EX-99 3 tdsq404exhibit991.htm

Exhibit 99.1

As previously announced, TDS and its subsidiaries will hold a joint teleconference Feb. 9, 2005, at 10:00 a.m. Chicago time. Interested parties may listen to the call live over the Internet by accessing the conference call page of the Investor Relations section in www.teldta.com .


Contact: Mark A. Steinkrauss, Vice President, Corporate Relations
  (312) 592-5384 mark.steinkrauss@teldta.com

  Julie D. Mathews, Manager, Investor Relations
  (312) 592-5341 julie.mathews@teldta.com


FOR RELEASE: IMMEDIATE

TDS REPORTS FOURTH QUARTER AND YEAR-END OPERATING RESULTS
Records non-cash impairment charge of $117.4 million relating to its
Competitive Local Exchange Carrier Operations

CHICAGO – Feb. 9, 2005 – Telephone and Data Systems, Inc. [AMEX:TDS] reported operating revenues of $946.5 million for the fourth quarter of 2004, up 6 percent from $890.1 million in the comparable period a year ago. Operating loss was $37.9 million in the fourth quarter compared to operating income of $55.6 million in the fourth quarter of 2003. Net loss available to common and diluted loss per share for the quarter were $37.3 million and $0.65 respectively, compared to net income available to common and diluted earnings per share of $25.7 million and $0.44 respectively, in the fourth quarter of 2003.

Fourth Quarter Events

  • TDS Telecom recorded a “Loss on Impairment of Assets” of $87.9 million due to a write-down of long-lived tangible assets to include property, plant and equipment. Additionally, TDS Telecom recorded a “Loss on Impairment of Intangible Assets” of $29.4 million due to a write-down of all of the goodwill associated with the CLEC operations. The impairments were related to a number of recently released regulatory rulings impacting wholesale prices and the availability of wholesale services to competitive local exchange carriers, as well as the impact of competition. In the fourth quarter of 2003, TDS Telecom recorded a “Loss on Impairment of Assets” of $4.9 million principally related to expansion properties that were determined to be impaired. The expenses were related to building leasehold improvements and lease obligations.

  • U.S. Cellular recorded a “Gain on Assets Held for Sale” of $10.1 million relating to the sale of two operating markets to ALLTEL Communications, Inc (“ALLTEL”). The ALLTEL transaction closed on Nov. 30, 2004. In the fourth quarter of 2003, U.S. Cellular recorded a “Loss on Assets Held for Sale” of $22.3 million principally related to the sale of its South Texas markets, which closed on Feb. 17, 2004.

  • The company recorded a $39.2 million “Gain on Investments” principally from the sale of investment markets to ALLTEL. Of the gain, the U.S. Cellular investment markets contributed $26.6 million and TDS Telecom’s investment interests contributed $12.9 million.

  • The company recorded a $2 million gain in “Discontinued Operations, net of tax,” or $0.04 diluted gain per share. The gain from discontinued operations relates to certain tax-related issues associated with the merger of Aerial Communications, Inc. with VoiceStream Wireless Corporation in 2000.

President’s Comments
“The fourth quarter capped off what was a very successful year for TDS,” said LeRoy T. Carlson, Jr., president and chief executive officer. “Our companies delivered good operating and financial results, and made significant strides delivering on their strategies during the year.

“During the fourth quarter, U.S. Cellular generated 150,000 net customer additions, continuing its strong net add performance of the last several quarters. Postpay churn remained low, at 1.6 percent for the quarter, testifying to the effectiveness of U.S. Cellular’s customer satisfaction strategy. In addition, despite the divestiture of several markets during the year, service revenue increased 8.5 percent year over year. When adjusted for those divestitures, revenue increased 11 percent year over year.

“U.S. Cellular added to its many accomplishments of 2004 during the fourth quarter. Its three new markets, launched the previous quarter, are all doing well. The company completed its three-year wireless network upgrade to CDMA 1X, which allows it to now offer its popular data services in all of its markets. Those data services continue to perform well, and we expect the strong take rates to continue, as data usage becomes more popular and as U.S. Cellular continues to enhance its data service offerings.

