×

TDS Reports First Quarter 2010 Results

CHICAGO, May 10, 2010 /PRNewswire via COMTEX/ -- Note: Comparisons are year over year unless otherwise noted.

1Q 2010 Highlights Enterprise/TDS Corporate Operating revenues were $1.2 billion.

Repurchased 510,902 TDS special common shares for a total of $14.8 million.

Wireless/U.S. Cellular 24,000 retail net additions, reflecting a gain of 33,000 prepaid customers and a loss of 9,000 postpay customers.

Service revenues of $965.2 million decreased 2 percent due to reductions in voice and inbound roaming revenues, offset by higher data revenues.

28 percent increase in data revenues to $201.3 million, representing 21 percent of total service revenues.

Retail service ARPU (average revenue per unit) increased to $46.99 from $46.87.

Retail postpay churn low at 1.4 percent; postpay customers comprised 95 percent of retail customers.

5 percent increase in cell sites in service to 7,310.

Wireline/TDS Telecom 16 percent increase in ILEC high-speed data customers.

13 percent increase in ILEC high-speed data revenues, representing 19 percent of ILEC revenues.

ILEC equivalent access lines remained stable at 778,700, due in part to acquisitions; ILEC physical access lines decreased 5 percent to 530,400.

Managed IP stations (ILEC and CLEC) grew to 16,600 from 5,100.

As previously announced, TDS will hold a teleconference May 10, 2010 at 9:30 am CDT. Interested parties may listen to the call live by accessing the Conference Calls page of www.teldta.com.

Telephone and Data Systems, Inc. (NYSE: TDS, TDS.S) reported operating revenues of $1,222.6 million for the first quarter of 2010, a decrease of 3 percent from $1,258.4 million in the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $49.1 million and $0.46, respectively, for the first quarter of 2010, compared to $74.5 million and $0.66, respectively, in the comparable period one year ago.

"Both of our businesses are dedicated to ensuring outstanding customer experiences," said LeRoy T. Carlson, Jr., TDS president and CEO, "and that means a focus on providing excellent data and broadband services. Increased customer use of data in the quarter led to strong growth in wireless data revenues, and U.S. Cellular's commitment to quality in all aspects of the customer experience reduced retail postpay churn to 1.4 percent. Data revenue growth helped to stabilize profitability in our wireline business, along with benefits from cost-reduction initiatives implemented in 2009. In a highly competitive communications industry, our businesses' shared focus on superior customer service is an important differentiator.

"U.S. Cellular continues to drive data revenue growth with its broad assortment of smartphones and data-intensive devices, and through its expanded 3G network.

This growth has helped to offset a decline in service revenues due to lower voice and inbound roaming revenues. The company made progress on its major enablement initiatives in the quarter, including upgrading its marketing campaign management system to better target key customer segments. Though planned expenses related to these initiatives reduced profitability in the quarter, U.S. Cellular expects that the initiatives will ultimately reduce operational expenses and support its customer-focused strategy over the long term.

"TDS Telecom continued to attract customers to its high-speed data services, which led to a year-over-year increase in data revenues. Value-oriented bundles of voice, high-speed data and video services remained popular and helped to keep churn low. As part of its commitment to bringing critical broadband services to rural communities, TDS Telecom submitted 46 applications, totaling $136 million, to the Rural Utilities Service for the second round of broadband stimulus funding. To advance our strategy of growing through complementary businesses, TDS recently acquired VISI Incorporated. VISI, based in Minnesota, provides data center services and managed hosting primarily to small and medium sized businesses.

"Both of our businesses are increasingly well-positioned to capitalize on the growing customer interest in wireless data and wireline broadband services. U.S.

Cellular plans to make 3G speeds available to 98 percent of its customers by the end of this summer, while it continues to develop its 4G/LTE rollout plans.

Ninety-three percent of TDS Telecom's ILEC access lines are equipped for broadband services, and the company is focused on increasing the broadband speeds offered to customers. Both businesses have the support and financial strength to move forward with their customer-focused strategies." Guidance Guidance for the year ending Dec. 31, 2010 is shown below compared to previous guidance provided on Feb. 25, 2010. The company has commenced guidance for adjusted OIBDA. There can be no assurance that final results will not differ materially from this guidance.

