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): August 3, 2012

TELEPHONE AND DATA SYSTEMS, INC.

(Exact name of registrant as specified in its 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 August 3, 2012, Telephone and Data Systems, Inc. (“TDS”) issued a news release announcing its results of operations for the period ended June 30, 2012.  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.

 

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:	August 3, 2012
By:	/s/ Douglas D. Shuma
	Douglas D. Shuma Senior Vice President and Corporate Controller

 

EXHIBIT INDEX

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

Exhibit No.	Description
99.1	Earnings Press Release dated August 3, 2012
99.2	Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement

EX-99.1

 

NEWS RELEASE                         

As previously announced, TDS will hold a teleconference Aug. 3, 2012 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Investor Relations 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 SECOND QUARTER 2012 RESULTS

Note: Comparisons are year over year unless otherwise noted.

2Q 2012 Highlights

TDS Consolidated

§Operating revenues increased 3 percent to $1,323.2 million.

U.S. Cellular

§         Smartphones as a percent of total devices sold increased to 51.9 percent from 39.6 percent; smartphone customers increased to 36.8 percent of postpaid customers from 23.1 percent.

§Postpaid ARPU (average revenue per user) increased 5 percent to $54.42 from $51.84; total ARPU increased 6 percent to $59.05 from $55.69. 

§Service revenues increased 3 percent to $1,029.7 million.

§Postpaid gross additions increased 9 percent and postpaid churn increased to 1.57 percent, resulting in a net loss of 48,000 postpaid customers. Postpaid customers comprised 94 percent of retail customers.

§Prepaid gross additions increased 77 percent, driven by the introduction in select Walmart stores of U Prepaid, a new no contract wireless service, and prepaid churn decreased to 6.2 percent, resulting in a net increase of 20,000 prepaid customers.

§         Retail gross additions increased 23 percent; net loss of 28,000 retail customers compared to a net loss of 58,000 retail customers.

§Cell sites in service increased 2 percent to 7,932, of which 4,512 are owned towers.

§         4G LTE  network covers 30 percent of customers; expect to reach 58 percent of customers by year-end.

§Investment in the Los Angeles Partnership contributed $19 million to equity in earnings of unconsolidated entities, up from $14 million.

TDS Telecom

§Operating revenues increased 5 percent to $208.5 million.

§ILEC triple play (voice, data, and video) penetration increased to 30 percent from 27 percent.

§managedIP connections (ILEC and CLEC) grew 91 percent to 74,600 from 39,000.

CHICAGO –Aug. 3, 2012 — Telephone and Data Systems, Inc. [NYSE:TDS] reported operating revenues of $1,323.2 million for the second quarter of 2012, an increase of 3 percent from $1,279.6 million in the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $42.3 million and $0.39, respectively, for the second quarter of 2012, compared to $92.0 million and $0.84, respectively, in the comparable period one year ago.

 

“Both of our primary businesses achieved solid growth in revenues, though higher expenses related mainly to device subsidies, data growth and investment spending caused profitability to decline,” said LeRoy T. Carlson, Jr., TDS president and CEO. “U.S. Cellular had a strong increase in gross retail customer additions and grew its net prepaid customer base. Postpaid churn remained elevated, and the company is working to address this. TDS Telecom added ILEC residential broadband and IPTV customers, and commercial managedIP customers, and increased revenues in its hosted and managed services business.”

“U.S. Cellular continued to increase average revenue per user through growth in smartphone penetration. To attract more customers, the company expanded the scope of its prepaid distribution through entry into more than 400 Walmart stores, and it is evaluating further opportunities to be where customers most want to shop. U.S. Cellular is offering high-demand devices like the 4G LTE Samsung Galaxy S® III on its growing 4G LTE network. To further differentiate itself from competitors and increase consideration, the company launched an innovative marketing campaign, Hello Better, in July that encourages consumers who are frustrated with their providers to switch to U.S. Cellular for a better wireless experience. 

“TDS Telecom continued to add high-speed broadband customers and to expand availability of TDS TV®. The company added commercial managedIP connections at a rapid pace, increasing 91 percent. Higher revenue from the hosted and managed services business offset decreases in legacy ILEC and CLEC revenue, and we continued to build the HMS business with the acquisition of solutions provider Vital Support Systems in June. Recent reforms to USF and ICC negatively impacted revenue and earnings in the first half of this year. We expect FCC-authorized recovery mechanisms to help offset additional rate changes set to begin in the second half.”

Guidance for year ending Dec. 31, 2012

Guidance for the year ending Dec. 31, 2012 as of Aug. 3, 2012 is provided below, compared to the previous guidance provided on May 4, 2012.  TDS undertakes no duty to update such information, whether as a result of new information, future events, or otherwise.  There can be no assurance that final results will not differ materially from this guidance. 