“TDS Telecom’s revenues grew 2 percent during the quarter. Contributing to TDS Telecom’s overall revenue performance was the continued strong growth of its long-distance and high-speed Internet services. Data services are proving an excellent growth driver for the company. And the fourth quarter marked a significant milestone for the ILEC’s popular DSL service when its DSL customer market share topped that of cable modems in the markets where the ILEC offers DSL, based on the company’s perceptual survey. This milestone underscores the progress TDS Telecom is making on being the preferred broadband provider in the markets it serves. And for the year, we are pleased that residential primary access lines at the ILEC were level, positive performance in a wireline industry environment characterized by declining access lines.

“In summary, the fourth quarter concluded what was a very productive year for the TDS businesses. I want to take this opportunity to thank all TDS employees for their hard work throughout the year. Their dedication to providing an outstanding experience for each of our customers is critical to growing our customer base. Our appreciation goes as well to each of TDS’s 6.1 million customers for their business and continued loyalty. Finally, we also appreciate the continued support of our shareholders and debt holders. Of note, TDS’s stock price rose 23 percent during the year, outperforming the broad market indices, and TDS increased its dividend once again, marking the 30th consecutive year of dividend increases. TDS made significant progress in 2004, and the company is well positioned for another good year in 2005.”

For the Year
For the year, operating revenues were $3.72 billion, up 8% from $3.45 billion in 2003. Operating income decreased 18% to $220.8 million from $267.9 million in 2003, principally attributed to the write-downs at TDS Metrocom. Net income available to common and diluted earnings per share for

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the year were $48.8 million and $0.84 respectively, compared to net income available to common and diluted earnings per share of $46.2 million and $0.79 respectively, in the year 2003.

In 2004, the company recorded a $6.4 million gain in “Discontinued Operations, net of tax” or $0.11 gain per diluted share relating to certain tax-related issues associated with the merger of Aerial Communications, Inc. with VoiceStream Wireless Corporation. In 2003, the company recorded a diluted loss per share of $.03 for discontinued operations relating to certain liabilities associated with the Aerial merger and a diluted loss per share of $.20 for the cumulative effect of an accounting change related to Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations”.

CFO’s Comments
Said Sandra L. Helton, executive vice president and chief financial officer, “2004 was a good year for the company. Our increase in revenues over 2003 were driven by continued strong customer growth at U.S. Cellular and steady performance at TDS Telecom.

“Equally important, we made progress during the year improving the company’s financial position, in line with our commitment to maintain a strong balance sheet and investment-grade credit ratings. Taking advantage of the positive credit market environment, we lengthened the maturity schedules of a portion of U.S. Cellular’s debt. This provides considerable financial flexibility going forward.

“In addition, we worked concertedly during the year to meet the requirements of the Sarbanes-Oxley Act of 2002. While this entailed a great deal of time and effort, we fully support the principles it embodies, which are in complete alignment with TDS’s commitment to financial integrity. The Sarbanes Oxley requirements provided us an opportunity to further improve our financial and operational processes and controls, which will benefit us in the future.

“In sum, TDS is well positioned financially going into 2005. Our balance sheet is strong; we have considerable liquidity to support our businesses; and we have solid investment-grade credit ratings. We look forward to another positive year.”

Reconciliation of U. S. Cellular Service Revenues

(Dollars in thousands)        
Quarter Ended Dec. 31, 2003:  
Service revenue as reported   $ 620,639  
Less service revenue attributed to markets sold or traded in 2004    14,962  
Pro-forma service revenue for the three months ended Dec. 31, 2003   $ 605,677  
   
Service revenue as reported for the three months ended Dec. 31, 2004   $ 673,223  
   
Percentage year-over-year service revenue growth  
for three months ended Dec. 31, 2004  
Based on amounts as reported    8.5%
Based on pro-forma service revenue for the three months ended Dec. 31, 2003    11.2%

The pro-forma numbers above are non-GAAP financial measures as defined by SEC rules. Management believes that they are useful measures to evaluate the company’s performance excluding the divested markets, but they should not be considered as alternatives to GAAP.

As previously announced, TDS and its subsidiaries will hold a joint teleconference Feb. 9, 2005, at 10:00 a.m. Chicago time. Interested parties may listen to the call live over the Internet by accessing http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=67422&eventID=1004106, or the conference call page of the Investor Relations section of www.teldta.com, or connect by telephone at 888/245-6674 with a pass code of 3521201. The conference call will be archived on the

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conference call section of our web site at www.teldta.com. Prior to the commencement of the call, certain financial and statistical information discussed during the conference call comments will be posted to the web site, together with reconciliations to generally accepted accounting principles (GAAP) of any non-GAAP information to be disclosed. Investors may access this additional information on the conference call page of the Investor Relations section of the TDS web site.

