10-K

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K
(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
					OR
	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-9712
UNITED STATES CELLULAR CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware							62-1147325
(State or other jurisdiction of incorporation or organization)							(IRS Employer Identification No.)
8410 West Bryn Mawr, Chicago, Illinois 60631 (Address of principal executive offices) (Zip code)
Registrant's Telephone Number: (773) 399-8900
Securities registered pursuant to Section 12(b) of the Act:
		Title of each class					Name of each exchange on which registered
		Common Shares, $1 par value					New York Stock Exchange
		6.95% Senior Notes Due 2060					New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.										Yes 	No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.										Yes 	No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.										Yes x	No 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).										Yes x	No 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.										x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer				Accelerated filer	x	Non-accelerated filer			Smaller reporting company		
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).										Yes 	No x
As of June 30, 2013, the aggregate market value of the registrant's Common Shares held by non-affiliates was approximately $475.2 million, based upon the closing price of the Common Shares on June 30, 2013 of $36.69, as reported by the New York Stock Exchange.  For purposes hereof, it was assumed that each director, executive officer and holder of 10% or more of any class of voting equity security of U.S. Cellular is an affiliate.
The number of shares outstanding of each of the registrant's classes of common stock, as of January 31, 2014, is 51,208,000 Common Shares, $1 par value, and 33,006,000 Series A Common Shares, $1 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Those sections or portions of the registrant's 2013 Annual Report to Shareholders (“Annual Report”), filed as Exhibit 13 hereto, and of the registrant’s Notice of Annual Meeting of Shareholders and Proxy Statement for its 2014 Annual Meeting of Shareholders (“Proxy Statement”) to be filed on or prior to April 30, 2014, described in the table of contents included herein are incorporated by reference into Parts II and III of this report.

United States Cellular Corporation
Annual Report on Form 10-K
For the Period Ended December 31, 2013
TABLE OF CONTENTS
		Page Number
Part I
	Item 1  Business	1
	Item 1A.  Risk Factors	15
	Item 1B.  Unresolved Staff Comments	30
	Item 2.  Properties	30
	Item 3.  Legal Proceedings	30
	Item 4.  Mine Safety Disclosures	30
Part II
	Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	31
	Item 6.  Selected Financial Data	31
	Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
	Item 7A.  Quantitative and Qualitative Disclosures About Market Risk	31
	Item 8.  Financial Statements and Supplementary Data	32
	Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	32
	Item 9A.  Controls and Procedures	32
	Item 9B.  Other Information	33
Part III
	Item 10.  Directors, Executive Officers and Corporate Governance	34
	Item 11.  Executive Compensation	34
	Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	34
	Item 13.  Certain Relationships and Related Transactions, and Director Independence	34
	Item 14.  Principal Accountant Fees and Services	34
Part IV
	Item 15.  Exhibits and Financial Statement Schedules	35

UNITED STATES CELLULAR CORPORATION 8410 WEST BRYN MAWR AVENUE, CHICAGO ILLINOIS 60631 TELEPHONE (773) 399-8900  

PART I

Item 1.  Business

General

United States Cellular Corporation (“U.S. Cellular”) was incorporated under the laws of the state of Delaware in 1983. At December 31, 2013, U.S. Cellular’s consolidated operating markets serve approximately 4.8 million customers in 23 states. U.S. Cellular operates in one reportable segment, wireless operations, and all of its wireless operating markets are in the United States.

U.S. Cellular is a majority-owned subsidiary of Telephone and Data Systems, Inc. (NYSE symbol “TDS”).  As of December 31, 2013, TDS owned 84% of the combined total of the outstanding Common Shares and Series A Common Shares of U.S. Cellular and controlled 96% of the combined voting power of both classes of common stock.  The Common Shares of U.S. Cellular are listed on the New York Stock Exchange under the symbol “USM.”  U.S. Cellular’s 6.95% Senior Notes are listed on the New York Stock Exchange (“NYSE”) under the symbol “UZA.”  U.S. Cellular’s 6.7% Senior Notes due 2033 are traded over the counter and are not listed on any stock exchange.

U.S. Cellular has its principal executive offices at 8410 West Bryn Mawr Avenue, Chicago, Illinois 60631 (telephone number 773-399-8900). U.S. Cellular’s website address is http://www.uscellular.com.  U.S. Cellular files with, or furnishes to, the Securities and Exchange Commission (“SEC”) annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, as well as various other information.  Investors may access, free of charge, through the Investor Relations portion of the website, U.S. Cellular’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practical after such material is filed electronically with the SEC. The public may read and copy any materials U.S. Cellular files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549.  The public may obtain information on the operation of the Reference Room by calling the SEC at 1-800-732-0330.  The public may also view electronic filings of U.S. Cellular by accessing SEC filings at http://www.sec.gov. 

U.S. Cellular is a wireless telecommunications service provider.  U.S. Cellular groups its individual markets (geographic service areas as defined by the Federal Communications Commission (“FCC”) in which wireless carriers are licensed, for fixed terms, to provide service) into broader geographic market areas (as discussed below in “Total Consolidated Markets” and “Consolidated Operating Markets”) to offer customers large service areas that primarily utilize U.S. Cellular’s network.  Since 1985, when it began providing wireless telecommunications service in Knoxville, Tennessee and Tulsa, Oklahoma, U.S. Cellular has expanded its consolidated wireless networks and customer service operations to cover  portions of 23 states, which collectively represent a total population of 31.8 million as of December 31, 2013.  U.S. Cellular uses roaming agreements with other wireless carriers to provide service to its customers in areas not covered by U.S. Cellular’s network. See “Divestiture Transaction” below. 

U.S. Cellular is subject to regulation by the FCC as a provider of wireless telecommunication services. The FCC regulates the licensing, construction, and operation of providers of wireless telecommunications systems, as well as the provision of services over those systems.  See “Regulation” below for further discussion regarding licenses as well as the regulations promulgated by the FCC.

U.S. Cellular’s ownership interests in wireless licenses include both consolidated and investment interests in licenses covering portions of 30 states and a total population of 58.0 million at December 31, 2013.

For purposes of tracking population counts in order to calculate market penetration, when U.S. Cellular acquires a licensed area that overlaps a licensed area it already owns, it does not duplicate the population counts for any overlapping licensed area.  In such cases, only incremental population counts are added to the reported amount of “total market population”. 

Total market population measures in U.S. Cellular’s consolidated markets and consolidated operating markets, as defined below, are provided to allow comparison of the total population to the relative size of U.S. Cellular’s customer base in those markets.  The total population of U.S. Cellular’s consolidated markets may have no direct relationship to the number of wireless customers or the revenues that may be realized from the operation of the related wireless systems.  In addition, population equivalents for investment interests have been provided to allow comparison to the relative size of U.S. Cellular’s consolidated markets.

1

Consolidated Markets
The following table summarizes information regarding licensed areas which U.S. Cellular consolidates as of December 31, 2013.  The population shown is the total population, regardless of U.S. Cellular’s percentage ownership in the licenses included:
		Population (1)	Customers	Penetration
Consolidated Operating Markets (2) (4)		31,759,000	4,774,000	15.0%
Total Consolidated Markets (3) (4)		58,013,000	4,774,000	8.2%
(1)	Represents 100% of the population of the licensed areas, based on 2012 Claritas population estimates.  “Population” in this context includes only the areas covering such markets and is used only for the purposes of calculating market penetration and is not related to “population equivalents,” as defined below.
(2)	Represents licensed areas which U.S. Cellular consolidates and are in operation in the following states CA, IA, IL, IN, KS, MD, ME, MN, MO, NC, NE, NH, OK, OR, PA, SC, TN, TX, VA, VT, WA, WI and WV.
(3)	Represents licensed areas which U.S. Cellular consolidates, including non-operating markets in the following states: AR, CA, CO, IA, ID, IL, IN, KS, KY, MD, ME, MI, MN, MO, NC, NE, NH, OH, OK, OR, PA, SC, SD, TN, TX, VA, VT, WA, WI and WV.
(4)	See "NY1 & NY2 Deconsolidation" and "Divestiture Transaction" below.

Investment Markets
The following table summarizes the markets in which U.S. Cellular owns an investment interest at December 31, 2013.  For licenses in which U.S. Cellular owns an investment interest, the related population equivalents are shown.
Market Area/Market		Population (1)	Current Percentage Interest (2)		Current Population Equivalents (3)
Los Angeles/Oxnard, CA		18,085,000	5.5%		995,000
New York Region		491,000	Varies	(4)	288,000
Oklahoma City, OK		1,220,000	14.6%		178,000
Others (fewer than 100,000 population equivalents each)		4,751,000	Varies		294,000
Total population equivalents in investment markets					1,755,000
(1)	Represents 100% of the total population of the licensed area in which U.S. Cellular owns an interest based on 2012 Claritas population estimates.
(2)	Represents U.S. Cellular’s percentage ownership interest in the licensed area as of December 31, 2013.
(3)	“Current Population Equivalents” are derived by multiplying the amount in the “Population” column by the percentage interest indicated in the “Current Percentage Interest” column.
(4)	See "NY1 & NY2 Deconsolidation" below.

NY1 & NY2 Deconsolidation

As more fully described in Note 7 – Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements, on April 3, 2013, U.S. Cellular entered into an agreement relating to St. Lawrence Seaway RSA Cellular Partnership (“NY1”) and New York RSA 2 Cellular Partnership (“NY2” and, together with NY1, the “Partnerships”) with Cellco Partnership d/b/a Verizon Wireless, which required U.S. Cellular to deconsolidate the Partnerships and thereafter account for them as equity method investments (the “NY1 & NY2 Deconsolidation”).

Refer to U.S. Cellular’s Form 8-K filed on February 26, 2014 for pro forma financial information related to the Divestiture Transaction and the NY1 & NY2 Deconsolidation for the three and twelve months ended December 31, 2013, as if these transactions had occurred at the beginning of the respective periods.  Also refer to U.S. Cellular’s Form 8-K filed on May 3, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 & NY2 Deconsolidation for the twelve months ended December 31, 2012.

2

Refer to the Summary Operating Data for U.S. Cellular Core Markets in Management’s Discussion and Analysis of Financial Condition and Operations – Results of Operations – U.S. Cellular, for summarized operating data for U.S. Cellular for 2013 and 2012 excluding the NY1 & NY2 markets (and the Divestiture Markets as described below).

Divestiture Transaction

As more fully described in Note 5 – Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements, on November 6, 2012, U.S. Cellular entered into a Purchase and Sale Agreement with subsidiaries of Sprint Corp, fka Sprint Nextel Corporation (“Sprint”). Pursuant to the Purchase and Sale Agreement, on May 16, 2013, U.S. Cellular transferred customers and certain PCS license spectrum to Sprint in U.S. Cellular's Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets (“Divestiture Markets”) in consideration for $480 million in cash. The Purchase and Sale Agreement also contemplated certain other agreements, together with the Purchase and Sale Agreement collectively referred to as the “Divestiture Transaction.”

The table below provides selected information related to the Divestiture Markets as of December 31, 2012 that are no longer included in operating data as of December 31, 2013:

Market population	15,037,000
Total customers	560,000
Postpaid customers	463,000
Prepaid customers	81,000
Reseller customers	16,000

Refer to U.S. Cellular’s Form 8-K filed on February 26, 2014 for pro forma financial information related to the Divestiture Transaction and the NY1 & NY2 Deconsolidation for the three and twelve months ended December 31, 2013, as if these transactions had occurred at the beginning of the respective periods.  Also refer to U.S. Cellular’s Form 8-K filed on May 3, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 & NY2 Deconsolidation for the twelve months ended December 31, 2012.

Refer to the Summary Operating Data for U.S. Cellular Core Markets in Management’s Discussion and Analysis of Financial Condition and Operations – Results of Operations – U.S. Cellular, for summarized operating data for 2013 and 2012 excluding the Divestiture Markets (and NY1 & NY2 markets). 

Products and Services

Wireless Services.  U.S. Cellular’s postpaid customers are able to choose from a variety of national plans with voice, messaging and data usage options and pricing that are designed to fit different customer needs, usage patterns and budgets.  Helping a customer find the right pricing plan is an important element of U.S. Cellular’s brand positioning.  Beginning in 2013, U.S. Cellular began offering Shared Data plans that include unlimited voice minutes and text messaging combined with a variety of data usage options.  Under these plans, customers can share data usage among all users and devices connected to the plan.  Business rate plans are offered to companies to meet their unique needs.  U.S. Cellular’s popular national plans price all calls as local calls, regardless of where they are made or received in the United States, with no long distance or roaming charges.  U.S. Cellular also offers prepaid service plans, which include voice, messaging and data options in a variety of ways, for a monthly fee. 

U.S. Cellular incents customer loyalty by offering industry-leading benefits. Customers who subscribe to postpaid national plans can earn loyalty reward points just for being a customer. Points can be used to obtain a free phone or to accelerate the timing of a phone upgrade, as well as for other rewards such as additional lines and accessories. Certain available postpaid plans include Overage Cap, a free service that prevents voice overage charges from exceeding $50 for a National Single Line Plan or $150 for a Family Plan.

U.S. Cellular’s portfolio of smartphones, tablets and other connected devices (see “Wireless Devices” below) is a key part of its strategy to deliver wireless devices which allow customers to stay productive, entertained and connected on the go. Backed by U.S. Cellular’s high-speed networks, including a fourth generation Long Term Evolution (“4G LTE”) network, which, as of December 31, 2013, covers 87% of its postpaid customers and a third generation (“3G”) network that supports nationwide roaming, U.S. Cellular’s smartphone messaging, data and internet services allow customers to access the web and social network sites, e-mail, text, picture and video message, utilize turn-by-turn GPS navigation, and browse and download thousands of applications to customize their wireless devices to fit their lifestyles.

3

U.S. Cellular offers smartphone and non-smartphone users a variety of services which run over its 4G LTE and 3G networks.  In 2013, U.S. Cellular launched several new services such as Family Protector and an international dialing plan while continuing to offer enhanced multimedia services, including digital radio, Mobile TV and gaming.  U.S. Cellular continues to offer data services and app-like experiences to non-smartphone devices via a technology known as Binary Runtime Environment for Wireless (“BREW”), which enables customers to access news, weather, sports, information, games, ring tones and other services.

U.S. Cellular plans to further enhance its advanced wireless services and connected solutions for consumer and business customers in 2014 and beyond.

Wireless Devices. U.S. Cellular offers a comprehensive range of wireless devices such as handsets, modems, mobile hotspots, home phone and tablets for use by its customers.  U.S. Cellular offers wireless devices that are compatible with some or all of its 4G LTE, 3G and 2G networks and all are compliant with the FCC’s enhanced wireless 911 (“E-911”) requirements.  In addition, U.S. Cellular offers a wide range of accessories, such as carrying cases, hands-free devices, batteries, battery chargers, memory cards and other items to customers. U.S. Cellular also sells wireless devices to agents and other third-party distributors for resale. U.S. Cellular frequently discounts wireless devices sold to new and current customers and provides discounts on upgraded wireless devices to current customers, in order to attract new customers or to retain existing customers by reducing the cost of becoming or remaining a wireless customer.  Beginning in 2013, U.S. Cellular began offering financing options on certain wireless devices.   

U.S. Cellular has established service facilities in many of its local markets to ensure quality service and repair of the wireless devices it sells.  These facilities allow U.S. Cellular to provide convenient and timely repair service to customers who experience device problems.  Additionally, U.S. Cellular offers several programs which allow the customer to receive a replacement device through a retail store or through direct mail.

During 2013, U.S. Cellular continued to bolster its expanding smartphone and tablet portfolio with the launch of Apple products such as the iPhone and iPad.  Throughout 2013, U.S. Cellular also launched a number of high-performance Android wireless devices, such as the Samsung Galaxy S4, the Samsung Galaxy Note 3, and the Motorola Moto X. U.S. Cellular’s smartphone offerings play a significant role in driving data service usage and revenues.  The devices offered include a full array of smartphones and feature phones.

U.S. Cellular purchases wireless devices and accessory products from a number of manufacturers, including Apple, Samsung, Motorola, Personal Communications Devices, LG, BlackBerry, Superior Communications, Kyocera, ZTE, Tessco, ABM Wireless (Mobilistics), and Xentris Wireless. U.S. Cellular negotiates volume discounts with its suppliers and works with them in promoting specific equipment in its local advertising.  U.S. Cellular does not own significant product warehousing and distribution infrastructure.  Instead, it contracts with third party providers for substantially all of its product warehousing, distribution and direct customer fulfillment activities. U.S. Cellular also contracts with third party providers for services related to its reward points and phone replacement programs.

U.S. Cellular monitors the financial condition of its wireless device and accessory suppliers.  Because U.S. Cellular purchases wireless devices and accessories from numerous suppliers, U.S. Cellular does not expect the financial condition of any single supplier to affect U.S. Cellular’s ability to offer a competitive variety of wireless devices and accessories for sale to customers.

Marketing

Customer Acquisition and Retention.  U.S. Cellular’s marketing plan is focused on acquiring, retaining and growing customer relationships by offering high-quality products and services built around customer needs at fair prices, maintaining an exceptional wireless network, and providing outstanding customer service.

U.S. Cellular believes that creating positive relationships with its customers enhances their wireless experience and builds customer loyalty.  U.S. Cellular currently offers several innovative, customer-centric programs and services at no cost to the customer.  The Overage Protection service provides customers peace-of-mind by sending them text message alerts when they come close to reaching their allowable monthly plan minutes, text messages or data usage in order to avoid overage charges. Although the FCC approved a proposal in 2011 that would require carriers to notify customers before they incur excessive charges, U.S. Cellular believes that it was the first to offer this service. My Contacts Backup offers extra security for customers by allowing them to retrieve their contact numbers if they lose or damage their wireless devices.

4

U.S. Cellular increases customer awareness using media such as television, radio, newspaper, direct mail advertising, the Internet, social media and sponsorships.  U.S. Cellular has achieved its current level of penetration of its markets through a combination of a strong brand position, promotional advertising, broad distribution, maintaining a high-quality wireless network and providing outstanding customer service.  U.S. Cellular’s advertising is directed at increasing the public awareness and understanding of the wireless services it offers, improving potential customers’ awareness of the U.S. Cellular brand, attracting and retaining customers, and increasing existing customers’ usage of U.S. Cellular’s services. U.S. Cellular attempts to select the advertising and promotional media that are most appealing to the targeted groups of potential customers in each local market.  U.S. Cellular supplements its advertising with a focused public relations program that drives store traffic, supports sales of products and services, and builds brand awareness and preference.  The approach combines national and local media relations in mainstream and social media channels with market-wide activities, events, and sponsorships. Since 2008, U.S. Cellular has focused its charitable giving strategy on the pressing needs of schools and has invested millions of dollars in its education initiatives, such as Calling All Communities and Calling All Teachers, which support schools and teachers in the communities U.S. Cellular serves.

U.S. Cellular manages customer retention by focusing on outstanding customer service through the development of processes that are customer-friendly, extensive training of frontline sales and support associates and the implementation of retention programs.  The marketing plan highlights the value of U.S. Cellular’s high quality network, service offerings and incorporates combinations of rate plans, additional value-added features and services and wireless devices which are designed to meet the needs of customers.

U.S. Cellular currently operates four regional customer care centers with personnel who are responsible for customer service activities, and a national financial services center with personnel who perform credit and other customer payment activities.  U.S. Cellular also contracts with third parties that provide additional customer care and financial services support.

Distribution Channels.  U.S. Cellular supports a multi-faceted distribution program, including retail sales and service centers, direct sales, third-party national retailers, and independent agents, plus the website and telesales for customers who wish to contact U.S. Cellular through the Internet or by phone.

Company retail store locations are designed to market wireless products and services to the consumer and small business segments in a setting familiar to these types of customers.  As of December 31, 2013, retail sales associates work in approximately 300 U.S. Cellular-operated retail stores and kiosks. Direct sales consultants market wireless services to mid-size business customers. Additionally, the U.S. Cellular website enables customers to activate service and purchase wireless devices online.

U.S. Cellular maintains an ongoing training program to improve the effectiveness of retail sales associates and direct sales consultants by focusing their efforts on obtaining customers by facilitating the sale of appropriate packages for the customer’s expected usage and value-added services that meet customer needs.

U.S. Cellular has relationships with exclusive and non-exclusive agents, which are independent businesses that obtain customers for U.S. Cellular on a commission basis.  At December 31, 2013, U.S. Cellular had contracts with these businesses aggregating over 750 locations.  U.S. Cellular provides additional support and training to its exclusive agents to increase customer satisfaction for customers they serve.  U.S. Cellular’s agents are generally in the business of selling wireless devices, wireless service packages and other related products.  No single agent accounted for 10% or more of U.S. Cellular’s operating revenues during the past three years.

In 2012 and 2013, U.S. Cellular expanded its distribution through third-party national and on-line retailers. As of December 2013, Wal-Mart and Sam’s Club offer U.S. Cellular products and services at select retail locations in U.S. Cellular’s service areas. Further, Amazon offers U.S. Cellular’s prepaid service on-line.  U.S. Cellular continues to explore new relationships with additional third-party retailers as part of its strategy to expand distribution.

U.S. Cellular also markets wireless service through resellers.  The resale business involves the sale of wholesale access and minutes to independent companies that package and resell wireless services to end-users.  These resellers generally provide prepaid and postpaid services to subscribers under their own brand names and also provide their own billing and customer service.  U.S. Cellular incurs no direct subscriber acquisition costs related to reseller customers.  At December 31, 2013, U.S. Cellular had approximately 164,000 customers of resellers.  For the year ended December 31, 2013, revenues from resale business were less than 1% of total service revenues.

Seasonality.  There is seasonality in operating expenses, which tend to be higher in the fourth quarter than in the other quarters due to increased marketing and promotional activities, which may cause operating income to vary from quarter to quarter.

5

Customers and System Usage

U.S. Cellular provides service to customers from a variety of demographic segments.  U.S. Cellular uses a segmentation model to classify businesses and consumers into logical groupings for developing new products and services, direct marketing campaigns, and retention efforts.  U.S. Cellular focuses on both retail consumers and small-to-mid-size business customers in vertical industries such as construction, retail, professional services and real estate.  These industries are primarily served through U.S. Cellular’s retail and direct sales channels.

U.S. Cellular’s main sources of revenues are from its own customers and from customers of competitors who roam on its network. The interoperability of wireless service enables a customer who is in a wireless service area other than the customer’s home service area to place or receive a call or use data in that service area.  U.S. Cellular has entered into reciprocal roaming agreements with operators of other wireless systems covering virtually all systems with Code Division Multiple Access (“CDMA”) technology in the United States, Canada and Mexico.  Roaming agreements offer customers the opportunity to roam on these systems.  These reciprocal agreements automatically pre-register the customers of U.S. Cellular’s systems in the other carriers’ systems.  In addition, a customer of a participating system roaming in a U.S. Cellular market where this arrangement is in effect is able to make and receive calls or data on U.S. Cellular’s system.  The charge for this service is negotiated as part of the roaming agreement between U.S. Cellular and the roaming customer’s carrier. U.S. Cellular bills this charge to the customer’s home carrier, which then may bill the customer.  In many instances, based on competitive factors, carriers, including U.S. Cellular, may not charge their customers, or charge lower amounts to their customers than the amounts actually charged by other wireless carriers for roaming. Since 2010, U.S. Cellular has offered nationwide 3G data roaming services, allowing its customers to access high-speed data across the country.

U.S. Cellular currently is exploring 4G LTE roaming agreements with operators of other wireless systems. The FCC’s adoption of mandatory 4G LTE roaming rules, which were upheld by the United States Court of Appeals for the District of Columbia, may be of assistance in the negotiation of 4G LTE roaming agreements with other wireless operators in the future. However, technological challenges currently exist which limit the interoperability of 4G LTE wireless devices on other carriers’ networks. Specifically, wireless devices support certain configurations of spectrum frequencies and as a result 4G LTE wireless devices offered by carriers are not necessarily compatible with the networks of other carriers. U.S. Cellular is working with other carriers, original equipment manufacturers and potential LTE roaming vendors to mitigate interoperability issues.  U.S. Cellular anticipates being ready to support inbound and outbound LTE roaming (with compatible networks) in the second half of 2014. See also “Regulation – FCC Interoperability Order” below.

Technology and System Design and Construction

Technology.  Wireless telecommunication systems transmit voice, data, graphics and video through the transmission of signals over networks of radio towers using radio spectrum licensed by the FCC.  Access to local, regional, national and worldwide telecommunications networks is provided through system interconnections.  A high-quality network, supported by continued investments in that network, will remain an important factor for wireless companies to remain competitive.

U.S. Cellular deployed 4G LTE technology in conjunction with King Street Wireless L.P. that covered approximately 87% of its postpaid customers as of December 31, 2013, and anticipates further expansion of 4G LTE coverage in 2014.  U.S. Cellular continues to offer services based on 3G technology and CDMA digital technology across its networks.

Through roaming agreements with other CDMA-based wireless carriers, U.S. Cellular’s customers may access CDMA service in virtually all areas of the United States, as well as parts of Canada and Mexico.  Another digital technology, Global System for Mobile Communication (“GSM”), has a larger installed base of customers worldwide. Since CDMA technology currently is not compatible with GSM technology, U.S. Cellular customers with CDMA-only based wireless devices are currently not able to use their wireless devices when traveling through areas serviced only by GSM-based networks. However, both CDMA and GSM technologies are being succeeded by 4G LTE technology.

System Design and Construction.  U.S. Cellular designs and constructs its systems in a manner it believes will permit it to provide high-quality service to substantially all types of compatible wireless devices.  Designs are based on engineering studies which relate to specific markets, in support of the larger network.  Such engineering studies are performed by U.S. Cellular personnel or third-party engineering firms.  Network reliability is given careful consideration and extensive backup redundancy is employed in many aspects of U.S. Cellular’s network design.  Route diversity, redundant equipment, ring topology and extensive use of emergency standby power also are used to enhance network reliability and minimize service disruption from any particular network element failure.

6

In accordance with its strategy of building and strengthening its operating market areas, U.S. Cellular has selected high-capacity, carrier-class digital wireless switching systems that are capable of serving multiple markets through a single mobile telephone switching office.  Centralized equipment, used for network and data management, is located in high-availability facilities supported by multiple levels of power and network redundancy. U.S. Cellular’s systems are designed to incorporate Internet Protocol (“IP”) packet-based Ethernet technology, which allows for increased data capacity and a more efficient network. Interconnection between the mobile telephone switching office and the cell sites utilizes Ethernet technology for nearly all 4G LTE sites, over fiber or microwave links.

U.S. Cellular believes that currently available technologies and appropriate capital additions will allow sufficient capacity on its networks to meet anticipated demand for voice and data services over the next few years. U.S. Cellular’s continued investment in new licenses will support future demand for fourth generation broadband services using 4G LTE. Increasing demand for high-speed data and video services may require the acquisition of additional licenses to provide sufficient capacity.

Construction of wireless systems is capital-intensive, requiring substantial investment for land and improvements, buildings, towers, mobile telephone switching offices, cell site equipment, transport equipment, engineering and installation.  U.S. Cellular primarily uses its own personnel to engineer each wireless system it owns and operates, and engages contractors to construct the facilities.

The costs (inclusive of the costs to acquire licenses) to develop the systems which U.S. Cellular operates have historically been financed primarily through proceeds from debt and equity offerings, with cash generated by operations, and proceeds from the sales of wireless interests.  U.S. Cellular believes that existing cash and investments balances, expected cash flows from operating and investing activities and funds available under its revolving credit facility provide substantial liquidity and financial flexibility for U.S. Cellular to meet its normal financing needs (including working capital and capital expenditures) for the foreseeable future. In addition, U.S. Cellular may access public and private capital markets to help meet its financing needs.

Competition

The wireless telecommunication industry is highly competitive.  U.S. Cellular competes directly with several wireless service providers in each of its markets. In general, there are between three and five competitors in each wireless market in which U.S. Cellular provides service, excluding resellers and mobile virtual network operators. U.S. Cellular generally competes against each of the national wireless companies: Verizon Wireless, AT&T Mobility, Sprint, and T-Mobile USA.  These competitors have substantially greater financial, technical, marketing, sales, purchasing and distribution resources than U.S. Cellular.

Since each of these competitors operates on systems using spectrum licensed by the FCC and has comparable technology and facilities, competition among wireless service providers for customers is principally on the basis of types of products and services, price, size of area covered, call quality, network speed and responsiveness of customer service.  U.S. Cellular employs a customer satisfaction strategy that includes maintaining an outstanding wireless network throughout its markets that it believes has contributed to its overall success.

The use of national advertising and promotional programs by the national wireless service providers may be a source of additional competitive and pricing pressures in all U.S. Cellular markets, even if those operators do not provide direct service in a particular market.  In addition, in the current wireless environment, U.S. Cellular’s ability to compete depends on its ability to continue to offer national voice and data plans. U.S. Cellular provides wireless services comparable to the national competitors, but the national wireless companies operate in a wider geographic area and are able to offer no- or low-cost roaming over a wider area on their own networks than U.S. Cellular can offer on its network.  When U.S. Cellular offers the same coverage area as one of these competitors, U.S. Cellular incurs roaming charges for data sessions and calls made in portions of the coverage area which are not part of its network, thereby increasing its cost of operations. U.S. Cellular depends on roaming agreements with other wireless carriers to provide voice and data roaming capabilities in areas not covered by U.S. Cellular’s network. Similarly, U.S. Cellular provides roaming services on its network to other wireless carriers’ customers who travel within U.S. Cellular’s coverage areas.

Bundled offerings, in the form of “triple plays” and “quadruple plays” (combinations of cable or satellite video service, high-speed internet, wireline service, and wireless service), are common among some of U.S. Cellular’s competitors.  Convergence is taking place on many levels, including dual-mode wireless devices that act as wireline or wireless devices depending on location and the incorporation of wireless “hot spot” technology in wireless devices for making internet access seamless regardless of location.  Although less directly a substitute for other wireless services, wireless data services such as Wi-Fi may be adequate for those who do not need full mobility wide area roaming or full two-way voice services.  Technological advances or regulatory changes in the future may make available other alternatives to wireless service, thereby creating additional sources of competition.

7

U.S. Cellular’s approach in 2014 and in future years will be to focus on the unique needs and attitudes towards wireless service of its selected target segments.  U.S. Cellular will deliver selected, targeted high quality products and services at fair prices and will continue to differentiate itself by providing an overall outstanding customer experience, including a high quality network experience. U.S. Cellular’s customer-centric approach, highly reliable network, as evidenced by numerous consumer satisfaction awards based on survey results, and cutting-edge wireless devices all represent examples of how U.S. Cellular believes it is differentiating itself from competitors as it relates to the customer experience. U.S. Cellular’s ability to compete successfully in the future, and to meet growth and return on capital objectives, will depend upon its ability to anticipate and respond to changes related to new service offerings, customer preferences, competitors’ pricing strategies, technology, demographic trends and economic conditions and its access to adequate spectrum resources.

Business Development Strategy

U.S. Cellular’s business development strategy is to obtain interests in and access to wireless licenses in its current operating markets and in areas that are adjacent to or in close proximity to its other wireless licenses, thereby building contiguous operating market areas with strong spectrum positions.  U.S. Cellular believes that the acquisition of additional licenses within its current operating markets will enhance its network capacity to meet its customers’ increased demand for data services.  U.S. Cellular anticipates that grouping its operations into market areas will continue to provide it with certain economies in its capital and operating costs.  U.S. Cellular may continue to make opportunistic acquisitions or exchanges that further strengthen its current operating markets or in other attractive markets.  U.S. Cellular seeks to acquire noncontrolling interests in licenses in which it already owns the majority interest and/or operates the license.  From time to time, U.S. Cellular has divested outright or included in exchanges for other wireless interests certain consolidated and investment interests that were considered less essential to its current and expected future operations.  As part of its business development strategy, U.S. Cellular from time to time may be engaged in negotiations relating to the acquisition, exchange or disposition of companies, strategic properties or wireless spectrum.  In general, U.S. Cellular may not disclose such transactions until there is a definitive agreement.  In addition, U.S. Cellular may participate as a bidder, or member of a bidding group, in auctions for wireless spectrum administered by the FCC. In general, U.S. Cellular may not disclose any such participation unless it or such bidding group is announced as a winning bidder by the FCC.

In addition to the Divestiture Transaction discussed in Note 5 – Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements, U.S. Cellular engaged in the following significant transactions in the last five years.

Spectrum Transactions. The following are significant license transactions in the last five years.  No customers, network assets, other assets or liabilities were included in these transactions.  In addition to the licenses listed below, U.S. Cellular has acquired or divested of a number of other licenses as part of less significant transactions in recent years.

2013 Spectrum Sales. On October 4, 2013, U.S. Cellular sold the majority of its Mississippi Valley non-operating market license (“unbuilt license”). On August 14, 2013, U.S. Cellular entered into a definitive agreement to sell the majority of its St. Louis area unbuilt license.

2012 700 MHz A-Block. On August 15, 2012, U.S. Cellular completed a license purchase whereby U.S. Cellular received four 700 MHz A-Block spectrum licenses covering portions of Iowa, Kansas, Missouri, Nebraska, and Oklahoma.  On November 20, 2012, U.S. Cellular completed a license purchase whereby U.S. Cellular received seven 700 MHz A-Block spectrum licenses covering portions of Illinois, Michigan, Minnesota, Missouri, Nebraska, Oregon, Washington and Wisconsin.

2011 Spectrum Swap. On September 30, 2011, U.S. Cellular completed an exchange whereby U.S. Cellular received eighteen 700 MHz spectrum licenses covering portions of Idaho, Illinois, Indiana, Kansas, Nebraska, Oregon and Washington in exchange for two PCS spectrum licenses covering portions of Illinois and Indiana.

FCC Auctions.  As more fully described in the Regulation section below, in 2012, the FCC conducted a single round, sealed bid, reverse auction to award Mobility Fund Phase I support to bidders that commit to provide wireless service in areas designated as unserved by the FCC.  U.S. Cellular and several of its subsidiaries were winning bidders in eligible areas within 10 states.

From time to time, the FCC conducts auctions through which additional spectrum is made available for the provision of wireless services.  U.S. Cellular has participated in certain prior FCC auctions indirectly through its limited partnership interests.  Each entity qualified as a “designated entity” and thereby was eligible for bidding credits with respect to most licenses purchased in accordance with the rules defined by the FCC for each auction.  In most cases, the bidding credits resulted in a 25% discount from the gross winning bid.

The FCC’s Auction 73 for spectrum in the 700 MHz band closed on March 20, 2008.  U.S. Cellular participated in Auction 73 indirectly through its limited partnership interest in King Street Wireless L.P. (“King Street Wireless”).  King Street Wireless was the successful winning bidder of 152 licenses in Auction 73. These licenses were granted by the FCC in December 2009.

8

Regulation

Regulatory Environment.  U.S. Cellular’s operations are subject to FCC and state regulation.  The wireless licenses that are held by U.S. Cellular and by the designated entities in which U.S. Cellular owns a non-controlling interest are granted by the FCC for the use of radio frequencies and are an important component of the overall value of U.S. Cellular’s consolidated assets.  The construction, operation and transfer of wireless systems in the United States are regulated to varying degrees by the FCC pursuant to the Communications Act of 1934 (“Communications Act”).  In 1996, Congress enacted the Telecommunications Act of 1996 (“Telecommunications Act”), which amended the Communications Act.  The Telecommunications Act mandated significant changes in telecommunications rules and policies to promote competition, ensure the availability of telecommunications services to all parts of the United States and streamline regulation of the telecommunications industry to remove regulatory burdens, as competition developed.  The FCC has promulgated regulations governing construction and operation of wireless systems, licensing (including renewal of licenses) and technical standards for the provision of wireless services under the Communications Act, and has implemented the legislative objectives of the Telecommunications Act, as discussed below.

Licensing—Wireless Service. Wireless licenses are granted by the FCC based on various geographic areas. The completion of acquisitions, involving the transfer of control of all or a portion of a wireless system, requires prior FCC approval.  The FCC determines on a case-by-case basis whether an acquisition of wireless licenses is in the public interest.

The Communications Act also requires the FCC to award new licenses for most commercial wireless services through a competitive bidding process in which spectrum is awarded to bidders in an auction.  From time to time, the FCC conducts auctions through which additional spectrum is made available for the provision of wireless services.  U.S. Cellular has participated in such auctions in the past and is likely to participate in other auctions conducted by the FCC in the future as an applicant or as a non-controlling partner in another auction applicant. FCC anti-collusion rules place certain restrictions on business communications and disclosures by participants in an FCC auction.

Licensing—Facilities.  The FCC must be notified each time an additional cell site for a cellular system is constructed which enlarges the service area of that cellular system.  The FCC is currently considering modifying this requirement by issuing licenses to cellular licensees for the market area they serve.  U.S. Cellular believes that its facilities are in compliance with current requirements and will comply with any future requirements.

Licensing—Commercial Mobile Radio Service.  Pursuant to the 1993 amendments to the Communications Act, cellular, personal communications, advanced wireless, and 700 MHz services are classified as Commercial Mobile Radio Service in that they are services offered to the public for a fee and are interconnected to the public switched telephone network.  The FCC has determined that it will not require carriers providing such services to comply with a number of statutory provisions otherwise applicable to common carriers, such as the filing of tariffs.  All Commercial Mobile Radio Service wireless licensees must satisfy specified coverage requirements.  Licensees which fail to meet the coverage requirements may be subject to forfeiture of their licenses.

Wireless licenses are generally granted for a ten year term or, in some cases, for fifteen years.  The FCC has established standards for conducting comparative renewal proceedings between a wireless licensee seeking renewal of its license and challengers filing competing applications.  All of U.S. Cellular’s licenses for which it applied for renewal between 1995 and 2013 have been renewed. In 2010, the FCC released a Notice of Proposed Rulemaking (“NPRM”) regarding wireless services renewal proceedings.  Pursuant to the NPRM, the FCC would abolish comparative renewal proceedings, and establish criteria by which it would determine whether a wireless licensee was entitled to license renewal.  The proposed changes have been opposed by most wireless carriers, including U.S. Cellular.  It is, however, likely that the FCC will take some action to modify the license renewal process.  U.S. Cellular expects to meet the criteria of any license renewal process.

U.S. Cellular conducts and plans to conduct its operations in accordance with all relevant FCC rules and regulations and anticipates being able to qualify for renewal expectancy in its upcoming renewal filings whatever renewal criteria are applied.  Accordingly, U.S. Cellular expects to be able to renew its licenses.  However, changes in the regulation of wireless operators or their activities or changes in the FCC’s renewal requirements could have a material adverse effect on U.S. Cellular’s operations.

E-911.  The FCC has imposed E-911 regulations on wireless carriers.  The rules require wireless carriers to provide different levels of detailed location information about E-911 callers depending on the capabilities of the local emergency call center. As of June 28, 2013, wireless carriers also are required to provide an automatic "bounce-back" text message to customers who attempt to send a text message to the local emergency call center from a location where "text to 911" is not available.  The bounce back message would advise such customers that "text to 911" is not supported at that location and to contact emergency services by other means.  U.S. Cellular is in compliance with the FCC’s requirements regarding E-911.

9

Hearing Aid Compatibility.  The FCC has imposed Hearing Aid Compatibility requirements on wireless carriers.  These rules mandate that carriers offer to customers a certain number or percentage of handsets which are compatible with different types of hearing aids.  The rules also require certain types of marketing and labeling practices in relation to such handsets, as well as certain disclosures on wireless carrier websites.  There are also annual carrier reporting requirements regarding Hearing Aid Compatibility.  U.S. Cellular is in compliance with the FCC's Hearing Aid Compatibility requirements.

Telecommunications Act—General.  The primary purpose of the Telecommunications Act is to open all telecommunications markets to competition.  The Telecommunications Act makes most direct or indirect state and local barriers to competition unlawful.  It directs the FCC to preempt all inconsistent state and local laws and regulations, after notice and comment proceedings.  It also enables electric and other utilities to engage in telecommunications service through qualifying subsidiaries.

Only narrow powers over wireless carriers are left to state and local authorities.  Each state retains the power to impose competitively neutral requirements that are consistent with the Telecommunications Act’s universal service provisions which a state considers necessary to promote universal service, public safety and welfare, continued service quality and consumer rights.  Although a state may not impose requirements that effectively function as barriers to entry, it retains limited authority to regulate certain competitive practices in rural telephone company service areas.

The Telecommunications Act authorizes and directs the FCC to establish an explicit universal service fund, to preserve and advance universal access to telecommunications services in rural and high-cost areas of the country, to ensure that low-income consumers have access to telecommunications services, and to promote access for schools, libraries and health care providers. The Telecommunications Act requires all interstate telecommunications providers, including wireless service providers, to “make an equitable and non-discriminatory contribution” to support the cost of providing universal service, unless their contribution would be de minimis. At present, the provision of wireline and wireless telephone service in high cost areas is subsidized by support from the Universal Service Fund (“USF”) to which all carriers with interstate and international revenues must contribute.  Carriers are free to pass on the cost of such contributions to their customers.  In 2013, U.S. Cellular contributed $90 million into the federal USF and passed on the cost of such contributions to its customers.

Wireless carriers may be designated by states, or in some cases by the FCC, as eligible to receive universal service support payments if they provide specified services in “high cost” areas.  In 2013, U.S. Cellular received approximately $106.8 million in high cost support for service to high cost areas in the states of Illinois, Iowa, Kansas, Maine, Missouri, Nebraska, New Hampshire, New York, North Carolina, Oklahoma, Oregon, Tennessee, Virginia, Washington, Wisconsin and West Virginia.  This high cost support is undergoing change, as set forth below.

National Broadband Plan. In 2009, Congress directed the FCC to develop a National Broadband Plan (the “Plan”) to ensure every American has “access to broadband capability.”  In March 2010, the FCC released the Plan which describes the FCC’s goals in enhancing broadband availability and the methods for achieving those goals over the next decade. Among the recommendations in the Plan which are significant to wireless providers are a series of proposals to make up to 500 MHz of spectrum newly available for broadband wireless uses by 2020, with a benchmark of making 300 MHz available by 2015, to reserve additional spectrum for unlicensed wireless use and to make more spectrum available for opportunistic and secondary uses. The Plan also made recommendations for transitioning the USF from supporting voice networks to broadband networks over time.

FCC’s USF and ICC Reform Order.  Pursuant to the Plan and subsequent notices of proposed rulemaking, on November 18, 2011, the FCC released a Report and Order and Further Notice of Proposed Rulemaking (“Reform Order”) adopting reforms of its universal service and intercarrier compensation mechanisms, and proposing further rules to advance reform.  The Reform Order substantially revised the USF high cost program and intercarrier compensation regime.  The current USF program, which supports voice services, began to be phased out in 2012. As a replacement, the FCC is adopting the Connect America Fund (“CAF”), a new Mobility Fund, and a Remote Area Fund, which will collectively support broadband-capable networks.  Mobile wireless carriers such as U.S. Cellular may be eligible to receive funding under each of these funds under certain circumstances.

The FCC has determined that both wireline and wireless facilities should be supported with one wireline carrier and one mobile carrier receiving support in each area.  The Mobility Fund will be implemented in two phases.  The Phase I Mobility Fund which was implemented in 2012 is designed to provide one-time funding through a reverse auction to fill in coverage in “dead zones” that currently lack 3G wireless service.  In Phase I, $300 million was allocated throughout the country and an additional $50 million was set aside for tribal lands through the reverse auction described below.  The Phase II Mobility Fund will have a budget of up to $500 million per year (up to $100 million of which is reserved for tribal lands), with the method of disbursement to be determined in a further NPRM.  Phase II funding will be provided to areas that lack 4G wireless service.  The CAF will support service to homes, businesses, and anchor institutions, using any technology that can meet the technical requirements.

10

On September 27, 2012, the FCC conducted a single round, sealed bid, reverse auction to award up to $300 million in one-time Mobility Fund Phase I support to successful bidders that commit to provide 3G, or better, wireless service in areas designated as unserved by the FCC.  This auction was designated by the FCC as Auction 901. U.S. Cellular and several of its wholly-owned subsidiaries participated in Auction 901 and were winning bidders in eligible areas within 10 states and will receive up to $40.1 million in one-time support from the Mobility Fund,  $13.4 million of which was received as of December 31, 2013.  In connection with these winning bids, in June 2013, U.S. Cellular provided $17.4 million in letters of credit to the FCC.  Pursuant to the auction rules, winning bidders must complete network build-out projects to provide 3G or 4G service to these areas within two or three years, respectively, and must also make their networks available to other providers for roaming.  Winning bidders will receive support funding primarily upon achievement of coverage milestones defined in the auction rules. As a winning bidder, U.S. Cellular will be required to meet certain regulatory conditions in the areas where it will receive funding to provide service.  Examples of these regulatory conditions include: allowing other carriers to colocate on U.S. Cellular’s towers, allowing voice and data roaming on U.S. Cellular’s network, and submitting various reports and certifications to retain eligibility each year.  It is possible that additional regulatory requirements will be imposed pursuant to the FCC’s Reform Order.

The terms and rules for participating in the CAF and Phase II Mobility Fund as a wireless eligible telecommunications carrier (“ETC”) have not been developed yet by the FCC.  It is uncertain whether U.S. Cellular will obtain support through the CAF or Phase II of the Mobility Fund.  If U.S. Cellular is successful in obtaining support, it will be required to meet certain regulatory conditions to obtain and retain the right to receive support including, for example, allowing other carriers to colocate on U.S. Cellular’s towers, allowing voice and data roaming on U.S. Cellular’s network, and submitting various reports and certifications to retain eligibility each year.  It is possible that additional regulatory requirements will be imposed pursuant to the FCC’s Reform Order.

U.S. Cellular’s current ETC support is being phased down. ETC support was frozen on January 1, 2012 at the 2011 level and is being phased down at the rate of 20% per year beginning July 1, 2012.   If the Phase II Mobility Fund is not operational by July 2014, the phase down will halt at that time and U.S. Cellular will continue to receive 60% of its baseline support until the Phase II Mobility Fund is operational.

With respect to intercarrier compensation, the Reform Order provides for a reduction in the charges that U.S. Cellular pays to wireline phone companies to transport and terminate calls that originate on U.S. Cellular’s network, which has reduced U.S. Cellular’s operating expenses.  The reductions in intercarrier charges are to increase over the next five to ten years, further reducing U.S. Cellular’s operating expenses.

The FCC's Reform Order, and any subsequent orders it adopts to reform universal service and intercarrier compensation, are subject to judicial review.  Multiple appeals of the Reform Order were consolidated and argued in the U.S. Court of Appeals for the 10^th Circuit on November 19, 2013, with a decision anticipated in 2014.  At this time, U.S. Cellular cannot predict the timing or outcome of any such decision, or whether such decision or any future rulemaking, reconsideration and legal challenges would result in a material adverse effect on U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular also cannot predict the net effect of the FCC's changes to the USF high cost support program in the Reform Order or whether reductions in support will be fully offset with additional support from the CAF or the Mobility Fund.  Accordingly, U.S. Cellular cannot predict whether such changes will have a material adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Middle Class Tax Relief and Job Creation Act of 2012.  In 2012, Congress adopted the Middle Class Tax Relief and Job Creation Act of 2012 ("Spectrum Act") granting the FCC, among other matters, general authority to conduct incentive auctions including an incentive auction of broadcast television spectrum, and establishing a three year deadline for the FCC to reallocate, auction and grant new commercial licenses in the following  bands, 1915-1920 MHz paired with 1995-2000 MHz (collectively the "H Block"), and 15 MHz within 1675-1710 MHz,  2155-2180 MHz, and 15 MHz "to be identified by the FCC" (collectively, the “AWS-3 Blocks”).  In late 2012 and continuing in 2013, the FCC commenced proceedings to implement these mandates in the Spectrum Act.  In 2013, the FCC completed rules to auction and license ten megahertz of paired H Block spectrum for terrestrial fixed and mobile use as required by the Spectrum Act.  The FCC commenced the auction for this H block spectrum in January 2014.  The FCC's proceedings to prepare for the auction of the AWS-3 Blocks and to hold a separate incentive auction of broadcast television spectrum to expand mobile broadband service remain pending.  The FCC has indicated its intention to auction the AWS-3 Blocks in late 2014 in order to satisfy a Spectrum Act licensing deadline of February 2015. Commencement of the FCC's incentive auction of broadcast television spectrum is expected in 2015. The Spectrum Act does not specify a deadline for commencement of this incentive auction. 

11

Net Neutrality. In 2009, the FCC initiated a rulemaking proceeding designed to codify its existing “Net Neutrality” principles and impose new requirements that could have the effect of restricting the ability of wireless internet service providers to manage applications and content that traverse their networks.  In December 2010, after a lengthy proceeding which considered different approaches including the “reclassification” of internet access as “common carrier” service under Title II of the Communications Act, the FCC adopted a net neutrality rule based on its Title I “ancillary” authority to enforce different parts of the Communications Act. The rule requires all providers of broadband internet access, including both fixed (that is, telephone and cable) and wireless providers, to publicly disclose accurate information regarding their network management practices, performance and commercial terms sufficient for consumers to make informed choices regarding the use of such services. The rule also prohibits all internet providers from blocking consumers’ access to lawful websites, subject to reasonable network management, and from blocking applications that compete with the provider’s voice or video telephony services, also subject to reasonable network management. The rule subjects the providers of fixed but not wireless broadband internet access to a prohibition on “unreasonable discrimination” in transmitting internet traffic over their networks, also subject to reasonable network management. The exemption of wireless providers from this part of the rule reflects recognition of the capacity constraints and other “special conditions” under which mobile broadband service is offered and the competitive nature of evolving wireless networks. Thus, the FCC considered it appropriate in 2010 to take only the “measured steps” with respect to mobile broadband service reflected in the rule. The net neutrality rules are controversial and have been challenged in the courts.  On January 14, 2014, a three judge panel of  the U.S. Court of Appeals for the District of Columbia Circuit vacated the "anti-blocking" and "anti-discrimination" portions of the FCC's net neutrality rules, leaving in place the disclosure requirements of the rules.  In a public statement made on February 19, 2014, the Chairman of the FCC indicated that the agency does not plan to appeal the Court’s decision, but will consider ways to achieve its policy goals with respect to the “anti-blocking” and “anti-discrimination” provisions within the authority allowed by the Court’s decision, in particular authority granted under Section 706 of the Telecommunications Act of 1996.   The Chairman proposed a new rulemaking proceeding to advance that process with a Notice of Proposed Rulemaking anticipated later this year.   U.S. Cellular cannot predict the outcome of this proceeding.

Data Roaming.  In 2007, the FCC adopted a rule requiring that wireless carriers offer “voice” roaming agreements to each other on a just, reasonable and non-discriminatory basis.  The FCC stated that this was a common carrier obligation under Title II of the Communications Act.  In 2011, the FCC broadened this obligation to require carriers to offer wireless “data” roaming agreements to each other.  However, because this obligation involved the use of the Internet, it could not be a “common carrier” obligation.  Thus, the FCC grounded the obligation in Title III of the Communications Act, under which the FCC regulates use of the radio spectrum.  This order was challenged in the U.S. Court of Appeals for the District of Columbia Circuit on the grounds that it constituted an unlawful common carrier regulation.  However, in December 2012, the court upheld the FCC's ruling.  U.S. Cellular was an intervenor in the case in support of the FCC and believes that the FCC and court rulings will be beneficial to it and similarly situated wireless carriers.

Network Resiliency.  On September 27, 2013, the FCC released a Notice of Proposed Rulemaking seeking comment on a proposed rule requiring wireless carriers to submit to the FCC, on a daily basis, for public disclosure, the percentage of their cell sites that are providing wireless service during and immediately after major disasters.  The FCC also seeks comment on whether other measures of service outages during disasters might be appropriate and asks for proposals regarding other approaches to measuring network resilience. A decision on this proceeding is anticipated in 2014.  Complying with such a mandate would not be expected to have a material adverse effect on U.S. Cellular's operations.

Customer Proprietary Network Information.  Wireless carriers are required under Section 222 of the Communications Act to protect the confidentiality of customer information they receive as a consequence of the customer-carrier relationship, such as "call detail" information.  Such information is referred to as "Customer Proprietary Network Information" ("CPNI").  On June 13, 2013, the FCC issued a Declaratory Ruling stating that Section 222 also applies to information "collected" by a wireless subscriber's mobile device, provided the collection is undertaken at the carrier's direction and the carrier still has access to or control over that information.  This extends the reach of the CPNI definition beyond CPNI stored in a carrier's switches, servers or other places where they store information.  U.S. Cellular will comply with this ruling.

Rural Call Completion.  In 2013, the FCC adopted new rules concerning "rural call completion," to take effect in 2014.  The rules may increase costs by imposing new data-retention and reporting requirements on providers of long-distance voice service.  U.S. Cellular is now determining the extent to which these rules are applicable to it, and how to comply with them.  To the extent the rules are applicable, compliance could be costly, but otherwise is not expected to have a material adverse effect on U.S. Cellular's operations.

Spectrum Holdings. In September 2012, the FCC adopted an NPRM which proposed a review of its policies regarding mobile spectrum holdings in the context of both auctions and secondary market transactions.  Comments and reply comments were filed in November 2012 and January 2013.  In the proceeding, the FCC sought and received comment on whether it should retain or modify the current case by case analysis used to evaluate mobile spectrum holdings, or adopt “bright line” limits on the amount of wireless spectrum which may be held by any carrier.

12

The FCC also is considering updating the spectrum bands included in the evaluation of mobile spectrum holdings and whether to make distinctions between different bands in evaluating spectrum holdings.  The FCC also is re-examining its determinations of geographic and product markets in the context of evaluating wireless transactions.  It also is reviewing its spectrum “attribution” rules and remedies if a proposed transaction does not comply with its rules or policies.

FCC Interoperability Order.  On October 25, 2013, the FCC adopted a Report and Order and Order of Proposed Modification confirming a voluntary industry agreement on interoperability in the Lower 700 MHz spectrum band. The FCC's Report and Order lays out a roadmap for the voluntary commitments of AT&T and DISH Network Corporation ("DISH") to become fully binding under a regulatory framework which will require the FCC to take additional actions proposed to be completed by the first quarter of 2014. Pursuant to thisvoluntary agreement, AT&T will begin incorporating changes in its network and devices that will foster interoperability across all paired spectrum blocks in the Lower 700 MHz Band, collectively comprising “Band 12” under the standards of the 3^rd Generation Partnership Project (“3GPP”). AT&T also agreedto support LTE roaming on its networks for carriers with compatible Band 12 devices, consistent with the FCC’s rules on roaming. As outlined in its voluntary commitment, AT&T will be implementing the foregoing changes in phases starting with network software enhancement taking place possibly through the third quarter of 2015 with the AT&T Band 12 device roll-out to follow. In addition, the FCC has adopted changes in its technical rules for certain unpaired spectrum licensed to AT&T and DISH in the Lower 700 MHz band to enhance prospects for Lower 700 MHz interoperability. AT&T’s network and devices currently only interoperate across two of the three paired blocks in the Lower 700 MHz band. U.S. Cellular’s LTE deployment utilizes spectrum in all three of these blocks and consequently was not interoperable with the AT&T configuration. U.S. Cellular believes that the FCC action will broaden the ecosystem of devices available to U.S. Cellular’s customers over time.

U.S. Cellular cannot predict what, if any, changes the FCC will make to the foregoing rules, but intends to comply with all applicable requirements.

State and Local Regulation.  U.S. Cellular is subject to state and local regulation in some instances. In 1981, the FCC preempted the states from exercising jurisdiction in the areas of licensing, technical standards and market structure.  In 1993, Congress preempted states from regulating the entry of wireless systems into service and the rates charged by wireless systems to customers.  The siting and construction of wireless facilities, including transmitter towers, antennas and equipment shelters are still subject to state or local zoning and land use regulations.  However, in 1996, Congress amended the Communications Act to provide that states could not discriminate against wireless carriers in tower zoning proceedings and had to decide on zoning requests with reasonable speed.  In addition, states may still regulate other terms and conditions of wireless service.

In 2009, the FCC adopted a rule, subsequently upheld by the Supreme Court, which provides that local zoning authorities must act on tower "colocation" requests within 90 days and must act within 150 days on applications for new facilities.  Failure to act during those time frames constitutes a "failure to act" under the statute and the courts may fashion an appropriate remedy.  Also, in 2012, Congress enacted Section 6409(a) of the Communications Act, which requires local zoning authorities to approve wireless carrier requests for modifications of existing wireless antenna towers or base stations which do not "substantially change" the "physical dimensions" of the tower.  These changes in FCC regulations and the Communications Act were intended to promote tower construction and antenna colocation and thus should be helpful to U.S. Cellular and other wireless carriers.

In 2000, the FCC ruled that the preemption provisions of the Communications Act do not preclude the states from acting under state tort, contract, and consumer protection laws to regulate the practices of commercial mobile radio service carriers, even if such activities might have an incidental effect on wireless rates.  This ruling has led to more state regulation of commercial mobile radio service carriers, particularly from the standpoint of consumer protection.  U.S. Cellular intends to comply with state regulation and to seek reasonable regulation of its activities in this regard.

The FCC is required to forbear from applying any statutory or regulatory provision that is not necessary to keep telecommunications rates and terms reasonable or to protect consumers.  A state may not apply a statutory or regulatory provision that the FCC decides to forbear from applying.  In addition, the FCC must review its telecommunications regulations every two years and change any that are no longer necessary.  Further, the FCC is empowered under certain circumstances to preempt state regulatory authorities if a state is obstructing the Communications Act’s basic purposes.

U.S. Cellular and its subsidiaries have been and intend to remain active participants in proceedings before the FCC and state regulatory authorities.  Proceedings with respect to the foregoing policy issues before the FCC and state regulatory authorities could have a significant impact on the competitive market structure among wireless providers and the relationships between wireless providers and other carriers.  U.S. Cellular is unable to predict the scope, pace or financial impact of policy changes which could be adopted in these proceedings.

Radio Frequency Emissions.  The FCC has adopted rules specifying standards and the methods to be used in evaluating radio frequency (“RF”) emissions from radio equipment, including network equipment and wireless devices used in connection with commercial mobile radio service.  These rules were upheld on appeal by the U.S. Court of Appeals for the Second Circuit in 2000.

13

The U.S. Supreme Court declined to review the Second Circuit’s ruling. U.S. Cellular’s network facilities and the wireless devices it sells to customers comply with these standards. 

In August 2012, the Government Accountability Office ("GAO") issued a report which recommended that the FCC reassess its current radio frequency emission limits.  In response to the GAO request, on March 29, 2013, the FCC released its First Report and Order ("Order"), Further Notice of Proposed Rulemaking ("FNPRM") and Notice of Inquiry ("NOI") concerning RF radiation issues.  Comments on the FNPRM and NOI were filed during 2013 and the FCC may take further action in 2014.  The Order resolves certain minor and technical issues.  The FNPRM proposes to update the FCC's RF exposure regulations, by changing evaluation procedures and proposing certain exemptions from evaluation.  The NOI seeks comment on possible new policies regarding RF exposure, and regarding whether present exposure limits should be changed to make them either more stringent or more lenient.  U.S. Cellular cannot predict future FCC actions with respect to RF radiation or whether such actions might have a material adverse effect on U.S. Cellular's operations.

Employees

U.S. Cellular had approximately 6,700 full-time and part-time employees as of December 31, 2013.  None of U.S. Cellular’s employees are represented by labor organizations. U.S. Cellular considers its relationship with its employees to be good.

14

Item 1A.  Risk Factors 

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

SAFE HARBOR CAUTIONARY STATEMENT

This Annual Report on Form 10-K, including exhibits, contains 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 U.S. Cellular 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 under “Risk Factors” in this Form 10-K. Each of the following risks could have a material adverse effect on U.S. Cellular; 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.  U.S. Cellular 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 following risk factors and other information contained in, or incorporated by reference into, this Form 10-K to understand the material risks relating to U.S. Cellular’s business.

RISK FACTORS

1)Intense competition in the markets in which U.S. Cellular operates could adversely affect U.S. Cellular’s revenues or increase its costs to compete.

Competition in the telecommunications industry is currently intense and could intensify further in the future due to the general effects of the economy, as well as due to multiple wireless industry factors such as increasing market penetration, decreasing customer churn rates, introduction of new products, new competitors and changing prices.  There is competition in handsets and other devices; network quality, coverage, speed and technologies; distribution; pricing; and other categories.  U.S. Cellular’s ability to compete effectively will depend, in part, on its ability to anticipate and respond to various competitive factors affecting the telecommunications industry.  U.S. Cellular anticipates that, in the future, competition may cause the prices for products and services to continue to decline and the costs to compete to increase.  Most of U.S. Cellular’s competitors are national or global telecommunications companies that are larger than U.S. Cellular, possess greater resources, possess more extensive coverage areas and more spectrum within their coverage areas, and market other services with their communications services that U.S. Cellular does not offer.  In addition, U.S. Cellular may face competition from technologies that may be introduced in the future or from new entrants into the industry.  New technologies, services and products that are more commercially effective than the technologies, services and products offered by U.S. Cellular may be developed.  Further, new technologies may be proprietary such that U.S. Cellular is not able to adopt such technologies.  There can be no assurance that U.S. Cellular will be able to compete successfully in this environment. 

Sources of competition to U.S. Cellular’s business typically include three to five competing wireless telecommunications service providers in each market, wireline telecommunications service providers, cable companies, resellers (including mobile virtual network operators), and providers of other alternate telecommunications services.  Many of U.S. Cellular’s wireless competitors and other competitors have substantially greater financial, technical, marketing, sales, purchasing and distribution resources than U.S. Cellular.

U.S. Cellular’s competitors offer a wide array of wireless service offerings and wireless devices.  There is increasing complexity associated with these wireless product and service offerings and the related pricing.  Further, new wireless services and products and pricing structures are frequently introduced.  Multiple events related to new services, products and pricing offered by U.S. Cellular’s competitors occurring simultaneously or in close proximity may impact U.S. Cellular’s ability to respond to such events and compete effectively.

