8-K

FORM 8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 25, 2010

TELEPHONE AND DATA SYSTEMS, INC.

(Exact name of registrant as specified in their charter)

Delaware (State or other jurisdiction of incorporation)	001-14157 (Commission File Number)	36-2669023 (I.R.S. Employer Identification No.)
30 North LaSalle Street, Suite 4000, Chicago, Illinois (Address of principal executive offices)		60602 (Zip Code)

Registrant's telephone number, including area code:  (312) 630-1900

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition

On February 25, 2010, Telephone and Data Systems, Inc. (“TDS”) issued a news release announcing its results of operations for the period ended December 31, 2009.  A copy of the news release is attached hereto as Exhibit 99.1 and is incorporated by reference herein. 

The information in this Item 2.02 of Form 8-K is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.

Item 9.01.  Financial Statements and Exhibits

(d)       Exhibits:

In accordance with the provisions of Item 601 of Regulation S-K, any Exhibits filed or furnished herewith are set forth on the Exhibit Index attached hereto.

Attached as Exhibit 99.2 is a safe harbor cautionary statement under the Private Securities Litigation Reform Act of 1995.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on their behalf by the undersigned, thereto duly authorized.

Telephone and Data Systems, Inc. (Registrant)
Date:	February 25, 2010
By:	/s/ Douglas D. Shuma
	Douglas D. Shuma Senior Vice President and Corporate Controller

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EXHIBIT INDEX

The following exhibits are filed or furnished herewith as noted below.

Exhibit No.	Description
99.1	Earnings Press Release dated February 25, 2010
99.2	Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement

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EX-99.1

Exhibit 99.1

NEWS RELEASE

As previously announced, TDS will hold a teleconference Feb. 25, 2010 at 9:30 a.m. CST.  Interested parties may listen to the call live via the Internet by accessing the Conference Calls page of www.teldta.com.

Contact:	Jane W. McCahon, Vice President, Corporate Relations
	(312) 592-5379, jane.mccahon@teldta.com
	Julie D. Mathews, Manager, Investor Relations
	(312) 592-5341, julie.mathews@teldta.com

FOR RELEASE: IMMEDIATE

TDS Reports FOURTH quarter results

provides financial guidance for 2010

Note: Comparisons are year over year unless otherwise noted.

4Q 2009 Highlights

Enterprise/TDS Corporate

§Operating revenues were stable at $1.3 billion.

§Repurchased 552,981 TDS common and special common shares; $247 million remaining on current authorization.

Wireless/U.S. Cellular

§354,000 retail gross additions; 39,000 retail net additions of which 26,000 were postpay and 13,000 were prepaid.

§1 percent increase in service revenues to $986 million, despite a $17 million reduction in inbound roaming revenues.

§34 percent increase in data revenues to $190 million, representing 19 percent of service revenues.

§Retail service ARPU (average revenue per unit) increased from $46.43 to $47.12.

§Retail postpay churn low at 1.6 percent; postpay customers comprised 95 percent of retail customers.

§Redeemed 8.75 percent senior notes; principal amount of $130 million.

§$14 million impairment on licenses; $387 million in the fourth quarter of 2008.

 

 Wireline/TDS Telecom

§ 17 percent increase in ILEC high-speed data customers.

§12 percent increase in ILEC high-speed data revenues, representing 18 percent of ILEC revenues.

§ILEC equivalent access lines held steady at 775,900, primarily due to growth in high-speed data customers and acquisitions, offset by a loss of physical access lines.

§Managed IP stations (ILEC and CLEC) grew to 13,900 from 2,700.

CHICAGO – Feb. 25, 2010 – Telephone and Data Systems, Inc. [NYSE:TDS, TDS.S] reported operating revenues of $1,262.8 million for the fourth quarter of 2009, versus $1,264.0 million in the comparable period one year ago.  Net income attributable to TDS was $16.5 million, or $0.15 per diluted share, impacted by a $14 million (pre-tax), or $0.07 diluted loss per share, charge for impairment of licenses.  In the fourth quarter of 2008, net loss attributable to TDS was $168.9 million, or $1.49 diluted loss per share, impacted by a $414.4 million (pre-tax), or $1.84 diluted loss per share, charge for impairment of licenses.

For the twelve months ended Dec. 31, 2009, TDS reported operating revenues of $5,020.7 million, versus $5,092.0 million in 2008. Net income attributable to TDS for 2009 was $193.9 million, or $1.77 per diluted share, impacted by a $14 million (pre-tax), or $0.07 diluted loss per share, charge for impairment of licenses. In 2008, net income attributable to TDS was $93.5 million, or $0.80 diluted earnings per share, impacted by a $414.4 million (pre-tax), or $1.80 diluted loss per share, charge for impairment of licenses.

“Robust data and broadband offerings, combined with exceptional customer service, continued to be the key drivers of our businesses in 2009,” said LeRoy T. Carlson, Jr., TDS president and CEO. “Though the economy and competitive pressures impacted results across the enterprise, we saw improvements in the key areas of data revenue and data penetration, and we ended the year poised to build on that success.

“Seventy-five percent of U.S. Cellular’s customers had access to 3G speeds at the end of the year. Sales of smart phones and premium phones stimulated data use and drove strong increases in both overall data revenues and data revenue per customer. We improved retail net customer additions from the third quarter in both the prepaid and postpay segments, and churn, an important measure of our ability to serve our customers, also improved.