TDS, a FORTUNE 500 company, is a diversified telecommunications corporation founded in 1969. Through its strategic business units, U.S. Cellular and TDS Telecom, TDS operates primarily by providing wireless, local telephone and broadband services. TDS builds value for its shareholders by providing excellent communications services in growing, closely related segments of the telecommunications industry. As of Dec. 31, 2004, the company employed 11,500 people and served 6.1 million customers/units in 36 states.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company’s plans, beliefs, estimates and expectations. These statements are based on current estimates and projections, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: changes in circumstances or events that may affect the ability of USM to start up the operations of the licensed areas involved in the AT&T Wireless transaction completed in August 2003; the ability of U.S. Cellular to successfully manage and grow the operations of the Chicago MTA and newly launched markets; changes in the overall economy; changes in competition in the markets in which TDS and U.S. Cellular operate; changes due to industry consolidation; advances in telecommunications technology, including Voice over Internet Protocol; the impact of local number portability; changes to access and pricing of unbundled network elements; changes in the telecommunications regulatory environment; changes in the value of investments, including variable prepaid forward contracts; an adverse change in the ratings afforded TDS and U.S. Cellular debt securities by nationally accredited ratings organizations; pending and future litigation; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly service revenue per unit, churn rates, roaming rates and the mix of products and services offered in TDS and U.S. Cellular markets. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K used by TDS to furnish this press release to the Securities and Exchange Commission, which are incorporated by reference herein.

For more information about TDS and its subsidiaries, visit the web sites at:

TDS: www.teldta.com TDS Telecom: www.tdstelecom.com
USM: www.uscellular.com TDS Metrocom www.tdsmetro.com

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TELEPHONE AND DATA SYSTEMS, INC.
SUMMARY OPERATING DATA


Quarter Ended      12/31/2004    9/30/2004    6/30/2004    3/31/2004    12/31/2003  
U.S. Cellular:  
Consolidated Markets:  
    Total population (000s) (1)    44,391    45,581    45,581    45,581    46,267  
    Customer units    4,945,000    4,828,000    4,684,000    4,547,000    4,409,000  
    Gross customer unit activations    408,000    387,000    365,000    397,000    368,000  
    Net customer unit activations    150,000    144,000    137,000    196,000    141,000  
    Market penetration (1)    11.14 %  10.59 %  10.28 %  9.98 %  9.53 %
    Cell sites in service    4,856    4,713    4,420    4,122    4,184  
    Average monthly revenue per unit (2)   $ 46.12   $ 48.49   $ 47.79   $ 46.16   $ 47.80  
       Retail service revenue per unit (2)   $ 40.55   $ 41.51   $ 41.58   $ 40.26   $ 40.64  
       Inbound roaming revenue per unit (2)   $ 2.47   $ 3.39   $ 3.21   $ 3.17   $ 3.90  
       Long-distance/other revenue per unit (2)   $ 3.10   $ 3.59   $ 3.00   $ 2.73   $ 3.26  
    Minutes of use (MOU) (3)    568    553    542    491    462  
    Postpay churn rate per month (4)    1.6 %  1.6 %  1.5 %  1.3 %  1.4 %
    Marketing cost per gross  
       customer unit addition (5)   $ 442   $ 410   $ 392   $ 371   $ 384  
    Construction Expenditures (000s)   $ 260,358   $ 131,648   $ 162,579   $ 100,535   $ 193,413  