If U.S. Cellular does not adapt to compete effectively in such a highly competitive environment, such competitive factors could result in product, service, pricing or cost disadvantages and could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

15

2)A failure by U.S. Cellular to successfully execute its business strategy (including planned acquisitions, divestitures and exchanges) or allocate resources or capital could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular is a regional wireless carrier that operates on a customer satisfaction strategy, seeking to meet customer needs by providing a comprehensive range of wireless products and services, excellent customer support, and a high-quality network.  U.S. Cellular seeks to operate controlling interests in wireless licenses in areas adjacent to or in proximity to its other wireless licenses, thereby building contiguous operating market areas.  U.S. Cellular relies on roaming agreements with other carriers to provide roaming capability to its customers in areas of the U.S. outside its service areas and to improve coverage within selected areas of U.S. Cellular’s network footprint.  U.S. Cellular pursues a product and technology strategy which requires it to recognize product and technology advances and quickly adopt and execute rollouts of such advances.  This strategy requires U.S. Cellular to make timely and effective strategic decisions related to technological advances and related products and services, and which of these technological advances to adopt and roll out to its customers.

Further, U.S. Cellular’s strategic decisions related to the adoption of new technologies are ultimately impacted by such factors as consumer preferences for technologies and the related services and products, and original equipment manufacturer (“OEM”) and standard bodies support of such technologies, including Long-Term Evolution (“LTE”) and Voice over LTE (“VoLTE”), among other factors.  If U.S. Cellular’s competitors adopt new technologies faster than U.S. Cellular, then consumers who are eager to adopt new technologies more quickly may select U.S. Cellular’s competitors rather than U.S. Cellular as their service provider.  These customers who are early adopters of new technologies are often customers who generate higher average revenue per unit (“ARPU”), and to the extent that U.S. Cellular does not attract these types of customers, U.S. Cellular could be at a competitive disadvantage and have a customer base that generates lower overall ARPU relative to its competition.

The successful execution of strategy and optimal capital allocation decisions depend on various internal and external factors, many of which are not in U.S. Cellular’s control.  U.S. Cellular’s ability to implement and execute its business strategy and optimally allocate its assets and capital and, as a result, achieve desired financial results, could be affected by such factors.  Such factors include pricing practices by competitors, relative scale, purchasing power, roaming and other strategic agreements, wireless device availability, timing of introduction of wireless devices and other factors.  In addition, there is no assurance that U.S. Cellular’s strategy will be successful.  Even if U.S. Cellular executes its business strategy as intended, such strategy may not be successful in the long term to profitably sustain growth in revenue or otherwise. 

A failure by U.S. Cellular to execute its business strategy successfully or to allocate resources or capital optimally could have an adverse effect on U.S. Cellular’s wireless business, financial condition or results of operations.

3)A failure by U.S. Cellular’s service offerings to meet customer expectations could limit U.S. Cellular’s ability to attract and retain customers and could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Customer acceptance of the services that U.S. Cellular offers is and will continue to be affected by technology and the range of wireless device and service-based differences from competition and by the operational performance, quality, reliability, and coverage of U.S. Cellular’s networks.  U.S. Cellular may have difficulty attracting and retaining customers if it is unable to meet customer expectations for a range of services, such as wireless device selection and easy access to a broad variety of applications, or if it is otherwise unable to resolve quality issues relating to its networks, billing systems or customer care.  Any of these issues may limit U.S. Cellular’s ability to expand its network capacity or customer base or otherwise place U.S. Cellular at a competitive disadvantage to other service providers in its markets.  The levels of customer demand for any U.S. Cellular next-generation services and products are uncertain.  Customer demand could be impacted by differences in the types of services offered, service content, technology, footprint and service areas, network quality, customer perceptions, customer care levels and rate plans.

In the third quarter of 2013, U.S. Cellular migrated most of its customers to a new Billing and Operational Support System (“B/OSS”) which includes a new point-of-sale system and consolidates billing on one platform.  This conversion resulted in billing delays. In addition, intermittent system outages and delayed system response times negatively impacted customer service and sales operations at certain times.  Continuing operational problems associated with the conversion to the new billing system could have adverse effects on U.S. Cellular’s business (in areas such as overall customer satisfaction, customer attrition, uncollectible accounts receivable, gross customer additions, or operating expenses), financial condition or results of operations.

16

4)U.S. Cellular’s system infrastructure may not be capable of supporting changes in technologies and services expected by customers, which could result in lost customers and revenues.

The wireless telecommunications industry is experiencing significant changes in technologies and services expected by customers.  Future technological changes or advancements may enable other wireless technologies to equal or exceed U.S. Cellular’s current levels of service and render its system infrastructure obsolete.  New technologies or services often render existing technology products, services or infrastructure obsolete, too costly or otherwise unmarketable.  U.S. Cellular’s system infrastructure may not be able to accommodate new product features and functionality, new reporting requirements, new capacity requirements or deployment of complex next generation services.  If U.S. Cellular is unable to meet future advances in or changes in competing technologies on a timely basis, or at an acceptable cost, it may not be able to compete effectively with other carriers, which could result in lost customers and revenues.  This could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

5)Changes in roaming practices or other factors could cause U.S. Cellular's roaming revenues to decline from current levels and/or impact U.S. Cellular's ability to service its customers in geographic areas where U.S. Cellular does not have its own network, which would have an adverse effect on U.S. Cellular's business, financial condition or results of operations.

U.S. Cellular’s service revenues include roaming revenues related to the use of U.S. Cellular’s network by other carriers’ customers who travel within U.S. Cellular’s coverage areas.  Changes in the network footprints of carriers due to mergers, acquisitions or network expansions could have an adverse effect on U.S. Cellular’s roaming revenues.  For example, consolidation among other carriers which have network footprints that currently overlap U.S. Cellular’s network could decrease the amount of roaming revenues for U.S. Cellular.

Similarly, U.S. Cellular's customers can access another carrier’s digital system automatically only if the other carrier allows U.S. Cellular's customers to roam on its network.  U.S. Cellular relies on roaming agreements with other carriers to provide roaming capability to its customers in areas of the U.S., Mexico and Canada outside of its service areas and to improve coverage within selected areas of U.S. Cellular's network footprint.  Such agreements cover traditional voice services as well as data services.  Although U.S. Cellular currently has long-term roaming agreements with certain other carriers, these agreements generally are subject to renewal and termination if certain events occur.  FCC rules and orders impose certain requirements on wireless carriers to offer certain roaming arrangements to other carriers.  However, carriers frequently disagree on what is required.  At this time, there is no assurance that U.S. Cellular will be able to enter into agreements to provide roaming services using 4G LTE or other technologies or that it will be able to do so on reasonable or cost-effective terms.

Some competitors may be able to obtain lower roaming rates than U.S. Cellular is able to obtain because they have larger call volumes or may be able to reduce roaming charges by providing service principally over their own networks.  In addition, the quality of service that a wireless carrier delivers during a roaming call may be inferior to the quality of service U.S. Cellular provides, the price of a roaming call may not be competitive with prices of other wireless carriers for such call, and U.S. Cellular’s customers may not be able to use some of the advanced features, such as voicemail notification or data applications, that U.S. Cellular’s customers enjoy when making calls on U.S. Cellular’s network.  U.S. Cellular’s rate of adoption of new technologies, such as those enabling high-speed data services, could affect its ability to enter into or maintain roaming agreements with other carriers.  In addition, U.S. Cellular’s wireless technology may not be compatible with technologies used by other carriers, which may limit the ability of U.S. Cellular to enter into voice or data roaming agreements with such other carriers.  U.S. Cellular’s roaming partners could switch their business to new operators or, over time, to their own networks.  Changes in roaming usage patterns, rates for roaming minutes or data usage or relationships with carriers whose customers generate roaming minutes or data use on U.S. Cellular’s network could have an adverse effect on U.S. Cellular’s revenues and revenue growth.

To the extent that U.S. Cellular’s key roaming partners expand their networks in U.S. Cellular’s service areas, the roaming arrangements between U.S. Cellular and these key roaming partners could become less strategic to such key roaming partners.  That is, these key roaming partners will have fewer or less extensive geographic areas where roaming services are required by their customers and, as a result, the roaming arrangements could become less critical to serving their customer base.  This presents a risk to U.S. Cellular in that, to the extent U.S. Cellular is not able to enter into economically viable roaming arrangements with key roaming partners, this could impact U.S. Cellular’s ability to service its customers in geographic areas where U.S. Cellular does not have its own network.

If U.S. Cellular’s roaming revenues decline, or if U.S. Cellular is unable to obtain or maintain roaming agreements with other wireless carriers that contain pricing and other terms that are competitive and acceptable to U.S. Cellular, and that satisfy U.S. Cellular’s quality and interoperability requirements, its business, financial condition or results of operations could be adversely affected.

17

6)A failure by U.S. Cellular 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 U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular’s business depends on the ability to use portions of the radio spectrum licensed by the FCC.  U.S. Cellular could fail to obtain access to sufficient spectrum capacity in new or existing critical markets, whether through FCC auctions or other transactions, in order to meet the anticipated spectrum requirements associated with increased demand for existing services, especially increases in customer demand for data services, and to enable deployment of next-generation services.  U.S. Cellular believes that this increased demand for data services reflects a trend that will continue for the foreseeable future; as such, U.S. Cellular could fail to accurately forecast its future spectrum requirements considering changes in customer usage patterns, technology requirements and the expanded demands of new services. Such a failure could have an adverse impact on the quality of U.S. Cellular’s services or U.S. Cellular’s ability to roll out such future services in some markets, or could require that U.S. Cellular curtail existing services in order to make spectrum available for next-generation services.  Spectrum constrained providers could be effectively capped in increasing market share.  As spectrum constrained providers gain customers, they use up their network capacity. Since they lack spectrum, they can respond to demand only by adding cell sites, which is capital intensive, limited by zoning considerations, and ultimately may not be cost effective.  U.S. Cellular may acquire access to spectrum through a number of alternatives, including participation in spectrum auctions, partnering on a non-controlling basis with other auction applicants (“Other Applicants”) and other acquisitions and exchanges.  As required by law, the FCC has conducted auctions for licenses to use some parts of the radio spectrum.  The decision to conduct auctions, and the determination of what spectrum frequencies will be made available for auction and the determination of geographic size of licenses, are made by the FCC pursuant to laws that they administer.  The FCC may not be able to allocate spectrum sufficient to meet the demands of all those wishing to obtain licenses for new market entry or to expand their spectrum holdings to meet the expanding demand for data services or to address other spectrum constraints.  Due to factors such as geographic size of licenses and auction bidders that may raise prices beyond acceptable levels, U.S. Cellular or Other Applicants may not be successful in FCC auctions in obtaining the spectrum that either believes is necessary to implement its business and technology strategies.  In addition, newly auctioned spectrum may not be compatible with existing spectrum, and vendors may not create suitable products to use such spectrum.  Further, access to use spectrum won in FCC auctions may not be available on a timely basis.  Such access is dependent upon the FCC actually granting licenses won in the various auctions, which can be delayed for various reasons, including the possible need for the FCC to transition current users of spectrum to other portions of the radio spectrum.  U.S. Cellular also may seek to acquire radio spectrum through purchases and exchanges with other spectrum licensees.  However, U.S. Cellular may not be able to acquire sufficient spectrum through these types of transactions, and U.S. Cellular may not be able to complete any of these transactions on favorable terms.

7)To the extent conducted by the Federal Communications Commission (“FCC”), U.S. Cellular is likely to participate in FCC auctions of additional spectrum 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 U.S. Cellular.

From time to time, the FCC conducts auctions through which additional spectrum is made available for the provision of wireless services.  U.S. Cellular has participated in such auctions in the past and is likely to participate in other auctions conducted by the FCC in the future as an applicant or as a non-controlling partner in another auction applicant. FCC anti-collusion rules place certain restrictions on business communications and disclosures by participants in an FCC auction.  These anti-collusion rules may restrict the normal conduct of U.S. Cellular’s business and/or disclosures by U.S. Cellular relating to an FCC auction, which could last three to six months or more. The restrictions could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

8)Changes in the regulatory environment or a failure by U.S. Cellular to timely or fully comply with any applicable regulatory requirements could adversely affect U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular’s operations are subject to varying degrees of regulation by the FCC, state public utility commissions and other federal, state and local regulatory agencies and legislative bodies.  Adverse decisions or increased regulation by these regulatory bodies could negatively impact U.S. Cellular’s operations by, among other things, increasing U.S. Cellular’s costs of doing business, permitting greater competition or limiting U.S. Cellular’s ability to engage in certain sales or marketing activities.  New regulatory mandates or enforcement may require unexpected or changed capital investment, lost revenues, changes in operations or other changes.

U.S. Cellular’s business requires licenses granted by the FCC to provide wireless telecommunications services.  Typically, such licenses are issued for an initial ten-year term and may be renewed for additional ten-year terms, subject to FCC approval of the renewal applications.  Failure to comply with FCC requirements in a given service area could result in the revocation of U.S. Cellular’s license for that area or in the imposition of fines.  Court decisions and rulemakings could have a substantial impact on U.S. Cellular’s operations, including rulemakings on intercarrier access compensation and universal service.  Litigation and different objectives among federal and state regulators could create uncertainty and delay U.S. Cellular’s ability to respond to new regulations. 

18

U.S. Cellular is unable to predict the future actions of the various regulatory bodies that govern U.S. Cellular, but such actions could have adverse effects on U.S. Cellular’s business.

In March 2010, the FCC released its National Broadband Plan (the “Plan”) which describes the FCC’s goals for enhancing broadband availability and the methods for achieving those goals over the next decade.  The FCC notes that about one-half of the Plan will be addressed by the FCC, while the remainder would be addressed by Congress, the Executive Branch and state and local governments working closely with private and non-profit sectors.  U.S. Cellular cannot predict the outcome of these deliberations or what effects any final rules, regulations or laws may have on its ability to compete in the provision of wireless broadband services to its customer base. Changes in regulation or the amount or distribution of USF funds to U.S. Cellular and other telecommunications service providers could impact competition in certain of U.S. Cellular’s service areas, and could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

In 2009, the FCC initiated a rulemaking proceeding designed to codify its existing “Net Neutrality” principles and impose new requirements that could have the effect of restricting the ability of internet service providers to manage applications and content that traverse their networks.  In December 2010, after a lengthy proceeding, which considered different approaches, including the “reclassification” of internet access as “common carrier” service under Title II of the Communications Act, the FCC adopted a net neutrality rule based on its Title I “ancillary” authority to enforce different parts of the Communications Act, which rule is now in effect. The rule requires all providers of broadband internet access, including both fixed (that is, telephone and cable) and wireless providers, to publicly disclose accurate information regarding their network management practices, performance and commercial terms sufficient for consumers to make informed choices regarding the use of such services. The rule also prohibits all internet providers from blocking consumers’ access to lawful websites, subject to reasonable network management, and from blocking applications that compete with the provider’s voice or video telephony services, also subject to reasonable network management. The rule subjects the providers of fixed but not wireless broadband internet access to a prohibition on “unreasonable discrimination” in transmitting internet traffic over their networks, also subject to reasonable network management. The exemption of wireless providers from this part of the rule reflects a recognition of the capacity constraints and other “special conditions” under which mobile broadband service is offered and the competitive nature of evolving wireless networks. Thus, the FCC considered it appropriate in 2009 to take only the “measured steps” with respect to mobile broadband service reflected in the rule. The order is controversial and has been challenged in the courts.  On January 14, 2014, a three judge panel of  the US Court of Appeals for the District of Columbia Circuit vacated the "anti-blocking" and "anti-discrimination" portions of the FCC's net neutrality rules, leaving in place the disclosure requirements of the rules. In a public statement made on February 19, 2014, the Chairman of the FCC indicated that the agency does not plan to appeal the Court’s decision, but will consider ways to achieve its policy goals with respect to the “anti-blocking” and “anti-discrimination” provisions within the authority allowed by the Court’s decision, in particular authority granted under Section 706 of the Telecommunications Act of 1996.   The Chairman proposed a new rulemaking proceeding to advance that process with a Notice of Proposed Rulemaking anticipated later this year.   U.S. Cellular cannot predict the outcome of this proceeding.

U.S. Cellular’s operations are subject to various federal, state and local environmental and health and safety laws and regulations, including those relating to the generation, storage, handling and disposal of hazardous substances and wastes.  U.S. Cellular’s operations involve the use of materials such as petroleum fuel for emergency generators, as well as batteries, cleaning solutions and other materials. Unexpected events, equipment malfunctions and human error, among other factors, can lead to violations of environmental laws, regulations or permits. To the extent that U.S. Cellular may be responsible under applicable laws, regulations or leases for the removal or cleanup of hazardous substances or wastes from properties that it owns or leases, the cost of such removal or cleanup activities could be substantial.

Fluctuations in the price of power can increase the cost of energy used by U.S. Cellular’s businesses. Federal legislative proposals have been considered that would, if adopted, implement various forms of regulation or taxation to reduce or mitigate greenhouse gas emissions. Some states have also considered or adopted laws intended to limit fuel consumption and/or encourage the use of renewable energy for the same purpose. Regulation of greenhouse gas emissions could increase the costs of electricity or petroleum, and these cost increases could consequently increase U.S. Cellular’s costs for electricity or emergency generator fuels.  U.S. Cellular could be directly subject to taxes, fees or costs, or could indirectly be required to reimburse electricity providers for such costs as a result of such regulation.  The impacts of climate change could increase costs of operation due to, for example, higher maintenance and repair costs due to extreme weather events or an increase in energy use in order to maintain the temperature of equipment used in U.S. Cellular’s operations.

In addition, new or amended regulatory requirements could increase U.S. Cellular’s costs and divert resources from other initiatives.

U.S. Cellular attempts to timely and fully comply with all regulatory requirements.  However, in certain circumstances, U.S. Cellular may not be able to timely or fully comply with all regulatory requirements due to various factors, including changes to regulatory requirements, limitations in or availability of technology, insufficient time provided for compliance, problems encountered in attempting to comply or other factors.  Any failure by U.S. Cellular to timely or fully comply with any regulatory requirements could adversely affect U.S. Cellular’s financial condition, results of operations or ability to do business.

19

9)Changes in Universal Service Fund (“USF”) funding and/or intercarrier compensation could have an adverse impact on U.S. Cellular’s business, financial condition or results of operations.

USF and ICC Reform Order.  On November 18, 2011, pursuant to the Plan and subsequent notices of proposed rulemaking, the FCC released a Report and Order and Further Notice of Proposed Rulemaking (“Reform Order”) adopting reforms of its universal service and intercarrier compensation mechanisms, and proposing further rules to advance reform.  The Reform Order substantially revised the USF high cost program and intercarrier compensation regime.  The current USF program, which supports voice services, began to be phased out in 2012.  As a replacement, the FCC is adopting the Connect America Fund (“CAF”), a new Mobility Fund, and a Remote Area Fund, which will collectively support broadband-capable networks.  Mobile wireless carriers such as U.S. Cellular are eligible to receive funds in both the CAF and the Mobility Fund, although some areas that U.S. Cellular currently serves may be declared ineligible for support if they are already served, or are subject to certain rights of first refusal by incumbent carriers.

The FCC has determined that both wireline and wireless facilities should be supported, with one wireline carrier and one mobile carrier receiving support in each area.  The Mobility Fund will be implemented in two phases.  The Phase I Mobility Fund which was implemented in 2012 is designed to provide one-time funding through a reverse auction to fill in coverage in “dead zones” that currently lack 3G wireless service.  In Phase I, $300 million was allocated throughout the country and an additional $50 million was set aside for tribal lands.  The Phase II Mobility Fund will have a budget of up to $500 million per year (up to $100 million of which is reserved for tribal lands), with the method of disbursement to be determined in a further NPRM.  Phase II funding will be provided to areas that lack “4G” wireless service.  The CAF will support service to homes, businesses, and anchor institutions, using any technology that can meet the technical requirements.

The terms and rules for participating in the CAF for wireless ETCs have not been developed yet by the FCC.  It is uncertain whether U.S. Cellular will obtain support through the CAF or Phase II of the Mobility Fund.  If U.S. Cellular is successful in obtaining support, it will be required to meet certain regulatory conditions to obtain and retain the right to receive support including, for example, allowing other carriers to colocate on U.S. Cellular’s towers, allowing voice and data roaming on U.S. Cellular’s network, and submitting various reports and certifications to retain eligibility each year.  It is possible that additional regulatory requirements will be imposed pursuant to the FCC’s Reform Order. 

U.S. Cellular’s current ETC support is being phased down at the rate of 20% per year beginning July 1, 2012.   If the Phase II Mobility Fund is not operational by July 2014, the phase down will halt at that time and U.S. Cellular will continue to receive 60% of its baseline support until the Phase II Mobility Fund is operational.

With respect to intercarrier compensation, the Reform Order provides for a reduction in the charges that U.S. Cellular pays to wireline phone companies to transport and terminate calls that originate on U.S. Cellular's network, which will reduce U.S. Cellular's operating expenses.  The reductions in intercarrier charges are to increase over the next five to ten years, further reducing U.S. Cellular's operating expenses.

The FCC's Reform Order, and any subsequent orders it adopts to reform universal service and intercarrier compensation, are subject to judicial review.  Multiple appeals of the Reform Order were consolidated and argued in the U.S. Court of Appeals for the 10^th Circuit on November 19, 2013, with a decision anticipated in 2014.  At this time, U.S. Cellular cannot predict the timing or outcome of any such decision, or whether such decision or any future rulemaking, reconsideration and legal challenges would result in a material adverse effect on U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular also cannot predict the net effect of the FCC's changes to the USF high cost support program in the Reform Order or whether reductions in support will be fully offset with additional support from the CAF or the Mobility Fund.  Accordingly, U.S. Cellular cannot predict whether such changes will have a material adverse effect on U.S. Cellular's business, financial condition or results of operations. 

10)An inability to attract and/or retain highly competent management, technical, sales and other personnel could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular’s business is highly technical and competition for skilled talent in the wireless industry is aggressive.  Due to competition for qualified management, technical, sales and other personnel, there can be no assurance that U.S. Cellular will be able to continue to attract and/or retain qualified personnel necessary for the development of its business.  The loss of the services of existing key personnel as well as the failure to recruit additional qualified personnel in a timely manner could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

20

11)U.S. Cellular’s assets are concentrated in the U.S. wireless telecommunications industry. As a result, its results of operations may fluctuate based on factors related primarily to conditions in this industry.

U.S. Cellular’s assets are concentrated in the U.S. wireless telecommunications industry and the United States.  The U.S. wireless telecommunications industry is facing significant change and an uncertain operating environment.  U.S. Cellular has not diversified its revenue streams beyond wireless telecommunications.  U.S. Cellular’s focus on the U.S. wireless telecommunications industry, together with its positioning relative to larger competitors with greater resources within the industry, may represent increased risk for investors due to the lack of diversification.  This could have an adverse effect on U.S. Cellular’s ability to profitably sustain long-term revenue growth and could have an adverse effect on its business, financial condition or results of operations.

12)U.S. Cellular’s lower scale relative to larger competitors could adversely affect its business, financial condition or results of operations.   

There has been a trend in the telecommunications and related industries in recent years towards consolidation of service providers through acquisitions, reorganizations and joint ventures.  This trend could continue, leading to larger competitors over time.  U.S. Cellular has lower scale efficiencies compared to larger competitors.  U.S. Cellular may be unable to compete successfully with larger companies that have substantially greater financial, technical, marketing, sales, purchasing and distribution resources or that offer more services than U.S. Cellular, which could adversely affect U.S. Cellular’s revenues and costs of doing business.  Specifically, U.S. Cellular’s smaller scale relative to most of its competitors could have the following impacts, among others:

·Increased operating costs due to lack of leverage with vendors;

·Limited opportunities for strategic partnerships as potential partners are focused on wireless companies with greater scale;

·Limited access to content;

·Limited access to wireless devices;

·Limited ability to influence industry standards;

·Reduced ability to invest in research and development of new products and services;

·Vendors may deem U.S. Cellular non-strategic and not develop or sell products and services to U.S. Cellular, particularly where technical requirements differ from those of larger companies.

·Limited access to intellectual property; and

·Other limited opportunities such as for software development, third party distribution, and amortization of fixed costs.

U.S. Cellular’s business increasingly depends on access to content for data, music or video services and access to new wireless devices being developed by vendors.  U.S. Cellular’s ability to obtain such access depends in part on other parties.  If U.S. Cellular is unable to obtain timely access to new content or wireless devices being developed by vendors, its business, financial condition or results of operations could be adversely affected.

As a result of the foregoing, U.S. Cellular’s lower scale relative to larger competitors could adversely affect U.S. Cellular’s business, financial condition or results of operations.

13)Changes in various business factors could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Changes in any of several factors could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.  These factors include, but are not limited to:

·Demand for or usage of services, particularly data services;

·Customer preferences, including type of wireless devices;

·Customer perceptions of network quality and performance;

·The pricing of services;

·The overall size and growth rate of U.S. Cellular’s customer base;

·Average revenue per customer;

·Penetration rates;

·Churn rates;

·Selling expenses;

·Net customer acquisition and retention costs;

·Customers’ ability to pay for wireless service and the potential impact on bad debts expense;

·Roaming agreements and rates;

·Third-party vendor support;

·The mix of products and services offered by U.S. Cellular and purchased by customers; and

·The costs of providing products and services.

21

14)Advances or changes in technology could render certain technologies used by U.S. Cellular obsolete, could put U.S. Cellular at a competitive disadvantage, could reduce U.S. Cellular’s revenues or could increase its costs of doing business.

The telecommunications industry is experiencing significant technological change, as evidenced by evolving industry standards, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new services, and products, and enhancements and changes in end-user requirements and preferences.  Widespread deployment of new technologies could cause the technology used on U.S. Cellular’s wireless networks or traditional circuit-switched telephone services to become less competitive or obsolete.  Non-traditional competitors may try to dis-intermediate the wireless carrier and render it less valuable or obsolete.  U.S. Cellular may not be able to respond to such changes and implement new technology on a timely or cost-effective basis, which could reduce its revenues or increase its costs of doing business.  If U.S. Cellular cannot keep pace with these technological changes or other changes in the telecommunications industry over time, its financial condition, results of operations or ability to do business could be adversely affected.

15)Complexities associated with deploying new technologies present substantial risk.

Complexities associated with deploying new technologies present substantial risk to U.S. Cellular’s business.

U.S. Cellular has selected 4G LTE technology as its approach to address demand for services enabled by fourth generation wireless technology.  The deployment of 4G LTE technology is impacted by a number of technical challenges. 

Manufacturers of wireless devices (“Original Equipment Manufacturers” or “OEMs”) must design and manufacture equipment that operates on the frequency bands available to U.S. Cellular.  This may involve software and hardware support for such bands in wireless device chipsets as well as band-specific designs for components such as filters.  OEMs, chipset manufacturers, and component manufacturers will likely prioritize the support of frequency bands that are specified by the largest wireless carriers.  Given U.S. Cellular’s smaller scale relative to its competitors, certain bands of spectrum licensed to U.S. Cellular in certain cases represent a lower priority for chipset and wireless device manufacturers.  As a result, the timing and the availability of wireless devices to support U.S. Cellular’s continued 4G LTE roll out could be negatively impacted.  In addition, due to U.S. Cellular’s relatively smaller scale, the cost of such equipment could be higher for U.S. Cellular than for U.S. Cellular’s competitors.

Additionally, the efficiency of LTE networks and the peak speeds they can provide are optimized when the technology is deployed in larger channel bandwidths that, in early releases of LTE, require larger amounts of contiguous spectrum.  To the extent that U.S. Cellular’s competitors have access to larger contiguous spectrum positions, they may be able to offer faster speeds or provision their networks more efficiently.  In order for U.S. Cellular to realize the same LTE data transfer speeds as competitors, it is important that both network infrastructure and device manufacturers support non-contiguous spectrum aggregation features for U.S. Cellular.

Lack of wireless devices available to U.S. Cellular to support its 4G LTE network, comparatively smaller spectrum positions for 4G LTE deployments, or carrier aggregation standards that result in U.S. Cellular delivering slower 4G LTE data transfer speeds relative to its competitors, could have an adverse impact on U.S. Cellular’s business, financial condition and results of operations.

16)U.S. Cellular 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.

Telecommunications providers pay a variety of surcharges and fees on their gross revenues from interstate and intrastate services, including USF fees and common carrier regulatory fees. The division of services between interstate services and intrastate services, including the divisions associated with the federal USF fees, is a matter of interpretation and may in the future be contested by the FCC or state authorities. The FCC also may change in the future the basis on which federal USF fees are charged. The Federal government and many states also apply transaction-based taxes to sales of U.S. Cellular products and services and to purchases of telecommunications services from various carriers. In addition, state regulators and local governments have imposed and may continue to impose various surcharges, taxes and fees on U.S. Cellular services. The applicability of these surcharges and fees to its services is uncertain in many cases and jurisdictions may contest whether U.S. Cellular has assessed and remitted those monies correctly.  Periodically, state and federal regulators may increase or change the surcharges and fees U.S. Cellular currently pays.  In some instances U.S. Cellular passes through these charges to its customers.  However, Congress, the FCC, state regulatory agencies or state legislatures may limit the ability to pass through transaction-based tax liabilities, regulatory surcharges and regulatory fees imposed on U.S. Cellular to customers.  U.S. Cellular may or may not be able to recover some or all of those taxes from its customers and the amount of taxes may deter demand for its services or increase its cost to provide service which could have an adverse effect on its business, financial condition or operating results.

22

17)Performance under device purchase agreements could have a material adverse impact on U.S. Cellular's business, financial condition or results of operations.

In March 2013, U.S. Cellular entered into an agreement with Apple to purchase certain minimum quantities of iPhone products over a three-year period beginning in November 2013.  U.S. Cellular may enter into similar purchase commitments with other vendors in the future.  If U.S. Cellular is unable to sell all of the devices that it is required to purchase under such agreements, or if it is unable to sell them at the prices it projects, its business, financial condition or results of operations could be adversely affected.

18)Changes in U.S. Cellular’s enterprise value, changes in the market supply or demand for wireless licenses, adverse developments in the business or the industry in which U.S. Cellular is involved and/or other factors could require U.S. Cellular to recognize impairments in the carrying value of its licenses, goodwill and/or physical assets.

A large portion of U.S. Cellular’s assets consists of indefinite-lived intangible assets in the form of licenses and goodwill.  U.S. Cellular also has substantial investments in long-lived assets such as property, plant and equipment.  U.S. Cellular reviews its licenses, goodwill and other long-lived assets for impairment annually or whenever events or circumstances indicate that the carrying amount of such assets may not be fully recoverable.  An impairment loss may need to be recognized to the extent the carrying value of the assets exceeds the fair value of such assets.  The amount of any such impairment loss could be significant and could have an adverse effect on U.S. Cellular’s reported financial results for the period in which the loss is recognized.  The estimation of fair values requires assumptions by management about factors that are uncertain including future cash flows, the appropriate discount rate and other factors.  Different assumptions for these factors could create materially different results.

19)Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or licenses and/or expansion of U.S. Cellular’s business could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

As part of U.S. Cellular’s operating strategy, U.S. Cellular from time to time may be engaged in the acquisition, divestiture or exchange of companies, businesses, strategic properties, wireless spectrum or other assets.  U.S. Cellular may change the markets in which it operates and the services that it provides through such acquisitions, divestitures and/or exchanges.   In general, U.S. Cellular may not disclose the negotiation of such transactions until a definitive agreement has been reached.

These transactions commonly involve a number of risks, including:

·Identification of attractive companies, businesses, properties, spectrum or other assets for acquisition or exchange, and/or the selection of U.S. Cellular’s businesses or assets for divestiture or exchange;

·Competition for acquisition targets and the ability to acquire or exchange businesses at reasonable prices;

·Possible lack of buyers for businesses or assets that U.S. Cellular desires to divest and the ability to divest or exchange such businesses or assets at reasonable prices;

·Ability to negotiate favorable terms and conditions for acquisitions, divestitures and exchanges;

·Significant expenditures associated with acquisitions, divestitures and exchanges;

·Legal and regulatory risks associated with new businesses or markets;

·Ability to enter markets in which U.S. Cellular has limited or no direct prior experience and competitors have stronger positions;

·Ability to manage businesses that are engaged in activities other than traditional wireless service;

·Uncertain revenues and expenses associated with acquisitions, with the result that U.S. Cellular may not realize the growth in revenues, anticipated cost structure, profitability, or return on investment that it expects;

·Difficulty of integrating the technologies, services, products, operations and personnel of the acquired businesses, or of separating such matters for divested businesses or assets;

·Diversion of management’s attention;

·Disruption of ongoing business;

·Impact on U.S. Cellular’s cash and available credit lines for use in financing future growth and working capital needs;

·Inability to retain key personnel;

·Inability to successfully incorporate acquired assets and rights into U.S. Cellular’s service offerings;

·Inability to maintain uniform standards, controls, procedures and policies;

·Possible conditions to approval by the FCC, the Federal Trade Commission and/or the Department of Justice; and

·Impairment of relationships with employees, customers or vendors.

No assurance can be given that U.S. Cellular will be successful with respect to its acquisition, divestiture or exchange strategies or initiatives.  If U.S. Cellular is not successful with respect to its acquisitions, divestitures or exchanges, its business, financial condition or results of operations could be adversely affected.

23

20)A significant portion of U.S. Cellular’s revenues is derived from customers who buy services through independent agents who market U.S. Cellular’s services on a commission basis and third-party national retailers. If U.S. Cellular’s relationships with these agents or third-party national retailers are seriously harmed, its business, financial condition or results of operations could be adversely affected.

U.S. Cellular has relationships with agents and third-party national retailers to obtain customers.  Agents are independent business people who obtain customers for U.S. Cellular on a commission basis.  U.S. Cellular’s agents and third-party national retailers are generally in the business of selling wireless devices, wireless service packages and other related products.

U.S. Cellular’s business and growth depends, in part, on the maintenance of satisfactory relationships with its agents and third-party national retailers.  If such relationships are seriously harmed or if such parties experience financial difficulties, including bankruptcy, U.S. Cellular’s revenues and, as a result, its business, financial condition or results of operations, could be adversely affected.

21)U.S. Cellular’s investments in unproven technologies may not produce the benefits that U.S. Cellular expects.

U.S. Cellular is making investments in various new technologies and service and product offerings.  These investments include technologies for enhanced data service offerings.  U.S. Cellular expects new services, products and solutions based on these new technologies to contribute to future growth in its revenues.  However, the markets for some of these services, products and solutions are still emerging and the overall potential for these markets remains uncertain.  If customer demand for these new services, products and solutions does not develop as expected, U.S. Cellular’s business, financial condition or results of operations could be adversely affected.

22)A failure by U.S. Cellular 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, support and other systems and infrastructure could have an adverse effect on its operations.

U.S. Cellular’s business plan includes significant construction activities and enhancements to its network.  As U.S. Cellular deploys, expands and enhances its network, it may need to acquire additional spectrum.  Also, as U.S. Cellular continues to build out and enhance its network, U.S. Cellular must, among other things, continue to:

·Lease, acquire or otherwise obtain rights to cell and switch sites;

·Obtain zoning variances or other local governmental or third-party approvals or permits for network construction;

·Complete and update the radio frequency design, including cell site design, frequency planning and network optimization, for each of U.S. Cellular’s markets; and

·Improve, expand and maintain customer care, network management, billing and other financial and management systems.

Any difficulties encountered in completing these activities, as well as problems in vendor equipment availability, technical resources, system performance or system adequacy, could delay expansion of operations and product capabilities in new or existing markets or result in increased costs.  Failure to successfully build out and enhance U.S. Cellular’s network and necessary support facilities and systems in a cost-effective manner, and in a manner that satisfies customer expectations for quality and coverage, could have an adverse effect on U.S. Cellular’s business, business prospects, financial condition or results of operations.

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

U.S. Cellular depends upon certain vendors to provide it with equipment, services or content to continue its network construction and upgrade and to operate its business.  U.S. Cellular does not have operational or financial control over such key suppliers and has limited influence with respect to the manner in which these key suppliers conduct their businesses.  If these key suppliers experience financial difficulties or file for bankruptcy or experience other operational difficulties, they may be unable to provide equipment, services or content to U.S. Cellular on a timely basis or cease to provide such equipment, services or content or otherwise fail to honor their obligations to U.S. Cellular. 

Regulations regarding the use of “conflict minerals” mined from the Democratic Republic of Congo and adjoining countries may affect some of U.S. Cellular’s suppliers.  These regulations may limit the availability of conflict free minerals and, as a result, U.S. Cellular may not be able to obtain products in sufficient quantities or at competitive prices from its vendors who utilize such minerals in the manufacture of products.

24

In such cases, U.S. Cellular may be unable to maintain and upgrade its network or provide products and services to its customers in a competitive manner, or could suffer other disruptions to its business.  In that event, U.S. Cellular’s business, financial condition or results of operations could be adversely affected.

In addition, operation of U.S. Cellular’s supply chain and management of its inventory require accurate forecasting of customer growth and demand, which has become increasingly challenging.  If overall demand for wireless devices or the mix of demand for wireless devices is significantly different than U.S. Cellular’s expectations, U.S. Cellular could face inadequate or excess supplies of particular models of wireless devices.  This could result in lost sales opportunities or an excess supply of inventory.  Either of these situations could adversely affect U.S. Cellular’s revenues, costs of doing business, results of operations or financial condition.

24)U.S. Cellular has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on U.S. Cellular’s financial condition or results of operations.

U.S. Cellular has significant investments in entities that it does not control, including a 5.5% ownership interest in the Los Angeles SMSA Limited Partnership (the “LA Partnership”) and a limited partnership interest in King Street Wireless L.P.  U.S. Cellular’s interests in such entities do not provide U.S. Cellular with control over the business strategy, financial goals, build-out plans or other operational aspects of these entities.  U.S. Cellular cannot provide assurance that these entities will operate in a manner that will increase the value of U.S. Cellular’s investments, that U.S. Cellular’s proportionate share of income from the LA Partnership and other investments will continue at the current level in the future or that U.S. Cellular will not incur losses from the holding of such investments.  Losses in the values of such investments or a reduction in income from the LA Partnership or other investments could adversely affect U.S. Cellular’s financial condition or results of operations.

25)A failure by U.S. Cellular 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 U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular relies extensively on its telecommunication networks and information technology to operate and manage its business, process transactions and summarize and report results.  These networks and technology become obsolete over time and must be upgraded, replaced and/or otherwise enhanced over time.  Enhancements must be more flexible and robust than ever before.  All of this is capital intensive and challenging.  A failure by U.S. Cellular to maintain flexible and capable telecommunication networks or information technology could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

The increased provision of data services has introduced significant new demands on U.S. Cellular’s network and has also increased complexities related to network management.  Further, the increased provision of data services on U.S. Cellular’s networks has created an increased level of risk related to quality of service.  This is due to the fact that many customers increasingly rely on data communications to execute and validate transactions.  As a result, redundancy and geographical diversity of U.S. Cellular’s network facilities are critical to providing uninterrupted service.  Also, the speed of repair and maintenance procedures in the event of network interruptions is critical to maintaining customer satisfaction.  U.S. Cellular’s ability to maintain high quality, uninterrupted service to its customers is critical, particularly given the increasingly competitive environment and customers’ ability to choose other service providers. 

In addition, U.S. Cellular’s networks and information technology and the networks and information technology of vendors on which U.S. Cellular relies are subject to damage or interruption due to various events, including power outages, computer, network and telecommunications failures, computer viruses, security breaches, hackers and other cyber security risks, catastrophic events, natural disasters, errors or unauthorized actions by employees and vendors, flawed conversion of systems, disruptive technologies and technology changes.  U.S. Cellular experiences cyber-attacks of varying degrees on a regular basis. U.S. Cellular maintains administrative, technical and physical controls, as well as other preventative actions, to reduce the risk of security breaches.  Although to date U.S. Cellular has not experienced a material security breach, these efforts may be insufficient to prevent a security breach stemming from future cyber attacks.  If U.S. Cellular’s or its vendors’ networks and information technology are not adequately adapted to changes in technology or are damaged or fail to function properly, and/or if U.S. Cellular’s or its vendors’ security is breached or otherwise compromised, U.S. Cellular could suffer adverse consequences, including theft, destruction or other loss of critical and private data, including customer and/or employee data, interruptions or delays in its operations, inaccurate billings, inaccurate financial reporting, and significant costs to remedy the problems.  If U.S. Cellular’s or its vendors’ systems become unavailable or suffer a security breach of customer or other data, U.S. Cellular may be required to expend significant resources and take various actions to address the problems, including notification under data privacy laws and regulations, may be subject to fines, sanctions and litigation, and its reputation and operating results could be adversely affected.  Any material disruption in U.S. Cellular’s networks or information technology, including security breaches, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

25

26)Wars, conflicts, hostilities and/or terrorist attacks or equipment failures, power outages, natural disasters or other events could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Wars, conflicts, hostilities, terrorist attacks, major equipment failures, power outages, natural disasters, or similar disasters or failures that affect U.S. Cellular’s mobile telephone switching offices, information systems, microwave links, third-party owned local and long distance networks on which U.S. Cellular relies, U.S. Cellular’s cell sites, data centers or other equipment or the networks of other providers and vendors which U.S. Cellular or its customers use or on which customers roam could have an adverse effect on U.S. Cellular’s operations.  Although U.S. Cellular has certain back-up and similar arrangements, it has not established a formal, comprehensive business continuity or emergency response plan at this time.  As a result, under certain circumstances, U.S. Cellular may not be prepared to continue its operations, respond to emergencies or recover from disasters or other similar events.  U.S. Cellular’s inability to operate its telecommunications systems or access or operate its information systems even for a limited time period, may result in a loss of customers or impair U.S. Cellular’s ability to serve customers or attract new customers, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

27)The market price of U.S. Cellular’s Common Shares is subject to fluctuations due to a variety of factors.

Factors that may affect the future market price of U.S. Cellular’s Common Shares include:

·General economic conditions, including conditions in the credit and financial markets;

·Industry conditions;

·Fluctuations in U.S. Cellular’s quarterly customer additions, churn rate, revenues, results of operations or cash flows;

·Variations between U.S. Cellular’s actual financial and operating results and those expected by analysts and investors; and

·Announcements by U.S. Cellular’s competitors.

Any of these or other factors could adversely affect the future market price of U.S. Cellular’s Common Shares, or could cause the future market price of U.S. Cellular’s Common Shares to fluctuate from time to time.

28)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 U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular prepares its consolidated financial statement in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and files such financial statements with the SEC in accordance with the SEC’s rules and regulations.  The possible identification of any errors in such prior filings with the SEC could require restatements of financial information or amendments to disclosures included in this or prior filings with the SEC.

Restatements and delays in filing reports with the SEC could have adverse consequences, including the following: U.S. Cellular’s credit ratings could be downgraded, which would result in an increase in its borrowing costs and could make it more difficult for U.S. Cellular to borrow funds on satisfactory terms.  The lenders on U.S. Cellular’s revolving credit agreement could refuse to waive a default or extend a waiver of default, impose restrictive covenants or conditions or require increased payments and fees.  The holders of debt under U.S. Cellular’s indentures could attempt to assert a default and, if successful and U.S. Cellular does not cure the default in a timely manner, accelerate the repayment date of such debt.  The New York Stock Exchange could begin delisting proceedings with respect to U.S. Cellular Common Shares and debt that is listed thereon.  U.S. Cellular may not be able to use or file shelf registration statements on Form S-3 for an extended period of time, which may limit U.S. Cellular’s ability to access the capital markets.  U.S. Cellular may not be able to use Form S-8 registration statements relating to its employee benefit plans, which may have an adverse effect on U.S. Cellular’s ability to attract and retain employees.  U.S. Cellular also could face shareholder litigation or SEC enforcement action.  Any of these events could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

26

29)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 U.S. Cellular’s business, financial condition or results of operations.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, U.S. Cellular is required to furnish a report of management’s assessment of the design and effectiveness of its internal control over financial reporting as part of its Form 10-K filed with the SEC.  U.S. Cellular management also is required to report on the effectiveness of U.S. Cellular’s disclosure controls and procedures.  The independent auditors of U.S. Cellular are required to attest to, and report on, the effectiveness of internal control over financial reporting.  Material weaknesses could result in inaccurate financial statements or other disclosures or failure to prevent fraud, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.  Further, if U.S. Cellular does not successfully remediate any known material weaknesses in a timely manner, it could be subject to sanctions by regulatory authorities such as the SEC, it could fail to timely meet its regulatory reporting obligations, or investor perceptions could be negatively affected; each of these potential consequences could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

30)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 U.S. Cellular to record charges in excess of amounts accrued in the financial statements, if any, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

The preparation of financial statements requires U.S. Cellular to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  U.S. Cellular bases its estimates on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.  Actual results may differ from estimates under different assumptions or conditions.  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 U.S. Cellular to record charges in excess of amounts accrued in the financial statements, if any, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

31)Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede U.S. Cellular’s 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 U.S. Cellular’s business, financial condition or results of operations.

Disruptions in the credit and financial markets, declines in consumer confidence, increases in unemployment, declines in economic growth and uncertainty about corporate earnings could have a significant negative impact on the U.S. and global financial and credit markets and the overall economy.  Such events could have an adverse impact on financial institutions resulting in limited access to capital and credit for many companies.  Furthermore, economic uncertainties make it very difficult to accurately forecast and plan future business activities.  Changes in economic conditions, changes in financial markets, deterioration in the capital markets or other factors could have an adverse effect on U.S. Cellular’s business, financial condition, revenues, results of operations and cash flows.

32)Uncertainty of U.S. Cellular’s ability to access capital, deterioration in the capital markets, other changes in market conditions, changes in U.S. Cellular’s credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its construction, development or acquisition programs.

U.S. Cellular and its subsidiaries operate a capital-intensive business.  U.S. Cellular has used internally-generated funds and has also obtained substantial funds from external sources to finance the build out and enhancement of markets, to fund acquisitions and for general corporate purposes.  U.S. Cellular also may require substantial additional capital for, among other uses, acquisitions of providers of wireless telecommunications services, spectrum license or system acquisitions, system development and network capacity expansion.  There can be no assurance that sufficient funds will continue to be available to U.S. Cellular or its subsidiaries on terms or at prices acceptable to U.S. Cellular.  Changes in U.S. Cellular’s credit rating, uncertainty of access to capital for telecommunications companies, deterioration in the capital markets, reduced regulatory capital at banks which in turn limits their ability to borrow and lend, other changes in market conditions or other factors could limit or restrict the availability of financing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its construction, development and acquisition programs.  Reduction of U.S. Cellular’s construction, development and acquisition programs likely would have a negative impact on U.S. Cellular’s consolidated revenues, income and cash flows.

27

33)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 U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular is regularly involved in a number of legal and policy proceedings before the FCC and various state and federal courts.  Such legal and policy proceedings can be complex, costly, protracted and highly disruptive to business operations by diverting the attention and energies of management and other key personnel.

The assessment of legal and policy proceedings is a highly subjective process that requires judgments about future events.  Additionally, amounts ultimately received or paid upon settlement or resolution of litigation and other contingencies may differ materially from amounts accrued in the financial statements.  Depending on a range of factors, these or similar proceedings could impose restraints on U.S. Cellular’s current or future manner of doing business.  Such potential outcomes could have an adverse effect on U.S. Cellular’s financial condition, results of operations or ability to do business.

34)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 U.S. Cellular’s business, financial condition or results of operations.

Media reports and certain professional studies have suggested that certain radio frequency emissions from wireless devices may be linked to various health problems, including cancer or tumors, and may interfere with various electronic medical devices, including hearing aids and pacemakers.  U.S. Cellular is a party to and may in the future be a party to lawsuits against wireless carriers and other parties claiming damages for alleged health effects, including cancer or tumors, arising from wireless phones or radio frequency transmitters.  Concerns over radio frequency emissions may discourage use of wireless devices or expose U.S. Cellular to potential litigation.  In addition, the FCC or other regulatory authorities may adopt regulations in response to concerns about radio frequency emissions.  Any resulting decrease in demand for wireless services, costs of litigation and damage awards or regulation could have an adverse effect on U. S. Cellular’s business, financial condition or results of operations.

In addition, some studies have indicated that some aspects of using wireless devices while driving may impair drivers’ attention in certain circumstances, making accidents more likely.  These concerns could lead to potential litigation relating to accidents, deaths or serious bodily injuries, any of which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Numerous state and local legislative bodies have enacted or proposed legislation restricting or prohibiting the use of wireless devices while driving motor vehicles.  These enacted or proposed laws or other similar laws, if passed, could have the effect of reducing customer usage and/or increasing costs, which could have an adverse effect on U.S. Cellular’s business, financial condition, or results of operations.

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

U.S. Cellular faces possible effects of industry litigation relating to patents, other intellectual property or otherwise, that may restrict U.S. Cellular’s access to devices for sale to customers.  If technology that U.S. Cellular uses in products or services were determined by a court to infringe a patent or other intellectual property right held by another person, U.S. Cellular could be precluded from using that technology and could be required to pay significant monetary damages.  U.S. Cellular also may be required to pay significant royalties to such person to continue to use such technology in the future.  The successful enforcement of any intellectual property rights, or U.S. Cellular’s inability to negotiate a license for such rights on acceptable terms, could force U.S. Cellular to cease using the relevant technology and offering services incorporating the technology.  Any litigation to determine the validity of claims that U.S. Cellular’s products or services infringe or may infringe intellectual property rights of another, regardless of their merit or resolution, could be costly and divert the effort and attention of U.S. Cellular’s management and technical personnel.  Regardless of the merits of any specific claim, U.S. Cellular cannot give assurance that it would prevail in litigation because of the complex technical issues and inherent uncertainties in intellectual property litigation.  Although U.S. Cellular generally seeks to obtain indemnification agreements from vendors that provide it with technology, there can be no assurance that any claim of infringement will be covered by an indemnity or that U.S. Cellular will be able to recover all or any of its losses and costs under any available indemnity agreements.  Any claims of infringement of intellectual property and proprietary rights of others could prevent U.S. Cellular from using necessary technology to provide its services or subject U.S. Cellular to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

28

36)There are potential conflicts of interests between TDS and U.S. Cellular.

TDS owns over 80% of the combined total of both classes of common stock of U.S. Cellular, including a majority of the outstanding Common Shares and 100% of the Series A Common Shares, and controls approximately 96% of their combined voting power.  As a result, TDS is effectively able to elect all of U.S. Cellular’s ten directors and otherwise control the management and operations of U.S. Cellular.  Three of the ten directors of U.S. Cellular are also directors of TDS and two of those three directors are also executive officers of TDS or U.S. Cellular.  Directors and officers of TDS who are also directors or officers of U.S. Cellular, and TDS as U.S. Cellular’s controlling shareholder, are in positions involving the possibility of conflicts of interest with respect to certain transactions concerning U.S. Cellular.  When the interests of TDS and U.S. Cellular diverge, TDS may exercise its influence in its own best interests.

U.S. Cellular and TDS have entered into contractual arrangements governing certain transactions and relationships between them.  These agreements were executed prior to the initial public offering of U.S. Cellular’s Common Shares and were not the result of arm’s-length negotiations.  Accordingly, there is no assurance that the terms and conditions of these agreements are as favorable to U.S. Cellular as could have been obtained from unaffiliated third parties.  See “Certain Relationships and Related Transactions” in this Form 10-K.

Conflicts of interest may arise between TDS and U.S. Cellular when faced with decisions that could have different implications for U.S. Cellular and TDS, including technology decisions, financial budgets, the payment of distributions by U.S. Cellular, agreements or transactions between TDS and U.S. Cellular, business activities and other matters.  TDS also may take action that favors its other businesses and the interests of its shareholders over U.S. Cellular’s wireless business and the interests of U.S. Cellular shareholders and debt holders.  Because TDS controls U.S. Cellular, conflicts of interest could be resolved in a manner adverse to U.S. Cellular and its other shareholders or its debt holders.

The U.S. Cellular Restated Certificate of Incorporation provides that, so long as not less than 500,000 Series A Common Shares are outstanding, U.S. Cellular, without the written consent of TDS, shall not, directly or indirectly own, invest or otherwise have an interest in, lease, operate or manage any business other than a business engaged solely in the construction of, the ownership of interests in and/or the management of wireless telephone systems.  This limitation on the scope of U.S. Cellular’s potential business could hurt the growth of U.S. Cellular’s business.  This restriction would preclude U.S. Cellular from pursuing attractive related or unrelated business opportunities unless TDS consents in writing.  TDS has no obligation to consent to any business opportunities proposed by U.S. Cellular and may withhold its consent in its own best interests.

37)Certain matters, such as control by TDS and provisions in the U.S. Cellular Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of U.S. Cellular.

The control of U.S. Cellular by TDS may tend to deter non-negotiated tender offers or other efforts to obtain control of U.S. Cellular and thereby deprive shareholders of opportunities to sell shares at prices higher than those prevailing in the market.

The U.S. Cellular Restated Certificate of Incorporation also contains provisions which may serve to discourage or make more difficult a change in control of U.S. Cellular without the support of TDS or without meeting various other conditions.  In particular, the authorization of multiple classes of capital stock with different voting rights could prevent shareholders from profiting from an increase in the market value of their shares as a result of a change in control of U.S. Cellular by delaying or preventing such change in control.

The U.S. Cellular Restated Certificate of Incorporation also authorizes the U.S. Cellular Board of Directors to designate and issue Preferred Shares in one or more classes or series from time to time.  Generally, no further action or authorization by the shareholders is necessary prior to the designation or issuance of the additional Preferred Shares authorized pursuant to the U.S. Cellular Restated Certificate of Incorporation unless applicable laws or regulations would require such approval in a given instance.  Such Preferred Shares could be issued in circumstances that would serve to preserve TDS’ control of U.S. Cellular.

38)Any of the foregoing events or other events could cause revenues, earnings, capital expenditures and/or any other financial or statistical information to vary from U.S. Cellular’s forward-looking estimates by a material amount.

From time to time, U.S. Cellular may disclose forward-looking information, including estimates of future service revenues; income before income taxes; and/or capital expenditures.  Any such forward-looking information includes consideration of known or anticipated changes to the extent disclosed, but dynamic market conditions and/or other unknown or unanticipated events, including but not limited to the risks discussed above, could cause such estimates to differ materially from the actual amounts.

29

Item 1B.  Unresolved Staff Comments

None.

Item 2.  Properties

U.S. Cellular’s mobile telephone switching offices, cell sites, call centers and retail stores are located primarily in U.S. Cellular’s operating markets and are either owned or leased under long-term leases by U.S. Cellular, one of its subsidiaries, or the partnership, limited liability company or corporation which holds the license issued by the FCC.  U.S. Cellular’s cell and transmitter sites are located on private and public property.  Locations on private land are by virtue of easements or other arrangements.  U.S. Cellular has not experienced major problems with obtaining zoning approval for cell sites or operating facilities and does not anticipate significant problems in this area in future periods. 

U.S. Cellular leases space for its corporate offices in Chicago, Bensenville and Wood Dale, Illinois; it also leases space for its network operations center in Schaumburg, Illinois and its regional and local market business offices.  U.S. Cellular operates four customer care centers; one of the facilities used in these operations is owned and three are leased. 

As of December 31, 2013, U.S. Cellular’s Property, plant and equipment, net of accumulated depreciation, totaled $2,856.5 million.

U.S. Cellular considers the properties owned or leased by it and its subsidiaries to be maintained in good operating condition and are suitable and adequate for its business operations.

Item 3.  Legal Proceedings

U.S. Cellular is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts. If U.S. Cellular believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss. If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within that range is better than another, the low end of the range is accrued. The assessment of the expected outcomes of legal proceedings is a highly subjective process that requires judgments about future events. The legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financial statement disclosures. The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements.  See Note 11 — Commitments and Contingencies in the Notes to Consolidated Financial Statements for further information.

Item 4.  Mine Safety Disclosures.

Not applicable

30

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market, holder, dividend and performance graph information is incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report sections entitled “Shareholder Information” and “Consolidated Quarterly Information (Unaudited).”

Information  relating to Issuer Purchases of Equity Securities is set forth below.

On November 17, 2009, the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009 and continuing each year thereafter, on a cumulative basis (the “2009 Authorization”).  These purchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on market prices and other conditions.  This authorization does not have an expiration date.

The following table provides certain information with respect to all purchases made by or on behalf of U.S. Cellular, and any open market purchases made by any “affiliated purchaser” (as defined by the SEC) of U.S. Cellular, of U.S. Cellular Common Shares during the fourth quarter of 2013.

U.S. CELLULAR PURCHASES OF COMMON SHARES
Period	Total Number of Common Shares Purchased	Average Price Paid per Common Share		Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Common Shares that May Yet Be Purchased Under the  Plans or Programs
October 1 — 31, 2013	-	$	-	-	2,828,875
November 1 — 30, 2013	-		-	-	2,828,875
December 1 — 31, 2013	-		-	-	2,828,875
Total as of or for the quarter ended   December 31, 2013	-	$	-	-	2,828,875

The following is additional information with respect to the 2009 Authorization:

i.The date the program was announced was November 20, 2009 by Form 8-K.

ii.The amount approved was up to 1,300,000 U.S. Cellular Common Shares on an annual basis in 2009 and continuing each year thereafter on a cumulative basis.

iii.This program does not have an expiration date.

iv.The authorization did not expire during the fourth quarter of 2013.

v.U.S. Cellular did not determine to terminate the foregoing program prior to expiration, or to cease making further purchases thereunder, during the fourth quarter of 2013.

Item 6.  Selected Financial Data

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report section entitled “Selected Consolidated Financial and Operating Data,” except for Ratio of earnings to fixed charges, which is incorporated herein by reference from Exhibit 12 to this Form 10-K.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report section entitled “Market Risk.”

31

Item 8.  Financial Statements and Supplementary Data

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report sections entitled “Consolidated Statement of Operations,” “Consolidated Statement of Cash Flows,” “Consolidated Balance Sheet,” “Consolidated Statement of Changes in Equity,” “Notes to Consolidated Financial Statements,” “Management’s Report on Internal Control Over Financial Reporting,”  “Report of Independent Registered Public Accounting Firm,” and “Consolidated Quarterly Information (Unaudited).”  The Consolidated Statement of Comprehensive Income was not included because comprehensive income for the years ended December 31, 2013, 2012 and 2011 equaled net income.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

U.S. Cellular maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in its reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to U.S. Cellular’s management, including its principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As required by SEC Rule 13a-15(b), U.S. Cellular carried out an evaluation, under the supervision and with the participation of management, including its principal executive officer and principal financial officer, of the effectiveness of the design and operation of U.S. Cellular’s disclosure controls and procedures as of the end of the period covered by this Annual Report.  Based on this evaluation, the principal executive officer and principal financial officer have concluded that U.S. Cellular’s disclosure controls and procedures were effective as of December 31, 2013, at the reasonable assurance level.  

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.  U.S. Cellular’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  U.S. Cellular’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and, where required, the board of directors of the issuer; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the issuer’s assets that could have a material effect on the interim or annual consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of U.S. Cellular’s management, including its principal executive officer and principal financial officer, U.S. Cellular conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2013, based on the criteria established in the 1992 version of Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  Management has concluded that U.S. Cellular maintained effective internal control over financial reporting as of December 31, 2013 based on criteria established in the 1992 version of Internal Control — Integrated Framework issued by the COSO.

The effectiveness of U.S. Cellular’s internal control over financial reporting as of December 31, 2013 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in the firm’s report which is incorporated by reference into Item 8 of this Annual Report on Form 10-K from Exhibit 13 filed herewith.

32

Changes in Internal Control Over Financial Reporting

Internal controls over financial reporting are updated as necessary to accommodate modifications to our business processes and accounting procedures.  U.S. Cellular migrated its customers to a new billing and operational support system in 2013, which was completed in the third quarter of 2013.  There were no changes in U.S. Cellular’s internal control over financial reporting during the fourth quarter of 2013 that have materially affected, or are reasonably likely to materially affect, U.S. Cellular’s internal control over financial reporting.

Item 9B.  Other Information

None.

33

PART III

Item 10.  Directors, Executive Officers and Corporate Governance

Incorporated by reference from Proxy Statement sections entitled “Election of Directors,” “Corporate Governance,” “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance.”

Item 11.  Executive Compensation

Incorporated by reference from Proxy Statement section entitled “Executive and Director Compensation.”

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Incorporated by reference from Proxy Statement sections entitled “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance under Equity Compensation Plans.”

Item 13.  Certain Relationships and Related Transactions, and Director Independence

Incorporated by reference from Proxy Statement sections entitled “Corporate Governance” and “Certain Relationships and Related Transactions.”

Item 14.  Principal Accountant Fees and Services

Incorporated by reference from Proxy Statement section entitled “Fees Paid to Principal Accountants.”

34

PART IV
Item 15.  Exhibits and Financial Statement Schedules
(a)	The following documents are filed as a part of this report:
	(1)	Financial Statements
		Consolidated Statement of Operations		Annual Report*
		Consolidated Statement of Cash Flows		Annual Report*
		Consolidated Balance Sheet		Annual Report*
		Consolidated Statement of Changes in Equity		Annual Report*
		Notes to Consolidated Financial Statements		Annual Report*
		Management’s Report on Internal Control Over Financial Reporting		Annual Report*
		Report of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP		Annual Report*
		Consolidated Quarterly Information (Unaudited)		Annual Report*
			* Incorporated by reference from Exhibit 13.
	(2)	Financial Statement Schedules
				Location
		Los Angeles SMSA Limited Partnership Financial Statements		S-1
			Report of Independent Registered Public Accounting Firm — Deloitte & Touche LLP	S-2
			Balance Sheets	S-3
			Statements of Operations	S-4
			Statements of Changes in Partners’ Capital	S-5
			Statements of Cash Flows	S-6
			Notes to Financial Statements	S-7
All other schedules have been omitted because they are not applicable or not required or because the required information is shown in the financial statements or notes thereto.
	(3)	Exhibits
The exhibits set forth in the accompanying Index to Exhibits are filed as a part of this Report.  Compensatory plans or arrangements are identified in the Index to Exhibits with an asterisk.

