2019 Estimated Results and Actual Results for the Year Ended December 31, 2018

U.S. Cellular

TDS Telecom

TDS (1)

Actual

Estimate

Actual

Estimate

Actual

(Dollars in millions)

Total operating revenues

$4,100-$4,300

$

3,967

$900-$950

$

927

$5,225-$5,475

$

5,109

Adjusted OIBDA (2)

$725-$875

$

790

$280-$310

$

303

$1,000-$1,180

$

1,079

Adjusted EBITDA (2)

$900-$1,050

$

963

$290-$320

$

313

$1,185-$1,365

$

1,267

Capital expenditures

$625-$725

$

515

$300-$350

$

232

$940-$1,090

$

767

U.S. Cellular

TDS Telecom

TDS (1)

Estimate

Actual

Estimate

Actual

Estimate

Actual

(Dollars in millions)

Net income (GAAP)

N/A

$

164

N/A

$

89

N/A

$

175

Add back:

Income tax expense

N/A

51

N/A

16

N/A

46

Income before income taxes (GAAP)

$60-$210

$

215

$85-$115

$

105

$50-$230

$

221

Add back:

Interest expense

115

116

—

(2)

175

172

Depreciation, amortization and accretion expense

710

640

205

212

945

883

EBITDA (Non-GAAP) (2)

$885-$1,035

$

971

$290-$320

$

315

$1,170-$1,350

$

1,276

Add back or deduct:

(Gain) loss on asset disposals, net

20

10

—

(2)

20

9

(Gain) loss on license sales and exchanges, net

(5)

(18)

—

—

(5)

(18)

Adjusted EBITDA (Non-GAAP) (2)

$900-$1,050

$

963

$290-$320

$

313

$1,185-$1,365

$

1,267

Deduct:

Equity in earnings of unconsolidated entities

155

159

—

—

155

160

Interest and dividend income

20

15

10

8

30

26

Other, net

—

(1)

—

2

—

2

Adjusted OIBDA (Non-GAAP) (2)

$725-$875

$

790

$280-$310

$

303

$1,000-$1,180

$

1,079

Numbers may not foot due to rounding.

(1)

The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments.

(2)

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above. EBITDA, Adjusted EBITDA and Adjusted OIBDA 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 or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. TDS does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future. Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS' operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of TDS' financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income (loss) before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for December 31, 2018, can be found on TDS' website at investors.tdsinc.com.

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

12/31/2018 (1)

9/30/2018 (1)

6/30/2018 (1)

3/31/2018 (1)

12/31/2017

Retail Connections

Postpaid

Total at end of period

4,472,000

4,466,000

4,468,000

4,481,000

4,518,000

Gross additions

179,000

172,000

146,000

129,000

177,000

Feature phones

4,000

3,000

5,000

5,000

5,000

Smartphones

132,000

130,000

106,000

91,000

128,000

Connected devices

43,000

39,000

35,000

33,000

44,000

Net additions (losses)

6,000

(1,000)

(13,000)

(37,000)

5,000

Feature phones

(11,000)

(14,000)

(12,000)

(15,000)

(15,000)

Smartphones

31,000

29,000

17,000

(1,000)

33,000

Connected devices

(14,000)

(16,000)

(18,000)

(21,000)

(13,000)

ARPU (2)

$

45.58

$

45.31

$

44.74

$

44.34

$

44.12

ABPU (Non-GAAP) (3)

$

60.46

$

59.41

$

57.75

$

57.10

$

56.69

ARPA (4)

$

119.60

$

119.42

$

118.57

$

118.22

$

118.05

ABPA (Non-GAAP) (5)

$

158.66

$

156.57

$

153.03

$

152.26

$

151.68

Churn rate (6)

1.29

%

1.29

%

1.19

%

1.23

%

1.27

%

Handsets

1.00

%

1.02

%

0.92

%

0.97

%

1.00

%

Connected devices

3.20

%

3.04

%

2.85

%

2.79

%

2.84

%

Prepaid

Total at end of period

516,000

528,000

527,000

525,000

519,000

Gross additions

66,000

80,000

78,000

88,000

83,000

Net additions (losses)

(12,000)

1,000

2,000

6,000

4,000

ARPU (2)

$

32.80

$

32.09

$

32.32

$

31.78

$

32.42

Churn rate (6)

4.98

%

4.98

%

4.83

%

5.27

%

5.09

%

Total connections at end of period (7)

5,041,000

5,050,000

5,051,000

5,063,000

5,096,000

Market penetration at end of period

Consolidated operating population

31,469,000

31,469,000

31,469,000

31,469,000

31,834,000

Consolidated operating penetration (8)

16

%

16

%

16

%

16

%

16

%

Capital expenditures (millions)

$

242

$

118

$

86

$

70

$

213

Total cell sites in service

6,531

6,506

6,478

6,473

6,460

Owned towers

4,129

4,119

4,105

4,099

4,080

Due to rounding, the sum of quarterly results may not equal the total for the year.

