2020 Estimated Results

U.S. Cellular

Previous

Current

(Dollars in millions)

Service revenues

$3,000-$3,100

Unchanged

Adjusted OIBDA1

$775-$900

$725-$850

Adjusted EBITDA1

$950-$1,075

$900-$1,025

Capital expenditures

$850-$950

Unchanged

TDS Telecom

Previous

Current

(Dollars in millions)

Total operating revenues

$950-$1,000

Unchanged

Adjusted OIBDA1

$280-$310

Unchanged

Adjusted EBITDA1

$290-$320

Unchanged

Capital expenditures

$300-$350

Unchanged

2020 Estimated Results

U.S. Cellular

TDS Telecom

(Dollars in millions)

Net income (GAAP)

N/A

N/A

Add back:

Income tax expense

N/A

N/A

Income before income taxes (GAAP)

$80-$205

$80-$110

Add back:

Interest expense

110

—

Depreciation, amortization and accretion expense

690

210

EBITDA (Non-GAAP)1

$880-$1,005

$290-$320

Add back or deduct:

(Gain) loss on asset disposals, net

20

—

Adjusted EBITDA (Non-GAAP)1

$900-$1,025

$290-$320

Deduct:

Equity in earnings of unconsolidated entities

165

—

Interest and dividend income

10

10

Adjusted OIBDA (Non-GAAP)1

$725-$850

$280-$310

Actual Results

Three Months EndedMarch 31, 2020

Year EndedDecember 31, 2019

U.S.Cellular

TDSTelecom

U.S.Cellular

TDSTelecom

(Dollars in millions)

Net income (GAAP)

$

72

$

28

$

133

$

92

Add back:

Income tax expense

4

4

52

30

Income before income taxes (GAAP)

$

76

$

31

$

185

$

122

Add back:

Interest expense

24

(1)

110

(3)

Depreciation, amortization and accretion expense

177

52

702

200

EBITDA (Non-GAAP)1

$

277

$

82

$

997

$

320

Add back or deduct:

(Gain) loss on asset disposals, net

4

—

19

(7)

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

—

—

(1)

—

Adjusted EBITDA (Non-GAAP)1

$

281

$

82

$

1,015

$

313

Deduct:

Equity in earnings of unconsolidated entities

45

—

166

—

Interest and dividend income

4

2

17

12

Other, net

1

—

—

—

Adjusted OIBDA (Non-GAAP)1

$

231

$

80

$

832

$

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 March 31, 2020, 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

3/31/2020

12/31/2019

9/30/2019

6/30/2019

3/31/2019

Retail Connections

Postpaid

Total at end of period

4,359,000

4,383,000

4,395,000

4,414,000

4,440,000

Gross additions

132,000

170,000

163,000

137,000

137,000

Feature phones

2,000

2,000

3,000

5,000

4,000

Smartphones

88,000

128,000

121,000

97,000

98,000

Connected devices

42,000

40,000

39,000

35,000

35,000

Net additions (losses)

(26,000)

(12,000)

(19,000)

(26,000)

(32,000)

Feature phones

(10,000)

(11,000)

(11,000)

(10,000)

(13,000)

Smartphones

(10,000)

13,000

9,000

(1,000)

(1,000)

Connected devices

(6,000)

(14,000)

(17,000)

(15,000)

(18,000)

ARPU1

$

47.23

$

46.57

$

46.16

$

45.90

$

45.44

ARPA2

$

122.92

$

120.99

$

119.87

$

119.46

$

118.84

Churn rate3

1.21

%

1.38

%

1.38

%

1.23

%

1.26

%

Handsets

0.95

%

1.11

%

1.09

%

0.97

%

0.99

%

Connected devices

3.11

%

3.44

%

3.44

%

3.01

%

3.08

%

Prepaid

Total at end of period

494,000

506,000

510,000

500,000

503,000

Gross additions

57,000

63,000

70,000

61,000

61,000

Net additions (losses)

(12,000)

(3,000)

9,000

(2,000)

(13,000)

ARPU1

$

34.07

$

34.11

$

34.35

$

34.43

$

33.44

Churn rate3

4.67

%

4.40

%

4.03

%

4.20

%

4.92

%

Total connections at end of period4

4,903,000

4,941,000

4,957,000

4,967,000

4,995,000

Market penetration at end of period

Consolidated operating population

31,292,000

30,740,000

31,310,000

31,310,000

31,310,000

Consolidated operating penetration5

16

%

16

%

16

%

16

%

16

%

Capital expenditures (millions)

$

236

$

243

$

170

$

195

$

102

Total cell sites in service

6,629

6,578

6,554

6,535

6,506

Owned towers

4,184

4,166

4,123

4,116

4,106

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.