35

LOS ANGELES SMSA LIMITED PARTNERSHIP
FINANCIAL STATEMENTS

U.S. Cellular owns a 5.5% limited partnership interest in the Los Angeles SMSA Limited Partnership and accounts for such interest by the equity method.  The partnership’s financial statements were obtained by U.S. Cellular as a limited partner. 

S-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of

Los Angeles SMSA Limited Partnership:

Basking Ridge, New Jersey

We have audited the accompanying balance sheets of Los Angeles SMSA Limited Partnership (the "Partnership") as of December 31, 2013 and 2012, and the related statements of operations, changes in partners’ capital, and cash flows for each of the three years in the period ended December 31, 2013. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Atlanta, Georgia

February 28, 2014

S-2

Los Angeles SMSA Limited Partnership
Balance Sheets - As of December 31, 2013 and 2012
(Dollars in Thousands)
			2013		2012
ASSETS
CURRENT ASSETS:
	Accounts receivable, net of allowance of $21,600 and $14,205		$	363,069	$	338,599
	Unbilled revenue			20,070		19,491
	Due from affiliate			316,794		243,748
	Prepaid expenses and other current assets			4,357		4,537
		Total current assets		704,290		606,375
PROPERTY, PLANT AND EQUIPMENT—Net				1,581,317		1,569,418
WIRELESS LICENSES				79,543		79,543
OTHER ASSETS				8,848		655
TOTAL ASSETS			$	2,373,998	$	2,255,991
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
	Accounts payable and accrued liabilities		$	117,972	$	132,558
	Advance billings and customer deposits			152,698		144,849
	Deferred gain on lease transaction			4,923		4,923
		Total current liabilities		275,593		282,330
LONG TERM LIABILITIES:
	Deferred gain on lease transaction			28,892		33,833
	Other long term liabilities			34,411		23,964
		Total long term liabilities		63,303		57,797
		Total liabilities		338,896		340,127
PARTNERS' CAPITAL				2,035,102		1,915,864
TOTAL LIABILITIES AND PARTNERS' CAPITAL			$	2,373,998	$	2,255,991
See notes to financial statements.

S-3

Los Angeles SMSA Limited Partnership
Statements of Operations - Years Ended December 31, 2013, 2012 and 2011
(Dollars in Thousands)
			2013		2012		2011
OPERATING REVENUE:
	Service revenue		$	4,166,296	$	3,920,064	$	3,782,027
	Equipment and other			667,963		677,836		593,330
		Total operating revenue		4,834,259		4,597,900		4,375,357
OPERATING COSTS AND EXPENSES:
	Cost of service (exclusive of depreciation and amortization)			753,438		705,065		797,797
	Depreciation and amortization			337,313		343,565		366,119
	Cost of equipment			885,502		948,130		955,002
	Selling, general and administrative			1,445,229		1,375,852		1,263,604
		Total operating costs and expenses		3,421,482		3,372,612		3,382,522
OPERATING INCOME				1,412,777		1,225,288		992,835
OTHER INCOME:
	Interest income, net			1,520		1,051		561
	Other			4,941		4,941		6,964
		Total other income		6,461		5,992		7,525
NET INCOME			$	1,419,238	$	1,231,280	$	1,000,360
Allocation of Net Income:
	Limited Partners		$	851,543	$	738,768	$	600,216
	General Partner		$	567,695	$	492,512	$	400,144
See notes to financial statements.

S-4

Los Angeles SMSA Limited Partnership
Statements of Changes in Partners' Capital - Years Ended December 31, 2013, 2012 and 2011
(Dollars in Thousands)
		General Partner		Limited Partners
		AirTouch Cellular		AirTouch Cellular		Cellco Partnership		United States Cellular Corporation		Total Partners' Capital
BALANCE—January 1, 2011		$	833,690	$	881,627	$	254,276	$	114,631	$	2,084,224
	Distributions		(480,000)		(507,600)		(146,400)		(66,000)		(1,200,000)
	Net Income		400,144		423,152		122,044		55,020		1,000,360
BALANCE—December 31, 2011			753,834		797,179		229,920		103,651		1,884,584
	Distributions		(480,000)		(507,600)		(146,400)		(66,000)		(1,200,000)
	Net Income		492,512		520,832		150,216		67,720		1,231,280
BALANCE—December 31, 2012			766,346		810,411		233,736		105,371		1,915,864
	Distributions		(520,000)		(549,900)		(158,600)		(71,500)		(1,300,000)
	Net Income		567,695		600,337		173,146		78,060		1,419,238
BALANCE—December 31, 2013		$	814,041	$	860,848	$	248,282	$	111,931	$	2,035,102
See notes to financial statements.

S-5

Los Angeles SMSA Limited Partnership
Statements of Cash Flows - Years Ended December 31, 2013, 2012 and 2011
(Dollars in Thousands)
					2013		2012		2011
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$	1,419,238	$	1,231,280	$	1,000,360
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				337,313		343,565		366,119
		Amortization of deferred gain on lease transaction				(4,941)		(4,957)		(4,949)
		Provision for losses on accounts receivable				44,339		37,057		27,249
		Changes in certain assets and liabilities:
			Accounts receivable			(68,809)		(69,272)		(47,942)
			Unbilled revenue			(579)		2,761		(1,014)
			Prepaid expenses and other current assets			180		(760)		(125)
			Other assets			(8,193)		19		—
			Accounts payable and accrued liabilities			(15,872)		18,548		24,243
			Advance billings and customer deposits			7,849		9,826		8,518
			Other long term liabilities			10,447		4,208		3,124
				Net cash provided by operating activities		1,720,972		1,572,275		1,375,583
CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures, net					(347,926)		(272,176)		(364,956)
	Change in due from affiliate, net					(73,046)		(100,099)		189,373
				Net cash used in investing activities		(420,972)		(372,275)		(175,583)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Distributions to partners					(1,300,000)		(1,200,000)		(1,200,000)
				Net cash used in financing activities		(1,300,000)		(1,200,000)		(1,200,000)
CHANGE IN CASH						—		—		—
CASH—Beginning of year						—		—		—
CASH—End of year					$	—	$	—	$	—
NONCASH TRANSACTIONS FROM INVESTING ACTIVITIES:
	Accruals for Capital Expenditures				$	12,689	$	11,403	$	3,372
See notes to financial statements.

S-6

Los Angeles SMSA Limited Partnership

Notes to Financial Statements – Years Ended December 31, 2013, 2012 and 2011.

(Dollars in Thousands)

1.ORGANIZATION AND MANAGEMENT

Los Angeles SMSA Limited Partnership – Los Angeles SMSA Limited Partnership (the “Partnership”) was formed in 1984. The principal activity of the Partnership is providing cellular service in the Los Angeles metropolitan service area.

The partners and their respective ownership percentages as of December 31, 2013, 2012 and 2011 are as follows:

General Partner
	AirTouch Cellular* (“General Partner”)	40.0%
Limited Partners:
	AirTouch Cellular*	42.3%
	Cellco Partnership	12.2%
	United States Cellular Corporation	5.5%

______________________________

* AirTouch Cellular is a wholly-owned subsidiary of Verizon Wireless (VAW) LLC (a wholly-owned subsidiary of Cellco Partnership (“Cellco”) doing business as Verizon Wireless.

In accordance with the partnership agreement, Cellco is responsible for managing the operations of the partnership (See Note 5).

2.SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates — The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. Estimates are used for, but are not limited to, the accounting for: revenue and expense, allocations, allowance for uncollectible accounts receivable, unbilled revenue, depreciation and amortization, useful lives and impairment of assets, accrued expenses, and contingencies.

Revenue Recognition — The Partnership offers products and services to our customers through bundled arrangements. These arrangements involve multiple deliverables which may include products, services, or a combination of products and services.

S-7

The Partnership earns revenue by providing access to its network (access revenue) and usage of its network (usage revenue), which includes voice and data revenue. Customers are associated with the Partnership based upon mobile identification number. In general, access revenue is billed one month in advance and is recognized when earned; the unearned portion is classified in Advance billings in the balance sheet. Usage revenue is recognized when service is rendered and included in unbilled revenue until billed. Equipment sales revenue associated with the sale of wireless devices and related equipment costs are recognized when the products are delivered to and accepted by the customer, as this is considered to be a separate earnings process from the sale of wireless services. Customer activation fees charged to customers are considered additional consideration and are recorded in Equipment and other revenue, generally, at the time of customer acceptance. For agreements involving the resale of third-party services in which the Partnership is considered the primary obligor in the arrangements, the Partnership records revenue gross at the time of sale.  For equipment sales, the Partnership currently subsidizes the cost of wireless devices. The amount of this subsidy is generally contingent on the arrangement and terms selected by the customer.  In multiple deliverable arrangements which involve the sale of equipment and a service contract, the equipment revenue is recognized up to the amount collected when the wireless device is sold.

The roaming rates charged by the Partnership to Cellco do not necessarily reflect current market rates. The Partnership will continue to re-evaluate the rates on a periodic basis (See Note 5).

The Partnership reports taxes imposed by governmental authorities on revenue-producing transactions between us and our customers on a net basis.

S-8

Operating Costs and Expenses — Operating expenses include expenses incurred directly by the Partnership, as well as an allocation of selling, general and administrative, and operating costs incurred by Cellco or its affiliates on behalf of the Partnership. Employees of Cellco provide services performed on behalf of the Partnership. These employees are not employees of the Partnership, therefore operating expenses include direct and allocated charges of salary and employee benefit costs for the services provided to the Partnership. Cellco believes such allocations, principally based on the Partnership’s percentage of total customers, customer gross additions or minutes-of-use, are in accordance with the Partnership Agreement and are a reasonable method of allocating such costs. The roaming rates charged to the Partnership by Cellco do not necessarily reflect current market rates. The Partnership will continue to re-evaluate the rates on a periodic basis (see Note 5).

Retail Stores —The daily operations of all retail stores owned by the Partnership are managed by Cellco. All fixed assets, liabilities, income and expenses related to these retail stores are recorded in the financial statements of the Partnership.

Comprehensive Income — Comprehensive income is the same as net income as presented in the accompanying statements of operations.

Income Taxes — The Partnership is not a taxable entity for federal and state income tax purposes. Any taxable income or loss is apportioned to the partners based on their respective partnership interests and is reported by them individually.

Inventory — Inventory is owned by Cellco and is not recorded on the Partnership’s financial statements. Upon sale, the related cost of the inventory is transferred to the Partnership at Cellco’s cost basis and included in the accompanying statements of operations.

Allowance for Doubtful Accounts — The Partnership maintains allowances for uncollectible accounts receivable for estimated losses resulting from the inability of customers to make required payments. Estimates are based on the aging of the accounts receivable balances and the historical write-off experience, net of recoveries.

Property, Plant and Equipment — Property, plant and equipment primarily represents costs incurred to construct and expand capacity and network coverage on mobile telephone switching offices and cell sites. The cost of property, plant and equipment is depreciated over its estimated useful life using the straight-line method of depreciation. Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related lease. Major improvements to existing plant and equipment that extend the useful lives are capitalized. Routine maintenance and repairs that do not extend the life of the plant and equipment are charged to expense as incurred. 

Upon the sale or retirement of property, plant and equipment, the cost and related accumulated depreciation or amortization are eliminated and any related gain or loss is reflected in the statements of operations. All property, plant and equipment purchases are made through an affiliate of Cellco. Transfers of property, plant and equipment between Cellco and affiliates are recorded at net book value and included in due from affiliate until settled.

S-9

Network engineering costs incurred during the construction phase of the Partnership’s network and real estate properties under development are capitalized as part of property, plant and equipment and recorded as construction in progress until the projects are completed and placed into service.

FCC Licenses — The Federal Communications Commission (“FCC”) issues licenses that authorize cellular carriers to provide service in specific cellular geographic service areas. The FCC grants licenses for terms of up to ten years. In 1993 the FCC adopted specific standards to apply to cellular renewals, concluding it will award a license renewal to a cellular licensee that meets certain standards of past performance. Historically, the FCC has granted license renewals routinely and at nominal costs, which are expensed as incurred. The current terms of the Partnership’s FCC licenses expire in October 2014, February 2016 and April 2017. Cellco and the Partnership believe they will be able to meet all requirements necessary to secure renewal of the Partnership’s cellular licenses. FCC wireless licenses totaling $79,543 are recorded on the books of the Partnership as of December 31, 2013 and 2012. There are additional wireless licenses issued by the FCC that authorize the Partnership to provide cellular service recorded on the books of Cellco.

Valuation of Assets — Long-lived assets, including property, plant and equipment and intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

The Partnership’s principal intangible assets are licenses, which provide the Partnership with the exclusive right to utilize certain radio frequency spectrum to provide wireless communication services. Cellco and the Partnership re-evaluate the useful life determination for wireless licenses at least annually to determine whether events and circumstances continue to support an indefinite useful life. Moreover, Cellco and the Partnership have determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of the Partnership’s wireless licenses. As a result, the wireless licenses are treated as an indefinite life intangible asset, and are not amortized but rather are tested for impairment.

 Cellco and the Partnership test their wireless licenses for potential impairment annually, and more frequently if indications of impairment exist.  In 2013, Cellco and the Partnership performed a qualitative assessment to determine whether it is more likely than not that the fair value of its wireless licenses was less than the carrying amount.  As part of the assessment, Cellco and the Partnership considered several qualitative factors including the business enterprise value and other industry and market considerations.  Based on our assessment in 2013, Cellco and the Partnership qualitatively concluded that it was more likely than not that the fair value of their wireless licenses significantly exceeded their carrying value and therefore did not result in any impairment.  In 2012 and 2011 Cellco and the Partnership evaluated their licenses on an aggregate basis, using a direct income-based value approach.  This approach estimates fair value using a discounted cash flow analysis to estimate what a marketplace participant would be willing to pay to purchase the aggregated wireless licenses as of the valuation date.  If the fair value of the aggregated wireless licenses is less than the aggregated carrying amount of the wireless licenses, an impairment is recognized.

In addition, Cellco believes that under the Partnership agreement it has the right to allocate, based on a reasonable methodology, any impairment loss recognized by Cellco for all licenses included in Cellco’s national footprint. Cellco does not charge the Partnership for the use of any FCC license recorded on its books (except for the annual cost of $51,699 related to the spectrum leases). Cellco and the Partnership evaluated their wireless licenses for potential impairment as of December 15, 2013 and December 15, 2012. These evaluations resulted in no impairment of wireless licenses.

Concentrations — The Partnership maintains allowances for uncollectible accounts receivable for estimated losses resulting from the inability of customers to make required payments. Estimates are based on historical net write-off experience. No single customer receivable is large enough to present a significant financial risk to the partnership.

Cellco and the Partnership rely on local and long-distance telephone companies, some of which are related parties (See Note 5), and other companies to provide certain communication services. Although management believes alternative telecommunications facilities could be found in a timely manner, any disruption of these services could potentially have a material adverse impact on the Partnership’s operating results.

Although Cellco attempts to maintain multiple vendors for its network assets and inventory, which are important components of its operations, they are currently acquired from only a few sources. Certain of these products are in turn utilized by the Partnership and are important components of the Partnership’s operations. If the suppliers are unable to meet Cellco’s needs as it builds out its network infrastructure and sells service and equipment, delays and increased costs in the expansion of the Partnership’s network infrastructure or losses of potential customers could result, which would adversely affect operating results.

S-10

Financial Instruments — The Partnership’s trade receivables and payables are short-term in nature, and accordingly, their carrying value approximates fair value.

Due from affiliate — Due from affiliate principally represents the Partnership’s cash position with Cellco. Cellco manages, on behalf of the Partnership, all cash, inventory, investing and financing activities of the Partnership. As such, the change in due from affiliate is reflected as an investing activity or a financing activity in the statements of cash flows depending on whether it represents a net asset or net liability for the Partnership.

Additionally, administrative and operating costs incurred by Cellco on behalf of the Partnership, as well as property, plant and equipment transactions with affiliates, are charged to the Partnership through this account. Starting in 2011, interest income is based on the Applicable Federal Rate which was approximately .2%, .2% and .4% for the years ended December 31, 2013, 2012 and 2011, respectively.  Interest expense is calculated by applying Cellco’s average cost of borrowing from Verizon Communications, Inc, which was approximately 7.4%, 7.3% and 6.8% for the years ended December 31, 2013, 2012 and 2011, respectively.  Included in net interest income is interest income of $1,352, $1,123 and $712 for the years ended December 31, 2013, 2012 and 2011, respectively, related to due from affiliate.

S-11

Distributions - The Partnership is required to make distributions to its partners based upon the Partnership’s operating results, due to/from affiliate status, and financing needs as determined by the General Partner at the date of the distribution.

Recently Adopted Accounting Standards - During the first quarter of 2013 we adopted the accounting standard update regarding testing of intangible assets for impairment.  This standard update allows companies the option to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired.  An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not the asset is impaired. The adoption of this standard did not have a significant impact on the financial statements.

Subsequent Events – Events subsequent to December 31, 2013 have been evaluated through February 28, 2014, the date the financial statements were issued. 

S-12

3.PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consist of the following as of December 31, 2013 and 2012:

	2013		2012
Land	$	7,730	$	7,742
Buildings and improvements (15-40 years)		633,840		575,456
Wireless plant and equipment (3-15 years)		3,483,289		3,265,052
Furniture, fixtures and equipment (3-10 years)		67,981		65,823
Leasehold improvements (5 years)		327,277		308,050
		4,520,117		4,222,123
Less: accumulated depreciation		(2,938,800)		(2,652,705)
Property, plant and equipment, net	$	1,581,317	$	1,569,418
Depreciation expense	$	337,302	$	343,565

Capitalized network engineering costs of $22,242 and $22,253 were recorded during the years ended December 31, 2013 and 2012, respectively. Construction in progress included in certain classifications shown above, principally wireless plant and equipment, amounted to $88,836 and $85,383 as of December 31, 2013 and 2012, respectively.

Tower Transactions – Prior to the acquisition of the Partnership interest by Cellco in 2000, Vodafone Group Plc (“Vodafone”), then parent company of AirTouch Cellular, entered into agreements to sublease all of its unused space on up to 430 of its communications towers (“Sublease Agreement”) to SpectraSite Holdings, Inc. (“SpectraSite”) in exchange for $155,000. At various closings in 2001 and 2000, SpectraSite leased 274 communications towers owned and operated by the Partnership for $98,465.  At December 31, 2013 and 2012, the Partnership has $33,815 and $38,756, respectively, recorded as deferred gain on lease transaction.  The Sublease Agreement requires monthly maintenance fees for the existing physical space used by the Partnership’s cellular equipment. The Partnership paid $8,872, $11,421 and $12,150 to SpectraSite pursuant to the Sublease Agreement for the years ended December 31, 2013, 2012 and 2011, respectively, which is included in cost of service in the accompanying Statements of Operations.

S-13

4.CURRENT LIABILITIES

Accounts payable and accrued liabilities consist of the following as of December 31, 2013 and 2012:

	2013		2012
Accounts payable	$	104,654	$	117,935
Accrued liabilities		13,318		14,623
Accounts payable and accrued liabilities	$	117,972	$	132,558

Advance billings and customer deposits consist of the following as of December 31, 2013 and 2012:

	2013		2012
Advance billings	$	148,328	$	140,617
Customer deposits		4,370		4,232
Advance billings and customer deposits	$	152,698	$	144,849

5.TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

In addition to fixed asset purchases (see Note 2), substantially all of service revenues, equipment and other revenues, cost of service, cost of equipment, and selling, general and administrative expenses represent transactions processed by affiliates (Cellco and its related parties) on behalf of the Partnership or represent transactions with affiliates.  These transactions consist of revenues and expenses that pertain to the Partnership which are processed by Cellco and directly attributed to or directly charged to the Partnership.  They also include certain revenues and expenses that are processed or incurred by Cellco which are allocated to the Partnership based on factors such as the Partnership’s percentage of customers, gross customer additions, or minutes of use. These transactions do not necessarily represent arm’s length transactions and may not represent all revenues and costs if the Partnership operated on a standalone basis.

Service revenues - Service revenues include monthly customer billings processed by Cellco on behalf of the Partnership and roaming revenues relating to customers of other affiliated markets that are specifically identified to the Partnership.  Service revenue also includes long distance, data, and certain revenue reductions including revenue concessions that are processed by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco.

Equipment and other revenues - Equipment revenue includes equipment sales processed by Cellco and specifically identified to the Partnership, as well as certain handset and

S-14

accessory revenues, contra-revenues including equipment concessions, and coupon rebates that are processed by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco.  Other revenues include switch revenue and other fees and surcharges charged to the customer that are specifically identified to the Partnership.

Cost of Service - Cost of service includes roaming costs relating to customers roaming in other affiliated markets that are specifically identified to the Partnership.  Cost of service also includes cost of telecom, long distance and application content that are incurred by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco.  The Partnership has also entered into a lease agreement for the right to use additional spectrum owned by Cellco.  See Note 6 for further information regarding this arrangement.

Cost of equipment - Cost of equipment includes the cost of inventory specifically identified and transferred to the Partnership (see Note 2). Cost of equipment also includes certain costs related to handsets, accessories and other costs incurred by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco.

Selling, general and administrative - Selling, general and administrative expenses include commissions, customer billing, office telecom, customer care, salaries, sales and marketing and advertising expenses that are specifically identified to the Partnership as well as incurred by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco.

6.COMMITMENTS 

Cellco, on behalf of the Partnership, and the Partnership itself have entered into operating leases for facilities, and equipment and spectrum used in its operations. Lease contracts include renewal options that include rent expense adjustments based on the Consumer Price Index as well as annual and end-of-lease term adjustments. Rent expense is recorded on a straight-line basis. The noncancellable lease term used to calculate the amount of the straight-line rent expense is generally determined to be the initial lease term, including any optional renewal terms that are reasonably assured. Leasehold improvements related to these operating leases are amortized over the shorter of their estimated useful lives or the noncancellable lease term. For the years ended December 31, 2013, 2012 and 2011, the Partnership incurred a total of $139,341, $131,362 and $127,469, respectively, as rent expense related to these operating leases, which was included in cost of service and general and administrative expenses in the accompanying statements of operations. Aggregate future minimum rental commitments under noncancellable operating leases, excluding renewal options that are not reasonably assured and remaining tower maintenance fees of $70,018  (See Note 3), for the years shown are as follows:

Years	Amount
2014	$	96,696
2015		82,764
2016		70,595
2017		28,442
2018		14,521
2019 and thereafter		36,724
Total minimum payments	$	329,742

On November 30, 2010, the Partnership entered into a 700 MHz upper band spectrum lease with Cellco. The lease includes an initial term extending through June 13, 2019 and a renewal option through June 13, 2029. The license, held by Cellco, is considered an indefinite-lived intangible as Cellco believes it will be able to meet all requirements necessary to secure renewal of this license. The Partnership accounts for this spectrum lease as an executory contract which is similar to an operating lease.

Based on the terms of the spectrum license lease as of December 31, 2013, future spectrum lease obligations, including the renewal period, are expected to be as follows:

Years	Amount
2014	$	20,843
2015		20,843
2016		20,843
2017		20,843
2018		20,843
2019 and thereafter		217,112
Total minimum payments	$	321,327

S-15

The General Partner currently expects that the renewal option in the lease will be exercised.

From time to time Cellco enters into purchase commitments, primarily for network equipment, on behalf of the Partnership. These represent legal obligations of Cellco.

S-16

7.CONTINGENCIES 

Cellco and the Partnership are subject to lawsuits and other claims including class actions, product liability, patent infringement, intellectual property, antitrust, partnership disputes, and claims involving relations with resellers and agents. Cellco is also currently defending lawsuits filed against it and other participants in the wireless industry alleging various adverse effects as a result of wireless phone usage. Various consumer class action lawsuits allege that Cellco violated certain state consumer protection laws and other statutes and defrauded customers through misleading billing practices or statements. These matters may involve indemnification obligations by third parties and/or affiliated parties covering all or part of any potential damage awards against Cellco and the Partnership and/or insurance coverage. All of the above matters are subject to many uncertainties, and the outcomes are not currently predictable.

The Partnership may be allocated a portion of the damages that may result upon adjudication of these matters if the claimants prevail in their actions. In none of the currently pending matters is the amount of accrual material. An estimate of the reasonably possible loss or range of loss in excess of the amounts already accrued to either Cellco or the Partnership with respect to these matters as of December 31, 2013 cannot be made at this time due to various factors typical in contested proceedings, including (1) uncertain damage theories and demands; (2) a less than complete factual record; (3) uncertainty concerning legal theories and their resolution by courts or regulators; and (4) the unpredictable nature of the opposing party and its demands. We continuously monitor these proceedings as they develop and adjust any accrual or disclosure as needed. We do not expect that the ultimate resolution of any pending regulatory or legal matter in future periods will have a material effect on the financial condition of the Partnership, but it could have a material effect on our results of operations for a given reporting period.

8.RECONCILIATION OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

		Balance at Beginning of the Year		Additions Charged to Operations		Write-offs Net of Recoveries		Balance at End of the Year
Accounts Receivable Allowances:
	2013	$	14,205	$	44,339	$	(36,944)	$	21,600
	2012		14,076		37,057		(36,928)		14,205
	2011		15,135		27,249		(28,308)		14,076
******

S-17

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

UNITED STATES CELLULAR CORPORATION
By:	/s/ Kenneth R. Meyers
	Kenneth R. Meyers President and Chief Executive Officer (principal executive officer)
By:	/s/ Steven T. Campbell
	Steven T. Campbell Executive Vice President—Finance, Chief Financial Officer and Treasurer (principal financial officer)
By:	/s/ Douglas D. Shuma
	Douglas D. Shuma Chief Accounting Officer (principal accounting officer)

Dated: February 28, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ LeRoy T. Carlson, Jr.	Director	February 28, 2014
LeRoy T. Carlson, Jr.
/s/ Kenneth R. Meyers	Director	February 28, 2014
Kenneth R. Meyers
/s/ James Barr III	Director	February 28, 2014
James Barr III
/s/ Walter C.D. Carlson	Director	February 28, 2014
Walter C.D. Carlson
/s/ J. Samuel Crowley	Director	February 28, 2014
J. Samuel Crowley
/s/ Ronald E. Daly	Director	February 28, 2014
Ronald E. Daly
/s/ Paul-Henri Denuit	Director	February 28, 2014
Paul-Henri Denuit
/s/ Harry J. Harczak, Jr.	Director	February 28, 2014
Harry J. Harczak, Jr.
/s/ Gregory P. Josefowicz	Director	February 28, 2014
Gregory P. Josefowicz
/s/ Cecelia D. Stewart	Director	February 28, 2014
Cecelia D. Stewart

INDEX TO EXHIBITS

Exhibit  Number	Description of Documents
3.1(a)	Restated Certificate of Incorporation, as amended, filed as Exhibit 2(a) to U.S. Cellular’s Amendment No. 1 on Form 8 dated March 24, 1992 to U.S. Cellular’s Report on Form 8-A.
3.1(b)	Certificate of Amendment to Restated Certificate of Incorporation is hereby incorporated by reference to Exhibit 2(a)(i) to U.S. Cellular’s Amendment No. 2 on Form 8 dated December 28, 1992 to U.S. Cellular’s Report on Form 8-A.
3.2	Restated Bylaws, as amended, are hereby incorporated by reference to Exhibit 3.1 to U.S. Cellular’s Current Report on Form 8-K dated April 6, 2012.
4.1(a)	Restated Certificate of Incorporation, as amended, incorporated herein as Exhibit 3.1 (a).
4.1(b)	Certificate of Amendment to Restated Certificate of Incorporation is incorporated herein as Exhibit 3.1 (b).
4.2	Restated Bylaws, as amended, are incorporated herein as Exhibit 3.2.
4.3	Revolving Credit Agreement dated December 17, 2010 among U.S. Cellular  and the lenders named therein, Toronto Dominion (New York) LLC as Administrative Agent and Swing Line Lender, The Toronto Dominion Bank, New York Branch as Letter of Credit Issuer, TD Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Co-Lead Arrangers and Joint Book Managers, Wells Fargo Bank, N.A. as Syndication Agent, and Bank of America, N.A., SunTrust Bank and CoBank ACB as Co-Documentation Agents, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Current Report on Form 8-K dated December 17, 2010.
4.4(a)	Indenture for Senior Debt Securities dated June 1, 2002 between U.S. Cellular and The Bank of New York Mellon Trust Company, N.A., formerly known as BNY Midwest Trust Company of New York (“BNY”) is hereby incorporated by reference to Exhibit 4.1 to Form S-3 dated May 31, 2013 (File No. 333-188971).
4.4(b)	Form of Third Supplemental Indenture dated December 3, 2003 between U.S. Cellular and BNY Midwest Trust Company, relating to $444,000,000 of U.S. Cellular’s 6.7% Senior Notes due 2033, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Current Report on Form 8-K dated December 3, 2003.
4.4(c)	Form of Fifth Supplemental Indenture dated June 21, 2004 between U.S. Cellular and BNY Midwest Trust Company, relating to $100,000,000 of U.S. Cellular’s 6.7% Senior Notes due 2033, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Current Report on Form 8-K dated June 21, 2004.
4.4(d)	Form of Sixth Supplemental Indenture dated as of May 9, 2011 between U.S. Cellular and BNY Midwest Trust Company, related to $342,000,000 of U.S. Cellular’s 6.95% Senior Notes due 2060, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Current Report on Form 8-K dated May 9, 2011.
4.5	Indenture for Subordinated Debt Securities between U.S. Cellular and BNY is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Current Report on Form 8-K dated September 16, 2013.
9.1	Amendment and Restatement (dated April 22, 2005) of Voting Trust Agreement dated June 30, 1989 is hereby incorporated by reference to the Exhibit filed on Amendment No. 3 to the Schedule 13D dated May 2, 2005 filed by the trustees of such voting trust with respect to TDS Common Shares.
10.1	Tax Allocation Agreement between U.S. Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Registration No. 33-16975).
10.2	Cash Management Agreement between U.S. Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Registration No. 33-16975).
10.3	Registration Rights Agreement between U.S. Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Registration No. 33-16975).
10.4	Exchange Agreement between U.S. Cellular and TDS, as amended, is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Registration No. 33-16975).
10.5	Intercompany Agreement between U.S. Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Registration No. 33-16975).
10.6	Employee Benefit Plans Agreement between U.S. Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Registration No. 33-16975).
10.7	Insurance Cost Sharing Agreement between U.S. Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Registration No. 33-16975).
10.8(a)*	TDS Supplemental Executive Retirement Plan, as amended and restated, effective January 1, 2009 is hereby incorporated by reference to Exhibit 10.1 to TDS’ Current Report on Form 8-K dated August 27, 2008.
10.8(b)*	Amendment to the TDS Supplemental Executive Retirement Plan, is hereby incorporated by reference to Exhibit 10.2 to TDS’ Current Report on Form 8-K dated March 15, 2012.
10.9*	U.S. Cellular Restated Compensation Plan for Non-Employee Directors is hereby incorporated by reference to Exhibit B to the U.S. Cellular’s Notice of Annual Meeting of Shareholders and Proxy Statement dated April 15, 2013.
10.10*	U.S. Cellular 2013 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit A to the U.S. Cellular Notice of Annual Meeting of Shareholders and Proxy Statement dated April 15, 2013.
10.11*	U.S. Cellular Form of Long-Term Incentive Plan Executive Deferred Compensation Agreement —Phantom Stock Account for officers is hereby incorporated by reference to Exhibit 10.5 to U.S. Cellular’s Current Report on Form 8-K dated May 14, 2013.
10.12(a)*	U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference to Exhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated December 10, 2007.
10.12(b)*	First Amendment to U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference to Exhibit 10.6 to U.S. Cellular’s Current Report on Form 8-K dated December 9, 2008.
10.12(c)*	Second Amendment to U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference to Exhibit 10.12(c) to U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2012.
10.12(d)*	Election Form for U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference to Exhibit 10.12(d) to U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2012.
10.13*	Letter Agreement dated October 28, 2013 between U.S. Cellular and Jay Ellison.
10.14*	U.S. Cellular Form of Long-Term Incentive Plan Stock Option Award Agreement for officers is hereby incorporated by reference to Exhibit 10.3 to U.S. Cellular’s Current Report on Form 8-K dated May 14, 2013.
10.15*	U.S. Cellular Form of Long-Term Incentive Plan Restricted Stock Unit Award Agreement for officers is hereby incorporated by reference to Exhibit 10.4 to U.S. Cellular’s Current Report on Form 8-K dated May 14, 2013.
10.16*	Letter Agreement between U.S. Cellular and Steven T. Campbell dated June 1, 2005 is hereby incorporated by reference to Exhibit 99.2 to U.S. Cellular’s Current Report on Form 8-K dated June 1, 2005.
10.17*	Form of Retention Bonus Letter to “named executive officers” other than the President and CEO is hereby incorporated by reference to Exhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated April 12, 2011.
10.18*	U.S. Cellular 2013 Officer Annual Incentive Plan is hereby incorporated by reference to Exhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated July 22, 2013.
10.19*	Letter Agreement dated July 25, 2013 between U.S. Cellular and Kenneth R. Meyers is hereby incorporated by reference to Exhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated July 25, 2013.
10.20**	Master Service Agreement entered into by United States Cellular Corporation and Amdocs Software Systems Limited on August 17, 2010 to develop a Billing and Operational Support System (“B/OSS”) with a new point-of-sale system to consolidate billing on one platform, is hereby incorporated by reference to Exhibit 10.8 to U.S. Cellular’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010.
10.21**	Software License and Maintenance Agreement entered into by United States Cellular Corporation and Amdocs Software Systems Limited on August 17, 2010 to develop a Billing and Operational Support System (“B/OSS”) with a new point-of-sale system to consolidate billing on one platform, is hereby incorporated by reference to Exhibit 10.9 to U.S. Cellular’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010.
10.22*	Employment and General Release Agreement dated December 17, 2013 between U.S. Cellular and Carter S. Elenz, is hereby incorporated by reference to Exhibit 10.1 to an amendment dated December 19, 2013 to U.S. Cellular’s Current Report on Form 8-K dated October 28, 2013.
11	Statement regarding computation of earnings per share (included in Note 4 — Earnings Per Share in the Notes to Consolidated Financial Statements in Exhibit 13).
12	Statement regarding computation of ratio of earnings to fixed charges for the years ended December 31, 2013, 2012, 2011, 2010, and 2009.
13	Incorporated portions of 2013 Annual Report to Shareholders.
21	Subsidiaries of U.S. Cellular.
23.1	Consent of Independent Registered Public Accounting Firm—PricewaterhouseCoopers LLP.
23.2	Consent of Independent Registered Public Accounting Firm—Deloitte & Touche LLP.
31.1	Principal executive officer certification pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
31.2	Principal financial officer certification pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
32.1	Principal executive officer certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.2	Principal financial officer certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
*      Indicates a management contract or compensatory plan or arrangement.
**   Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to the Securities Exchange Act of 1934, as amended.

EX-10.13

 

Exhibit 10.13

 

8410 W. Bryn Mawr Avenue
Chicago, IL 60631-3486

773 399 8900 p

www.uscellular.com

October 28, 2013                                                

Jay Ellison

DearJay, 

We are pleased to extend an offer for you to join U.S. Cellular Corporation as the Executive Vice President, Sales and Customer Service reporting to Ken Meyers.  We hope that you accept this offer and agree to start on November, 1, 2013. Upon acceptance, your appointment as an officer is subject to the approval of the U.S. Cellular Board of Directors.

This letter contains our complete offer of employment to you.  Your starting salary will be $17,693, paid bi-weekly, ($460,000 annualized) and will be subject to all applicable withholdings.  Your pay check or direct deposit notification will be mailed to you at your address of record.  You will be eligible for an annual performance review and given consideration for a salary increase in March, 2014. 

You will be eligible for participation in an annual bonus program and will have a target bonus equal to 75% of your 2013 annual base earnings. Actual bonus paid for 2013 will be pro-rated based upon your hire date. Any bonus earned for 2013 is scheduled to be paid in March, 2014, provided you are an employee in good standing at that time.

You will be eligible to participate in the company’sLong-Term Incentive Plan(LTIP) with an initial award of $59,416 worth of non-qualified stock options. The exercise price and the number of options granted will be determined by the closing price of a share of U. S. Cellular stock on the latter of your start date or the date the Long Term Incentive Compensation Committee of the Board of Directors, and the full Board of Directors, approves your grant. The options will vest in three installments (33 1/3% each year) over three years. Participation in this plan also includes an opportunity for you to receive future stock options and restricted stock unit (RSU’s) awards which historically are granted on the first trading day of April each year.

In subsequent years, assuming U.S. Cellular continues its LTIP in its current form with the same base pay multiples, your target Long-Term Incentive (LTI) value will be 155%  of your base earnings.  This assumes that the company and you meet certain performance targets.  If we maintain the current equity award vehicles and certain performance targets are met, 50%  of your LTI value will be paid as stock options and 50%  will be paid as RSU’s.  For any LTI awards made in April 2014, your RSU award allocation may be pro-rated based on your date of hire during 2013.

U.S. Cellular provides an excellent benefits package, including group insurance, 401(k) plan participation, pension and flexible spending accounts.  Also, as a member of senior management, you are eligible to participate in two separate salary and bonus deferral programs.  Additional information regarding these programs, as well as U.S. Cellular’s complete benefits program will be discussed with you at time of hire.

This offer is expressly contingent upon the acceptable results of a pre-employment drug screening.  Failure to submit to a drug screen within 48 hours of the acceptance of this offer or a confirmed positive drug test shall result in the withdrawal of the employment offer and denial of employment.

This offer is also contingent upon the background check results provided by our third-party administrator, Orange Tree Employment Screening, and upon your ability to prove your identity and eligibility to be employed in compliance with the Immigration Reform and Control Act of 1986.  At the time of hire, you will be provided with a comprehensive list of acceptable documents, which may be utilized to comply with the requirements of this federal law, as well as a Federal I-9 form, which you must complete.

In addition, this offer is contingent upon you signing this letter and completing the USCC Payroll Corporation Confidentiality / Non-Solicitation / Non-Competition Agreement.  By signing below, you also represent to U.S. Cellular that you are not subject to any Confidentiality / Non-Solicitation / Non-Competition Agreement with any former employer or firm with respect to which you were an independent contractor. It is important that you understand all terms and conditions stated in the Agreement, and we will be happy to review the details with you directly.

To accept our invitation and as a condition of employment, we ask that you please sign and return this letter.  A second copy of this letter is provided for your records.

On behalf of Ken Meyers, I welcome you to join U.S. Cellular®, and we look forward to a successful partnership with you

Sincerely,

/s/ Jenn Hooper

Jenn Hooper

Senior Director of Human Resources

Accepted and agreed:

/s/ Jay Ellison                                                                                       Date:      10/30/13                                                                              

Jay Ellison

Copy:     Ken Meyers

                President and Chief Executive Officer

                U.S. Cellular

Enclosures:           USCC Confidentiality/Non-Solicitation/Non-Competition Agreement

                                USCC Benefits At A Glance

EX-12

 

									Exhibit 12
UNITED STATES CELLULAR CORPORATION RATIO OF EARNINGS TO FIXED CHARGES
For the Year Ended December 31,
(Dollars in thousands)		2013		2012		2011		2010		2009
EARNINGS:
Income before income taxes (1)		$	257,656	$	205,053	$	312,822	$	241,116	$	349,165
Add (deduct):
	Equity in earnings of unconsolidated   entities		(131,949)		(90,364)		(83,566)		(97,318)		(96,800)
	Distributions from unconsolidated   entities		125,660		84,417		91,768		100,359		91,105
	Amortization of capitalized interest		3,704		855		613		492		320
	Income attributable to noncontrolling   interests in subsidiaries that do not have   fixed charges		(6,575)		(30,122)		(24,247)		(23,869)		(22,663)
			248,496		169,839		297,390		220,780		321,127
Add fixed charges:
	Consolidated interest expense (2)		43,963		42,393		65,614		61,555		78,199
	Interest portion (1/3) of consolidated rent   expense		38,783		47,394		44,130		42,550		41,305
		$	331,242	$	259,626	$	407,134	$	324,885	$	440,631
FIXED CHARGES:
	Consolidated interest expense (2)	$	43,963	$	42,393	$	65,614	$	61,555	$	78,199
	Capitalized interest		18,382		17,930		10,064		2,446		1,647
	Interest portion (1/3) of consolidated rent   expense		38,783		47,394		44,130		42,550		41,305
		$	101,128	$	107,717	$	119,808	$	106,551	$	121,151
RATIO OF EARNINGS TO FIXED CHARGES			3.28		2.41		3.40		3.05		3.64
(1)	Includes non-cash charges related to losses on impairment of $14.0 million in 2009.
	Includes gain on sale of business and other exit costs, net of $246.8 million in 2013 and loss on sale of business and other exit costs, net of $21.0 million in 2012.
	Includes gain on license sales and exchanges of $255.5 million in 2013 and $11.8 million in 2011.
	Includes gain on investments of $18.6 million in 2013 and $11.4 million in 2011 and loss on investment of $3.7 million in 2012.
(2)	Interest expense on income tax contingencies is not included in fixed charges.

EX-13

 

	Exhibit 13
United States Cellular Corporation and Subsidiaries
Financial Reports Contents
Management’s Discussion and Analysis of Results of Operations and Financial Condition	1
Overview	1
Results of Operations	5
Inflation	12
Recently Issued Accounting Pronouncements	12
Financial Resources	12
Liquidity and Capital Resources	15
Application of Critical Accounting Policies and Estimates	18
Certain Relationships and Related Transactions	21
Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement	22
Market Risk	25
Consolidated Statement of Operations	26
Consolidated Statement of Cash Flows	27
Consolidated Balance Sheet—Assets	28
Consolidated Balance Sheet—Liabilities and Equity	29
Consolidated Statement of Changes in Equity	30
Notes to Consolidated Financial Statements	33
Reports of Management	62
Report of Independent Registered Public Accounting Firm	64
Selected Consolidated Financial Data	65
Consolidated Quarterly Information (Unaudited)	66
Shareholder Information	68

United States Cellular Corporation

Management’s Discussion and Analysis of Financial Condition and Results of Operations

United States Cellular Corporation (“U.S. Cellular”) owns, operates and invests in wireless markets throughout the United States.  U.S. Cellular is an 84%‑owned subsidiary of Telephone and Data Systems, Inc. (“TDS”).

The following discussion and analysis should be read in conjunction with U.S. Cellular’s audited consolidated financial statements and the description of U.S. Cellular’s business included in Item 1 of the U.S. Cellular Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2013.  The discussion and analysis contained herein refers to consolidated data and results of operations, unless otherwise noted.

OVERVIEW

The following is a summary of certain selected information contained in the comprehensive Management’s Discussion and Analysis of Financial Condition and Results of Operations that follows.  The overview does not contain all of the information that may be important.  You should carefully read the entire Management’s Discussion and Analysis of Financial Condition and Results of Operations and not rely solely on the overview.

In its consolidated operating markets, U.S. Cellular serves approximately 4.8 million customers in 23 states. As of December 31, 2013, U.S. Cellular’s average penetration rate in its consolidated operating markets was 15.0%. U.S. Cellular operates on a customer satisfaction strategy, striving to meet or exceed customer needs by providing a comprehensive range of wireless products and services, excellent customer support, and a high-quality network. U.S. Cellular’s business development strategy is to obtain interests in and access to wireless licenses in its current operating markets and in areas that are adjacent to or in close proximity to its other wireless licenses, thereby building contiguous operating market areas with strong spectrum positions.  U.S. Cellular believes that the acquisition of additional licenses within its current operating markets will enhance its network capacity to meet its customers’ increased demand for data services.  U.S. Cellular anticipates that grouping its operations into market areas will continue to provide it with certain economies in its capital and operating costs.

Financial and operating highlights in 2013 included the following:

·On April 3, 2013, U.S. Cellular entered into an agreement relating to St. Lawrence Seaway RSA Cellular Partnership (“NY1”) and New York RSA 2 Cellular Partnership (“NY2” and, together with NY1, the “Partnerships”) with Cellco Partnership d/b/a Verizon Wireless, which required U.S. Cellular to deconsolidate the Partnerships and thereafter account for them as equity method investments (the “NY1 & NY2 Deconsolidation”).  In connection with the deconsolidation, U.S. Cellular recognized a non-cash pre-tax gain of $18.5 million which was recorded in Gain on investments in the Consolidated Statement of Operations.  See Note 7 – Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information regarding this transaction.

·On May 16, 2013, U.S. Cellular completed the sale of customers and certain PCS license spectrum in U.S. Cellular’s Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets (“Divestiture Markets”), to Sprint Corp., fka Sprint Nextel Corporation, for $480 million in cash (the “Divestiture Transaction”).  In connection with the sale, U.S. Cellular recognized a pre-tax gain of $266.4 million which was recorded in (Gain) loss on sale of business and other exit costs, net in the Consolidated Statement of Operations.  See Note 5 – Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information regarding this transaction.  

·On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75 per share, for an aggregate amount of $482.3 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013.

·On October 4, 2013, U.S. Cellular sold the majority of its Mississippi Valley non-operating market license (“unbuilt license”) for $308.0 million.  A pre-tax gain of $250.6 million was recorded in (Gain) loss on license sales and exchanges in the Consolidated Statement of Operations. 

·In the fourth quarter of 2013, U.S. Cellular issued loyalty reward points with a value of $43.5 million as a loyalty bonus in recognition of the inconvenience experienced by customers during U.S. Cellular’s recent billing system conversion. The loyalty bonus reduced Operating revenues in the Consolidated Statement of Operations and increased Customer deposits and deferred revenues in the Consolidated Balance Sheet.

1

·Total consolidated customers were 4,774,000 at December 31, 2013, including 4,610,000 retail customers (97% of total).

The following operating information is presented for Core Markets.  As used here, Core Markets is defined as all consolidated markets in which U.S. Cellular currently conducts business and, therefore, excludes the Divestiture Markets and the NY1 & NY2 Deconsolidated Markets. Core Markets as defined also includes any other income or expenses due to U.S. Cellular’s direct or indirect ownership interests in other spectrum in the Divestiture Markets which was not included in the Divestiture Transaction and other retained assets from the Divestiture Markets.

·Retail customer net losses were 215,000 in 2013 compared to net additions of 32,000 in 2012. In the postpaid category, there were net losses of 217,000 in 2013, compared to net losses of 92,000 in 2012.  Prepaid net additions were 2,000 in 2013 compared to net additions of 124,000 in 2012.

·Postpaid customers comprised approximately 93% of U.S. Cellular’s retail customers as of December 31, 2013 and December 31, 2012. The postpaid churn rate was 1.7% in 2013 and 1.5% in 2012.  The prepaid churn rate was 6.7% in 2013 and 5.2% in 2012.

·Billed average revenue per user (“ARPU”) increased to $50.82 in 2013 from $50.54 in 2012 reflecting an increase in postpaid ARPU due to increases in smartphone adoption and corresponding revenues from data products and services, offset by a decrease in prepaid ARPU. Service revenue ARPU decreased to $57.66 in 2013 from $58.49 in 2012 due primarily to decreases in inbound roaming and eligible telecommunications carriers (“ETC”) revenues. The special issuance of loyalty rewards points in the fourth quarter of 2013 negatively impacted both billed ARPU and service revenue ARPU by $0.73 in 2013.

·Postpaid customers on smartphone service plans increased to 51% as of December 31, 2013 compared to 41% as of December 31, 2012. In addition, smartphones represented 69% of all devices sold in 2013 compared to 56% in 2012. 

The following financial information is presented for U.S. Cellular consolidated results:

·Retail service revenues of $3,165.5 million decreased $382.5 million year-over-year, due to a decrease of 619,000 in the average number of customers (including approximately 550,000 due to the reductions caused by the Divestiture Transaction and NY1 & NY2 Deconsolidation).

·Cash flows from operating activities were $290.9 million in 2013 compared to $899.3 million in 2012. At December 31, 2013, Cash and cash equivalents and Short-term investments totaled $392.2 million and there were no outstanding borrowings under the revolving credit facility.

·Total additions to Property, plant and equipment were $737.5 million, including expenditures to deploy fourth generation Long-Term Evolution (“4G LTE”) equipment, construct cell sites, increase capacity in existing cell sites and switches, outfit new and remodel existing retail stores, develop new billing and other customer management related systems and platforms, and enhance existing office systems. Total cell sites in service decreased 13% year-over-year to 6,975 primarily as a result of the NY1 & NY2 Deconsolidation and the deactivation of certain cell sites in the Divestiture Markets.

·Operating income decreased $9.8 million, or 6%, to $146.9 million in 2013 from $156.7 million in 2012, reflecting lower service revenues as discussed above as well as lower inbound roaming revenues, higher equipment subsidies and accelerated depreciation related to the Divestiture Transaction. The impacts of these items were offset by lower operating expenses in other categories and gains related to sales of the Divestiture Markets and spectrum licenses. See additional discussion below in “Results of Operations”.

·Net income attributable to U.S. Cellular shareholders increased $29.0 million, or 26%, to $140.0 million in 2013 compared to $111.0 million in 2012, reflecting the factors discussed below in “Results of Operations”. Basic earnings per share was $1.67 in 2013, which was $0.36 higher than in 2012, and Diluted earnings per share was $1.65, which was $0.35 higher than in 2012.

U.S. Cellular anticipates that future results will be affected by the following factors:

·Impacts of selling Apple iPhone products;

·Relative ability to attract and retain customers in a competitive marketplace in a cost effective manner;

·Effects of industry competition on service and equipment pricing as well as the impacts associated with the expanding presence of carriers and other retailers offering low-priced, unlimited prepaid service;

2

·Expanded distribution of products and services in third-party national retailers;

·Potential increases in prepaid customers, who generally generate lower ARPU and higher churn, as a percentage of U.S. Cellular’s customer base in response to changes in customer preferences and industry dynamics;

·The nature and rate of growth in the wireless industry, requiring U.S. Cellular to grow revenues primarily from selling additional products and services to its existing customers, increasing the number of multi-device users among its existing customers, increasing the use of data products and services and attracting wireless customers switching from other wireless carriers;

·Continued growth in revenues and costs related to data products and services and declines in revenues from voice services;

·Rapid growth in the demand for new data devices and services which may result in increased cost of equipment sold and other operating expenses and the need for additional investment in network capacity and enhancements;

·Further consolidation among carriers in the wireless industry, which could result in increased competition for customers and/or cause roaming revenues to decline;

·Uncertainty related to various rulemaking proceedings under way at the Federal Communications Commission (“FCC”);

·The ability to negotiate satisfactory 4G LTE data roaming agreements with other wireless operators;

·U.S. Cellular completed the migration of its customers to a new Billing and Operational Support System (“B/OSS”) in the third quarter of 2013. This conversion caused billing delays, which were largely resolved in the fourth quarter of 2013. In addition, intermittent system outages and delayed system response times negatively impacted customer service and sales operations at certain times. Continuing operational problems associated with the conversion to the new billing system could have adverse effects on U.S. Cellular’s business (in areas such as overall customer satisfaction, customer attrition, uncollectible accounts receivable, gross customer additions, or operating expenses).  All of these factors could have a material adverse effect on U.S. Cellular’s results of operations or cash flows; and

·On August 14, 2013 U.S. Cellular entered into a definitive agreement to sell the majority of its St. Louis area unbuilt license for $92.3 million. The sale will result in an estimated pre-tax gain of $76.2 million. This transaction is subject to regulatory approval and is expected to close in the first quarter of 2014 at which time, the gain on sale will be recorded.  In accordance with GAAP, the book value of the license has been accounted for and disclosed as “held for sale” in the Consolidated Balance Sheet at December 31, 2013.

Pro Forma Financial Information

Refer to U.S. Cellular’s Form 8-K filed on February 26, 2014 for pro forma financial information related to the Divestiture Transaction and the NY1 & NY2 Deconsolidation for the three and twelve months ended December 31, 2013, as if the transactions had occurred at the beginning of the respective periods.  Also refer to U.S. Cellular’s Form 8-K filed on May 3, 2013 for pro forma financial information related to the Divestiture Transaction and the NY1 & NY2 Deconsolidation for the twelve months ended December 31, 2012.

REGULATORY DEVELOPMENTS

FCC Reform Order

In 2011, the FCC released an order (“Reform Order”) to: reform its universal service and intercarrier compensation mechanisms; establish a new, broadband-focused support mechanism; and propose further rules to advance reform.  Appeals of the Reform Order were consolidated and argued in the U.S. Court of Appeals for the 10^th Circuit on November 19, 2013, with a decision anticipated in 2014.

There have been no significant changes to the Reform Order since December 31, 2012 that are expected to adversely affect U.S. Cellular.  U.S. Cellular cannot predict the outcome of the consolidated appeals referred to above or any future rulemaking, reconsideration or legal challenges and, as a consequence, the impacts that such potential developments may have on U.S. Cellular’s business, financial condition or results of operations.

3

FCC Interoperability Order

On October 25, 2013, the FCC adopted a Report and Order and Order of Proposed Modification confirming a voluntary industry agreement on interoperability in the Lower 700 MHz spectrum band.   The FCC's Report and Order lays out a roadmap for the voluntary commitments of AT&T and DISH Network Corporation ("DISH") to become fully binding under a regulatory framework which will require the FCC to take additional actions proposed to be completed by the first quarter of 2014. Pursuant to thisvoluntary agreement, AT&T will begin incorporating changes in its network and devices that will foster interoperability across all paired spectrum blocks in the Lower 700 MHz Band, collectively comprising “Band 12” under the standards of the 3^rd Generation Partnership Project (“3GPP”).  AT&T also agreed to support LTE roaming on its networks for carriers with compatible Band 12 devices, consistent with the FCC’s rules on roaming.  As outlined in its voluntary commitment, AT&T will be implementing the foregoing changes in phases starting with network software enhancement taking place possibly through the third quarter of 2015 with its Band 12 device roll-out to follow.  In addition the FCC has adopted changes in its technical rules for certain unpaired spectrum licensed to AT&T and DISH in the Lower 700 MHz band to enhance prospects for Lower 700 MHz interoperability.  AT&T’s network and devices currently only interoperate across two of the three paired blocks in the Lower 700 MHz band.   U.S. Cellular’s LTE deployment, carried out in conjunction with its partner, King Street Wireless, utilizes spectrum in all three of these blocks and consequently was not interoperable with the AT&T configuration.  U.S. Cellular believes that the FCC action will broaden the ecosystem of devices available to U.S. Cellular’s customers over time.

4

RESULTS OF OPERATIONS

Summary Operating Data for U.S. Cellular Consolidated Markets

Following is a table of summarized operating data for U.S. Cellular’s Consolidated Markets. Consolidated Markets herein refers to markets which U.S. Cellular currently consolidates, or previously consolidated in the periods presented, and is not adjusted in prior periods presented for subsequent divestitures or deconsolidations. Unless otherwise noted, figures reported in Results of Operations are representative of consolidated results.
As of or for the Year Ended December 31,			2013			2012			2011
Retail Customers
	Postpaid
		Total at end of period		4,267,000			5,134,000			5,302,000
		Gross additions		697,000			880,000			836,000
		Net additions (losses)		(325,000)			(165,000)			(117,000)
		ARPU(1)	$	54.31		$	54.32		$	52.20
		Churn rate(2)		1.8	%		1.7	%		1.5	%
		Smartphone penetration(3)(4)		50.8	%		41.8	%		30.5	%
	Prepaid
		Total at end of period		343,000			423,000			306,000
		Gross additions		309,000			368,000			228,000
		Net additions (losses)		(21,000)			118,000			(8,000)
		ARPU(1)	$	31.44		$	33.26		$	33.42
		Churn rate(2)		7.0	%		6.0	%		6.6	%
Total customers at end of period				4,774,000			5,798,000			5,891,000
Billed ARPU(1)			$	50.73		$	50.81		$	48.63
Service revenue ARPU(1)			$	57.61		$	58.70		$	56.54
Smartphones sold as a percent of total devices sold				68.4	%		55.8	%		44.0	%
Total Population
	Consolidated markets(5)			58,013,000			93,244,000			91,965,000
	Consolidated operating markets(5)			31,759,000			46,966,000			46,888,000
Market penetration at end of period
	Consolidated markets(6)			8.2	%		6.2	%		6.4	%
	Consolidated operating markets(6)			15.0	%		12.3	%		12.6	%
Capital expenditures (000s)			$	737,501		$	836,748		$	782,526
Total cell sites in service				6,975			8,028			7,882
Owned towers in service				4,448			4,408			4,311

Summary Operating Data for U.S. Cellular Core Markets

Following is a table of summarized operating data for U.S. Cellular's Core Markets (which excludes the Divestiture Markets and NY1 and NY2 markets) as of or for the year ended December 31, 2013 or 2012.
As of or for the Year Ended December 31,			2013			2012
Retail Customers
	Postpaid
		Total at end of period		4,267,000			4,496,000
		Gross additions		682,000			746,000
		Net additions (losses)		(217,000)			(92,000)
		ARPU(1)	$	54.23		$	53.65
		Churn rate(2)		1.7	%		1.5	%
		Smartphone penetration(3)(4)		50.8	%		41.1	%
	Prepaid
		Total at end of period		343,000			342,000
		Gross additions		295,000			288,000
		Net additions (losses)		2,000			124,000
		ARPU(1)	$	31.45		$	32.98
		Churn rate(2)		6.7	%		5.2	%
Total customers at end of period				4,774,000			5,022,000
Billed ARPU (1)			$	50.82		$	50.54
Service revenue ARPU(1)			$	57.66		$	58.49
Smartphones sold as a percent of total devices sold				68.6	%		56.1	%
Total Population
	Consolidated markets(5)			58,013,000			83,384,000
	Consolidated operating markets(5)			31,759,000			31,445,000
Market penetration at end of period
	Consolidated markets(6)			8.2	%		6.0	%
	Consolidated operating markets(6)			15.0	%		16.0	%
Capital expenditures (000s)			$	735,082		$	768,884
Total cell sites in service				6,161			6,130
Owned towers in service				3,913			3,847

5

(1)ARPU metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period.  These revenue bases and customer populations are shown below:

a.Postpaid ARPU consists of total postpaid service revenues and postpaid customers.

b.Prepaid ARPU consists of total prepaid service revenues and prepaid customers.

c.Billed ARPU consists of total postpaid, prepaid and reseller service revenues and postpaid, prepaid and reseller customers.

d.Service revenue ARPU consists of total retail service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(2)Churn metrics represent the percentage of the postpaid or prepaid customers that disconnects service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.

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

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

(5)Used only to calculate market penetration of consolidated and core markets and consolidated and core operating markets, respectively. See footnote (6) below.

(6)Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated and core markets and consolidated and core operating markets, respectively, estimated by Claritas.  

6

Components of Operating Income
Year Ended December 31,		2013		Increase/ (Decrease)		Percentage Change	2012		Increase/ (Decrease)		Percentage Change	2011
(Dollars in thousands)
Retail service		$	3,165,496	$	(382,483)	(11)%	$	3,547,979	$	61,457	2%	$	3,486,522
Inbound roaming			263,186		(85,531)	(25)%		348,717		408	N/M		348,309
Other			166,091		(36,069)	(18)%		202,160		(16,806)	(8)%		218,966
	Service revenues		3,594,773		(504,083)	(12)%		4,098,856		45,059	1%		4,053,797
Equipment sales			324,063		(29,165)	(8)%		353,228		63,679	22%		289,549
	Total operating revenues		3,918,836		(533,248)	(12)%		4,452,084		108,738	3%		4,343,346
System operations (excluding   Depreciation, amortization   and accretion reported below)			763,435		(183,370)	(19)%		946,805		17,426	2%		929,379
Cost of equipment sold			999,000		63,053	7%		935,947		144,145	18%		791,802
Selling, general and   administrative			1,677,395		(87,538)	(5)%		1,764,933		(4,768)	N/M		1,769,701
Depreciation, amortization   and accretion			803,781		195,148	32%		608,633		35,076	6%		573,557
(Gain) loss on asset disposals, net			30,606		(12,518)	(69)%		18,088		(8,199)	(83)%		9,889
(Gain) loss on sale of business   and other exit costs, net			(246,767)		267,789	>100		21,022		(21,022)	N/M		-
(Gain) loss on license sales and   exchanges			(255,479)		255,479	N/M		-		(11,762)	N/M		(11,762)
	Total operating expenses		3,771,971		(523,457)	(12)%		4,295,428		232,862	6%		4,062,566
Operating income		$	146,865	$	(9,791)	(6)%	$	156,656	$	(124,124)	(44)%	$	280,780
N/M - Percentage change not meaningful

Operating Revenues

Service revenues

Service revenues consist primarily of: (i) charges for access, airtime, roaming, recovery of regulatory costs and value‑added services, including data products and services, provided to U.S. Cellular’s retail customers and to end users through third-party resellers (“retail service”); (ii) charges to other wireless carriers whose customers use U.S. Cellular’s wireless systems when roaming, including long-distance roaming (“inbound roaming”); and (iii) amounts received from the Federal USF.

Retail service revenues

Retail service revenues decreased by $382.5 million, or 11%, to $3,165.5 million due primarily to a decrease in U.S. Cellular’s average customer base (including the reductions caused by the Divestiture Transaction and NY1 & NY2 Deconsolidation) and a slight decrease in billed ARPU.  In 2012, retail service revenues increased by $61.5 million, or 2%, to $3,548.0 million due primarily to the impact of an increase in billed ARPU, partially offset by a decrease in U.S. Cellular’s average customer base. 

In the fourth quarter of 2013, U.S. Cellular issued loyalty reward points with a value of $43.5 million as a loyalty bonus in recognition of the inconvenience experienced by customers during U.S. Cellular’s recent billing system conversion. The value of the loyalty bonus reduced Operating revenues in the Consolidated Statement of Operations and increased Customer deposits and deferred revenues in the Consolidated Balance Sheet.