(1)

As of January 1, 2018, U.S. Cellular adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported.

(2)

Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period. These revenue bases and connection populations are shown below:

•

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

•

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

(3)

Average Billings Per User (ABPU) - non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid connections and by the number of months in the period. Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.

(4)

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

(5)

Average Billings Per Account (ABPA) - non-GAAP 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. Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.

(6)

Churn rate represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.

(7)

Includes reseller and other connections.

(8)

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

TDS Telecom

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

12/31/2018

9/30/2018

6/30/2018

3/31/2018

12/31/2017

TDS Telecom

Wireline

Residential connections

Voice (1)

274,100

278,400

282,200

286,000

290,600

Broadband (2)

235,400

237,100

234,300

230,500

228,600

Video (3)

54,000

53,100

51,500

50,300

Wireline residential connections

568,600

568,000

566,900

567,700

Total residential revenue per connection (4)

$

47.39

$

47.30

$

47.22

$

47.04

$

46.21

Commercial connections

Voice (1)

130,500

134,000

137,300

140,100

143,000

Broadband (2)

20,600

20,700

20,600

20,600

20,600

managedIP (5)

134,000

138,000

141,400

143,000

146,500

Video (3)

400

400

400

400

—

Wireline commercial connections

285,400

293,100

299,600

304,000

310,100

Total Wireline connections

861,700

867,700

870,900

877,800

Cable

Cable Connections

Broadband (6)

167,400

163,600

159,400

156,800

153,300

Video (7)

102,900

102,100

101,600

100,700

101,800

Voice (8)

65,200

63,600

62,000

60,600

59,700

managedIP (5)

1,000

700

700

600

400

Cable connections

336,500

330,100

323,700

318,700

315,100

Numbers may not foot due to rounding.

(1)

The individual circuits connecting a customer to Wireline's central office facilities.

(2)

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

(3)

The number of Wireline customers provided video services.

(4)

Total residential revenue per connection is calculated by dividing total Wireline residential revenue by the average number of Wireline residential connections and by the number of months in the period.

(5)

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

(6)

Billable number of lines into a building for high-speed data services.

(7)

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.

(8)

Billable number of lines into a building for voice services.

TDS Telecom

Capital Expenditures (Unaudited)

Quarter Ended

12/31/2018

9/30/2018

6/30/2018

3/31/2018

12/31/2017

(Dollars in millions)

Wireline

$

73

$

41

$

33

$

29

$

55

Cable

19

13

13

11

20

Total TDS Telecom (1)

$

91

$

54

$

46

$

40

$

74

Numbers may not foot due to rounding.

(1)

TDS re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, changed its reportable segments. Effective January 1, 2018, HMS is no longer reported under TDS Telecom. Prior periods have been recast to conform to the revised presentation.

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)

Three Months EndedDecember 31,

Year EndedDecember 31,

2017

2018

vs. 2017

2018 (1)

2017

2018

vs. 2017

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

Operating revenues

U.S. Cellular

$

1,051

$

1,029

2

%

$

3,967

$

3,890

2

%

TDS Telecom (2)

232

229

1

%

927

919

1

%

All Other (2)(3)

49

50

(3)

%

215

235

(9)

%

1,332

1,308

2

%

5,109

5,044

1

%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

881

877

–

3,177

3,215

Depreciation, amortization and accretion

162

155

5

%

640

615

4

%

Loss on impairment of goodwill (4)

—

—

N/M

—

370

N/M

(Gain) loss on asset disposals, net

5

4

33

%

10

17

(40)

%

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

—

—

N/M

—

N/M

(Gain) loss on license sales and exchanges, net

—

(3)

N/M

(18)

(22)

20

%

1,048

1,033

2

%

3,809

4,194

(9)

%

TDS Telecom (2)

Expenses excluding depreciation, amortization and accretion (5)

159

151

5

%

624

604

3

%

Depreciation, amortization and accretion

52

49

6

%

212

195

9

%

(Gain) loss on asset disposals, net

—

1

(87)

%

(2)

3

N/M

211

201

5

%

834

803

4

%

All Other (2)(3)

Expenses excluding depreciation and amortization (5)

53

50

6

%

229

229

–

Depreciation and amortization

8

9

(8)

%

31

34

(6)

%

Loss on impairment of goodwill (4)

—

—

N/M

—

(108)

N/M

(Gain) loss on asset disposals, net

—

—

N/M

1

1

N/M

60

58

4

%

261

155

68

%

Total operating expenses

1,319

1,292

2

%

4,904

5,152

(5)