(1) Market penetration is calculated using 2003 Claritas population estimates for all periods of 2004 and 2002 Claritas estimates for 2003. "Total population" represents the total population of each of U.S. Cellular's consolidated markets, regardless of whether the market has begun marketing operations. The 12/31/04 total population counts exclude the population of the two markets sold to ALLTEL in November 2004. The 9/30/04, 6/30/04 and 3/31/04 total population counts include the population of the market added to consolidated operations as of 1/1/04, but exclude the population of the six markets sold to AT&T Wireless (now Cingular Wireless) in February 2004. The 12/31/03 total population counts exclude the population of the 10 markets transferred to AT&T Wireless (now Cingular Wireless) in August 2003 and include the population of markets acquired from AT&T Wireless (now Cingular Wireless) in that transaction. The population of markets in which U.S. Cellular has deferred the transfer of licenses from AT&T Wireless (now Cingular Wireless) are not included in the total population counts for any period.
(2) Per unit revenue measurements are derived from Service Revenues as reported in Financial Highlights for each respective quarter as follows:
Service Revenues per Financial Highlights     $ 673,223   $ 691,964   $ 662,658   $ 619,382   $ 620,639  
Components:  
  Retail service revenue during quarter   $ 591,972   $ 592,411   $ 576,541   $ 540,228   $ 527,626  
  Inbound roaming revenue during quarter   $ 36,027   $ 48,402   $ 44,516   $ 42,499   $ 50,653  
  Long-distance/other revenue during quarter   $ 45,224   $ 51,151   $ 41,601   $ 36,655   $ 42,360  
     
Divided by average customers during quarter (000s)    4,866    4,757    4,622    4,473    4,328  
Divided by three months in each quarter    3    3    3    3    3  
   
Retail service revenue per unit   $ 40.55   $ 41.51   $ 41.58   $ 40.26   $ 40.64  
Inbound roaming revenue per unit   $ 2.47   $ 3.39   $ 3.21   $ 3.17   $ 3.90  
Long-distance/other revenue per unit   $ 3.10   $ 3.59   $ 3.00   $ 2.73   $ 3.26  
     Average monthly revenue per unit   $ 46.12   $ 48.49   $ 47.79   $ 46.16   $ 47.80  

(3) Average monthly local minutes of use per customer (without roaming).
(4) Postpay churn rate per month is calculated by dividing the average monthly postpay customer disconnects during the quarter by the average postpay customer base for the quarter.
(5) Due to changes in accounting for agent rebates and net customer retention expenses, for all periods shown this measurement is no longer calculable using information from the financial statements as reported. The details of this calculation and a reconciliation to line items reported in Financial Highlights for each respective quarter are shown on U.S. Cellular's web site, along with additional information related to U.S. Cellular's fourth quarter results, at www.uscellular.com.

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TELEPHONE AND DATA SYSTEMS, INC.
SUMMARY OPERATING DATA


Quarter Ended      12/31/2004    9/30/2004    6/30/2004    3/31/2004    12/31/2003  
TDS Telecom  
    ILEC:  
    Access line equivalents (1)    730,400    725,500    725,600    722,400    722,200  
    Access lines    652,300    658,200    660,400    660,900    663,800  
    Dial-up Internet service accounts    101,300    104,800    112,100    113,600    112,900  
    Digital Subscriber Lines (DSL) customers    41,900    33,000    31,500    27,300    23,600  
    Long Distance customers (3)    295,000    289,000    280,900    266,300    230,500  
    Caller I.D. penetration (2)    36.0 %  35.2 %  34.5 %  33.8 %  33.1 %
    Voicemail penetration (2)    13.5 %  13.5 %  13.5 %  13.3 %  13.3 %
    Construction Expenditures (000s)   $ 26,921   $ 31,571   $ 26,961   $ 17,616   $ 35,217  
    CLEC:  
    Access line equivalents (1)    426,800    412,500    395,600    378,800    364,800  
    Dial-up Internet service accounts    18,200    19,100    20,300    21,600    22,200  
    Percent of access lines on-switch    87.9 %  86.8 %  85.7 %  84.5 %  83.5 %
    Digital Subscriber Lines (DSL) customers    29,000    27,000    25,000    22,700    20,100  
    Construction Expenditures (000s)   $ 12,928   $ 7,198   $ 8,596   $ 6,456   $ 10,086  

(1) Access line equivalents are derived by converting high capacity data lines to the estimated capacity of one switched access line.
(2) Caller I.D. and Voicemail penetration is the total residential and business one-party customers purchasing the service divided by the total of these lines equipped for the service.
(3) Beginning January 1, 2004, the long distance customers reflect those lines that have chosen TDS Telecom as their primary interexchange carrier. Prior to that, a count of customers was used.