Billed ARPU of $50.73 in 2013 was relatively flat compared to $50.81 in 2012. The special issuance of loyalty rewards points in the fourth quarter of 2013 negatively impacted billed ARPU by $0.70 in 2013, which was partially offset by an increase in smartphone adoption and corresponding revenues from data products and services. The increase in billed ARPU in 2012 from $48.63 in 2011 also reflects the impact of a larger portion of the customer base using smartphones which drives incremental data access revenue.

U.S. Cellular expects continued pressure on revenues in the foreseeable future due to industry competition for customers and related effects on pricing of service plan offerings offset to some degree by continued adoption of smartphones and data usage.

7

Inbound roaming revenues

Inbound roaming revenues decreased by $85.5 million, or 25% in 2013 to $263.2 million.  The decrease was due primarily to lower rates ($47.9 million) and the impacts of the Divestiture Transaction and NY1 & NY2 Deconsolidation ($37.6 million).  Data volume increased year-over year but the impact of this increase was offset by the combined impacts of lower volume for voice and lower rates for both data and voice.  The decline in roaming revenues was offset by a decline in roaming expense also due to lower rates.  U.S. Cellular expects continued growth in data volume but also expects that the revenue impact of this growth will be offset by the impacts of decreases in data rates and voice volume.

Inbound roaming revenues of $348.7 million were flat in 2012 compared to 2011 as higher data revenues, reflecting significantly higher volumes but lower negotiated rates, were offset by lower voice revenues, reflecting both lower volumes and rates.

Other revenues

Other revenues decreased by $36.1 million, or 18%, in 2013 compared to 2012. In 2012, Other revenues decreased by $16.8 million, or 8%.  The decreases in both years are due primarily to decreases in ETC support.

Pursuant to the FCC’s Reform Order (See “Overview – FCC Reform Order”), U.S. Cellular’s current ETC support is being phased down at the rate of 20% per year beginning July 1, 2012.   If the Phase II Mobility Fund is not operational by July 2014, the phase down will halt at that time and U.S. Cellular will continue to receive 60% of its baseline support until the Phase II Mobility Fund is operational.

At this time, U.S. Cellular cannot predict the net effect of the FCC’s changes to the USF high cost support program in the Reform Order.  Accordingly, U.S. Cellular cannot predict whether such changes will have a material adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Equipment sales revenues

Equipment sales revenues include revenues from sales of wireless devices and related accessories to both new and existing customers, as well as revenues from sales of wireless devices and accessories to agents. All Equipment sales revenues are recorded net of rebates.

U.S. Cellular offers a competitive portfolio of quality wireless devices to both new and existing customers. U.S. Cellular’s customer acquisition and retention efforts include offering new wireless devices to customers at discounted prices; in addition, customers on currently offered rate plans receive loyalty reward points that may be used to purchase a new wireless device or accelerate the timing of a customer’s eligibility for a wireless device upgrade at promotional pricing. U.S. Cellular also continues to sell wireless devices to agents including national retailers; this practice enables U.S. Cellular to provide better control over the quality of wireless devices sold to its customers, establish roaming preferences and earn quantity discounts from wireless device manufacturers which are passed along to agents and other retailers.

The decrease in 2013 equipment sales revenues of $29.2 million, or 8%, to $324.1 million was driven primarily by selling fewer devices, partially due to the Divestiture Transaction.  Declines in volume were offset by an increase of 12.0% in average revenue per device.  The increase in 2012 equipment sales revenues of $63.7 million, or 22%, to $353.2 million was driven primarily by a 17% increase in average revenue per wireless device sold; an increase in equipment activation fees also was a factor.  Average revenue per wireless device sold increased in both years due to a continued shift in customer preference to higher priced smartphones.

Operating Expenses

System operations expenses (excluding Depreciation, amortization and accretion)

System operations expenses (excluding Depreciation, amortization and accretion) include charges from telecommunications service providers for U.S. Cellular’s customers’ use of their facilities, costs related to local interconnection to the wireline network, charges for cell site rent and maintenance of U.S. Cellular’s network, long-distance charges, outbound roaming expenses and payments to third‑party data product and platform developers.  

System operations expenses decreased $183.4 million, or 19%, to $763.4 million in 2013 and increased $17.4 million, or 2%, to $946.8 million in 2012.  Key components of the net changes in System operations expenses were as follows:

8

·Expenses incurred when U.S. Cellular’s customers used other carriers’ networks while roaming decreased $64.1 million, or 27%, in 2013 and $11.1 million, or 4%, in 2012, due primarily to lower rates and the impacts of the Divestiture Transaction and NY1 & NY2 Deconsolidation. For both years, data roaming usage increased; however, the impact of the increase was more than offset by lower rates for both data and voice and lower voice volume.

·Maintenance, utility and cell site expenses decreased $61.6 million, or 15%, in 2013 and increased $24.4 million, or 6%, in 2012.  The decrease in 2013 is driven primarily by impacts of the Divestiture Transaction and reductions in expenses related to 3G equipment support and network costs, offset by increases in charges related to 4G LTE equipment and network costs.  The increase in 2012 is driven primarily by an increase in the number of cell sites within U.S. Cellular’s network and costs related to the deployment and operation of LTE networks. 

·Customer usage expenses decreased by $57.7 million, or 19%, in 2013, and increased by $4.1 million, or 1%, in 2012.  The decrease in 2013 is driven by impacts of the Divestiture Transaction and decreases in intercarrier charges as a result of the FCC’s Reform Order and certain data costs, partially offset by increases due to network costs for 4G LTE.  The increase in 2012 is due primarily to an increase in data capacity and usage, offset by a decline in voice usage as well as reduced intercarrier compensation expenses as a result of the FCC’s Reform Order. 

U.S. Cellular expects system operations expenses to increase in the future to support the continued growth in cell sites and other network facilities as it continues to add capacity, enhance quality and deploy new technologies as well as to support increases in total customer usage, particularly data usage.  However, these increases are expected to be offset to some extent by cost savings generated by shifting data traffic to the 4G LTE network from the 3G network.

Cost of equipment sold

Cost of equipment sold increased $63.1 million, or 7%, in 2013 and $144.1 million, or 18% in 2012. In both years, the increase was driven primarily by an increase in the average cost per wireless device sold (33% in 2013  and 18% in 2012). Average cost per device sold increased due to general customer preference for higher priced 4G LTE smartphones, including the introduction of Apple products in the fourth quarter of 2013.  In 2013, total devices sold decreased by 18% partially due to the Divestiture Transaction; in 2012, total devices sold increased by 1%.

U.S. Cellular’s loss on equipment, defined as equipment sales revenues less cost of equipment sold, was $674.9 million, $582.7 million and $502.3 million for 2013, 2012 and 2011, respectively. U.S. Cellular expects loss on equipment to continue to be a significant cost in the foreseeable future as wireless carriers continue to use device pricing as a means of competitive differentiation. In addition, U.S. Cellular expects increasing sales of data centric wireless devices to result in higher equipment subsidies over time; these devices generally have higher purchase costs which cannot be recovered through proportionately higher selling prices to customers under the standard contract/subsidy model the industry has operated with for many years.  However, U.S. Cellular is beginning to offer new equipment pricing constructs such as device financing to offset a higher proportion of increasing equipment costs.

Selling, general and administrative expenses

Selling, general and administrative expenses include salaries, commissions and expenses of field sales and retail personnel and facilities; telesales department salaries and expenses; agent commissions and related expenses; corporate marketing and merchandise management; and advertising expenses.  Selling, general and administrative expenses also include bad debts expense, costs of operating customer care centers and corporate expenses.

Selling, general and administrative expenses decreased by $87.5 million to $1,677.4 million in 2013 and by $4.8 million to $1,764.9 in 2012.  Key components of the net changes in Selling, general and administrative expenses were as follows:

2013—

·Selling and marketing expenses decreased by $75.7 million, or 9%, primarily from lower commission expenses, more cost-effective advertising spending and reduced employee and facilities costs as a result of the Divestiture Transaction.

·General and administrative expenses decreased by $11.8 million, or 1%, driven by corporate cost containment and reduction initiatives and reduced spending as a result of the Divestiture Transaction, offset by costs associated with launching the new billing system of $55.8 million and higher bad debts expense of $31.5 million due to higher customer accounts receivable balances resulting from billing issues experienced after the system conversion.

9

2012—

·Selling and marketing expenses decreased by $24.8 million, or 3%, primarily from more cost-effective advertising spending.

·General and administrative expenses increased by $20.1 million, or 2%, driven by increases in bad debts expense, Federal Universal Service Charge (“FUSC”) expense and non-income tax expense.  FUSC charges are assessed to customers and also included in Service revenues.

Depreciation, amortization and accretion

Depreciation, amortization and accretion expense increased $195.1 million, or 32%, in 2013, and $35.1 million, or 6%, in 2012 due primarily to the acceleration of depreciation, amortization and accretion in the Divestiture Markets.  The impact of the acceleration year over year was $158.5 million in 2013.  The accelerated depreciation, amortization and accretion in the Divestiture Markets is expected to conclude in the first quarter of 2014.

(Gain) loss on asset disposals, net

(Gain) loss on asset disposals, net was a loss of $30.6 million in 2013 and $18.1 million in 2012 due primarily to losses resulting from the write-off and disposals of certain network assets.

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

(Gain) loss on sale of business and other exit costs, net was a gain of $246.8 million in 2013, primarily related to the closing of the Divestiture Transaction.  The loss of $21.0 million in 2012 was due primarily to employee severance costs and asset write-offs in the Divestiture Markets, partially offset by a $4.2 million gain resulting from the sale of a wireless market in March 2012.

(Gain) loss on license sales and exchanges

(Gain) loss on license sales and exchanges resulted from the sale of the Mississippi Valley non-operating market license for $308.0 million, which resulted in a pre-tax gain of $250.6 million.

Components of Other Income (Expense)
Year Ended December 31,	2013		Increase / (Decrease)		Percentage Change	2012		Increase / (Decrease)		Percentage Change	2011
(Dollars in thousands)
Operating income	$	146,865	$	(9,791)	(6)%	$	156,656	$	(124,124)	(44)%	$	280,780
Equity in earnings of   unconsolidated entities		131,949		41,585	46%		90,364		6,798	8%		83,566
Interest and dividend income		3,961		317	9%		3,644		249	7%		3,395
Gain (loss) on investments		18,556		22,274	>100		(3,718)		(15,091)	>(100)		11,373
Interest expense		(43,963)		1,570	4%		(42,393)		(23,221)	(35)%		(65,614)
Other, net		288		(212)	(42)%		500		1,178	>100		(678)
Total investment and   other income		110,791		62,394	>100%		48,397		16,355	51%		32,042
Income before income taxes		257,656		52,603	26%		205,053		(107,769)	(34)%		312,822
Income tax expense		113,134		49,157	77%		63,977		(50,101)	(44)%		114,078
Net income		144,522		3,446	2%		141,076		(57,668)	(29)%		198,744
Less: Net income attributable   to noncontrolling interests,   net of tax		(4,484)		25,586	85%		(30,070)		(6,367)	(27)%		(23,703)
Net income attributable to   U.S. Cellular shareholders	$	140,038	$	29,032	26%	$	111,006	$	(64,035)	(37)%	$	175,041

10

Equity in earnings of unconsolidated entities

Equity in earnings of unconsolidated entities represents U.S. Cellular’s share of net income from entities in which it has a noncontrolling interest and that are accounted for by the equity method. U.S. Cellular generally follows the equity method of accounting for unconsolidated entities in which its ownership interest is less than or equal to 50% but equals or exceeds 20% for corporations and 3% for partnerships and limited liability companies, or for unconsolidated entities in which its ownership is greater than 50% but U.S. Cellular does not have a controlling financial interest.

U.S. Cellular’s investment in the Los Angeles SMSA Limited Partnership (“LA Partnership”) contributed $78.4 million, $67.2 million and $55.3 million to Equity in earnings of unconsolidated entities in 2013, 2012 and 2011, respectively.  U.S. Cellular received cash distributions from the LA Partnership of $71.5 million in 2013 and $66.0 million in 2012 and 2011.

On April 3, 2013, U.S. Cellular deconsolidated the NY1 & NY2 Partnerships and began reporting them as equity method investments in its consolidated financial statements as of that date.  In 2013, U.S. Cellular’s investments in the NY1 & NY2 Partnerships contributed $24.7 million to Equity in earnings of unconsolidated entities subsequent to their deconsolidation.  No amounts were included in 2012 or 2011 because the NY1 & NY2 Partnerships were consolidated in those years.  Distributions from the NY1 & NY2 Partnerships of $29.4 million in 2013, after the deconsolidation on April 1, 2013, are included in Distributions from unconsolidated entities on the Consolidated Statement of Cash Flows.

Gain (loss) on investments

In connection with the deconsolidation of the NY1 & NY2 Partnerships, U.S. Cellular recognized a non-cash pre-tax gain of $18.5 million which was recorded in Gain (loss) on investments in 2013. See Note 7 – Investments in Unconsolidated Entities for additional information.

Interest expense

Interest expense in 2013 as compared to 2012 was relatively flat.  In 2012, interest expense decreased by $23.2 million from 2011 due to lower effective interest rates on long-term debt and an increase in capitalized interest for multi-year projects; in addition, in 2011, U.S. Cellular wrote off $8.2 million of unamortized debt issuance costs related to its $330 million, 7.5% Senior Notes redeemed on June 20, 2011.  

Income tax expense

The effective tax rates on Income before income taxes for 2013, 2012 and 2011 were 43.9%, 31.2% and 36.5%, respectively. The following significant discrete and other items impacted income tax expense for these years:

2013 — Includes a tax expense of $20.4 million related to the NY1 & NY2 Deconsolidation and the Divestiture Transaction, and a tax benefit of $5.4 million resulting from statute of limitation expirations.

2012 — Includes tax benefits of $12.1 million resulting from statute of limitation expirations and $5.3 million resulting from corrections relating to a prior period.

2011 — Includes a tax benefit of $9.9 million resulting from state statute of limitations expirations and tax expense of $6.1 million resulting from corrections of partnership basis.

See Note 3 — Income Taxes in the Notes to Consolidated Financial Statements for a discussion of income tax expense and the overall effective tax rate on Income before income taxes.

Net income attributable to noncontrolling interests, net of tax

The large decrease in 2013 is primarily due to the elimination of the noncontrolling interests as a result of the NY1 & NY2 Deconsolidation on April 3, 2013.

11

INFLATION

Management believes that inflation affects U.S. Cellular’s business to no greater or lesser extent than the general economy.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In general, recently issued accounting pronouncements did not have and are not expected to have a significant effect on U.S. Cellular’s financial condition and results of operations.

See Note 1 — Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the Notes to Consolidated Financial Statements for information on recently issued accounting pronouncements.

FINANCIAL RESOURCES

U.S. Cellular operates a capital‑ and marketing‑intensive business.  U.S. Cellular utilizes cash on hand, cash from operating activities, cash proceeds from divestitures and disposition of investments, short-term credit facilities and long-term debt financing to fund its acquisitions (including licenses), construction costs, operating expenses and share repurchases.  Cash flows may fluctuate from quarter to quarter and year to year due to seasonality, the timing of acquisitions, capital expenditures and other factors.  The table below and the following discussion in this Financial Resources section summarize U.S. Cellular’s cash flow activities in 2013, 2012 and 2011. 

		2013		2012		2011
(Dollars in thousands)
Cash flows from (used in)
	Operating activities	$	290,897	$	899,291	$	987,862
	Investing activities		172,749		(896,611)		(759,603)
	Financing activities		(499,939)		(48,477)		(81,019)
Net increase (decrease) in cash and cash equivalents		$	(36,293)	$	(45,797)	$	147,240

Cash Flows from Operating Activities

Cash flows from operating activities were $290.9 million in 2013 and $899.3 million in 2012.  Significant items to note are as follows:

·Net income increased by $3.4 million.  This increase resulted primarily from the gains recognized as a result of the closing of the Divestiture Transaction, the NY1& NY2 Deconsolidation and the Mississippi Valley license sale.  These gains were partially offset by a decrease in Operating revenues, higher cost of equipment sold, and an increase in non-cash expenses, including depreciation expense.

·Net income tax payments of $157.8 million were recorded in 2013 compared to net income tax refunds of $58.6 million in 2012.  The 2013 tax payments were due primarily to the gain recognized as a result of the closing of the Divestiture Transaction and the Mississippi Valley license sale.  Federal tax refunds of $66.8 million were received in 2012 primarily related to a federal net operating loss in 2011 largely attributable to 100% bonus depreciation applicable to qualified capital expenditures.  U.S. Cellular carried back this federal net operating loss to prior tax years and received these refunds in 2012 for carrybacks to 2009 and 2010 tax years.

·Changes in Accounts receivable combined with the impact of Bad debts expense required $192.9 million in 2013 and provided $2.6 million in 2012.  Changes in Accounts receivable were driven primarily by billing delays encountered as a result of the conversion to a new billing system in the third quarter of 2013, which caused Accounts receivable to increase at December 31, 2013. Given these billing delays and the corresponding increase in Accounts receivable, U.S. Cellular believes it has made an adequate provision for allowance for doubtful accounts at December 31, 2013. However, such provision is an estimate, and U.S. Cellular’s actual experience with uncollectible accounts in future periods could materially differ from the amounts provided in the allowance for doubtful accounts at December 31, 2013. Any such difference could have a material adverse impact on future results of operations and cash flow.

·Changes in Inventory required $82.4 million in 2013 and required $28.8 million in 2012.  This change was due primarily to higher costs per unit related to 4G LTE smartphones.

·Changes in Accounts payable provided $85.3 million in 2013 and required $6.4 million in 2012.  Changes in Accounts payable were driven primarily by payment timing differences related to operating expenses, capital expenditures and device purchases.

12

Cash flows from operating activities were $899.3 million in 2012 and $987.9 million in 2011.  Significant items to note are as follows:

·Net income decreased by $57.7 million.  This decrease resulted primarily from increases in Cost of equipment sold and non-cash expenses, including depreciation expense.

·Net income tax refunds of $58.6 million were recorded in 2012 compared to net income tax refunds of $54.4 million in 2011.  Tax refunds received in 2012 were primarily for federal net operating loss carrybacks from the 2011 tax year to the 2009 and 2010 tax years.  Tax refunds received in 2011 primarily represented federal refunds related to overpayment of 2010 taxes.

·Changes in Accounts receivable combined with the impact of Bad debts expense provided $2.6 million in 2012 and required $20.0 million in 2011.  Accounts receivable balances fluctuate based on the timing of customer payments, promotions and other factors. 

·Changes in Inventory required $28.8 million in 2012 and $14.6 million in 2011.  This change was due primarily to higher inventory levels and a change in inventory mix resulting in a higher cost per unit.

·Changes in Accounts payable required $6.4 million in 2012 and provided $29.8 million in 2011.  Changes in Accounts payable were primarily driven by payment timing differences related to network equipment and device purchases.

·Changes in Other assets and liabilities required $27.7 million and $3.3 million in 2012 and 2011, respectively.  This change was due primarily to an increase in LTE-related deferred charges.

Cash Flows from Investing Activities

U.S. Cellular makes substantial investments to acquire wireless licenses and properties and to construct and upgrade wireless telecommunications networks and facilities as a basis for creating long-term value for shareholders.  In recent years, rapid changes in technology and new opportunities have required substantial investments in potentially revenue‑enhancing and cost-reducing upgrades of U.S. Cellular’s networks.

The primary purpose of U.S. Cellular’s construction and expansion expenditures is to provide for customer and usage growth, to upgrade service and to take advantage of service‑enhancing and cost-reducing technological developments.

Capital expenditures (i.e., additions to property, plant and equipment and system development expenditures) totaled $737.5 million in 2013, $836.7 million in 2012 and $782.5 million in 2011.  Cash used for additions to property, plant and equipment is reported in the Consolidated Statement of Cash Flows, and excludes amounts accrued in Accounts payable for capital expenditures at December 31 of the current year and includes amounts paid in the current period that were accrued at December 31 of the prior year.  Cash used for additions to property, plant and equipment totaled $717.9 million, $826.4 million and $771.8 million in 2013, 2012 and 2011, respectively. These expenditures were made to construct new cell sites, build out 4G LTE networks in certain markets, increase capacity in existing cell sites and switches, develop new and enhance existing office systems such as the new Billing and Operational Support System (“B/OSS”) and customer relationship management platforms, and construct new and remodel existing retail stores.  The decrease in capital expenditures on a year-over-year basis is due primarily to the timing of spending for network operations equipment.

Cash payments for acquisitions in 2013, 2012 and 2011 were as follows:
Cash Payments for Acquisitions	2013		2012		2011
(Dollars in thousands)
Licenses	$	16,540	$	122,690	$	4,406
Additional interest in operating market		-		-		19,367
Total	$	16,540	$	122,690	$	23,773

Cash amounts paid for the acquisitions may differ from the purchase price due to cash acquired in the transactions and the timing of cash payments related to the respective transactions.

Cash received from divestitures in 2013, 2012 and 2011 were as follows:
Cash Received from Divestitures	2013		2012		2011
(Dollars in thousands)
Licenses	$	311,989	$	-	$	-
Businesses		499,131		49,932		-
Total	$	811,120	$	49,932	$	-

13

U.S. Cellular received $480.0 million in cash at the close of the Divestiture Transaction in May 2013.   In addition, U.S. Cellular received $10.6  million in reimbursements for certain network decommissioning costs, network site lease rent and termination costs, network access termination costs, and employee termination benefits for specified engineering employees (the “Sprint Cost Reimbursement”) in 2013.

On October 4, 2013, U.S. Cellular sold the majority of its Mississippi Valley unbuilt license for $308.0 million.  This sale resulted in a $250.6 million gain which was recorded in the fourth quarter of 2013.

On August 14, 2013 U.S. Cellular entered into a definitive agreement to sell the majority of its St. Louis area unbuilt license for $92.3 million.  The sale will result in an estimated pre-tax gain of $76.2 million.  This transaction is subject to regulatory approval and is expected to close in the first quarter of 2014.

U.S. Cellular invested $120.0 million and $110.0 million in 2012 and 2011, respectively, in U.S. Treasury Notes and corporate notes with maturities greater than three months from the acquisition date.  U.S. Cellular realized cash proceeds of $100.0 million, $125.0 million, and $145.3 million in 2013, 2012, and 2011, respectively, related to the maturities of its investments in U.S. Treasury Notes and corporate notes. 

Cash Flows from Financing Activities

Cash flows from financing activities include repayments of and proceeds from short-term and long-term debt, dividends to shareholders, distributions to noncontrolling interests, cash used to repurchase Common Shares and cash proceeds from reissuance of Common Shares pursuant to stock-based compensation plans.

In May 2011, U.S. Cellular issued $342.0 million of 6.95% Senior Notes due 2060, and paid related debt issuance costs of $11.0 million.  The net proceeds from the 6.95% Senior Notes were used primarily to redeem $330.0 million of U.S. Cellular’s 7.5% Senior Notes in June 2011.  The redemption price of the 7.5% Senior Notes was equal to 100% of the principal amount plus accrued and unpaid interest thereon to the redemption date.

On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75 per share, for an aggregate amount of $482.3 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013.

U.S. Cellular repurchased Common Shares for $18.5 million, $20.0 million and $62.3 million in 2013, 2012 and 2011, respectively.  See Note 14 — Common Shareholders' Equity in the Notes to Consolidated Financial Statements for additional information related to these transactions.

Free Cash Flow

The following table presents Free cash flow.  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 which U.S. Cellular believes may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after Cash used for additions to property, plant and equipment.

	2013		2012		2011
(Dollars in thousands)
Cash flows from operating activities	$	290,897	$	899,291	$	987,862
Cash used for additions to property, plant and equipment		(717,862)		(826,400)		(771,798)
Free cash flow	$	(426,965)	$	72,891	$	216,064

See Cash flows from Operating Activities and Cash flows from Investing Activities for details on the changes to the components of Free cash flow.

14

LIQUIDITY AND CAPITAL RESOURCES

U.S. Cellular believes that existing cash and investment balances, funds available under its revolving credit facility and expected cash flows from operating and investing activities provide substantial liquidity and financial flexibility for U.S. Cellular to meet its normal financing needs for the foreseeable future.  In addition, U.S. Cellular may access public and private capital markets to help meet its financing needs.

U.S. Cellular’s profitability historically has been lower in the fourth quarter as a result of significant marketing and promotional activities during the holiday season.  Changes in these or other economic factors could have a material adverse effect on demand for U.S. Cellular’s products and services and on U.S. Cellular’s financial condition and results of operations.

U.S. Cellular cannot provide assurances that circumstances that could have a material adverse effect on its liquidity or capital resources will not occur. Economic conditions, changes in financial markets or other factors could restrict U.S. Cellular’s liquidity and availability of financing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its capital expenditure, acquisition or share repurchase programs. Such reductions could have a material adverse effect on U.S. Cellular’s business, financial condition or results of operations.

The following table summarizes U.S. Cellular's cash and investments as of December 31, 2013.
(Dollars in thousands)
Cash and cash equivalents	$	342,065
Short-term investments	$	50,104

Cash and Cash Equivalents

Cash and cash equivalents include cash and short-term, highly liquid investments with original maturities of three months or less. The primary objective of U.S. Cellular’s Cash and cash equivalents investment activities is to preserve principal.  At December 31, 2013, the majority of U.S. Cellular’s Cash and cash equivalents was held in bank deposit accounts and in money market funds that invest exclusively in U.S. Treasury Notes or in repurchase agreements fully collateralized by such obligations.  U.S. Cellular monitors the financial viability of the money market funds and direct investments in which it invests and believes that the credit risk associated with these investments is low.

Short-term and Long-term Investments

Short-term investments consist of U.S. Treasury Notes which are designated as held-to-maturity investments and are recorded at amortized cost in the Consolidated Balance Sheet.  For these investments, U.S. Cellular’s objective is to earn a higher rate of return on funds that are not anticipated to be required to meet liquidity needs in the near term, while maintaining a low level of investment risk.  See Note 2 — Fair Value Measurements in the Notes to Consolidated Financial Statements for additional information on Short-term investments.  As of December 31, 2013, U.S. Cellular does not hold Long-term investments.

Revolving Credit Facility

U.S. Cellular has a revolving credit facility available for general corporate purposes. 

In connection with U.S. Cellular’s revolving credit facility, TDS and U.S. Cellular entered into a subordination agreement dated December 17, 2010 together with the administrative agent for the lenders under U.S. Cellular’s revolving credit facility.  At December 31, 2013, no U.S. Cellular debt was subordinated pursuant to this subordination agreement.

U.S. Cellular’s interest cost on its revolving credit facility is subject to increase if its current credit rating from nationally recognized credit rating agencies is lowered, and is subject to decrease if the rating is raised.  The credit facility would not cease to be available nor would the maturity date accelerate solely as a result of a downgrade in U.S. Cellular’s credit rating.  However, a downgrade in U.S. Cellular’s credit rating could adversely affect its ability to renew the credit facility or obtain access to other credit facilities in the future.

As of December 31, 2013, U.S. Cellular’s senior debt credit rating from nationally recognized credit rating agencies remained at investment grade.

In June 2013, U.S. Cellular provided $17.4 million in letters of credit to the FCC in connection with U.S. Cellular’s winning bids in Auction 901.  See Note 16 — Supplemental Cash Flow Disclosures in the Notes to Consolidated Financial Statements for additional information on Auction 901.

15

The continued availability of the revolving credit facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and make representations regarding certain matters at the time of each borrowing. The covenants also prescribe certain terms associated with intercompany loans from TDS or TDS subsidiaries to U.S. Cellular or U.S. Cellular subsidiaries.  There were no intercompany loans at December 31, 2013 or 2012.  U.S. Cellular believes that it was in compliance as of December 31, 2013 with all of the financial covenants and requirements set forth in its revolving credit facility.

See Note 10 — Debt in the Notes to Consolidated Financial Statements for additional information regarding the revolving credit facility.

Long-Term Financing

U.S. Cellular’s long-term debt indentures do not contain any provisions resulting in acceleration of the maturities of outstanding debt in the event of a change in U.S. Cellular’s credit rating. However, a downgrade in U.S. Cellular’s credit rating could adversely affect its ability to obtain long-term debt financing in the future.  U.S. Cellular believes that it was in compliance as of December 31, 2013 with all financial covenants and other requirements set forth in its long-term debt indentures.  U.S. Cellular has not failed to make nor does it expect to fail to make any scheduled payment of principal or interest under such indentures.

The long-term debt principal payments due for the next four years represent less than 1% of the total long-term debt obligation at December 31, 2013.  Refer to Market Risk — Long-Term Debt for additional information regarding required principal payments and the weighted average interest rates related to U.S. Cellular’s Long-term debt.

U.S. Cellular, at its discretion, may from time to time seek to retire or purchase its outstanding debt through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

U.S. Cellular has an effective shelf registration statement on Form S-3 to issue senior or subordinated debt securities. The proceeds from any such issuance may be used for general corporate purposes, including: the possible reduction of other long-term debt; in connection with acquisition, construction and development programs; the reduction of short-term debt; for working capital; to provide additional investments in subsidiaries; or the repurchase of shares.  The U.S. Cellular shelf registration statement permits U.S. Cellular to issue at any time and from time to time senior or subordinated debt securities in one or more offerings up to an aggregate principal amount of $500 million.  The ability of U.S. Cellular to complete an offering pursuant to such shelf registration statement is subject to market conditions and other factors at the time.

See Note 10 — Debt in the Notes to Consolidated Financial Statements for additional information on Long-term financing.

Capital Expenditures

U.S. Cellular’s capital expenditures for 2014 are expected to be approximately $640million.  These expenditures are expected to be for the following general purposes:

·Expand and enhance network coverage in its service areas, including providing additional capacity to accommodate increased network usage, principally data usage, by current customers;

·Continue to deploy 4G LTE technology in certain markets;

·Expand and enhance the retail store network; and

·Develop and enhance office systems.

U.S. Cellular plans to finance its capital expenditures program for 2014 using primarily Cash flows from operating activities and, as necessary, existing cash balances and short-term investments.

16

Acquisitions, Divestitures and Exchanges

U.S. Cellular assesses its existing wireless interests on an ongoing basis with a goal of improving the competitiveness of its operations and maximizing its long-term return on investment. As part of this strategy, U.S. Cellular reviews attractive opportunities to acquire additional wireless operating markets and wireless spectrum. In addition, U.S. Cellular may seek to divest outright or include in exchanges for other wireless interests those interests that are not strategic to its long-term success. As a result, U.S. Cellular may be engaged from time to time in negotiations relating to the acquisition, divestiture or exchange of companies, properties or wireless spectrum. In general, U.S. Cellular may not disclose such transactions until there is a definitive agreement.  See Note 5 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to significant transactions.

Variable Interest Entities

U.S. Cellular consolidates certain entities because they are “variable interest entities” under accounting principles generally accepted in the United States of America (“GAAP”). See Note 12 — Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information related to these variable interest entities. U.S. Cellular may elect to make additional capital contributions and/or advances to these variable interest entities in future periods in order to fund their operations.

Common Share Repurchase Program

In the past year, U.S. Cellular has repurchased and expects to continue to repurchase its Common Shares, subject to its repurchase program.  For additional information related to the current repurchase authorization and repurchases made during 2013, 2012 and 2011, see Note 14 — Common Shareholders' Equity in the Notes to Consolidated Financial Statements and Part II, Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

Contractual and Other Obligations
At December 31, 2013, the resources required for contractual obligations were as follows:
				Payments Due by Period
(Dollars in millions)		Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years
Long-term debt obligations (1)		$	886.0	$	-	$	-	$	-	$	886.0
Interest payments on long-term debt obligations			1,846.2		60.3		120.4		120.4		1,545.1
Operating leases (2)			1,363.6		152.3		251.3		176.3		783.7
Capital leases			6.9		0.5		1.1		1.0		4.3
Purchase obligations (3)			1,797.3		589.9		1,006.9		121.0		79.5
		$	5,900.0	$	803.0	$	1,379.7	$	418.7	$	3,298.6
(1)	Includes current and long-term portions of debt obligations. The total long-term debt obligation differs from Long-term debt in the Consolidated Balance Sheet due to capital leases and the $11.6 million unamortized discount related to U.S. Cellular’s 6.7% Senior Notes.  See Note 10 — Debt in the Notes to Consolidated Financial Statements for additional information.
(2)	Includes future lease costs related to office space, retail sites, cell sites and equipment.  See Note 11 — Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information.
(3)	Includes obligations payable under non-cancellable contracts, commitments for network facilities and transport services, agreements for software licensing, long-term marketing programs, and an agreement with Apple to purchase Apple iPhone products.  As described more fully in Note 5 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements, U.S. Cellular expects to incur network-related exit costs in the Divestiture Markets as a result of the transaction, including: (i) costs to decommission cell sites and mobile telephone switching office (“MTSO”) sites, (ii) costs to terminate real property leases and (iii) costs to terminate certain network access arrangements in the subject markets.  The impacts of these exit activities on U.S. Cellular's purchase obligations are reflected in the table above only to the extent that agreements were consummated at December 31, 2013.

The table above excludes liabilities related to “unrecognized tax benefits” as defined by GAAP because U.S. Cellular is unable to predict the period of settlement of such liabilities.  Such unrecognized tax benefits were $28.8 million at December 31, 2013.  See Note 3 — Income Taxes in the Notes to Consolidated Financial Statements for additional information on unrecognized tax benefits.

17

Agreements

As previously disclosed, on August 17, 2010, U.S. Cellular and Amdocs Software Systems Limited (“Amdocs”) entered into a Software License and Maintenance Agreement (“SLMA”) and a Master Service Agreement (“MSA”) (collectively, the “Amdocs Agreements”) to develop a Billing and Operational Support System (B/OSS”).  In July 2013, U.S. Cellular implemented B/OSS, pursuant to an updated Statement of Work dated June 29, 2012.  Total payments to Amdocs related to this implementation are estimated to be approximately $183.9 million (subject to certain potential adjustments) over the period from commencement of the SLMA through the first half of 2014.  As of December 31, 2013, $136.8 million had been paid to Amdocs.

Apple iPhone Products Purchase Commitment

In March 2013, U.S. Cellular entered into an agreement with Apple to purchase certain minimum quantities of iPhone products over a three-year period beginning in November 2013.  The minimum quantity of iPhone products to be purchased during the first contract year is fixed and is subject to adjustment for the second and third contract years based on the percentage growth in smartphone sales in the United States for the immediately preceding calendar year. Based on current forecasts, U.S. Cellular estimates that the remaining contractual purchase commitment as of December 31, 2013 is approximately $950 million.  At this time, U.S. Cellular expects to meet its contractual commitment with Apple. 

Off-Balance Sheet Arrangements

U.S. Cellular had no transactions, agreements or other contractual arrangements with unconsolidated entities involving “off-balance sheet arrangements,” as defined by SEC rules, that had or are reasonably likely to have a material current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Dividends

On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75 per share, for an aggregate amount of $482.3 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013. 

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

U.S. Cellular prepares its consolidated financial statements in accordance with GAAP.  U.S. Cellular’s significant accounting policies are discussed in detail in Note 1 — Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the Notes to Consolidated Financial Statements.

Management believes the application of the following critical accounting policies and the estimates required by such application reflect its most significant judgments and estimates used in the preparation of U.S. Cellular’s consolidated financial statements.  Management has discussed the development and selection of each of the following accounting policies and related estimates and disclosures with the Audit Committee of U.S. Cellular’s Board of Directors.

Goodwill and Licenses

See the Goodwill and Licenses Impairment Assessment section of Note 1 — Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the Notes to Consolidated Financial Statements for information on Goodwill and Licenses impairment testing policies and methods.  U.S. Cellular performs annual impairment testing of Goodwill and Licenses, as required by GAAP, in the fourth quarter of its fiscal year, based on fair values and net carrying values determined as of November 1.

See Note 6 — Intangible Assets in the Notes to Consolidated Financial Statements for additional information related to Goodwill and Licenses activity in 2013 and 2012.

Goodwill

U.S. Cellular tests Goodwill for impairment at the level of reporting referred to as a reporting unit.  For purposes of impairment testing of Goodwill in 2013, U.S. Cellular identified four reporting units based on geographic service areas.  For purposes of the impairment testing of Goodwill in 2012, U.S. Cellular identified five reporting units based on geographic service areas.  The change in reporting units resulted from the NY1 & NY2 Deconsolidation more fully described in Note 7 — Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements.  There were no changes to U.S. Cellular’s overall Goodwill impairment testing methodology between November 1, 2013 and November 1, 2012. 

18

A discounted cash flow approach was used to value each reporting unit, using value drivers and risks specific to the industry and current economic factors.  The cash flow estimates incorporated assumptions that market participants would use in their estimates of fair value and may not be indicative of U.S. Cellular specific assumptions.  The most significant assumptions made in this process were the revenue growth rate (shown as a ten year compound annual growth rate in the table below), the terminal revenue growth rate, the discount rate and capital expenditures as a percentage of revenue (shown as a simple average in the table below).  The averages below are based on ten year projection periods.  These assumptions were as follows for November 1, 2013 and 2012:

	November 1,		November 1,
Key Assumptions	2013		2012
Revenue growth rate	2.2	%	2.2	%
Terminal revenue growth rate	2.0	%	2.0	%
Discount rate	10.0	%	11.0	%
Capital expenditures as a percentage of revenue	16.0	%	15.2	%

The carrying value of each U.S. Cellular reporting unit as of November 1, 2013 was as follows:
Reporting Unit	Carrying Value
(Dollars in millions)
Central Region	$	2,902
Mid-Atlantic Region		811
New England Region		256
Northwest Region		318
Total	$	4,287

As of November 1, 2013, the fair values of the reporting units exceeded their respective carrying values by amounts ranging from 19.1% to 40.2%. Therefore, no impairment of Goodwill existed.  Given that the fair values of the respective reporting units exceed their respective carrying values, provided all other assumptions remained the same, the discount rate would have to increase to a range of 11.7% to 13.2% to yield estimated fair values of reporting units that equal their respective carrying values at November 1, 2013.  Further, assuming all other assumptions remained the same, the terminal growth rate assumptions would need to decrease to amounts ranging from negative 2.1% to negative 7.7% to yield estimates of fair value equal to the carrying values of the respective reporting units at November 1, 2013.

Licenses

U.S. Cellular tests licenses for impairment at the level of reporting referred to as a unit of accounting.  For purposes of its impairment testing of licenses as of November 1, 2013, U.S. Cellular separated its FCC licenses into eleven units of accounting based on geographic service areas.  As of November 1, 2012, U.S. Cellular separated its FCC licenses into thirteen units of accounting based on geographic service areas.  The change in units of accounting resulted from (i) the Divestiture Transaction and the Mississippi Valley non-operating market license sale, both of which are more fully described in Note 5 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements and (ii) the NY1 & NY2 Deconsolidation more fully described in Note 7 — Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements.  In both 2013 and 2012, seven of the units of accounting represented geographic groupings of licenses which, because they were not being utilized and, therefore, were not expected to generate cash flows from operating activities in the foreseeable future, were considered separate units of accounting for purposes of impairment testing.

Developed operating market licenses (“built licenses”)

U.S. Cellular applies the build-out method to estimate the fair values of built licenses. The most significant assumptions applied for purposes of the November 1, 2013 and 2012 licenses impairment assessments were as follows:

Key Assumptions	November 1, 2013		November 1, 2012
Build-out period	5 years		7 years
Discount rate	8.5	%	8.5	%
Terminal revenue growth rate	2.0	%	2.0	%
Terminal capital expenditures as a percentage of revenue	13.6	%	13.2	%
Customer penetration rates	12.5-16.7	%	13.3-17.3	%

19

The shorter build-out period in 2013 reflects a change in management’s expectations of the time required to build out the U.S. Cellular network and is based on recent company-specific experience and industry observation.

The discount rate used in the valuation of licenses is less than the discount rate used in the valuation of reporting units for purposes of goodwill impairment testing. The discount rate used for licenses does not include a company-specific risk premium as a wireless license would not be subject to such risk.

The discount rate is the most significant assumption used in the build-out method.  The discount rate is estimated based on the overall risk-free interest rate adjusted for industry participant information, such as a typical capital structure (i.e., debt-equity ratio), the after-tax cost of debt and the cost of equity.  The cost of equity takes into consideration the average risk specific to individual market participants.

As of November 1, 2013, the fair values of the built licenses units of accounting exceeded their respective carrying values by amounts ranging from 33.8% to 75.9%.  Therefore, no impairment of Licenses existed.  Given that the fair values of the licenses exceed their respective carrying values, the discount rate would have to increase to a range of 8.9% to 9.5% to yield estimated fair values of licenses in the respective units of accounting that equal their respective carrying values at November 1, 2013.  An increase of 50 basis points to the assumed discount rate would cause an impairment of approximately $7 million.

Non-operating market licenses (“unbuilt licenses”)

For purposes of performing impairment testing of unbuilt licenses, U.S. Cellular prepares estimates of fair value by reference to prices paid in recent auctions and market transactions where available. If such information is not available, the fair value of the unbuilt licenses is assumed to have changed by the same percentage, and in the same direction, that the fair value of built licenses measured using the build-out method changed during the period. There was no impairment loss recognized related to unbuilt licenses as a result of the November 1, 2013 licenses impairment test.

Carrying Value of Licenses
The carrying value of licenses at November 1, 2013 was as follows:
Unit of Accounting (1)		Carrying Value
(Dollars in millions)
Developed Operating markets
Central Region		$	749
Mid-Atlantic Region			235
New England Region			102
Northwest Region			68
Non-operating markets
New England			1
North Northwest			3
South Northwest			2
North Central			59
South Central			22
East Central			107
Mid-Atlantic			50
Total (2)		$	1,398
(1)	U.S. Cellular participated in spectrum auctions indirectly through its interests in Aquinas Wireless L.P. (“Aquinas Wireless”) and King Street Wireless L.P. (“King Street Wireless”), collectively, the “limited partnerships.”  Interests in other limited partnerships that participated in spectrum auctions have since been acquired.  Each limited partnership participated in and was awarded spectrum licenses in one of two separate spectrum auctions (FCC Auctions 78 and 73). All of the units of accounting above, except New England, include licenses awarded to the limited partnerships.
(2)	Between November 1, 2013 and December 31, 2013, U.S. Cellular capitalized interest on certain licenses pursuant to current network build-outs in the amount of $3 million.

Income Taxes

20

U.S. Cellular is included in a consolidated federal income tax return with other members of the TDS consolidated group.  TDS and U.S. Cellular are parties to a Tax Allocation Agreement which provides that U.S. Cellular and its subsidiaries be included with the TDS affiliated group in a consolidated federal income tax return and in state income or franchise tax returns in certain situations.  For financial statement purposes, U.S. Cellular and its subsidiaries calculate their income, income tax and credits as if they comprised a separate affiliated group.  Under the Tax Allocation Agreement, U.S. Cellular remits its applicable income tax payments to TDS.

The amounts of income tax assets and liabilities, the related income tax provision and the amount of unrecognized tax benefits are critical accounting estimates because such amounts are significant to U.S. Cellular’s financial condition and results of operations.

The preparation of the consolidated financial statements requires U.S. Cellular to calculate a provision for income taxes.  This process involves estimating the actual current income tax liability together with assessing temporary differences resulting from the different treatment of items for tax purposes.  These temporary differences result in deferred income tax assets and liabilities, which are included in U.S. Cellular’s Consolidated Balance Sheet.  U.S. Cellular must then assess the likelihood that deferred income tax assets will be realized based on future taxable income and, to the extent management believes that realization is not likely, establish a valuation allowance.  Management’s judgment is required in determining the provision for income taxes, deferred income tax assets and liabilities and any valuation allowance that is established for deferred income tax assets.

U.S. Cellular recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.  

See Note 3 — Income Taxes in the Notes to Consolidated Financial Statements for details regarding U.S. Cellular’s income tax provision, deferred income taxes and liabilities, valuation allowances and unrecognized tax benefits, including information regarding estimates that impact income taxes.

Loyalty Reward Program

See the Revenue Recognition section of Note 1 — Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the Notes to Consolidated Financial Statements for a description of this program and the related accounting. 

U.S. Cellular follows the deferred revenue method of accounting for its loyalty reward program.  Under this method, revenue allocated to loyalty reward points is deferred.  Revenue is recognized at the time of customer redemption or when such points have been depleted via an account maintenance charge.  U.S. Cellular periodically reviews and revises the redemption and depletion rates as appropriate based on history and related future expectations.  As of December 31, 2013, U.S. Cellular estimated loyalty reward points breakage based on actuarial estimates and recorded a $7.4 million change in estimate, which reduced Customer deposits and deferred revenues in the Consolidated Balance Sheet and increased Total operating revenues in the Consolidated Statement of Operations.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Note 17 – Related Parties and Note 18 – Certain Relationships and Related Transactions in the Notes to Consolidated Financial Statements.

Possible related party transaction

U.S. Cellular is currently considering a possible purchase of FCC spectrum licenses from TDS.  U.S. Cellular’s spectrum requirements and the relative value of the FCC licenses are being reviewed.  U.S. Cellular formed a special committee comprised entirely of independent and disinterested directors with the exclusive power to consider, negotiate and, if appropriate, approve a transaction with TDS.  The U.S. Cellular special committee has engaged independent financial advisors and legal counsel.  There is no assurance as to whether a transaction will be consummated.

21

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

SAFE HARBOR CAUTIONARY STATEMENT

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Annual Report contain statements that are not based on historical facts, including the words “believes,” “anticipates,” “intends,” “expects” and similar words.  These statements constitute and represent “forward‑looking statements” as this term is defined in the Private Securities Litigation Reform Act of 1995.  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, but are not limited to, the following risks:

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

·A failure by U.S. Cellular to successfully execute its business strategy (including planned acquisitions, divestitures and exchanges) or allocate resources or capital could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

·A failure by U.S. Cellular’s service offerings to meet customer expectations could limit U.S. Cellular’s ability to attract and retain customers and could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

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

·Changes in roaming practices or other factors could cause U.S. Cellular's roaming revenues to decline from current levels and/or impact U.S. Cellular's ability to service its customers in geographic areas where U.S. Cellular does not have its own network, which would have an adverse effect on U.S. Cellular's business, financial condition or results of operations.

·A failure by U.S. Cellular 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 U.S. Cellular’s business, financial condition or results of operations.

·To the extent conducted by the Federal Communications Commission (“FCC”), U.S. Cellular is likely to participate in FCC auctions of additional spectrum 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 U.S. Cellular.

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

·Changes in Universal Service Fund (“USF”) funding and/or intercarrier compensation could have an adverse impact on U.S. Cellular’s business, 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 U.S. Cellular’s business, financial condition or results of operations.

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

·U.S. Cellular’s lower scale relative to larger competitors could adversely affect its business, financial condition or results of operations.   

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

·Advances or changes in technology could render certain technologies used by U.S. Cellular obsolete, could put U.S. Cellular at a competitive disadvantage, could reduce U.S. Cellular’s revenues or could increase its costs of doing business.

·Complexities associated with deploying new technologies present substantial risk.

·U.S. Cellular is subject to numerous surcharges and fees from federal, state and local governments, and the applicability and the

22

amount of these fees are subject to great uncertainty.

·Performance under device purchase agreements could have a material adverse impact on U.S. Cellular's business, financial condition or results of operations.

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

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

·A significant portion of U.S. Cellular’s revenues is derived from customers who buy services through independent agents who market U.S. Cellular’s services on a commission basis and third-party national retailers. If U.S. Cellular’s relationships with these agents or third-party national retailers are seriously harmed, its business, financial condition or results of operations could be adversely affected.

·U.S. Cellular’s investments in unproven technologies may not produce the benefits that U.S. Cellular expects.

·A failure by U.S. Cellular 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, support and other systems and infrastructure could have an adverse effect on its operations.

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

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

·A failure by U.S. Cellular 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 U.S. Cellular’s 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 U.S. Cellular’s business, financial condition or results of operations.

·The market price of U.S. Cellular’s 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 U.S. Cellular’s 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 U.S. Cellular’s 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 U.S. Cellular to record charges in excess of amounts accrued in the financial statements, if any, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

23

·Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede U.S. Cellular’s 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 U.S. Cellular’s business, financial condition or results of operations.

·Uncertainty of U.S. Cellular’s ability to access capital, deterioration in the capital markets, other changes in market conditions, changes in U.S. Cellular’s credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular 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 U.S. Cellular’s business, financial condition or results of operations.

·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 U.S. Cellular’s 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 U.S. Cellular from using necessary technology to provide products or services or subject U.S. Cellular to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

·There are potential conflicts of interests between TDS and U.S. Cellular.

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

·Any of the foregoing events or other events could cause revenues, earnings, capital expenditures and/or any other financial or statistical information to vary from U.S. Cellular’s forward-looking estimates by a material amount.

See “Risk Factors” in U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2013 for a further discussion of these risks.  U.S. Cellular 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.

24

MARKET RISK

Long-Term Debt

As of December 31, 2013, the majority of U.S. Cellular’s long-term debt was in the form of fixed-rate notes with maturities ranging up to 47 years.  Fluctuations in market interest rates can lead to significant fluctuations in the fair value of these fixed-rate notes.

The following table presents the scheduled principal payments on long-term debt and capital lease obligations, and the related weighted average interest rates by maturity dates at December 31, 2013:

		Principal Payments Due by Period
(Dollars in millions)			Long-Term Debt Obligations (1)	Weighted-Avg. Interest Rates on Long-Term Debt Obligations (2)
2014		$	0.2	9.7	%
2015			0.2	9.7	%
2016			0.2	9.7	%
2017			0.2	9.7	%
2018			0.2	9.7	%
After 5 years			888.8	6.8	%
Total		$	889.8	6.8	%
(1)	The total long-term debt obligation differs from Long-term debt in the Consolidated Balance Sheet due to the $11.6 million unamortized discount related to the 6.7% Senior Notes. See Note 10 — Debt in the Notes to Consolidated Financial Statements for additional information.
(2)	Represents the weighted average interest rates at December 31, 2013 for debt maturing in the respective periods.

Fair Value of Long-Term Debt

At December 31, 2013 and 2012, the estimated fair value of long-term debt obligations, excluding capital lease obligations and the current portion of such long-term debt, was $817.5 million and $959.4 million, respectively.  The fair value of long-term debt, excluding capital lease obligations and the current portion of such long-term debt, was estimated using market prices for the 6.95% Senior Notes at December 31, 2013 and 2012 and discounted cash flow analysis for the 6.7% Senior Notes at December 31, 2013 and 2012.

Other Market Risk Sensitive Instruments

The substantial majority of U.S. Cellular’s other market risk sensitive instruments (as defined in item 305 of SEC Regulation S-K) are short-term, including Cash and cash equivalents and Short-term investments.  The fair value of such instruments is less sensitive to market fluctuations than longer term instruments.  Accordingly, U.S. Cellular believes that a significant change in interest rates would not have a material effect on such other market risk sensitive instruments.

25

United States Cellular Corporation Consolidated Statement of Operations
Year Ended December 31,			2013		2012		2011
(Dollars and shares in thousands, except per share amounts)
Operating revenues
	Service		$	3,594,773	$	4,098,856	$	4,053,797
	Equipment sales			324,063		353,228		289,549
		Total operating revenues		3,918,836		4,452,084		4,343,346
Operating expenses
	System operations (excluding Depreciation, amortization and   accretion reported below)			763,435		946,805		929,379
	Cost of equipment sold			999,000		935,947		791,802
	Selling, general and administrative (including charges from   affiliates of $99.2 million, $104.3 million and $104.1 million   in 2013, 2012 and 2011)			1,677,395		1,764,933		1,769,701
	Depreciation, amortization and accretion			803,781		608,633		573,557
	(Gain) loss on asset disposals, net			30,606		18,088		9,889
	(Gain) loss on sale of business and other exit costs, net			(246,767)		21,022		-
	(Gain) loss on license sales and exchanges			(255,479)		-		(11,762)
		Total operating expenses		3,771,971		4,295,428		4,062,566
Operating income				146,865		156,656		280,780
Investment and other income (expense)
	Equity in earnings of unconsolidated entities			131,949		90,364		83,566
	Interest and dividend income			3,961		3,644		3,395
	Gain (loss) on investments			18,556		(3,718)		11,373
	Interest expense			(43,963)		(42,393)		(65,614)
	Other, net			288		500		(678)
		Total investment and other income (expense)		110,791		48,397		32,042
Income before income taxes				257,656		205,053		312,822
	Income tax expense			113,134		63,977		114,078
Net income				144,522		141,076		198,744
	Less: Net income attributable to noncontrolling interests, net of tax			4,484		30,070		23,703
Net income attributable to U.S. Cellular shareholders			$	140,038	$	111,006	$	175,041
Basic weighted average shares outstanding				83,968		84,645		84,877
Basic earnings per share attributable to U.S. Cellular shareholders			$	1.67	$	1.31	$	2.06
Diluted weighted average shares outstanding				84,730		85,230		85,448
Diluted earnings per share attributable to U.S. Cellular shareholders			$	1.65	$	1.30	$	2.05
Special dividend per share to U.S. Cellular shareholders			$	5.75	$	-	$	-
The accompanying notes are an integral part of these consolidated financial statements.

26

United States Cellular Corporation Consolidated Statement of Cash Flows
Year Ended December 31,			2013		2012		2011
(Dollars in thousands)
Cash flows from operating activities
	Net income		$	144,522	$	141,076	$	198,744
	Add (deduct) adjustments to reconcile net income to net   cash flows from operating activities
		Depreciation, amortization and accretion		803,781		608,633		573,557
		Bad debts expense		98,864		67,372		62,157
		Stock-based compensation expense		15,844		21,466		20,183
		Deferred income taxes, net		(75,348)		49,244		203,264
		Equity in earnings of unconsolidated entities		(131,949)		(90,364)		(83,566)
		Distributions from unconsolidated entities		125,660		84,417		91,768
		(Gain) loss on asset disposals, net		30,606		18,088		9,889
		(Gain) loss on sale of business and other exit costs, net		(246,767)		21,022		-
		(Gain) loss on license sales and exchanges		(255,479)		-		(11,762)
		(Gain) loss on investments		(18,556)		3,718		(11,373)
		Noncash interest expense		1,059		(1,822)		10,040
		Other operating activities		646		546		102
	Changes in assets and liabilities from operations
		Accounts receivable		(291,759)		(64,816)		(82,175)
		Inventory		(82,422)		(28,786)		(14,640)
		Accounts payable - trade		85,199		(4,977)		28,410
		Accounts payable - affiliate		147		(1,458)		1,392
		Customer deposits and deferred revenues		66,344		30,353		34,927
		Accrued taxes		30,037		73,064		(39,984)
		Accrued interest		273		167		225
		Other assets and liabilities		(9,805)		(27,652)		(3,296)
				290,897		899,291		987,862
Cash flows from investing activities
	Cash used for additions to property, plant and equipment			(717,862)		(826,400)		(771,798)
	Cash paid for acquisitions and licenses			(16,540)		(122,690)		(23,773)
	Cash received from divestitures			811,120		49,932		-
	Cash paid for investments			-		(120,000)		(110,000)
	Cash received for investments			100,000		125,000		145,250
	Other investing activities			(3,969)		(2,453)		718
				172,749		(896,611)		(759,603)
Cash flows from financing activities
	Repayment of long-term debt			(414)		(145)		(330,338)
	Issuance of long-term debt			-		-		342,000
	Common shares reissued for benefit plans, net of tax payments			5,784		(2,205)		1,935
	Common shares repurchased			(18,544)		(20,045)		(62,294)
	Payment of debt issuance costs			(23)		(514)		(11,400)
	Dividends paid			(482,270)		-		-
	Distributions to noncontrolling interests			(3,766)		(22,970)		(21,094)
	Payments to acquire additional interest in subsidiaries			(1,005)		(3,167)		-
	Other financing activities			299		569		172
				(499,939)		(48,477)		(81,019)
Net increase (decrease) in cash and cash equivalents				(36,293)		(45,797)		147,240
Cash and cash equivalents
	Beginning of period			378,358		424,155		276,915
	End of period		$	342,065	$	378,358	$	424,155
The accompanying notes are an integral part of these consolidated financial statements.

27

United States Cellular Corporation Consolidated Balance Sheet — Assets
December 31,			2013		2012
(Dollars in thousands)
Current assets
	Cash and cash equivalents		$	342,065	$	378,358
	Short-term investments			50,104		100,676
	Accounts receivable
		Customers and agents, less allowances of $59,206 and $24,290, respectively		467,255		349,424
		Roaming		30,136		31,782
		Affiliated		980		375
		Other, less allowances of $1,032 and $2,612, respectively		88,224		63,639
	Inventory, net			238,188		155,886
	Income taxes receivable			-		1,612
	Prepaid expenses			65,596		62,560
	Net deferred income tax asset			99,105		35,419
	Other current assets			19,538		16,745
				1,401,191		1,196,476
Assets held for sale				16,027		216,763
Investments
	Licenses			1,401,126		1,456,794
	Goodwill			387,524		421,743
	Investments in unconsolidated entities			265,585		144,531
	Long-term investments			-		50,305
				2,054,235		2,073,373
Property, plant and equipment
	In service and under construction			7,717,512		7,478,428
	Less: Accumulated depreciation			4,860,992		4,455,840
				2,856,520		3,022,588
Other assets and deferred charges				117,735		78,250
Total assets			$	6,445,708	$	6,587,450
The accompanying notes are an integral part of these consolidated financial statements.

28

United States Cellular Corporation Consolidated Balance Sheet — Liabilities and Equity
December 31,						2013		2012
(Dollars and shares in thousands)
Current liabilities
	Current portion of long-term debt					$	166	$	92
	Accounts payable
		Affiliated					11,243		10,725
		Trade					405,583		310,936
	Customer deposits and deferred revenues						256,740		192,113
	Accrued taxes						73,820		35,834
	Accrued compensation						66,566		90,418
	Other current liabilities						192,055		114,881
							1,006,173		754,999
Liabilities held for sale							-		19,594
Deferred liabilities and credits
	Net deferred income tax liability						836,297		849,818
	Other deferred liabilities and credits						315,073		288,441
Long-term debt							878,032		878,858
Commitments and contingencies
Noncontrolling interests with redemption features							536		493
Equity
	U.S. Cellular shareholders' equity
		Series A Common and Common Shares
			Authorized 190,000 shares (50,000 Series A Common and 140,000 Common Shares)
			Issued 88,074 shares (33,006 Series A Common and 55,068 Common Shares)
			Outstanding 84,205 shares (33,006 Series A Common and 51,199 Common  Shares)   and 84,168 shares (33,006 Series A Common and 51,162 Common Shares),   respectively
			Par Value ($1 per share) ($33,006 Series A Common and $55,068 Common Shares)				88,074		88,074
		Additional paid-in capital					1,424,729		1,412,453
		Treasury Shares, at cost, 3,869 and 3,906 Common Shares, respectively					(164,692)		(165,724)
		Retained earnings					2,043,095		2,399,052
				Total U.S. Cellular shareholders' equity			3,391,206		3,733,855
	Noncontrolling interests						18,391		61,392
					Total equity		3,409,597		3,795,247
Total liabilities and equity						$	6,445,708	$	6,587,450
The accompanying notes are an integral part of these consolidated financial statements.

29

United States Cellular Corporation
Consolidated Statement of Changes in Equity
	U.S. Cellular Shareholders
(Dollars in thousands)	Series A Common and Common Shares		Additional Paid-In Capital		Treasury Shares		Retained Earnings		Total U.S. Cellular Shareholders' Equity		Noncontrolling Interests		Total Equity
Balance, December 31, 2012	$	88,074	$	1,412,453	$	(165,724)	$	2,399,052	$	3,733,855	$	61,392	$	3,795,247
Add (Deduct)
Net income attributable to U.S. Cellular shareholders		-		-		-		140,038		140,038		-		140,038
Net income attributable to noncontrolling interests   classified as equity		-		-		-		-		-		4,251		4,251
Common and Series A Common Shares   dividends		-		-		-		(482,270)		(482,270)		-		(482,270)
Repurchase of Common Shares		-		-		(18,544)		-		(18,544)		-		(18,544)
Incentive and compensation plans		-		222		19,576		(13,725)		6,073		-		6,073
Stock-based compensation awards		-		15,467		-		-		15,467		-		15,467
Tax windfall (shortfall) from stock awards		-		(3,267)		-		-		(3,267)		-		(3,267)
Distributions to noncontrolling interests		-		-		-		-		-		(3,576)		(3,576)
Adjust investment in subsidiaries for noncontrolling    interest purchases		-		(146)		-		-		(146)		94		(52)
Deconsolidation of partnerships		-		-		-		-		-		(43,770)		(43,770)
Balance, December 31, 2013	$	88,074	$	1,424,729	$	(164,692)	$	2,043,095	$	3,391,206	$	18,391	$	3,409,597
The accompanying notes are an integral part of these consolidated financial statements.

30

United States Cellular Corporation
Consolidated Statement of Changes in Equity
	U.S. Cellular Shareholders
(Dollars in thousands)	Series A Common and Common Shares		Additional Paid-In Capital		Treasury Shares		Retained Earnings		Total U.S. Cellular Shareholders' Equity		Noncontrolling Interests		Total Equity
Balance, December 31, 2011	$	88,074	$	1,387,341	$	(152,817)	$	2,297,363	$	3,619,961	$	55,956	$	3,675,917
Add (Deduct)
Net income attributable to U.S. Cellular shareholders		-		-		-		111,006		111,006		-		111,006
Net income attributable to noncontrolling interests   classified as equity		-		-		-		-		-		30,019		30,019
Repurchase of Common Shares		-		-		(20,045)		-		(20,045)		-		(20,045)
Incentive and compensation plans		-		137		7,138		(9,317)		(2,042)		-		(2,042)
Stock-based compensation awards		-		21,249		-		-		21,249		-		21,249
Tax windfall (shortfall) from stock awards		-		(1,518)		-		-		(1,518)		-		(1,518)
Distributions to noncontrolling interests		-		-		-		-		-		(22,970)		(22,970)
Adjust investment in subsidiaries for noncontrolling    interest purchases		-		5,244		-		-		5,244		(1,586)		3,658
Other		-		-		-		-		-		(27)		(27)
Balance, December 31, 2012	$	88,074	$	1,412,453	$	(165,724)	$	2,399,052	$	3,733,855	$	61,392	$	3,795,247
The accompanying notes are an integral part of these consolidated financial statements.

