Loss on asset disposals, net

436

351

85

24%

222,391

210,117

12,274

6%

All Other (1)

Expenses excluding depreciation and amortization

6,208

9,361

(3,153)

(34%)

Depreciation and amortization

3,005

2,817

188

7%

Loss on asset disposals, net

18

29

(11)

(38%)

9,231

12,207

(2,976)

(24%)

Total operating expenses

1,214,065

1,314,602

(100,537)

(8%)

Operating income (loss)

U.S. Cellular

(43,207)

48,079

(91,286)

>(100%)

TDS Telecom

12,152

10,300

1,852

18%

All Other (1)

(2,030)

(2,873)

843

29%

(33,085)

55,506

(88,591)

>(100%)

Investment and other income (expense)

Equity in earnings of unconsolidated entities

37,609

25,015

12,594

50%

Interest and dividend income

2,507

2,359

148

6%

Interest expense

(24,961)

(20,497)

(4,464)

(22%)

Other, net

145

217

(72)

(33%)

Total investment and other income

15,300

7,094

8,206

>100%

Income (loss) before income taxes

(17,785)

62,600

(80,385)

>(100%)

Income tax expense (benefit)

(6,731)

22,442

(29,173)

>(100%)

Net income (loss)

(11,054)

40,158

(51,212)

>(100%)

Less: Net income (loss) attributable to noncontrolling interests, net of tax

(1,542)

11,041

(12,583)

>(100%)

Net income (loss) attributable to TDS shareholders

(9,512)

29,117

(38,629)

>(100%)

Preferred dividend requirement

(12)

(12)

—

—

Net income (loss) available to common shareholders

$

(9,524)

$

29,105

$

(38,629)

>(100%)

Basic weighted average shares outstanding

108,571

108,819

(248)

—

Basic earnings (loss) per share attributable to TDS shareholders

$

(0.09)

$

0.27

$

(0.36)

>(100%)

Diluted weighted average shares outstanding

108,571

109,246

(675)

—

Diluted earnings (loss) per share attributable to TDS shareholders

$

(0.09)

$

0.26

$

(0.35)

>(100%)

(1)

Consists of Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom, the Non-Reportable Segment and corporate operations.

N/M – Percentage change not meaningful

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Nine Months Ended September 30,

(Unaudited, dollars and shares in thousands, except per share amounts)

Increase/ (Decrease)

2013

2012

Amount

Percent

Operating revenues

U.S. Cellular

$

3,016,112

$

3,336,878

$

(320,766)

(10%)

TDS Telecom

675,064

633,011

42,053

7%

All Other (1)

26,543

29,179

(2,636)

(9%)

3,717,719

3,999,068

(281,349)

(7%)

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

2,472,825

2,668,224

(195,399)

(7%)

Depreciation, amortization and accretion

593,410

439,391

154,019

35%

Loss on asset disposals, net

16,153

15,967

186

1%

(Gain) loss on sale of business and other exit costs, net

(243,627)

(4,148)

(239,479)

>100%

2,838,761

3,119,434

(280,673)

(9%)

TDS Telecom

Expenses excluding depreciation, amortization and accretion

493,090

453,918

39,172

9%

Depreciation, amortization and accretion

149,552

143,639

5,913

4%

(Gain) loss on asset disposals, net

(53)

738

(791)

>(100%)

(Gain) loss on sale of business and other exit costs, net

—

39

(39)

N/M

642,589

598,334

44,255

7%

All Other (1)

Expenses excluding depreciation and amortization

25,480

31,418

(5,938)

(19%)

Depreciation and amortization

8,613

9,132

(519)

(6%)

Loss on impairment of assets

—

515

(515)

N/M

(Gain) loss on asset disposals, net

(10)

11

(21)

>(100%)

(Gain) loss on sale of business and other exit costs, net

(54,010)

—

(54,010)

N/M

(19,927)

41,076

(61,003)

>(100%)

Total operating expenses

3,461,423

3,758,844

(297,421)

(8%)

Operating income (loss)

U.S. Cellular

177,351

217,444

(40,093)

(18%)

TDS Telecom

32,475

34,677

(2,202)

(6%)

All Other (1)

46,470

(11,897)

58,367

>(100%)

256,296

240,224

16,072

7%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

100,303

73,796

26,507

36%

Interest and dividend income

6,685

6,894

(209)

(3%)

Gain (loss) on investments

14,518

(3,728)

18,246

>(100%)

Interest expense

(73,208)

(68,100)

(5,108)

(8%)

Other, net

(206)

196

(402)

>(100%)

Total investment and other income

48,092

9,058

39,034

>100%

Income before income taxes

304,388

249,282

55,106

22%

Income tax expense

130,056

85,619

44,437

52%

Net income

174,332

163,663

10,669

7%

Less: Net income attributable to noncontrolling interests, net of tax

26,348

39,955

(13,607)

(34%)

Net income attributable to TDS shareholders

147,984

123,708

24,276

20%

Preferred dividend requirement

(37)

(37)

—

—

Net income available to common shareholders

$

147,947

$

123,671