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TELEPHONE AND DATA SYSTEMS, INC.
FINANCIAL HIGHLIGHTS
Three Months Ended December 31,
(Unaudited, dollars in thousands, except per share amounts)


Increase (Decrease)
2004 2003 Amount Percent
Operating Revenues                    
     U.S. Cellular   $ 719,531   $ 668,096   $ 51,435    7.7%
     TDS Telecom    226,978    222,041    4,937    2.2%
     946,509    890,137    56,372    6.3%
Operating Expenses  
     U.S. Cellular  
        Expenses excluding depreciation, amortization
           and accretion		    553,620    507,074    46,546    9.2%
        Depreciation, amortization and accretion    134,391    114,428    19,963    17.4%
        (Gain) loss on assets held for sale    (10,081 )  22,289    (32,370 )  N/M  
     677,930    643,791    34,139    5.3%
     TDS Telecom  
        Expenses excluding depreciation and amortization    144,856    144,914    (58 )  (0.0% )
        Depreciation and amortization    44,240    40,937    3,303    8.1%
        Loss on impairment of intangible assets    29,440    —    29,440    N/M  
        Loss on impairment of assets    87,910    4,914    82,996    N/M  
     306,446    190,765    115,681    60.6%
            Total Operating Expenses    984,376    834,556    149,820    18.0%
Operating Income (Loss)  
     U.S. Cellular    41,601    24,305    17,296    71.2%
     TDS Telecom    (79,468 )  31,276    (110,744 )  N/M  
     (37,867 )  55,581    (93,448 )  (168.1% )
Other Income (Expense)  
     Investment income    16,882    15,243    1,639    10.8%
     Interest and dividend income    13,386    5,095    8,291    162.7%
     Gain (loss) on investments    39,175    (1,700 )  40,875    N/M  
     Interest expense    (51,328 )  (42,434 )  (8,894 )  (21.0% )
     Other income (expense), net    (282 )  2,533    (2,815 )  (111.1% )
     17,833    (21,263 )  39,096    183.9%
Income (Loss) Before Income Taxes and Minority Interest     (20,034 )  34,318    (54,352 )  (158.4% )
     Income tax expense    9,405    2,904    6,501    N/M  
Income (Loss) Before Minority Interest     (29,439 )  31,414    (60,853 )  (193.7% )
     Minority share of income    (9,845 )  (5,624 )  (4,221 )  (75.1% )
Income (Loss) From Continuing Operations    (39,284 )  25,790    (65,074 )  N/M  
Discontinued Operations, net of tax     2,011    —    2,011    N/M  
Net Income (Loss)     (37,273 )  25,790    (63,063 )  N/M  
     Preferred dividend requirement    (51 )  (104 )  53    N/M  
Net Income (Loss) Available to Common    $ (37,324 ) $ 25,686   $ (63,010 )  N/M  
   
Basic Weighted Average Common Shares
    Outstanding (000s)		    57,423    57,397    26    0.0%
Basic Earnings (Loss) Per Share  
     Income (Loss) from Continuing Operations   $ (0.69 ) $ 0.45   $ (1.14 )  N/M  
     Discontinued Operations    0.04    —    0.04    N/M  
    $ (0.65 ) $ 0.45   $ (1.10 )  N/M  
   
Diluted Weighted Average Common Shares
    Outstanding (000s) 		    57,423    57,726    (303 )  (0.5% )
Diluted Earnings (Loss) Per Share  
     Income (Loss) from Continuing Operations   $ (0.69 ) $ 0.44   $ (1.13 )  N/M  
     Discontinued Operations    0.04    —    0.04    N/M  
    $ (0.65 ) $ 0.44   $ (1.09 )  N/M  

N/M - Percentage change not meaningful


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TELEPHONE AND DATA SYSTEMS, INC.
FINANCIAL HIGHLIGHTS
Year Ended December 31,
(Unaudited, dollars in thousands, except per share amounts)