U.S. Cellular		2012 Estimated Results (1)	Previous Estimates (2)
	Service revenues	$4,050-$4,150 million	Unchanged
	Operating income (3)	$200-$300 million	Unchanged
	Depreciation, amortization and accretion expenses, and net gain or loss on asset disposals and
	exchanges and loss on impairment of assets (3)	Approx. $600 million	Unchanged
	Adjusted OIBDA (3) (5)	$800-$900 million	Unchanged
	Capital expenditures	Approx. $850 million	Unchanged
TDS Telecom Operations		2012 Estimated Results (4)	Previous Estimates (2)
	Operating revenues	$850-$880 million	$810-$840 million
	Operating income	$50-$70 million	$55-$85 million
	Depreciation, amortization and accretion expenses, and net gain or loss on asset disposals and
	exchanges and loss on impairment of assets (3)	Approx. $195 million	Approx. $190 million
	Adjusted OIBDA (5)	$245-$265 million	$245-$275 million
	Capital expenditures	$170-$190 million	$150-$180 million

(1)These estimates are based on U.S. Cellular’s current plans, which include a multi-year deployment of 4G LTE technology which commenced in 2011. New developments or changing conditions (such as customer net growth, customer demand for data services or possible acquisitions, dispositions or exchanges) could affect U.S. Cellular’s plans and, therefore, its 2012 estimated results.

(2)   The 2012 Estimated Results as disclosed in TDS’ Quarterly Report on Form 10-Q for the period ended March 31, 2012.

(3)The 2012 Estimated Results do not include any estimate for unrecognized net gains or losses related to disposals and exchanges of assets or losses on impairment of assets (since such transactions and their effects are uncertain). 

(4)These estimates are based on TDS Telecom’s current plans which include a multi-year deployment of IPTV that commenced in 2011. New developments or changing conditions (such as costs to deploy, agreements for content or franchises or possible acquisitions, dispositions or exchanges) could affect TDS Telecom’s plans and, therefore, its 2012 estimated results.

(5)Adjusted OIBDA is defined as operating income excluding the effects of depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals and exchanges (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash Flows.  Adjusted OIBDA excludes the net gain or loss on asset disposals and exchanges (if any) and loss on impairment of assets (if any) in order to show operating results on a more comparable basis from period to period.  TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual and, accordingly, they may be incurred in the future.  TDS believes this measure provides useful information to investors regarding TDS’ financial condition and results of operations because it highlights certain key cash and non-cash items and their impacts on cash flows from operating activities.

2

Interest expense

Interest expense was down $22 million, primarily due to the write-off of unamortized debt issuance costs in 2011 of $15.4 million, as well as, lower interest rates on outstanding debt.

Income taxes

In the quarter, TDS’ overall effective tax rate was 39 percent compared to 9.5 percent. In the second quarter of 2011, income tax expense was reduced by $29.1 million, primarily due to tax benefits from state law changes and other discrete items.

Stock repurchase

TDS did not repurchase any shares during the quarter.  TDS determines whether to repurchase shares from time to time based on many considerations, including cash needed for other known or possible requirements, the stock price, market conditions, debt rating considerations, business forecasts, business plans, macroeconomic conditions, share issuances under compensation plans, provisions in governing and legal documents and other legal requirements, and other facts and circumstances.  Subject to these considerations, TDS intends to continue to repurchase its shares from time to time when circumstances warrant.  To the extent TDS does not complete its existing share authorization by the expiration date in November 2012, it is expected that the TDS board of directors will approve an additional authorization at that time.

Conference call information

TDS will hold a conference call on Aug. 3, 2012at 9:30 a.m. CDT.

§Access the live call on the Investor Relations page of www.teldta.com  or at http://www.videonewswire.com/event.asp?id=88721.

§Access the call by phone at 877/407-8029 (US/Canada), no pass code required. 

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Investor Relations page of www.teldta.com. 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 approximately 7 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 employed 12,300 people as of June 30, 2012.

Visit www.teldta.com  for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.

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 the company to successfully manage and grow its markets; the overall economy; competition; the access to and pricing of unbundled network elements; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; 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; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per user, 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 Current Report used by TDS to furnish this press release to the Securities and Exchange Commission (“SEC”), which are incorporated by reference herein.

For more information about TDS and its subsidiaries, visit:

TDS: www.teldta.com

U.S. Cellular: www.uscellular.com

TDS Telecom: www.tdstelecom.com

3

 