Current guidance Previous guidance ---------------- ----------------- U.S. Cellular 2010 guidance as of May 10, 2010 is as follows: Service revenue $3,975-$4,075 million Unchanged Adjusted OIBDA(1) $850-$950 million N/A Operating income $250-$350 million Unchanged Depreciation, amortization and accretion(2) Approx. $600 million Unchanged Capital expenditures Approx. $600 million Unchanged TDS Telecom (ILEC and CLEC) 2010 guidance as of May 10, 2010 is as follows: Operating revenues $760-$790 million $740-$780 million Adjusted OIBDA(1) $250-$275 million N/A Operating income $80-$105 million $70-$100 million Depreciation, amortization and accretion(2) Approx. $170 million Unchanged Capital expenditures Approx. $155 million Approx. $140 million (1) Defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of intangible assets (if any). This amount may also be commonly referred to by management as operating cash flow. This amount should not be confused with cash flows from operating activities, which is a component of the consolidated statement of cash flows. TDS did not previously provide guidance on adjusted OIBDA.

(2) Includes estimated losses on disposals of assets but does not include an estimate for loss on impairment of intangible assets since this cannot be predicted.

This guidance represents the views of management as of May 10, 2010 and should not be assumed to be accurate as of any other date. TDS undertakes no legal duty to update such information, whether as a result of new information, future events or otherwise.

Stock repurchase summary The following represents repurchases of TDS common shares and TDS special common shares.

Cost (in Repurchase Period # Shares millions) ----------------- -------- --------- 2010 (first quarter) 510,902 $14.8 2009 (full year) 6,374,741 $176.6 2008 (full year) 5,861,822 $199.6 -------- ------ Total 12,747,465 $391.0 ========= ====== Conference call information TDS will hold a conference call on May 10, 2010 at 9:30 a.m. CDT.

Access the live call on the Conference Calls page of www.teldta.com or at http://ir.teldta.com/phoenix.zhtml?p=irol-eventDetails&c=67422&eventID=3055234.

Access the call by phone at 866-871-4351 (US/Canada) and use conference ID # 72053512.

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of www.teldta.com, together with reconciliations to generally accepted accounting principles (GAAP) of any non-GAAP information to be disclosed. The call will be archived on the Conference Calls page of www.teldta.com.

About TDS Telephone and Data Systems, Inc. (TDS), a Fortune 500(R) company, provides wireless, local and long-distance telephone, and broadband services to approximately 7.3 million customers in 36 states through its business units, U.S. Cellular (wireless) and TDS Telecom (wireline). Founded in 1969 and headquartered in Chicago, TDS employed 12,300 people as of March 31, 2010.

Visit www.teldta.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.

About U.S. Cellular United States Cellular Corporation, the nation's sixth-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support and a high-quality network to approximately 6.1 million customers in 26 states. The Chicago-based company employed 8,900 full-time equivalent associates as of March 31, 2010.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates and expectations. These statements are based on current estimates, projections and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: The ability of the company to successfully grow its markets; the overall economy; competition; the access to and pricing of unbundled network elements; the ability to obtain or maintain roaming arrangements with other carriers; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by U.S. Cellular and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K used by TDS to furnish this press release to the SEC, which are incorporated by reference herein.

