2020 Estimated Results and Actual Results for the Year Ended December 31, 2019

U.S. Cellular

Estimate

Actual

(Dollars in millions)

Service revenues

$3,000-$3,100

$

3,035

Adjusted OIBDA1

$775-$900

$

832

Adjusted EBITDA1

$950-$1,075

$

1,015

Capital expenditures

$850-$950

$

710

TDS Telecom

Estimate

Actual

(Dollars in millions)

Total operating revenues

$950-$1,000

$

930

Adjusted OIBDA1

$280-$310

$

300

Adjusted EBITDA1

$290-$320

$

313

Capital expenditures

$300-$350

$

316

U.S. Cellular

TDS Telecom

Estimate

Actual

Estimate

Actual

(Dollars in millions)

Net income (GAAP)

N/A

$

133

N/A

$

92

Add back:

Income tax expense

N/A

52

N/A

30

Income before income taxes (GAAP)

$130-$255

$

185

$80-$110

$

122

Add back:

Interest expense

110

110

—

(3)

Depreciation, amortization and accretion expense

690

702

210

200

EBITDA (Non-GAAP)1

$930-$1,055

$

997

$290-$320

$

320

Add back or deduct:

(Gain) loss on asset disposals, net

20

19

—

(7)

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

—

(1)

—

—

Adjusted EBITDA (Non-GAAP)1

$950-$1,075

$

1,015

$290-$320

$

313

Deduct:

Equity in earnings of unconsolidated entities

160

166

—

—

Interest and dividend income

15

17

10

12

Adjusted OIBDA (Non-GAAP)1

$775-$900

$

832

$280-$310

$

300

Numbers may not foot due to rounding.

1

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 before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for December 31, 2019, 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

12/31/2019

9/30/2019

6/30/2019

3/31/2019

12/31/2018

Retail Connections

Postpaid

Total at end of period

4,383,000

4,395,000

4,414,000

4,440,000

4,472,000

Gross additions

170,000

163,000

137,000

137,000

179,000

Feature phones

2,000

3,000

5,000

4,000

4,000

Smartphones

128,000

121,000

97,000

98,000

132,000

Connected devices

40,000

39,000

35,000

35,000

43,000

Net additions (losses)

(12,000)

(19,000)

(26,000)

(32,000)

6,000

Feature phones

(11,000)

(11,000)

(10,000)

(13,000)

(11,000)

Smartphones

13,000

9,000

(1,000)

(1,000)

31,000

Connected devices

(14,000)

(17,000)

(15,000)

(18,000)

(14,000)

ARPU1

$

46.57

$

46.16

$

45.90

$

45.44

$

45.58

ARPA2

$

120.99

$

119.87

$

119.46

$

118.84

$

119.60

Churn rate3

1.38

%

1.38

%

1.23

%

1.26

%

1.29

%

Handsets

1.11

%

1.09

%

0.97

%

0.99

%

1.00

%

Connected devices

3.44

%

3.44

%

3.01

%

3.08

%

3.20

%

Prepaid

Total at end of period

506,000

510,000

500,000

503,000

516,000

Gross additions

63,000

70,000

61,000

61,000

66,000

Net additions (losses)

(3,000)

9,000

(2,000)

(13,000)

(12,000)

ARPU1

$

34.11

$

34.35

$

34.43

$

33.44

$

32.80

Churn rate3

4.40

%

4.03

%

4.20

%

4.92

%

4.98

%

Total connections at end of period4

4,941,000

4,957,000

4,967,000

4,995,000

5,041,000

Market penetration at end of period

Consolidated operating population

30,740,000

31,310,000

31,310,000

31,310,000

31,469,000

Consolidated operating penetration5

16

%

16

%

16

%

16

%

16

%

Capital expenditures (millions)

$

243

$

170

$

195

$

102

$

242

Total cell sites in service

6,578

6,554

6,535

6,506

6,531

Owned towers

4,166

4,123

4,116

4,106

4,129

1

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.

2

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.

3

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.

4

Includes reseller and other connections.