United States Cellular Corporation Summary Operating Data (Unaudited)
Quarter Ended		6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011
Total population
	Consolidated markets (1)		92,684,000			92,684,000			91,965,000			91,965,000			91,204,000
	Consolidated operating markets (1)		46,966,000			46,966,000			46,888,000			46,888,000			46,888,000
Market penetration at end of period
	Consolidated markets (2)		6.3	%		6.3	%		6.4	%		6.5	%		6.5	%
	Consolidated operating markets (2)		12.3	%		12.4	%		12.6	%		12.7	%		12.7	%
All customers
	Total at end of period		5,799,000			5,837,000			5,891,000			5,932,000			5,968,000
	Gross additions		290,000			285,000			306,000			299,000			257,000
	Net additions (losses)		(38,000	)		(49,000	)		(41,000	)		(36,000	)		(70,000	)
	Smartphones sold as a percent of
	total devices sold (3)		51.9	%		54.1	%		52.5	%		39.9	%		39.6	%
Retail customers
	Total at end of period		5,542,000			5,570,000			5,608,000			5,621,000			5,644,000
	Smartphone penetration (3) (4)		36.8	%		34.4	%		30.5	%		26.2	%		23.1	%
	Gross additions		277,000			273,000			298,000			284,000			226,000
	Net retail additions (losses) (5)		(28,000	)		(34,000	)		(13,000	)		(23,000	)		(58,000	)
	Net postpaid additions (losses)		(48,000	)		(38,000	)		(20,000	)		(34,000	)		(41,000	)
	Net prepaid additions (losses)		20,000			4,000			7,000			11,000			(17,000	)
Service revenue components (000s)
	Retail service	$	889,219		$	888,527		$	882,091		$	871,199		$	868,630
	Inbound roaming		86,363			80,132			93,353			107,810			82,760
	Other		54,160			55,161			54,601			57,600			50,640
Total service revenues (000s)		$	1,029,742		$	1,023,820		$	1,030,045		$	1,036,609		$	1,002,030
Total ARPU (6)		$	59.05		$	58.21		$	58.13		$	58.09		$	55.69
Billed ARPU (7)		$	50.99		$	50.52		$	49.78		$	48.82		$	48.28
Postpaid ARPU (8)		$	54.42		$	54.00		$	53.35		$	52.41		$	51.84
Postpaid churn rate (9)			1.6	%		1.6	%		1.6	%		1.5	%		1.4	%
Capital expenditures (000s)		$	183,200		$	201,300		$	276,400		$	248,000		$	162,100
Cell sites in service			7,932			7,875			7,882			7,828			7,770

(1)    Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively.  See footnote (2) below.

(2)    Market Penetration is 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®.

(3)    Smartphones represent wireless devices which run on an Android™, Blackberry®, or Windows Mobile®operating system, excluding tablets.

(4)    Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(5)    Includes net postpaid additions (losses) and net prepaid additions (losses).

(6)    Total ARPU - Average monthly service revenue per user includes retail service, inbound roaming and other service revenues and is calculated by dividing total service revenues by the number of months in the period and by the average total customers during the period.

(7)    Billed ARPU - Average monthly billed revenue per user is calculated by dividing total retail service revenues by the number of months in the period and by the average total customers during the period. Retail service revenues include revenues attributable to postpaid, prepaid and reseller customers.

(8)    Postpaid ARPU - Average monthly revenue per postpaid user is calculated by dividing total retail service revenues from postpaid customers by the number of months in the period and by the average postpaid customers during the period.

(9)    Represents the percentage of the postpaid customer base that disconnects service each month. This amount represents the average postpaid churn rate for each respective quarterly period.

4

 

TDS Telecom Summary Operating Data (Unaudited)
Quarter Ended				6/30/2012		3/31/2012		12/31/2011		9/30/2011		6/30/2011
TDS Telecom
ILEC:
	Residential Connections
		Physical access lines (1)			360,100		363,500		367,600		373,700		378,500
		Broadband connections (2)			222,400		219,500		219,600		220,500		217,600
		IPTV customers			5,600		4,900		4,600		4,500		4,300
			ILEC Residential Connections		588,100		587,900		591,800		598,700		600,400
	Commercial Connections
		Physical access lines (1)			111,100		112,600		114,400		116,500		117,800
		Broadband connections (2)			18,400		18,200		18,200		17,900		17,600
		managedIP connections (3)			13,200		10,800		8,600		6,800		5,800
			ILEC Commercial Connections		142,700		141,600		141,200		141,200		141,200
CLEC:
	Residential Connections
		Physical access lines (1)			27,900		29,600		31,800		33,900		36,700
		Broadband connections (2)			9,500		10,100		11,000		11,700		12,800
			CLEC Residential Connections		37,400		39,700		42,800		45,600		49,500
	Commercial Connections
		Physical access lines (1)			145,100		151,100		157,300		163,600		168,100
		Broadband connections (2)			12,800		13,700		14,600		15,400		15,900
		managedIP connections (3)			61,400		53,700		44,900		38,000		33,200
			CLEC Commercial Connections		219,300		218,500		216,800		217,000		217,200
Total ILEC and CLEC customer connections					987,500		987,700		992,600		1,002,500		1,008,300

(1)Individual circuits connecting customers to TDS Telecom's central office facilities.

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

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

TDS Telecom Capital Expenditures (000s)
Quarter Ended	6/30/2012		3/31/2012		12/31/2011		9/30/2011		6/30/2011
ILEC	$	32,500	$	27,500	$	50,300	$	36,500	$	34,500
CLEC		4,900		5,100		7,200		4,700		6,200
HMS		5,500		3,100		5,900		15,000		4,600
	$	42,900	$	35,700	$	63,400	$	56,200	$	45,300

5

 