For more information about TDS and its subsidiaries, visit: TDS: www.teldta.com U.S. Cellular: www.uscellular.com TDS Telecom: www.tdstelecom.com UNITED STATES CELLULAR CORPORATION SUMMARY OPERATING DATA Quarter Ended 3/31/2010 12/31/2009 9/30/2009 --------- ---------- --------- Total population Consolidated markets (1) 90,468,000 89,712,000 85,118,000 Consolidated operating markets (1) 46,546,000 46,306,000 46,306,000 Market penetration at end of period Consolidated markets (2) 6.8% 6.8% 7.2% Consolidated operating markets (2) 13.2% 13.3% 13.2% All customers Total at end of period 6,147,000 6,141,000 6,131,000 Gross additions 358,000 399,000 386,000 Net additions (losses) 6,000 10,000 (24,000) Retail customers Total at end of period 5,768,000 5,744,000 5,705,000 Gross additions 305,000 354,000 351,000 Net retail additions (losses) (3) 24,000 39,000 (6,000) Net postpay additions (losses) (9,000) 26,000 8,000 Net prepaid additions (losses) 33,000 13,000 (14,000) Service revenues components (000s) Voice and other retail service $663,939 $676,554 $690,106 Data service 201,280 189,759 174,286 ------- ------- ------- Total retail service $865,219 $866,313 $864,392 Inbound roaming 51,942 61,728 68,767 Other 48,027 56,814 50,289 ------ ------ ------ Total service revenues (000s) (4) $965,188 $984,855 $983,448 Divided by average customers (000s) 6,137 6,139 6,138 Divided by three months in each quarter 3 3 3 --- --- --- Average monthly revenue per unit (5) $52.42 $53.48 $53.41 Voice and other retail service (5) $36.06 $36.75 $37.48 Data service (5) $10.93 $10.30 $9.46 ------ ------ ----- Total retail service (5) $46.99 $47.05 $46.94 Inbound roaming (5) $2.82 $3.35 $3.73 Other (5) $2.61 $3.08 $2.74 Postpay churn rate (6) 1.4% 1.6% 1.7% Capital expenditures (000s) $121,500 $189,000 $128,900 Cell sites in service 7,310 7,279 7,161 Quarter Ended 6/30/2009 3/31/2009 --------- --------- Total population Consolidated markets (1) 83,726,000 83,726,000 Consolidated operating markets (1) 46,306,000 46,306,000 Market penetration at end of period Consolidated markets (2) 7.4% 7.5% Consolidated operating markets (2) 13.3% 13.5% All customers Total at end of period 6,155,000 6,243,000 Gross additions 317,000 404,000 Net additions (losses) (88,000) 47,000 Retail customers Total at end of period 5,711,000 5,770,000 Gross additions 286,000 366,000 Net retail additions (losses) (3) (59,000) 63,000 Net postpay additions (losses) (32,000) 60,000 Net prepaid additions (losses) (27,000) 3,000 Service revenues components (000s) Voice and other retail service $708,609 $718,885 Data service 161,955 156,954 ------- ------- Total retail service $870,564 $875,839 Inbound roaming 62,223 60,057 Other 41,323 47,719 ------ ------ Total service revenues (000s) (4) $974,110 $983,615 Divided by average customers (000s) 6,199 6,229 Divided by three months in each quarter 3 3 --- --- Average monthly revenue per unit (5) $52.38 $52.64 Voice and other retail service (5) $38.11 $38.47 Data service (5) $8.71 $8.40 ----- ----- Total retail service (5) $46.82 $46.87 Inbound roaming (5) $3.35 $3.21 Other (5) $2.21 $2.56 Postpay churn rate (6) 1.7% 1.5% Capital expenditures (000s) $91,200 $137,700 Cell sites in service 7,043 6,942 (1) Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively, which is calculated by dividing customers by the total market population (without duplication of population in overlapping markets).

(2) Calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas.

(3) Calculated by adding net postpay additions (losses) and net prepaid additions (losses).

(4) U.S. Cellular revised previously reported Service revenues for all quarterly periods in 2009 to reflect certain corrections. See "Revision of Prior Period Amounts" section for additional details. Previously reported Service revenues were $986.3 million, $984.9 million, $974.8 million and $981.9 million for the three month periods ended December 31, September 30, June 30 and March 31, 2009, respectively.

(5) Calculated by dividing the components of service revenues by the average customers and number of months in the quarter.

(6) Calculated by dividing the total postpay customer disconnects during the quarter by the average postpay customer base for the quarter.

TELEPHONE AND DATA SYSTEMS, INC.

SUMMARY OPERATING DATA Quarter Ended 3/31/2010 12/31/2009 9/30/2009 --------- ---------- --------- TDS Telecom ILEC Equivalent access lines (1) 778,700 775,900 772,700 Physical access lines (2) 530,400 536,300 539,400 High-speed data customers (3) 217,400 208,300 202,100 Long-distance customers 365,600 362,800 356,500 Managed IP stations (4) 2,300 1,900 1,500 Capital expenditures (000s) $20,200 $26,900 $23,800 CLEC Equivalent access lines (1) 349,300 355,900 364,100 High-speed data customers (3) 36,000 36,900 37,600 Managed IP stations (4) 14,300 12,000 9,600 Capital expenditures (000s) $3,200 $6,800 $4,700 Quarter Ended 6/30/2009 3/31/2009 --------- --------- TDS Telecom ILEC Equivalent access lines (1) 775,800 777,100 Physical access lines (2) 548,000 556,800 High-speed data customers (3) 197,100 188,100 Long-distance customers 354,100 348,900 Managed IP stations (4) 1,200 1,000 Capital expenditures (000s) $26,200 $21,400 CLEC Equivalent access lines (1) 372,300 381,100 High-speed data customers (3) 38,700 39,700 Managed IP stations (4) 6,400 4,100 Capital expenditures (000s) $5,700 $5,000 (1) Sum of physical access lines and high-capacity data lines, adjusted to estimate the equivalent number of physical access lines in terms of capacity, plus the number of managed IP stations.