%

Operating income (loss)

U.S. Cellular

3

(4)

N/M

158

(304)

N/M

TDS Telecom (2)(5)

22

28

(22)

%

93

116

(20)

%

All Other (2)(3)(5)

(12)

(8)

(45)

%

(46)

80

N/M

13

16

(21)

%

205

N/M

Investment and other income (expense)

Equity in earnings of unconsolidated entities

39

36

9

%

160

137

17

%

Interest and dividend income

8

4

N/M

26

15

67

%

Interest expense

(43)

(42)

(3)

%

(172)

(170)

(1)

%

Other, net (5)

1

1

17

%

2

4

(22)

%

Total investment and other income (expense) (5)

5

(1)

N/M

16

(14)

N/M

Income (loss) before income taxes

18

15

22

%

221

(122)

N/M

Income tax expense (benefit)

(319)

99

%

46

(279)

N/M

Net income

20

334

(94)

%

175

157

11

%

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

4

47

(91)

%

40

4

N/M

Net income available to TDS common shareholders

$

16

$

287

(94)

%

$

135

$

153

(12)

%

Basic weighted average shares outstanding

113

111

2

%

112

111

1

%

Basic earnings per share available to TDS common shareholders

$

0.14

$

2.59

(95)

%

$

1.20

$

1.39

(14)

%

Diluted weighted average shares outstanding

115

112

3

%

114

112

2

%

Diluted earnings per share available to TDS common shareholders

$

0.14

$

2.54

(94)

%

$

1.17

$

1.37

(15)

%

N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

End Notes (1) (2) (3) (4) (5) — Explained on page 10 of the release.

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

(Unaudited)

Year Ended December 31,

2018 (1)

2017

(Dollars in millions)

Cash flows from operating activities

Net income

$

175

$

157

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

Depreciation, amortization and accretion

883

844

Bad debts expense

101

95

Stock-based compensation expense

54

46

Deferred income taxes, net

33

(369)

Equity in earnings of unconsolidated entities

(160)

(137)

Distributions from unconsolidated entities

153

136

Loss on impairment of goodwill

—

262

(Gain) loss on asset disposals, net

9

21

(Gain) loss on license sales and exchanges, net

(18)

(22)

Other operating activities

4

2

Changes in assets and liabilities from operations

Accounts receivable

(39)

(61)

Equipment installment plans receivable

(149)

(261)

Inventory

(5)

6

Accounts payable

2

(7)

Customer deposits and deferred revenues

8

(4)

Accrued taxes

(29)

37

Other assets and liabilities

(5)

31

Net cash provided by operating activities

1,017

776

Cash flows from investing activities

Cash paid for additions to property, plant and equipment

(776)

(685)

Cash paid for acquisitions and licenses

(16)

(218)

Cash received for investments

100

—

Cash paid for investments

(17)

(100)

Cash received from divestitures and exchanges

29

21

Other investing activities

—

1

Net cash used in investing activities

(680)

(981)

Cash flows from financing activities

Repayment of long-term debt

(20)

(17)

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

42

4

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

18

1

Dividends paid to TDS shareholders

(72)

(69)

Distributions to noncontrolling interests

(6)

(4)

Other financing activities

6

8

Net cash used in financing activities

(32)

(77)

Net increase (decrease) in cash, cash equivalents and restricted cash

305

(282)

Cash, cash equivalents and restricted cash

Beginning of period

622

904

End of period

$

927

$

622

End Note (1) — Explained on page 10 of the release.

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

ASSETS

December 31,

2018

2017

(Dollars in millions)

Current assets

Cash and cash equivalents

$

921

$

619

Short-term investments

17

100

Accounts receivable

1,099

961

Inventory, net

150

145

Prepaid expenses

103

112

Income taxes receivable

12

2

Other current assets

28

27

Total current assets

2,330

1,966

Assets held for sale

54

10

Licenses

2,195

2,232

Goodwill

509

509

Other intangible assets, net

253

279

Investments in unconsolidated entities

480

453

Property, plant and equipment, net

3,346

3,424

Other assets and deferred charges

616

422

Total assets

$

9,783

$

9,295

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

LIABILITIES AND EQUITY

December 31,

2018

2017

(Dollars in millions, except per share amounts)

Current liabilities

Current portion of long-term debt

$

21

$

20

Accounts payable

365

368

Customer deposits and deferred revenues

197

223

Accrued interest

11

11

Accrued taxes

44

64

Accrued compensation

127

126

Other current liabilities

106

Total current liabilities

879

918

Liabilities held for sale

1

—

Deferred liabilities and credits

Deferred income tax liability, net

640

552

Other deferred liabilities and credits

541

495

Long-term debt, net

2,418

2,437

Noncontrolling interests with redemption features

11

1

Equity

TDS shareholders' equity

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

1

1

Capital in excess of par value

2,432

2,413

Treasury shares, at cost

(519)

(669)

Accumulated other comprehensive loss

(10)

(1)

Retained earnings

2,656

2,525

Total TDS shareholders' equity

4,560

4,269

Noncontrolling interests

733

623

Total equity

5,293

4,892

Total liabilities and equity

$

9,783

$

9,295

(1)

As of January 1, 2018, TDS adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported, except as specifically stated.

