2015 Estimated Results

U.S. Cellular

TDS Telecom

TDS(2)

Current

Previous

Current

Previous

Current

Previous

(Dollars in millions)

Total operating revenues

$4,000-$4,200

Unchanged

$1,130-$1,180

Unchanged

$5,145-$5,395

Unchanged

Operating cash flow (1)

$400-$500

$350-$450

$280-$310

Unchanged

$685-$815

$635-$765

Adjusted EBITDA (1)

$580-$680

$530-$630

$280-$310

Unchanged

$870-$1,000

$820-$950

Capital expenditures

$600

Unchanged

$220

Unchanged

$830

Unchanged

(1)

Operating cash flow is defined as net income, adjusted for the items set forth in the reconciliation below. Adjusted EBITDA is defined as net income, adjusted for the items set forth in the reconciliation below. Operating cash flow and Adjusted EBITDA exclude these items in order to show operating results on a more comparable basis from period to period. From time to time, TDS may exclude other items from Operating cash flow and/or Adjusted EBITDA if such items help reflect operating results on a more comparable basis. TDS does not intend to imply that any such items that are excluded are non-recurring, infrequent or unusual; such items may occur in the future. Operating cash flow and Adjusted EBITDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States ("GAAP") and should not be considered as alternatives to net income as indicators of the company's operating performance or as alternatives to cash flows from operating activities, determined in accordance with GAAP, as indicators of cash flows or as measures of liquidity. TDS believes Operating cash flow and Adjusted EBITDA are useful measures of TDS' operating results before significant recurring non-cash charges, gains and losses, and other items as indicated below. The following tables provide a reconciliation to Operating cash flow and Adjusted EBITDA for 2015 estimated results, actual results for the three months ended March 31, 2015 and 2014 actual results:

2015 Estimated Results (3)

U.S. Cellular

TDS Telecom

TDS(2)

(Dollars in millions)

Net income (loss) (GAAP)

N/A

N/A

N/A

Add back:

Income tax expense (benefit)

N/A

N/A

N/A

Income (loss) before income taxes (GAAP)

$140-$240

$45-$75

$140 -$270

Add back:

Interest expense

$80

―

$140

Depreciation, amortization and accretion expense

$580

$235

$825

EBITDA

$800-$900

$280-$310

$1,105-$1,235

Add back:

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

($110)

―

($125)

(Gain) loss on license sales and exchanges, net

($125)

―

($125)

(Gain) loss on assets disposals, net

$15

―

$15

Adjusted EBITDA

$580-$680

$280-$310

$870-$1,000

Deduct:

Equity in earnings of unconsolidated entities

($130)

―

($130)

Interest and dividend income

($50)

―

($55)

Operating cash flow (4)

$400-$500

$280-$310

$685-$815

Actual Results

Three months ended March 31, 2015

Year ended December 31, 2014

U.S. Cellular

TDS

Telecom

TDS (2)

U.S. Cellular

TDS

Telecom

TDS (2)

(Dollars in millions)

Net income (loss) (GAAP)

$165

$13

$176

($47)

($24)

($147)

Add back:

Income tax expense (benefit)

$108

$8

$116

($12)

$18

($5)

Income (loss) before income taxes (GAAP)

$273

$21

$292

($59)

($7)

($153)

Add back:

Interest expense

$20

—

$34

$57

($1)

$111

Depreciation, amortization and accretion expense

$147

$57

$207

$606

$220

$837

EBITDA

$440

$78

$533

$605

$212

$796

Add back:

Loss on impairment of assets

—

—

—

—

$84

$88

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

($111)

—

($124)

($33)

($2)

($16)

(Gain) loss on license sales and exchanges, net

($123)

—

($123)

($113)

—

($113)

(Gain) loss on assets disposals, net

$4

$1

$5

$21

$5

$27

Adjusted EBITDA

$209

$80

$291

$480

$298

$781

Deduct:

Equity in earnings of unconsolidated entities

($34)

—

($35)

($130)

—

($132)

Interest and dividend income

($8)

—

($8)

($12)

($2)

($17)

Operating cash flow (4)

$167

$80

$248

$338

$296

$632

Note: Totals may not foot due to rounding differences.