31

United States Cellular Corporation
Consolidated Statement of Changes in Equity
	U.S. Cellular Shareholders
(Dollars in thousands)	Series A Common and Common Shares		Additional Paid-In Capital		Treasury Shares		Retained Earnings		Total U.S. Cellular Shareholders' Equity		Noncontrolling Interests		Total Equity
Balance, December 31, 2010	$	88,074	$	1,368,487	$	(105,616)	$	2,135,507	$	3,486,452	$	53,518	$	3,539,970
Add (Deduct)
Net income attributable to U.S. Cellular shareholders		-		-		-		175,041		175,041		-		175,041
Net income attributable to noncontrolling interests   classified as equity		-		-		-		-		-		23,532		23,532
Repurchase of Common Shares		-		-		(62,294)		-		(62,294)		-		(62,294)
Incentive and compensation plans		-		57		15,093		(13,185)		1,965		-		1,965
Stock-based compensation awards		-		20,183		-		-		20,183		-		20,183
Tax windfall (shortfall) from stock awards		-		(1,386)		-		-		(1,386)		-		(1,386)
Distributions to noncontrolling interests		-		-		-		-		-		(21,094)		(21,094)
Balance, December 31, 2011	$	88,074	$	1,387,341	$	(152,817)	$	2,297,363	$	3,619,961	$	55,956	$	3,675,917
The accompanying notes are an integral part of these consolidated financial statements.

32

United States Cellular Corporation

Notes to Consolidated Financial Statements

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

United States Cellular Corporation (“U.S. Cellular”), a Delaware Corporation, is an 84%-owned subsidiary of Telephone and Data Systems, Inc. (“TDS”).

Nature of Operations

U.S. Cellular owns, operates and invests in wireless systems throughout the United States.  As of December 31, 2013, U.S. Cellular served 4.8 million customers.  U.S. Cellular operates as one reportable segment.

Principles of Consolidation

The accounting policies of U.S. Cellular conform to accounting principles generally accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Unless otherwise specified, references to accounting provisions and GAAP in these notes refer to the requirements of the FASB ASC.  The consolidated financial statements include the accounts of U.S. Cellular, its majority-owned subsidiaries, general partnerships in which U.S. Cellular has a majority partnership interest and variable interest entities (“VIEs”) in which U.S. Cellular is the primary beneficiary.  Both VIE and primary beneficiary represent terms defined by GAAP. 

Intercompany accounts and transactions have been eliminated.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2013 financial statement presentation.  These reclassifications did not affect consolidated net income attributable to U.S. Cellular shareholders, cash flows, assets, liabilities or equity for the years presented.

Business Combinations

U.S. Cellular accounts for business combinations at fair value in accordance with the acquisition method.  This method requires that the acquirer recognize 100% of the acquiree’s assets and liabilities at their fair values on the acquisition date for all acquisitions, whether full or partial.  In addition, transaction costs related to acquisitions are expensed.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (b) the reported amounts of revenues and expenses during the reported period.  Actual results could differ from those estimates.  Significant estimates are involved in accounting for goodwill and indefinite-lived intangible assets, depreciation, amortization and accretion, allowance for doubtful accounts, loyalty reward points, income taxes, stock based compensation and asset retirement obligations.

Cash and Cash Equivalents

Cash and cash equivalents include cash and short-term, highly liquid investments with original maturities of three months or less.

Short-Term and Long-Term Investments

At December 31, 2013 and 2012, U.S. Cellular had $50.1 million and $100.7 million, respectively, in Short-term investments.  At December 31, 2012, U.S. Cellular had $50.3 million in Long-term investments. Short-term and Long-term investments consist primarily of U.S. Treasury Notes which are designated as held-to-maturity investments and are recorded at amortized cost in the Consolidated Balance Sheet.  For these investments, U.S. Cellular’s objective is to earn a higher rate of return on funds that are not anticipated to be required to meet liquidity needs in the near term, while maintaining a low level of investment risk. See Note 2 — Fair Value Measurements for additional details on Short-term and Long-term investments.

33

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consist primarily of amounts owed by customers for wireless services and equipment sales, by agents for sales of equipment to them and by other wireless carriers whose customers have used U.S. Cellular’s wireless systems.

The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related to existing accounts receivable.  The allowance is estimated based on historical experience and other factors that could affect collectability.  Accounts receivable balances are reviewed on either an aggregate or individual basis for collectability depending on the type of receivable.  When it is probable that an account balance will not be collected, the account balance is charged against the allowance for doubtful accounts.  U.S. Cellular does not have any off-balance sheet credit exposure related to its customers.

The changes in the allowance for doubtful accounts during the years ended December 31, 2013, 2012 and 2011 were as follows:
		2013		2012		2011
(Dollars in thousands)
Beginning balance		$	26,902	$	23,537	$	25,816
	Additions, net of recoveries		98,864		67,372		62,157
	Deductions		(65,528)		(64,007)		(64,436)
Ending balance		$	60,238	$	26,902	$	23,537

Inventory

Inventory consists primarily of wireless devices stated at the lower of cost or market, with cost determined using the first-in, first-out method and market determined by replacement costs or estimated net realizable value.

Fair Value Measurements

Under the provisions of GAAP, fair value is a market-based measurement and not an entity-specific measurement, based on an exchange transaction in which the entity sells an asset or transfers a liability (exit price).  The provisions also establish a fair value hierarchy that contains three levels for inputs used in fair value measurements.  Level 1 inputs include quoted market prices for identical assets or liabilities in active markets.  Level 2 inputs include quoted market prices for similar assets and liabilities in active markets or quoted market prices for identical assets and liabilities in inactive markets.  Level 3 inputs are unobservable.  A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  A financial instrument’s level within the fair value hierarchy is not representative of its expected performance or its overall risk profile and, therefore, Level 3 assets are not necessarily higher risk than Level 2 assets or Level 1 assets.

Goodwill

U.S. Cellular has Goodwill as a result of its acquisitions of wireless businesses. Such Goodwill represents the excess of the total purchase price over the fair value of net assets acquired in these transactions.

Licenses

Licenses consist of direct and incremental costs incurred in acquiring Federal Communications Commission (“FCC”) licenses to provide wireless service.

U.S. Cellular has determined that wireless licenses are indefinite-lived intangible assets and, therefore, not subject to amortization based on the following factors:

·Radio spectrum is not a depleting asset.

·The ability to use radio spectrum is not limited to any one technology.

·U.S. Cellular and its consolidated subsidiaries are licensed to use radio spectrum through the FCC licensing process, which enables licensees to utilize specified portions of the spectrum for the provision of wireless service.

34

·U.S. Cellular and its consolidated subsidiaries are required to renew their FCC licenses every ten years or, in some cases, every fifteen years. To date, all of U.S. Cellular’s license renewal applications have been granted by the FCC. Generally, license renewal applications filed by licensees otherwise in compliance with FCC regulations are routinely granted. If, however, a license renewal application is challenged either by a competing applicant for the license or by a petition to deny the renewal application, the license will be renewed if the licensee can demonstrate its entitlement to a “renewal expectancy.” Licensees are entitled to such an expectancy if they can demonstrate to the FCC that they have provided “substantial service” during their license term and have “substantially complied” with FCC rules and policies. U.S. Cellular believes that it is probable that its future license renewal applications will be granted.

Goodwill and Licenses Impairment Assessment

Goodwill and Licenses must be assessed for impairment annually or more frequently if events or changes in circumstances indicate that such assets might be impaired. U.S. Cellular performs its annual impairment assessment of Goodwill and Licenses as of November 1 of each year.

U.S. Cellular may first assess qualitative factors, such as company, industry and economic trends to determine whether it is necessary to perform the two-step Goodwill impairment test. If determined to be necessary, the first step compares the fair value of the reporting unit to its carrying value. If the carrying amount exceeds the fair value, the second step of the test is performed to measure the amount of impairment loss, if any. The second step compares the implied fair value of reporting unit Goodwill with the carrying amount of that Goodwill. To calculate the implied fair value of Goodwill in this second step, an enterprise allocates the fair value of the reporting unit to all of the assets and liabilities of that reporting unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value was the price paid to acquire the reporting unit. The excess of the fair value of the reporting unit over the amount assigned to the assets and liabilities of the reporting unit is the implied fair value of Goodwill. If the carrying amount of Goodwill exceeds the implied fair value of Goodwill, an impairment loss is recognized for that difference.

The impairment test for an indefinite-lived intangible asset other than Goodwill may consist of first assessing qualitative factors, such as company, industry and economic trends.  If determined to be necessary, the next step compares the fair value of the intangible asset to its carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized for the difference.

Quoted market prices in active markets are the best evidence of fair value of an intangible asset or reporting unit and are used when available. If quoted market prices are not available, the estimate of fair value is based on the best information available, including prices for similar assets and the use of other valuation techniques. Other valuation techniques include present value analysis, multiples of earnings or revenues, or similar performance measures. The use of these techniques involve assumptions by management about factors that are uncertain including future cash flows, the appropriate discount rate, and other inputs. Different assumptions for these inputs could create materially different results.

U.S. Cellular tests Goodwill for impairment at the level of reporting referred to as a reporting unit. For purposes of its impairment testing of Goodwill in 2013, U.S. Cellular identified four reporting units. The four reporting units represent four geographic groupings of operating markets, representing four geographic service areas.  For purposes of its impairment testing of Goodwill in 2012, U.S. Cellular identified five reporting units.  The change in reporting units resulted from the NY1 & NY2 Deconsolidation more fully described in Note 7 — Investments in Unconsolidated Entities.

A discounted cash flow approach was used to value each reporting unit for purposes of the Goodwill impairment review by using value drivers and risks specific to the current industry and economic markets. The cash flow estimates incorporated assumptions that market participants would use in their estimates of fair value. Key assumptions made in this process were the discount rate, estimated expected revenue growth rate, projected capital expenditures and the terminal growth rate.

U.S. Cellular tests Licenses for impairment at the level of reporting referred to as a unit of accounting. For purposes of its 2013 impairment testing of Licenses, U.S. Cellular separated its FCC licenses into eleven units of accounting based on geographic service areas. For purposes of its 2012 impairment testing of Licenses, U.S. Cellular separated its FCC licenses into thirteen units of accounting based on geographic service areas.  The change in units of accounting resulted from (i) the Divestiture Transaction and the Mississippi Valley non-operating market license sale, both of which are more fully described in Note 5 — Acquisitions, Divestitures and Exchanges and (ii) the NY1 & NY2 Deconsolidation more fully described in Note 7 — Investments in Unconsolidated Entities.  In both 2013 and 2012, seven of the units of accounting represented geographic groupings of licenses which, because they were not being utilized and, therefore, were not expected to generate cash flows from operating activities in the foreseeable future, were considered separate units of accounting for purposes of impairment testing.

35

U.S. Cellular estimates the fair value of built licenses for purposes of impairment testing using the build-out method. The build-out method estimates the fair value of Licenses by calculating future cash flows from a hypothetical start-up wireless company and assuming that the only assets available upon formation are the underlying Licenses. To apply this method, a hypothetical build-out of U.S. Cellular’s wireless network, infrastructure, and related costs are projected based on market participant information. Calculated cash flows, along with a terminal value, are discounted to the present and summed to determine the estimated fair value.

For units of accounting which consist of unbuilt licenses, U.S. Cellular prepares estimates of fair value by reference to prices paid in recent auctions and market transactions where available. If such information is not available, the fair value of the unbuilt licenses is assumed to change by the same percentage, and in the same direction, that the fair value of built licenses measured using the build-out method changed during the period.

Investments in Unconsolidated Entities

Investments in unconsolidated entities consist of amounts invested in wireless entities in which U.S. Cellular holds a noncontrolling interest.  U.S. Cellular follows the equity method of accounting for such investments in which its ownership interest is less than or equal to 50% but equals or exceeds 20% for corporations and 3% for partnerships and limited liability companies, or for unconsolidated entities in which its ownership is greater than 50% but U.S. Cellular does not have a controlling financial interest.  The cost method of accounting is followed for such investments in which U.S. Cellular’s ownership interest is less than 20% for corporations and is less than 3% for partnerships and limited liability companies and for investments for which U.S. Cellular does not have the ability to exercise significant influence.

For its equity method investments for which financial information is readily available, U.S. Cellular records its equity in the earnings of the entity in the current period.  For its equity method investments for which financial information is not readily available, U.S. Cellular records its equity in the earnings of the entity on a one quarter lag basis.

Property, Plant and Equipment

U.S. Cellular’s Property, plant and equipment is stated at the original cost of construction or purchase including capitalized costs of certain taxes, payroll-related expenses, interest and estimated costs to remove the assets.

Expenditures that enhance the productive capacity of assets in service or extend their useful lives are capitalized and depreciated.  Expenditures for maintenance and repairs of assets in service are charged to System operations expense or Selling, general and administrative expense, as applicable. Retirements and disposals of assets are recorded by removing the original cost of the asset (along with the related accumulated depreciation) from plant in service and charging it, together with net removal costs (removal costs less any applicable accrued asset retirement obligations and salvage value realized), to (Gain) loss on asset disposals, net. 

Costs of developing new information systems are capitalized and amortized over their expected economic useful lives.

Depreciation

Depreciation is provided using the straight-line method over the estimated useful life of the assets.

U.S. Cellular depreciates leasehold improvement assets associated with leased properties over periods ranging from one to thirty years; such periods approximate the shorter of the assets’ economic lives or the specific lease terms.

Useful lives of specific assets are reviewed throughout the year to determine if changes in technology or other business changes would warrant accelerating the depreciation of those specific assets. Due to the Divestiture Transaction more fully described in Note 5 — Acquisitions, Divestitures and Exchanges, U.S. Cellular changed the useful lives of certain assets in 2013 and 2012.  Other than the Divestiture Transaction, there were no other material changes to useful lives of property, plant and equipment in 2013, 2012 or 2011.

Impairment of Long-lived Assets

U.S. Cellular reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired. If necessary, the impairment test for tangible long-lived assets is a two-step process. The first step compares the carrying value of the asset (or asset group) with the estimated undiscounted cash flows over the remaining asset (or asset group) life. If the carrying value of the asset (or asset group) is greater than the undiscounted cash flows, the second step of the test is performed to measure the amount of impairment loss. The second step compares the carrying value of the asset to its estimated fair value. If the carrying value exceeds the estimated fair value (less cost to sell), an impairment loss is recognized for the difference.

36

U.S. Cellular has one asset group for purposes of assessing property, plant and equipment for impairment based on the fact that the individual operating markets are reliant on centrally operated data centers, mobile telephone switching offices, network operations center and wide-area network.  As a result, U.S. Cellular operates a single integrated national wireless network, and the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities represent cash flows generated by this single interdependent network.

Quoted market prices in active markets are the best evidence of fair value of a tangible long-lived asset and are used when available. If quoted market prices are not available, the estimate of fair value is based on the best information available, including prices for similar assets and the use of other valuation techniques. A present value analysis of cash flow scenarios is often the best available valuation technique. The use of this technique involves assumptions by management about factors that are uncertain including future cash flows, the appropriate discount rate and other inputs. Different assumptions for these inputs could create materially different results.

Agent Liabilities

U.S. Cellular has relationships with agents, which are independent businesses that obtain customers for U.S. Cellular.  At December 31, 2013 and 2012, U.S. Cellular had accrued $121.3 million and $88.2 million, respectively, for amounts due to agents.  This amount is included in Other current liabilities in the Consolidated Balance Sheet.

Other Assets and Deferred Charges

Other assets and deferred charges include underwriters’ and legal fees and other charges related to issuing U.S. Cellular’s various borrowing instruments and other long-term agreements, and are amortized over the respective term of each instrument.  The amounts for deferred charges included in the Consolidated Balance Sheet at December 31, 2013 and 2012, are shown net of accumulated amortization of $26.0 million and $12.7 million, respectively.

Asset Retirement Obligations

U.S. Cellular operates cell sites, retail stores and office spaces in its operating markets.  A majority of these sites, stores and office spaces are leased.  Most of these leases contain terms which require or may require U.S. Cellular to return the leased property to its original condition at the lease expiration date.

U.S. Cellular accounts for asset retirement obligations by recording the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligations are incurred.  At the time the liability is incurred, U.S. Cellular records a liability equal to the net present value of the estimated cost of the asset retirement obligation and increases the carrying amount of the related long-lived asset by an equal amount.  The liability is accreted to its present value over a period ending with the estimated settlement date of the respective asset retirement obligation. The carrying amount of the long-lived asset is depreciated over the useful life of the asset. Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability (including accretion of discount) is recognized in the Consolidated Statement of Operations.

Treasury Shares

Common Shares repurchased by U.S. Cellular are recorded at cost as treasury shares and result in a reduction of equity.  Treasury shares are reissued as part of U.S. Cellular’s stock-based compensation programs.  When treasury shares are reissued, U.S. Cellular determines the cost using the first-in, first-out cost method.  The difference between the cost of the treasury shares and reissuance price is included in Additional paid-in capital or Retained earnings.

Revenue Recognition

Revenues from wireless operations consist primarily of:

·Charges for access, airtime, roaming, long distance, data and other value added services provided to U.S. Cellular’s retail customers and to end users through third‑party resellers;

·Charges to carriers whose customers use U.S. Cellular’s systems when roaming;

·Sales of equipment and accessories;

·Amounts received from the Universal Service Fund (“USF”) in states where U.S. Cellular has been designated an Eligible Telecommunications Carrier (“ETC”); and

·Redemptions of loyalty reward points for products or services.

Revenues related to wireless services and other value added services are recognized as services are rendered.  Revenues billed in advance or in arrears of the services being provided are estimated and deferred or accrued, as appropriate.

37

Revenues from sales of equipment and accessories are recognized when title and risk of loss passes to the agent or end-user customer. 

U.S. Cellular allocates revenue to each element of multiple element service offerings using the relative selling price method.  Under this method, arrangement consideration, which consists of the amounts billed to the customer net of any cash-based discounts, is allocated to each element on the basis of its relative selling price on a stand-alone basis.  Such stand-alone selling price is determined in accordance with the following hierarchy:

·U.S. Cellular-specific objective evidence of stand-alone selling price, if available; otherwise

·Third-party evidence of selling price, if it is determinable; otherwise

·A best estimate of stand-alone selling price.

U.S. Cellular estimates stand-alone selling prices of the elements of its service offerings as follows:

·Wireless services – Based on the actual selling price U.S. Cellular offers when such plan is sold on a stand-alone basis, or if the plan is not sold on a stand-alone basis, U.S. Cellular’s estimate of the price of such plan based on similar plans that are sold on a stand-alone basis.

·Wireless devices – Based on the selling price of the respective wireless device when it is sold on a stand-alone basis.

·Phone Replacement – Based on U.S. Cellular’s estimate of the price of this service if it were sold on a stand-alone basis, which was calculated by estimating the cost of this program plus a reasonable margin. 

·Loyalty reward points – By estimating the retail price of the products and services for which points may be redeemed and dividing such amount by the number of loyalty points required to receive such products and services.  This is calculated on a weighted average basis and requires U.S. Cellular to estimate the percentage of loyalty points that will be redeemed for each product or service. 

U.S. Cellular follows the deferred revenue method of accounting for its loyalty reward program.  Under this method, revenue allocated to loyalty reward points is deferred.  Revenue is recognized at the time of customer redemption or when such points have been depleted via an account maintenance charge.  U.S. Cellular periodically reviews and revises the redemption and depletion rates as appropriate based on history and related future expectations.  As of December 31, 2013, U.S. Cellular estimated loyalty reward points breakage based on actuarial estimates and recorded a $7.4 million change in estimate, which reduced Customer deposits and deferred revenues in the Consolidated Balance Sheet and increased Service revenues in the Consolidated Statement of Operations.

In the fourth quarter of 2013, U.S. Cellular issued loyalty reward points with a value of $43.5 million as a loyalty bonus in recognition of the inconvenience experienced by customers during U.S. Cellular’s recent billing system conversion.  The value of the loyalty bonus reduced Service revenues in the Consolidated Statement of Operations and increased Customer deposits and deferred revenues in the Consolidated Balance Sheet.

As of December 31, 2013 and 2012, U.S. Cellular had deferred revenue related to loyalty reward points outstanding of $116.2 million and $56.6 million, respectively.  These amounts are recorded in Customer deposits and deferred revenues (a current liability account) in the Consolidated Balance Sheet, as customers may redeem their reward points within the current period. 

Cash-based discounts and incentives, including discounts to customers who pay their bills through the use of on-line bill payment methods, are recognized as a reduction of Operating revenues concurrently with the associated revenue, and are allocated to the various products and services in the bundled offering based on their respective relative selling price. 

In order to provide better control over wireless device quality, U.S. Cellular sells wireless devices to agents. U.S. Cellular pays rebates to agents at the time an agent activates a new customer or retains an existing customer in a transaction involving a wireless device.  U.S. Cellular accounts for these rebates by reducing revenues at the time of the wireless device sale to the agent rather than at the time the agent activates a new customer or retains a current customer.  Similarly, U.S. Cellular offers certain wireless device sales rebates and incentives to its retail customers and records the revenue net of the corresponding rebate or incentive.  The total potential rebates and incentives are reduced by U.S. Cellular’s estimate of rebates that will not be redeemed by customers based on historical experience of such redemptions.

GAAP requires that activation fees charged with the sale of equipment and service be allocated to the equipment and service based upon the relative selling prices of each item.  Device activation fees charged at agent locations, where U.S. Cellular does not also sell a wireless device to the customer, are deferred and recognized over the average device life.  Device activation fees charged as a result of handset sales at Company-owned retail stores are recognized at the time the handset is delivered to the customer.

ETC revenues recognized in the reporting period represent the amounts which U.S. Cellular is entitled to receive for such period, as determined and approved in connection with U.S. Cellular’s designation as an ETC in various states.

38

Amounts Collected from Customers and Remitted to Governmental Authorities

U.S. Cellular records amounts collected from customers and remitted to governmental authorities net within a tax liability account if the tax is assessed upon the customer and U.S. Cellular merely acts as an agent in collecting the tax on behalf of the imposing governmental authority.  If the tax is assessed upon U.S. Cellular, then amounts collected from customers as recovery of the tax are recorded in Service revenues and amounts remitted to governmental authorities are recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations.  The amounts recorded gross in revenues that are billed to customers and remitted to governmental authorities totaled $114.7 million, $135.7 million and $125.2 million for 2013, 2012 and 2011, respectively. 

Advertising Costs

U.S. Cellular expenses advertising costs as incurred.  Advertising costs totaled $199.9 million, $227.0 million and $257.8 million in 2013, 2012 and 2011, respectively.

Income Taxes

U.S. Cellular is included in a consolidated federal income tax return with other members of the TDS consolidated group.  TDS and U.S. Cellular are parties to a Tax Allocation Agreement which provides that U.S. Cellular and its subsidiaries be included with the TDS affiliated group in a consolidated federal income tax return and in state income or franchise tax returns in certain situations.  For financial statement purposes, U.S. Cellular and its subsidiaries calculate their income, income taxes and credits as if they comprised a separate affiliated group.  Under the Tax Allocation Agreement, U.S. Cellular remits its applicable income tax payments to TDS.  U.S. Cellular had a tax payable balance with TDS of $34.8 million and $1.1 million as of December 31, 2013 and 2012, respectively.

Deferred taxes are computed using the liability method, whereby deferred tax assets are recognized for future deductible temporary differences and operating loss carryforwards, and deferred tax liabilities are recognized for future taxable temporary differences.  Both deferred tax assets and liabilities are measured using the tax rates anticipated to be in effect when the temporary differences reverse.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.  Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.  U.S. Cellular evaluates income tax uncertainties, assesses the probability of the ultimate settlement with the applicable taxing authority and records an amount based on that assessment. 

Stock-Based Compensation

U.S. Cellular has established a long-term incentive plan and a Non-Employee Director compensation plan, and previously had an employee stock purchase plan before this was terminated in the fourth quarter of 2011.  Also, U.S. Cellular employees were eligible to participate in the TDS employee stock purchase plan before this was terminated in the fourth quarter of 2011.  These plans are described more fully in Note 15 — Stock-based Compensation.  These plans are considered compensatory plans and, therefore, recognition of compensation cost for grants made under these plans is required.

U.S. Cellular values its share-based payment transactions using a Black-Scholes valuation model.  Stock-based compensation cost recognized during the period is based on the portion of the share-based payment awards that are ultimately expected to vest.  Accordingly, stock-based compensation cost recognized has been reduced for estimated forfeitures.  Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  Pre-vesting forfeitures and expected life are estimated based on historical experience related to similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior.  U.S. Cellular believes that its historical experience provides the best estimates of future pre-vesting forfeitures and future expected life.  The expected volatility assumption is based on the historical volatility of U.S. Cellular’s common stock over a period commensurate with the expected life.  The dividend yield assumption is zero because U.S. Cellular has never paid a dividend, except a special cash dividend in June 2013, and has expressed its intention to retain all future earnings in the business.  The risk-free interest rate assumption is determined using the U.S. Treasury Yield Curve Rate with a term length that approximates the expected life of the stock options.

The fair value of options is recognized as compensation cost over the respective requisite service period of the awards, which is generally the vesting period, on a straight-line basis for each separate vesting portion of the awards as if the awards were, in-substance, multiple awards (graded vesting attribution method).

39

Defined Contribution Plans

U.S. Cellular participates in a qualified noncontributory defined contribution pension plan sponsored by TDS; such plan provides pension benefits for the employees of U.S. Cellular and its subsidiaries.  Under this plan, pension benefits and costs are calculated separately for each participant and are funded currently.  Pension costs were $10.4 million, $12.4 million and $11.6 million in 2013, 2012 and 2011, respectively.

U.S. Cellular also participates in a defined contribution retirement savings plan (“401(k) plan”) sponsored by TDS.  Total costs incurred from U.S. Cellular’s contributions to the 401(k) plan were $15.4 million, $17.1 million and $15.5 million in 2013, 2012 and 2011, respectively.

Operating Leases

U.S. Cellular is a party to various lease agreements for office space, retail stores, cell sites and equipment that are accounted for as operating leases.  Certain leases have renewal options and/or fixed rental increases.  Renewal options that are reasonably assured of exercise are included in determining the lease term.  U.S. Cellular accounts for certain operating leases that contain rent abatements, lease incentives and/or fixed rental increases by recognizing lease revenue and expense on a straight-line basis over the lease term.

Recently Issued Accounting Pronouncements

On July 18, 2013, the FASB issued Accounting Standards Update 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryfoward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 addresses the presentation of an unrecognized tax benefit when a net operating loss carryforward or tax credit carryforward exists. In such event, an unrecognized tax benefit, or portion of an unrecognized tax benefit, would be presented in the Consolidated Balance Sheet as a reduction to deferred tax assets unless the net operating loss carryforward or tax credit carryforward at the reporting date is not available under the tax law of the applicable jurisdiction.  U.S. Cellular is required to adopt the provisions of ASU 2013-11 effective January 1, 2014.  The adoption of ASU 2013-11 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

NOTE 2 FAIR VALUE MEASUREMENTS

As of December 31, 2013 and 2012, U.S. Cellular did not have any financial assets or liabilities that were required to be recorded at fair value in its Consolidated Balance Sheet in accordance with GAAP.  However, U.S. Cellular has applied the provisions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayed below.

			December 31, 2013				December 31, 2012
		Level within the Fair Value Hierarchy	Book Value			Fair Value	Book Value		Fair Value
(Dollars in thousands)
Cash and cash equivalents		1	$	342,065	$	342,065	$	378,358	$	378,358
Short-term investments
	U.S. Treasury Notes	1		50,104		50,104		100,676		100,676
Long-term investments
	U.S. Treasury Notes	1		-		-		50,305		50,339
Long-term debt
	6.95% Senior Notes	1		342,000		309,852		342,000		376,610
	6.7% Senior Notes	2		532,449		507,697		532,194		582,744

Short-term investments are designated as held-to-maturity investments and recorded at amortized cost in the Consolidated Balance Sheet.  Long-term debt excludes capital lease obligations and the current portion of Long-term debt.

The fair values of Cash and cash equivalents and Short-term investments approximate their book values due to the short-term nature of these financial instruments.  The fair values of Long-term investments were estimated using quoted market prices for the individual issuances.  The fair value of Long-term debt was estimated using market prices for the 6.95% Senior Notes, and discounted cash flow analysis using an estimated yield to maturity of 7.35% and 6.09% for the 6.7% Senior Notes at December 31, 2013 and 2012, respectively.

As of December 31, 2013 and 2012, U.S. Cellular did not have nonfinancial assets or liabilities that required the application of fair value accounting for purposes of reporting such amounts in the Consolidated Balance Sheet.

40

NOTE 3 INCOME TAXES

U.S. Cellular’s income taxes balances at December 31, 2013 and 2012 were as follows:

December 31,	2013		2012
(Dollars in thousands)
Federal income taxes (payable)	$	(32,351)	$	(1,614)
State income taxes receivable (payable)		(1,545)		1,612

Income tax expense (benefit) is summarized as follows:
Year Ended December 31,		2013		2012		2011
(Dollars in thousands)
Current
	Federal	$	180,056	$	10,547	$	(90,235)
	State		8,426		4,186		1,049
Deferred
	Federal		(69,917)		54,490		187,581
	State		(5,431)		(5,246)		15,683
		$	113,134	$	63,977	$	114,078

A reconciliation of U.S. Cellular’s income tax expense computed at the statutory rate to the reported income tax expense, and the statutory federal income tax expense rate to U.S. Cellular’s effective income tax expense rate is as follows:

Year Ended December 31,		2013				2012				2011
		Amount		Rate		Amount		Rate		Amount		Rate
(Dollars in millions)
Statutory federal income tax expense and rate		$	90.2	35.0	%	$	71.8	35.0	%	$	109.5	35.0	%
State income taxes, net of federal benefit (1)			5.2	2.0			3.7	1.8			4.5	1.4
Effect of noncontrolling interests			(2.2)	(0.9)			(6.3)	(3.1)			(4.9)	(1.6)
Gains (losses) on investments and sale of assets (2)			20.5	8.0			-	-			-	-
Correction of deferred taxes (3)			-	-			(5.3)	(2.6)			6.1	2.0
Other differences, net			(0.6)	(0.2)			0.1	0.1			(1.1)	(0.3)
Total income tax expense and rate		$	113.1	43.9	%	$	64.0	31.2	%	$	114.1	36.5	%
(1)	Net state income taxes include changes in the valuation allowance.  In addition, state tax benefits related to the settlement of state tax audits and the expiration of statutes of limitations are included in 2013, 2012 and 2011.
(2)	Represents 2013 tax expense related to the NY1 & NY2 Deconsolidation and the Divestiture Transaction.
(3)	U.S. Cellular recorded immaterial adjustments to correct deferred tax balances in 2012 and 2011 related to tax basis and law changes that related to periods prior to 2012 and 2011, respectively.

U.S. Cellular’s current Net deferred income tax asset totaled $99.1 million and $35.4 million at December 31, 2013 and 2012, respectively, and primarily represents the deferred tax effects of the deferred revenue for the loyalty reward points, the allowance for doubtful accounts on customer receivables and accrued liabilities.

U.S. Cellular’s noncurrent deferred income tax assets and liabilities at December 31, 2013 and 2012 and the temporary differences that gave rise to them were as follows:
December 31,		2013		2012
(Dollars in thousands)
Noncurrent deferred tax assets
	Net operating loss (“NOL”) carryforwards	$	61,294	$	63,240
	Stock-based compensation		19,028		22,411
	Compensation and benefits - other		3,746		13,673
	Deferred rent		19,462		15,822
	Other		24,604		25,432
			128,134		140,578
	Less valuation allowance		(40,392)		(40,208)
	Total noncurrent deferred tax assets		87,742		100,370
Noncurrent deferred tax liabilities
	Property, plant and equipment		503,491		527,547
	Licenses/intangibles		282,764		294,738
	Partnership investments		133,931		124,221
	Other		3,853		3,682
	Total noncurrent deferred tax liabilities		924,039		950,188
Net noncurrent deferred income tax liability		$	836,297	$	849,818

41

At December 31, 2013, U.S. Cellular and certain subsidiaries had $1,149.4 million of state NOL carryforwards (generating a $51.1 million deferred tax asset) available to offset future taxable income.  The state NOL carryforwards expire between 2014 and 2033.  Certain subsidiaries had federal NOL carryforwards (generating a $10.2 million deferred tax asset) available to offset their future taxable income.  The federal NOL carryforwards expire between 2018 and 2033.  A valuation allowance was established for certain state NOL carryforwards and federal NOL carryforwards since it is more likely than not that a portion of such carryforwards will expire before they can be used.

A summary of U.S. Cellular’s deferred tax asset valuation allowance is as follows:
		2013		2012		2011
(Dollars in thousands)
Balance at January 1,		$	41,295	$	30,261	$	29,891
	Charged to income tax expense		(1,527)		3,033		(1,450)
	Charged to other accounts		3,607		8,001		1,820
Balance at December 31,		$	43,375	$	41,295	$	30,261
As of December 31, 2013, the valuation allowance reduced current deferred tax assets by $3.0 million and noncurrent deferred tax assets by $40.4 million.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
		2013		2012		2011
(Dollars in thousands)
Unrecognized tax benefits balance at January 1,		$	26,460	$	28,745	$	32,547
	Additions for tax positions of current year		5,925		6,656		4,487
	Additions for tax positions of prior years		1,501		854		332
	Reductions for tax positions of prior years		(45)		(115)		(1,104)
	Reductions for settlements of tax positions		(576)		-		(244)
	Reductions for lapses in statutes of limitations		(4,452)		(9,680)		(7,273)
Unrecognized tax benefits balance at December 31,		$	28,813	$	26,460	$	28,745

Unrecognized tax benefits are included in Accrued taxes and Other deferred liabilities and credits in the Consolidated Balance Sheet.  If these benefits were recognized, they would have reduced income tax expense in 2013, 2012 and 2011 by $18.7 million, $17.2 million and $18.7 million, respectively, net of the federal benefit from state income taxes.  As of December 31, 2013, U.S. Cellular does not expect unrecognized tax benefits to change significantly in the next twelve months.

U.S. Cellular recognizes accrued interest and penalties related to unrecognized tax benefits in Income tax expense.  The amounts charged to Income tax expense related to interest and penalties resulted in an expense of $0.6 million in 2013, and a benefit of $2.2 million and $2.6 million in 2012 and 2011, respectively.  Net accrued interest and penalties were $12.3 million and $12.8 million at December 31, 2013 and 2012, respectively.

U.S. Cellular is included in TDS’ consolidated federal income tax return. U.S. Cellular also files various state and local income tax returns.  The TDS consolidated group remains subject to federal income tax audits for the tax years after 2011. With only a few exceptions, TDS is no longer subject to state income tax audits for years prior to 2009.

42

NOTE 4 EARNINGS PER SHARE

Basic earnings per share attributable to U.S. Cellular shareholders is computed by dividing Net income attributable to U.S. Cellular shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share attributable to U.S. Cellular shareholders is computed by dividing Net income attributable to U.S. Cellular shareholders by the weighted average number of common shares outstanding during the period adjusted to include the effects of potentially dilutive securities. Potentially dilutive securities primarily include incremental shares issuable upon exercise of outstanding stock options and the vesting of restricted stock units.

The amounts used in computing earnings per common share and the effects of potentially dilutive securities on the weighted average number of common shares were as follows:

Year ended December 31,		2013		2012		2011
(Dollars and shares in thousands, except earnings per share)
Net income attributable to U.S. Cellular shareholders		$	140,038	$	111,006	$	175,041
Weighted average number of shares used in basic earnings per share			83,968		84,645		84,877
Effect of dilutive securities:
	Stock options		211		184		224
	Restricted stock units		551		401		347
Weighted average number of shares used in diluted earnings per share			84,730		85,230		85,448
Basic earnings per share attributable to U.S. Cellular shareholders		$	1.67	$	1.31	$	2.06
Diluted earnings per share attributable to U.S. Cellular shareholders		$	1.65	$	1.30	$	2.05

Certain Common Shares issuable upon the exercise of stock options or vesting of restricted stock units were not included in average diluted shares outstanding for the calculation of Diluted earnings per share attributable to U.S. Cellular shareholders because their effects were antidilutive. The number of such Common Shares excluded, if any, is shown in the table below.

Year Ended December 31,	2013	2012	2011
(Shares in thousands)
Stock options	2,010	2,123	1,591
Restricted stock units	190	369	250

On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75 per share, for an aggregate amount of $482.3 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013.  Outstanding U.S. Cellular stock options and restricted stock unit awards were equitably adjusted for the special cash dividend.  The impact of such adjustments on the earnings per share calculation was fully reflected for all years presented.

NOTE 5ACQUISITIONS, DIVESTITURES AND EXCHANGES

U.S. Cellular assesses its existing wireless interests on an ongoing basis with a goal of improving the competitiveness of its operations and maximizing its long-term return on investment.  As part of this strategy, U.S. Cellular reviews attractive opportunities to acquire additional operating markets and wireless spectrum.  In addition, U.S. Cellular may seek to divest outright or include in exchanges for other wireless interests those interests that are not strategic to its long-term success.

Acquisitions did not have a material impact on U.S. Cellular’s consolidated financial statements for the periods presented and pro forma results, assuming acquisitions had occurred at the beginning of each period presented, would not be materially different from the results reported.

43

Divestiture Transaction

On November 6, 2012, U.S. Cellular entered into a Purchase and Sale Agreement with subsidiaries of Sprint Corp., fka Sprint Nextel Corporation (“Sprint”).   Pursuant to the Purchase and Sale Agreement, on May 16, 2013, U.S. Cellular transferred customers and certain PCS license spectrum to Sprint in U.S. Cellular’s Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets (“Divestiture Markets”) in consideration for $480 million in cash.  The Purchase and Sale Agreement also contemplated certain other agreements, together with the Purchase and Sale Agreement collectively referred to as the “Divestiture Transaction.”

U.S. Cellular retained other assets and liabilities related to the Divestiture Markets, including network assets, retail stores and related equipment, and other buildings and facilities.  The transaction did not affect spectrum licenses held by U.S. Cellular or variable interest entities (“VIEs”) that were not used in the operations of the Divestiture Markets. Pursuant to the Purchase and Sale Agreement, U.S. Cellular and Sprint also entered into certain other agreements, including customer and network transition services agreements, which require U.S. Cellular to provide customer, billing and network services to Sprint for a period of up to 24 months after the May 16, 2013 closing date.  Sprint will reimburse U.S. Cellular for providing such services at an amount equal to U.S. Cellular’s estimated costs, including applicable overhead allocations.  In addition, these agreements require Sprint to reimburse U.S. Cellular up to $200 million (the “Sprint Cost Reimbursement”) for certain network decommissioning costs, network site lease rent and termination costs, network access termination costs, and employee termination benefits for specified engineering employees.  It is estimated that up to $175 million of the Sprint Cost Reimbursement will be recorded in (Gain) loss on sale of business and other exit costs, net and up to $25 million of the Sprint Cost Reimbursement will be recorded in System operations in the Consolidated Statement of Operations.  For the year ended December 31, 2013, $10.6 million of the Sprint Cost Reimbursement had been received and recorded in Cash received from divestitures in the Consolidated Statement of Cash Flows.

Financial impacts of the Divestiture Transaction are classified in the Consolidated Statement of Operations within Operating income. The table below describes the amounts U.S. Cellular has recognized and expects to recognize in the Consolidated Statement of Operations between the date the Purchase and Sale Agreement was signed and the end of the transition services period.

44

(Dollars in thousands)			Expected Period of Recognition	Projected Range				Cumulative Amount Recognized as of December 31, 2013		Actual Amount Recognized Year Ended December 31, 2013		Actual Amount Recognized Three Months Ended December 31, 2013		Actual Amount Recognized Three Months and Year Ended December 31, 2012
(Gain) loss on sale of business and other exit   costs, net
	Proceeds from Sprint
		Purchase price	2013	$	(480,000)	$	(480,000)	$	(480,000)	$	(480,000)	$	-	$	-
		Sprint Cost Reimbursement	2013-2014		(120,000)		(175,000)		(47,641)		(47,641)		(43,420)		-
	Net assets transferred		2013		213,593		213,593		213,593		213,593		-		-
	Non-cash charges for the write-off and   write-down of property under construction   and related assets		2012-2014		10,000		14,000		10,675		3		(51)		10,672
	Employee related costs including severance,   retention and outplacement		2012-2014		12,000		18,000		14,262		1,653		(809)		12,609
	Contract termination costs		2012-2014		110,000		160,000		59,584		59,525		40,744		59
	Transaction costs		2012-2014		5,000		6,000		5,565		4,428		347		1,137
		Total (Gain) loss on sale of business and   other exit costs, net		$	(249,407)	$	(243,407)	$	(223,962)	$	(248,439)	$	(3,189)	$	24,477
Depreciation, amortization and accretion   expense
	Incremental depreciation, amortization and   accretion, net of salvage values		2012-2014		200,000		225,000		198,571		178,513		44,513		20,058
(Increase) decrease in Operating income				$	(49,407)	$	(18,407)	$	(25,391)	$	(69,926)	$	41,324	$	44,535

45

Incremental depreciation, amortization and accretion, net of salvage values represents anticipated amounts to be recorded in the specified time periods as a result of a change in estimate for the remaining useful life and salvage value of certain assets and a change in estimate which accelerated the settlement dates of certain asset retirement obligations in conjunction with the Divestiture Transaction.  Specifically, for the years indicated, this is estimated depreciation, amortization and accretion recorded on assets and liabilities of the Divestiture Markets after the November 6, 2012 transaction date less depreciation, amortization and accretion that would have been recorded on such assets and liabilities in the normal course, absent the Divestiture Transaction. 

As a result of the transaction, U.S. Cellular recognized the following amounts in the Consolidated Balance Sheet:
				Year Ended December 31, 2013
(Dollars in thousands)		Balance December 31, 2012		Costs Incurred		Cash Settlements (1)		Adjustments (2)		Balance December 31, 2013
Accrued compensation
	Employee related costs including  severance, retention, outplacement	$	12,305	$	6,853	$	(11,905)	$	(5,200)	$	2,053
Other current liabilities
	Contract termination costs	$	30	$	22,675	$	(8,713)	$	-	$	13,992
Other deferred liabilities and credits
	Contract termination costs	$	-	$	34,283	$	(3,434)	$	-	$	30,849
				Year Ended December 31, 2012
(Dollars in thousands)		Balance November 6, 2012		Costs Incurred		Cash Settlements (1)		Adjustments (2)		Balance December 31, 2012
Accrued compensation
	Employee related costs including  severance, retention, outplacement	$	-	$	12,609	$	(304)	$	-	$	12,305
Other current liabilities
	Contract termination costs	$	-	$	59	$	(29)	$	-	$	30
(1)	Cash settlement amounts are included in either the Net income or changes in Other assets and liabilities line items as part of Cash flows from operating activities on the Consolidated Statement of Cash Flows.
(2)	Adjustment to liability represents changes to previously accrued amounts.

Other Acquisitions, Divestitures and Exchanges

On October 4, 2013, U.S. Cellular sold the majority of its Mississippi Valley non-operating market license (“unbuilt license”) for $308.0 million.  At the time of the sale, a $250.6 million gain was recorded in (Gain) loss on license sales and exchanges in the Consolidated Statement of Operations. 

On August 14, 2013 U.S. Cellular entered into a definitive agreement to sell the majority of its St. Louis area unbuilt license for $92.3 million.  This transaction is subject to regulatory approval and is expected to close in the first quarter of 2014.  In accordance with GAAP, the book value of the license has been accounted for and disclosed as “held for sale” in the Consolidated Balance Sheet at December 31, 2013.

On November 20, 2012, U.S. Cellular acquired seven 700 MHz licenses covering portions of Illinois, Michigan, Minnesota, Missouri, Nebraska, Oregon, Washington and Wisconsin for $57.7 million.

On August 15, 2012, U.S. Cellular acquired four 700 MHz licenses covering portions of Iowa, Kansas, Missouri, Nebraska and Oklahoma for $34.0 million.

46

On March 14, 2012, U.S. Cellular sold the majority of the assets and liabilities of a wireless market for $49.8 million in cash.  At the time of the sale, a $4.2 million gain was recorded in (Gain) loss on sale of business and other exit costs, net in the Consolidated Statement of Operations.  On May 9, 2011, pursuant to certain required terms of the partnership agreement, U.S. Cellular paid $24.6 million in cash to purchase the remaining ownership interest in this wireless market in which it previously held a 49% noncontrolling interest. In connection with the acquisition of the remaining interest, a $13.4 million gain was recorded to adjust the carrying value of this 49% investment to its fair value of $25.7 million based on an income approach valuation method.  The gain was recorded in Gain (loss) on investments in the Consolidated Statement of Operations in 2011. 

On September 30, 2011, U.S. Cellular completed an exchange whereby U.S. Cellular received eighteen 700 MHz spectrum licenses covering portions of Idaho, Illinois, Indiana, Kansas, Nebraska, Oregon and Washington in exchange for two PCS spectrum licenses covering portions of Illinois and Indiana.  The exchange of licenses provided U.S. Cellular with additional spectrum to meet anticipated future capacity and coverage requirements in several of its markets.  No cash, customers, network assets, other assets or liabilities were included in the exchange.  As a result of this transaction, U.S. Cellular recognized a gain of $11.8 million, representing the difference between the fair value of the licenses received, calculated using a market approach valuation method, and the carrying value of the licenses surrendered.  This gain was recorded in (Gain) loss on license sales and exchanges in the Consolidated Statement of Operations for the year ended December 31, 2011. 

U.S. Cellular acquisitions in 2013 and 2012 and the allocation of the purchase price for these acquisitions were as follows:
			Allocation of Purchase Price
(Dollars in thousands)	Purchase Price		Goodwill		Licenses		Intangible Assets Subject to Amortization		Net Tangible Assets/(Liabilities)
2013
Licenses	$	16,540	$	-	$	16,540	$	-	$	-
2012
Licenses	$	122,690	$	-	$	122,690	$	-	$	-

At December 31, 2013 and 2012, the following assets and liabilities were classified in the Consolidated Balance Sheet as "Assets held for sale" and "Liabilities held for sale":
			Current Assets		Licenses		Goodwill		Property, Plant and Equipment		Loss on Assets Held for Sale (1)		Total Assets Held for Sale		Liabilities Held for Sale (2)
(Dollars in thousands)
2013
Divestiture of Spectrum   Licenses			$	-	$	16,027	$	-	$	-	$	-	$	16,027	$	-
2012
Divestiture Transaction			$	-	$	140,599	$	72,994	$	-	$	-	$	213,593	$	19,594
Bolingbrook Customer Care   Center (3)				-		-		-		4,275		(1,105)		3,170		-
	Total		$	-	$	140,599	$	72,994	$	4,275	$	(1,105)	$	216,763	$	19,594
(1)		Loss on assets held for sale was recorded in (Gain) loss on sale of business and other exit costs, net in the Consolidated Statement of Operations.
(2)		Liabilities held for sale primarily consisted of Customer deposits and deferred revenues.
(3)		Effective January 1, 2013, U.S. Cellular transferred its Bolingbrook Customer Care Center operations to an existing third party vendor.

NOTE 6 INTANGIBLE ASSETS

Changes in U.S. Cellular's Licenses and Goodwill are presented below.  See Note 5 — Acquisitions, Divestitures and Exchanges for information regarding transactions which affected Licenses and Goodwill during the periods.

47

Licenses
Year Ended December 31,	2013		2012
(Dollars in thousands)
Balance, beginning of year	$	1,456,794	$	1,470,769
Acquisitions		16,540		122,690
Divestitures		(59,419)		-
Transferred to Assets held for sale		(16,027)		(140,599)
Other		3,238		3,934
Balance, end of year	$	1,401,126	$	1,456,794

Goodwill
Year Ended December 31,		2013		2012
(Dollars in thousands)
Assigned value at time of acquisition		$	494,737	$	494,737
	Accumulated impairment losses in prior periods		-		-
	Transferred to Assets held for sale		(72,994)		-
Balance, beginning of year			421,743		494,737
	Divestitures		(505)		-
	Transferred to Assets held for sale		-		(72,994)
	NY1 & NY2 Deconsolidation		(33,714)		-
Balance, end of year		$	387,524	$	421,743

NOTE 7 INVESTMENTS IN UNCONSOLIDATED ENTITIES

Investments in unconsolidated entities consist of amounts invested in wireless entities in which U.S. Cellular holds a noncontrolling interest. These investments are accounted for using either the equity or cost method as shown in the following table:

December 31,		2013		2012
(Dollars in thousands)
Equity method investments:
	Capital contributions, loans, advances and adjustments	$	121,571	$	10,323
	Cumulative share of income		1,152,916		1,017,449
	Cumulative share of distributions		(1,010,513)		(884,852)
			263,974		142,920
Cost method investments			1,611		1,611
Total investments in unconsolidated entities		$	265,585	$	144,531

Equity in earnings of unconsolidated entities totaled $131.9 million, $90.4 million and $83.6 million in 2013, 2012 and 2011, respectively; of those amounts, U.S. Cellular’s investment in the Los Angeles SMSA Limited Partnership (“LA Partnership”) contributed $78.4 million, $67.2 million and $55.3 million in 2013, 2012 and 2011, respectively.  U.S. Cellular held a 5.5% ownership interest in the LA Partnership throughout and at the end of each of these years. 

The following tables, which are based on information provided in part by third parties, summarize the combined assets, liabilities and equity, and the combined results of operations of U.S. Cellular’s equity method investments:

48

December 31,		2013		2012
(Dollars in thousands)
Assets
	Current	$	489,659	$	444,100
	Due from affiliates		408,735		298,707
	Property and other		2,026,104		1,896,784
		$	2,924,498	$	2,639,591
Liabilities and Equity
	Current liabilities	$	351,624	$	350,067
	Deferred credits		84,834		80,660
	Long-term liabilities		19,712		21,328
	Long-term capital lease obligations		707		405
	Partners' capital and shareholders' equity		2,467,621		2,187,131
		$	2,924,498	$	2,639,591

Year Ended December 31,		2013		2012		2011
(Dollars in thousands)
Results of Operations
	Revenues	$	6,218,067	$	5,804,466	$	5,519,024
	Operating expenses		4,473,722		4,363,399		4,282,277
	Operating income		1,744,345		1,441,067		1,236,747
	Other income, net		4,842		4,003		4,976
	Net income	$	1,749,187	$	1,445,070	$	1,241,723

NY1 & NY2 Deconsolidation

U.S. Cellular holds a 60.00% interest in St. Lawrence Seaway RSA Cellular Partnership (“NY1”)  and a 57.14% interest in New York RSA 2 Cellular Partnership (“NY2”) (together with NY1, the “Partnerships”).  The remaining interests in the Partnerships are held by Cellco Partnership d/b/a Verizon Wireless (“Verizon Wireless”).  The Partnerships are operated by Verizon Wireless under the Verizon Wireless brand.  Prior to April 3, 2013, because U.S. Cellular owned a greater than 50% interest in each of these Partnerships and based on U.S. Cellular’s rights under the Partnership Agreements, U.S. Cellular consolidated the financial results of these Partnerships in accordance with GAAP. 

On April 3, 2013, U.S. Cellular entered into an agreement relating to the Partnerships. The agreement amends the Partnership Agreements in several ways which provide Verizon Wireless with substantive participating rights that allow Verizon Wireless to make decisions that are in the ordinary course of business of the Partnerships and which are significant to directing and executing the activities of the business.  Accordingly, as required by GAAP, U.S. Cellular deconsolidated the Partnerships effective as of April 3, 2013 and thereafter reported them as equity method investments in its consolidated financial statements (“NY1 & NY2 Deconsolidation”).  After the NY1 & NY2 Deconsolidation, U.S. Cellular retained the same ownership percentages in the Partnerships and will continue to report the same percentages of income from the Partnerships, which will be recorded in Equity in earnings of unconsolidated entities in the Consolidated Statement of Operations. In addition to the foregoing described arrangements, U.S. Cellular has certain other arm’s length, ordinary business relationships with Verizon Wireless and its affiliates.  

In accordance with GAAP, as a result of the NY1 & NY2 Deconsolidation, U.S. Cellular’s interest in the Partnerships was reflected in Investments in unconsolidated entities at a fair value of $114.8 million as of April 3, 2013. Recording U.S. Cellular’s interest in the Partnerships required allocation of the excess of fair value over book value to customer lists, licenses, a favorable contract and goodwill of the Partnerships. Amortization expense related to customer lists and the favorable contract will be recognized over their respective useful lives and is included in Equity in earnings of unconsolidated entities in the Consolidated Statement of Operations.  In addition, U.S. Cellular recognized a non-cash pre-tax gain of $18.5 millionin the second quarter of 2013.  The gain was recorded in Gain (loss) on investments in the Consolidated Statement of Operations.

The Partnerships were valued using a discounted cash flow approach and a publicly-traded guideline company method. The discounted cash flow approach uses value drivers and risks specific to the industry and current economic factors and incorporates assumptions that market participants would use in their estimates of fair value and may not be indicative of U.S. Cellular specific assumptions.  The most significant assumptions made in this process were the revenue growth rate (shown as a simple average in the table below), the terminal revenue growth rate, discount rate and capital expenditures.  The assumptions were as follows:

Key assumptions
Average expected revenue growth rate (next ten years)	2.0	%
Terminal revenue growth rate (after year ten)	2.0	%
Discount rate	10.5	%
Capital expenditures as a percentage of revenue	14.9-18.8	%

49

The publicly-traded guideline company method develops an indication of fair value by calculating average market pricing multiples for selected publicly-traded companies using multiples of: Revenue and Earnings before Interest, Taxes, and Depreciation and Amortization (EBITDA). The developed multiples were applied to applicable financial measures of the Partnerships to determine fair value. The discounted cash flow approach and publicly-traded guideline company method were weighted to arrive at the total fair value of the Partnerships.

NOTE 8 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment in service and under construction, and related accumulated depreciation and amortization, as of December 31, 2013 and 2012 were as follows:

December 31,	Useful Lives (Years)	2013		2012
(Dollars in thousands)
Land	N/A	$	36,266	$	33,947
Buildings	20		304,272		341,852
Leasehold and land improvements	1-30		1,197,520		1,188,720
Cell site equipment	6-25		3,306,575		3,100,916
Switching equipment	1-8		1,161,976		1,155,114
Office furniture and equipment	3-5		539,248		535,656
Other operating assets and equipment	5-25		92,456		128,290
System development	3-7		962,698		631,184
Work in process	N/A		116,501		362,749
			7,717,512		7,478,428
Accumulated depreciation and amortization			(4,860,992)		(4,455,840)
		$	2,856,520	$	3,022,588

Depreciation and amortization expense totaled $791.1 million, $597.7 million and $565.1 million in 2013, 2012 and 2011, respectively.  As a result of the Divestiture Transaction, U.S. Cellular recognized incremental depreciation and amortization in 2012 and 2013.  See Note 5 — Acquisitions, Divestitures and Exchanges for additional information.

In 2013, 2012 and 2011, (Gain) loss on asset disposals, net included charges of $30.6 million, $18.1 million and $9.9 million, respectively, related to disposals of assets, trade-ins of older assets for replacement assets and other retirements of assets from service in the normal course of business.

NOTE 9 ASSET RETIREMENT OBLIGATIONS

U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations in its operating markets.  Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions.  These obligations are included in Other deferred liabilities and credits and Other current liabilities in the Consolidated Balance Sheet.

In 2013 and 2012, U.S. Cellular performed a review of the assumptions and estimated costs related to its asset retirement obligations.  The results of the reviews (identified as “Revisions in estimated cash outflows”) and other changes in asset retirement obligations during 2013 and 2012, including the Divestiture Transaction, were as follows:

50

(Dollars in thousands)		2013		2012
Balance, beginning of period		$	179,607	$	143,402
	Additional liabilities accrued		635		5,578
	Revisions in estimated cash outflows (1)		6,268		22,588
	Disposition of assets (2)		(3,534)		(2,674)
	Accretion expense (3)		12,592		10,713
Balance, end of period (4)		$	195,568	$	179,607
(1)	Included increases of $14.9 million as a result of changes in expected settlement dates related to the Divestiture Transaction in 2012.
(2)	Included $2.0 million of incremental disposition costs related to the Divestiture Transaction in 2013.
(3)	Included $1.1 million and $0.2 million of incremental accretion related to the Divestiture Transaction in 2013 and 2012, respectively.
(4)	In 2013, as a result of the accelerated settlement dates of certain asset retirement obligations related to the Divestiture Transaction, U.S. Cellular reclassified $37.7 million of its asset retirement obligations from Other deferred liabilities and credits to Other current liabilities.

NOTE 10 DEBT

Revolving Credit Facility

At December 31, 2013, U.S. Cellular had a revolving credit facility available for general corporate purposes.  Amounts under the revolving credit facility may be borrowed, repaid and reborrowed from time to time until maturity.  U.S. Cellular did not borrow under its current or previous revolving credit facilities in 2013, 2012 or 2011 except for letters of credit.

U.S. Cellular’s interest cost on its revolving credit facility is subject to increase if its current credit ratings from nationally recognized credit rating agencies is lowered, and is subject to decrease if the ratings are raised.  The credit facility would not cease to be available nor would the maturity date accelerate solely as a result of a downgrade in U.S. Cellular’s credit rating.  However, a downgrade in U.S. Cellular’s credit rating could adversely affect its ability to renew the credit facilities or obtain access to other credit facilities in the future.

The maturity date of any borrowings under the U.S. Cellular revolving credit facility would accelerate in the event of a change in control. 

51

The following table summarizes the terms of the revolving credit facility as of December 31, 2013:
(Dollars in millions)
Maximum borrowing capacity			$	300.0
Letters of credit outstanding (1)			$	17.6
Amount borrowed			$	-
Amount available for use			$	282.4
Borrowing rate: One-month London Interbank Offered Rate ("LIBOR") plus contractual spread (2)				1.67	%
	LIBOR			0.17	%
	Contractual spread			1.50	%
Range of commitment fees on amount available for use (3)
	Low			0.13	%
	High			0.30	%
Agreement date				December 2010
Maturity date				December 2017
Fees incurred attributable to the Revolving Credit Facility are as follows:
	Fees incurred as a percent of Maximum borrowing capacity for 2013			0.25	%
	Fees incurred, amount
		2013	$	0.8
		2012	$	1.1
		2011	$	1.2
(1)	In June 2013, U.S. Cellular provided $17.4 million in letters of credit to the FCC in connection with U.S. Cellular's winning bids in Auction 901. See Note 16 —  Supplemental Cash Flow Disclosures for additional information on Auction 901.
(2)	Borrowings under the revolving credit facility bear interest at LIBOR plus a contractual spread based on U.S. Cellular’s credit rating or, at U.S. Cellular’s option, an alternate “Base Rate” as defined in the revolving credit agreement.  U.S. Cellular may select a borrowing period of either one, two, three or six months (or other period of twelve months or less if requested by U.S. Cellular and approved by the lenders).  If U.S. Cellular provides notice of intent to borrow less than three business days in advance of a borrowing, interest on borrowing is at the Base Rate plus the contractual spread.
(3)	The revolving credit facility has commitment fees based on the unsecured senior debt ratings assigned to U.S. Cellular by certain ratings agencies.

The continued availability of the revolving credit facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and make representations regarding certain matters at the time of each borrowing. U.S. Cellular believes it was in compliance as of December 31, 2013 with all covenants and other requirements set forth in the revolving credit facility.

In connection with U.S. Cellular’s revolving credit facility, TDS and U.S. Cellular entered into a subordination agreement dated December 17, 2010 together with the administrative agent for the lenders under U.S. Cellular’s revolving credit agreement.  Pursuant to this subordination agreement, (a) any consolidated funded indebtedness from U.S. Cellular to TDS will be unsecured and (b) any (i) consolidated funded indebtedness from U.S. Cellular to TDS (other than “refinancing indebtedness” as defined in the subordination agreement) in excess of $105,000,000, and (ii) refinancing indebtedness in excess of $250,000,000, will be subordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under U.S. Cellular’s revolving credit agreement.  As of December 31, 2013, U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the revolving credit agreement pursuant to the subordination agreement.

At December 31, 2013, U.S. Cellular had recorded $2.7 million of issuance costs related to the revolving credit facility which is included in Other assets and deferred charges in the Consolidated Balance Sheet.

52

Long-Term Debt
Long-term debt as of December 31, 2013 and 2012 was as follows:
December 31,
(Dollars in thousands)			Issuance date	Maturity date	Call date	2013		2012
	Unsecured Senior Notes
		6.7%	December 2003 and June 2004	December 2033	December 2003	$	544,000	$	544,000
		Less: 6.7% Unamortized discount					(11,551)		(11,806)
							532,449		532,194
		6.95%	May 2011	May 2060	May 2016		342,000		342,000
	Obligation on capital leases						3,749		4,756
Total long-term debt						$	878,198	$	878,950
	Long-term debt, current					$	166	$	92
	Long-term debt, noncurrent					$	878,032	$	878,858

U.S. Cellular may redeem the 6.7% Senior Notes, in whole or in part, at any time prior to maturity at a redemption price equal to the greater of (a) 100% of the principal amount of such notes, plus accrued and unpaid interest, or (b) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semi-annual basis at the Treasury Rate plus 30 basis points. U.S. Cellular may redeem the 6.95% Senior Notes, in whole or in part at any time after the call date, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest.