5

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

12/31/2019

9/30/2019

6/30/2019

3/31/2019

12/31/2018

TDS Telecom

Wireline

Residential connections

Voice1

262,100

266,100

269,000

271,100

274,100

Broadband2

241,300

242,200

240,200

236,100

235,400

Video3

58,500

57,300

56,200

54,300

54,000

Wireline residential connections

561,900

565,600

565,500

561,500

563,500

Total residential revenue per connection4

$

49.11

$

49.02

$

47.88

$

48.16

$

47.39

Commercial connections

Voice1

117,800

121,200

124,200

127,300

130,500

Broadband2

20,400

20,600

20,600

20,400

20,600

managedIP5

121,200

124,500

128,300

132,000

134,000

Video3

100

400

400

400

400

Wireline commercial connections

259,600

266,600

273,500

280,100

285,400

Total Wireline connections

821,500

832,300

839,000

841,500

848,900

Cable

Cable residential and commercial connections

Broadband6

193,500

174,900

172,600

171,100

167,400

Video7

106,600

98,000

100,300

101,400

102,900

Voice8

69,500

63,900

64,800

65,400

65,200

managedIP5

1,300

1,200

1,100

1,100

1,000

Total Cable connections

370,900

338,000

338,900

339,000

336,500

Numbers may not foot due to rounding.

1

The individual circuits connecting a customer to Wireline's central office facilities that provide voice services.

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

12/31/2019

9/30/2019

6/30/2019

3/31/2019

12/31/2018

(Dollars in millions)

Wireline

$

98

$

61

$

55

$

29

$

73

Cable

26

20

15

13

19

Total TDS Telecom

$

124

$

81

$

70

$

42

$

91

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)

Three Months EndedDecember 31,

Year EndedDecember 31,

2019

2018

2019

vs. 2018

2019

2018

2019

vs. 2018

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

Operating revenues

U.S. Cellular

$

1,052

$

1,051

–

$

4,022

$

3,967

1

%

TDS Telecom

235

232

1

%

930

927

–

All Other1

49

49

1

%

224

215

4

%

1,336

1,332

–

5,176

5,109

1

%

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

871

881

(1)

%

3,190

3,177

–

Depreciation, amortization and accretion

178

162

10

%

702

640

10

%

(Gain) loss on asset disposals, net

6

5

18

%

19

10

80

%

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

—

—

N/M

(1)

—

N/M

(Gain) loss on license sales and exchanges, net

—

—

N/M

—

(18)

98

%

1,055

1,048

1

%

3,910

3,809

3

%

TDS Telecom

Expenses excluding depreciation, amortization and accretion

162

159

2

%

629

624

1

%

Depreciation, amortization and accretion

51

52

(2)

%

200

212

(5)

%

(Gain) loss on asset disposals, net

—

—

77

%

(7)

(2)

N/M

213

211

1

%

823

834

(1)

%

All Other1

Expenses excluding depreciation and amortization

53

53

–

235

229

2

%

Depreciation and amortization

7

8

(8)

%

30

31

(5)

%

(Gain) loss on asset disposals, net

—

—

N/M

—

1

N/M

60

60

(1)

%

264

261

1

%

Total operating expenses

1,328

1,319

1

%

4,997

4,904

2

%

Operating income (loss)

U.S. Cellular

(3)

3

N/M

112

158

(29)

%

TDS Telecom

21

22

(3)

%

107

93

15

%

All Other1

(11)

(12)

10

%

(40)

(46)

12

%

8

13

(41)

%

179

205

(13)

%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

39

39

(2)

%

168

160

5

%

Interest and dividend income

5

8

(39)

%

29

26

15

%

Interest expense

(37)

(43)

15

%

(165)

(172)

4

%

Other, net

(1)

1

(71)

%

—

2

N/M

Total investment and other income (expense)

6

5

38

%

32

16

92

%

Income before income taxes

14

18

(19)

%

211

221

(5)

%

Income tax expense (benefit)

(1)

(2)

75

%

64

46

37

%

Net income

15

20

(25)

%

147

175

(16)

%

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

3

4

(17)

%

26

40

(36)

%

Net income attributable to TDS shareholders

$

12

$

16

(27)

%

$

121

$

135

(10)

%

Basic weighted average shares outstanding

115

113

1

%

114

112

2

%

Basic earnings per share attributable to TDS shareholders

$

0.10

$

0.14

(28)

