2016 Estimated Results

U.S. Cellular

TDS Telecom

TDS(2)

Current

Previous

Current

Previous

Current

Previous

(Dollars in millions)

Total operating revenues

$3,900-$4,100

Unchanged

$1,130-$1,180

Unchanged

$5,040-$5,290

Unchanged

Operating cash flow (1)

$525-$650

Unchanged

$270-$310

Unchanged

$800-$965

Unchanged

Adjusted EBITDA (1)

$725-$850

Unchanged

$270-$310

Unchanged

$1,000-$1,165

Unchanged

Capital expenditures

Approx. $ 500

Unchanged

Approx. $ 180

Unchanged

Approx. $ 695

Unchanged

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)

$

0-125

$

40-80

$

(20)-145

Add back:

Interest expense

105

–

160

Depreciation, amortization and accretion expense

600

230

840

EBITDA

$

705-830

$

270-310

$

980-1,145

Add back:

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

–

–

–

(Gain) loss on license sales and exchanges, net

–

–

–

(Gain) loss on asset disposals, net

20

–

20

Adjusted EBITDA (1)

$

725-850

$

270-310

$

1,000-1,165

Deduct:

Equity in earnings of unconsolidated entities

140

–

140

Interest and dividend income

60

–

60

Operating cash flow (1)(4)

$

525-650

$

270-310

$

800-965

Actual Results

Three Months Ended March 31, 2016

Year ended December 31, 2015

U.S. Cellular

TDS

Telecom

TDS (2)

U.S. Cellular*

TDS

Telecom

TDS (2)*

(Dollars in millions)

Net income (loss) (GAAP)

$

9

$

10

$

10

$

247

$

46

$

263

Add back:

Income tax expense (benefit)

11

7

13

156

35

172

Income (loss) before income taxes (GAAP)

$

20

$

17

$

23

$

404

$

81

$

435

Add back:

Interest expense

28

–

41

86

1

142

Depreciation, amortization and accretion expense

153

58

212

606

228

844

EBITDA

$

201

$

75

$

276

$

1,096

$

310

$

1,421

Add back:

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

–

–

–

(114)

(10)

(136)

(Gain) loss on license sales and exchanges, net

–

–

–

(147)

–

(147)

(Gain) loss on asset disposals, net

5

1

6

16

6

22

Adjusted EBITDA (1)

$

206

$

76

$

282

$

852

$

306

$

1,160

Deduct:

Equity in earnings of unconsolidated entities

35

–

35

140

–

140

Interest and dividend income

13

1

14

37

2

39

Other, net

1

(1)

–

–

–

–

Operating cash flow (1)(4)

$

157

$

76

$

233

$

675

$

304

$

981

* Includes $58 million of revenue related to termination of the rewards points program.

Note: Totals may not foot due to rounding differences.

(1)

Operating cash flow is defined as net income, adjusted for the items set forth in the reconciliation above. Adjusted EBITDA is defined as net income, adjusted for the items set forth in the reconciliation above. 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 above.

(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 2016 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.

(4)

A reconciliation of Operating cash flow (Non-GAAP) to operating income (GAAP) for March 31, 2016 actual results can be found on the company's website at investors.tdsinc.com.

Repurchase Period

# Shares

Cost (in millions)

2016 (year-to-date through March 31, 2016)

111,700

$

3

2015 (full year)

–

$

–

Total

111,700

$

3

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

3/31/2016

12/31/2015

9/30/2015

6/30/2015

3/31/2015

Retail Customers

Postpaid

Total at end of period

4,454,000

4,409,000

4,341,000

4,324,000

4,307,000

Gross additions

215,000

240,000

200,000

191,000

200,000

Feature phones

9,000

10,000

14,000

15,000

14,000

Smartphones

124,000

132,000

119,000

115,000

119,000

Connected devices

82,000

98,000

67,000

61,000

67,000

Net additions (losses)

45,000

68,000

17,000

17,000

9,000

Feature phones

(25,000)

(25,000)

(28,000)

(26,000)

(34,000)

Smartphones

20,000

23,000

6,000

7,000

3,000

Connected devices

50,000

70,000

39,000

36,000

40,000

ARPU (1)(8)

$

48.13

$

51.46

$

58.12

$

53.62

$

54.87

ABPU (2)(8)

$

56.06

$

58.57

$

63.88

$

58.08

$

58.50

ARPA (3)(8)

$

125.36

$

131.96

$

147.00

$

133.85

$

134.94

ABPA (4)(8)

$

145.99

$

150.19

$

161.57

$

144.99

$

143.86

Churn rate (5)

1.28%

1.31%

1.41%

1.34%

1.48%

Smartphone penetration (6)

75%

74%

72%

69%

67%

Prepaid

Total at end of period

399,000

387,000

380,000

368,000

360,000

Gross additions

75,000

69,000

71,000

65,000

73,000

Net additions (losses)

12,000

7,000

12,000

8,000

12,000

ARPU (1)