Telephone and Data Systems, Inc. Consolidated Statement of Operations Highlights Three Months Ended June 30, (Unaudited, dollars and shares in thousands, except per share amounts)
										Increase/ (Decrease)
				2012			2011			Amount			Percent
Operating revenues
	U.S. Cellular			$	1,104,400		$	1,076,182		$	28,218			3	%
	TDS Telecom				208,519			198,896			9,623			5	%
	All Other (1)				10,250			4,562			5,688			>100	%
					1,323,169			1,279,640			43,529			3	%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			869,980			822,587			47,393			6	%
		Depreciation, amortization and accretion			147,555			146,577			978			1	%
		Loss on asset disposals and exchanges, net			2,702			2,922			(220	)		(8	%)
					1,020,237			972,086			48,151			5	%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			148,983			128,846			20,137			16	%
		Depreciation, amortization and accretion			47,945			43,843			4,102			9	%
		Loss on asset disposals, net			306			317			(11	)		(3	%)
					197,234			173,006			24,228			14	%
	All Other (1)
		Expenses excluding depreciation and amortization			11,111			4,569			6,542			>100	%
		Depreciation and amortization			3,009			2,625			384			15	%
		Loss on impairment of intangible assets			515			—			515			N/M
		(Gain) on asset disposals, net			(13	)		(1	)		(12	)		>100	%
					14,622			7,193			7,429			>100	%
			Total operating expenses		1,232,093			1,152,285			79,808			7	%
Operating income (loss)
	U.S. Cellular				84,163			104,096			(19,933	)		(19	%)
	TDS Telecom				11,285			25,890			(14,605	)		(56	%)
	All Other (1)				(4,372	)		(2,631	)		(1,741	)		(66	%)
					91,076			127,355			(36,279	)		(28	%)
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				25,392			22,590			2,802			12	%
	Interest and dividend income				2,352			2,093			259			12	%
	Gain (loss) on investment				(3,728	)		13,373			(17,101	)		>(100	%)
	Interest expense				(23,139	)		(45,417	)		22,278			49	%
	Other, net				(249	)		1,306			(1,555	)		>(100	%)
		Total investment and other income (expense)			628			(6,055	)		6,683			>100	%
Income before income taxes					91,704			121,300			(29,596	)		(24	%)
	Income tax expense				35,765			11,560			24,205			>100	%
Net income					55,939			109,740			(53,801	)		(49	%)
	Less: Net income attributable to noncontrolling interests, net of tax				(13,602	)		(17,786	)		4,184			24	%
Net income attributable to TDS shareholders					42,337			91,954			(49,617	)		(54	%)
	Preferred dividend requirement				(12	)		(12	)		—			—
Net income available to common shareholders				$	42,325		$	91,942		$	(49,617	)		(54	%)
Basic weighted average shares outstanding (2)					108,732			108,423			309			—
Basic earnings per share attributable to TDS shareholders (2)				$	0.39		$	0.85		$	(0.46	)		(54	%)
Diluted weighted average shares outstanding (2)					109,022			109,133			(111	)		—
Diluted earnings per share attributable to TDS shareholders (2)				$	0.39		$	0.84		$	(0.45	)		(54	%)

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

(2)  On January 13, 2012, TDS shareholders approved a Share Consolidation Amendment to the Restated Certificate of Incorporation of TDS. Average basic and diluted shares outstanding used to calculate earnings per share for the comparative period presented have been retroactively restated to reflect the impact of the increased shares outstanding as a result of the Share Consolidation Amendment.

N/M – Percentage change not meaningful

6

   

Telephone and Data Systems, Inc. Consolidated Statement of Operations Highlights Six Months Ended June 30, (Unaudited, dollars and shares in thousands, except per share amounts)
										Increase/ (Decrease)
				2012			2011			Amount			Percent
Operating revenues
	U.S. Cellular			$	2,196,521		$	2,133,274		$	63,247			3	%
	TDS Telecom				412,594			397,812			14,782			4	%
	All Other (1)				19,845			7,235			12,610			>100	%
					2,628,960			2,538,321			90,639			4	%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			1,732,424			1,676,554			55,870			3	%
		Depreciation, amortization and accretion			294,240			289,917			4,323			1	%
		Loss on asset disposals and exchanges, net			492			3,959			(3,467	)		(88	%)
					2,027,156			1,970,430			56,726			3	%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			292,403			250,615			41,788			17	%
		Depreciation, amortization and accretion			95,388			88,680			6,708			8	%
		Loss on asset disposals, net			426			421			5			1	%
					388,217			339,716			48,501			14	%
	All Other (1)
		Expenses excluding depreciation and amortization			22,057			6,685			15,372			>100	%
		Depreciation and amortization			6,315			5,261			1,054			20	%
		Loss on impairment of intangible assets			515			—			515			N/M
		(Gain) loss on asset disposals, net			(18	)		1			(19	)		>(100	%)
					28,869			11,947			16,922			>100	%
			Total operating expenses		2,444,242			2,322,093			122,149			5	%
Operating income (loss)
	U.S. Cellular				169,365			162,844			6,521			4	%
	TDS Telecom				24,377			58,096			(33,719	)		(58	%)
	All Other (1)				(9,024	)		(4,712	)		(4,312	)		(92	%)
					184,718			216,228			(31,510	)		(15	%)
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				48,781			41,978			6,803			16	%
	Interest and dividend income				4,535			4,717			(182	)		(4	%)
	Gain (loss) on investment				(3,728	)		13,373			(17,101	)		>(100	%)
	Interest expense				(47,603	)		(71,926	)		24,323			34	%
	Other, net				(21	)		1,386			(1,407	)		>(100	%)
		Total investment and other income (expense)			1,964			(10,472	)		12,436			>100	%
Income before income taxes					186,682			205,756			(19,074	)		(9	%)
	Income tax expense				63,177			41,719			21,458			51	%
Net income					123,505			164,037			(40,532	)		(25	%)
	Less: Net income attributable to noncontrolling interests, net of tax				(28,914	)		(28,579	)		(335	)		(1	%)
Net income attributable to TDS shareholders					94,591			135,458			(40,867	)		(30	%)
	Preferred dividend requirement				(25	)		(25	)		—			—
Net income available to common shareholders				$	94,566		$	135,433		$	(40,867	)		(30	%)
Basic weighted average shares outstanding (2)					108,693			108,678			15			—
Basic earnings per share attributable to TDS shareholders (2)				$	0.87		$	1.25		$	(0.38	)		(30	%)
Diluted weighted average shares outstanding (2)					108,964			109,385			(421	)		—
Diluted earnings per share attributable to TDS shareholders (2)				$	0.86		$	1.23		$	(0.37	)		(30	%)