(2)

TDS re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, changed its reportable segments. Effective January 1, 2018, HMS is no longer reported under TDS Telecom. Prior periods have been recast to conform to the revised presentation.

(3)

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

(4)

During the third quarter of 2017, U.S. Cellular recorded a goodwill impairment of $370 million while TDS recorded a goodwill impairment of the U.S. Cellular reporting unit of $227 million. Prior to 2009, TDS accounted for U.S. Cellular's share repurchases as step acquisitions, allocating a portion of the share repurchase value to TDS' Goodwill. Further, goodwill of the U.S. Cellular reporting unit was impaired at the TDS level in 2003 but not at U.S. Cellular. Consequently, U.S. Cellular's goodwill on a stand-alone basis and any resulting impairments of goodwill does not equal the TDS consolidated goodwill related to U.S. Cellular. The TDS adjustment of $143 million is included in "All other". During the third quarter of 2017, TDS also recorded a goodwill impairment of $35 million related to its HMS operations included in "All other".

(5)

ASU 2017-07, regarding net periodic pension cost and net periodic postretirement benefit cost was adopted January 1, 2018, and applied retrospectively. All prior period numbers have been recast to conform to this standard.

Balance Sheet Highlights

(Unaudited)

December 31, 2018

U.S.

Cellular

TDS

Telecom

TDSCorporate

& Other

Intercompany

Eliminations

TDS

Consolidated

(Dollars in millions)

Cash and cash equivalents

$

580

$

23

$

318

$

—

$

921

Affiliated cash investments

—

460

—

(460)

—

$

580

$

483

$

318

$

(460)

$

921

Licenses, goodwill and other intangible assets

$

2,186

$

754

$

17

$

—

$

2,957

Investment in unconsolidated entities

441

4

42

(7)

480

$

2,627

$

758

$

59

$

(7)

$

3,437

Property, plant and equipment, net

$

2,202

$

1,017

$

127

$

—

$

3,346

Long-term debt, net:

Current portion

$

19

$

1

$

1

$

—

$

21

Non-current portion

1,605

2

811

—

2,418

$

1,624

$

3

$

812

$

—

$

2,439

TDS Telecom Highlights

(Unaudited)

Three Months EndedDecember 31,

Year EndedDecember 31,

2018 (1)

2017

2018 vs.2017

2018 (1)

2017

2018 vs.2017

(Dollars in millions)

Wireline

Operating revenues

Residential

$

80

$

79

2

%

$

321

$

319

1

%

Commercial

45

48

(8)

%

184

199

(7)

%

Wholesale

48

48

(1)

%

191

195

(2)

%

Total service revenues

173

175

(2)

%

697

713

(2)

%

Equipment and product sales

—

—

53

%

2

1

35

%

173

176

(2)

%

699

714

(2)

%

Operating expenses

Cost of services

67

64

5

%

266

258

3

%

Cost of equipment and products

—

—

(20)

%

1

2

(31)

%

Selling, general and administrative expenses (2)

51

47

9

%

197

194

1

%

Expenses excluding depreciation, amortization and accretion

118

111

6

%

465

454

2

%

Depreciation, amortization and accretion

35

37

(6)

%

142

151

(5)

%

(Gain) loss on asset disposals, net

—

—

N/M

(3)

1

N/M

153

149

3

%

604

606

–

Operating income (2)

$

20

$

27

(27)

%

$

95

$

108

(13)

%

Cable

Operating revenues

Residential

$

48

$

44

10

%

$

188

$

169

11

%

Commercial

12

10

19

%

42

37

13

%

60

54

11

%

230

206

12

%

Operating expenses

Cost of services

26

25

3

%

104

98

6

%

Selling, general and administrative expenses

15

15

(1)

%

57

54

6

%

Expenses excluding depreciation, amortization and accretion

41

40

1

%

161

151

6

%

Depreciation, amortization and accretion

17

12

42

%

69

44

57

%

(Gain) loss on asset disposals, net

—

1

(72)

%

1

2

(33)

%

58

53

9

%

231

198

17

%

Operating income (loss)

$

2

$

1

N/M

$

(2)

$

8

N/M

Total TDS Telecom operating income (2)(3)

$

22

$

28

(22)

%

$

93

$

116

(20)

%

N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.