(2)

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.

(3)

In providing 2015 Estimated Results, TDS has not completed the above reconciliation to net income because it does not provide guidance for income taxes. TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, the company is unable to provide such guidance. Accordingly, a reconciliation to net income is not available without unreasonable effort.

(4)

A reconciliation of Operating cash flow (Non-GAAP) to operating income (GAAP) for March 31, 2015 actual results can be found on the company's website at investors.tdsinc.com.

# Shares

Cost (in millions)

2015 (first quarter)

—

$

—

2014 (full year)

1,541,850

$

39.1

Total

1,541,850

$

39.1

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

3/31/2015

12/31/2014

9/30/2014

6/30/2014

3/31/2014

Retail Customers

Postpaid

Total at end of period

4,307,000

4,298,000

4,200,000

4,148,000

4,174,000

Gross additions

200,000

302,000

251,000

190,000

197,000

Net additions (losses)

9,000

98,000

52,000

(26,000)

(93,000)

ARPU (1)

$

54.87

$

56.51

$

56.37

$

56.82

$

57.59

ARPA (2)

$

134.94

$

136.13

$

132.99

$

131.95

$

132.03

Churn rate (3)

1.5%

1.6%

1.6%

1.7%

2.3%

Smartphone penetration (4)

66.9%

64.8%

61.7%

58.4%

55.8%

Prepaid

Total at end of period

360,000

348,000

350,000

352,000

356,000

Gross additions

73,000

60,000

64,000

65,000

85,000

Net additions (losses)

12,000

(2,000)

(2,000)

(4,000)

13,000

ARPU (1)

$

35.72

$

35.33

$

34.40

$

34.02

$

32.22

Churn rate (3)

5.8%

5.9%

6.3%

6.5%

6.9%

Total customers at end of period

4,775,000

4,760,000

4,674,000

4,653,000

4,684,000

Billed ARPU (1)

$

52.29

$

53.63

$

53.24

$

53.36

$

53.93

Service revenue ARPU (1)

$

58.01

$

60.10

$

60.92

$

60.32

$

60.19

Smartphones sold as a percent of total

handsets sold

85.7%

86.5%

80.8%

79.0%

78.2%

Total population

Consolidated markets (5)

45,737,000

50,906,000

54,817,000

54,817,000

54,817,000

Consolidated operating markets (5)

31,814,000

31,729,000

31,729,000

31,729,000

31,729,000

Market penetration at end of period

Consolidated markets (6)

10.4%

9.4%

8.5%

8.5%

8.5%

Consolidated operating markets (6)

15.0%

15.0%

14.7%

14.7%

14.8%

Capital expenditures (000s)

$

66,460

$

181,655

$

142,452

$

143,927

$

89,581

Total cell sites in service

6,219

6,220

6,209

6,183

6,165

Owned towers (7)

3,955

4,281

4,487

4,457

4,448

(1)

Average Revenue Per User ("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 postpaid, prepaid and reseller service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers

(2)

Average Revenue Per Account ("ARPA") metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts by the number of months in the period

(3)

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

(4)

Smartphones represent wireless devices which run on an Android, Apple, BlackBerry or Windows Mobile operating system, excluding connected devices. Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid handset customers

(5)

The decrease in the population of Consolidated markets is due primarily to the license exchange transactions of certain non-operating licenses in North Carolina in December 2014 and Illinois and Indiana in March 2015. Total Population is used only to calculate market penetration of consolidated markets and consolidated 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 markets and consolidated operating markets, respectively, as estimated by Claritas. The increase in consolidated markets penetration is due primarily to a lower denominator as a result of the license divestitures described in footnote (5) above

(7)

During the quarters ended March 31, 2015 and December 31, 2014, sold 359 and 236 towers, respectively, in divested markets

TDS Telecom

Summary Operating Data (Unaudited)