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

(2)  On January 13, 2012, TDS shareholders approved a Share Consolidation Amendment to the Restated Certificate of Incorporation of TDS. Average basic and diluted shares outstanding used to calculate earnings per share for the comparative period presented have been retroactively restated to reflect the impact of the increased shares outstanding as a result of the Share Consolidation Amendment.

N/M – Percentage change not meaningful

7

   

Telephone and Data Systems, Inc. Consolidated Balance Sheet Highlights (Unaudited, dollars in thousands)
ASSETS
		June 30, 2012		December 31, 2011
Current assets
	Cash and cash equivalents	$	613,764	$	563,275
	Short-term investments		150,921		246,273
	Accounts receivable from customers and others		542,156		542,577
	Inventory		189,242		130,044
	Net deferred income tax asset		44,598		40,898
	Prepaid expenses		86,794		80,628
	Income taxes receivable		9,376		85,636
	Other current assets		19,224		16,349
			1,656,075		1,705,680
Assets held for sale			—		49,647
Investments
	Licenses		1,507,447		1,494,014
	Goodwill		816,668		797,077
	Other intangible assets, net		65,285		50,734
	Investments in unconsolidated entities		213,049		173,710
	Long-term investments		55,468		45,138
	Other investments		1,017		3,072
			2,658,934		2,563,745
Property, plant and equipment, net
	U.S. Cellular		2,883,118		2,790,302
	TDS Telecom		928,686		936,757
	Other		41,483		57,476
			3,853,287		3,784,535
Other assets and deferred charges			115,435		97,398
Total assets		$	8,283,731	$	8,201,005

8

 

Telephone and Data Systems, Inc. Consolidated Balance Sheet Highlights (Unaudited, dollars in thousands)
LIABILITIES AND EQUITY
				June 30, 2012			December 31, 2011
Current liabilities
	Current portion of long-term debt			$	1,283		$	1,509
	Accounts payable				310,610			364,746
	Customer deposits and deferred revenues				231,743			207,633
	Accrued interest				5,522			7,456
	Accrued taxes				53,698			41,069
	Accrued compensation				83,080			107,719
	Other current liabilities				105,640			144,001
					791,576			874,133
Liabilities held for sale					—			1,051
Deferred liabilities and credits
	Net deferred income tax liability				847,725			808,713
	Other deferred liabilities and credits				391,898			383,567
Long-term debt					1,529,836			1,529,857
Noncontrolling interests with redemption features					1,050			1,005
Equity
	TDS shareholders’ equity
		Series A Common and Common Shares, par value $.01 per share			1,326			1,326
		Capital in excess of par value (1)			2,280,802			2,268,711
		Treasury shares at cost (1)			(742,906	)		(750,921	)
		Accumulated other comprehensive loss			(8,494	)		(8,854	)
		Retained earnings (1)			2,514,327			2,451,899
			Total TDS shareholders’ equity		4,045,055			3,962,161
	Preferred shares				830			830
	Noncontrolling interests				675,761			639,688
		Total equity			4,721,646			4,602,679
Total liabilities and equity				$	8,283,731		$	8,201,005

(1)  The December 31, 2011 amounts reflect the impact of the Share Consolidation Amendment to the Restated Certificate of Incorporation of TDS, as approved by the TDS shareholders on January 13, 2012.

9

 

Balance Sheet Highlights June 30, 2012 (Unaudited, dollars in thousands)
			U.S.		TDS		TDS Corporate			Intercompany			TDS
			Cellular		Telecom		& Other			Eliminations			Consolidated
Cash and cash equivalents			$	437,624	$	71,861	$	104,279		$	―		$	613,764
Affiliated cash investments				―		396,855		―			(396,855	)		―
Short-term investments				100,738		―		50,183			―			150,921
			$	538,362	$	468,716	$	154,462		$	(396,855	)	$	764,685
Licenses, goodwill and other intangible assets			$	1,979,109	$	589,225	$	(178,934	)	$	―		$	2,389,400
Investment in unconsolidated entities				175,663		3,805		39,906			(6,325	)		213,049
Long-term and other investments				55,550		933		2			―			56,485
			$	2,210,322	$	593,963	$	(139,026	)	$	(6,325	)	$	2,658,934
Property, plant and equipment, net			$	2,883,118	$	928,686	$	41,483		$	―		$	3,853,287
Long-term debt:
	Current portion		$	127	$	190	$	966		$	―		$	1,283
	Non-current portion			880,623		1,685		647,528			―			1,529,836
		Total	$	880,750	$	1,875	$	648,494		$	―		$	1,531,119
Preferred shares			$	―	$	―	$	830		$	―		$	830

10

 

Telephone and Data Systems, Inc.