“Our wireline business, TDS Telecom, increased its ILEC high-speed data revenues in the quarter, and achieved 39 percent broadband penetration within the ILEC residential customer base by year-end. The company is aggressively driving its broadband strategy with new services and products for residential and commercial customers, and continues to build loyalty with value-oriented bundles of high-demand services, including video.

“Both businesses made important investments in infrastructure in 2009, and they will continue to do so in 2010. U.S. Cellular is moving ahead on multi-year initiatives to enable seamless integration of new billing and operational support systems, help the company better understand and target key customer segments, and promote online sales and self-service. In 2010, U.S. Cellular plans to stimulate and support further growth in demand for data by completing its 3G network expansion and continuing its 4G trials and developing its 4G rollout strategy.

“TDS Telecom recently completed the first phase of its leased 10G network and plans to connect two-thirds of its access lines to the network during the first quarter. The network will enable the company to offer more robust broadband services and leading technologies, providing greater reliability and security for its customers, while reducing costs. We are encouraged that TDS Telecom has been awarded $12.5 million to date in federal stimulus grants to bring broadband services to some of our most rural customers.

“At the enterprise level, TDS remains committed to generating long-term value for our shareholders. We are continuing our active share repurchase program and increased our dividend in 2009 for the 35th consecutive year. We have an exceptionally strong balance sheet and investment-grade credit ratings that will enable us to support our businesses as they move forward with their important initiatives.”

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Stock repurchase summary

The following represents repurchases of both TDS common and special common shares.

Repurchase Period	Number of Shares	Percent of Shares Outstanding	Cost (in millions)
2009 (fourth quarter)	552,981		$	16.6
2009 (third quarter)	2,633,467		$	74.0
2009 (second quarter)	2,684,267		$	73.9
2009 (first quarter)	504,026		$	12.1
2009 (full year)	6,374,741	6%	$	176.6
2008 (full year)	5,861,822	5%	$	199.6
Total 2009 and 2008	12,236,563	10%	$	376.2

Loss on impairment of intangible assets

In the fourth quarter of 2009, TDS recorded an impairment loss of $14 million (pre-tax) on licenses as a result of its annual impairment assessment of licenses and goodwill. In the fourth quarter of 2008, TDS recorded an impairment loss of $414.4 million on licenses, attributable to the deterioration in the credit and financial markets.  The impairment charges had no impact on cash or cash flow.

	Impact of Impairment for the three months ended December 31,						Impact of Impairment for the year ended December 31,
(Dollars in millions, except per share amounts)	2009			2008			2009			2008
Net income attributable to TDS shareholders, excluding licenses impairments (1)	$	23.6		$	40.3		$	201.0		$	302.7
Loss on impairment of intangible assets related to licenses		(14.0	)		(414.4	)		(14.0	)		(414.4	)
Income tax and noncontrolling interest impact of licenses impairment (1)		6.9			205.2			6.9			205.2
Impact of licenses impairments on net income attributable to TDS shareholders (1)		(7.1	)		(209.2	)		(7.1	)		(209.2	)
Net income attributable to TDS shareholders	$	16.5		$	(168.9	)	$	193.9		$	93.5
Diluted earnings per share attributable to TDS shareholders, excluding licenses impairments (1)	$	0.22		$	0.35		$	1.84		$	2.60
Impact of licenses impairments on diluted earnings (loss) per share attributable to TDS shareholders (1)		(0.07	)		(1.84	)		(0.07	)		(1.80	)
Diluted earnings (loss) per share attributable to TDS shareholders	$	0.15		$	(1.49	)	$	1.77		$	0.80

(1)These amounts are non-GAAP financial measures.  The purpose of presenting these measures is to provide information on the impact of losses on impairment related to licenses on results of operations.  Such impairments are discrete, significant amounts that impact the comparability of the results of operations, and TDS believes it is useful to disclose these impacts.  The income tax and noncontrolling interest impact is calculated by allocating the losses on impairment to the respective consolidated subsidiaries, and applying the income tax rate and noncontrolling interest percentages applicable to these respective subsidiaries.

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Guidance for year ending Dec. 31, 2010

This guidance represents the views of management as of Feb. 25, 2010 and should not be assumed to be accurate as of any other date.  There can be no assurance that final results will not differ materially from this guidance.  TDS undertakes no legal duty to update such information, whether as a result of new information, future events, or otherwise.

U.S. Cellular
	Service Revenue	$3,975 - $4,075 million
	Operating Income	$250 - $350 million
	Depreciation, Amortization & Accretion (1)	Approx. $600 million
	Capital Expenditures	Approx. $600 million
TDS Telecom (ILEC and CLEC)
	Operating Revenues	$740-$780 million
	Operating Income	$70-$100 million
	Depreciation, Amortization & Accretion (1)	Approx. $170 million
	Capital Expenditures	Approx. $140 million
	(1)  Includes losses on disposals of assets

Conference call information

TDS will hold a conference call on Feb. 25, 2010 at 9:30 a.m. CST.

§ Access the live call online at http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=67422&eventID=2754661 or on the Conference Calls page of www.teldta.com.

§ Access the call by phone at 866-871-4351 (US/Canada) and use conference ID #57950705.

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of www.teldta.com, together with reconciliations to generally accepted accounting principles (GAAP) of any non-GAAP information to be disclosed. The call will be archived on the Conference Calls page of www.teldta.com.