Quarter Ended

3/31/2015

12/31/2014

9/30/2014

6/30/2014

3/31/2014

TDS Telecom

Wireline

Residential connections

Voice (1)

333,400

335,900

340,300

346,100

348,700

Broadband (2)

229,400

229,200

231,600

232,700

229,000

IPTV (3)

25,600

23,400

20,700

18,200

15,900

Wireline residential connections

588,400

588,500

592,600

597,000

593,600

Total residential revenue per connection (4)

$

42.32

$

41.56

$

41.47

$

41.05

$

40.79

Commercial connections

Voice (1)

187,500

193,200

199,300

206,200

212,200

Broadband (2)

24,300

24,700

25,300

26,000

26,600

managedIP (5)

143,200

140,200

137,700

133,300

131,000

Wireline commercial connections

355,000

358,100

362,300

365,500

369,800

Total Wireline connections

943,400

946,600

954,900

962,500

963,400

Cable

Cable Connections

Video (6)

109,700

110,400

109,100

69,700

68,700

Broadband (7)

112,200

110,900

106,400

63,200

63,000

Voice (7)

49,100

46,000

41,800

17,800

17,700

Cable connections

271,000

267,300

257,300

150,700

149,400

(1)

The individual circuit connecting customers to TDS Telecom's central office facilities

(2)

The number of customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies

(3)

The number of customers provided video services using IP networking technology

(4)

Total residential revenue per connection is calculated by dividing the average residential revenue for the period by the average number of residential connections for the period

(5)

The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology

(6)

Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service

(7)

Broadband and voice connections reflect billable number of lines into a building for high speed data and voice services, respectively

TDS Telecom

Capital Expenditures (000s)

Quarter Ended

3/31/2015

12/31/2014

9/30/2014

6/30/2014

3/31/2014

Wireline

$

20,400

$

51,400

$

34,200

$

27,400

$

22,900

Cable

11,600

14,600

7,600

7,200

6,200

HMS

4,900

13,400

9,800

10,600

2,800

$

36,900

$

79,400

$

51,600

$

45,200

$

31,900

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)

Change

2015

2014

Amount

Percent

Operating revenues

U.S. Cellular

$

965,245

$

925,811

$

39,434

4%

TDS Telecom

279,985

262,416

17,569

7%

All Other (1)

6,363

7,735

(1,372)

(18%)

1,251,593

1,195,962

55,631

5%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

797,946

846,645

(48,699)

(6%)

Depreciation, amortization and accretion

147,085

167,753

(20,668)

(12%)

(Gain) loss on asset disposals, net

4,251

1,934

2,317

>100%

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

(111,477)

(6,900)

(104,577)

>100%

(Gain) loss on license sales and exchanges, net

(122,873)

(91,446)

(31,427)

(34%)

714,932

917,986

(203,054)

(22%)

TDS Telecom

Expenses excluding depreciation, amortization and accretion

200,460

190,303

10,157

5%

Depreciation, amortization and accretion

57,163

53,775

3,388

6%

(Gain) loss on asset disposals, net

1,130

344

786

>100%

258,753

244,422

14,331

6%

All Other (1)

Expenses excluding depreciation and amortization

5,262

9,326

(4,064)

(44%)

Depreciation and amortization

2,327

3,391

(1,064)

(31%)

(Gain) loss on asset disposals, net

(4)

152

(156)

>(100%)

(Gain) loss on sale of business and other exit costs, net (2)

(12,306)

-

(12,306)

N/M

(4,721)

12,869

(17,590)

>(100%)

Total operating expenses

968,964

1,175,277

(206,313)

(18%)

Operating income (loss)

U.S. Cellular

250,313

7,825

242,488

>100%

TDS Telecom

21,232

17,994

3,238

18%

All Other (1)

11,084

(5,134)

16,218

>(100%)

282,629

20,685

261,944

>100%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

34,641

37,327

(2,686)

(7%)

Interest and dividend income

8,385

2,486

5,899

>100%

Interest expense

(33,830)