(2) Individual circuits connecting customers to a telephone company's central office facilities.

(3) The number of customers provided high-capacity data circuits via various technologies, including digital subscriber line ("DSL"), managed Internet Protocol ("Managed IP") and dedicated Internet circuit technologies.

(4) The number of telephone handsets providing communications using packet networking technology.

Telephone And Data Systems, Inc.

Consolidated Statement of Operations Highlights Three Months Ended March 31, (Unaudited, dollars and shares in thousands, except per share amounts) 2010 2009 (1) ---- ------- Operating revenues U.S. Cellular $1,024,037 $1,054,505 TDS Telecom 195,505 199,302 All Other (2) 3,073 4,580 ----- ----- 1,222,615 1,258,387 --------- --------- Operating expenses U.S. Cellular Expenses excluding depreciation, amortization and accretion 796,843 793,743 Depreciation, amortization and accretion 143,233 137,878 Loss on asset disposals, net 5,176 3,945 945,252 935,566 ------- ------- TDS Telecom Expenses excluding depreciation, amortization and accretion 125,865 130,745 Depreciation, amortization and accretion 43,423 41,863 Loss on asset disposals, net 345 215 --- --- 169,633 172,823 ------- ------- All Other (2) Expenses excluding depreciation and amortization 1,930 6,358 Depreciation and amortization 2,733 3,252 Loss on asset disposals, net (90) 10 4,573 9,620 ----- ----- Total operating expenses 1,119,458 1,118,009 --------- --------- Operating income (loss) U.S. Cellular 78,785 118,939 TDS Telecom 25,872 26,479 All Other (2) (1,500) (5,040) ------ ------ 103,157 140,378 ------- ------- Investment and other income (expense) Equity in earnings of unconsolidated entities 24,903 25,337 Interest and dividend income 2,441 2,072 Interest expense (28,720) (30,370) Other, net (190) 499 ---- --- Total investment and other income (expense) (1,566) (2,462) ------ ------ Income before income taxes 101,591 137,916 Income tax expense 38,465 42,106 ------ ------ Net income 63,126 95,810 Less: Net income attributable to noncontrolling interests, net of tax (14,011) (21,350) ------- ------- Net income attributable to TDS shareholders 49,115 74,460 Preferred dividend requirement (12) (13) --- --- Net income available to common shareholders $49,103 $74,447 ======= ======= Basic weighted average shares outstanding 105,938 112,238 Basic earnings per share attributable to TDS shareholders $0.46 $0.66 Diluted weighted average shares outstanding 106,250 112,427 Diluted earnings per share attributable to TDS shareholders $0.46 $0.66 Increase/(Decrease) Amount Percent ------ ------- Operating revenues U.S. Cellular $(30,468) (3)% TDS Telecom (3,797) (2)% All Other (2) (1,507) (33)% ------ (35,772) (3)% ------- Operating expenses U.S. Cellular Expenses excluding depreciation, amortization and accretion 3,100 - Depreciation, amortization and accretion 5,355 4 % Loss on asset disposals, net 1,231 31 % 9,686 1 % ----- TDS Telecom Expenses excluding depreciation, amortization and accretion (4,880) (4)% Depreciation, amortization and accretion 1,560 4 % Loss on asset disposals, net 130 60 % --- (3,190) (2)% ------ All Other (2) Expenses excluding depreciation and amortization (4,428) (70)% Depreciation and amortization (519) (16)% Loss on asset disposals, net (100) >(100)% (5,047) (52)% ------ Total operating expenses 1,449 - ----- Operating income (loss) U.S. Cellular (40,154) (34)% TDS Telecom (607) (2)% All Other (2) 3,540 70 % ----- (37,221) (27)% ------- Investment and other income (expense) Equity in earnings of unconsolidated entities (434) (2)% Interest and dividend income 369 18 % Interest expense 1,650 5 % Other, net (689) >(100)% ---- Total investment and other income (expense) 896 36 % --- Income before income taxes (36,325) (26)% Income tax expense (3,641) (9)% ------ Net income (32,684) (34)% Less: Net income attributable to noncontrolling interests, net of tax 7,339 34 % ----- Net income attributable to TDS shareholders (25,345) (34)% Preferred dividend requirement 1 8 % --- Net income available to common shareholders $(25,344) (34)% ======== Basic weighted average shares outstanding (6,300) (6)% Basic earnings per share attributable to TDS shareholders $(0.20) (30)% Diluted weighted average shares outstanding (6,177) (5)% Diluted earnings per share attributable to TDS shareholders $(0.20) (30)% (1) Amounts have been revised. See "Revision of Prior Period Amounts" section for additional details. (2) Consists of a non-reportable segment (Suttle-Straus printing and distribution operations), corporate operations, intercompany eliminations and corporate investments.