About TDS

Telephone and Data Systems, Inc. (TDS), a Fortune 500® company, provides wireless, local and long-distance telephone, and broadband services to 7.3 million customers in 36 states through its business units, U.S. Cellular (wireless) and TDS Telecom (wireline). Founded in 1969 and headquartered in Chicago, TDS had 12,400 employees as of Dec. 31, 2009. For more information about TDS, visit www.teldta.com.

About U.S. Cellular

United States Cellular Corporation, the nation’s sixth-largest wireless carrier, provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to more than 6.1 million customers in 26 states. The Chicago-based company employed 8,900 full-time equivalent associates as of Dec. 31, 2009. For more information about U.S. Cellular, visit www.uscellular.com.

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, projections and assumptions, 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: The ability of U.S. Cellular to successfully grow its markets; the overall economy; competition; the access to and pricing of unbundled network elements; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; risks and uncertainties relating to possible future restatements; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by U.S. Cellular and TDS Telecom. 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 SEC, 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

U.S. Cellular: www.uscellular.com

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UNITED STATES CELLULAR CORPORATION SUMMARY OPERATING DATA
Quarter Ended		12/31/2009			9/30/2009			6/30/2009			3/31/2009			12/31/2008
Total population
	Consolidated markets (1) (2)		89,712,000			85,118,000			83,726,000			83,726,000			83,014,000
	Consolidated operating markets (1)		46,306,000			46,306,000			46,306,000			46,306,000			46,009,000
Market penetration at end of period
	Consolidated markets (3)		6.8	%		7.2	%		7.4	%		7.5	%		7.5	%
	Consolidated operating markets (3)		13.3	%		13.2	%		13.3	%		13.5	%		13.5	%
All customers
	Total at end of period		6,141,000			6,131,000			6,155,000			6,243,000			6,196,000
	Gross additions		399,000			386,000			317,000			404,000			395,000
	Net additions (losses)		10,000			(24,000	)		(88,000	)		47,000			20,000
Retail customers
	Total at end of period		5,744,000			5,705,000			5,711,000			5,770,000			5,707,000
	Gross additions		354,000			351,000			286,000			366,000			352,000
	Net postpay additions (losses)		26,000			8,000			(32,000	)		60,000			41,000
	Net prepay additions (losses)		13,000			(14,000	)		(27,000	)		3,000			(8,000	)
Service revenue components (000s)
	Retail service revenue	$	867,765		$	865,867		$	871,209		$	874,098		$	860,503
	Inbound roaming revenue		61,728			68,767			62,223			60,057			78,768
	Other revenue		56,814			50,289			41,323			47,719			37,681
Total service revenues (000s)		$	986,307		$	984,923		$	974,755		$	981,874		$	976,952
Divided by average customers (000s)			6,139			6,138			6,199			6,229			6,178
Divided by three months in each quarter			3			3			3			3			3
Average monthly revenue per unit (4)		$	53.55		$	53.49		$	52.41		$	52.54		$	52.71
	Retail service revenue per unit (4)	$	47.12		$	47.02		$	46.85		$	46.78		$	46.43
	Inbound roaming revenue per unit (4)	$	3.35		$	3.73		$	3.35		$	3.21		$	4.25
	Other revenue per unit (4)	$	3.08		$	2.74		$	2.21		$	2.55		$	2.03
Postpay churn rate (5)			1.6	%		1.7	%		1.7	%		1.5	%		1.6	%
Capital expenditures (000s)		$	189,000		$	128,900		$	91,200		$	137,700		$	190,000
Cell sites in service			7,279			7,161			7,043			6,942			6,877

(1)Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively, which is calculated by dividing customers by the total market population (without duplication of population in overlapping markets).

(2)Includes 4.5 million incremental population counts resulting from the licenses awarded to King Street Wireless L.P. in December 2009.

(3)Calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas.

(4)Calculated by dividing the components of Service Revenues by the average customers and number of months in the quarter.

(5)   Calculated by dividing the total postpay customer disconnects during the quarter by the average postpay customer base for the quarter.

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TELEPHONE AND DATA SYSTEMS, INC. SUMMARY OPERATING DATA
Quarter Ended		12/31/2009		9/30/2009		6/30/2009		3/31/2009		12/31/2008
TDS Telecom
	ILEC:
	Equivalent access lines (1)		775,900		772,700		775,800		777,100		776,700
	Physical access lines (2)		536,300		539,400		548,000		556,800		566,200
	High-speed data customers (3)		208,300		202,100		197,100		188,100		178,300
	Long-distance customers		362,800		356,500		354,100		348,900		347,000
	Managed IP stations (4)		1,900		1,500		1,200		1,000		600
	Capital expenditures (000s)	$	26,900	$	23,800	$	26,200	$	21,400	$	50,200
	CLEC:
	Equivalent access lines (1)		355,900		364,100		372,300		381,000		393,000
	High-speed data customers (3)		36,900		37,600		38,700		39,700		40,800
	Managed IP stations (4)		12,000		9,600		6,400		4,100		2,100
	Capital expenditures (000s)	$	6,800	$	4,700	$	5,700	$	5,000	$	7,200

(1)Sum of physical access lines and high-capacity data lines, adjusted to estimate the equivalent number of physical access lines in terms of capacity, plus the number of Managed IP stations.

(2)Individual circuits connecting customers to a telephone company's central office facilities.

(3)The number of customers provided high-capacity data circuits via various technologies, including DSL, Managed IP and dedicated Internet circuit technologies.

(4)The number of telephone handsets providing communications using packet networking technology.