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

3/31/2020

12/31/2019

9/30/2019

6/30/2019

3/31/2019

TDS Telecom

Wireline

Residential connections

Voice1

259,100

262,100

266,100

269,000

271,100

Broadband2

242,700

241,300

242,200

240,200

236,100

Video3

59,000

58,500

57,300

56,200

54,300

Wireline residential connections

560,700

561,900

565,600

565,500

561,500

Total residential revenue per connection4

$

50.12

$

49.11

$

49.02

$

47.88

$

48.16

Commercial connections

Voice1

114,400

117,800

121,200

124,200

127,300

Broadband2

20,500

20,400

20,600

20,600

20,400

managedIP5

118,300

121,200

124,500

128,300

132,000

Video3

100

100

400

400

400

Wireline commercial connections

253,400

259,600

266,600

273,500

280,100

Total Wireline connections

814,200

821,500

832,300

839,000

841,500

Cable

Cable residential and commercial connections

Broadband6

196,800

193,500

174,900

172,600

171,100

Video7

105,100

106,600

98,000

100,300

101,400

Voice8

68,900

69,500

63,900

64,800

65,400

managedIP5

1,400

1,300

1,200

1,100

1,100

Total Cable connections

372,300

370,900

338,000

338,900

339,000

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

3/31/2020

12/31/2019

9/30/2019

6/30/2019

3/31/2019

(Dollars in millions)

Wireline

$

39

$

98

$

61

$

55

$

29

Cable

15

26

20

15

13

Total TDS Telecom

$

54

$

124

$

81

$

70

$

42

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)

Three Months EndedMarch 31,

2020

2019

2020vs. 2019

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

Operating revenues

U.S. Cellular

$

963

$

966

–

TDS Telecom

240

230

4

%

All Other1

58

61

(5)

%

1,261

1,257

–

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

732

735

–

Depreciation, amortization and accretion

177

169

5

%

(Gain) loss on asset disposals, net

4

2

72

%

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

—

(2)

N/M

(Gain) loss on license sales and exchanges, net

—

(2)

N/M

913

902

1

%

TDS Telecom

Expenses excluding depreciation, amortization and accretion

160

150

7

%

Depreciation, amortization and accretion

52

50

2

%

(Gain) loss on asset disposals, net

—

(7)

N/M

212

193

10

%

All Other1

Expenses excluding depreciation and amortization

58

60

(4)

%

Depreciation and amortization

6

8

(23)

%

64

68

(6)

%

Total operating expenses

1,189

1,163

2

%

Operating income (loss)

U.S. Cellular

50

64

(22)

%

TDS Telecom

28

37

(23)

%

All Other1

(6)

(7)

10

%

72

94

(23)

%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

45

44

3

%

Interest and dividend income

6

9

(30)

%

Interest expense

(37)

(43)

14

%

Total investment and other income

14

10

41

%

Income before income taxes

86

104

(17)

%

Income tax expense

3

34

(89)

%

Net income

83

70

18

%

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

14

11

25

%

Net income attributable to TDS shareholders

$

69

$

59

17

%

Basic weighted average shares outstanding

115

114

1

%

Basic earnings per share attributable to TDS shareholders

$

0.60

$

0.52

16

%

Diluted weighted average shares outstanding

116

116

–

Diluted earnings per share attributable to TDS shareholders

$

0.59

$

0.50

17

%

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)

Three Months EndedMarch 31,

2020

2019

(Dollars in millions)

Cash flows from operating activities

Net income

$

83

$

70

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

Depreciation, amortization and accretion

235

227

Bad debts expense

34

25

Stock-based compensation expense

11

13

Deferred income taxes, net

75

25

Equity in earnings of unconsolidated entities

(45)

(44)

Distributions from unconsolidated entities

25

19

(Gain) loss on asset disposals, net

4

(5)

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

—

(2)

(Gain) loss on license sales and exchanges, net

—

(2)

Other operating activities

—

1

Changes in assets and liabilities from operations

Accounts receivable

43

28

Equipment installment plans receivable

23

(10)

Inventory

(52)

(15)

Accounts payable

87

46

Customer deposits and deferred revenues

(9)

5

Accrued taxes

(74)

9

Accrued interest

9

11

Other assets and liabilities

(82)

(74)

Net cash provided by operating activities

367

327

Cash flows from investing activities

Cash paid for additions to property, plant and equipment

(377)

(155)

Cash paid for licenses

(26)

(1)

Cash received from investments

—

2

Cash paid for investments

(1)

(1)

Cash received from divestitures and exchanges

—

31

Advance payments for license acquisitions

—

(135)

Net cash used in investing activities

(404)

(259)

Cash flows from financing activities

Issuance of long-term debt

50

—

Repayment of long-term debt

(2)