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights (Unaudited, dollars in thousands) ASSETS March 31, December 31, 2010 2009 (1) ---- ------- Current assets Cash and cash equivalents $645,466 $670,992 Short-term investments 148,364 113,275 Accounts receivable from customers and other 486,778 515,443 Inventory 157,935 156,987 Other current assets 200,522 190,974 ------- ------- 1,639,065 1,647,671 --------- --------- Investments Licenses 1,446,825 1,443,025 Goodwill 713,013 707,840 Other intangible assets 31,823 26,589 Investments in unconsolidated entities 221,112 203,799 Other investments 9,627 9,785 ----- ----- 2,422,400 2,391,038 --------- --------- Property, plant and equipment, net U.S. Cellular 2,578,460 2,601,338 TDS Telecom 871,232 880,378 Other 25,963 26,129 ------ ------ 3,475,655 3,507,845 --------- --------- Other assets and deferred charges 64,651 65,759 ------ ------ Total assets $7,601,771 $7,612,313 ========== ========== (1) Amounts have been revised. See "Revision of Prior Period Amounts" section for additional details.

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights (Unaudited, dollars in thousands) LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31, 2010 2009 (1) ---- ------- Current liabilities Current portion of long-term debt $2,277 $2,509 Accounts payable 307,423 347,348 Customer deposits and deferred revenues 166,080 164,451 Accrued interest 21,330 12,227 Accrued taxes 99,432 57,087 Accrued compensation 62,021 93,524 Other current liabilities 99,023 117,081 ------ ------- 757,586 794,227 Deferred liabilities and credits Net deferred income tax liability 506,453 516,919 Other deferred liabilities and credits 371,698 373,862 ------- ------- 878,151 890,781 Long-term debt 1,492,666 1,492,908 Noncontrolling interests with redemption features 752 727 Equity TDS shareholders' equity Common Shares, par value $.01 571 571 Special Common Shares, par value $.01 634 634 Series A Common Shares, par value $.01 65 65 Capital in excess of par value 2,095,636 2,088,807 Treasury shares, at cost: Common Shares (216,249) (217,381) Special Common Shares (477,140) (464,268) Accumulated other comprehensive loss (2,966) (2,710) Retained earnings 2,399,321 2,363,759 --------- --------- Total TDS shareholders' equity 3,799,872 3,769,477 Preferred shares 831 832 Noncontrolling interests 671,913 663,361 ------- ------- Total equity 4,472,616 4,433,670 Total liabilities and equity $7,601,771 $7,612,313 ========== ========== (1) Amounts have been revised. See "Revision of Prior Period Amounts" section for additional details.

Telephone and Data Systems, Inc.