$

35.51

$

35.54

$

35.64

$

35.98

$

35.72

Churn rate (5)

5.37%

5.40%

5.24%

5.22%

5.76%

Total customers at end of period

4,926,000

4,876,000

4,807,000

4,779,000

4,775,000

Smartphones sold as a percent of total handsets sold

92%

91%

87%

87%

86%

Market penetration at end of period

Consolidated operating population

31,994,000

31,967,000

31,814,000

31,814,000

31,814,000

Consolidated operating penetration (7)

15%

15%

15%

15%

15%

Capital expenditures (millions)

$

79

$

198

$

135

$

134

$

66

Total cell sites in service

6,306

6,297

6,246

6,223

6,219

Owned towers

3,989

3,978

3,957

3,940

3,936

(1)

Average Revenue Per User ("ARPU") are metrics calculated by dividing a revenue base by an average number of customers and by the number of months in the period. These revenue bases and customer populations are shown below:

▪

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

▪

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

(2)

Average Billings Per User ("ABPU") metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid customers and by the number of months in the period.

(3)

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

(4)

Average Billings Per Account ("ABPA") metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid accounts and by the number of months in the period.

(5)

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.

(6)

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 handsets.

(7)

Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated operating markets as estimated by Nielsen.

(8)

The quarter ended September 30, 2015 results include the recognition of $58 million in revenue due to the termination of the awards program.

TDS Telecom

Summary Operating Data (Unaudited)

Quarter Ended

3/31/2016

12/31/2015

9/30/2015

6/30/2015

3/31/2015

TDS Telecom

Wireline

Residential connections

Voice (1)

318,400

319,800

325,900

329,000

333,400

Broadband (2)

229,100

228,500

231,600

231,200

229,400

IPTV (3)

38,300

34,400

30,300

27,900

25,600

Wireline residential connections

585,800

582,700

587,800

588,100

588,400

Total residential revenue per connection (4)

$

43.28

$

41.24

$

42.83

$

42.10

$

42.32

Commercial connections

Voice (1)

167,400

171,500

176,700

181,800

187,500

Broadband (2)

22,000

22,400

23,000

23,700

24,300

managedIP (5)

148,500

147,100

145,900

145,100

143,200

Wireline commercial connections

337,900

341,000

345,600

350,600

355,000

Total Wireline connections

923,700

923,700

933,400

938,700

943,400

Cable

Cable Connections

Video (6)

104,600

106,800

108,300

109,100

109,700

Broadband (7)

121,700

117,100

114,600

112,300

112,200

Voice (7)

58,100

56,400

54,000

51,500

49,100

Cable connections

284,400

280,300

276,900

272,900

271,000

(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 monthly 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 (millions)

Quarter Ended

3/31/2016

12/31/2015

9/30/2015

6/30/2015

3/31/2015

Wireline

$

27

$

50

$

38

$

32

$

20

Cable

13

15

13

12

12

HMS

2

8

5

9

5

$

42

$

73

$

56

$

53

$

37

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)

Three Months Ended March 31,

2016

2015

2016 vs. 2015

(Dollars and shares in millions, except per share amounts)

Operating revenues

U.S. Cellular

$

958

$

965

$

(7)

(1)%

TDS Telecom

281

280

1

-

All Other (1)

4

7

(3)

(51)%

1,243

1,252

(9)

(1)%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

801

798

3

-

Depreciation, amortization and accretion

153

147

6

4%

(Gain) loss on asset disposals, net

5

4

1

19%

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

–

(111)

111

100%

(Gain) loss on license sales and exchanges, net

–

(123)

123

N/M

959

715

244

34%

TDS Telecom

Expenses excluding depreciation, amortization and accretion

205

201

4

2%

Depreciation, amortization and accretion

58

57

1

1%

(Gain) loss on asset disposals, net

1

1

–

(14)%

264

259

5

2%

All Other (1)

Expenses excluding depreciation and amortization

4

5

(1)

(59)%

Depreciation and amortization

1

3

(2)

(19)%

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

–

(13)

13

100%

5

(5)

10

>100%

Total operating expenses

1,228

969

259

27%

Operating income (loss)

U.S. Cellular (3)

(1)

250

(251)

>(100)%

TDS Telecom

17

21

(4)

(21)%

All Other (1)

(1)

12

(13)

>(100)%

15

283

(268)

(95)%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

35

35

–

2%

Interest and dividend income

14

8

6

65%

Interest expense

(41)

(34)

(7)

(24)%

Total investment and other income

8

9

(1)

(22)%

Income before income taxes

23

292

(269)

(92)%

Income tax expense (benefit)

13

116

(103)

(89)%

Net income

10

176

(166)

(94)%

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

2

30

(28)

(94)%

Net income attributable to TDS shareholders

8

146

(138)

(94)%

TDS Preferred dividend requirement

–

–

–

-

Net income available to common shareholders

$

8

$

146

$

(138)

(94)%

Basic weighted average shares outstanding

109

108

1

1%

Basic earnings per share attributable to TDS shareholders

$

0.07

$

1.35

$

(1.28)

(95)%

Diluted weighted average shares outstanding

110

109

1

1%

Diluted earnings per share attributable to TDS shareholders

$

0.07

$

1.33

$

(1.26)

(95)%

(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 $12 million on the tower sale as a result of a lower basis in the assets disposed in 2015.