Schedule of Cash and Cash Equivalents and Investments

(Unaudited, dollars in thousands)

The following table presents TDS’ cash and cash equivalents and investments at June 30, 2012 and December 31, 2011.

		June 30, 2012		December 31, 2011
Cash and cash equivalents		$	613,764	$	563,275
Amounts included in short-term investments (1) (2)
	Government-backed securities (3)		150,921		218,829
	Certificates of deposit		—		27,444
		$	150,921	$	246,273
Amounts included in long-term investments (1) (4)
	Government-backed securities (3)	$	55,468	$	45,138

(1)Designated as held-to-maturity investments and recorded at amortized cost in the Consolidated Balance Sheet.

(2)Maturities are less than twelve months from the respective balance sheet dates.

(3)Includes U.S. treasuries and corporate notes guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.

(4)At June 30, 2012, maturities range between 12 and 21 months.

11

 

Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
Six Months Ended June 30,
(Unaudited, dollars in thousands)
				2012			2011
Cash flows from operating activities
	Net income			$	123,505		$	164,037
		Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
			Depreciation, amortization and accretion		395,943			383,858
			Bad debts expense		33,626			29,906
			Stock-based compensation expense		20,955			18,913
			Deferred income taxes, net		29,929			79,637
			Equity in earnings of unconsolidated entities		(48,781	)		(41,978	)
			Distributions from unconsolidated entities		6,973			47,375
			Loss on impairment of intangible assets		515			—
			Loss on asset disposals, net		900			4,381
			(Gain) loss on investment		3,728			(13,373	)
			Noncash interest expense		1,728			17,147
			Other operating activities		1,010			1,070
		Changes in assets and liabilities from operations
			Accounts receivable		(10,197	)		(37,819	)
			Inventory		(58,467	)		(48,826	)
			Accounts payable		(23,336	)		24,678
			Customer deposits and deferred revenues		22,786			22,600
			Accrued taxes		89,433			(459	)
			Accrued interest		(1,823	)		1,355
			Other assets and liabilities		(81,517	)		(90,291	)
					506,910			562,211
Cash flows from investing activities
	Cash used for additions to property, plant and equipment				(501,211	)		(350,856	)
	Cash paid for acquisitions and licenses				(52,213	)		(22,167	)
	Cash received from divestitures				50,036			—
	Cash paid for investments				(45,000	)		(71,000	)
	Cash received for investments				128,444			213,030
	Other investing activities				(8,916	)		(816	)
					(428,860	)		(231,809	)
Cash flows from financing activities
	Repayment of long-term debt				(952	)		(613,387	)
	Issuance of long-term debt				358			643,700
	TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments				(39	)		1,055
	U.S. Cellular Common Shares reissued for benefit plans, net of tax payments				(2,465	)		1,264
	Repurchase of TDS Common and Special Common Shares				—			(21,500	)
	Repurchase of U.S. Cellular Common Shares				—			(62,308	)
	Dividends paid				(26,610	)		(24,343	)
	Payment of debt issuance costs				—			(21,191	)
	Distributions to noncontrolling interests				(643	)		(1,377	)
	Other financing activities				2,790			2,077
					(27,561	)		(96,010	)
Cash classified as held for sale					—			(5,687	)
Net increase in cash and cash equivalents					50,489			228,705
Cash and cash equivalents
	Beginning of period				563,275			341,683
	End of period			$	613,764		$	570,388

12

 