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TELEPHONE AND DATA SYSTEMS, INC. CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS Three Months Ended December 31, (Unaudited, dollars and shares in thousands, except per share amounts)
										Increase/ (Decrease)
				2009 (2) (3)			2008			Amount			Percent
Operating revenues
	U.S. Cellular			$	1,060,997		$	1,052,862		$	8,135		1	%
	TDS Telecom				198,048			204,790			(6,742	)	(3	)%
	All Other (1)				3,764			6,317			(2,553	)	(40	)%
					1,262,809			1,263,969			(1,160	)	—
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			879,636			845,013			34,623		4	%
		Depreciation, amortization and accretion			146,807			143,709			3,098		2	%
		Loss on asset disposals, net			7,528			6,602			926		14	%
		Loss on impairment of intangible assets			14,000			386,653			(372,653	)	(96	)%
					1,047,971			1,381,977			(334,006	)	(24	)%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			129,568			130,154			(586	)	—
		Depreciation, amortization and accretion			42,044			40,751			1,293		3	%
		Loss on asset disposals, net			649			508			141		28	%
					172,261			171,413			848		—
	All Other (1)
		Expenses excluding depreciation and amortization			367			6,739			(6,372	)	(95	)%
		Depreciation and amortization			2,757			3,458			(701	)	(20	)%
		(Gain) Loss on asset disposals, net			119			(4	)		123		>100	%
		Loss on impairment of intangible assets			—			27,723			(27,723	)	N/M
					3,243			37,916			(34,673	)	(91	)%
			Total operating expenses		1,223,475			1,591,306			(367,831	)	(23	)%
Operating income (loss)
	U.S. Cellular				13,026			(329,115	)		342,141		>100	%
	TDS Telecom				25,787			33,377			(7,590	)	(23	)%
	All Other (1)				521			(31,599	)		32,120		>100	%
					39,334			(327,337	)		366,671		>100	%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				23,698			22,867			831		4	%
	Interest and dividend income				2,686			3,313			(627	)	(19	)%
	Interest expense				(31,777	)		(29,265	)		(2,512	)	(9	)%
	Other, net				496			127			369		>100	%
					(4,897	)		(2,958	)		(1,939	)	(66	)%
Income (loss) before income taxes					34,437			(330,295	)		364,732		>100	%
	Income tax expense (benefit)				11,909			(133,443	)		145,352		>100	%
Net income (loss)					22,528			(196,852	)		219,380		>100	%
Less: Net (income) loss attributable to noncontrolling interests, net of tax					(6,010	)		27,926			(33,936	)	>100	%
Net income (loss) attributable to TDS shareholders					16,518			(168,926	)		185,444		>100	%
	Preferred dividend requirement				(13	)		(13	)		—		—
Net income (loss) available to common				$	16,505		$	(168,939	)	$	185,444		>100	%
Basic weighted average shares outstanding					106,166			113,711			(7,545	)	(7	)%
Basic earnings (loss) per share attributable to TDS shareholders				$	0.16		$	(1.49	)	$	1.65		>100	%
Diluted weighted average shares outstanding					106,489			113,711			(7,222	)	(6	)%
Diluted earnings (loss) per share attributable to TDS shareholders				$	0.15		$	(1.49	)	$	1.64		>100	%

(1)Consists of Suttle Straus printing and distribution operations, corporate operations and intercompany eliminations.

(2)During the three months ended December 31, 2009, U.S. Cellular operating expenses excluding depreciation, amortization and accretion were reduced by a $7.1 million out-of-period adjustment to correct rent expense.  Management does not believe that the adjustment is material to the current year or any prior year’s earnings, earnings trends or financial statement line items.  The adjustment was recorded in the three months ended December 31, 2009 and no prior periods were adjusted. 

(3)During the three months ended December 31, 2009, TDS recorded adjustments that decreased and increased U.S. Cellular operating expenses excluding depreciation, amortization and accretion by $9.7 million and $11.6 million, respectively, to reflect revised estimates related to customer usage charges and bad debts expense.  The net of these adjustments was an increase to U.S. Cellular operating expenses excluding depreciation, amortization and accretion of $1.9 million during the three months ended December 31, 2009. 