Interest on the 6.7% Senior Notes is payable semi-annually, and on the 6.95% Senior Notes is payable quarterly.

Capitalized debt issuance costs for Unsecured Senior Notes totaled $16.3 million and are included in Other assets and deferred charges (a long-term asset account).  These costs are amortized over the life of the notes using the effective interest method.

U.S. Cellular does not have any annual requirements for principal payments on long-term debt over the next five years (excluding capital lease obligations).

The covenants associated with U.S. Cellular’s long-term debt obligations, among other things, restrict U.S. Cellular’s ability, subject to certain exclusions, to incur additional liens, enter into sale and leaseback transactions, and sell, consolidate or merge assets.

U.S. Cellular’s long-term debt indentures do not contain any provisions resulting in acceleration of the maturities of outstanding debt in the event of a change in U.S. Cellular’s credit rating.  However, a downgrade in U.S. Cellular’s credit rating could adversely affect its ability to obtain long-term debt financing in the future.

NOTE 11 COMMITMENTS AND CONTINGENCIES

Agreements

As previously disclosed, on August 17, 2010, U.S. Cellular and Amdocs Software Systems Limited (“Amdocs”) entered into a Software License and Maintenance Agreement (“SLMA”) and a Master Service Agreement (“MSA”) (collectively, the “Amdocs Agreements”) to develop a Billing and Operational Support System (“B/OSS”).  In July 2013, U.S. Cellular implemented B/OSS, pursuant to an updated Statement of Work dated June 29, 2012.  Total payments to Amdocs related to this implementation are estimated to be approximately $183.9 million (subject to certain potential adjustments) over the period from commencement of the SLMA through the first half of 2014.  As of December 31, 2013, $136.8 million had been paid to Amdocs.

Lease Commitments

U.S. Cellular is a party to various lease agreements, both as lessee and lessor, for office space, retail store sites, cell sites and equipment which are accounted for as operating leases.  Certain leases have renewal options and/or fixed rental increases.  Renewal options that are reasonably assured of exercise are included in determining the lease term.  Any rent abatements or lease incentives, in addition to fixed rental increases, are included in the calculation of rent expense and calculated on a straight-line basis over the defined lease term.

As of December 31, 2013, future minimum rental payments required under operating leases and rental receipts expected under operating leases that have noncancellable lease terms in excess of one year were as follows:

53

	Operating Leases Future Minimum Rental Payments		Operating Leases Future Minimum Rental Receipts
(Dollars in thousands)
2014	$	152,349	$	46,357
2015		134,852		36,847
2016		116,397		26,201
2017		97,098		17,226
2018		79,166		6,521
Thereafter		783,730		227
Total	$	1,363,592	$	133,379

Rent expense totaled $162.1 million, $183.9 million and $171.6 million in 2013, 2012 and 2011, respectively.

Rent revenue totaled $45.7 million, $41.7 million and $39.2 million in 2013, 2012 and 2011, respectively.

Indemnifications

U.S. Cellular enters into agreements in the normal course of business that provide for indemnification of counterparties.  The terms of the indemnifications vary by agreement.  The events or circumstances that would require U.S. Cellular to perform under these indemnities are transaction specific; however, these agreements may require U.S. Cellular to indemnify the counterparty for costs and losses incurred from litigation or claims arising from the underlying transaction.  U.S. Cellular is unable to estimate the maximum potential liability for these types of indemnifications as the amounts are dependent on the outcome of future events, the nature and likelihood of which cannot be determined at this time.  Historically, U.S. Cellular has not made any significant indemnification payments under such agreements.

Legal Proceedings

U.S. Cellular is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts.  If U.S. Cellular believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss.  If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within that range is better than another, the low end of the range is accrued.  The assessment of the expected outcomes of legal proceedings is a highly subjective process that requires judgments about future events.  The legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financial statement disclosures.  The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements.

U.S. Cellular has accrued $0.3 million and $1.7 million with respect to legal proceedings and unasserted claims as of December 31, 2013 and 2012, respectively.  U.S. Cellular has not accrued any amount for legal proceedings if it cannot estimate the amount of the possible loss or range of loss.  U.S. Cellular does not believe that the amount of any contingent loss in excess of the amounts accrued would be material.

Apple iPhone Products Purchase Commitment

In March 2013, U.S. Cellular entered into an agreement with Apple to purchase certain minimum quantities of Apple iPhone products over a three-year period beginning in November 2013.  Based on current forecasts, U.S. Cellular estimates that the remaining contractual purchase commitment as of December 31, 2013 is approximately $950 million.  At this time, U.S. Cellular expects to meet its contractual commitment with Apple.

NOTE 12 VARIABLE INTEREST ENTITIES (VIEs)

U.S. Cellular consolidates variable interest entities in which it has a controlling financial interest and is the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE.  U.S. Cellular reviews these criteria initially at the time it enters into agreements and subsequently when reconsideration events occur.

54

Consolidated VIEs

As of December 31, 2013, U.S. Cellular holds a variable interest in and consolidates the following VIEs under GAAP:

·Aquinas Wireless L.P. (“Aquinas Wireless”); and

·King Street Wireless L.P. (“King Street Wireless”) and King Street Wireless, Inc., the general partner of King Street Wireless.

The power to direct the activities that most significantly impact the economic performance of Aquinas Wireless and King Street Wireless (collectively, the “limited partnerships”) is shared.  Specifically, the general partner of these VIEs has the exclusive right to manage, operate and control the limited partnerships and make all decisions to carry on the business of the partnerships; however, the general partner of each partnership needs consent of the limited partner, a U.S. Cellular subsidiary, to sell or lease certain licenses, to make certain large expenditures, admit other partners or liquidate the limited partnerships.  Although the power to direct the activities of the VIEs is shared, U.S. Cellular has a disproportionate level of exposure to the variability associated with the economic performance of the VIEs, indicating that U.S. Cellular is the primary beneficiary of the VIEs in accordance with GAAP.  Accordingly, these VIEs are consolidated.

The following table presents the classification of the consolidated VIEs’ assets and liabilities in U.S. Cellular’s Consolidated Balance Sheet.

December 31,		2013		2012
(Dollars in thousands)
Assets
	Cash and cash equivalents	$	2,076	$	5,849
	Other current assets		1,184		120
	Licenses		310,475		308,091
	Property, plant and equipment, net		18,600		16,443
	Other assets and deferred charges		511		887
	Total assets	$	332,846	$	331,390
Liabilities
	Current liabilities	$	46	$	1,013
	Deferred liabilities and credits		3,139		3,024
	Total liabilities	$	3,185	$	4,037

Other Related Matters

Aquinas Wireless and King Street Wireless were formed to participate in FCC auctions of wireless spectrum and to fund, establish, and provide wireless service with respect to any FCC licenses won in the auctions.  As such, these entities have risks similar to those described in the “Risk Factors” in U.S. Cellular’s Annual Report on Form 10-K.

U.S. Cellular may agree to make additional capital contributions and/or advances to Aquinas Wireless and King Street Wireless and/or to their general partners to provide additional funding for the development of licenses granted in various auctions.  U.S. Cellular may finance such amounts with a combination of cash on hand, borrowings under its revolving credit agreement and/or long-term debt.  There is no assurance that U.S. Cellular will be able to obtain additional financing on commercially reasonable terms or at all to provide such financial support.

55

The limited partnership agreements of Aquinas Wireless and King Street Wireless also provide the general partner with a put option whereby the general partner may require the limited partner, a subsidiary of U.S. Cellular, to purchase its interest in the limited partnership.  The general partner’s put options related to its interests in King Street Wireless and Aquinas Wireless will become exercisable in 2019 and 2020, respectively.  The put option price is determined pursuant to a formula that takes into consideration fixed interest rates and the market value of U.S. Cellular’s Common Shares.  Upon exercise of the put option, the general partner is required to repay borrowings due to U.S. Cellular.  If the general partner does not elect to exercise its put option, the general partner may trigger an appraisal process in which the limited partner (a subsidiary of U.S. Cellular) may have the right, but not the obligation, to purchase the general partner’s interest in the limited partnership at a price and on other terms and conditions specified in the limited partnership agreement.  In accordance with requirements under GAAP, U.S. Cellular is required to calculate a theoretical redemption value for all of the put options assuming they are exercisable at the end of each reporting period, even though such exercise is not contractually permitted.  Pursuant to GAAP, this theoretical redemption value, net of amounts payable to U.S. Cellular for loans and accrued interest thereon made by U.S. Cellular to the general partners the (“net put value”), was $0.5 million at December 31, 2013 and 2012, respectively.  The net put value is recorded as Noncontrolling interests with redemption features in U.S. Cellular’s Consolidated Balance Sheet.  Also in accordance with GAAP, changes in the redemption value of the put options, net of interest accrued on the loans, are recorded as a component of Net income attributable to noncontrolling interests, net of tax, in U.S. Cellular’s Consolidated Statements of Operations.

U.S. Cellular’s capital contributions and advances made to Aquinas Wireless and King Street Wireless and/or their general partners totaled $10.0 million in the year ended December 31, 2012. There were no capital contributions or advances made to Aquinas Wireless or King Street Wireless or their general partners in 2013.

U.S. Cellular currently provides 4G LTE service in conjunction with King Street Wireless. Aquinas Wireless is still in the process of developing long-term business plans.

NOTE 13 NONCONTROLLING INTERESTS

U.S. Cellular’s consolidated financial statements include certain noncontrolling interests that meet the GAAP definition of mandatorily redeemable financial instruments.  These mandatorily redeemable noncontrolling interests represent interests held by third parties in consolidated partnerships and limited liability companies (“LLCs”), where the terms of the underlying partnership or LLC agreement provide for a defined termination date at which time the assets of the subsidiary are to be sold, the liabilities are to be extinguished and the remaining net proceeds are to be distributed to the noncontrolling interest holders and U.S. Cellular in accordance with the respective partnership and LLC agreements.  The termination dates of these mandatorily redeemable noncontrolling interests range from 2085 to 2107.

The estimated aggregate amount that would be due and payable to settle all of these noncontrolling interests assuming an orderly liquidation of the finite-lived consolidated partnerships and LLCs on December 31, 2013, net of estimated liquidation costs, is $24.8 million.  This amount excludes redemption amounts recorded in Noncontrolling interests with redemption features in the Consolidated Balance Sheet.  The estimate of settlement value was based on certain factors and assumptions which are subjective in nature.  Changes in those factors and assumptions could result in a materially larger or smaller settlement amount.  U.S. Cellular currently has no plans or intentions relating to the liquidation of any of the related partnerships or LLCs prior to their scheduled termination dates.  The corresponding carrying value of the mandatorily redeemable noncontrolling interests in finite-lived consolidated partnerships and LLCs at December 31, 2013 was $15.4 million, and is included in Noncontrolling interests in the Consolidated Balance Sheet. The excess of the aggregate settlement value over the aggregate carrying value of these mandatorily redeemable noncontrolling interests is due primarily to the unrecognized appreciation of the noncontrolling interest holders’ share of the underlying net assets in the consolidated partnerships and LLCs.  Neither the noncontrolling interest holders’ share, nor U.S. Cellular’s share, of the appreciation of the underlying net assets of these subsidiaries is reflected in the consolidated financial statements.

NOTE 14 COMMON SHAREHOLDERS’ EQUITY

Tax-Deferred Savings Plan

U.S. Cellular has reserved 67,215 Common Shares for issuance under the TDS Tax-Deferred Savings Plan, a qualified profit‑sharing plan pursuant to Sections 401(a) and 401(k) of the Internal Revenue Code.  Participating employees have the option of investing their contributions in a U.S. Cellular Common Share fund, a TDS Common Share fund or certain unaffiliated funds.

56

Series A Common Shares

Series A Common Shares are convertible on a share-for-share basis into Common Shares.  In matters other than the election of directors, each Series A Common Share is entitled to ten votes per share, compared to one vote for each Common Share.  The Series A Common Shares are entitled to elect 75% of the directors (rounded down), and the Common Shares elect 25% of the directors (rounded up).  As of December 31, 2013, a majority of U.S. Cellular’s outstanding Common Shares and all of U.S. Cellular’s outstanding Series A Common Shares were held by TDS.

Common Share Repurchase Program

On November 17, 2009, the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009 and continuing each year thereafter, on a cumulative basis.  These purchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on market prices and other conditions.  This authorization does not have an expiration date.

Share repurchases made under this authorization were as follows:

Year Ended December 31,		Number of Shares	Average Cost Per Share		Total Cost
(Dollar amounts and shares in thousands)
2013
	U.S. Cellular Common Shares	499	$	37.19	$	18,544
2012
	U.S. Cellular Common Shares	571	$	35.11	$	20,045
2011
	U.S. Cellular Common Shares	1,276	$	48.82	$	62,294

Pursuant to certain employee and non-employee benefit plans, U.S. Cellular reissued 535,578,182,195, and 286,211 Treasury Shares in 2013, 2012 and 2011, respectively.

Dividend

On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75 per share, for an aggregate amount of $482.3 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013. 

NOTE 15 STOCK-BASED COMPENSATION

U.S. Cellular has established the following stock‑based compensation plans: long-term incentive plans and a Non-Employee Director compensation plan, and had an employee stock purchase plan that was terminated in the fourth quarter of 2011.  In addition, U.S. Cellular employees were eligible to participate in the TDS employee stock purchase plan before that plan also was terminated in the fourth quarter of 2011.

Under the U.S. Cellular Long-Term Incentive Plans, U.S. Cellular may grant fixed and performance based incentive and non-qualified stock options, restricted stock, restricted stock units, and deferred compensation stock unit awards to key employees.  At December 31, 2013, the only types of awards outstanding are fixed non-qualified stock option awards, restricted stock unit awards, and deferred compensation stock unit awards.

On June 25, 2013, U.S. Cellular paid a special cash dividend to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013.  Outstanding U.S. Cellular stock options, restricted stock unit awards and deferred compensation stock units were equitably adjusted for the special cash dividend.  The impact of such adjustments are fully reflected for all years presented.  See Note 4 – Earnings Per Share for additional information.

At December 31, 2013, U.S. Cellular had reserved 10,139,000 Common Shares for equity awards granted and to be granted under the Long-Term Incentive Plans. No Common Shares were reserved for issuance to employees under any employee stock purchase plan since this plan was terminated in the fourth quarter of 2011.

U.S. Cellular also has established a Non-Employee Director compensation plan under which it has reserved 212,000 Common Shares at December 31, 2013 for issuance as compensation to members of the Board of Directors who are not employees of U.S. Cellular or TDS.

U.S. Cellular uses treasury stock to satisfy requirements for Common Shares issued pursuant to its various stock-based compensation

57

plans.

Long-Term Incentive Plans—Stock Options—Stock options granted to key employees are exercisable over a specified period not in excess of ten years.  Stock options generally vest over a period of three years from the date of grant.  Stock options outstanding at December 31, 2013 expire between 2014 and 2023.  However, vested stock options typically expire 30 days after the effective date of an employee’s termination of employment for reasons other than retirement.  Employees who leave at the age of retirement have 90 days (or one year if they satisfy certain requirements) within which to exercise their vested stock options.  The exercise price of options equals the market value of U.S. Cellular Common Shares on the date of grant.

U.S. Cellular estimated the fair value of stock options granted during 2013, 2012, and 2011 using the Black‑Scholes valuation model and the assumptions shown in the table below.

	2013	2012	2011
Expected life	4.6-9.0 years	4.5 years	4.3 years
Expected volatility	29.2%-39.6%	40.7%-42.6%	43.4%-44.8%
Dividend yield	0%	0%	0%
Risk-free interest rate	0.7%-2.4%	0.5%-0.9%	0.7%-2.0%
Estimated annual forfeiture rate	0.0%-8.1%	0.0%-9.1%	0.0%-7.8%

A summary of U.S. Cellular stock options outstanding (total and portion exercisable) and changes during the three years ended December 31, 2013, is presented in the table below:

Common Share Options		Number of Options	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding at December 31, 2010		2,627,000	$	42.28
(1,333,000 exercisable)				47.18
	Granted	694,000		44.34	$	16.66
	Exercised	(201,000)		32.32			$	2,099,000
	Forfeited	(83,000)		39.42
	Expired	(203,000)		49.32
Outstanding at December 31, 2011		2,834,000	$	43.07
(1,533,000 exercisable)				46.23
	Granted	677,000		34.91	$	12.61
	Exercised	(47,000)		29.82			$	205,000
	Forfeited	(117,000)		38.45
	Expired	(133,000)		46.17
Outstanding at December 31, 2012		3,214,000	$	41.58
(1,928,000 exercisable)			$	43.99
	Granted	1,213,000		32.45	$	11.53
	Exercised	(892,000)		34.78			$	6,787,000
	Forfeited	(574,000)		34.17
	Expired	(247,000)		48.35
Outstanding at December 31, 2013		2,714,000	$	42.22			$	13,015,000	6.80
(1,359,000 exercisable)			$	46.91			$	2,632,000	4.60

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between U.S. Cellular’s closing stock price and the exercise price multiplied by the number of in-the-money options) that was received by the option holders upon exercise or that would have been received by option holders had all options been exercised on December 31, 2013.

Long-Term Incentive Plans—Restricted Stock Units—U.S. Cellular grants restricted stock unit awards, which generally vest after three years, to key employees. 

U.S. Cellular estimates the fair value of restricted stock units based on the closing market price of U.S. Cellular shares on the date of grant.  The fair value is then recognized as compensation cost on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

58

A summary of U.S. Cellular nonvested restricted stock units at December 31, 2013 and changes during the year then ended is presented in the table below:

Common Restricted Stock Units	Number	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2012	1,139,000	$	38.40
Granted	601,000		32.06
Vested	(238,000)		42.26
Forfeited	(332,000)		35.63
Nonvested at December 31, 2013	1,170,000	$	36.46

The total fair value of restricted stock units that vested during 2013, 2012 and 2011 was $8.8 million, $8.9 million and $9.5 million, respectively, as of the respective vesting dates.  The weighted average grant date fair value of restricted stock units granted in 2013, 2012 and 2011 was $32.06, $34.09 and $42.33, respectively.

Long-Term Incentive Plans—Deferred Compensation Stock Units—Certain U.S. Cellular employees may elect to defer receipt of all or a portion of their annual bonuses and to receive a company matching contribution on the amount deferred.  All bonus compensation that is deferred by employees electing to participate is immediately vested and is deemed to be invested in U.S. Cellular Common Share stock units.  The amount of U.S. Cellular’s matching contribution depends on the portion of the annual bonus that is deferred.  Participants receive a 25% match for amounts deferred up to 50% of their total annual bonus and a 33% match for amounts that exceed 50% of their total annual bonus; such matching contributions also are deemed to be invested in U.S. Cellular Common Share stock units.  

The total fair value of deferred compensation stock units that vested was less than $0.1 million during 2013, 2012 and 2011.  The weighted average grant date fair value of deferred compensation stock units granted in 2013, 2012 and 2011 was $31.50, $36.34 and $41.79, respectively. As of December 31, 2013, there were 12,000 vested but unissued deferred compensation stock units valued at $0.5 million.

Compensation of Non-Employee Directors—U.S. Cellular issued 13,000, 7,600 and 6,600 Common Shares in 2013, 2012 and 2011, respectively, under its Non-Employee Director compensation plan. 

Stock‑Based Compensation Expense

The following table summarizes stock‑based compensation expense recognized during 2013, 2012 and 2011:

Year Ended December 31,	2013		2012		2011
(Dollars in thousands)
Stock option awards	$	5,810	$	8,471	$	9,549
Restricted stock unit awards		9,485		12,300		10,037
Deferred compensation bonus and matching stock unit awards		2		240		12
Awards under employee stock purchase plan		-		-		255
Awards under Non-Employee Director compensation plan		547		455		330
Total stock-based compensation, before income taxes		15,844		21,466		20,183
Income tax benefit		(5,984)		(8,121)		(7,581)
Total stock-based compensation expense, net of income taxes	$	9,860	$	13,345	$	12,602

The following table provides a summary of the stock-based compensation expense included in the Consolidated Statement of Operations for the years ended:

59

December 31,		2013		2012		2011
(Dollars in thousands)
Selling, general and administrative expense	$	12,933	$	18,437	$	17,538
System operations		2,911		3,029		2,645
Total stock-based compensation expense	$	15,844	$	21,466	$	20,183

At December 31, 2013, unrecognized compensation cost for all U.S. Cellular stock‑based compensation awards was $24.5 million and is expected to be recognized over a weighted average period of 2.3 years.

U.S. Cellular’s tax benefits realized from the exercise of stock options and other awards totaled $6.1 million in 2013.

NOTE 16 SUPPLEMENTAL CASH FLOW DISCLOSURES

Following are supplemental cash flow disclosures regarding interest paid and income taxes paid.

Year Ended December 31,	2013		2012		2011
(Dollars in thousands)
Interest paid	$	42,904	$	44,048	$	55,580
Income taxes paid (refunded)	$	157,778	$	(58,609)	$	(54,469)

Following are supplemental cash flow disclosures regarding transactions related to stock-based compensation awards.  In certain situations, U.S. Cellular withholds shares that are issuable upon the exercise of stock options or the vesting of restricted shares to cover, and with a value equivalent to, the exercise price and/or the amount of taxes required to be withheld from the stock award holder at the time of the exercise or vesting.  U.S. Cellular then pays the amount of the required tax withholdings to the taxing authorities in cash.

Year Ended December 31,	2013		2012		2011
(Dollars in thousands)
Common Shares withheld		606,582		92,846		120,250
Aggregate value of Common Shares withheld	$	25,179	$	3,604	$	5,952
Cash receipts upon exercise of stock options		10,468		900		5,447
Cash disbursements for payment of taxes		(4,684)		(3,105)		(3,512)
Net cash receipts (disbursements) from exercise of stock   options and vesting of other stock awards	$	5,784	$	(2,205)	$	1,935

On September 27, 2012, the FCC conducted a single round, sealed bid, reverse auction to award up to $300 million in one-time Mobility Fund Phase I support to successful bidders that commit to provide 3G, or better, wireless service in areas designated as unserved by the FCC.  This auction was designated by the FCC as Auction 901. U.S. Cellular and several of its wholly-owned subsidiaries participated in Auction 901 and were winning bidders in eligible areas within 10 states and will receive up to $40.1 million in one-time support from the Mobility Fund. These funds will reduce the carrying amount of the assets to which they relate or will offset operating expenses.  U.S. Cellular has received $13.4 million in support funds as of December 31, 2013, of which $10.3 million is included as a component of Other assets and deferred charges in the Consolidated Balance Sheet and $3.1 million reduced the carrying amount of the assets to which they relate, which are included in Property, plant and equipment in the Consolidated Balance Sheet.

On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75 per share, for an aggregate amount of $482.3 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013. 

60

NOTE 17 RELATED PARTIES

U.S. Cellular is billed for all services it receives from TDS, pursuant to the terms of various agreements between it and TDS.  These billings are included in U.S. Cellular's Selling, general and administrative expenses.  Some of these agreements were established at a time prior to U.S. Cellular's initial public offering when TDS owned more than 90% of U.S. Cellular's outstanding capital stock and may not reflect terms that would be obtainable from an unrelated third party through arms-length negotiations.  Billings from TDS to U.S. Cellular are based on expenses specifically identified to U.S. Cellular and on allocations of common expenses.  Such allocations are based on the relationship of U.S. Cellular's assets, employees, investment in property, plant and equipment and expenses relative to all subsidiaries in the TDS consolidated group.  Management believes the method TDS uses to allocate common expenses is reasonable and that all expenses and costs applicable to U.S. Cellular are reflected in its financial statements.  Billings to U.S. Cellular from TDS totaled $99.2 million, $104.3 million and $104.1 million in 2013, 2012 and 2011, respectively.

The Audit committee of the Board of Directors of U.S. Cellular is responsible for the review and evaluation of all related party transactions as such term is defined by the rules of the New York Stock Exchange (“NYSE”).

NOTE 18 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following persons are partners of Sidley Austin LLP, the principal law firm of U.S. Cellular and its subsidiaries: Walter C.D. Carlson, a director of U.S. Cellular, a director and non-executive Chairman of the Board of Directors of TDS and a trustee and beneficiary of a voting trust that controls TDS; William S. DeCarlo, the General Counsel of TDS and an Assistant Secretary of TDS and certain subsidiaries of TDS; and Stephen P. Fitzell, the General Counsel of U.S. Cellular and TDS Telecommunications Corporation and an Assistant Secretary of U.S. Cellular and certain other subsidiaries of TDS. Walter C.D. Carlson does not provide legal services to TDS, U.S. Cellular or their subsidiaries.  U.S. Cellular and its subsidiaries incurred legal costs from Sidley Austin LLP of $13.2 million in 2013, $10.7 million in 2012 and $9.2 million in 2011.

The Audit Committee of the Board of Directors is responsible for the review and evaluation of all related-party transactions as such term is defined by the rules of the New York Stock Exchange.

61

REPORTS OF MANAGEMENT

Management’s Responsibility for Financial Statements

Management of United States Cellular Corporation has the responsibility for preparing the accompanying consolidated financial statements and for their integrity and objectivity.  The statements were prepared in accordance with accounting principles generally accepted in the United States of America and, in management’s opinion, were fairly presented.  The financial statements included amounts that were based on management’s best estimates and judgments.  Management also prepared the other information in the annual report and is responsible for its accuracy and consistency with the financial statements.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited these consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and has expressed herein its unqualified opinion on these financial statements.

/s/ Kenneth R. Meyers	/s/ Steven T. Campbell
Kenneth R. Meyers President and Chief Executive Officer (principal executive officer)	Steven T. Campbell Executive Vice President—Finance, Chief Financial Officer and Treasurer (principal financial officer)

/s/ Douglas D. Shuma

Douglas D. Shuma
Chief Accounting Officer

(principal accounting officer)

62

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.  U.S. Cellular’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  U.S. Cellular’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and, where required, the Board of Directors of the issuer; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the issuer’s assets that could have a material effect on the interim or annual consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of U.S. Cellular’s management, including its principal executive officer and principal financial officer, U.S. Cellular conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2013, based on the criteria established in the 1992 version of Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Management has concluded that U.S. Cellular maintained effective internal control over financial reporting as of December 31, 2013 based on criteria established in the 1992 version of Internal Control — Integrated Framework issued by the COSO.

The effectiveness of U.S. Cellular’s internal control over financial reporting as of December 31, 2013 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in the firm’s report included herein.

/s/ Kenneth R. Meyers	/s/ Steven T. Campbell
Kenneth R. Meyers President and Chief Executive Officer (principal executive officer)	Steven T. Campbell Executive Vice President—Finance, Chief Financial Officer and Treasurer (principal financial officer)

/s/ Douglas D. Shuma

Douglas D. Shuma
Chief Accounting Officer

(principal accounting officer)

63

Report of Independent Registered Public Accounting Firm

Tothe Board of Directors and Shareholders of United States Cellular Corporation:

In our opinion, based on our audits and the report of other auditors, the accompanying consolidated balance sheets and the related consolidated statements of operations, changes in equity, and cash flows present fairly, in all material respects, the financial position of United States Cellular Corporation and its subsidiaries at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, based on our audit, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.  Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We did not audit the financial statements of Los Angeles SMSA Limited Partnership, a 5.5% owned entity accounted for by the equity method of accounting. The consolidated financial statements of United States Cellular Corporation reflect an investment in this partnership of $112,200,000 and $105,300,000 as of December 31, 2013 and 2012, respectively, and equity earnings of $78,400,000, $67,200,000 and $55,300,000 for each of the three years in the period ended December 31, 2013. The financial statements of Los Angeles SMSA Limited Partnership were audited by other auditors whose report thereon has been furnished to us, and our opinion on the financial statements expressed herein, insofar as it relates to the amounts included for Los Angeles SMSA Limited Partnership, is based solely on the report of the other auditors. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits and the report of other auditors provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 28, 2014

64

	United States Cellular Corporation SELECTED CONSOLIDATED FINANCIAL DATA
Year Ended or at December 31,		2013		2012		2011		2010		2009
(Dollars and shares in thousands, except   per share amounts)
Statement of Operations data
Service revenues		$	3,594,773	$	4,098,856	$	4,053,797	$	3,913,001	$	3,927,128
Equipment sales			324,063		353,228		289,549		264,680		286,752
Operating revenues			3,918,836		4,452,084		4,343,346		4,177,681		4,213,880
Loss on impairment of assets (1)			-		-		-		-		14,000
(Gain) loss on sale of business and other   exit costs, net			(246,767)		21,022		-		-		-
(Gain) loss on license sales and exchanges			(255,479)		-		(11,762)		-		-
Operating income			146,865		156,656		280,780		201,473		325,525
Equity in earnings of unconsolidated   entities			131,949		90,364		83,566		97,318		96,800
Gain (loss) on investments			18,556		(3,718)		11,373		-		-
Income before income taxes			257,656		205,053		312,822		241,116		349,165
Net income			144,522		141,076		198,744		159,158		231,315
Net income attributable to noncontrolling   interests, net of tax			4,484		30,070		23,703		23,084		21,768
Net income attributable to U.S. Cellular   shareholders		$	140,038	$	111,006	$	175,041	$	136,074	$	209,547
Basic weighted average shares outstanding			83,968		84,645		84,877		86,128		86,946
Basic earnings per share attributable to   U.S. Cellular shareholders		$	1.67	$	1.31	$	2.06	$	1.58	$	2.41
Diluted weighted average shares   outstanding (2)			84,730		85,230		85,448		86,587		87,198
Diluted earnings per share attributable to   U.S. Cellular shareholders (2)		$	1.65	$	1.30	$	2.05	$	1.57	$	2.40
Special dividend per share to U.S. Cellular   shareholders (2)		$	5.75	$	-	$	-	$	-	$	-
Balance Sheet data
Total assets			6,445,708		6,587,450		6,327,976		5,875,549		5,716,848
Long-term debt (excluding current portion)			878,032		878,858		880,320		867,941		867,522
Total U.S. Cellular shareholders' equity		$	3,391,206	$	3,733,855	$	3,619,961	$	3,486,452	$	3,390,532
(1)	Loss on Impairment of intangible assets related to Licenses in 2009.
(2)	On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75 per share, for an aggregate amount of $482.3 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013.  Outstanding U.S. Cellular stock options and restricted stock unit awards were equitably adjusted for the special cash dividend.  The impact of such adjustments on the earnings per share calculation was reflected in all prior periods presented.
U.S. Cellular has not paid any cash dividends, except for a special cash dividend of $5.75 per share in June 2013, and currently intends to retain all earnings for use in U.S. Cellular’s business.

65

	United States Cellular Corporation
	CONSOLIDATED QUARTERLY INFORMATION (UNAUDITED)
		Quarter Ended
(Amounts in thousands, except per share amounts)		March 31		June 30		September 30		December 31
2013
Operating revenues		$	1,081,746	$	995,130	$	939,236	$	902,724
(Gain) loss on sale of business and other exit costs, net (1)			6,931		(249,024)		(1,534)		(3,140)
(Gain) loss on license sales and exchanges (1)			-		-		-		(255,479)
Operating income (loss) (2)			1,466		219,092		(43,207)		(30,486)
Gain (loss) on investments (1)			-		18,527		-		29
Net income (loss) (2)			10,710		143,675		(9,601)		(262)
Net income (loss) attributable to U.S. Cellular shareholders		$	4,914	$	143,391	$	(9,859)	$	1,592
Basic weighted average shares outstanding			83,838		83,845		84,005		84,181
Diluted weighted average shares outstanding (3)			84,588		84,661		84,005		85,033
Basic earnings (loss) per share attributable   to U.S. Cellular shareholders		$	0.06	$	1.71	$	(0.12)	$	0.02
Diluted earnings (loss) per share attributable   to U.S. Cellular shareholders (3)		$	0.06	$	1.69	$	(0.12)	$	0.02
Stock price
U.S. Cellular Common Shares (4)
	High	$	39.74	$	41.33	$	45.91	$	48.98
	Low		34.69		32.25		34.22		39.27
	Close	$	36.00	$	36.69	$	45.53	$	41.82
Special cash dividend paid (3)		$	-	$	5.75	$	-	$	-
		Quarter Ended
(Amounts in thousands, except per share amounts)		March 31		June 30		September 30		December 31
2012
Operating revenues		$	1,092,121	$	1,104,400	$	1,140,357	$	1,115,206
(Gain) loss on sale of business and other exit costs, net (1)			(4,213)		-		65		25,170
Operating income (1)(2)			85,202		84,163		48,079		(60,788)
Gain (loss) on investments			-		(3,728)		-		10
Net income (loss) (1)(2)(5)			69,012		59,248		42,140		(29,324)
Net income (loss) attributable to U.S. Cellular shareholders		$	62,492	$	52,685	$	35,451	$	(39,622)
Basic weighted average shares outstanding			84,570		84,707		84,737		84,568
Diluted weighted average shares outstanding (3)			85,269		85,236		85,348		84,568
Basic earnings (loss) per share attributable   to U.S. Cellular shareholders		$	0.74	$	0.62	$	0.42	$	(0.47)
Diluted earnings (loss) per share attributable   to U.S. Cellular shareholders (3)		$	0.73	$	0.62	$	0.42	$	(0.47)
Stock price
U.S. Cellular Common Shares (4)
	High	$	48.30	$	41.15	$	41.54	$	40.40
	Low		39.97		36.55		36.30		33.16
	Close	$	40.93	$	38.62	$	39.13	$	35.24

(1)See Note 5 —  Acquisitions, Divestitures and Exchanges for additional information related to sales of businesses and spectrum licenses.  See Note 7 —  Investments in Unconsolidated Entities for additional information on Gain (loss) on investments in 2013.

(2)Management believes there exists a seasonality in operating expenses, which tend to be higher in the fourth quarter than in the other quarters due to increased marketing and promotional activities, which may cause operating income to vary from quarter to quarter.

(3)On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75 per share, for an aggregate amount of $482.3 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013.  Outstanding U.S. Cellular stock

66

options and restricted stock unit awards were equitably adjusted for the special cash dividend.  The impact of such adjustments on the earnings per share calculation was reflected in all prior periods presented.

(4)The high, low and closing sales prices as reported by the New York Stock Exchange (“NYSE”).

(5)During the quarter ended December 31, 2012, U.S. Cellular revised its method of amortizing capitalized debt issuance costs and original issue debt discounts from straight-line to the effective interest method.  This change decreased interest expense for the quarter, and resulted in corresponding increase to Net income (loss) attributable to U.S. Cellular shareholders for the quarter of $2.2 million.

U.S. Cellular has not paid any cash dividends, except for a special cash dividend of $5.75 per share in June 2013, and currently intends to retain all earnings for use in U.S. Cellular’s business.

67

United States Cellular Corporation

SHAREHOLDER INFORMATION

Stock and dividend information

U.S. Cellular's Common Shares are listed on the New York Stock Exchange under the symbol “USM” and in the newspapers as “US Cellu.”  As of January 31, 2014, the last trading day of the month, U.S. Cellular's Common Shares were held by approximately 300 record owners.  All of the Series A Common Shares were held by TDS.  No public trading market exists for the Series A Common Shares.  The Series A Common Shares are convertible on a share-for-share basis into Common Shares.

U.S. Cellular has not paid any cash dividends, except for a special cash dividend of $5.75 per share in June 2013, and currently intends to retain all earnings for use in U.S. Cellular’s business.

See “Consolidated Quarterly Information (Unaudited)” for information on the high and low trading prices of the USM Common Shares for 2013 and 2012.

Stock performance graph

The following chart provides a comparison of U.S. Cellular’s cumulative total return to shareholders (stock price appreciation plus dividends) during the previous five years to the returns of the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones U.S. Telecommunications Index.  As of December 31, 2013, the Dow Jones U.S. Telecommunications Index was composed of the following companies: AT&T Inc., CenturyLink Inc., Crown Castle International Corp., Frontier Communications Corp., Level 3 Communications Inc., NII Holdings Inc., SBA Communications Corp., Sprint Corp., T-Mobile US Inc., Telephone and Data Systems, Inc. (TDS), TW Telecom, Inc., Verizon Communications Inc., and Windstream Holdings Inc.

* Cumulative total return assumes reinvestment of dividends.

	2008		2009		2010		2011		2012		2013
U.S. Cellular (NYSE: USM)	$	100	$	98.08	$	115.49	$	100.90	$	81.50	$	113.33
S&P 500 Index		100		126.46		145.51		148.59		172.37		228.19
Dow Jones U.S. Telecommunications Index		100		109.85		129.35		134.48		159.75		182.32

68

Assumes $100.00 invested at the close of trading on the last trading day preceding the first day of 2008, in U.S. Cellular Common Shares, S&P 500 Index and the Dow Jones U.S. Telecommunications Index.

69

Investor relations

U.S. Cellular’s annual report, SEC filings and news releases are available to investors, securities analysts and other members of the investment community.  These reports are provided, without charge, upon request to our Corporate Office.  Investors may also access these and other reports through the Investor Relations portion of the U.S. Cellular website (http://www.uscellular.com).  

Questions regarding lost, stolen or destroyed certificates, consolidation of accounts, transferring of shares and name or address changes should be directed to:

Julie Mathews, Manager—Investor Relations
Telephone and Data Systems, Inc.
30 North LaSalle Street, Suite 4000
Chicago, IL 60602
312.592.5341
312.630.9299 (fax)
julie.mathews@teldta.com 

General inquiries by investors, securities analysts and other members of the investment community should be directed to:

Jane W. McCahon, Vice President—Corporate Relations and Corporate Secretary
Telephone and Data Systems, Inc.
30 North LaSalle Street, Suite 4000
Chicago, IL 60602
312.592.5379
312.630.9299 (fax)
jane.mccahon@teldta.com 

Directors and executive officers

See “Election of Directors” and “Executive Officers” sections of the Proxy Statement issued in 2014 for the 2014 Annual Meeting.

Principal counsel
Sidley Austin LLP, Chicago, Illinois

Transfer agent
Computershare Trust Company, N.A.
211 Quality Circle, Suite 210

College Station, TX 77845
312.360.5326

Independent registered public accounting firm
PricewaterhouseCoopers LLP

Visit U.S. Cellular's website at www.uscellular.com 

70

EX-21

 

	Exhibit 21
UNITED STATES CELLULAR CORPORATION
SUBSIDIARY COMPANIES
December 31, 2013
SUBSIDIARY COMPANIES	STATE OF ORGANIZATION
BANGOR CELLULAR TELEPHONE, L.P.	DELAWARE
BARAT WIRELESS, INC.	DELAWARE
BARAT WIRELESS, L.P.	DELAWARE
CALIFORNIA RURAL SERVICE AREA #1, INC.	CALIFORNIA
CARROLL PCS, INC.	DELAWARE
CARROLL WIRELESS, L.P.	DELAWARE
CEDAR RAPIDS CELLULAR TELEPHONE, L.P.	DELAWARE
CELLVEST, INC.	DELAWARE
CENTRAL CELLULAR TELEPHONES, LTD.	ILLINOIS
CHAMPLAIN CELLULAR, INC.	NEW YORK
COMMUNITY CELLULAR TELEPHONE COMPANY	TEXAS
CROWN POINT CELLULAR, INC.	NEW YORK
DUBUQUE CELLULAR TELEPHONE, L.P.	DELAWARE
EASTERN NORTH CAROLINA CELLULAR JOINT VENTURE	DELAWARE
HARDY CELLULAR TELEPHONE COMPANY	DELAWARE
HUMPHREYS COUNTY CELLULAR, INC.	DELAWARE
INDIANA RSA # 5, INC.	INDIANA
INDIANA RSA NO. 4 LIMITED PARTNERSHIP	INDIANA
INDIANA RSA NO. 5 LIMITED PARTNERSHIP	INDIANA
IOWA RSA # 3, INC.	DELAWARE
IOWA RSA # 9, INC.	DELAWARE
IOWA RSA # 12, INC.	DELAWARE
JACKSONVILLE CELLULAR PARTNERSHIP	NORTH CAROLINA
JACKSONVILLE CELLULAR TELEPHONE COMPANY	NORTH CAROLINA
KANSAS #15 LIMITED PARTNERSHIP	DELAWARE
KENOSHA CELLULAR TELEPHONE, L.P.	DELAWARE
MADISON CELLULAR TELEPHONE COMPANY	WISCONSIN
MAINE RSA # 1, INC.	MAINE
MAINE RSA # 4, INC.	MAINE
MCDANIEL CELLULAR TELEPHONE COMPANY	DELAWARE
MINNESOTA INVCO OF RSA # 7, INC.	DELAWARE
NEWPORT CELLULAR, INC.	NEW YORK
NH #1 RURAL CELLULAR, INC.	NEW HAMPSHIRE
NORTH CAROLINA RSA 1 PARTNERSHIP	DELAWARE
OREGON RSA #2, INC.	OREGON
PCS WISCONSIN, LLC	WISCONSIN
RACINE CELLULAR TELEPHONE COMPANY	WISCONSIN
TENNESSEE NO. 3, LIMITED PARTNERSHIP	TENNESSEE
TEXAHOMA CELLULAR LIMITED PARTNERSHIP	TEXAS
TEXAS INVCO OF RSA # 6, INC.	DELAWARE
TOWNSHIP CELLULAR TELEPHONE, INC.	DELAWARE
UNITED STATES CELLULAR INVESTMENT CO. OF OKLAHOMA CITY, INC.	OKLAHOMA
UNITED STATES CELLULAR INVESTMENT COMPANY, LLC	DELAWARE
UNITED STATES CELLULAR INVESTMENT CORPORATION OF LOS ANGELES	INDIANA
UNITED STATES CELLULAR OPERATING COMPANY LLC	DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY OF BANGOR	MAINE
UNITED STATES CELLULAR OPERATING COMPANY OF CEDAR RAPIDS	DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY OF CHICAGO, LLC	DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY OF DUBUQUE	IOWA
UNITED STATES CELLULAR OPERATING COMPANY OF KNOXVILLE	TENNESSEE
UNITED STATES CELLULAR OPERATING COMPANY OF MEDFORD	OREGON
UNITED STATES CELLULAR OPERATING COMPANY OF YAKIMA	WASHINGTON
UNITED STATES CELLULAR TELEPHONE COMPANY (GREATER KNOXVILLE), L.P.	TENNESSEE
USCC DISTRIBUTION CO., LLC	DELAWARE
USCC FINANCIAL L.L.C.	ILLINOIS
USCC PURCHASE, LLC	DELAWARE
USCC REAL ESTATE CORPORATION	DELAWARE
USCC SERVICES, LLC	DELAWARE
USCC WIRELESS INVESTMENT, INC.	DELAWARE
USCCI CORPORATION	DELAWARE
USCIC OF FRESNO	CALIFORNIA
USCIC OF NORTH CAROLINA RSA # 1, INC.	DELAWARE
USCOC NEBRASKA/KANSAS, INC.	DELAWARE
USCOC NEBRASKA/KANSAS, LLC	DELAWARE
USCOC OF CENTRAL ILLINOIS, LLC	ILLINOIS
USCOC OF CHICAGO REAL ESTATE HOLDINGS, LLC	DELAWARE
USCOC OF CUMBERLAND, LLC	DELAWARE
USCOC OF GREATER IOWA, LLC	DELAWARE
USCOC OF GREATER MISSOURI, LLC	DELAWARE
USCOC OF GREATER NORTH CAROLINA, LLC	DELAWARE
USCOC OF GREATER OKLAHOMA, LLC	OKLAHOMA
USCOC OF JACK/WIL, INC.	DELAWARE
USCOC OF JACKSONVILLE, LLC	DELAWARE
USCOC OF LACROSSE, LLC	WISCONSIN
USCOC OF OREGON RSA # 5, INC.	DELAWARE
USCOC OF PENNSYLVANIA RSA NO. 10-B2, INC.	DELAWARE
USCOC OF RICHLAND, INC.	WASHINGTON
USCOC OF ROCHESTER, INC.	DELAWARE
USCOC OF SOUTH CAROLINA RSA # 4, INC.	SOUTH CAROLINA
USCOC OF TEXAHOMA, INC.	TEXAS
USCOC OF VIRGINIA RSA # 3, INC.	VIRGINIA
USCOC OF WASHINGTON-4, INC.	DELAWARE
USCOC OF WILMINGTON, LLC	DELAWARE
VERMONT RSA NO. 2-B2, INC.	DELAWARE
WASHINGTON RSA # 5, INC.	WASHINGTON
WESTELCOM CELLULAR, INC.	NEW YORK
WESTERN SUB-RSA LIMITED PARTNERSHIP	DELAWARE
WILMINGTON CELLULAR PARTNERSHIP	NORTH CAROLINA
WILMINGTON CELLULAR TELEPHONE COMPANY	NORTH CAROLINA
YAKIMA MSA LIMITED PARTNERSHIP	DELAWARE
OTHER ENTITIES CONSOLIDATED IN ACCORDANCE WITH GAAP
AQUINAS WIRELESS, L.P.	DELAWARE
KING STREET WIRELESS, L.P.	DELAWARE
KING STREET WIRELESS, INC.	DELAWARE

EX-23.1

 

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-188971), Form S-4 (No. 33-41826) and Form S-8 (Nos. 333-42366, 333-105675, 333-152841, 333-161119, 333-188966 and 333-190331) of United States Cellular Corporation of our report dated February 28, 2014, relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 28, 2014

EX-23.2

 

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-188971), Form S-4 (No. 33-41826), and in the Registration Statements on Form S-8 (Nos. 333-42366, 333-105675, 333-152841, 333-161119, 333-188966 and 333-190331) of United States Cellular Corporation  of our report dated February 28, 2014, relating to the financial statements of Los Angeles SMSA Limited Partnership as of December 31, 2013 and 2012, and for each of the three years in the period ended December 31, 2013, appearing in the Annual Report on Form 10-K of United States Cellular Corporation for the year ended December 31, 2013.

/s/ Deloitte & Touche LLP

Atlanta, Georgia
February 28, 2014

EX-31.1

 

Exhibit 31.1

Certification of Principal Executive Officer

I, Kenneth R. Meyers, certify that:

1.I have reviewed this annual report on Form 10-K of United States Cellular Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  February 28, 2014

/s/ Kenneth R. Meyers                       

                                                                                                Kenneth R. Meyers

                                                                                                President and Chief Executive Officer

                                                                                                (principal executive officer)

EX-31.2

 

Exhibit 31.2

Certification of Principal Financial Officer

I, Steven T. Campbell, certify that:

1.I have reviewed this annual report on Form 10-K of United States Cellular Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   February 28, 2014

/s/ Steven T. Campbell                      

                                                                                                Steven T. Campbell

Executive Vice President-Finance,

Chief Financial Officer and Treasurer

(principal financial officer)

EX-32.1

 

Exhibit 32.1

Certification Pursuant to Section 1350 of Chapter 63

of Title 18 of the United States Code

I, Kenneth R. Meyers, the principal executive officer of United States Cellular Corporation, certify that (i) the annual report on Form 10-K for the year ended December 31, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of United States Cellular Corporation.

/s/ Kenneth R. Meyers                       

                                                                                                                Kenneth R. Meyers

February 28, 2014

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to United States Cellular Corporation and will be retained by United States Cellular Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

 

Exhibit 32.2

Certification Pursuant to Section 1350 of Chapter 63

of Title 18 of the United States Code

I, Steven T. Campbell, the principal financial officer of United States Cellular Corporation, certify that (i) the annual report on Form 10-K for the year ended December 31, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of United States Cellular Corporation.

/s/ Steven T. Campbell                      

                                                                                                                Steven T. Campbell

                                                                                                                February 28, 2014

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to United States Cellular Corporation and will be retained by United States Cellular Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Stock-Based Compensation (Table)

12 Months Ended

Dec. 31, 2013

Stock based compensation

Stock-based compensation, fair value assumptions

	2013	2012	2011
Expected life	4.6-9.0 years	4.5 years	4.3 years
Expected volatility	29.2%-39.6%	40.7%-42.6%	43.4%-44.8%
Dividend yield	0%	0%	0%
Risk-free interest rate	0.7%-2.4%	0.5%-0.9%	0.7%-2.0%
Estimated annual forfeiture rate	0.0%-8.1%	0.0%-9.1%	0.0%-7.8%

Summary of stock options

Common Share Options		Number of Options	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding at December 31, 2010		2,627,000	$	42.28
(1,333,000 exercisable)				47.18
	Granted	694,000		44.34	$	16.66
	Exercised	(201,000)		32.32			$	2,099,000
	Forfeited	(83,000)		39.42
	Expired	(203,000)		49.32
Outstanding at December 31, 2011		2,834,000	$	43.07
(1,533,000 exercisable)				46.23
	Granted	677,000		34.91	$	12.61
	Exercised	(47,000)		29.82			$	205,000
	Forfeited	(117,000)		38.45
	Expired	(133,000)		46.17
Outstanding at December 31, 2012		3,214,000	$	41.58
(1,928,000 exercisable)			$	43.99
	Granted	1,213,000		32.45	$	11.53
	Exercised	(892,000)		34.78			$	6,787,000
	Forfeited	(574,000)		34.17
	Expired	(247,000)		48.35
Outstanding at December 31, 2013		2,714,000	$	42.22			$	13,015,000	6.80
(1,359,000 exercisable)			$	46.91			$	2,632,000	4.60

Summary of nonvested restricted stock units

Common Restricted Stock Units	Number	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2012	1,139,000	$	38.40
Granted	601,000		32.06
Vested	(238,000)		42.26
Forfeited	(332,000)		35.63
Nonvested at December 31, 2013	1,170,000	$	36.46

Stock-based compensation

Year Ended December 31,	2013		2012		2011
(Dollars in thousands)
Stock option awards	$	5,810	$	8,471	$	9,549
Restricted stock unit awards		9,485		12,300		10,037
Deferred compensation bonus and matching stock unit awards		2		240		12
Awards under employee stock purchase plan		-		-		255
Awards under Non-Employee Director compensation plan		547		455		330
Total stock-based compensation, before income taxes		15,844		21,466		20,183
Income tax benefit		(5,984)		(8,121)		(7,581)
Total stock-based compensation expense, net of income taxes	$	9,860	$	13,345	$	12,602

Stock-based compensation, allocation by financial statement line item

December 31,		2013		2012		2011
(Dollars in thousands)
Selling, general and administrative expense	$	12,933	$	18,437	$	17,538
System operations		2,911		3,029		2,645
Total stock-based compensation expense	$	15,844	$	21,466	$	20,183

XML

Acquisitions, Divestitures and Exchanges, divestitures (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended				3 Months Ended	12 Months Ended			14 Months Ended			12 Months Ended					3 Months Ended	12 Months Ended	26 Months Ended	12 Months Ended	26 Months Ended	12 Months Ended	14 Months Ended	12 Months Ended			24 Months Ended	3 Months Ended	12 Months Ended	14 Months Ended	24 Months Ended			12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012		Dec. 31, 2011	Dec. 31, 2013 Divestiture transaction	Dec. 31, 2013 Divestiture transaction	Dec. 31, 2012 Divestiture transaction		Dec. 31, 2013 Divestiture transaction	Dec. 31, 2012 Bolingbrook customer care center		Dec. 31, 2013 Bolingbrook customer care center Divestiture	Dec. 31, 2013 Wireless market	Dec. 31, 2012 Wireless market	Dec. 31, 2013 Mississippi Valley	Dec. 31, 2013 St. Louis	Mar. 31, 2014 Expected event St. Louis	Dec. 31, 2013 Minimum Divestiture transaction	Dec. 31, 2014 Minimum Expected event Divestiture transaction	Dec. 31, 2013 Maximum Divestiture transaction	Dec. 31, 2014 Maximum Expected event Divestiture transaction	Dec. 31, 2013 Purchase price Divestiture transaction	Dec. 31, 2013 Purchase price Divestiture transaction	Dec. 31, 2013 Purchase price Minimum Divestiture transaction	Dec. 31, 2013 Purchase price Maximum Divestiture transaction	Dec. 31, 2013 Sprint Cost Reimbursement Divestiture transaction Cash received from divestitures	Dec. 31, 2014 Sprint Cost Reimbursement Maximum Expected event Divestiture transaction	Dec. 31, 2013 Sprint Cost Reimbursement (Gain) loss on sale of business and other exit costs, net Divestiture transaction	Dec. 31, 2013 Sprint Cost Reimbursement (Gain) loss on sale of business and other exit costs, net Divestiture transaction	Dec. 31, 2013 Sprint Cost Reimbursement (Gain) loss on sale of business and other exit costs, net Divestiture transaction	Dec. 31, 2014 Sprint Cost Reimbursement (Gain) loss on sale of business and other exit costs, net Minimum Expected event Divestiture transaction	Dec. 31, 2014 Sprint Cost Reimbursement (Gain) loss on sale of business and other exit costs, net Maximum Expected event Divestiture transaction	Dec. 31, 2014 Sprint Cost Reimbursement System operations Maximum Expected event Divestiture transaction	Dec. 31, 2013 Employee related costs including severance, retention and outplacement Divestiture transaction		Dec. 31, 2012 Employee related costs including severance, retention and outplacement Divestiture transaction		Dec. 31, 2013 Contract termination costs Other current liabilities Divestiture transaction		Dec. 31, 2012 Contract termination costs Other current liabilities Divestiture transaction		Dec. 31, 2013 Contract termination costs Other deferred liabilities and credits Divestiture transaction
Divestitures
Business divestiture date						May 16, 2013						Jan. 01, 2013		Mar. 14, 2012	Oct. 04, 2013
Business divestiture description						On November 6, 2012, U.S. Cellular entered into a Purchase and Sale Agreement with subsidiaries of Sprint Corp., fka Sprint Nextel Corporation (“Sprint”). Pursuant to the Purchase and Sale Agreement, on May 16, 2013, U.S. Cellular transferred customers and certain PCS license spectrum to Sprint in U.S. Cellular’s Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets (“Divestiture Markets”) in consideration for $480 million in cash. The Purchase and Sale Agreement also contemplated certain other agreements, together with the Purchase and Sale Agreement collectively referred to as the “Divestiture Transaction.” U.S. Cellular retained other assets and liabilities related to the Divestiture Markets, including network assets, retail stores and related equipment, and other buildings and facilities. The transaction did not affect spectrum licenses held by U.S. Cellular or variable interest entities (“VIEs”) that were not used in the operations of the Divestiture Markets. Pursuant to the Purchase and Sale Agreement, U.S. Cellular and Sprint also entered into certain other agreements, including customer and network transition services agreements, which require U.S. Cellular to provide customer, billing and network services to Sprint for a period of up to 24 months after the May 16, 2013 closing date. Sprint will reimburse U.S. Cellular for providing such services at an amount equal to U.S. Cellular’s estimated costs, including applicable overhead allocations. In addition, these agreements require Sprint to reimburse U.S. Cellular up to $200 million (the “Sprint Cost Reimbursement”) for certain network decommissioning costs, network site lease rent and termination costs, network access termination costs, and employee termination benefits for specified engineering employees.						Effective January 1, 2013, U.S. Cellular transferred its Bolingbrook Customer Care Center operations to an existing third party vendor.	On March 14, 2012, U.S. Cellular sold the majority of the assets and liabilities of a wireless market for $49.8 million in cash. At the time of the sale, a $4.2 million gain was recorded in (Gain) loss on sale of business and other exit costs, net in the Consolidated Statement of Operations.		On October 4, 2013, U.S. Cellular sold the majority of its Mississippi Valley non-operating market license (“unbuilt license”) for $308.0 million. At the time of the sale, a $250.6 million gain was recorded in (Gain) loss on license sales and exchanges in the Consolidated Statement of Operations.
Business divestiture agreement description																On August 14, 2013 U.S. Cellular entered into a definitive agreement to sell the majority of its St. Louis area unbuilt license for $92.3 million. This transaction is subject to regulatory approval and is expected to close in the first quarter of 2014. In accordance with GAAP, the book value of the license has been accounted for and disclosed as “held for sale” in the Consolidated Balance Sheet at December 31, 2013.
Business divestiture agreement date						Nov. 06, 2012										Aug. 14, 2013
Transition services agreement duration																				24M
(Increase) decrease in Operating Income	$ (146,865)	$ (156,656)		$ (280,780)	$ 41,324	$ (69,926)	$ 44,535		$ (25,391)										$ (49,407)		$ (18,407)
(Gain) loss on license sales and exchanges	(255,479)			(11,762)											(250,600)
Divestiture Financial Impacts
Cash received from divestitures	(811,120)	(49,932)												(49,800)	(308,000)		(92,300)					(480,000)	(480,000)	(480,000)	(480,000)	(10,600)	(200,000)	(43,420)	(47,641)	(47,641)	(120,000)	(175,000)	(25,000)
Net assets transferred						213,593			213,593									213,593		213,593
Non-cash charges for the write-off and write-down of property under construction and related assets					(51)	3	10,672		10,675										10,000		14,000
Employee related costs including severance, retention and outplacement					(809)	1,653	12,609		14,262										12,000		18,000
Contract termination costs					40,744	59,525	59		59,584										110,000		160,000
Transaction costs					347	4,428	1,137		5,565										5,000		6,000
Total (Gain) loss on sale of business and other exit costs, net	(246,767)	21,022			(3,189)	(248,439)	24,477		(223,962)					(4,200)					(249,407)		(243,407)
Incremental depreciation, amortization and accretion, net of salvage values	803,781	608,633		573,557	44,513	178,513	20,058		198,571										200,000		225,000
Balance Sheet rollforward
Balance, beginning of period																																		12,305				30
Costs incurred																																		6,853		12,609		22,675		59		34,283
Cash settlements																																		(11,905)	[1]	(304)	[1]	(8,713)	[1]	(29)	[1]	(3,434)	[1]
Adjustments																																		(5,200)	[2]
Balance, end of period																																		2,053		12,305		13,992		30		30,849
Assets and liabilities held for sale
Licenses		140,599					140,599									16,027
Goodwill		72,994					72,994
Property, plant and equipment		4,275								4,275	[3]
Loss on assets held for sale		(1,105)	[4]							(1,105)	[3],[4]
Total Assets held for sale	16,027	216,763					213,593			3,170	[3]					16,027
Liabilities held for sale		$ 19,594					$ 19,594	[5]

[1] Cash settlement amounts are included in either the Net income or changes in Other assets and liabilities line items as part of Cash flows from operating activities on the Consolidated Statement of Cash Flows.

[2] Adjustment to liability represents changes to previously accrued amounts.

[3] Effective January 1, 2013, U.S. Cellular transferred its Bolingbrook Customer Care Center operations to an existing third party vendor.

[4] Loss on assets held for sale was recorded in (Gain) loss on sale of business and other exit costs, net in the Consolidated Statement of Operations.

[5] Liabilities held for sale primarily consisted of Customer deposits and deferred revenues.