%

$

1.06

$

1.20

(11)

%

Diluted weighted average shares outstanding

116

115

–

116

114

2

%

Diluted earnings per share attributable to TDS shareholders

$

0.10

$

0.14

(28)

%

$

1.03

$

1.17

(12)

%

N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

1

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

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

(Unaudited)

Year Ended December 31,

2019

2018

(Dollars in millions)

Cash flows from operating activities

Net income

$

147

$

175

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

Depreciation, amortization and accretion

932

883

Bad debts expense

112

101

Stock-based compensation expense

59

54

Deferred income taxes, net

34

33

Equity in earnings of unconsolidated entities

(168)

(160)

Distributions from unconsolidated entities

162

153

(Gain) loss on asset disposals, net

12

9

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

(1)

—

(Gain) loss on license sales and exchanges, net

—

(18)

Other operating activities

4

4

Changes in assets and liabilities from operations

Accounts receivable

(49)

(39)

Equipment installment plans receivable

(97)

(149)

Inventory

(19)

(5)

Accounts payable

(60)

2

Customer deposits and deferred revenues

(9)

8

Accrued taxes

(17)

(29)

Other assets and liabilities

(26)

(5)

Net cash provided by operating activities

1,016

1,017

Cash flows from investing activities

Cash paid for additions to property, plant and equipment

(957)

(776)

Cash paid for acquisitions and licenses

(346)

(16)

Cash received from investments

29

100

Cash paid for investments

(11)

(17)

Cash received from divestitures and exchanges

41

29

Other investing activities

(5)

—

Net cash used in investing activities

(1,249)

(680)

Cash flows from financing activities

Repayment of long-term debt

(118)

(20)

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

(6)

42

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

(9)

18

Repurchase of U.S. Cellular Common Shares

(21)

—

Dividends paid to TDS shareholders

(75)

(72)

Distributions to noncontrolling interests

(4)

(6)

Other financing activities

13

6

Net cash used in financing activities

(220)

(32)

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

(453)

305

Cash, cash equivalents and restricted cash

Beginning of period

927

622

End of period

$

474

$

927

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

ASSETS

December 31,

2019¹

2018

(Dollars in millions)

Current assets

Cash and cash equivalents

$

465

$

921

Short-term investments

—

17

Accounts receivable

1,124

1,099

Inventory, net

169

150

Prepaid expenses

98

103

Income taxes receivable

36

12

Other current assets

29

28

Total current assets

1,921

2,330

Assets held for sale

—

54

Licenses

2,480

2,195

Goodwill

547

509

Other intangible assets, net

239

253

Investments in unconsolidated entities

488

480

Property, plant and equipment, net

3,527

3,346

Operating lease right-of-use assets

972

—

Other assets and deferred charges

607

616

Total assets

$

10,781

$

9,783

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

LIABILITIES AND EQUITY

December 31,

2019¹

2018

(Dollars in millions, except per share amounts)

Current liabilities

Current portion of long-term debt

$

10

$

21

Accounts payable

374

365

Customer deposits and deferred revenues

189

197

Accrued interest

11

11

Accrued taxes

41

44

Accrued compensation

121

127

Short-term operating lease liabilities

116

—

Other current liabilities

100

114

Total current liabilities

962

879

Liabilities held for sale

—

1

Deferred liabilities and credits

Deferred income tax liability, net

676

640

Long-term operating lease liabilities

931

—

Other deferred liabilities and credits

481

541

Long-term debt, net

2,316

2,418

Noncontrolling interests with redemption features

11

11

Equity

TDS shareholders' equity

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

1

1

Capital in excess of par value

2,468

2,432

Treasury shares, at cost

(479)

(519)

Accumulated other comprehensive loss

(9)

(10)

Retained earnings

2,672

2,656

Total TDS shareholders' equity

4,653

4,560

Noncontrolling interests

751

733

Total equity

5,404

5,293

Total liabilities and equity

$

10,781

$

9,783

1

As of January 1, 2019, TDS adopted the new lease accounting standard, ASC 842, using a modified retrospective method. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2019 amounts include the impacts of ASC 842, but 2018 amounts remain as previously reported.