Balance Sheet Highlights Three Months Ended March 31, 2010 (Unaudited, dollars in thousands) U.S. TDS TDS ---- --- --- Cellular Telecom Corporate -------- ------- --------- & Other ------- Cash and cash equivalents $289,658 $33,691 $322,117 Affiliated cash investments - 310,856 - Short-term investments 25,534 97,510 25,320 Notes receivable-affiliates - - 8,809 -- -- ----- $315,192 $442,057 $356,246 ======== ======== ======== Licenses, goodwill and other intangibles $1,936,429 $451,282 $(196,050) Investment in unconsolidated entities 178,903 3,661 45,120 Other investments 4,179 2,072 3,376 ----- ----- ----- $2,119,511 $457,015 $(147,554) ========== ======== ========= Property, plant and equipment, net $2,578,460 $871,232 $25,963 ========== ======== ======= Notes payable-affiliates $- $8,809 $310,856 === ====== ======== Long-term debt Current portion $84 $391 $1,802 Non-current portion 867,662 2,181 622,823 Total $867,746 $2,572 $624,625 ======== ====== ======== Preferred shares $- $- $831 === === ==== Capital expenditures Quarter ended 3/31/2010 $121,514 $23,376 $1,732 Intercompany TDS ------------ --- Eliminations Consolidated ------------ ------------ Cash and cash equivalents $- $645,466 Affiliated cash investments (310,856) - Short-term investments - 148,364 Notes receivable-affiliates (8,809) - ------ -- $(319,665) $793,830 ========= ======== Licenses, goodwill and other intangibles $- $2,191,661 Investment in unconsolidated entities (6,572) 221,112 Other investments - 9,627 -- ----- $(6,572) $2,422,400 ======= ========== Property, plant and equipment, net $- $3,475,655 === ========== Notes payable-affiliates $(319,665) $- ========= === Long-term debt Current portion $- $2,277 Non-current portion - 1,492,666 Total $- $1,494,943 === ========== Preferred shares $- $831 === ==== Capital expenditures Quarter ended 3/31/2010 $- $146,622 TDS Telecom Highlights Three Months Ended March 31, (Unaudited, dollars in thousands) 2010 2009 ---- ---- Local Telephone Operations Operating revenues Voice $44,558 $48,578 Data 28,298 25,060 Network access 67,942 67,831 Miscellaneous 9,358 8,718 ---- ---- 150,156 150,187 ------ ------ Operating expenses Cost of services and products 46,492 47,684 Selling, general and administrative expenses 41,737 41,029 Depreciation, amortization and accretion 37,058 36,086 Loss on asset disposals, net 260 138 -- -- 125,547 124,937 ------ ------ Operating income $24,609 $25,250 ------- ------- Competitive Local Exchange Carrier Operations Revenues $47,743 $51,189 ------- ------- Expenses excluding depreciation, amortization and accretion 40,030 44,106 Depreciation, amortization and accretion 6,365 5,777 Loss on asset disposals, net 85 77 -- -- 46,480 49,960 ----- ----- Operating income $1,263 $1,229 ------ ------ Intercompany revenues $(2,394) $(2,074) Intercompany expenses (2,394) (2,074) ------ ------ - - -- -- Total TDS Telecom operating income $25,872 $26,479 ======= ======= Increase (Decrease) ------------------- Amount Percent ------ ------- Local Telephone Operations Operating revenues Voice $(4,020) (8)% Data 3,238 13% Network access 111 - Miscellaneous 640 7% -- (31) - --- Operating expenses Cost of services and products (1,192) (2)% Selling, general and administrative expenses 708 2% Depreciation, amortization and accretion 972 3% Loss on asset disposals, net 122 88% -- 610 - -- Operating income $(641) (3)% ----- Competitive Local Exchange Carrier Operations Revenues $(3,446) (7)% ------- Expenses excluding depreciation, amortization and accretion (4,076) (9)% Depreciation, amortization and accretion 588 10% Loss on asset disposals, net 8 10% -- (3,480) (7)% ------ Operating income $34 3% -- Intercompany revenues $(320) (15)% Intercompany expenses (320) (15)% ---- - -- Total TDS Telecom operating income $(607) (2)% ===== Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows (Unaudited) Three Months Ended March 31, 2010 2009 (1) ---- ------- (Dollars in thousands) Cash flows from operating activities Net income $63,126 $95,810 Add (deduct) adjustments to reconcile net income to net cash flows from operating activities Depreciation, amortization and accretion 189,389 182,993 Bad debts expense 20,245 20,303 Stock-based compensation expense 7,444 5,556 Deferred income taxes, net (13,874) 5,603 Equity in earnings of unconsolidated entities (24,903) (25,337) Distributions from unconsolidated entities 7,243 6,029 Loss on asset disposals, net 5,431 4,170 Other operating activities 948 52 Changes in assets and liabilities from operations Accounts receivable 9,648 (10,936) Inventory (947) 7,720 Accounts payable (40,676) (48,271) Customer deposits and deferred revenues 784 (1,010) Accrued taxes 35,641 34,893 Accrued interest 9,212 9,358 Other assets and liabilities (58,051) (63,683) ------- ------- 210,660 223,250 ------- ------- Cash flows from investing activities Additions to property, plant and equipment (146,622) (165,236) Cash paid for acquisitions and licenses (21,118) (14,582) Cash paid for investments (50,000) (26,248) Cash received for investments 15,561 - Other investing activities 439 1,010 --- ----- (201,740) (205,056) -------- -------- Cash flows from financing activities Repayment of long-term debt (697) (993) TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments 463 383 U.S. Cellular Common Shares reissued for benefit plans, net of tax payments 486 356 Repurchase of TDS Special Common Shares (14,810) (12,237) Repurchase of U.S.