TDS Telecom Highlights Three Months Ended June 30, (Unaudited, dollars in thousands)
									Increase (Decrease)
			2012			2011			Amount			Percent
Local Telephone Operations
	Operating revenues
		Residential	$	70,082		$	69,951		$	131			—
		Commercial		24,201			24,856			(655	)		(3	%)
		Wholesale		49,769			54,574			(4,805	)		(9	%)
				144,052			149,381			(5,329	)		(4	%)
	Operating expenses
		Cost of services and products		47,180			47,646			(466	)		(1	%)
		Selling, general and administrative expenses		43,216			40,076			3,140			8	%
		Depreciation, amortization and accretion		37,834			36,116			1,718			5	%
		Loss on asset disposals, net		136			245			(109	)		(44	%)
				128,366			124,083			4,283			3	%
	Operating income		$	15,686		$	25,298		$	(9,612	)		(38	%)
Competitive Local Exchange Carrier Operations
	Operating revenues
		Residential	$	4,338		$	5,330		$	(992	)		(19	%)
		Commercial		34,905			35,023			(118	)		—
		Wholesale		4,957			5,243			(286	)		(5	%)
				44,200			45,596			(1,396	)		(3	%)
	Operating expenses
		Cost of services and products		22,702			23,029			(327	)		(1	%)
		Selling, general and administrative expenses		16,769			16,087			682			4	%
		Depreciation, amortization and accretion		5,466			5,439			27			—
		Loss on asset disposals, net		72			47			25			53	%
				45,009			44,602			407			1	%
	Operating income (loss)		$	(809	)	$	994		$	(1,803	)		>(100	%)
Hosted and Managed Services Operations
		Revenues	$	22,876		$	6,625		$	16,251			>100	%
	Operating expenses
		Cost of services and products		15,090			2,193			12,897			>100	%
		Selling, general and administrative expenses		6,635			2,521			4,114			>100	%
		Depreciation, amortization and accretion		4,645			2,288			2,357			>100	%
		Loss on asset disposals, net		98			25			73			>100	%
				26,468			7,027			19,441			>100	%
	Operating loss		$	(3,592	)	$	(402	)	$	(3,190	)		>(100	%)
Intercompany revenues			$	(2,609	)	$	(2,706	)	$	97			4	%
Intercompany expenses				(2,609	)		(2,706	)		97			4	%
Total TDS Telecom operating income			$	11,285		$	25,890		$	(14,605	)		(56	%)

13

 

TDS Telecom Highlights Six Months Ended June 30, (Unaudited, dollars in thousands)
									Increase (Decrease)
			2012			2011			Amount			Percent
Local Telephone Operations
	Operating revenues
		Residential	$	139,481		$	139,664		$	(183	)		—
		Commercial		48,331			50,227			(1,896	)		(4	%)
		Wholesale		101,305			109,064			(7,759	)		(7	%)
				289,117			298,955			(9,838	)		(3	%)
	Operating expenses
		Cost of services and products		96,348			93,048			3,300			4	%
		Selling, general and administrative expenses		84,730			75,558			9,172			12	%
		Depreciation, amortization and accretion		75,612			73,316			2,296			3	%
		Loss on asset disposals, net		202			286			(84	)		(29	%)
				256,892			242,208			14,684			6	%
	Operating income		$	32,225		$	56,747		$	(24,522	)		(43	%)
Competitive Local Exchange Carrier Operations
	Operating revenues
		Residential	$	9,126		$	11,827		$	(2,701	)		(23	%)
		Commercial		69,246			69,040			206			—
		Wholesale		9,872			10,057			(185	)		(2	%)
				88,244			90,924			(2,680	)		(3	%)
	Operating expenses
		Cost of services and products		45,266			45,501			(235	)		(1	%)
		Selling, general and administrative expenses		33,029			31,735			1,294			4	%
		Depreciation, amortization and accretion		10,955			10,929			26			—
		Loss on asset disposals, net		125			78			47			60	%
				89,375			88,243			1,132			1	%
	Operating income (loss)		$	(1,131	)	$	2,681		$	(3,812	)		>(100	%)
Hosted and Managed Services Operations
		Revenues	$	40,434		$	12,867		$	27,567			>100	%
	Operating expenses
		Cost of services and products		24,864			4,475			20,389			>100	%
		Selling, general and administrative expenses		13,367			5,232			8,135			>100	%
		Depreciation, amortization and accretion		8,821			4,435			4,386			99	%
		Loss on asset disposals, net		99			57			42			74	%
				47,151			14,199			32,952			>100	%
	Operating loss		$	(6,717	)	$	(1,332	)	$	(5,385	)		>(100	%)
Intercompany revenues			$	(5,201	)	$	(4,934	)	$	(267	)		(5	%)
Intercompany expenses				(5,201	)		(4,934	)		(267	)		(5	%)
Total TDS Telecom operating income			$	24,377		$	58,096		$	(33,719	)		(58	%)

14

Telephone and Data Systems, Inc. Financial Measures and Reconciliation (Unaudited, dollars in thousands)
Three Months Ended June 30, 2012			U.S. Cellular			TDS Telecom (1)			All Other (2)			Consolidated Total
Operating revenues			$	1,104,400		$	208,519		$	10,250		$	1,323,169
Deduct:
	U.S. Cellular equipment sales revenue			74,658
		Service revenues		1,029,742
Operating income (loss)				84,163			11,285			(4,372	)		91,076
Add (Deduct):
	Depreciation, amortization and accretion			147,555			47,945			3,009			198,509
	Loss on impairment of intangible assets			—			—			515			515
	(Gain) loss on asset disposals and exchanges			2,702			306			(13	)		2,995
		Adjusted OIBDA (3)	$	234,420		$	59,536		$	(861	)	$	293,095
		Adjusted OIBDA margin (4)		22.8	%		28.6	%
Three Months Ended June 30, 2011			U.S. Cellular			TDS Telecom (1)			All Other (2)			Consolidated Total
Operating revenues			$	1,076,182		$	198,896		$	4,562		$	1,279,640
Deduct:
	U.S. Cellular equipment sales revenue			74,152
		Service revenues		1,002,030
Operating income (loss)				104,096			25,890			(2,631	)		127,355
Add (Deduct):
	Depreciation, amortization and accretion			146,577			43,843			2,625			193,045
	Loss on impairment of intangible assets			—			—			—			—
	(Gain) loss on asset disposals and exchanges			2,922			317			(1	)		3,238
		Adjusted OIBDA (3)	$	253,595		$	70,050		$	(7	)	$	323,638
		Adjusted OIBDA margin (4)		25.3	%		35.2	%
			TDS Consolidated
Three Months Ended June 30,			2012			2011
Cash flows from operating activities			$	224,665		$	229,169
Deduct:
Cash used for additions to property, plant and equipment				258,600			192,959
		Free cash flow (5)	$	(33,935	)	$	36,210