(28,707)

(5,123)

(18%)

Other, net

(4)

160

(164)

>(100%)

Total investment and other income

9,192

11,266

(2,074)

(18%)

Income before income taxes

291,821

31,951

259,870

>100%

Income tax expense (benefit)

116,020

11,657

104,363

>100%

Net income

175,801

20,294

155,507

>100%

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

30,061

2,040

28,021

>100%

Net income attributable to TDS shareholders

145,740

18,254

127,486

>100%

TDS Preferred dividend requirement

(12)

(12)

—

—

Net income available to common shareholders

$

145,728

$

18,242

$

127,486

>100%

Basic weighted average shares outstanding

108,169

108,988

(819)

(1%)

Basic earnings per share attributable to TDS shareholders

$

1.35

$

0.17

$

1.18

>100%

Diluted weighted average shares outstanding

108,946

109,672

(726)

(1%)

Diluted earnings per share attributable to TDS shareholders

$

1.33

$

0.16

$

1.17

>100%

(1)

Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments.

(2)

Compared to U.S. Cellular, TDS recognized an incremental gain of $11.9 million on the tower sale as a result of a lower basis in the assets disposed.

N/M – Percentage change not meaningful

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

ASSETS

March 31,

December 31,

2015

2014

Current assets

Cash and cash equivalents

$

635,120

$

471,901

Accounts receivable from customers and others

658,888

683,681

Inventory, net

178,313

273,707

Net deferred income tax asset

92,791

107,686

Prepaid expenses

97,707

86,506

Income taxes receivable

853

113,708

Other current assets

29,132

29,766

1,692,804

1,766,955

Assets held for sale

29,771

103,343

Investments

Licenses

1,837,238

1,453,574

Goodwill

771,674

771,352

Franchise rights

244,300

244,300

Other intangible assets, net

59,708

64,499

Investments in unconsolidated entities

343,382

321,729

Other investments

485

508

3,256,787

2,855,962

Property, plant and equipment, net

U.S. Cellular

2,645,117

2,728,217

TDS Telecom

1,077,924

1,093,671

Other

23,793

24,237

3,746,834

3,846,125

Other assets and deferred charges

270,042

334,554

Total assets

$

8,996,238

$

8,906,939

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

LIABILITIES AND EQUITY

March 31,

December 31,

2015

2014

Current liabilities

Current portion of long-term debt

$

805

$

808

Accounts payable

312,091

387,125

Customer deposits and deferred revenues

338,076

324,318

Accrued interest

17,376

7,919

Accrued taxes

174,043

46,734

Accrued compensation

68,838

114,549

Other current liabilities

145,871

181,803

1,057,100

1,063,256

Liabilities held for sale

406

21,643

Deferred liabilities and credits

Net deferred income tax liability

878,809

941,519

Other deferred liabilities and credits

441,745

430,774

Long-term debt

1,993,457

1,993,586

Noncontrolling interests with redemption features

6,619

1,150

Equity

TDS shareholders' equity

Series A Common and Common Shares, par value $.01

1,327

1,327

Capital in excess of par value

2,344,274

2,336,511

Treasury shares, at cost

(745,590)

(748,199)

Accumulated other comprehensive loss

6,012

6,452

Retained earnings

2,460,323

2,330,187

Total TDS shareholders' equity

4,066,346

3,926,278

Preferred shares

824

824

Noncontrolling interests

550,932

527,909

Total equity

4,618,102

4,455,011

Total liabilities and equity

$

8,996,238

$

8,906,939

Balance Sheet Highlights

March 31, 2015

(Unaudited, dollars in thousands)

U.S.