XML

Income Taxes, Net Operating Losses (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
State
Operating Loss Carryforwards [Line Items]
State NOL carryforwards	$ 1,149.4
Deferred tax asset for State NOL carryforwards	51.1
State | Minimum
Operating Loss Carryforwards [Line Items]
Expiration of NOL carryforwards	Dec. 31, 2014
State | Maximum
Operating Loss Carryforwards [Line Items]
Expiration of NOL carryforwards	Dec. 31, 2033
Federal
Operating Loss Carryforwards [Line Items]
Deferred tax asset for Federal NOL carryforward (entities not on Federal return)	$ 10.2
Federal | Minimum
Operating Loss Carryforwards [Line Items]
Expiration of NOL carryforwards	Dec. 31, 2018
Federal | Maximum
Operating Loss Carryforwards [Line Items]
Expiration of NOL carryforwards	Dec. 31, 2033

XML

Stock-Based Compensation Overview, Expense and Valuation Model (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Stock based compensation
Stock-based compensation expense	$ 15,844,000	$ 21,466,000	$ 20,183,000
Income tax benefit	(5,984,000)	(8,121,000)	(7,581,000)
Total stock-based compensation expense, net of income taxes	9,860,000	13,345,000	12,602,000
Unrecognized compensation cost for all stock-based compensation awards	24,500,000
Weighted average period for recognition of unrecognized compensation cost for all stock-based compensation awards	2 years 4 months
Tax benefit from exercise of stock options and other awards	6,100,000
System operations
Stock based compensation
Stock-based compensation expense	2,911,000	3,029,000	2,645,000
Selling, general and administrative expense
Stock based compensation
Stock-based compensation expense	12,933,000	18,437,000	17,538,000
2005 and 2013 Long-Term Incentive Plans
Stock-based compensation, overview
Terms of Award	Under the U.S. Cellular Long-Term Incentive Plans, U.S. Cellular may grant fixed and performance based incentive and non-qualified stock options, restricted stock, restricted stock units, and deferred compensation stock unit awards to key employees. At December 31, 2013, the only types of awards outstanding are fixed non-qualified stock option awards, restricted stock unit awards, and deferred compensation stock unit awards.
2005 and 2013 Long-Term Incentive Plans | Stock Options
Stock based compensation
Stock-based compensation expense	5,810,000	8,471,000	9,549,000
2005 and 2013 Long-Term Incentive Plans | Stock Options | Minimum
Stock-based compensation, overview
Stock options expiration date	Mar. 29, 2014
2005 and 2013 Long-Term Incentive Plans | Stock Options | Maximum
Stock-based compensation, overview
Stock options expiration date	Dec. 18, 2023
2005 and 2013 Long-Term Incentive Plans | Restricted Stock Units
Stock based compensation
Stock-based compensation expense	9,485,000	12,300,000	10,037,000
2005 and 2013 Long-Term Incentive Plans | Deferred Compensation Stock Units
Stock based compensation
Stock-based compensation expense	2,000	240,000	12,000
2009 Employee Stock Purchase Plan
Stock-based compensation, overview
Terms of Award	The U.S. Cellular 2009 Employee Stock Purchase Plan was terminated in the fourth quarter of 2011.
Stock based compensation
Stock-based compensation expense			255,000
Non-Employee Directors' Plan
Stock based compensation
Stock-based compensation expense	$ 547,000	$ 455,000	$ 330,000
Common Shares | 2005 and 2013 Long-Term Incentive Plans | Stock Options
Stock-based compensation, overview
Terms of Award	Stock options granted to key employees are exercisable over a specified period not in excess of ten years. Stock options generally vest over a period of three years from the date of grant. Stock options outstanding at December 31, 2013 expire between 2014 and 2023. However, vested stock options typically expire 30 days after the effective date of an employee’s termination of employment for reasons other than retirement. Employees who leave at the age of retirement have 90 days (or one year if they satisfy certain requirements) within which to exercise their vested stock options. The exercise price of options equals the market value of U.S. Cellular Common Shares on the date of grant.
Black Scholes valuation model assumptions
Expected life		4 years 6 months	4 years 4 months
Expected annual volatility rate, minimum	29.20%	40.70%	43.40%
Expected annual volatility rate, maximum	39.60%	42.60%	44.80%
Dividend yield	0.00%	0.00%	0.00%
Risk-free interest rate, minimum	0.70%	0.50%	0.70%
Risk-free interest rate, maximum	2.40%	0.90%	2.00%
Estimated annual forfeiture rate, minimum	0.00%	0.00%	0.00%
Estimated annual forfeiture rate, maximum	8.10%	9.10%	7.80%
Common Shares | 2005 and 2013 Long-Term Incentive Plans | Stock Options | Minimum
Black Scholes valuation model assumptions
Expected life	4 years 5 months
Common Shares | 2005 and 2013 Long-Term Incentive Plans | Stock Options | Maximum
Stock based compensation
Shares reserved	10,139,000
Black Scholes valuation model assumptions
Expected life	9 years 0 months
Common Shares | 2005 and 2013 Long-Term Incentive Plans | Restricted Stock Units
Stock-based compensation, overview
Terms of Award	U.S. Cellular grants restricted stock unit awards, which generally vest after three years, to key employees. U.S. Cellular estimates the fair value of restricted stock units based on the closing market price of U.S. Cellular shares on the date of grant. The fair value is then recognized as compensation cost on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.
Common Shares | 2005 and 2013 Long-Term Incentive Plans | Deferred Compensation Stock Units
Stock-based compensation, overview
Terms of Award	Certain U.S. Cellular employees may elect to defer receipt of all or a portion of their annual bonuses and to receive a company matching contribution on the amount deferred. All bonus compensation that is deferred by employees electing to participate is immediately vested and is deemed to be invested in U.S. Cellular Common Share stock units. The amount of U.S. Cellular’s matching contribution depends on the portion of the annual bonus that is deferred. Participants receive a 25% match for amounts deferred up to 50% of their total annual bonus and a 33% match for amounts that exceed 50% of their total annual bonus; such matching contributions also are deemed to be invested in U.S. Cellular Common Share stock units.
Common Shares | Non-Employee Directors' Plan
Stock based compensation
Shares reserved	212,000

XML

Acquisitions, Divestitures and Exchanges, exchanges (Details) (Spectrum exchange, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2011
Spectrum exchange
Exchanges
Agreement date		Sep. 30, 2011
Asset exchange description	On September 30, 2011, U.S. Cellular completed an exchange whereby U.S. Cellular received eighteen 700 MHz spectrum licenses covering portions of Idaho, Illinois, Indiana, Kansas, Nebraska, Oregon and Washington in exchange for two PCS spectrum licenses covering portions of Illinois and Indiana.  The exchange of licenses provided U.S. Cellular with additional spectrum to meet anticipated future capacity and coverage requirements in several of its markets.  No cash, customers, network assets, other assets or liabilities were included in the exchange.  As a result of this transaction, U.S. Cellular recognized a gain of $11.8 million, representing the difference between the fair value of the licenses received, calculated using a market approach valuation method, and the carrying value of the licenses surrendered.  This gain was recorded in (Gain) loss on license sales and exchanges in the Consolidated Statement of Operations for the year ended December 31, 2011.
Gain on asset exchange		$ 11.8
Asset exchange, valuation method	market approach valuation method

XML

Income Taxes, Rate Reconciliation (Details)	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Income tax rate reconciliation
Statutory federal income tax rate	35.00%		35.00%		35.00%
Effect of state income tax, net of federal benefit	2.00%	[1]	1.80%	[1]	1.40%	[1]
Effect of noncontrolling interests on income tax rate	(0.90%)		(3.10%)		(1.60%)
Gains (losses) on investments and sales of assets on income tax rate	8.00%	[2]
Effect of correction of deferred taxes on income tax rate			(2.60%)	[3]	2.00%	[3]
Other differences effect on income tax rate	(0.20%)		0.10%		(0.30%)
Total income tax rate	43.90%		31.20%		36.50%

[1] Net state income taxes include changes in the valuation allowance. In addition, state tax benefits related to the settlement of state tax audits and the expiration of statutes of limitations are included in 2013, 2012 and 2011.

[2] Represents 2013 tax expense related to the NY1 & NY2 Deconsolidation and the Divestiture Transaction.

[3] U.S. Cellular recorded immaterial adjustments to correct deferred tax balances in 2012 and 2011 related to tax basis and law changes that related to periods prior to 2012 and 2011, respectively.

XML

Property, Plant and Equipment (Table)

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Property, plant and equipment

December 31,	Useful Lives (Years)	2013		2012
(Dollars in thousands)
Land	N/A	$	36,266	$	33,947
Buildings	20		304,272		341,852
Leasehold and land improvements	1-30		1,197,520		1,188,720
Cell site equipment	6-25		3,306,575		3,100,916
Switching equipment	1-8		1,161,976		1,155,114
Office furniture and equipment	3-5		539,248		535,656
Other operating assets and equipment	5-25		92,456		128,290
System development	3-7		962,698		631,184
Work in process	N/A		116,501		362,749
			7,717,512		7,478,428
Accumulated depreciation and amortization			(4,860,992)		(4,455,840)
		$	2,856,520	$	3,022,588

XML

Supplemental Cash Flow Disclosures (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Supplemental cash flow disclosures
Interest paid	$ 42,904,000	$ 44,048,000	$ 55,580,000
Income taxes paid (refunded)	157,778,000	(58,609,000)	(54,469,000)
Dividend payable date	Jun. 25, 2013
Dividend date of record	Jun. 11, 2013
Series A Common and Common Shares, dividends per share paid	$ 5.75
Series A Common and Common Shares, dividends paid	482,270,000
Supplemental cash flows, stock based compensation
Net cash receipts (disbursements) from exercise of stock options and vesting of other stock awards	5,784,000	(2,205,000)	1,935,000
Auction 901 Mobility Funds
Supplemental cash flow disclosures
FCC auction date	Sep. 27, 2012
FCC auction amount received	13,400,000
FCC auction number of states won	10
Other assets and deferred charges | Auction 901 Mobility Funds
Supplemental cash flow disclosures
FCC auction amount received	10,300,000
Property, plant and equipment, net | Auction 901 Mobility Funds
Supplemental cash flow disclosures
FCC auction amount received	3,100,000
Maximum | Auction 901 Mobility Funds
Supplemental cash flow disclosures
FCC auction amount	300,000,000
FCC auction amount awarded	40,100,000
Common Shares
Supplemental cash flows, stock based compensation
Shares withheld	606,582	92,846	120,250
Aggregate value of shares withheld	25,179,000	3,604,000	5,952,000
Cash receipts upon exercise of stock options	10,468,000	900,000	5,447,000
Cash disbursements for payments of taxes	(4,684,000)	(3,105,000)	(3,512,000)
Net cash receipts (disbursements) from exercise of stock options and vesting of other stock awards	$ 5,784,000	$ (2,205,000)	$ 1,935,000

XML

Investments in Unconsolidated Entities (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Equity and cost method investments
Capital contributions, loans, advances and adjustments	$ 121,571	$ 10,323
Cumulative share of income	1,152,916	1,017,449
Cumulative share of distributions	(1,010,513)	(884,852)
Equity method investments	263,974	142,920
Cost method investments	1,611	1,611
Total investments in unconsolidated entities	265,585	144,531
Equity in earnings of unconsolidated entities	131,949	90,364	83,566
Los Angeles SMSA Limited Partnership
Equity and cost method investments
Equity in earnings of unconsolidated entities	78,400	67,200	55,300
Ownership interest in equity method investment	5.50%	5.50%	5.50%
Aggregate equity method investments
Equity method investments, combined assets
Current	489,659	444,100
Due from affiliates	408,735	298,707
Property and other	2,026,104	1,896,784
Total assets	2,924,498	2,639,591
Equity method investments, combined liabilities and equity
Current liabilities	351,624	350,067
Deferred credits	84,834	80,660
Long-term liabilities	19,712	21,328
Long-term capital lease obligations	707	405
Partners' capital and shareholders' equity	2,467,621	2,187,131
Total liabilities and equity	2,924,498	2,639,591
Equity method investments, combined income statements
Revenues	6,218,067	5,804,466	5,519,024
Operating expenses	4,473,722	4,363,399	4,282,277
Operating income	1,744,345	1,441,067	1,236,747
Other income, net	4,842	4,003	4,976
Net income	$ 1,749,187	$ 1,445,070	$ 1,241,723

XML

Stock-Based Compensation Option Rollforward (Details) (Common Shares, 2005 and 2013 Long-Term Incentive Plans, Stock Options, USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Common Shares | 2005 and 2013 Long-Term Incentive Plans | Stock Options
Stock compensation, stock option rollforward schedule, number of options
Outstanding, begin of period	3,214,000	2,834,000	2,627,000
Exercisable options, begin of period	1,928,000	1,533,000	1,333,000
Granted options	1,213,000	677,000	694,000
Exercised options	(892,000)	(47,000)	(201,000)
Forfeited options	(574,000)	(117,000)	(83,000)
Expired options	(247,000)	(133,000)	(203,000)
Outstanding, end of period	2,714,000	3,214,000	2,834,000
Exercisable options, end of period	1,359,000	1,928,000	1,533,000
Stock compensation, stock option rollforward schedule, other information
Options outstanding, begin of period - weighted average exercise price	$ 41.58	$ 43.07	$ 42.28
Options exercisable, begin of period - weighted average exercise price	$ 43.99	$ 46.23	$ 47.18
Options granted, weighted average exercise price	$ 32.45	$ 34.91	$ 44.34
Options exercised, weighted average exercise price	$ 34.78	$ 29.82	$ 32.32
Options forfeited, weighted average exercise price	$ 34.17	$ 38.45	$ 39.42
Options expired, weighted average exercise price	$ 48.35	$ 46.17	$ 49.32
Options outstanding, end of period - weighted average exercise price	$ 42.22	$ 41.58	$ 43.07
Options exercisable, end of period - weighted average exercise price	$ 46.91	$ 43.99	$ 46.23
Options granted, weighted average grant date fair value	$ 11.53	$ 12.61	$ 16.66
Aggregate intrinsic value, options exercised	$ 6,787,000	$ 205,000	$ 2,099,000
Aggregate intrinsic value, options outstanding	13,015,000
Aggregate intrinsic value, options exercisable	$ 2,632,000
Weighted average remaining contractual life, outstanding	6 years 7 months
Weighted average remaining contractual life, exercisable	4 years 5 months

XML

Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Significant Accounting Policies)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Nature of Operations

U.S. Cellular owns, operates and invests in wireless systems throughout the United States. As of December 31, 2013, U.S. Cellular served 4.8 million customers. U.S. Cellular operates as one reportable segment.

Principles of Consolidation

The accounting policies of U.S. Cellular conform to accounting principles generally accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Unless otherwise specified, references to accounting provisions and GAAP in these notes refer to the requirements of the FASB ASC. The consolidated financial statements include the accounts of U.S. Cellular, its majority-owned subsidiaries, general partnerships in which U.S. Cellular has a majority partnership interestand variable interest entities (“VIEs”) in which U.S. Cellular is the primary beneficiary. Both VIE and primary beneficiary represent terms defined by GAAP.

Intercompany accounts and transactions have been eliminated.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2013 financial statement presentation. These reclassifications did not affect consolidated net income attributable to U.S. Cellular shareholders, cash flows, assets, liabilities or equity for the years presented.

Business Combinations

U.S. Cellular accounts for business combinations at fair value in accordance with the acquisition method. This method requires that the acquirer recognize 100% of the acquiree's assets and liabilities at their fair values on the acquisition date for all acquisitions, whether full or partial. In addition, transaction costs related to acquisitions are expensed.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (b) the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates are involved in accounting for goodwill and indefinite-lived intangible assets, depreciation, amortization and accretion, allowance for doubtful accounts, loyalty reward points, income taxes, stock based compensation and asset retirement obligations.

Cash and Cash Equivalents

Cash and cash equivalents include cash and short-term, highly liquid investments with original maturities of three months or less.

Short-Term and Long-Term Investments

At December 31, 2013 and 2012, U.S. Cellular had $50.1 million and $100.7 million, respectively, in Short-term investments. At December 31, 2012, U.S. Cellular had $50.3million in Long-term investments. Short-term and Long-term investments consist primarily of U.S. Treasury Noteswhich are designated as held-to-maturity investments and are recorded at amortized cost in the Consolidated Balance Sheet. For these investments, U.S. Cellular's objective is to earn a higher rate of return on funds that are not anticipated to be required to meet liquidity needs in the near term, while maintaining a low level of investment risk. See Note 2—Fair Value Measurementsfor additional details on Short-term and Long-term investments.

Accounts Receivable

Accounts receivable consist primarily of amounts owed by customers for wireless services and equipment sales, by agents for sales of equipment to them and by other wireless carriers whose customers have used U.S. Cellular's wireless systems.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related to existing accounts receivable. The allowance is estimated based on historical experience and other factors that could affect collectability. Accounts receivable balances are reviewed on either an aggregate or individual basis for collectability depending on the type of receivable. When it is probable that an account balance will not be collected, the account balance is charged against the allowance for doubtful accounts. U.S. Cellular does not have any off-balance sheet credit exposure related to its customers.

Inventory

Inventory consists primarilyof wireless devices stated at the lower of cost or market, with cost determined using the first-in, first-out method and market determined byreplacement costs or estimated net realizable value.

Fair Value Measurements

Under the provisions of GAAP, fair value is a market-based measurement and not an entity-specific measurement, based on an exchange transaction in which the entity sells an asset or transfers a liability (exit price). The provisions also establish a fair value hierarchy that contains three levels for inputs used in fair value measurements. Level 1 inputs include quoted market prices for identical assets or liabilities in active markets. Level 2 inputs include quoted market prices for similar assets and liabilities in active markets or quoted market prices for identical assets and liabilities in inactive markets. Level 3 inputs are unobservable. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. A financial instrument's level within the fair value hierarchy is not representative of its expected performance or its overall risk profile and, therefore, Level 3 assets are not necessarily higher risk than Level 2 assets or Level 1 assets.

Intangible Assets

Goodwill

U.S. Cellular has Goodwill as a result of its acquisitions of wireless businesses. Such Goodwill represents the excess of the total purchase price over the fair value of net assets acquired in these transactions.

Licenses

Licenses consist of direct and incremental costs incurred in acquiring Federal Communications Commission (“FCC”) licenses to provide wireless service.

U.S. Cellular has determined that wireless licenses are indefinite-lived intangible assets and, therefore, not subject to amortization based on the following factors:

• Radio spectrum is not a depleting asset.
• The ability to use radio spectrum is not limited to any one technology.
• U.S. Cellular and its consolidated subsidiaries are licensed to use radio spectrum through the FCC licensing process, which enables licensees to utilize specified portions of the spectrum for the provision of wireless service.
• U.S. Cellular and its consolidated subsidiaries are required to renew their FCC licenses every ten years or, in some cases, every fifteen years. To date, all of U.S. Cellular's license renewal applications have been granted by the FCC. Generally, license renewal applications filed by licensees otherwise in compliance with FCC regulations are routinely granted. If, however, a license renewal application is challenged either by a competing applicant for the license or by a petition to deny the renewal application, the license will be renewed if the licensee can demonstrate its entitlement to a “renewal expectancy.” Licensees are entitled to such an expectancy if they can demonstrate to the FCC that they have provided “substantial service” during their license term and have “substantially complied” with FCC rules and policies. U.S. Cellular believes that it is probable that its future license renewal applications will be granted.

Goodwill and Licenses Impairment Assessment

Goodwill and Licenses must be assessed for impairment annually or more frequently if events or changes in circumstances indicate that such assets might be impaired. U.S. Cellular performs its annual impairment assessment of Goodwill and Licenses as of November 1 of each year.

U.S. Cellular may first assess qualitative factors, such as company, industry and economic trends to determine whether it is necessary to perform the two-step Goodwill impairment test. If determined to be necessary, the first step compares the fair value of the reporting unit to its carrying value. If the carrying amount exceeds the fair value, the second step of the test is performed to measure the amount of impairment loss, if any. The second step compares the implied fair value of reporting unit Goodwill with the carrying amount of that Goodwill. To calculate the implied fair value of Goodwill in this second step, an enterprise allocates the fair value of the reporting unit to all of the assets and liabilities of that reporting unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value was the price paid to acquire the reporting unit. The excess of the fair value of the reporting unit over the amount assigned to the assets and liabilities of the reporting unit is the implied fair value of Goodwill. If the carrying amount of Goodwill exceeds the implied fair value of Goodwill, an impairment loss is recognized for that difference.

The impairment test for an indefinite-lived intangible asset other than Goodwill may consist of first assessing qualitative factors, such as company, industry and economic trends. If determined to be necessary, the next step compares the fair value of the intangible asset to its carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized for the difference.

Quoted market prices in active markets are the best evidence of fair value of an intangible asset or reporting unit and are used when available. If quoted market prices are not available, the estimate of fair value is based on the best information available, including prices for similar assets and the use of other valuation techniques. Other valuation techniques include present value analysis, multiples of earnings or revenues, or similar performance measures. The use of these techniques involve assumptions by management about factors that are uncertain including future cash flows, the appropriate discount rate, and other inputs. Different assumptions for these inputs could create materially different results.

U.S. Cellular tests Goodwill for impairment at the level of reporting referred to as a reporting unit. For purposes of its impairment testing of Goodwill in 2013, U.S. Cellular identified four reporting units. The four reporting units represent four geographic groupings of operating markets, representing four geographic service areas. For purposes of its impairment testing of Goodwill in 2012, U.S. Cellular identified five reporting units. The change in reporting units resulted from the NY1 & NY2 Deconsolidation more fully described in Note 7 — Investments in Unconsolidated Entities.

A discounted cash flow approach was used to value each reporting unit for purposes of the Goodwill impairment review by using value drivers and risks specific to the current industry and economic markets. The cash flow estimates incorporated assumptions that market participants would use in their estimates of fair value. Key assumptions made in this process were the discount rate, estimated expected revenue growth rate, projected capital expenditures and the terminal growth rate.

U.S. Cellular tests Licenses for impairment at the level of reporting referred to as a unit of accounting. For purposes of its 2013 impairment testing of Licenses, U.S. Cellular separated its FCC licenses into eleven units of accounting based on geographic service areas. For purposes of its 2012 impairment testing of Licenses, U.S. Cellular separated its FCC licenses into thirteen units of accounting based on geographic service areas. The change in units of accounting resulted from (i) the Divestiture Transactionand the Mississippi Valley non-operating market license sale, both of which are more fully described in Note 5 — Acquisitions, Divestitures and Exchanges and (ii) the NY1 & NY2 Deconsolidation more fully described in Note 7 — Investments in Unconsolidated Entities. In both 2013 and 2012, seven of the units of accounting represented geographic groupings of licenses which, because they were not being utilized and, therefore, were not expected to generate cash flows from operating activities in the foreseeable future, were considered separate units of accounting for purposes of impairment testing.

U.S. Cellular estimates the fair value of built licenses for purposes of impairment testing using the build-out method. The build-out method estimates the fair value of Licenses by calculating future cash flows from a hypothetical start-up wireless company and assuming that the only assets available upon formation are the underlying Licenses. To apply this method, a hypothetical build-out of U.S. Cellular's wireless network, infrastructure, and related costs are projected based on market participant information. Calculated cash flows, along with a terminal value, are discounted to the present and summed to determine the estimated fair value.

For units of accounting which consist of unbuilt licenses, U.S. Cellular prepares estimates of fair value by reference to prices paid in recent auctions and market transactions where available. If such information is not available, the fair value of the unbuilt licenses is assumed to change by the same percentage, and in the same direction, that the fair value of built licenses measured using the build-out method changed during the period.

Investments in Unconsolidated Entities

Investments in unconsolidated entities consist of amounts invested in wireless entities in which U.S. Cellular holds a noncontrolling interest. U.S. Cellular follows the equity method of accounting for such investments in which its ownership interest is less than or equal to 50% but equals or exceeds 20% for corporations and 3% for partnerships and limited liability companies, or for unconsolidated entities in which its ownership is greater than 50% but U.S. Cellular does not have a controlling financial interest. The cost method of accounting is followed for such investments in which U.S. Cellular's ownership interest is less than 20% for corporations and is less than 3% for partnerships and limited liability companies and for investments for which U.S. Cellular does not have the ability to exercise significant influence.

For its equity method investments for which financial information is readily available, U.S. Cellular records its equity in the earnings of the entity in the current period. For its equity method investments for which financial information is not readily available, U.S. Cellular records its equity in the earnings of the entity on a one quarter lag basis.

Property, Plant and Equipment

U.S. Cellular's Property, plant and equipment is stated at the original cost of construction or purchase including capitalized costs of certain taxes, payroll-related expenses, interest and estimated costs to remove the assets.

Expenditures that enhance the productive capacity of assets in service or extend their useful lives are capitalized and depreciated. Expenditures for maintenance and repairs of assets in service are charged to System operations expense or Selling, general and administrative expense, as applicable. Retirements and disposals of assets are recorded by removing the original cost of the asset (along with the related accumulated depreciation) from plant in service and charging it, together with net removal costs (removal costs less any applicable accrued asset retirement obligationsand salvage value realized), to (Gain) loss on asset disposals, net.

Costs of developing new information systems are capitalized and amortized over their expected economic useful lives.

Depreciation

Depreciation is provided using the straight-line method over the estimated useful life of the assets.

U.S. Cellular depreciates leasehold improvement assets associated with leased properties over periods ranging from one to thirty years; such periods approximate the shorter of the assets' economic lives or the specific lease terms.

Useful lives of specific assets are reviewed throughout the year to determine if changes in technology or other business changes would warrant accelerating the depreciation of those specific assets. Due to the Divestiture Transaction more fully described in Note 5 — Acquisitions, Divestitures and Exchanges, U.S. Cellular changed the useful lives of certain assets in 2013 and 2012. Other than the Divestiture Transaction, there were no other material changesto useful lives of property, plant and equipment in 2013, 2012 or 2011.

Impairment of Long-lived Assets

U.S. Cellular reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired. If necessary, the impairment test for tangible long-lived assets is a two-step process. The first step compares the carrying value of the asset (or asset group) with the estimated undiscounted cash flows over the remaining asset (or asset group) life. If the carrying value of the asset (or asset group) is greater than the undiscounted cash flows, the second step of the test is performed to measure the amount of impairment loss. The second step compares the carrying value of the asset to its estimated fair value. If the carrying value exceeds the estimated fair value (less cost to sell), an impairment loss is recognized for the difference.

U.S. Cellular has one asset group for purposes of assessing property, plant and equipment for impairment based on the fact that the individual operating markets are reliant on centrally operated data centers, mobile telephone switching offices, network operations center and wide-area network. As a result, U.S. Cellular operates a single integrated national wireless network, and the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities represent cash flows generated by this single interdependent network.

Quoted market prices in active markets are the best evidence of fair value of a tangible long-lived asset and are used when available. If quoted market prices are not available, the estimate of fair value is based on the best information available, including prices for similar assets and the use of other valuation techniques. A present value analysis of cash flow scenarios is often the best available valuation technique. The use of this technique involves assumptions by management about factors that are uncertain including future cash flows, the appropriate discount rate and other inputs. Different assumptions for these inputs could create materially different results.

Agent Liabilities

U.S. Cellular has relationships with agents, which are independent businesses that obtain customers for U.S. Cellular. At December 31, 2013 and 2012, U.S. Cellular had accrued $121.3 million and $88.2 million, respectively, for amounts due to agents. This amount is included in Other current liabilities in the Consolidated Balance Sheet.

Other Assets and Deferred Charges

Other assets and deferred charges includeunderwriters' and legal fees and other charges related to issuing U.S. Cellular's various borrowing instruments and other long-term agreements, and are amortized over the respective term of each instrument. The amounts for deferred charges included in the Consolidated Balance Sheet at December 31, 2013 and 2012, are shown net of accumulated amortization of $26.0 million and $12.7 million, respectively.

Asset Retirement Obligations

U.S. Cellular operates cell sites, retail stores and office spaces in its operating markets. A majority of these sites, stores and office spaces are leased. Most of these leases contain terms which require or may require U.S. Cellular to return the leased property to its original condition at the lease expiration date.

U.S. Cellular accounts for asset retirement obligations by recording the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligations are incurred. At the time the liability is incurred, U.S. Cellular records a liability equal to the net present value of the estimated cost of the asset retirement obligation and increases the carrying amount of the related long-lived asset by an equal amount. The liability is accreted to its present value over a period ending with the estimated settlement date of the respective asset retirement obligation. The carrying amount of the long-lived asset is depreciated over the useful life of the asset. Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability (including accretion of discount) is recognized in the Consolidated Statement of Operations.

Treasury Shares

Common Shares repurchased by U.S. Cellular are recorded at cost as treasury shares and result in a reduction of equity. Treasury shares are reissued as part of U.S. Cellular’s stock-based compensation programs. When treasury shares are reissued, U.S. Cellular determines the cost using the first-in, first-out cost method. The difference between the cost of the treasury shares and reissuance price is included in Additional paid-in capital or Retained earnings.

Revenue Recognition

Revenues from wireless operations consist primarily of:

• Charges for access, airtime, roaming, long distance, data and other value added services provided to U.S. Cellular's retail customers and to end users through third-party resellers;
• Charges to carriers whose customers use U.S. Cellular's systems when roaming;
• Sales of equipment and accessories;
• Amounts received from the Universal Service Fund (“USF”) in states where U.S. Cellular has been designated an Eligible Telecommunications Carrier (“ETC”); and
• Redemptions of loyalty reward points for products or services.

Revenues related to wireless services and other value added services are recognized as services are rendered. Revenues billed in advance or in arrears of the services being provided are estimated and deferred or accrued, as appropriate.

Revenues from sales of equipment and accessories are recognized when title and risk of loss passes to the agent or end-user customer.

U.S. Cellular allocates revenue to each element of multiple element service offerings using the relative selling price method. Under this method, arrangement consideration, which consists of the amounts billed to the customer net of any cash-based discounts, is allocated to each element on the basis of its relative selling price on a stand-alone basis. Such stand-alone selling price is determined in accordance with the following hierarchy:

• U.S. Cellular-specific objective evidence of stand-alone selling price, if available; otherwise
• Third-party evidence of selling price, if it is determinable; otherwise
• A best estimate of stand-alone selling price.

U.S. Cellular estimates stand-alone selling prices of the elements of its service offerings as follows:

• Wireless services – Based on the actual selling price U.S. Cellular offers when such plan is sold on a stand-alone basis, or if the plan is not sold on a stand-alone basis, U.S. Cellular's estimate of the price of such plan based on similar plans that are sold on a stand-alone basis.
• Wireless devices – Based on the selling price of the respective wireless device when it is sold on a stand-alone basis.
• Phone Replacement – Based on U.S. Cellular's estimate of the price of this service if it were sold on a stand-alone basis, which was calculated by estimating the cost of this program plus a reasonable margin.
• Loyalty reward points – By estimating the retail price of the products and services for which points may be redeemed and dividing such amount by the number of loyalty points required to receive such products and services. This is calculated on a weighted average basis and requires U.S. Cellular to estimate the percentage of loyalty points that will be redeemed for each product or service.

U.S. Cellular follows the deferred revenue method of accounting for its loyalty reward program. Under this method, revenue allocated to loyalty reward points is deferred. Revenue is recognized at the time of customer redemption or when such points have been depleted via an account maintenance charge. U.S. Cellular periodically reviews and revises the redemption and depletion rates as appropriate based on history and related future expectations.As of December 31, 2013, U.S. Cellular estimated loyalty reward points breakage based on actuarial estimates and recorded a $7.4 million change in estimate, which reduced Customer deposits and deferred revenues in the Consolidated Balance Sheet and increased Service revenues in the Consolidated Statement of Operations.

In the fourth quarter of 2013, U.S. Cellular issued loyalty reward points with a value of $43.5 million as a loyalty bonus in recognition of the inconvenience experienced by customers during U.S. Cellular's recent billing system conversion. The value of the loyalty bonus reduced Service revenues in the Consolidated Statement of Operations and increased Customer deposits and deferred revenues in the Consolidated Balance Sheet.

As of December 31, 2013 and 2012, U.S. Cellular had deferred revenue related to loyalty reward points outstanding of $116.2 million and $56.6million, respectively. These amounts are recorded in Customer deposits and deferred revenues (a current liability account) in the Consolidated Balance Sheet, as customers may redeem their reward points within the current period.

Cash-based discounts and incentives, including discounts to customers who pay their bills through the use of on-line bill payment methods, are recognized as a reduction of Operating revenues concurrently with the associated revenue, and are allocated to the various products and services in the bundled offering based on their respective relative selling price.

In order to provide better control over wireless device quality, U.S. Cellular sells wireless devices to agents. U.S. Cellular pays rebates to agents at the time an agent activates a new customer or retains an existing customer in a transaction involving a wireless device. U.S. Cellular accounts for these rebates by reducing revenues at the time of the wireless device sale to the agent rather than at the time the agent activates a new customer or retains a current customer. Similarly, U.S. Cellular offers certain wireless device sales rebates and incentives to its retail customers and records the revenue net of the corresponding rebate or incentive. The total potential rebates and incentives are reduced by U.S. Cellular's estimate of rebates that will not be redeemed by customers based on historical experience of such redemptions.

GAAP requires that activation fees charged with the sale of equipment and service be allocated to the equipment and service based upon the relative selling prices of each item. Device activation fees charged at agent locations, where U.S. Cellular does not also sell a wireless device to the customer, are deferred and recognized over the average device life. Device activation fees charged as a result of handset sales at Company-owned retail stores are recognized at the time the handset is delivered to the customer.

ETC revenues recognized in the reporting period represent the amounts which U.S. Cellular is entitled to receive for such period, as determined and approved in connection with U.S. Cellular's designation as an ETC in various states.

Amounts Collected from Customers and Remitted to Governmental Authorities

U.S. Cellular records amounts collected from customers and remitted to governmental authorities net within a tax liability account if the tax is assessed upon the customer and U.S. Cellular merely acts as an agent in collecting the tax on behalf of the imposing governmental authority. If the tax is assessed upon U.S. Cellular, then amounts collected from customers as recovery of the tax are recorded in Service revenues and amounts remitted to governmental authorities are recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations. The amounts recorded gross in revenues that are billed to customers and remitted to governmental authorities totaled $114.7 million, $135.7 million and $125.2 million for 2013, 2012 and 2011, respectively.

Advertising Costs

U.S. Cellular expenses advertising costs as incurred. Advertising costs totaled $199.9 million, $227.0million and $257.8 million in 2013, 2012 and 2011, respectively.

Income Taxes

U.S. Cellular is included in a consolidated federal income tax return with other members of the TDS consolidated group. TDS and U.S. Cellular are parties to a Tax Allocation Agreement which provides that U.S. Cellular and its subsidiaries be included with the TDS affiliated group in a consolidated federal income tax return and in state income or franchise tax returns in certain situations. For financial statement purposes, U.S. Cellular and its subsidiaries calculate their income, income taxes and credits as if they comprised a separate affiliated group. Under the Tax Allocation Agreement, U.S. Cellular remits its applicable income tax payments to TDS. U.S. Cellular had a tax payable balance with TDS of $34.8 million and $1.1 million as of December 31,2013 and 2012, respectively.

Deferred taxes are computed using the liability method, whereby deferred tax assets are recognized for future deductible temporary differences and operating loss carryforwards, and deferred tax liabilities are recognized for future taxable temporary differences. Both deferred tax assets and liabilities are measured using the tax rates anticipated to be in effect when the temporary differences reverse. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. U.S. Cellular evaluates income tax uncertainties, assesses the probability of the ultimate settlement with the applicable taxing authority and records an amount based on that assessment.

Stock-Based Compensation

U.S. Cellular has established a long-term incentive plan and a Non-Employee Director compensation plan, and previously had an employee stock purchase plan before this was terminated in the fourth quarter of 2011. Also, U.S. Cellular employees were eligible to participate in the TDS employee stock purchase plan before this was terminated in the fourth quarter of 2011. These plans are described more fully in Note 15—Stock-based Compensation. These plans are considered compensatory plans and, therefore, recognition of compensation cost for grants made under these plans is required.

U.S. Cellular values its share-based payment transactions using a Black-Scholes valuation model. Stock-based compensation cost recognized during the period is based on the portion of the share-based payment awards that are ultimately expected to vest. Accordingly, stock-based compensation cost recognized has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures and expected life are estimated based on historical experience related to similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. U.S. Cellular believes that its historical experience provides the best estimates of future pre-vesting forfeitures and future expected life. The expected volatility assumption is based on the historical volatility of U.S. Cellular's common stock over a period commensurate with the expected life. The dividend yield assumption is zero because U.S. Cellular has never paid a dividend, except a special cash dividend in June 2013, and has expressed its intention to retain all future earnings in the business. The risk-free interest rate assumption is determined using the U.S. Treasury Yield Curve Rate with a term length that approximates the expected life of the stock options.

The fair value of options is recognized as compensation cost over the respective requisite service period of the awards, which is generally the vesting period, on a straight-line basis for each separate vesting portion of the awards as if the awards were, in-substance, multiple awards (graded vesting attribution method).

Defined Contribution Plans

U.S. Cellular participates in a qualified noncontributory defined contribution pension plan sponsored by TDS; such plan provides pension benefits for the employees of U.S. Cellular and its subsidiaries. Under this plan, pension benefits and costs are calculated separately for each participant and are funded currently. Pension costs were $10.4 million, $12.4million and $11.6 million in 2013, 2012 and 2011, respectively.

U.S. Cellular also participates in a defined contribution retirement savings plan (“401(k) plan”) sponsored by TDS. Total costs incurred from U.S. Cellular's contributions to the 401(k) plan were $15.4 million, $17.1 million and $15.5 million in 2013, 2012 and 2011, respectively.

Operating Leases

U.S. Cellular is a party to various lease agreements for office space, retail stores, cell sites and equipment that are accounted for as operating leases. Certain leases have renewal options and/or fixed rental increases. Renewal options that are reasonably assured of exercise are included in determining the lease term. U.S. Cellular accounts for certain operating leases that contain rent abatements, lease incentives and/or fixed rental increases by recognizing lease revenue and expense on a straight-line basis over the lease term.

Recently Issued Accounting Pronouncements

On July 18, 2013, the FASB issued Accounting Standards Update 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryfoward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 addresses the presentation of an unrecognized tax benefit when a net operating loss carryforward or tax credit carryforward exists. In such event, an unrecognized tax benefit, or portion of an unrecognized tax benefit, would be presented in the Consolidated Balance Sheet as a reduction to deferred tax assets unless the net operating loss carryforward or tax credit carryforward at the reporting date is not available under the tax law of the applicable jurisdiction. U.S. Cellular is required to adopt the provisions of ASU 2013-11 effective January 1, 2014. The adoption of ASU 2013-11 is not expected to have a significant impact on U.S. Cellular's financial position or results of operations.

Variable Interest Entities

U.S. Cellular consolidates variable interest entities in which it has a controlling financial interest and is the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE. U.S. Cellular reviews these criteria initially at the time it enters into agreements and subsequently when reconsideration events occur.

Legal proceedings

U.S. Cellular is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts.  If U.S. Cellular believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss.  If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within that range is better than another, the low end of the range is accrued.  The assessment of the expected outcomes of legal proceedings is a highly subjective process that requires judgments about future events.  The legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financial statement disclosures.  The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements.

XML

Income Taxes, Unrecognized Tax Benefits (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Summary of unrecognized income tax benefits
Unrecognized tax benefit, beginning balance	$ 26,460,000	$ 28,745,000	$ 32,547,000
Additions for tax positions of current year	5,925,000	6,656,000	4,487,000
Additions for tax positions of prior years	1,501,000	854,000	332,000
Reductions for tax positions of prior years	(45,000)	(115,000)	(1,104,000)
Reductions for settlements of tax positions	(576,000)		(244,000)
Reductions for lapses in statutes of limitations	(4,452,000)	(9,680,000)	(7,273,000)
Unrecognized tax benefit, ending balance	28,813,000	26,460,000	28,745,000
Effect of unrecognized tax benefit on income tax expense	$ 18,700,000	$ 17,200,000	$ 18,700,000

XML

Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified					12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2013 6.7% Senior Notes	Dec. 31, 2012 6.7% Senior Notes	Dec. 31, 2013 Fair Value Level 1	Dec. 31, 2012 Fair Value Level 1	Dec. 31, 2013 Fair Value Level 1 6.95% Senior Notes	Dec. 31, 2012 Fair Value Level 1 6.95% Senior Notes	Dec. 31, 2013 Fair Value Level 2 6.7% Senior Notes	Dec. 31, 2012 Fair Value Level 2 6.7% Senior Notes	Dec. 31, 2013 Fair Value U.S. Treasury Notes Level 1	Dec. 31, 2012 Fair Value U.S. Treasury Notes Level 1	Dec. 31, 2013 Book Value	Dec. 31, 2012 Book Value	Dec. 31, 2013 Book Value 6.95% Senior Notes	Dec. 31, 2012 Book Value 6.95% Senior Notes	Dec. 31, 2013 Book Value 6.7% Senior Notes	Dec. 31, 2012 Book Value 6.7% Senior Notes	Dec. 31, 2013 Book Value U.S. Treasury Notes	Dec. 31, 2012 Book Value U.S. Treasury Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 342,065	$ 378,358	$ 424,155	$ 276,915			$ 342,065	$ 378,358							$ 342,065	$ 378,358
Short-term investments	50,104	100,676											50,104	100,676							50,104	100,676
Long-term investments		50,305												50,339								50,305
Long-term debt									$ 309,852	$ 376,610	$ 507,697	$ 582,744					$ 342,000	$ 342,000	$ 532,449	$ 532,194
Fair value assumption, interest rate					7.35%	6.09%

XML

Certain Relationships and Related Transactions (Details) (Sidley Austin LLP, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Sidley Austin LLP
Certain relationships and related transactions
Legal expense	$ 13.2	$ 10.7	$ 9.2
Description of related transaction	The following persons are partners of Sidley Austin LLP, the principal law firm of U.S. Cellular and its subsidiaries: Walter C.D. Carlson, a director of U.S. Cellular, a director and non-executive Chairman of the Board of Directors of TDS and a trustee and beneficiary of a voting trust that controls TDS; William S. DeCarlo, the General Counsel of TDS and an Assistant Secretary of TDS and certain subsidiaries of TDS; and Stephen P. Fitzell, the General Counsel of U.S. Cellular and TDS Telecommunications Corporation and an Assistant Secretary of U.S. Cellular and certain other subsidiaries of TDS. Walter C.D. Carlson does not provide legal services to TDS, U.S. Cellular or their subsidiaries.

XML

Variable Interest Entities VIEs (Tables)

12 Months Ended

Dec. 31, 2013

Variable Interest Entities VIEs

Consolidated VIE assets and liabilities

December 31,		2013		2012
(Dollars in thousands)
Assets
	Cash and cash equivalents	$	2,076	$	5,849
	Other current assets		1,184		120
	Licenses		310,475		308,091
	Property, plant and equipment, net		18,600		16,443
	Other assets and deferred charges		511		887
	Total assets	$	332,846	$	331,390
Liabilities
	Current liabilities	$	46	$	1,013
	Deferred liabilities and credits		3,139		3,024
	Total liabilities	$	3,185	$	4,037

XML

Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Earnings per share
Net income attributable to U.S. Cellular shareholders	$ 140,038	$ 111,006	$ 175,041
Weighted average number of shares used in basic earnings per share
Weighted average number of shares used in basic earnings per share	83,968	84,645	84,877
Effect of dilutive securities:
Stock options	211	184	224
Restricted stock units	551	401	347
Weighted average number of shares used in diluted earnings per share	84,730	85,230	85,448
Earnings per share, Other disclosures
Basic earnings per share attributable to U.S. Cellular shareholders	$ 1.67	$ 1.31	$ 2.06
Diluted earnings per share attributable to U.S. Cellular shareholders	$ 1.65	$ 1.30	$ 2.05
Dividend payable date	Jun. 25, 2013
Dividend date of record	Jun. 11, 2013
Series A Common and Common Shares, dividends per share paid	$ 5.75
Series A Common and Common Shares, dividends paid	$ 482,270
Stock Options
Earnings per share, Other disclosures
Antidilutive securities	2,010	2,123	1,591
Restricted Stock Units
Earnings per share, Other disclosures
Antidilutive securities	190	369	250

XML

Variable Interest Entities VIEs (Details) (USD $)	12 Months Ended				12 Months Ended
	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2013 Variable Interest Entities (VIE's)	Dec. 31, 2012 Variable Interest Entities (VIE's)
Assets
Cash and cash equivalents	$ 378,358,000	$ 342,065,000	$ 424,155,000	$ 276,915,000	$ 2,076,000	$ 5,849,000
Other current assets	16,745,000	19,538,000			1,184,000	120,000
Licenses	1,456,794,000	1,401,126,000			310,475,000	308,091,000
Property, plant and equipment, net	3,022,588,000	2,856,520,000			18,600,000	16,443,000
Other assets and deferred charges	78,250,000	117,735,000			511,000	887,000
Total assets					332,846,000	331,390,000
Liabilities
Current liabilities	754,999,000	1,006,173,000			46,000	1,013,000
Deferred liabilities and credits					3,139,000	3,024,000
Total liabilities					3,185,000	4,037,000
Capital contributions and advances	10,000,000
VIE put options					true
Put option exercisable dates					The limited partnership agreements of Aquinas Wireless and King Street Wireless also provide the general partner with a put option whereby the general partner may require the limited partner, a subsidiary of U.S. Cellular, to purchase its interest in the limited partnership.  The general partner’s put options related to its interests in King Street Wireless and Aquinas Wireless will become exercisable in 2019 and 2020, respectively.
Noncontrolling interests with redemption features	$ 493,000	$ 536,000

XML

Debt, Revolving Credit Facilities (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012	Dec. 31, 2011
Revolving credit
Subordination agreement description	In connection with U.S. Cellular’s revolving credit facility, TDS and U.S. Cellular entered into a subordination agreement dated December 17, 2010 together with the administrative agent for the lenders under U.S. Cellular’s revolving credit agreement. Pursuant to this subordination agreement, (a) any consolidated funded indebtedness from U.S. Cellular to TDS will be unsecured and (b) any (i) consolidated funded indebtedness from U.S. Cellular to TDS (other than “refinancing indebtedness” as defined in the subordination agreement) in excess of $105,000,000, and (ii) refinancing indebtedness in excess of $250,000,000, will be subordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under U.S. Cellular’s revolving credit agreement. As of December 31, 2013, U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the revolving credit agreement pursuant to the subordination agreement.
U.S. Cellular revolving credit facility
Revolving credit
Maximum borrowing capacity	$ 300.0
Letters of credit outstanding	17.6	[1]
Amount available for use	282.4
LIBOR	0.17%	[2]
Contractual spread	1.50%	[2]
Borrowing rate: One-month London InterBank Offered Rate ("LIBOR") plus contractual spread	1.67%	[2]
Fees incurred as a percent of Maximum borrowing capacity for 2013	0.25%
Fees incurred, amount	0.8		1.1	1.2
Agreement date	Dec. 17, 2010
Maturity date	Dec. 17, 2017
Borrowing rate description	Borrowings under the revolving credit facility bear interest at LIBOR plus a contractual spread based on U.S. Cellular’s credit rating or, at U.S. Cellular’s option, an alternate “Base Rate” as defined in the revolving credit agreement. U.S. Cellular may select a borrowing period of either one, two, three or six months (or other period of twelve months or less if requested by U.S. Cellular and approved by the lenders). If U.S. Cellular provides notice of intent to borrow less than three business days in advance of a borrowing, interest on borrowing is at the Base Rate plus the contractual spread.
Debt issuance costs, net of accumulated amortization	2.7
U.S. Cellular revolving credit facility | Letters of credit to the FCC
Revolving credit
Letters of credit outstanding	$ 17.4
U.S. Cellular revolving credit facility | Minimum
Revolving credit
Range of commitment fees on amount available for use	0.13%	[3]
U.S. Cellular revolving credit facility | Maximum
Revolving credit
Range of commitment fees on amount available for use	0.30%	[3]

[1] In June 2013, U.S. Cellular provided $17.4 million in letters of credit to the FCC in connection with U.S. Cellular's winning bids in Auction 901. See Note 16 — Supplemental Cash Flow Disclosures for additional information on Auction 901.

[2] Borrowings under the revolving credit facility bear interest at LIBOR plus a contractual spread based on U.S. Cellular’s credit rating or, at U.S. Cellular’s option, an alternate “Base Rate” as defined in the revolving credit agreement. U.S. Cellular may select a borrowing period of either one, two, three or six months (or other period of twelve months or less if requested by U.S. Cellular and approved by the lenders). If U.S. Cellular provides notice of intent to borrow less than three business days in advance of a borrowing, interest on borrowing is at the Base Rate plus the contractual spread.

[3] The revolving credit facility has commitment fees based on the unsecured senior debt ratings assigned to U.S. Cellular by certain ratings agencies.

XML

Income Taxes, Components of Deferred Income Tax (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Components Of Deferred Tax Assets And Liabilities Abstract
Net current deferred income tax asset	$ 99,105	$ 35,419
Noncurrent deferred income tax assets
Net operating loss ("NOL") carryforwards	61,294	63,240
Stock-based compensation	19,028	22,411
Compensation and benefits, other	3,746	13,673
Deferred rent	19,462	15,822
Other	24,604	25,432
Gross noncurrent deferred income tax assets	128,134	140,578
Deferred tax assets valuation allowance noncurrent	(40,392)	(40,208)
Total noncurrent deferred tax assets	87,742	100,370
Noncurrent deferred income tax liabilities
Property, plant and equipment	503,491	527,547
Licenses/intangibles	282,764	294,738
Partnership investments	133,931	124,221
Other	3,853	3,682
Total noncurrent deferred tax liabilities	924,039	950,188
Net noncurrent deferred income tax liability	$ 836,297	$ 849,818

XML

Income Taxes

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Income Taxes

NOTE 3 INCOME TAXES

U.S. Cellular'sincome taxesbalancesat December 31, 2013 and 2012 were as follows:

December 31,	2013		2012
(Dollars in thousands)
Federal income taxes (payable)	$	(32,351)	$	(1,614)
State income taxes receivable (payable)		(1,545)		1,612

Income tax expense (benefit) is summarized as follows:
Year Ended December 31,		2013		2012		2011
(Dollars in thousands)
Current
	Federal	$	180,056	$	10,547	$	(90,235)
	State		8,426		4,186		1,049
Deferred
	Federal		(69,917)		54,490		187,581
	State		(5,431)		(5,246)		15,683
		$	113,134	$	63,977	$	114,078

A reconciliation of U.S. Cellular's income tax expense computed at the statutory rate to the reported income tax expense, and the statutory federal income tax expense rate to U.S. Cellular's effective income tax expense rate is as follows:

Year Ended December 31,		2013				2012				2011
		Amount		Rate		Amount		Rate		Amount		Rate
(Dollars in millions)
Statutory federal income tax expense and rate		$	90.2	35.0	%	$	71.8	35.0	%	$	109.5	35.0	%
State income taxes, net of federal benefit (1)			5.2	2.0			3.7	1.8			4.5	1.4
Effect of noncontrolling interests			(2.2)	(0.9)			(6.3)	(3.1)			(4.9)	(1.6)
Gains (losses) on investments and sale of assets (2)			20.5	8.0			-	-			-	-
Correction of deferred taxes (3)			-	-			(5.3)	(2.6)			6.1	2.0
Other differences, net			(0.6)	(0.2)			0.1	0.1			(1.1)	(0.3)
Total income tax expense and rate		$	113.1	43.9	%	$	64.0	31.2	%	$	114.1	36.5	%
(1)	Net state income taxes include changes in the valuation allowance. In addition, state tax benefits related to the settlement of state tax audits and the expiration of statutes of limitations are included in 2013, 2012 and 2011.
(2)	Represents 2013 tax expense related to the NY1 & NY2 Deconsolidation and the Divestiture Transaction.
(3)	U.S. Cellular recorded immaterial adjustments to correct deferred tax balances in 2012 and 2011 related to tax basis and law changes that related to periods prior to 2012 and 2011, respectively.

U.S. Cellular's current Net deferred income tax asset totaled $99.1million and $35.4 million at December 31, 2013 and 2012, respectively, and primarily representsthe deferred tax effects of the deferred revenue for the loyalty reward points, the allowance for doubtful accounts on customer receivables and accrued liabilities.

U.S. Cellular’s noncurrent deferred income tax assets and liabilities at December 31, 2013 and 2012 and the temporary differences that gave rise to them were as follows:
December 31,		2013		2012
(Dollars in thousands)
Noncurrent deferred tax assets
	Net operating loss (“NOL”) carryforwards	$	61,294	$	63,240
	Stock-based compensation		19,028		22,411
	Compensation and benefits - other		3,746		13,673
	Deferred rent		19,462		15,822
	Other		24,604		25,432
			128,134		140,578
	Less valuation allowance		(40,392)		(40,208)
	Total noncurrent deferred tax assets		87,742		100,370
Noncurrent deferred tax liabilities
	Property, plant and equipment		503,491		527,547
	Licenses/intangibles		282,764		294,738
	Partnership investments		133,931		124,221
	Other		3,853		3,682
	Total noncurrent deferred tax liabilities		924,039		950,188
Net noncurrent deferred income tax liability		$	836,297	$	849,818

At December 31, 2013, U.S. Cellular and certain subsidiaries had $1,149.4million of state NOL carryforwards (generating a $51.1million deferred tax asset) available to offset future taxable income. The state NOL carryforwards expire between 2014and 2033.Certain subsidiaries had federal NOL carryforwards (generating a $10.2million deferred tax asset) available to offset their future taxable income. The federal NOL carryforwards expire between 2018 and 2033. A valuation allowance was established for certain state NOL carryforwards and federal NOL carryforwards since it is more likely than not that a portion of such carryforwards will expire before they can be used.

A summary of U.S. Cellular’s deferred tax asset valuation allowance is as follows:
		2013		2012		2011
(Dollars in thousands)
Balance at January 1,		$	41,295	$	30,261	$	29,891
	Charged to income tax expense		(1,527)		3,033		(1,450)
	Charged to other accounts		3,607		8,001		1,820
Balance at December 31,		$	43,375	$	41,295	$	30,261
As of December 31, 2013, the valuation allowance reduced current deferred tax assets by $3.0 million and noncurrent deferred tax assets by $40.4 million.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
		2013		2012		2011
(Dollars in thousands)
Unrecognized tax benefits balance at January 1,		$	26,460	$	28,745	$	32,547
	Additions for tax positions of current year		5,925		6,656		4,487
	Additions for tax positions of prior years		1,501		854		332
	Reductions for tax positions of prior years		(45)		(115)		(1,104)
	Reductions for settlements of tax positions		(576)		-		(244)
	Reductions for lapses in statutes of limitations		(4,452)		(9,680)		(7,273)
Unrecognized tax benefits balance at December 31,		$	28,813	$	26,460	$	28,745

Unrecognized tax benefits are included in Accrued taxes and Other deferred liabilities and credits in the Consolidated Balance Sheet. If these benefits were recognized, they would have reduced income tax expense in 2013, 2012and2011by $18.7 million, $17.2 million and $18.7million, respectively, net of the federal benefit from state income taxes.As of December 31, 2013, U.S. Cellular does not expect unrecognized tax benefits to change significantly in the next twelve months.

U.S. Cellular recognizes accrued interest and penalties related to unrecognized tax benefits in Income tax expense. The amounts charged to Income tax expense related to interest and penalties resulted in an expense of $0.6 million in 2013, and a benefit of $2.2 million and $2.6 million in2012 and2011, respectively. Net accrued interest and penalties were $12.3 million and $12.8 million at December 31, 2013 and 2012, respectively.

U.S. Cellular is included in TDS' consolidated federal income tax return. U.S. Cellular also files various state and local income tax returns. The TDS consolidated group remains subject to federal income tax audits for the tax years after 2011. With only a few exceptions, TDS is no longer subject to state income tax audits for years prior to 2009.

XML

Debt, Fixed Rate Debt (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Long term debt
Debt issuance cost	$ 16,300,000
Obligation on capital leases	3,749,000	4,756,000
Total long-term debt	878,198,000	878,950,000
Long-term debt, current	166,000	92,000
Long-term debt, noncurrent	878,032,000	878,858,000
6.95% Senior Notes
Long term debt
Interest rate on debt	6.95%
Date of debt issuance	May 09, 2011
Maturity date of debt issued	May 15, 2060
Call date of debt issued	May 15, 2016
Long term debt	342,000,000	342,000,000
6.7% Senior Notes
Long term debt
Interest rate on debt	6.70%
Maturity date of debt issued	Dec. 15, 2033
Call date of debt issued	Dec. 31, 2003
Long term debt, face value	544,000,000	544,000,000
Unamortized discount	(11,551,000)	(11,806,000)
Long term debt	$ 532,449,000	$ 532,194,000
6.7% Senior Notes | Minimum
Long term debt
Date of debt issuance	Dec. 15, 2003
6.7% Senior Notes | Maximum
Long term debt
Date of debt issuance	Jun. 15, 2004

XML

Income Taxes, Receivable (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Income Tax Disclosure
Income taxes receivable		$ 1,612
State
Income Tax Disclosure
Income taxes receivable		1,612
Income taxes (payable)	(1,545)
Federal
Income Tax Disclosure
Income taxes (payable)	$ (32,351)	$ (1,614)

XML

Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2013

Earnings Per Share

Earnings per share

Year ended December 31,		2013		2012		2011
(Dollars and shares in thousands, except earnings per share)
Net income attributable to U.S. Cellular shareholders		$	140,038	$	111,006	$	175,041
Weighted average number of shares used in basic earnings per share			83,968		84,645		84,877
Effect of dilutive securities:
	Stock options		211		184		224
	Restricted stock units		551		401		347
Weighted average number of shares used in diluted earnings per share			84,730		85,230		85,448
Basic earnings per share attributable to U.S. Cellular shareholders		$	1.67	$	1.31	$	2.06
Diluted earnings per share attributable to U.S. Cellular shareholders		$	1.65	$	1.30	$	2.05

Summary of antidilutive shares

Year Ended December 31,	2013	2012	2011
(Shares in thousands)
Stock options	2,010	2,123	1,591
Restricted stock units	190	369	250

XML

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure

Income taxes receivable

December 31,	2013		2012
(Dollars in thousands)
Federal income taxes (payable)	$	(32,351)	$	(1,614)
State income taxes receivable (payable)		(1,545)		1,612

Income tax expense

Income tax expense (benefit) is summarized as follows:
Year Ended December 31,		2013		2012		2011
(Dollars in thousands)
Current
	Federal	$	180,056	$	10,547	$	(90,235)
	State		8,426		4,186		1,049
Deferred
	Federal		(69,917)		54,490		187,581
	State		(5,431)		(5,246)		15,683
		$	113,134	$	63,977	$	114,078

Income tax reconciliation

Year Ended December 31,		2013				2012				2011
		Amount		Rate		Amount		Rate		Amount		Rate
(Dollars in millions)
Statutory federal income tax expense and rate		$	90.2	35.0	%	$	71.8	35.0	%	$	109.5	35.0	%
State income taxes, net of federal benefit (1)			5.2	2.0			3.7	1.8			4.5	1.4
Effect of noncontrolling interests			(2.2)	(0.9)			(6.3)	(3.1)			(4.9)	(1.6)
Gains (losses) on investments and sale of assets (2)			20.5	8.0			-	-			-	-
Correction of deferred taxes (3)			-	-			(5.3)	(2.6)			6.1	2.0
Other differences, net			(0.6)	(0.2)			0.1	0.1			(1.1)	(0.3)
Total income tax expense and rate		$	113.1	43.9	%	$	64.0	31.2	%	$	114.1	36.5	%
(1)	Net state income taxes include changes in the valuation allowance. In addition, state tax benefits related to the settlement of state tax audits and the expiration of statutes of limitations are included in 2013, 2012 and 2011.
(2)	Represents 2013 tax expense related to the NY1 & NY2 Deconsolidation and the Divestiture Transaction.
(3)	U.S. Cellular recorded immaterial adjustments to correct deferred tax balances in 2012 and 2011 related to tax basis and law changes that related to periods prior to 2012 and 2011, respectively.

Temporary income tax differences

U.S. Cellular’s noncurrent deferred income tax assets and liabilities at December 31, 2013 and 2012 and the temporary differences that gave rise to them were as follows:
December 31,		2013		2012
(Dollars in thousands)
Noncurrent deferred tax assets
	Net operating loss (“NOL”) carryforwards	$	61,294	$	63,240
	Stock-based compensation		19,028		22,411
	Compensation and benefits - other		3,746		13,673
	Deferred rent		19,462		15,822
	Other		24,604		25,432
			128,134		140,578
	Less valuation allowance		(40,392)		(40,208)
	Total noncurrent deferred tax assets		87,742		100,370
Noncurrent deferred tax liabilities
	Property, plant and equipment		503,491		527,547
	Licenses/intangibles		282,764		294,738
	Partnership investments		133,931		124,221
	Other		3,853		3,682
	Total noncurrent deferred tax liabilities		924,039		950,188
Net noncurrent deferred income tax liability		$	836,297	$	849,818

Deferred tax valuation allowance

A summary of U.S. Cellular’s deferred tax asset valuation allowance is as follows:
		2013		2012		2011
(Dollars in thousands)
Balance at January 1,		$	41,295	$	30,261	$	29,891
	Charged to income tax expense		(1,527)		3,033		(1,450)
	Charged to other accounts		3,607		8,001		1,820
Balance at December 31,		$	43,375	$	41,295	$	30,261
As of December 31, 2013, the valuation allowance reduced current deferred tax assets by $3.0 million and noncurrent deferred tax assets by $40.4 million.

Income tax unrecognized benefits summary

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
		2013		2012		2011
(Dollars in thousands)
Unrecognized tax benefits balance at January 1,		$	26,460	$	28,745	$	32,547
	Additions for tax positions of current year		5,925		6,656		4,487
	Additions for tax positions of prior years		1,501		854		332
	Reductions for tax positions of prior years		(45)		(115)		(1,104)
	Reductions for settlements of tax positions		(576)		-		(244)
	Reductions for lapses in statutes of limitations		(4,452)		(9,680)		(7,273)
Unrecognized tax benefits balance at December 31,		$	28,813	$	26,460	$	28,745

XML

Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Licenses
Balance, beginning of period	$ 1,456,794	$ 1,470,769
Acquisitions	16,540	122,690
Divestitures	(59,419)
Transferred to Assets held for sale	(16,027)	(140,599)
Other	3,238	3,934
Balance, end of period	1,401,126	1,456,794
Goodwill
Assigned value at time of acquisition	494,737	494,737
Transferred to Assets held for sale	(72,994)
Balance, beginning of period	421,743	494,737
Divestitures	(505)
Transferred to Assets held for sale		(72,994)
NY1 & NY2 Deconsolidation	(33,714)
Balance, end of period	$ 387,524	$ 421,743

XML

Income Taxes, Expense (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income tax expense
Current federal income tax expense	$ 180,056	$ 10,547	$ (90,235)
Current state income tax expense	8,426	4,186	1,049
Deferred federal income tax expense	(69,917)	54,490	187,581
Deferred state income tax expense	(5,431)	(5,246)	15,683
Total income tax expense	$ 113,134	$ 63,977	$ 114,078

XML

Acquisitions, Divestitures and Exchanges (Tables)

12 Months Ended

Dec. 31, 2013

Business Combination

Acquisitions, Divestitures and Exchanges

U.S. Cellular acquisitions in 2013 and 2012 and the allocation of the purchase price for these acquisitions were as follows:
			Allocation of Purchase Price
(Dollars in thousands)	Purchase Price		Goodwill		Licenses		Intangible Assets Subject to Amortization		Net Tangible Assets/(Liabilities)
2013
Licenses	$	16,540	$	-	$	16,540	$	-	$	-
2012
Licenses	$	122,690	$	-	$	122,690	$	-	$	-

Divestiture Financial Impacts

Business divestiture financial impacts

(Dollars in thousands)			Expected Period of Recognition	Projected Range				Cumulative Amount Recognized as of December 31, 2013		Actual Amount Recognized Year Ended December 31, 2013		Actual Amount Recognized Three Months Ended December 31, 2013		Actual Amount Recognized Three Months and Year Ended December 31, 2012
(Gain) loss on sale of business and other exit costs, net
	Proceeds from Sprint
		Purchase price	2013	$	(480,000)	$	(480,000)	$	(480,000)	$	(480,000)	$	-	$	-
		Sprint Cost Reimbursement	2013-2014		(120,000)		(175,000)		(47,641)		(47,641)		(43,420)		-
	Net assets transferred		2013		213,593		213,593		213,593		213,593		-		-
	Non-cash charges for the write-off and write-down of property under construction and related assets		2012-2014		10,000		14,000		10,675		3		(51)		10,672
	Employee related costs including severance, retention and outplacement		2012-2014		12,000		18,000		14,262		1,653		(809)		12,609
	Contract termination costs		2012-2014		110,000		160,000		59,584		59,525		40,744		59
	Transaction costs		2012-2014		5,000		6,000		5,565		4,428		347		1,137
		Total (Gain) loss on sale of business and other exit costs, net		$	(249,407)	$	(243,407)	$	(223,962)	$	(248,439)	$	(3,189)	$	24,477
Depreciation, amortization and accretion expense
	Incremental depreciation, amortization and accretion, net of salvage values		2012-2014		200,000		225,000		198,571		178,513		44,513		20,058
(Increase) decrease in Operating income				$	(49,407)	$	(18,407)	$	(25,391)	$	(69,926)	$	41,324	$	44,535

As a result of the transaction, U.S. Cellular recognized the following amounts in the Consolidated Balance Sheet:
				Year Ended December 31, 2013
(Dollars in thousands)		Balance December 31, 2012		Costs Incurred		Cash Settlements (1)		Adjustments (2)		Balance December 31, 2013
Accrued compensation
	Employee related costs including severance, retention, outplacement	$	12,305	$	6,853	$	(11,905)	$	(5,200)	$	2,053
Other current liabilities
	Contract termination costs	$	30	$	22,675	$	(8,713)	$	-	$	13,992
Other deferred liabilities and credits
	Contract termination costs	$	-	$	34,283	$	(3,434)	$	-	$	30,849
				Year Ended December 31, 2012
(Dollars in thousands)		Balance November 6, 2012		Costs Incurred		Cash Settlements (1)		Adjustments (2)		Balance December 31, 2012
Accrued compensation
	Employee related costs including severance, retention, outplacement	$	-	$	12,609	$	(304)	$	-	$	12,305
Other current liabilities
	Contract termination costs	$	-	$	59	$	(29)	$	-	$	30
(1)	Cash settlement amounts are included in either the Net income or changes in Other assets and liabilities line items as part of Cash flows from operating activities on the Consolidated Statement of Cash Flows.
(2)	Adjustment to liability represents changes to previously accrued amounts.