Cellular Common Shares (5,186) (13,291) Dividends paid (11,891) (12,057) Distributions to noncontrolling interests (2,284) (1,458) Other financing activities (527) 61 ---- --- (34,446) (39,236) ------- ------- Net decrease in cash and cash equivalents (25,526) (21,042) Cash and cash equivalents Beginning of period 670,992 777,309 ------- ------- End of period $645,466 $756,267 (1) Amounts have been revised. See "Revision of Prior Period Amounts" section for additional details.

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations (Unaudited, dollars in thousands) Three Months Ended March 31, U.S. TDS 2010 Cellular Telecom (1) ---------------------------- -------- ------------ Operating revenues $1,024,037 $195,505 Deduct: U.S. Cellular equipment sales revenue 58,849 ------ Service revenues $965,188 Operating income $78,785 $25,872 Add: Depreciation, amortization and accretion 143,233 43,423 (Gain) Loss on asset disposals 5,176 345 ----- --- Adjusted OIBDA (3)(6) $227,194 $69,640 ======== ======= Adjusted OIBDA margin (4) 23.5% 35.6% Three Months Ended March 31, U.S. TDS 2009 Cellular (7) Telecom (1) ---------------------------- --------- ------------ Operating revenues $1,054,505 $199,302 Deduct: U.S. Cellular equipment sales revenue 70,890 ------ Service revenues $983,615 Operating income $118,939 $26,479 Add (Deduct): Depreciation, amortization and accretion 137,878 41,863 Loss on asset disposals 3,945 215 ----- --- Adjusted OIBDA (3)(6) $260,762 $68,557 ======== ======= Adjusted OIBDA margin (4) 26.5% 34.4% Three Months Ended March 31, All Consolidated 2010 Other (2) Total ---------------------------- ---------- ----- Operating revenues $3,073 $1,222,615 Deduct: U.S. Cellular equipment sales revenue Service revenues Operating income $(1,500) $103,157 Add: Depreciation, amortization and accretion 2,733 189,389 (Gain) Loss on asset disposals (90) 5,431 --- ----- Adjusted OIBDA (3)(6) $1,143 $297,977 ====== ======== Adjusted OIBDA margin (4) Three Months Ended March 31, All Consolidated 2009 Other (2) Total (7) ---------------------------- ---------- --------- Operating revenues $4,580 $1,258,387 Deduct: U.S. Cellular equipment sales revenue Service revenues Operating income $(5,040) $140,378 Add (Deduct): Depreciation, amortization and accretion 3,252 182,993 Loss on asset disposals 10 4,170 --- ----- Adjusted OIBDA (3)(6) $(1,778) $327,541 ======= ======== Adjusted OIBDA margin (4) TDS Consolidated ---------------- Three Months Ended March 31, 2010 2009 ---- ---- Cash flows from operating activities $210,660 $223,250 Deduct: Capital expenditures 146,622 165,236 ------ ------ Free cash flow (5) $64,038 $58,014 ======= ======= (1) Includes ILEC and CLEC intercompany eliminations.

(2) Consists of a non-reportable segment (Suttle Straus), corporate operations, intercompany eliminations between U.S. Cellular, TDS Telecom and corporate investments. Amounts in this column are presented only to reconcile to consolidated totals and may not otherwise be meaningful.

(3) Adjusted OIBDA is a segment measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of intangible assets (if any). This amount may also be commonly referred to by management as operating cash flow.

This amount should not be confused with Cash flows from operating activities, which is a component of the consolidated statement of cash flows.

(4) Defined as Adjusted OIBDA divided by service revenues (U.S.

Cellular) and operating revenues (TDS Telecom). Equipment revenues are excluded from the denominator of the U.S. Cellular calculation since equipment is generally sold at a net negative margin, and the equipment subsidy is effectively a cost for purposes of assessing business results. TDS believes that this calculation method is consistent with the method used by certain investors to assess U.S.

Cellular's business results. Adjusted OIBDA margin may also be commonly referred to by management as operating cash flow margin.

(5) Defined as cash flows from operating activities minus capital expenditures. Free cash flow is a Non-GAAP financial measure. TDS believes that free cash flow as reported by TDS is useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.