TDS

TDS Corporate

Intercompany

TDS

Cellular

Telecom

& Other

Eliminations

Consolidated

Cash and cash equivalents

$

336,893

$

68,221

$

230,006

$

―

$

635,120

Affiliated cash investments

―

407,200

―

(407,200)

―

$

336,893

$

475,421

$

230,006

$

(407,200)

$

635,120

Licenses, goodwill and other intangible assets

$

2,197,253

$

853,625

$

(137,958)

$

―

$

2,912,920

Investment in unconsolidated entities

304,501

3,805

39,898

(4,822)

343,382

Long-term and other investments

―

484

―

―

485

$

2,501,754

$

857,914

$

(98,060)

$

(4,821)

$

3,256,787

Property, plant and equipment, net

$

2,645,117

$

1,077,924

$

23,990

$

(197)

$

3,746,834

Long-term debt:

Current portion

$

57

$

25

$

723

$

―

$

805

Non-current portion

1,151,901

1,406

840,150

―

1,993,457

$

1,151,958

$

1,431

$

840,873

$

―

$

1,994,262

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

Three Months Ended March 31,

(Unaudited, dollars in thousands)

2015

2014

Cash flows from operating activities

Net income (loss)

$

175,801

$

20,294

Add (deduct) adjustments to reconcile net income to cash flows from operating activities

Depreciation, amortization and accretion

206,575

224,919

Bad debts expense

29,849

21,559

Stock-based compensation expense

8,096

6,759

Deferred income taxes, net

(47,466)

(14,510)

Equity in earnings of unconsolidated entities

(34,641)

(37,327)

Distributions from unconsolidated entities

12,988

12,820

(Gain) loss on asset disposals, net

5,377

2,430

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

(123,783)

(6,900)

(Gain) loss on license sales and exchanges, net

(122,873)

(91,446)

Noncash interest expense

670

506

Other operating activities

-

47

Changes in assets and liabilities from operations

Accounts receivable

21,240

90,555

Equipment installment plans receivable

(36,498)

2,394

Inventory

95,395

19,656

Accounts payable

(13,592)

(53,403)

Customer deposits and deferred revenues

13,319

(1,447)

Accrued taxes

251,510

(1,634)

Accrued interest

9,460

9,136

Other assets and liabilities

(96,121)

(99,471)

355,306

104,937

Cash flows from investing activities

Cash used for additions to property, plant and equipment

(166,461)

(150,890)

Cash paid for acquisitions and licenses

(280,710)

(8,254)

Cash received from divestitures and exchanges

274,131

103,042

Cash received for investments

—

10,000

Other investing activities

2,765

1,623

(170,275)

(44,479)

Cash flows from financing activities

Repayment of long-term debt

(247)

(392)

TDS Common Shares reissued for benefit plans, net of tax payments

213

(50)

U.S. Cellular Common Shares reissued for benefit plans, net of tax payments

487

316

Repurchase of TDS Common Shares

—

(3,342)

Repurchase of U.S. Cellular Common Shares

(2,302)

(2,000)

Dividends paid to TDS shareholders

(15,232)

(14,582)

Payment of debt issuance costs

(3,018)

—

Distributions to noncontrolling interests

(225)

(346)

Other financing activities

(1,488)

2,834

(21,812)

(17,562)

Net increase in cash and cash equivalents

163,219

42,896

Cash and cash equivalents

Beginning of period

471,901

830,014

End of period

$

635,120

$

872,910

TDS Telecom Highlights

Three Months Ended March 31,

(Unaudited, dollars in thousands)

Change

2015

2014

Amount

Percent

Wireline

Operating revenues

Residential

$

74,686

$

72,505

$

2,181

3%

Commercial

55,762

57,980

(2,218)

(4%)

Wholesale

45,243

46,448

(1,205)

(3%)

Total service revenues

175,691

176,933

(1,242)

(1%)

Equipment sales

444

553

(109)

(20%)

176,135

177,486

(1,351)

(1%)

Operating expenses

Cost of services

62,427

64,400

(1,973)

(3%)

Cost of equipment sold

563

483

80

17%

Selling, general and administrative expenses

45,669

46,520

(851)

(2%)

Depreciation, amortization and accretion

42,009

42,736

(727)

(2%)

(Gain) loss on asset disposals, net

518

245

273

>100%

151,186

154,384

(3,198)

(2%)

Operating income

$

24,949

$

23,102

$