Increase (Decrease)
2004 2003 Amount Percent
Operating Revenues                    
     U.S. Cellular   $ 2,837,619   $ 2,582,783   $ 254,836    9.9%
     TDS Telecom    882,770    862,433    20,337    2.4%
     3,720,389    3,445,216    275,173    8.0%
Operating Expenses  
     U.S. Cellular  
        Expenses excluding depreciation, amortization
           and accretion		    2,172,721    1,935,964    236,757    12.2%
        Depreciation, amortization and accretion    497,942    432,333    65,609    15.2%
        Loss on impairment of intangible assets    —    49,595    (49,595 )  N/M  
        (Gain) loss on assets held for sale    (10,806 )  45,908    (56,714 )  N/M  
     2,659,857    2,463,800    196,057    8.0%
     TDS Telecom  
        Expenses excluding depreciation and amortization    552,417    545,215    7,202    1.3%
        Depreciation and amortization    170,014    163,399    6,615    4.0%
        Loss on impairment of intangible assets    29,440    —    29,440    N/M  
        Loss on impairment of assets    87,910    4,914    82,996    N/M  
     839,781    713,528    126,253    17.7%
           Total Operating Expenses    3,499,638    3,177,328    322,310    10.1%
Operating Income  
     U.S. Cellular    177,762    118,983    58,779    49.4%
     TDS Telecom    42,989    148,905    (105,916 )  (71.1% )
     220,751    267,888    (47,137 )  (17.6% )
Other Income (Expense)  
     Investment income    69,623    53,154    16,469    31.0%
     Interest and dividend income    27,755    19,918    7,837    39.3%
     Gain (loss) on investments    36,854    (10,200 )  47,054    N/M  
     Interest expense    (198,706 )  (171,391 )  (27,315 )  (15.9% )
     Minority interest in income of subsidiary trust    —    (16,678 )  16,678    N/M  
     Other income (expense), net    (6,931 )  (11,955 )  5,024    42.0%
     (71,405 )  (137,152 )  65,747    47.9%
Income From Continuing Operations Before Income Taxes  
   and Minority Interest    149,346    130,736    18,610    14.2%
     Income tax expense    78,651    50,350    28,301    56.2%
Income From Continuing Operations Before Minority
   Interest		    70,695    80,386    (9,691 )  (12.1% )
     Minority share of income    (28,053 )  (20,380 )  (7,673 )  (37.6% )
Income From Continuing Operations    42,642    60,006    (17,364 )  (28.9% )
Discontinued Operations, net of tax    6,362    (1,609 )  7,971    N/M  
Income Before Cumulative Effect of Accounting Change    49,004    58,397    (9,393 )  (16.1% )
Cumulative Effect of Accounting Change, net of tax and  
   minority interest    —    (11,789 )  11,789    N/M  
Net Income    49,004    46,608    2,396    5.1%
     Preferred dividend requirement    (203 )  (417 )  214    N/M  
Net Income Available to Common   $ 48,801   $ 46,191   $ 2,610    5.7%
   
Basic Weighted Average Common Shares
    Outstanding (000s)		    57,296    57,721    (425 )  (0.7% )
Basic Earnings (Loss) Per Share  
     Income from Continuing Operations   $ 0.74   $ 1.03   $ (0.29 )  (28.2% )
     Discontinued Operations    0.11    (0.03 )  0.14    N/M  
     Cumulative Effect of Accounting Change    —    (0.20 )  0.20    N/M  
    $ 0.85   $ 0.80   $ 0.05    6.2%
   
Diluted Average Common Shares
    Outstanding (000s)		    57,567    57,875    (308 )  (0.5% )
Diluted Earnings (Loss) Per Share  
     Income from Continuing Operations   $ 0.73   $ 1.02   $ (0.29 )  (28.4% )
     Discontinued Operations    0.11    (0.03 )  0.14    N/M  
     Cumulative Effect of Accounting Change    —    (0.20 )  0.20    N/M  
    $ 0.84   $ 0.79   $ 0.05    6.3%

N/M - Percentage change not meaningful


8

TELEPHONE AND DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)

ASSETS


December 31,
2004		 December 31,
2003
Current Assets            
    Cash and cash equivalents   $ 1,168,581   $ 937,651  
    Accounts receivable from customers and other    440,075    409,671  
    Prepaid expenses    44,014    32,766  
    Deferred income tax asset    36,040    19,396  
    Materials and supplies    91,556    87,270  
    Other current assets    29,951    18,192  
     1,810,217    1,504,946  
   
Investments  
    Licenses    1,186,764    1,189,326  
    License rights    42,037    42,037  
    Goodwill    823,259    887,937  
    Customer lists    24,915    24,448  
    Marketable equity securities    3,398,804    2,772,410  
    Investments in unconsolidated entities    206,763    214,885  
    Notes receivable    4,885    6,476  
    Other investments    18,154    15,439  
     5,705,581    5,152,958  
   
Property, Plant and Equipment, net  
    U.S. Cellular    2,439,719    2,271,254  
    TDS Telecom    945,762    1,079,732  
     3,385,481    3,350,986  
   
Other Assets and Deferred Charges    92,562    83,925  
   
Assets of Operations Held for Sale    —    100,523  
   
   
    $ 10,993,841   $ 10,193,338  

NOTE: Certain December 31, 2003 amounts have been changed to conform to current period presentation.