N/M – Percentage change not meaningful

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TELEPHONE AND DATA SYSTEMS, INC. CONSOLIDATED STATEMENT OF OPERATIONS HIGHLIGHTS Year Ended December 31, (Unaudited, dollars and shares in thousands, except per share amounts)
										Increase/(Decrease)
				2009 (2)			2008			Amount			Percent
Operating revenues
	U.S. Cellular			$	4,214,611		$	4,243,185		$	(28,574	)	(1	)%
	TDS Telecom				789,852			824,282			(34,430	)	(4	)%
	All Other (1)				16,211			24,552			(8,341	)	(34	)%
					5,020,674			5,092,019			(71,345	)	(1	)%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			3,288,370			3,228,513			59,857		2	%
		Depreciation, amortization and accretion			570,658			576,931			(6,273	)	(1	)%
		Loss on asset disposals, net			15,176			23,378			(8,202	)	(35	)%
		Loss on impairment of intangible assets			14,000			386,653			(372,653	)	(96	)%
					3,888,204			4,215,475			(327,271	)	(8	)%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			527,570			522,815			4,755		1	%
		Depreciation, amortization and accretion			167,316			158,366			8,950		6	%
		Loss on asset disposals, net			2,401			857			1,544		>100	%
					697,287			682,038			15,249		2	%
	All Other (1)
		Expenses excluding depreciation and amortization			15,193			23,788			(8,595	)	(36	)%
		Depreciation and amortization			11,996			14,780			(2,784	)	(19	)%
		Loss on asset disposals, net			188			61			127		>100	%
		Loss on impairment of intangible assets			—			27,723			(27,723	)	N/M
					27,377			66,352			(38,975	)	(59	)%
			Total operating expenses		4,612,868			4,963,865			(350,997	)	(7	)%
Operating income (loss)
	U.S. Cellular				326,407			27,710			298,697		>100	%
	TDS Telecom				92,565			142,244			(49,679	)	(35	)%
	All Other (1)				(11,166	)		(41,800	)		30,634		73	%
					407,806			128,154			279,652		>100	%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				90,732			89,812			920		1	%
	Interest and dividend income				11,121			39,131			(28,010	)	(72	)%
	Gain on investments and financial instruments				—			31,595			(31,595	)	N/M
	Interest expense				(124,557	)		(137,899	)		13,342		10	%
	Other, net				2,000			2,213			(213	)	(10	)%
		Total investment and other income (expense)			(20,704	)		24,852			(45,556	)	>100	%
Income before income taxes					387,102			153,006			234,096		>100	%
	Income tax expense				133,376			30,093			103,283		>100	%
Net income					253,726			122,913			130,813		>100	%
	Less: Net income attributable to noncontrolling interests, net of tax				(59,824	)		(29,372	)		(30,452	)	>100	%
Net income attributable to TDS shareholders					193,902			93,541			100,361		>100	%
	Preferred dividend requirement				(51	)		(52	)		1		2	%
Net income available to common				$	193,851		$	93,489		$	100,362		>100	%
Basic weighted average shares outstanding					109,339			115,817			(6,478	)	(6	)%
Basic earnings per share attributable to TDS shareholders				$	1.77		$	0.81		$	0.96		>100	%
Diluted weighted average shares outstanding					109,577			116,255			(6,678	)	(6	)%
Diluted earnings per share attributable to TDS shareholders				$	1.77		$	0.80		$	0.97		>100	%

(1)Consists of Suttle-Straus printing and distribution operations, corporate operations and intercompany eliminations.

(2)During the twelve months ended December 31, 2009, U.S. Cellular operating expenses excluding depreciation, amortization and accretion were reduced by a $6.5 million out-of-period adjustment to correct rent expense. Management does not believe that the adjustment is material to the current year or any prior year’s earnings, earnings trends or financial statement line items.  The adjustment was recorded in the twelve months ended December 31, 2009 and no prior periods were adjusted.

N/M – Percentage change not meaningful

8

 

TELEPHONE AND DATA SYSTEMS, INC. CONSOLIDATED BALANCE SHEET HIGHLIGHTS (Unaudited, dollars in thousands)
ASSETS
		December 31, 2009		December 31, 2008
Current assets
	Cash and cash equivalents	$	670,992	$	777,309
	Short-term investments		113,275		27,705
	Accounts receivable from customers and other		511,914		516,849
	Inventory		156,987		122,377
	Other current assets		190,974		184,696
			1,644,142		1,628,936
Investments
	Licenses		1,443,025		1,441,440
	Goodwill		707,840		707,079
	Customer lists		26,589		34,032
	Investments in unconsolidated entities		203,799		205,768
	Other investments		9,785		10,623
			2,391,038		2,398,942
Property, plant and equipment, net
	U.S. Cellular		2,601,338		2,620,376
	TDS Telecom		880,378		918,454
	Other		26,129		30,094
			3,507,845		3,568,924
Other assets and deferred charges			65,759		55,614
Total assets		$	7,608,784	$	7,652,416

9

 

TELEPHONE AND DATA SYSTEMS, INC. CONSOLIDATED BALANCE SHEET HIGHLIGHTS (Unaudited, dollars in thousands)
LIABILITIES AND EQUITY
				December 31, 2009			December 31, 2008
Current liabilities
		Current portion of long-term debt		$	2,509		$	15,337
		Accounts payable			347,348			319,575
		Customer deposits and deferred revenues			167,963			174,101
		Accrued interest			12,227			14,236
		Accrued taxes			39,644			25,192
		Accrued compensation			93,524			90,512
		Other current liabilities			117,081			134,334
					780,296			773,287
Deferred liabilities and credits
		Net deferred income tax liability			517,762			471,623
		Other deferred liabilities and credits			373,862			368,045
					891,624			839,668
Long-term debt					1,492,908			1,621,422
Noncontrolling interests with redemption features					727			589
Equity
	TDS stockholders’ equity
		Common Shares, $.01 par value			571			571
		Special Common Shares, $.01 par value			634			634
		Series A Common Shares, $.01 par value			65			65
		Capital in excess of par value			2,088,807			2,066,597
		Treasury Shares, at cost
			Common Shares		(217,381	)		(163,017	)
			Special Common Shares		(464,268	)		(350,091	)
		Accumulated other comprehensive income			(2,710	)		(16,812	)
		Retained earnings			2,371,587			2,229,540
			Total TDS stockholders’ equity		3,777,305			3,767,487
Preferred shares					832			852
Noncontrolling interests					665,092			649,111
		Total equity			4,443,229			4,417,450
Total liabilities and equity				$	7,608,784		$	7,652,416