15

Telephone and Data Systems, Inc. Financial Measures and Reconciliation (Unaudited, dollars in thousands)
Six Months Ended June 30, 2012			U.S. Cellular			TDS Telecom (1)			All Other (2)			Consolidated Total
Operating revenues			$	2,196,521		$	412,594		$	19,845		$	2,628,960
Deduct:
	U.S. Cellular equipment sales revenue			142,959
		Service revenues		2,053,562
Operating income (loss)				169,365			24,377			(9,024	)		184,718
Add (Deduct):
	Depreciation, amortization and accretion			294,240			95,388			6,315			395,943
	Loss on impairment of intangible assets			—			—			515			515
	(Gain) loss on asset disposals and exchanges			492			426			(18	)		900
		Adjusted OIBDA (3)	$	464,097		$	120,191		$	(2,212	)	$	582,076
		Adjusted OIBDA margin (4)		22.6	%		29.1	%
Six Months Ended June 30, 2011			U.S. Cellular			TDS Telecom (1)			All Other (2)			Consolidated Total
Operating revenues			$	2,133,274		$	397,812		$	7,235		$	2,538,321
Deduct:
	U.S. Cellular equipment sales revenue			146,131
		Service revenues		1,987,143
Operating income (loss)				162,844			58,096			(4,712	)		216,228
Add (Deduct):
	Depreciation, amortization and accretion			289,917			88,680			5,261			383,858
	Loss on impairment of intangible assets			—			—			—			—
	Loss on asset disposals and exchanges			3,959			421			1			4,381
		Adjusted OIBDA (3)	$	456,720		$	147,197		$	550		$	604,467
		Adjusted OIBDA margin (4)		23.0	%		37.0	%
			TDS Consolidated
Six Months Ended June 30,			2012			2011
Cash flows from operating activities			$	506,910		$	562,211
Deduct:
Cash used for additions to property, plant, and equipment				501,211			350,856
		Free cash flow (5)	$	5,699		$	211,355

(1)Includes ILEC, CLEC and HMS intercompany eliminations.

(2)Consists of Suttle-Straus and Airadigm (as of September 23, 2011), which represents TDS’ Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom and corporate operations. Amounts in this column are presented only to reconcile to consolidated totals and may not otherwise be meaningful.

(3)Adjusted OIBDA is a segment measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance.  Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any).  This measure also may be commonly referred to by management as operating cash flow.  This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and loss on impairment of assets, if any, in order to show operating results on a more comparable basis from period to period. TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual, and accordingly, they may be incurred in the future.

(4)Adjusted OIBDA margin is defined as adjusted OIBDA divided by service revenues (U.S. Cellular) and operating revenues (TDS Telecom).  Equipment revenues are excluded from the denominator of the U.S. Cellular calculation since equipment is generally sold at a net negative margin, and the net equipment subsidy is effectively a cost for purposes of assessing business results and is already reflected in adjusted OIBDA. TDS believes that this calculation method is consistent with the method used by certain investors to assess U.S. Cellular’s business results.  Adjusted OIBDA margin may also be commonly referred to by management as operating cash flow margin.

(5)Free cash flow is defined as cash flows from operating activities less Cash used for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure.  TDS believes that free cash flow as reported by TDS is useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.

16

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 facts 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 actual 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.  Further consolidation within the wireless industry and/or continued network build-outs by other wireless carriers could cause roaming revenues to decline from current levels, 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 Federal Communications Commission (“FCC”), TDS is likely to participate in FCC auctions in the future as an applicant or as a noncontrolling 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 Universal Service Fund (“USF”) funding and/or intercarrier compensation could have a material adverse impact on TDS' financial condition or results of operations.

·An inability to attract and/or retain highly competent 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 wireless devices, 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.

·TDS' inability to manage its supply chain or inventory successfully could have an adverse effect on its 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 (“HSPA”), WiMAX or Long-Term Evolution (“LTE”), Voice over LTE (“VoLTE”), or LTE Advanced,  could render certain technologies used by TDS obsolete, could put TDS at a competitive disadvantage, could reduce TDS’ revenues or could increase its costs of doing business.

·Complexities associated with deploying new technologies, such as TDS' ongoing upgrade to 4G LTE technology, present substantial risk.

·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 developing and enhancing business support systems, 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 business, financial condition or results of operations 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) or other operational difficulties of any 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 price of TDS’ Common Shares is 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 Securities and Exchange Commission (“SEC”).  Such amendments or restatements 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.

·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.

·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 wireless 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 products or 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 customer net additions, revenues, 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.