(3)

Year-over-year comparisons are affected by gains of $247 million from sales and exchanges of businesses and licenses in 2015.

N/M – Percentage change not meaningful

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

(Unaudited)

Three Months Ended March 31,

2016

2015

(Dollars in millions)

Cash flows from operating activities

Net income (loss)

$

10

$

176

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

Depreciation, amortization and accretion

212

207

Bad debts expense

19

30

Stock-based compensation expense

9

8

Deferred income taxes, net

5

(47)

Equity in earnings of unconsolidated entities

(35)

(35)

Distributions from unconsolidated entities

14

13

(Gain) loss on asset disposals, net

6

5

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

–

(124)

(Gain) loss on license sales and exchanges, net

–

(123)

Noncash interest expense

1

1

Changes in assets and liabilities from operations

Accounts receivable

20

21

Equipment installment plans receivable

(41)

(36)

Inventory

(1)

95

Accounts payable

39

(14)

Customer deposits and deferred revenues

(6)

13

Accrued taxes

63

252

Accrued interest

9

9

Other assets and liabilities

(78)

(96)

Net cash provided by operating activities

246

355

Cash flows from investing activities

Cash used for additions to property, plant and equipment

(159)

(166)

Cash paid for acquisitions and licenses

–

(281)

Cash received from divestitures and exchanges

2

274

Other investing activities

–

3

Net cash used in investing activities

(157)

(170)

Cash flows from financing activities

Repayment of long-term debt

(3)

–

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

1

–

Repurchase of TDS Common Shares

(3)

–

Repurchase of U.S. Cellular Common Shares

(2)

(2)

Dividends paid to TDS shareholders

(16)

(15)

Payment of debt issuance costs

–

(3)

Other financing activities

3

(2)

Net cash provided by financing activities

(20)

(22)

Net increase in cash and cash equivalents

69

163

Cash and cash equivalents

Beginning of period

985

472

End of period

$

1,054

$

635

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

ASSETS

March 31,

December 31,

2016

2015

(Dollars in millions)

Current assets

Cash and cash equivalents

$

1,054

$

985

Accounts receivable from customers and others, net

792

803

Inventory, net

160

158

Prepaid expenses

130

112

Income taxes receivable

5

70

Other current assets

32

30

2,173

2,158

Assets held for sale

26

–

Licenses

1,818

1,844

Goodwill

766

766

Franchise rights

244

244

Other intangible assets, net

43

47

Investments in unconsolidated entities

423

402

Property, plant and equipment, net

3,679

3,764

Other assets and deferred charges

211

197

Total assets

$

9,383

$

9,422

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

LIABILITIES AND EQUITY

March 31,

December 31,

2016

2015

(Dollars in millions)

Current liabilities

Current portion of long-term debt

$

14

$

14

Accounts payable

355

349

Customer deposits and deferred revenues

283

288

Accrued interest

21

12

Accrued taxes

36

41

Accrued compensation

75

113

Other current liabilities

106

127

890

944

Deferred liabilities and credits

Net deferred income tax liability

905

900

Other deferred liabilities and credits

441

433

Long-term debt

2,437

2,440

Noncontrolling interests with redemption features

2

1

Equity

TDS shareholders' equity

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

1

1

Capital in excess of par value

2,372

2,365

Treasury shares, at cost

(726)

(727)

Accumulated other comprehensive income (loss)

–

–

Retained earnings

2,479

2,487

Total TDS shareholders' equity

4,126

4,126

Preferred shares

1

1

Noncontrolling interests

581

577

Total equity

4,708

4,704

Total liabilities and equity

$

9,383

$

9,422

Balance Sheet Highlights

(Unaudited)

March 31, 2016

U.S.

TDS

TDS Corporate

Intercompany

TDS

Cellular

Telecom

& Other

Eliminations

Consolidated

(Dollars in millions)

Cash and cash equivalents

$

772

$

47

$

235

$

–

$

1,054

Affiliated cash investments

–

330

–

(330)

–

$

772

$

377

$

235

$

(330)

$

1,054

Licenses, goodwill and other intangible assets

$

2,178

$

831

$

(138)

$

–

$

2,871

Investment in unconsolidated entities

384

4

40

(5)

423

$

2,562

$

835

$

(98)

$

(5)

$

3,294

Property, plant and equipment, net

$

2,573

$

1,082

$

24

$

–

$

3,679

Long-term debt:

Current portion

$

11

$

–

$

3

$

–

$

14

Non-current portion

1,626

1

810

–

2,437

$

1,637

$

1

$

813