9a

TELEPHONE AND DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)

LIABILITIES AND STOCKHOLDERS' EQUITY


December 31,
2004		 December 31,
2003
Current Liabilities            
    Current portion of long-term debt   $ 38,787   $ 23,712  
    Notes payable    30,000    —  
    Accounts payable    323,256    361,010  
    Customer deposits and deferred revenues    119,380    108,372  
    Accrued interest    27,936    31,884  
    Accrued taxes    91,332    46,107  
    Accrued compensation    71,707    69,290  
    Other current liabilities    53,991    56,570  
     756,389    696,945  
   
Deferred Liabilities and Credits  
    Net deferred income tax liability    1,466,649    1,285,024  
    Derivative Liability    1,210,500    712,252  
    Asset retirement obligation    137,534    124,501  
    Other    64,608    119,076  
     2,879,291    2,240,853  
   
Long-term Debt, excluding current portion  
    Long-term debt    1,974,599    1,994,913  
    Forward contracts    1,689,644    1,672,762  
     3,664,243    3,667,675  
   
Minority Interest in Subsidiaries    499,306    502,702  
   
Liabilities of Operations Held for Sale    —    2,427  
   
Preferred Shares    3,864    3,864  
   
Common Stockholders' Equity  
    Common Shares, $.01 par value    564    563  
    Series A Common Shares, $.01 par value    64    64  
    Capital in excess of par value    1,823,161    1,843,468  
    Treasury Shares    (449,173 )  (493,714 )
    Accumulated other comprehensive income    373,505    296,820  
    Retained earnings    1,442,627    1,431,671  
     3,190,748    3,078,872  
   
    $ 10,993,841   $ 10,193,338  

NOTE: Certain December 31, 2003 amounts have been changed to conform to current period presentation.


9b

BALANCE SHEET HIGHLIGHTS
DECEMBER 31, 2004
(Unaudited, dollars in thousands)



U.S.
Cellular
TDS
Telecom 		TDS Corporate
& Other
Intercompany
Eliminations
TDS
Consolidated
Cash and cash equivalents     $ 40,863   $ 409,411   $ 718,307   $ —   $ 1,168,581  
Affiliated cash investments    59    531,276    —    (531,335 )  —  
Notes receivable—affiliates    —    —    345,126    (345,126 )  —  
    $ 40,922   $ 940,687   $ 1,063,433   $ (876,461 ) $ 1,168,581  
   
Licenses, goodwill and customer lists   $ 1,679,634   $ 397,341   $ —   $ —   $ 2,076,975  
Marketable equity securities    282,829    76,113    3,039,862    —    3,398,804  
Investment in unconsolidated entities    162,764    19,721    31,968    (7,690 )  206,763  
Notes receivable    4,885    —    —    —    4,885  
Long-term notes receivable - affiliates    —    —    400    (400 )  —  
Other investments    —    14,778    3,376    —    18,154  
    $ 2,130,112   $ 507,953   $ 3,075,606   $ (8,090 ) $ 5,705,581  
   
Property, Plant and  
  Equipment, net   $ 2,439,719   $ 945,762   $ —   $ —   $ 3,385,481  
   
Notes payable: external   $ 30,000   $ —   $ —   $ —   $ 30,000  
                     cash management    —    —    531,335    (531,335 )  —  
                     intercompany    —    345,126    —    (345,126 )  —  
    $ 30,000   $ 345,126   $ 531,335   $ (876,461 ) $ 30,000  
   
Forward contracts   $ 159,856   $ 41,182   $ 1,488,606   $ —   $ 1,689,644  
   
Long-term Debt:  
  Current portion   $ —   $ 19,237   $ 19,550   $ —   $ 38,787  
  Affiliated    —    400    —    (400 )  —  
  Non-current portion    1,000,930    224,801    748,868    —    1,974,599  
     Total   $ 1,000,930   $ 244,438   $ 768,418   $ (400 ) $ 2,013,386  
   