Balance Sheet Highlights

(Unaudited)

December 31, 2019

U.S.

Cellular

TDS

Telecom

TDS Corporate

& Other

Intercompany

Eliminations

TDS

Consolidated

(Dollars in millions)

Cash and cash equivalents

$

285

$

21

$

159

$

—

$

465

Affiliated cash investments

—

505

—

(505)

—

$

285

$

526

$

159

$

(505)

$

465

Licenses, goodwill and other intangible assets

$

2,471

$

783

$

12

$

—

$

3,266

Investment in unconsolidated entities

447

4

47

(10)

488

$

2,918

$

787

$

59

$

(10)

$

3,754

Property, plant and equipment, net

$

2,207

$

1,211

$

109

$

—

$

3,527

Long-term debt, net:

Current portion

$

8

$

1

$

1

$

—

$

10

Non-current portion

1,502

4

810

—

2,316

$

1,510

$

5

$

811

$

—

$

2,326

TDS Telecom Highlights

(Unaudited)

Three Months EndedDecember 31,

Year EndedDecember 31,

2019

2018

2019 vs. 2018

2019

2018

2019 vs. 2018

(Dollars in millions)

Wireline

Operating revenues

Residential

$

83

$

80

3

%

$

328

$

321

2

%

Commercial

40

45

(10)

%

168

184

(9)

%

Wholesale

47

48

–

186

191

(2)

%

Total service revenues

171

173

(1)

%

682

697

(2)

%

Equipment and product sales

—

—

(30)

%

1

2

(26)

%

171

173

(1)

%

683

699

(2)

%

Operating expenses

Cost of services

68

67

2

%

263

266

(1)

%

Cost of equipment and products

—

—

(17)

%

1

1

(24)

%

Selling, general and administrative expenses

50

51

(2)

%

199

197

1

%

Expenses excluding depreciation, amortization and accretion

119

118

–

463

465

–

Depreciation, amortization and accretion

33

35

(4)

%

132

142

(7)

%

(Gain) loss on asset disposals, net

—

—

N/M

(8)

(3)

N/M

153

153

–

587

604

(3)

%

Operating income

$

18

$

20

(7)

%

$

96

$

95

1

%

Cable

Operating revenues

Residential

$

53

$

48

9

%

$

205

$

188

9

%

Commercial

11

12

(5)

%

43

42

3

%

64

60

7

%

247

230

8

%

Operating expenses

Cost of services

26

26

3

%

105

104

2

%

Selling, general and administrative expenses

17

15

15

%

62

57

8

%

Expenses excluding depreciation, amortization and accretion

44

41

8

%

167

161

4

%

Depreciation, amortization and accretion

17

17

1

%

68

69

(2)

%

(Gain) loss on asset disposals, net

—

—

(46)

%

1

1

(48)

%

61

58

5

%

236

231

2

%

Operating income (loss)

$

3

$

2

42

%

$

11

$

(2)

N/M

Total TDS Telecom operating income

$

21

$

22

(3)

%

$

107

$

93

15

%

N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

Free Cash Flow

Three Months EndedDecember 31,

Year EndedDecember 31,

2019

2018

2019

2018

(Dollars in millions)

Cash flows from operating activities (GAAP)

$

142

$

205

$

1,016

$

1,017

Less: Cash paid for additions to property, plant and equipment

326

330

957

776

Free cash flow (Non-GAAP)1

$

(184)

$

(125)

$

59

$

241

1

Free cash flow is a non-GAAP financial measure which TDS believes may be useful to investors and other users of its financial information in evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment.

Three Months EndedDecember 31,

Year EndedDecember 31,

TDS1

2019

2018

2019

2018

(Dollars in millions)

Net income (GAAP)

$

15

$

20

$

147

$

175

Add back or deduct:

Income tax benefit

(1)

(2)

64

46

Income before income taxes (GAAP)

14

18

211

221

Add back:

Interest expense

37

43

165

172

Depreciation, amortization and accretion expense

236

222

932

883

EBITDA (Non-GAAP)

287

283

1,308

1,276

Add back or deduct:

(Gain) loss on asset disposals, net

6

5

12

9

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

—

—