(5)

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

(1)

(3)

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

—

(1)

Repurchase of TDS Common Shares

(6)

—

Repurchase of U.S. Cellular Common Shares

(21)

—

Dividends paid to TDS shareholders

(19)

(19)

Distributions to noncontrolling interests

(1)

(1)

Other financing activities

(3)

—

Net cash used in financing activities

(3)

(29)

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

(40)

39

Cash, cash equivalents and restricted cash

Beginning of period

474

927

End of period

$

434

$

966

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

ASSETS

March 31, 2020

December 31, 2019

(Dollars in millions)

Current assets

Cash and cash equivalents

$

421

$

465

Accounts receivable, net

1,052

1,124

Inventory, net

218

169

Prepaid expenses

115

98

Income taxes receivable

111

36

Other current assets

33

29

Total current assets

1,950

1,921

Licenses

2,511

2,480

Goodwill

547

547

Other intangible assets, net

232

239

Investments in unconsolidated entities

509

488

Property, plant and equipment, net

3,595

3,527

Operating lease right-of-use assets

975

972

Other assets and deferred charges

576

607

Total assets

$

10,895

$

10,781

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

LIABILITIES AND EQUITY

March 31, 2020

December 31, 2019

(Dollars in millions, except per share amounts)

Current liabilities

Current portion of long-term debt

$

8

$

10

Accounts payable

378

374

Customer deposits and deferred revenues

181

189

Accrued interest

19

11

Accrued taxes

38

41

Accrued compensation

77

121

Short-term operating lease liabilities

121

116

Other current liabilities

78

100

Total current liabilities

900

962

Deferred liabilities and credits

Deferred income tax liability, net

750

676

Long-term operating lease liabilities

929

931

Other deferred liabilities and credits

491

481

Long-term debt, net

2,365

2,316

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

2,489

2,468

Treasury shares, at cost

(480)

(479)

Accumulated other comprehensive loss

(8)

(9)

Retained earnings

2,718

2,672

Total TDS shareholders' equity

4,720

4,653

Noncontrolling interests

729

751

Total equity

5,449

5,404

Total liabilities and equity

$

10,895

$

10,781

Balance Sheet Highlights

(Unaudited)

March 31, 2020

U.S.

TDS

TDS Corporate

Intercompany

TDS

Cellular

Telecom

& Other

Eliminations

Consolidated

(Dollars in millions)

Cash and cash equivalents

$

258

$

26

$

137

$

—

$

421

Affiliated cash investments

—

488

—

(488)

—

$

258

$

514

$

137

$

(488)

$

421

Licenses, goodwill and other intangible assets

$

2,502

$

778

$

10

$

—

$

3,290

Investment in unconsolidated entities

469

4

46

(10)

509

$

2,971

$

782

$

56

$

(10)

$

3,799

Property, plant and equipment, net

$

2,268

$

1,222

$

105

$

—

$

3,595

Long-term debt, net:

Current portion

$

6

$

1

$

1

$

—

$

8

Non-current portion

1,503

4

858

—

2,365

$

1,509

$

5

$

859

$

—

$

2,373

TDS Telecom Highlights

(Unaudited)

Three Months EndedMarch 31,

2020

2019

2020 vs. 2019

(Dollars in millions)

Wireline

Operating revenues

Residential

$

84

$

81

4

%

Commercial

39

43

(10)

%

Wholesale

46

46

–

Total service revenues

169

170

(1)

%

Equipment and product sales

—

—

(43)

%

169

171

(1)

%

Operating expenses

Cost of services

65

63

4

%

Cost of equipment and products

—

—

(46)

%

Selling, general and administrative expenses

48

47

3

%

Expenses excluding depreciation, amortization and accretion

114

110

3

%

Depreciation, amortization and accretion

32

34

(4)

%

(Gain) loss on asset disposals, net

—

(7)

N/M

146

136

7

%

Operating income

$

23

$

34

(32)

%

Cable

Operating revenues

Residential

$

60

$

49

20

%

Commercial

11

10

11

%

71

60

19

%

Operating expenses

Cost of services

30

26

17

%

Selling, general and administrative expenses

17

14

16

%

Expenses excluding depreciation, amortization and accretion

47

40

17

%

Depreciation, amortization and accretion

19

17

15

%

(Gain) loss on asset disposals, net

—

—

(87)

%

66

57

15

%

Operating income (loss)

$

5

$

2

N/M

Total TDS Telecom operating income

$

28

$

37

(23)

%

N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited)

Free Cash Flow

Three Months EndedMarch 31,

2020

2019

(Dollars in millions)

Cash flows from operating activities (GAAP)

$

367

$

327

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

377

155

Free cash flow (Non-GAAP)1

$

(10)

$

172

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.