10

BALANCE SHEET HIGHLIGHTS December 31, 2009 (Unaudited, dollars in thousands)
			U.S. Cellular		TDS Telecom		TDS Corporate & Other			Intercompany Eliminations			TDS Consolidated
Cash and cash equivalents			$	294,411	$	32,288	$	344,293		$	―		$	670,992
Affiliated cash investments				―		274,687		―			(274,687	)		―
Short-term investments				330		112,945		―			―			113,275
Notes receivable―affiliates				―		―		5,005			(5,005	)		―
			$	294,741	$	419,920	$	349,298		$	(279,692	)	$	784,267
Licenses, goodwill and customer lists			$	1,933,820	$	438,862	$	(195,228	)	$	―		$	2,177,454
Investment in unconsolidated entities				161,481		3,660		44,766			(6,108	)		203,799
Other investments				4,214		2,178		3,393			―			9,785
			$	2,099,515	$	444,700	$	(147,069	)	$	(6,108	)	$	2,391,038
Property, plant and equipment, net			$	2,601,338	$	880,378	$	26,129		$	―		$	3,507,845
Notes payable―affiliates			$	―	$	5,005	$	274,687		$	(279,692	)	$	―
Long-term debt:
	Current portion		$	76	$	391	$	2,042		$	―		$	2,509
	Non-current portion			867,522		2,280		623,106			―			1,492,908
		Total	$	867,598	$	2,671	$	625,148		$	―		$	1,495,417
Preferred shares			$	―	$	―	$	832		$	―		$	832
Capital expenditures:
	Quarter ended 12/31/09		$	189,000	$	33,700	$	(2,100	)	$	―		$	220,600
	Year ended 12/31/09		$	546,800	$	120,500	$	3,900		$	―		$	671,200

11

TDS TELECOM HIGHLIGHTS Three Months Ended December 31, (Unaudited, dollars in thousands)
									Increase/(Decrease)
			2009			2008			Amount			Percent
Local Telephone Operations
	Operating revenues
		Voice	$	45,304		$	49,649		$	(4,345	)	(9	)%
		Data		26,965			24,171			2,794		12	%
		Network access		69,364			68,476			888		1	%
		Miscellaneous		9,840			10,735			(895	)	(8	)%
				151,473			153,031			(1,558	)	(1	)%
	Operating expenses
		Cost of services and products		47,588			45,241			2,347		5	%
		Selling, general and administrative expenses		42,996			42,579			417		1	%
		Depreciation, amortization and accretion		35,873			34,340			1,533		4	%
		Loss on asset disposals		456			434			22		5	%
				126,913			122,594			4,319		4	%
	Operating income		$	24,560		$	30,437		$	(5,877	)	(19	)%
Competitive Local Exchange Carrier Operations
		Revenues	$	48,940		$	53,295		$	(4,355	)	(8	)%
		Expenses excluding depreciation, amortization and accretion		41,349			43,870			(2,521	)	(6	)%
		Depreciation, amortization and accretion		6,171			6,411			(240	)	(4	)%
		Loss on asset disposals		193			74			119		>100	%
				47,713			50,355			(2,642	)	(5	)%
	Operating income		$	1,227		$	2,940		$	(1,713	)	(58	)%
Intercompany revenues			$	(2,365	)	$	(1,536	)	$	(829	)	(54	)%
Intercompany expenses				(2,365	)		(1,536	)		(829	)	(54	)%
				―			―			―		―
Total TDS Telecom operating income			$	25,787		$	33,377		$	(7,590	)	(23	)%

12

TDS TELECOM HIGHLIGHTS Twelve Months Ended December 31, (Unaudited, dollars in thousands)
									Increase/(Decrease)
			2009			2008			Amount			Percent
Local Telephone Operations
	Operating revenues
		Voice	$	187,223		$	203,372		$	(16,149	)	(8	)%
		Data		103,682			90,059			13,623		15	%
		Network access		271,276			278,484			(7,208	)	(3	)%
		Miscellaneous		37,346			39,119			(1,773	)	(5	)%
				599,527			611,034			(11,507	)	(2	)%
	Operating expenses
		Cost of services and products		194,030			184,285			9,745		5	%
		Selling, general and administrative expenses		171,250			166,787			4,463		3	%
		Depreciation, amortization and accretion		142,913			134,935			7,978		6	%
		Loss on asset disposals		1,949			466			1,483		>100	%
				510,142			486,473			23,669		5	%
	Operating income		$	89,385		$	124,561		$	(35,176	)	(28	)%
Competitive Local Exchange Carrier Operations
		Revenues	$	199,375		$	220,002		$	(20,627	)	(9	)%
		Expenses excluding depreciation, amortization and accretion		171,340			178,497			(7,157	)	(4	)%
		Depreciation, amortization and accretion		24,403			23,431			972		4	%
		Loss on asset disposals		452			391			61		16	%
				196,195			202,319			(6,124	)	(3	)%
	Operating income		$	3,180		$	17,683		$	(14,503	)	(82	)%
Intercompany revenues			$	(9,050	)	$	(6,754	)	$	(2,296	)	(34	)%
Intercompany expenses				(9,050	)		(6,754	)		(2,296	)	(34	)%
				―			―			―		―
Total TDS Telecom operating income			$	92,565		$	142,244		$	(49,679	)	(35	)%