(6) Excludes the net gain or loss on asset disposals and loss on impairment of intangible assets, if any, in order to show operating results on a more comparable basis from period to period. TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual. Accordingly, you should be aware that TDS may incur such amounts in the future.

(7) Previously reported GAAP amounts have been revised. See "Revision of Prior Period Amounts" section for additional details.

Revision of Prior Period Amounts In preparing its financial statements for the three months ended March 31, 2010, TDS discovered certain errors related to accounting for service revenues and sales tax liabilities. These errors resulted in the overstatement of operating revenues and understatement of sales tax liabilities for 2009, 2008 and 2007. In accordance with SEC Staff Accounting Bulletin Nos. 99 and 108 ("SAB 99 and SAB 108"), TDS evaluated these errors and determined that they were immaterial to each of the reporting periods affected and, therefore, amendment of previously filed reports was not required. However, if the adjustments to correct the cumulative errors had been recorded in the first quarter 2010, TDS believes the impact would have been significant to the first quarter and would impact comparisons to prior periods. As permitted by SAB 108, TDS revised in the current filing and plans to revise in the next filings of its quarterly and annual consolidated financial statements previously reported annual and quarterly results for 2009, 2008 and 2007 for these immaterial amounts. In addition to recording these adjustments, TDS recorded and plans to record other adjustments to prior-year amounts to correct other immaterial items, which include adjustments related to rent expense, as disclosed in TDS' 2009 Form 10-K.

The Consolidated Balance Sheet at December 31, 2009 was revised to reflect the cumulative effect of these errors which resulted in a decrease to Retained earnings of $7.8 million. Also, in accordance with SAB 108, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows have been revised as follows: Consolidated Statement of Operations -- Three Months Ended March 31, 2009 As previously (Dollars in thousands) reported Adjustment Revised -------- ---------- ------- Operating revenues $1,256,646 $1,741 $1,258,387 Total operating expenses 1,120,437 (2,428) 1,118,009 Operating income 136,209 4,169 140,378 Interest expense (30,105) (265) (30,370) Total investment and other income (expense) (2,197) (265) (2,462) Income before income taxes 134,012 3,904 137,916 Income tax expense 40,638 1,468 42,106 Net income 93,374 2,436 95,810 Net income attributable to noncontrolling interests, net of tax (21,366) 16 (21,350) Net income attributable to TDS shareholders 72,008 2,452 74,460 Net income available to common shareholders 71,995 2,452 74,447 Basic earnings attributable to TDS shareholders 0.64 0.02 0.66 Diluted earnings attributable to TDS shareholders 0.64 0.02 0.66 Consolidated Balance Sheet -- December 31, 2009 As previously (Dollars in thousands) reported Adjustment Revised -------- ---------- ------- Accounts receivable from customers and others $511,914 $3,529 $515,443 Total current assets 1,644,142 3,529 1,647,671 Total assets 7,608,784 3,529 7,612,313 Customer deposits and deferred revenues 167,963 (3,512) 164,451 Accrued taxes 39,644 17,443 57,087 Total current liabilities 780,296 13,931 794,227 Net deferred income tax liability 517,762 (843) 516,919 Total deferred liabilities and credits 891,624 (843) 890,781 Retained earnings 2,371,587 (7,828) 2,363,759 Total TDS shareholders' equity 3,777,305 (7,828) 3,769,477 Noncontrolling interests 665,092 (1,731) 663,361 Total equity 4,443,229 (9,559) 4,433,670 Total liabilities and equity 7,608,784 3,529 7,612,313 Consolidated Statement of Cash Flows -- Three Months Ended March 31, 2009 As previously (Dollars in thousands) reported Adjustment Revised -------- ---------- ------- Net income $93,374 $2,436 $95,810 Depreciation, amortization and accretion 182,766 227 182,993 Deferred income taxes, net 4,934 669 5,603 Loss on asset disposals 2,416 1,754 4,170 Change in accounts receivable (6,272) (4,664) (10,936) Change in customer deposits and deferred revenues (823) (187) (1,010) Change in accrued taxes 34,865 28 34,893 Change in other assets and liabilities (63,420) (263) (63,683) Cash flows from operating activities 223,250 - 223,250 SOURCE Telephone and Data Systems, Inc.

www.prnewswire.com Copyright (C) 2010 PR Newswire. All rights reserved -0- KEYWORD: Illinois INDUSTRY KEYWORD: CPR

TLS

TCS SUBJECT CODE: ERN

ERP

CCA