Preferred Shares   $ —   $ —   $ 3,864   $ —   $ 3,864  
   
Construction expenditures:  
   Quarter ended 12/31/04   $ 260,358   $ 39,849   $ 1,371        $ 301,578  
   Year ended 12/31/04   $ 655,120   $ 138,247   $ 4,885        $ 798,252  

10

TDS Telecom Highlights
Three Months Ended December 31,
(Unaudited, dollars in thousands)


Increase (Decrease)
2004 2003 Amount Percent
Local Telephone Operations                    
        Operating Revenues  
            Local service   $ 51,786   $ 50,389   $ 1,397    2.8%
            Network access and long-distance    93,976    93,777    199    0.2%
            Miscellaneous    24,849    24,564    285    1.2%
     170,611    168,730    1,881    1.1%
        Operating Expenses  
            Network operations    45,918    48,123    (2,205 )  (4.6% )
            Customer operations    25,386    25,740    (354 )  (1.4% )
            Corporate expenses    19,215    22,827    (3,612 )  (15.8% )
            Depreciation and amortization    34,026    32,237    1,789    5.5%
            Loss on impairment of assets    —    351    (351 )  N/M  
     124,545    129,278    (4,733 )  (3.7% )
            
        Operating Income   $ 46,066   $ 39,452   $ 6,614    16.8%
   
Competitive Local Exchange Carrier Operations  
        Revenues   $ 57,653   $ 55,115   $ 2,538    4.6%
   
        Expenses excluding depreciation and amortization    55,623    50,028    5,595    11.2%
        Depreciation and amortization    10,214    8,700    1,514    17.4%
        Loss on impairment of intangible assets    29,440    —    29,440    N/M  
        Loss on impairment of assets    87,910    4,563    83,347    N/M  
     183,187    63,291    119,896    189.4%
   
        Operating (Loss)   $ (125,534 ) $ (8,176 ) $ (117,358 )  N/M  
   
Intercompany revenues   $ (1,286 ) $ (1,804 ) $ 518    N/M  
Intercompany expenses    (1,286 )  (1,804 )  518    N/M  
     —    —    —    N/M  
   
Total TDS Telecom Operating Income (Loss)   $ (79,468 ) $ 31,276   $ (110,744 )  N/M  

N/M - Percentage change not meaningful.


11

TDS Telecom Highlights
Year Ended December 31,
(Unaudited, dollars in thousands)


Increase (Decrease)
2004 2003 Amount Percent
Local Telephone Operations                    
        Operating Revenues  
            Local service   $ 204,564   $ 199,552   $ 5,012    2.5%
            Network access and long-distance    363,352    362,917    435    0.1%
            Miscellaneous    90,606    90,313    293    0.3%
     658,522    652,782    5,740    0.9%
        Operating Expenses  
            Network operations    164,824    167,342    (2,518 )  (1.5% )
            Customer operations    93,939    95,221    (1,282 )  (1.3% )
            Corporate expenses    81,012    84,950    (3,938 )  (4.6% )
            Depreciation and amortization    131,665    130,036    1,629    1.3%
            Loss on impairment of assets    —    351    (351 )  N/M  
     471,440    477,900    (6,460 )  (1.4% )
                
        Operating Income   $ 187,082   $ 174,882   $ 12,200    7.0%
   
Competitive Local Exchange Carrier Operations  
        Revenues   $ 228,692   $ 213,501   $ 15,191    7.1%
   
        Expenses excluding depreciation and amortization    217,086    201,552    15,534    7.7%
        Depreciation and amortization    38,349    33,363    4,986    14.9%
        Loss on impairment of intangible assets    29,440    —    29,440    N/M  
        Loss on impairment of assets    87,910    4,563    83,347    N/M  
     372,785    239,478    133,307    55.7%
   
        Operating (Loss)   $ (144,093 ) $ (25,977 ) $ (118,116 )  N/M  
   
Intercompany revenues   $ (4,444 ) $ (3,850 ) $ (594 )  N/M  
Intercompany expenses    (4,444 )  (3,850 )  (594 )  N/M  
     —    —    —    N/M  
   
Total TDS Telecom Operating Income   $ 42,989   $ 148,905   $ (105,916 )  (71.1% )

N/M - Percentage change not meaningful.


12