13

TELEPHONE AND DATA SYSTEMS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS Twelve Months Ended December 31, (Unaudited, dollars in thousands)
				2009			2008
Cash flows from operating activities
	Net income			$	253,726		$	122,913
		Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
			Depreciation, amortization and accretion		749,970			750,077
			Bad debts expense		115,989			83,004
			Stock-based compensation expense		32,486			22,693
			Deferred income taxes, net		31,053			(437,919	)
			Gain on investments and financial instruments, net		—			(31,595	)
			Equity in earnings of unconsolidated entities		(90,732	)		(89,812	)
			Distributions from unconsolidated entities		91,587			92,335
			Loss on impairment of intangible assets		14,000			414,376
			Loss on asset disposals, net		17,765			24,296
			Noncash interest expense		4,412			10,125
			Excess tax benefit from stock awards		(25	)		(1,966	)
			Other operating activities		(46	)		(1,831	)
		Changes in assets and liabilities
			Accounts receivable		(110,258	)		(79,427	)
			Inventory		(34,566	)		(17,123	)
			Accounts payable		29,646			6,804
			Customer deposits and deferred revenues		(6,165	)		7,692
			Accrued taxes		56,068			(11,725	)
			Accrued interest		(2,009	)		(4,221	)
			Other assets and liabilities		(50,307	)		(9,804	)
					1,102,594			848,892
Cash flows from investing activities
	Additions to property, plant and equipment				(671,165	)		(734,923	)
	Cash paid for acquisitions and licenses				(29,276	)		(389,189	)
	Cash received from divestitures				50			6,838
	Proceeds from disposition of investments				—			259,017
	Cash paid to settle derivative liabilities				—			(17,404	)
	Cash paid for short-term investments				(109,230	)		(27,446	)
	Cash received from short-term investments				23,660			—
	Other investing activities				4,515			355
					(781,446	)		(902,752	)
Cash flows from financing activities
	Borrowings from revolving credit facilities				—			100,000
	Repayment of revolving credit facilities				—			(100,000	)
	Repayment of long-term debt				(143,078	)		(9,448	)
	Settlement of variable prepaid forward contracts				—			(47,357	)
	TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments				819			1,409
	U.S. Cellular Common Shares reissued for benefit plans, net of tax payments				(82	)		(2,288	)
	Excess tax benefit from stock awards				25			1,966
	Repurchase of TDS Common  and Special Common Shares				(178,536	)		(197,672	)
	Repurchase of U.S. Cellular Common Shares				(33,585	)		(28,366	)
	Dividends paid				(46,798	)		(47,320	)
	Payment of debt issuance costs				(10,079	)		—
	Distributions to noncontrolling interests				(17,533	)		(16,769	)
	Other financing activities				1,382			2,568
					(427,465	)		(343,277	)
Net decrease in cash and cash equivalents					(106,317	)		(397,137	)
Cash and cash equivalents
	Beginning of period				777,309			1,174,446
	End of period			$	670,992		$	777,309

14

EX-99.2

Exhibit 99.2

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

SAFE HARBOR CAUTIONARY STATEMENT

This Form 8-K and/or press release attached to this Form 8-K contain statements that are not based on historical fact and represent forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995.  All statements, other than statements of historical facts, that address activities, events or developments that TDS intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-looking statements.  The words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actua l results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward-looking statements.  Such risks, uncertainties and other factors include those set forth below, as more fully discussed under “Risk Factors” in the most recent filing of TDS’ Form 10-K, as updated by any TDS Form 10-Q filed subsequent to such Form 10-K.  However, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document.  Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements.  TDS undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.  You should carefully consider the Risk Factors in the most recent filing of TDS’ Form 10-K, as updated by any TDS Form 10-Q filed subsequent to such Form 10-K, the following factors and other information contained in, or incorporated by reference into, this Form 8-K and/or press release attached to this Form 8-K to understand the material risks relating to TDS’ business.

·Intense competition in the markets in which TDS operates could adversely affect TDS’ revenues or increase its costs to compete.

·A failure by TDS to successfully execute its business strategy or allocate resources or capital could have an adverse effect on TDS’ business, financial condition or results of operations.

·A failure by TDS’ service offerings to meet customer expectations could limit TDS’ ability to attract and retain customers and could have an adverse effect on TDS’ operations.

·TDS’ system infrastructure may not be capable of supporting changes in technologies and services expected by customers, which could result in lost customers and revenues.

·An inability to obtain or maintain roaming arrangements with other carriers on terms that are acceptable to TDS could have an adverse effect on TDS’ business, financial condition or results of operations.

·TDS currently receives a significant amount of roaming revenues from its wireless business.  As a result of acquisitions by other companies in the wireless industry, TDS roaming revenues have declined significantly from amounts earned in certain prior years.  Further industry consolidation and continued build outs by existing and new wireless carriers could cause roaming revenues to decline even more, which would have an adverse effect on TDS' business, financial condition and results of operations.

·A failure by TDS to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on TDS’ business and operations.

·To the extent conducted by the FCC, TDS is likely to participate in FCC auctions of additional spectrum in the future as an applicant or as a non-controlling partner in another auction applicant and, during certain periods, will be subject to the FCC’s anti-collusion rules, which could have an adverse effect on TDS.

·Changes in the regulatory environment or a failure by TDS to timely or fully comply with any applicable regulatory requirements could adversely affect TDS’ financial condition, results of operations or ability to do business.

·Changes in USF funding and/or intercarrier compensation could have a material adverse impact on TDS’ financial position or results of operations.

·An inability to attract and/or retain management, technical, sales and other personnel could have an adverse effect on TDS’ business, financial condition or results of operations.

·TDS’ assets are concentrated in the U.S. telecommunications industry. As a result, its results of operations may fluctuate based on factors related entirely to conditions in this industry.

·The completion of acquisitions by other companies has led to increased consolidation in the wireless telecommunications industry.  TDS’ lower scale relative to larger wireless carriers has in the past and could in the future prevent or delay its access to new products including handsets, new technology and/or new content and applications which could adversely affect TDS' ability to attract and retain customers and, as a result, could adversely affect its business, financial condition or results of operations.

·Inability to manage its supply chain or inventory successfully could have an adverse effect on TDS’ business, financial condition or results of operations.

·Changes in general economic and business conditions, both nationally and in the markets in which TDS operates, could have an adverse effect on TDS’ business, financial condition or results of operations.

·Changes in various business factors could have an adverse effect on TDS’ business, financial condition or results of operations.

·Advances or changes in telecommunications technology, such as Voice over Internet Protocol (“VoIP”'), High-Speed Packet Access, WiMAX or Long-Term Evolution (“LTE”), could render certain technologies used by TDS obsolete, could reduce TDS’ revenues or could increase its costs of doing business.

·TDS could incur higher than anticipated intercarrier compensation costs.

·TDS is subject to numerous surcharges and fees from federal, state and local governments, and the applicability and the amount of these fees are subject to great uncertainty.

·Changes in TDS’ enterprise value, changes in the market supply or demand for wireless licenses or wireline markets, adverse developments in the business or the industry in which TDS is involved and/or other factors could require TDS to recognize impairments in the carrying value of its license costs, goodwill and/or physical assets.

·Costs, integration problems or other factors associated with acquisitions/divestitures of properties or licenses and/or expansion of TDS’ business could have an adverse effect on TDS’ business, financial condition or results of operations.

·A significant portion of TDS’ wireless revenues is derived from customers who buy services through independent agents who market TDS’ services on a commission basis. If TDS’ relationships with these agents are seriously harmed, its wireless revenues could be adversely affected.

·TDS’ investments in technologies which are unproven may not produce the benefits that TDS expects.

·A failure by TDS to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network and support systems could have an adverse effect on its operations.

·Financial difficulties (including bankruptcy proceedings) of TDS’ key suppliers or vendors, termination or impairment of TDS’ relationships with such suppliers or vendors, or a failure by TDS to manage its supply chain effectively could result in delays or termination of TDS’ receipt of required equipment or services, or could result in excess quantities of required equipment or services, any of which could adversely affect TDS’ business, financial condition or results of operations.

·TDS has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on TDS’ financial condition or results of operations.

·A failure by TDS to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, including breaches of network or information technology security, could have an adverse effect on TDS’ business, financial condition or results of operations.

·Wars, conflicts, hostilities and/or terrorist attacks or equipment failures, power outages, natural disasters or other events could have an adverse effect on TDS’ business, financial condition or results of operations.

·The market prices of TDS’ Common Shares and Special Common Shares are subject to fluctuations due to a variety of factors.

·Identification of errors in financial information or disclosures could require amendments to or restatements of financial information or disclosures included in this or prior filings with the SEC.

·Restatements of financial statements by TDS and related matters, including resulting delays in filing periodic reports with the SEC, could have an adverse effect on TDS’ business, financial condition or results of operations.

·The existence of material weaknesses in the effectiveness of internal control over financial reporting could result in inaccurate financial statements or other disclosures or failure to prevent fraud, which could have an adverse effect on TDS’ business, financial condition or results of operations.

·Changes in facts or circumstances, including new or additional information that affects the calculation of potential liabilities for contingent obligations under guarantees, indemnities, claims, litigation or otherwise, could require TDS to record charges in excess of amounts accrued in the financial statements, if any, which could have an adverse effect on TDS' financial condition or results of operations.

·Early redemptions or repurchases of debt, issuances of debt, changes in operating leases, changes in purchase obligations or other factors or developments could cause the amounts reported under Contractual Obligations in TDS’ most recent Annual Report on Form 10-K, as updated by the Quarterly Reports on Form 10-Q, to be different from the amounts actually incurred.

·An increase in the amount of TDS’ debt could subject TDS to higher interest costs and restrictions on its financing, investing and operating activities and could decrease its net income and cash flows.

·Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events, could, among other things, impede TDS’ access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on TDS’ financial condition or results of operations.

·Uncertainty of access to capital for telecommunications companies, deterioration in the capital markets, other changes in market conditions, changes in TDS’ credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its construction, development or acquisition programs.

·TDS’ and U.S. Cellular’s credit facilities and the indentures governing their senior notes include restrictive covenants that limit their operating flexibility and TDS and U.S. Cellular may be unable to service their debt or to refinance their indebtedness before maturity.

·Changes in income tax rates, laws, regulations or rulings, or federal or state tax assessments, could have an adverse effect on TDS’ financial condition or results of operations.

·Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on TDS’ financial condition, results of operations or ability to do business.

·The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from handsets, wireless data devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices such as pacemakers, could have an adverse effect on TDS’ wireless business, financial condition or results of operations.

·Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDS from using necessary technology to provide services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS’ business, financial condition or results of operations.

·Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of TDS.

·Any of the foregoing events or other events could cause revenues, customer additions, operating income, capital expenditures and/or any other financial or statistical information to vary from TDS’ forward-looking estimates by a material amount.

TDS undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. Readers should evaluate any statements in light of these important factors.