Assets and liabilities held for sale

At December 31, 2013 and 2012, the following assets and liabilities were classified in the Consolidated Balance Sheet as "Assets held for sale" and "Liabilities held for sale":
			Current Assets		Licenses		Goodwill		Property, Plant and Equipment		Loss on Assets Held for Sale (1)		Total Assets Held for Sale		Liabilities Held for Sale (2)
(Dollars in thousands)
2013
Divestiture of Spectrum Licenses			$	-	$	16,027	$	-	$	-	$	-	$	16,027	$	-
2012
Divestiture Transaction			$	-	$	140,599	$	72,994	$	-	$	-	$	213,593	$	19,594
Bolingbrook Customer Care Center (3)				-		-		-		4,275		(1,105)		3,170		-
	Total		$	-	$	140,599	$	72,994	$	4,275	$	(1,105)	$	216,763	$	19,594
(1)		Loss on assets held for sale was recorded in (Gain) loss on sale of business and other exit costs, net in the Consolidated Statement of Operations.
(2)		Liabilities held for sale primarily consisted of Customer deposits and deferred revenues.
(3)		Effective January 1, 2013, U.S. Cellular transferred its Bolingbrook Customer Care Center operations to an existing third party vendor.

XML

Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2013

Licenses

Licenses

Licenses
Year Ended December 31,	2013		2012
(Dollars in thousands)
Balance, beginning of year	$	1,456,794	$	1,470,769
Acquisitions		16,540		122,690
Divestitures		(59,419)		-
Transferred to Assets held for sale		(16,027)		(140,599)
Other		3,238		3,934
Balance, end of year	$	1,401,126	$	1,456,794

Goodwill

Goodwill

Goodwill
Year Ended December 31,		2013		2012
(Dollars in thousands)
Assigned value at time of acquisition		$	494,737	$	494,737
	Accumulated impairment losses in prior periods		-		-
	Transferred to Assets held for sale		(72,994)		-
Balance, beginning of year			421,743		494,737
	Divestitures		(505)		-
	Transferred to Assets held for sale		-		(72,994)
	NY1 & NY2 Deconsolidation		(33,714)		-
Balance, end of year		$	387,524	$	421,743

XML

Fair Value Measurements

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Fair Value Measurements

NOTE 2FAIR VALUE MEASUREMENTS

As of December 31, 2013 and 2012,U.S. Cellular did not have any financial assets or liabilities that were required to be recorded at fair value in its Consolidated Balance Sheet in accordance with GAAP. However, U.S. Cellular has applied the provisions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayed below.

			December 31, 2013				December 31, 2012
		Level within the Fair Value Hierarchy	Book Value			Fair Value	Book Value		Fair Value
(Dollars in thousands)
Cash and cash equivalents		1	$	342,065	$	342,065	$	378,358	$	378,358
Short-term investments
	U.S. Treasury Notes	1		50,104		50,104		100,676		100,676
Long-term investments
	U.S. Treasury Notes	1		-		-		50,305		50,339
Long-term debt
	6.95% Senior Notes	1		342,000		309,852		342,000		376,610
	6.7% Senior Notes	2		532,449		507,697		532,194		582,744

Short-term investments are designated as held-to-maturity investments and recorded at amortized cost in the Consolidated Balance Sheet. Long-term debt excludes capital lease obligations and the current portion of Long-term debt.

The fair values of Cash and cash equivalents and Short-term investments approximate their book values due to the short-term nature of these financial instruments. The fair values of Long-term investments were estimated using quoted market prices for the individual issuances. The fair value of Long-term debt was estimated using market prices for the 6.95% Senior Notes, and discounted cash flow analysis using an estimated yield to maturity of 7.35% and 6.09%for the 6.7% Senior Notes at December 31,2013 and 2012, respectively.

As of December 31, 2013 and 2012, U.S. Cellular did not have nonfinancial assets or liabilities that required the application of fair value accounting for purposes of reporting such amounts in the Consolidated Balance Sheet.

XML

Investment in Unconsolidated Entities (Tables)

12 Months Ended

Dec. 31, 2013

Equity Method Investment, Summarized Financial Information

Equity and cost method investments

December 31,		2013		2012
(Dollars in thousands)
Equity method investments:
	Capital contributions, loans, advances and adjustments	$	121,571	$	10,323
	Cumulative share of income		1,152,916		1,017,449
	Cumulative share of distributions		(1,010,513)		(884,852)
			263,974		142,920
Cost method investments			1,611		1,611
Total investments in unconsolidated entities		$	265,585	$	144,531

Equity method investments, summarized financial position

December 31,		2013		2012
(Dollars in thousands)
Assets
	Current	$	489,659	$	444,100
	Due from affiliates		408,735		298,707
	Property and other		2,026,104		1,896,784
		$	2,924,498	$	2,639,591
Liabilities and Equity
	Current liabilities	$	351,624	$	350,067
	Deferred credits		84,834		80,660
	Long-term liabilities		19,712		21,328
	Long-term capital lease obligations		707		405
	Partners' capital and shareholders' equity		2,467,621		2,187,131
		$	2,924,498	$	2,639,591

Equity method investments, summarized results of operations

Year Ended December 31,		2013		2012		2011
(Dollars in thousands)
Results of Operations
	Revenues	$	6,218,067	$	5,804,466	$	5,519,024
	Operating expenses		4,473,722		4,363,399		4,282,277
	Operating income		1,744,345		1,441,067		1,236,747
	Other income, net		4,842		4,003		4,976
	Net income	$	1,749,187	$	1,445,070	$	1,241,723

Fair Value Key Assumptions

Key assumptions
Average expected revenue growth rate (next ten years)	2.0	%
Terminal revenue growth rate (after year ten)	2.0	%
Discount rate	10.5	%
Capital expenditures as a percentage of revenue	14.9-18.8	%

XML

Supplemental Cash Flow Disclosures (Table)

12 Months Ended

Dec. 31, 2013

Supplemental Cash Flow Disclosures

Supplemental cash flow disclosures

Year Ended December 31,	2013		2012		2011
(Dollars in thousands)
Interest paid	$	42,904	$	44,048	$	55,580
Income taxes paid (refunded)	$	157,778	$	(58,609)	$	(54,469)

Year Ended December 31,	2013		2012		2011
(Dollars in thousands)
Common Shares withheld		606,582		92,846		120,250
Aggregate value of Common Shares withheld	$	25,179	$	3,604	$	5,952
Cash receipts upon exercise of stock options		10,468		900		5,447
Cash disbursements for payment of taxes		(4,684)		(3,105)		(3,512)
Net cash receipts (disbursements) from exercise of stock options and vesting of other stock awards	$	5,784	$	(2,205)	$	1,935

XML

Acquisitions, Divestitures and Exchanges, acquisitions (Details) (USD $)			12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Business Acquisitions	Dec. 31, 2011 Business Acquisitions	Dec. 31, 2013 License Acquisitions	Dec. 31, 2012 License Acquisitions	Dec. 31, 2013 License Acquisitions 700 MHz Acquisition 1	Dec. 31, 2012 License Acquisitions 700 MHz Acquisition 1	Dec. 31, 2013 License Acquisitions 700 MHz Acquisition 2	Dec. 31, 2012 License Acquisitions 700 MHz Acquisition 2
Acquisitions, divestitures and exchanges
Licenses	$ 1,401,126,000	$ 1,456,794,000			$ 16,540,000	$ 122,690,000		$ 34,000,000		$ 57,700,000
Purchase price				24,600,000	16,540,000	122,690,000
Date of acquisition				May 09, 2011				Aug. 15, 2012		Nov. 20, 2012
Description of acquired entity			On May 9, 2011, pursuant to certain required terms of the partnership agreement, U.S. Cellular paid $24.6 million in cash to purchase the remaining ownership interest in this wireless market in which it previously held a 49% noncontrolling interest. In connection with the acquisition of the remaining interest, a $13.4 million gain was recorded to adjust the carrying value of this 49% investment to its fair value of $25.7 million based on an income approach valuation method.  The gain was recorded in Gain (loss) on investments in the Consolidated Statement of Operations in 2011.				On August 15, 2012, U.S. Cellular acquired four 700 MHz licenses covering portions of Iowa, Kansas, Missouri, Nebraska and Oklahoma for $34.0 million.		On November 20, 2012, U.S. Cellular acquired seven 700 MHz licenses covering portions of Illinois, Michigan, Minnesota, Missouri, Nebraska, Oregon, Washington and Wisconsin for $57.7 million.
Fair value equity investment prior to acquisition				25,700,000
Gain on equity investment remeasurement				$ 13,400,000
Ownership interest in equity method investment				49.00%
Valuation technique			income approach valuation method

XML

Stock-Based Compensation Nonvested Shares and Other (Details) (Common Shares, USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
2005 and 2013 Long-Term Incentive Plans | Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested [Roll Forward]
Nonvested stock units, begin of period - Number of shares	1,139,000
Granted number of shares	601,000
Vested number of shares	(238,000)
Forfeited number of shares	(332,000)
Nonvested stock units, end of period - Number of shares	1,170,000	1,139,000
Stock based compensation, Nonvested shares weighted average grant date fair value
Nonvested stock units - begin of period weighted average grant date fair value	$ 38.40
Granted weighted average grant date fair value	$ 32.06	$ 34.09	$ 42.33
Vested weighted average grant date fair value	$ 42.26
Forfeited weighted average grant date fair value	$ 35.63
Nonvested stock units - end of period weighted average grant date fair value	$ 36.46	$ 38.40
Fair value of vested stock units	$ 8.8	$ 8.9	$ 9.5
2005 and 2013 Long-Term Incentive Plans | Deferred Compensation Stock Units
Stock based compensation, Nonvested shares weighted average grant date fair value
Granted weighted average grant date fair value	$ 31.50	$ 36.34	$ 41.79
Fair value of vested stock units	0.1	0.1	0.1
Shares issued and granted under stock compensation plans
Vested number of shares, unissued	12,000
Vested number of shares, unissued, fair value	$ 0.5
Non-Employee Directors' Plan
Shares issued and granted under stock compensation plans
Shares issued	13,000	7,600	6,600

XML

Consolidated Statement Of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Operating revenues
Service	$ 3,594,773	$ 4,098,856	$ 4,053,797
Equipment sales	324,063	353,228	289,549
Total operating revenues	3,918,836	4,452,084	4,343,346
Operating expenses
System operations (excluding Depreciation, amortization and accretion reported below)	763,435	946,805	929,379
Cost of equipment sold	999,000	935,947	791,802
Selling, general and administrative (including charges from affiliates of $99.2 million, $104.3 million and $104.1 million in 2013, 2012 and 2011)	1,677,395	1,764,933	1,769,701
Depreciation, amortization and accretion	803,781	608,633	573,557
(Gain) loss on asset disposals, net	30,606	18,088	9,889
(Gain) loss on sale of business and other exit costs, net	(246,767)	21,022
(Gain) loss on license sales and exchanges	(255,479)		(11,762)
Total operating expenses	3,771,971	4,295,428	4,062,566
Operating income	146,865	156,656	280,780
Investment and other income (expense)
Equity in earnings of unconsolidated entities	131,949	90,364	83,566
Interest and dividend income	3,961	3,644	3,395
Gain (loss) on investments	18,556	(3,718)	11,373
Interest expense	(43,963)	(42,393)	(65,614)
Other, net	288	500	(678)
Total investment and other income (expense)	110,791	48,397	32,042
Income before income taxes	257,656	205,053	312,822
Income tax expense	113,134	63,977	114,078
Net income	144,522	141,076	198,744
Less: Net income attributable to noncontrolling interests, net of tax	4,484	30,070	23,703
Net income attributable to U.S. Cellular shareholders	$ 140,038	$ 111,006	$ 175,041
Basic weighted average shares outstanding	83,968	84,645	84,877
Basic earnings per share attributable to U.S. Cellular shareholders	$ 1.67	$ 1.31	$ 2.06
Diluted weighted average shares outstanding	84,730	85,230	85,448
Diluted earnings per share attributable to U.S. Cellular shareholders	$ 1.65	$ 1.30	$ 2.05
Special dividend per share to U.S. Cellular shareholders	$ 5.75

XML

Income Taxes, Expense Reconciliation (Details) (USD $)	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Income tax expense reconciliation
Statutory federal income tax expense	$ 90,200,000		$ 71,800,000		$ 109,500,000
State income taxes, net of federal benefit	5,200,000	[1]	3,700,000	[1]	4,500,000	[1]
Effect of noncontrolling interests	(2,200,000)		(6,300,000)		(4,900,000)
Gains (losses) on investments sales of assets	20,500,000	[2]
Correction of deferred taxes			(5,300,000)	[3]	6,100,000	[3]
Other differences, net	(600,000)		100,000		(1,100,000)
Total income tax expense	$ 113,134,000		$ 63,977,000		$ 114,078,000

[1] Net state income taxes include changes in the valuation allowance. In addition, state tax benefits related to the settlement of state tax audits and the expiration of statutes of limitations are included in 2013, 2012 and 2011.

[2] Represents 2013 tax expense related to the NY1 & NY2 Deconsolidation and the Divestiture Transaction.

[3] U.S. Cellular recorded immaterial adjustments to correct deferred tax balances in 2012 and 2011 related to tax basis and law changes that related to periods prior to 2012 and 2011, respectively.

XML

Consolidated Statement of Changes in Equity (USD $) In Thousands, unless otherwise specified	Total	Series A Common and Common Shares	Additional Paid-In Capital	Treasury Shares	Retained Earnings	Total U.S. Cellular Shareholders' Equity	Noncontrolling Interests
Beginning balance at Dec. 31, 2010	$ 3,539,970	$ 88,074	$ 1,368,487	$ (105,616)	$ 2,135,507	$ 3,486,452	$ 53,518
Add (Deduct)
Net income attributable to U.S. Cellular shareholders	175,041				175,041	175,041
Net income attributable to noncontrolling interests classified as equity	23,532						23,532
Repurchase of Common Shares	(62,294)			(62,294)		(62,294)
Incentive and compensation plans	1,965		57	15,093	(13,185)	1,965
Stock-based compensation awards	20,183		20,183			20,183
Tax windfall (shortfall) from stock awards	(1,386)		(1,386)			(1,386)
Distributions to noncontrolling interests	(21,094)						(21,094)
Ending balance at Dec. 31, 2011	3,675,917	88,074	1,387,341	(152,817)	2,297,363	3,619,961	55,956
Add (Deduct)
Net income attributable to U.S. Cellular shareholders	111,006				111,006	111,006
Net income attributable to noncontrolling interests classified as equity	30,019						30,019
Repurchase of Common Shares	(20,045)			(20,045)		(20,045)
Incentive and compensation plans	(2,042)		137	7,138	(9,317)	(2,042)
Stock-based compensation awards	21,249		21,249			21,249
Tax windfall (shortfall) from stock awards	(1,518)		(1,518)			(1,518)
Distributions to noncontrolling interests	(22,970)						(22,970)
Adjust investment in subsidiaries for noncontrolling interest purchases	3,658		5,244			5,244	(1,586)
Other	(27)						(27)
Ending balance at Dec. 31, 2012	3,795,247	88,074	1,412,453	(165,724)	2,399,052	3,733,855	61,392
Add (Deduct)
Net income attributable to U.S. Cellular shareholders	140,038				140,038	140,038
Net income attributable to noncontrolling interests classified as equity	4,251						4,251
Common and Series A Common Shares dividends	(482,270)				(482,270)	(482,270)
Repurchase of Common Shares	(18,544)			(18,544)		(18,544)
Incentive and compensation plans	6,073		222	19,576	(13,725)	6,073
Stock-based compensation awards	15,467		15,467			15,467
Tax windfall (shortfall) from stock awards	(3,267)		(3,267)			(3,267)
Distributions to noncontrolling interests	(3,576)						(3,576)
Adjust investment in subsidiaries for noncontrolling interest purchases	(52)		(146)			(146)	94
Deconsolidation of partnerships	(43,770)						(43,770)
Ending balance at Dec. 31, 2013	$ 3,409,597	$ 88,074	$ 1,424,729	$ (164,692)	$ 2,043,095	$ 3,391,206	$ 18,391

XML

Property, Plant and Equipment (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Property, Plant and Equipment [Line Items]
Land	$ 36,266,000	$ 33,947,000
Buildings	304,272,000	341,852,000
Leasehold and land improvements	1,197,520,000	1,188,720,000
Cell site equipment	3,306,575,000	3,100,916,000
Switching equipment	1,161,976,000	1,155,114,000
Office furniture and equipment	539,248,000	535,656,000
Other operating assets and equipment	92,456,000	128,290,000
System development	962,698,000	631,184,000
Work in process	116,501,000	362,749,000
Property, plant and equpment, gross	7,717,512,000	7,478,428,000
Less: Accumulated depreciation	(4,860,992,000)	(4,455,840,000)
Property, plant and equipment, net	2,856,520,000	3,022,588,000
Depreciation and amortization expense	791,100,000	597,700,000	565,100,000
(Gain) loss on asset disposals, net	$ 30,606,000	$ 18,088,000	$ 9,889,000
Buildings
Property, Plant and Equipment [Line Items]
Useful life	20 years
Leasehold Improvements [Member] | Minimum
Property, Plant and Equipment [Line Items]
Useful life	1 year
Leasehold Improvements [Member] | Maximum
Property, Plant and Equipment [Line Items]
Useful life	30 years
Cell site equipment | Minimum
Property, Plant and Equipment [Line Items]
Useful life	6 years
Cell site equipment | Maximum
Property, Plant and Equipment [Line Items]
Useful life	25 years
Switching equipment | Minimum
Property, Plant and Equipment [Line Items]
Useful life	1 year
Switching equipment | Maximum
Property, Plant and Equipment [Line Items]
Useful life	8 years
Office furniture and equipment | Minimum
Property, Plant and Equipment [Line Items]
Useful life	3 years
Office furniture and equipment | Maximum
Property, Plant and Equipment [Line Items]
Useful life	5 years
Other operating equipment | Minimum
Property, Plant and Equipment [Line Items]
Useful life	5 years
Other operating equipment | Maximum
Property, Plant and Equipment [Line Items]
Useful life	25 years
System development | Minimum
Property, Plant and Equipment [Line Items]
Useful life	3 years
System development | Maximum
Property, Plant and Equipment [Line Items]
Useful life	7 years

XML

Debt (Table)

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Revolving credit facilities

The following table summarizes the terms of the revolving credit facility as of December 31, 2013:
(Dollars in millions)
Maximum borrowing capacity			$	300.0
Letters of credit outstanding (1)			$	17.6
Amount borrowed			$	-
Amount available for use			$	282.4
Borrowing rate: One-month London Interbank Offered Rate ("LIBOR") plus contractual spread (2)				1.67	%
	LIBOR			0.17	%
	Contractual spread			1.50	%
Range of commitment fees on amount available for use (3)
	Low			0.13	%
	High			0.30	%
Agreement date				December 2010
Maturity date				December 2017
Fees incurred attributable to the Revolving Credit Facility are as follows:
	Fees incurred as a percent of Maximum borrowing capacity for 2013			0.25	%
	Fees incurred, amount
		2013	$	0.8
		2012	$	1.1
		2011	$	1.2
(1)	In June 2013, U.S. Cellular provided $17.4 million in letters of credit to the FCC in connection with U.S. Cellular's winning bids in Auction 901. See Note 16 — Supplemental Cash Flow Disclosures for additional information on Auction 901.
(2)	Borrowings under the revolving credit facility bear interest at LIBOR plus a contractual spread based on U.S. Cellular’s credit rating or, at U.S. Cellular’s option, an alternate “Base Rate” as defined in the revolving credit agreement. U.S. Cellular may select a borrowing period of either one, two, three or six months (or other period of twelve months or less if requested by U.S. Cellular and approved by the lenders). If U.S. Cellular provides notice of intent to borrow less than three business days in advance of a borrowing, interest on borrowing is at the Base Rate plus the contractual spread.
(3)	The revolving credit facility has commitment fees based on the unsecured senior debt ratings assigned to U.S. Cellular by certain ratings agencies.

Long term debt

Long-Term Debt
Long-term debt as of December 31, 2013 and 2012 was as follows:
December 31,
(Dollars in thousands)			Issuance date	Maturity date	Call date	2013		2012
	Unsecured Senior Notes
		6.7%	December 2003 and June 2004	December 2033	December 2003	$	544,000	$	544,000
		Less: 6.7% Unamortized discount					(11,551)		(11,806)
							532,449		532,194
		6.95%	May 2011	May 2060	May 2016		342,000		342,000
	Obligation on capital leases						3,749		4,756
Total long-term debt						$	878,198	$	878,950
	Long-term debt, current					$	166	$	92
	Long-term debt, noncurrent					$	878,032	$	878,858

XML

Commitments and Contingencies, purchase commitments (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
BOSS Implementation
Long Term Purchase Commitment [Line Items]
Purchase commitment agreement description	As previously disclosed, on August 17, 2010, U.S. Cellular and Amdocs Software Systems Limited (“Amdocs”) entered into a Software License and Maintenance Agreement (“SLMA”) and a Master Service Agreement (“MSA”) (collectively, the “Amdocs Agreements”) to develop a Billing and Operational Support System (“B/OSS”).  In July 2013, U.S. Cellular implemented B/OSS, pursuant to an updated Statement of Work dated June 29, 2012. Total payments to Amdocs related to this implementation are estimated to be approximately $183.9 million (subject to certain potential adjustments) over the period from commencement of the SLMA through the first half of 2014.  As of December 31, 2013, $136.8 million had been paid to Amdocs.
Purchase commitment period	August 17, 2010 through the first half of 2014
Purchase commitment payments made	$ 136.8
Purchase commitment estimated payments	183.9
Apple Products
Long Term Purchase Commitment [Line Items]
Purchase commitment agreement description	In March 2013, U.S. Cellular entered into an agreement with Apple to purchase certain minimum quantities of Apple iPhone products over a three-year period beginning in November 2013. Based on current forecasts, U.S. Cellular estimates that the remaining contractual purchase commitment as of December 31, 2013 is approximately $950 million. At this time, U.S. Cellular expects to meet its contractual commitment with Apple.
Purchase commitment period	three-year period beginning in November 2013
Purchase commitment remaining estimated payments	$ 950.0

XML

Supplemental Cash Flow Disclosures

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Supplemental Cash Flow Disclosures

NOTE 16 SUPPLEMENTAL CASH FLOW DISCLOSURES

Following are supplemental cash flow disclosures regarding interest paid and income taxes paid.

Year Ended December 31,	2013		2012		2011
(Dollars in thousands)
Interest paid	$	42,904	$	44,048	$	55,580
Income taxes paid (refunded)	$	157,778	$	(58,609)	$	(54,469)

Following are supplemental cash flow disclosures regarding transactions related to stock-based compensation awards. In certain situations, U.S. Cellular withholds shares that are issuable upon the exercise of stock options or the vesting of restricted shares to cover, and with a value equivalent to, the exercise price and/or the amount of taxes required to be withheld from the stock award holder at the time of the exercise or vesting. U.S. Cellular then pays the amount of the required tax withholdings to the taxing authorities in cash.

Year Ended December 31,	2013		2012		2011
(Dollars in thousands)
Common Shares withheld		606,582		92,846		120,250
Aggregate value of Common Shares withheld	$	25,179	$	3,604	$	5,952
Cash receipts upon exercise of stock options		10,468		900		5,447
Cash disbursements for payment of taxes		(4,684)		(3,105)		(3,512)
Net cash receipts (disbursements) from exercise of stock options and vesting of other stock awards	$	5,784	$	(2,205)	$	1,935

On September 27, 2012, the FCC conducted a single round, sealed bid, reverse auction to award up to $300 million in one-time Mobility Fund Phase I support to successful bidders that commit to provide 3G, or better, wireless service in areas designated as unserved by the FCC.  This auction was designated by the FCC as Auction 901. U.S. Cellular and several of its wholly-owned subsidiaries participated in Auction 901 and were winning bidders in eligible areas within 10 states and will receive up to $40.1 million in one-time support from the Mobility Fund. These funds will reduce the carrying amount of the assets to which they relate or will offset operating expenses. U.S. Cellular has received $13.4 million in support funds as of December 31, 2013, of which $10.3 million is included as a component of Other assets and deferred charges in the Consolidated Balance Sheet and $3.1 million reduced the carrying amount of the assets to which they relate, which are included in Property, plant and equipment in the Consolidated Balance Sheet.

On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75per share, for an aggregate amount of $482.3million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013.

XML

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Lease Commitments

	Operating Leases Future Minimum Rental Payments		Operating Leases Future Minimum Rental Receipts
(Dollars in thousands)
2014	$	152,349	$	46,357
2015		134,852		36,847
2016		116,397		26,201
2017		97,098		17,226
2018		79,166		6,521
Thereafter		783,730		227
Total	$	1,363,592	$	133,379

XML

Certain Relationships and Related Transactions

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Certain Relationships and Related Transactions

NOTE 18CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following persons are partners of Sidley Austin LLP, the principal law firm of U.S. Cellular and its subsidiaries: Walter C.D. Carlson, a director of U.S. Cellular, a director and non-executive Chairman of the Board of Directors of TDS and a trustee and beneficiary of a voting trust that controls TDS; William S. DeCarlo, the General Counsel of TDS and an Assistant Secretary of TDS and certain subsidiaries of TDS; and Stephen P. Fitzell, the General Counsel of U.S. Cellular and TDS Telecommunications Corporation and an Assistant Secretary of U.S. Cellular and certain other subsidiaries of TDS. Walter C.D. Carlson does not provide legal services to TDS, U.S. Cellular or their subsidiaries. U.S. Cellular and its subsidiaries incurred legal costs from Sidley Austin LLP of $13.2 million in 2013,$10.7 million in 2012 and $9.2 million in 2011.

The Audit Committee of the Board of Directors is responsible for the review and evaluation of all related-party transactions as such term is defined by the rules of the New York Stock Exchange.

XML

Noncontrolling Interests (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Redeemable noncontrolling interest
Termination date range of mandatorily redeemable noncontrolling interests - begin	2085
Termination date range of mandatorily redeemable noncontrolling interests - end	2107
Settlement value of mandatorily redeemable noncontrolling interests	$ 24.8
Carrying value of mandatorily redeemable noncontrolling interests	$ 15.4

XML

Summary of Significant Accounting Policies and Recent Accounting Pronouncements

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Summary of Significant Accounting Policies and Recent Accounting Pronouncements

NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

United States Cellular Corporation (“U.S. Cellular”), a Delaware Corporation, is an 84%-owned subsidiary of Telephone and Data Systems, Inc. (“TDS”).

Nature of Operations

U.S. Cellular owns, operates and invests in wireless systems throughout the United States. As of December 31, 2013, U.S. Cellular served 4.8 million customers. U.S. Cellular operates as one reportable segment.

Principles of Consolidation

The accounting policies of U.S. Cellular conform to accounting principles generally accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Unless otherwise specified, references to accounting provisions and GAAP in these notes refer to the requirements of the FASB ASC. The consolidated financial statements include the accounts of U.S. Cellular, its majority-owned subsidiaries, general partnerships in which U.S. Cellular has a majority partnership interestand variable interest entities (“VIEs”) in which U.S. Cellular is the primary beneficiary. Both VIE and primary beneficiary represent terms defined by GAAP.

Intercompany accounts and transactions have been eliminated.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2013 financial statement presentation. These reclassifications did not affect consolidated net income attributable to U.S. Cellular shareholders, cash flows, assets, liabilities or equity for the years presented.

Business Combinations

U.S. Cellular accounts for business combinations at fair value in accordance with the acquisition method. This method requires that the acquirer recognize 100% of the acquiree's assets and liabilities at their fair values on the acquisition date for all acquisitions, whether full or partial. In addition, transaction costs related to acquisitions are expensed.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (b) the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates are involved in accounting for goodwill and indefinite-lived intangible assets, depreciation, amortization and accretion, allowance for doubtful accounts, loyalty reward points, income taxes, stock based compensation and asset retirement obligations.

Cash and Cash Equivalents

Cash and cash equivalents include cash and short-term, highly liquid investments with original maturities of three months or less.

Short-Term and Long-Term Investments

At December 31, 2013 and 2012, U.S. Cellular had $50.1 million and $100.7 million, respectively, in Short-term investments. At December 31, 2012, U.S. Cellular had $50.3million in Long-term investments. Short-term and Long-term investments consist primarily of U.S. Treasury Noteswhich are designated as held-to-maturity investments and are recorded at amortized cost in the Consolidated Balance Sheet. For these investments, U.S. Cellular's objective is to earn a higher rate of return on funds that are not anticipated to be required to meet liquidity needs in the near term, while maintaining a low level of investment risk. See Note 2—Fair Value Measurementsfor additional details on Short-term and Long-term investments.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consist primarily of amounts owed by customers for wireless services and equipment sales, by agents for sales of equipment to them and by other wireless carriers whose customers have used U.S. Cellular's wireless systems.

The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related to existing accounts receivable. The allowance is estimated based on historical experience and other factors that could affect collectability. Accounts receivable balances are reviewed on either an aggregate or individual basis for collectability depending on the type of receivable. When it is probable that an account balance will not be collected, the account balance is charged against the allowance for doubtful accounts. U.S. Cellular does not have any off-balance sheet credit exposure related to its customers.

The changes in the allowance for doubtful accounts during the years ended December 31, 2013, 2012 and 2011 were as follows:
		2013		2012		2011
(Dollars in thousands)
Beginning balance		$	26,902	$	23,537	$	25,816
	Additions, net of recoveries		98,864		67,372		62,157
	Deductions		(65,528)		(64,007)		(64,436)
Ending balance		$	60,238	$	26,902	$	23,537

Inventory

Inventory consists primarilyof wireless devices stated at the lower of cost or market, with cost determined using the first-in, first-out method and market determined byreplacement costs or estimated net realizable value.

Fair Value Measurements

Under the provisions of GAAP, fair value is a market-based measurement and not an entity-specific measurement, based on an exchange transaction in which the entity sells an asset or transfers a liability (exit price). The provisions also establish a fair value hierarchy that contains three levels for inputs used in fair value measurements. Level 1 inputs include quoted market prices for identical assets or liabilities in active markets. Level 2 inputs include quoted market prices for similar assets and liabilities in active markets or quoted market prices for identical assets and liabilities in inactive markets. Level 3 inputs are unobservable. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. A financial instrument's level within the fair value hierarchy is not representative of its expected performance or its overall risk profile and, therefore, Level 3 assets are not necessarily higher risk than Level 2 assets or Level 1 assets.

Goodwill

U.S. Cellular has Goodwill as a result of its acquisitions of wireless businesses. Such Goodwill represents the excess of the total purchase price over the fair value of net assets acquired in these transactions.

Licenses

Licenses consist of direct and incremental costs incurred in acquiring Federal Communications Commission (“FCC”) licenses to provide wireless service.

U.S. Cellular has determined that wireless licenses are indefinite-lived intangible assets and, therefore, not subject to amortization based on the following factors:

• Radio spectrum is not a depleting asset.
• The ability to use radio spectrum is not limited to any one technology.
• U.S. Cellular and its consolidated subsidiaries are licensed to use radio spectrum through the FCC licensing process, which enables licensees to utilize specified portions of the spectrum for the provision of wireless service.
• U.S. Cellular and its consolidated subsidiaries are required to renew their FCC licenses every ten years or, in some cases, every fifteen years. To date, all of U.S. Cellular's license renewal applications have been granted by the FCC. Generally, license renewal applications filed by licensees otherwise in compliance with FCC regulations are routinely granted. If, however, a license renewal application is challenged either by a competing applicant for the license or by a petition to deny the renewal application, the license will be renewed if the licensee can demonstrate its entitlement to a “renewal expectancy.” Licensees are entitled to such an expectancy if they can demonstrate to the FCC that they have provided “substantial service” during their license term and have “substantially complied” with FCC rules and policies. U.S. Cellular believes that it is probable that its future license renewal applications will be granted.

Goodwill and Licenses Impairment Assessment

Goodwill and Licenses must be assessed for impairment annually or more frequently if events or changes in circumstances indicate that such assets might be impaired. U.S. Cellular performs its annual impairment assessment of Goodwill and Licenses as of November 1 of each year.

U.S. Cellular may first assess qualitative factors, such as company, industry and economic trends to determine whether it is necessary to perform the two-step Goodwill impairment test. If determined to be necessary, the first step compares the fair value of the reporting unit to its carrying value. If the carrying amount exceeds the fair value, the second step of the test is performed to measure the amount of impairment loss, if any. The second step compares the implied fair value of reporting unit Goodwill with the carrying amount of that Goodwill. To calculate the implied fair value of Goodwill in this second step, an enterprise allocates the fair value of the reporting unit to all of the assets and liabilities of that reporting unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value was the price paid to acquire the reporting unit. The excess of the fair value of the reporting unit over the amount assigned to the assets and liabilities of the reporting unit is the implied fair value of Goodwill. If the carrying amount of Goodwill exceeds the implied fair value of Goodwill, an impairment loss is recognized for that difference.

The impairment test for an indefinite-lived intangible asset other than Goodwill may consist of first assessing qualitative factors, such as company, industry and economic trends. If determined to be necessary, the next step compares the fair value of the intangible asset to its carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized for the difference.

Quoted market prices in active markets are the best evidence of fair value of an intangible asset or reporting unit and are used when available. If quoted market prices are not available, the estimate of fair value is based on the best information available, including prices for similar assets and the use of other valuation techniques. Other valuation techniques include present value analysis, multiples of earnings or revenues, or similar performance measures. The use of these techniques involve assumptions by management about factors that are uncertain including future cash flows, the appropriate discount rate, and other inputs. Different assumptions for these inputs could create materially different results.

U.S. Cellular tests Goodwill for impairment at the level of reporting referred to as a reporting unit. For purposes of its impairment testing of Goodwill in 2013, U.S. Cellular identified four reporting units. The four reporting units represent four geographic groupings of operating markets, representing four geographic service areas. For purposes of its impairment testing of Goodwill in 2012, U.S. Cellular identified five reporting units. The change in reporting units resulted from the NY1 & NY2 Deconsolidation more fully described in Note 7 — Investments in Unconsolidated Entities.

A discounted cash flow approach was used to value each reporting unit for purposes of the Goodwill impairment review by using value drivers and risks specific to the current industry and economic markets. The cash flow estimates incorporated assumptions that market participants would use in their estimates of fair value. Key assumptions made in this process were the discount rate, estimated expected revenue growth rate, projected capital expenditures and the terminal growth rate.

U.S. Cellular tests Licenses for impairment at the level of reporting referred to as a unit of accounting. For purposes of its 2013 impairment testing of Licenses, U.S. Cellular separated its FCC licenses into eleven units of accounting based on geographic service areas. For purposes of its 2012 impairment testing of Licenses, U.S. Cellular separated its FCC licenses into thirteen units of accounting based on geographic service areas. The change in units of accounting resulted from (i) the Divestiture Transactionand the Mississippi Valley non-operating market license sale, both of which are more fully described in Note 5 — Acquisitions, Divestitures and Exchanges and (ii) the NY1 & NY2 Deconsolidation more fully described in Note 7 — Investments in Unconsolidated Entities. In both 2013 and 2012, seven of the units of accounting represented geographic groupings of licenses which, because they were not being utilized and, therefore, were not expected to generate cash flows from operating activities in the foreseeable future, were considered separate units of accounting for purposes of impairment testing.

U.S. Cellular estimates the fair value of built licenses for purposes of impairment testing using the build-out method. The build-out method estimates the fair value of Licenses by calculating future cash flows from a hypothetical start-up wireless company and assuming that the only assets available upon formation are the underlying Licenses. To apply this method, a hypothetical build-out of U.S. Cellular's wireless network, infrastructure, and related costs are projected based on market participant information. Calculated cash flows, along with a terminal value, are discounted to the present and summed to determine the estimated fair value.

For units of accounting which consist of unbuilt licenses, U.S. Cellular prepares estimates of fair value by reference to prices paid in recent auctions and market transactions where available. If such information is not available, the fair value of the unbuilt licenses is assumed to change by the same percentage, and in the same direction, that the fair value of built licenses measured using the build-out method changed during the period.

Investments in Unconsolidated Entities

Investments in unconsolidated entities consist of amounts invested in wireless entities in which U.S. Cellular holds a noncontrolling interest. U.S. Cellular follows the equity method of accounting for such investments in which its ownership interest is less than or equal to 50% but equals or exceeds 20% for corporations and 3% for partnerships and limited liability companies, or for unconsolidated entities in which its ownership is greater than 50% but U.S. Cellular does not have a controlling financial interest. The cost method of accounting is followed for such investments in which U.S. Cellular's ownership interest is less than 20% for corporations and is less than 3% for partnerships and limited liability companies and for investments for which U.S. Cellular does not have the ability to exercise significant influence.

For its equity method investments for which financial information is readily available, U.S. Cellular records its equity in the earnings of the entity in the current period. For its equity method investments for which financial information is not readily available, U.S. Cellular records its equity in the earnings of the entity on a one quarter lag basis.

Property, Plant and Equipment

U.S. Cellular's Property, plant and equipment is stated at the original cost of construction or purchase including capitalized costs of certain taxes, payroll-related expenses, interest and estimated costs to remove the assets.

Expenditures that enhance the productive capacity of assets in service or extend their useful lives are capitalized and depreciated. Expenditures for maintenance and repairs of assets in service are charged to System operations expense or Selling, general and administrative expense, as applicable. Retirements and disposals of assets are recorded by removing the original cost of the asset (along with the related accumulated depreciation) from plant in service and charging it, together with net removal costs (removal costs less any applicable accrued asset retirement obligationsand salvage value realized), to (Gain) loss on asset disposals, net.

Costs of developing new information systems are capitalized and amortized over their expected economic useful lives.

Depreciation

Depreciation is provided using the straight-line method over the estimated useful life of the assets.

U.S. Cellular depreciates leasehold improvement assets associated with leased properties over periods ranging from one to thirty years; such periods approximate the shorter of the assets' economic lives or the specific lease terms.

Useful lives of specific assets are reviewed throughout the year to determine if changes in technology or other business changes would warrant accelerating the depreciation of those specific assets. Due to the Divestiture Transaction more fully described in Note 5 — Acquisitions, Divestitures and Exchanges, U.S. Cellular changed the useful lives of certain assets in 2013 and 2012. Other than the Divestiture Transaction, there were no other material changesto useful lives of property, plant and equipment in 2013, 2012 or 2011.

Impairment of Long-lived Assets

U.S. Cellular reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired. If necessary, the impairment test for tangible long-lived assets is a two-step process. The first step compares the carrying value of the asset (or asset group) with the estimated undiscounted cash flows over the remaining asset (or asset group) life. If the carrying value of the asset (or asset group) is greater than the undiscounted cash flows, the second step of the test is performed to measure the amount of impairment loss. The second step compares the carrying value of the asset to its estimated fair value. If the carrying value exceeds the estimated fair value (less cost to sell), an impairment loss is recognized for the difference.

U.S. Cellular has one asset group for purposes of assessing property, plant and equipment for impairment based on the fact that the individual operating markets are reliant on centrally operated data centers, mobile telephone switching offices, network operations center and wide-area network. As a result, U.S. Cellular operates a single integrated national wireless network, and the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities represent cash flows generated by this single interdependent network.

Quoted market prices in active markets are the best evidence of fair value of a tangible long-lived asset and are used when available. If quoted market prices are not available, the estimate of fair value is based on the best information available, including prices for similar assets and the use of other valuation techniques. A present value analysis of cash flow scenarios is often the best available valuation technique. The use of this technique involves assumptions by management about factors that are uncertain including future cash flows, the appropriate discount rate and other inputs. Different assumptions for these inputs could create materially different results.

Agent Liabilities

U.S. Cellular has relationships with agents, which are independent businesses that obtain customers for U.S. Cellular. At December 31, 2013 and 2012, U.S. Cellular had accrued $121.3 million and $88.2 million, respectively, for amounts due to agents. This amount is included in Other current liabilities in the Consolidated Balance Sheet.

Other Assets and Deferred Charges

Other assets and deferred charges includeunderwriters' and legal fees and other charges related to issuing U.S. Cellular's various borrowing instruments and other long-term agreements, and are amortized over the respective term of each instrument. The amounts for deferred charges included in the Consolidated Balance Sheet at December 31, 2013 and 2012, are shown net of accumulated amortization of $26.0 million and $12.7 million, respectively.

Asset Retirement Obligations

U.S. Cellular operates cell sites, retail stores and office spaces in its operating markets. A majority of these sites, stores and office spaces are leased. Most of these leases contain terms which require or may require U.S. Cellular to return the leased property to its original condition at the lease expiration date.

U.S. Cellular accounts for asset retirement obligations by recording the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligations are incurred. At the time the liability is incurred, U.S. Cellular records a liability equal to the net present value of the estimated cost of the asset retirement obligation and increases the carrying amount of the related long-lived asset by an equal amount. The liability is accreted to its present value over a period ending with the estimated settlement date of the respective asset retirement obligation. The carrying amount of the long-lived asset is depreciated over the useful life of the asset. Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability (including accretion of discount) is recognized in the Consolidated Statement of Operations.

Treasury Shares

Common Shares repurchased by U.S. Cellular are recorded at cost as treasury shares and result in a reduction of equity. Treasury shares are reissued as part of U.S. Cellular's stock-based compensation programs. When treasury shares are reissued, U.S. Cellular determines the cost using the first-in, first-out cost method. The difference between the cost of the treasury shares and reissuance price is included in Additional paid-in capital or Retained earnings.

Revenue Recognition

Revenues from wireless operations consist primarily of:

• Charges for access, airtime, roaming, long distance, data and other value added services provided to U.S. Cellular's retail customers and to end users through third-party resellers;
• Charges to carriers whose customers use U.S. Cellular's systems when roaming;
• Sales of equipment and accessories;
• Amounts received from the Universal Service Fund (“USF”) in states where U.S. Cellular has been designated an Eligible Telecommunications Carrier (“ETC”); and
• Redemptions of loyalty reward points for products or services.

Revenues related to wireless services and other value added services are recognized as services are rendered. Revenues billed in advance or in arrears of the services being provided are estimated and deferred or accrued, as appropriate.

Revenues from sales of equipment and accessories are recognized when title and risk of loss passes to the agent or end-user customer.

U.S. Cellular allocates revenue to each element of multiple element service offerings using the relative selling price method. Under this method, arrangement consideration, which consists of the amounts billed to the customer net of any cash-based discounts, is allocated to each element on the basis of its relative selling price on a stand-alone basis. Such stand-alone selling price is determined in accordance with the following hierarchy:

• U.S. Cellular-specific objective evidence of stand-alone selling price, if available; otherwise
• Third-party evidence of selling price, if it is determinable; otherwise
• A best estimate of stand-alone selling price.

U.S. Cellular estimates stand-alone selling prices of the elements of its service offerings as follows:

• Wireless services – Based on the actual selling price U.S. Cellular offers when such plan is sold on a stand-alone basis, or if the plan is not sold on a stand-alone basis, U.S. Cellular's estimate of the price of such plan based on similar plans that are sold on a stand-alone basis.
• Wireless devices – Based on the selling price of the respective wireless device when it is sold on a stand-alone basis.
• Phone Replacement – Based on U.S. Cellular's estimate of the price of this service if it were sold on a stand-alone basis, which was calculated by estimating the cost of this program plus a reasonable margin.
• Loyalty reward points – By estimating the retail price of the products and services for which points may be redeemed and dividing such amount by the number of loyalty points required to receive such products and services. This is calculated on a weighted average basis and requires U.S. Cellular to estimate the percentage of loyalty points that will be redeemed for each product or service.

U.S. Cellular follows the deferred revenue method of accounting for its loyalty reward program. Under this method, revenue allocated to loyalty reward points is deferred. Revenue is recognized at the time of customer redemption or when such points have been depleted via an account maintenance charge. U.S. Cellular periodically reviews and revises the redemption and depletion rates as appropriate based on history and related future expectations.As of December 31, 2013, U.S. Cellular estimated loyalty reward points breakage based on actuarial estimates and recorded a $7.4 million change in estimate, which reduced Customer deposits and deferred revenues in the Consolidated Balance Sheet and increased Service revenues in the Consolidated Statement of Operations.

In the fourth quarter of 2013, U.S. Cellular issued loyalty reward points with a value of $43.5 million as a loyalty bonus in recognition of the inconvenience experienced by customers during U.S. Cellular's recent billing system conversion. The value of the loyalty bonus reduced Service revenues in the Consolidated Statement of Operations and increased Customer deposits and deferred revenues in the Consolidated Balance Sheet.

As of December 31, 2013 and 2012, U.S. Cellular had deferred revenue related to loyalty reward points outstanding of $116.2 million and $56.6million, respectively. These amounts are recorded in Customer deposits and deferred revenues (a current liability account) in the Consolidated Balance Sheet, as customers may redeem their reward points within the current period.

Cash-based discounts and incentives, including discounts to customers who pay their bills through the use of on-line bill payment methods, are recognized as a reduction of Operating revenues concurrently with the associated revenue, and are allocated to the various products and services in the bundled offering based on their respective relative selling price.

In order to provide better control over wireless device quality, U.S. Cellular sells wireless devices to agents. U.S. Cellular pays rebates to agents at the time an agent activates a new customer or retains an existing customer in a transaction involving a wireless device. U.S. Cellular accounts for these rebates by reducing revenues at the time of the wireless device sale to the agent rather than at the time the agent activates a new customer or retains a current customer. Similarly, U.S. Cellular offers certain wireless device sales rebates and incentives to its retail customers and records the revenue net of the corresponding rebate or incentive. The total potential rebates and incentives are reduced by U.S. Cellular's estimate of rebates that will not be redeemed by customers based on historical experience of such redemptions.

GAAP requires that activation fees charged with the sale of equipment and service be allocated to the equipment and service based upon the relative selling prices of each item. Device activation fees charged at agent locations, where U.S. Cellular does not also sell a wireless device to the customer, are deferred and recognized over the average device life. Device activation fees charged as a result of handset sales at Company-owned retail stores are recognized at the time the handset is delivered to the customer.

ETC revenues recognized in the reporting period represent the amounts which U.S. Cellular is entitled to receive for such period, as determined and approved in connection with U.S. Cellular's designation as an ETC in various states.

Amounts Collected from Customers and Remitted to Governmental Authorities

U.S. Cellular records amounts collected from customers and remitted to governmental authorities net within a tax liability account if the tax is assessed upon the customer and U.S. Cellular merely acts as an agent in collecting the tax on behalf of the imposing governmental authority. If the tax is assessed upon U.S. Cellular, then amounts collected from customers as recovery of the tax are recorded in Service revenues and amounts remitted to governmental authorities are recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations. The amounts recorded gross in revenues that are billed to customers and remitted to governmental authorities totaled $114.7 million, $135.7 million and $125.2 million for 2013, 2012 and 2011, respectively.

Advertising Costs

U.S. Cellular expenses advertising costs as incurred. Advertising costs totaled $199.9 million, $227.0million and $257.8 million in 2013, 2012 and 2011, respectively.

Income Taxes

U.S. Cellular is included in a consolidated federal income tax return with other members of the TDS consolidated group. TDS and U.S. Cellular are parties to a Tax Allocation Agreement which provides that U.S. Cellular and its subsidiaries be included with the TDS affiliated group in a consolidated federal income tax return and in state income or franchise tax returns in certain situations. For financial statement purposes, U.S. Cellular and its subsidiaries calculate their income, income taxes and credits as if they comprised a separate affiliated group. Under the Tax Allocation Agreement, U.S. Cellular remits its applicable income tax payments to TDS. U.S. Cellular had a tax payable balance with TDS of $34.8 million and $1.1 million as of December 31,2013 and 2012, respectively.

Deferred taxes are computed using the liability method, whereby deferred tax assets are recognized for future deductible temporary differences and operating loss carryforwards, and deferred tax liabilities are recognized for future taxable temporary differences. Both deferred tax assets and liabilities are measured using the tax rates anticipated to be in effect when the temporary differences reverse. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. U.S. Cellular evaluates income tax uncertainties, assesses the probability of the ultimate settlement with the applicable taxing authority and records an amount based on that assessment.

Stock-Based Compensation

U.S. Cellular has established a long-term incentive plan and a Non-Employee Director compensation plan, and previously had an employee stock purchase plan before this was terminated in the fourth quarter of 2011. Also, U.S. Cellular employees were eligible to participate in the TDS employee stock purchase plan before this was terminated in the fourth quarter of 2011. These plans are described more fully in Note 15—Stock-based Compensation. These plans are considered compensatory plans and, therefore, recognition of compensation cost for grants made under these plans is required.

U.S. Cellular values its share-based payment transactions using a Black-Scholes valuation model. Stock-based compensation cost recognized during the period is based on the portion of the share-based payment awards that are ultimately expected to vest. Accordingly, stock-based compensation cost recognized has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures and expected life are estimated based on historical experience related to similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. U.S. Cellular believes that its historical experience provides the best estimates of future pre-vesting forfeitures and future expected life. The expected volatility assumption is based on the historical volatility of U.S. Cellular's common stock over a period commensurate with the expected life. The dividend yield assumption is zero because U.S. Cellular has never paid a dividend, except a special cash dividend in June 2013, and has expressed its intention to retain all future earnings in the business. The risk-free interest rate assumption is determined using the U.S. Treasury Yield Curve Rate with a term length that approximates the expected life of the stock options.

The fair value of options is recognized as compensation cost over the respective requisite service period of the awards, which is generally the vesting period, on a straight-line basis for each separate vesting portion of the awards as if the awards were, in-substance, multiple awards (graded vesting attribution method).

Defined Contribution Plans

U.S. Cellular participates in a qualified noncontributory defined contribution pension plan sponsored by TDS; such plan provides pension benefits for the employees of U.S. Cellular and its subsidiaries. Under this plan, pension benefits and costs are calculated separately for each participant and are funded currently. Pension costs were $10.4 million, $12.4million and $11.6 million in 2013, 2012 and 2011, respectively.

U.S. Cellular also participates in a defined contribution retirement savings plan (“401(k) plan”) sponsored by TDS. Total costs incurred from U.S. Cellular's contributions to the 401(k) plan were $15.4 million, $17.1 million and $15.5 million in 2013, 2012 and 2011, respectively.

Operating Leases

U.S. Cellular is a party to various lease agreements for office space, retail stores, cell sites and equipment that are accounted for as operating leases. Certain leases have renewal options and/or fixed rental increases. Renewal options that are reasonably assured of exercise are included in determining the lease term. U.S. Cellular accounts for certain operating leases that contain rent abatements, lease incentives and/or fixed rental increases by recognizing lease revenue and expense on a straight-line basis over the lease term.

Recently Issued Accounting Pronouncements

On July 18, 2013, the FASB issued Accounting Standards Update 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryfoward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 addresses the presentation of an unrecognized tax benefit when a net operating loss carryforward or tax credit carryforward exists. In such event, an unrecognized tax benefit, or portion of an unrecognized tax benefit, would be presented in the Consolidated Balance Sheet as a reduction to deferred tax assets unless the net operating loss carryforward or tax credit carryforward at the reporting date is not available under the tax law of the applicable jurisdiction. U.S. Cellular is required to adopt the provisions of ASU 2013-11 effective January 1, 2014. The adoption of ASU 2013-11 is not expected to have a significant impact on U.S. Cellular's financial position or results of operations.

XML

Consolidated Statement of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Cash flows from operating activities
Net income	$ 144,522	$ 141,076	$ 198,744
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
Depreciation, amortization and accretion	803,781	608,633	573,557
Bad debts expense	98,864	67,372	62,157
Stock-based compensation expense	15,844	21,466	20,183
Deferred income taxes, net	(75,348)	49,244	203,264
Equity in earnings of unconsolidated entities	(131,949)	(90,364)	(83,566)
Distributions from unconsolidated entities	125,660	84,417	91,768
(Gain) loss on asset disposals, net	30,606	18,088	9,889
(Gain) loss on sale of business and other exit costs, net	(246,767)	21,022
(Gain) loss on license sales and exchanges	(255,479)		(11,762)
(Gain) loss on investments	(18,556)	3,718	(11,373)
Noncash interest expense	1,059	(1,822)	10,040
Other operating activities	646	546	102
Changes in assets and liabilities from operations
Accounts receivable	(291,759)	(64,816)	(82,175)
Inventory	(82,422)	(28,786)	(14,640)
Accounts payable - trade	85,199	(4,977)	28,410
Accounts payable - affiliate	147	(1,458)	1,392
Customer deposits and deferred revenues	66,344	30,353	34,927
Accrued taxes	30,037	73,064	(39,984)
Accrued interest	273	167	225
Other assets and liabilities	(9,805)	(27,652)	(3,296)
Cash flows from operating activities	290,897	899,291	987,862
Cash flows from investing activities
Cash used for additions to property, plant and equipment	(717,862)	(826,400)	(771,798)
Cash paid for aquisitions and licenses	(16,540)	(122,690)	(23,773)
Cash received from divestitures	811,120	49,932
Cash paid for investments		(120,000)	(110,000)
Cash received for investments	100,000	125,000	145,250
Other investing activities	(3,969)	(2,453)	718
Cash flows from investing activities	172,749	(896,611)	(759,603)
Cash flows from financing activities
Repayment of long-term debt	(414)	(145)	(330,338)
Issuance of long-term debt			342,000
Common shares reissued for benefit plans, net of tax payments	5,784	(2,205)	1,935
Common shares repurchased	(18,544)	(20,045)	(62,294)
Payment of debt issuance costs	(23)	(514)	(11,400)
Dividends paid	(482,270)
Distributions to noncontrolling interests	(3,766)	(22,970)	(21,094)
Payments to acquire additional interest in subsidiaries	(1,005)	(3,167)
Other financing activities	299	569	172
Cash flows from financing activities	(499,939)	(48,477)	(81,019)
Net increase (decrease) in cash and cash equivalents	(36,293)	(45,797)	147,240
Cash and cash equivalents
Beginning of period	378,358	424,155	276,915
End of period	$ 342,065	$ 378,358	$ 424,155

XML

Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Commitments and Contingencies

NOTE 11 COMMITMENTS AND CONTINGENCIES

Agreements

As previously disclosed, on August 17, 2010, U.S. Cellular and Amdocs Software Systems Limited (“Amdocs”) entered into a Software License and Maintenance Agreement (“SLMA”) and a Master Service Agreement (“MSA”) (collectively, the “Amdocs Agreements”) to develop a Billing and Operational Support System (“B/OSS”).  In July 2013, U.S. Cellular implemented B/OSS, pursuant to an updated Statement of Work dated June 29, 2012. Total payments to Amdocs related to this implementation are estimated to be approximately $183.9million (subject to certain potential adjustments) over the period from commencement of the SLMA through the first half of 2014.  As of December 31, 2013, $136.8million had been paid to Amdocs.

Lease Commitments

U.S. Cellular is a party to various lease agreements, both as lessee and lessor, for office space, retail store sites, cell sites and equipment which are accounted for as operating leases. Certain leases have renewal options and/or fixed rental increases.Renewal options that are reasonably assured of exercise are included in determining the lease term. Any rent abatements or lease incentives, in addition to fixed rental increases, are included in the calculation of rent expense and calculated on a straight-line basis over the defined lease term.

As of December 31, 2013, future minimum rental payments required under operating leases and rental receipts expected under operating leases that have noncancellable lease terms in excess of one year were as follows:

	Operating Leases Future Minimum Rental Payments		Operating Leases Future Minimum Rental Receipts
(Dollars in thousands)
2014	$	152,349	$	46,357
2015		134,852		36,847
2016		116,397		26,201
2017		97,098		17,226
2018		79,166		6,521
Thereafter		783,730		227
Total	$	1,363,592	$	133,379

Rent expense totaled $162.1million, $183.9 million and $171.6 million in 2013, 2012 and 2011, respectively.

Rent revenue totaled $45.7 million, $41.7million and $39.2million in 2013, 2012 and 2011, respectively.

Indemnifications

U.S. Cellular enters into agreements in the normal course of business that provide for indemnification of counterparties.  The terms of the indemnifications vary by agreement.  The events or circumstances that would require U.S. Cellular to perform under these indemnities are transaction specific; however, these agreements may require U.S. Cellular to indemnify the counterparty for costs and losses incurred from litigation or claims arising from the underlying transaction.  U.S. Cellular is unable to estimate the maximum potential liability for these types of indemnifications as the amounts are dependent on the outcome of future events, the nature and likelihood of which cannot be determined at this time.  Historically, U.S. Cellular has not made any significant indemnification payments under such agreements.

Legal Proceedings

U.S. Cellular is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts.  If U.S. Cellular believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss.  If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within that range is better than another, the low end of the range is accrued.  The assessment of the expected outcomes of legal proceedings is a highly subjective process that requires judgments about future events.  The legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financial statement disclosures.  The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements.

U.S. Cellular has accrued $0.3 millionand $1.7 million with respect to legal proceedings and unasserted claims as of December 31, 2013 and 2012, respectively. U.S. Cellular has not accrued any amount for legal proceedings if it cannot estimate the amount of the possible loss or range of loss. U.S. Cellular does not believe that the amount of any contingent loss in excess of the amounts accrued would be material.

Apple iPhone Products Purchase Commitment

In March 2013, U.S. Cellular entered into anagreement with Apple to purchase certain minimum quantities of Apple iPhone products over a three-year period beginning in November 2013. Based on current forecasts, U.S. Cellular estimates that the remaining contractual purchase commitment as of December 31, 2013 is approximately $950 million. At this time, U.S. Cellular expects to meet its contractual commitment with Apple.

XML

Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Jun. 30, 2013	Jan. 31, 2014 Series A Common Shares	Jan. 31, 2014 Common Shares
Entity Registrant Name	United States Cellular Corporation
Entity Central Index Key	0000821130
Document Type	10-K
Document Period End Date	Dec. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float		$ 475,196,295
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Trading Symbol	USM
Entity Common Stock, Shares Outstanding			33,006,000	51,208,000

XML

Variable Interest Entities

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Variable Interest Entities

NOTE 12 VARIABLE INTEREST ENTITIES (VIEs)

U.S. Cellular consolidates variable interest entities in which it has a controlling financial interest and is the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE. U.S. Cellular reviews these criteria initially at the time it enters into agreements and subsequently when reconsideration events occur.

Consolidated VIEs

As of December 31, 2013, U.S. Cellular holds a variable interest in and consolidates the following VIEs under GAAP:

• Aquinas Wireless L.P. (“Aquinas Wireless”); and
• King Street Wireless L.P. (“King Street Wireless”) and King Street Wireless, Inc., the general partner of King Street Wireless.

The power to direct the activities that most significantly impact the economic performance of Aquinas Wireless and King Street Wireless (collectively, the “limited partnerships”) is shared. Specifically, the general partner of these VIEs has the exclusive right to manage, operate and control the limited partnerships and make all decisions to carry on the business of the partnerships; however, the general partner of each partnership needs consent of the limited partner, a U.S. Cellular subsidiary, to sell or lease certain licenses, to make certain large expenditures, admit other partners or liquidate the limited partnerships. Although the power to direct the activities of the VIEs is shared, U.S. Cellular has a disproportionate level of exposure to the variability associated with the economic performance of the VIEs, indicating that U.S. Cellular is the primary beneficiary of the VIEs in accordance with GAAP. Accordingly, these VIEs are consolidated.

The following table presents the classification of the consolidated VIEs' assets and liabilities in U.S. Cellular's Consolidated Balance Sheet.

December 31,		2013		2012
(Dollars in thousands)
Assets
	Cash and cash equivalents	$	2,076	$	5,849
	Other current assets		1,184		120
	Licenses		310,475		308,091
	Property, plant and equipment, net		18,600		16,443
	Other assets and deferred charges		511		887
	Total assets	$	332,846	$	331,390
Liabilities
	Current liabilities	$	46	$	1,013
	Deferred liabilities and credits		3,139		3,024
	Total liabilities	$	3,185	$	4,037

Other Related Matters

Aquinas Wireless and King Street Wireless were formed to participate in FCC auctions of wireless spectrum and to fund, establish, and provide wireless service with respect to any FCC licenses won in the auctions. As such, these entities have risks similar to those described in the “Risk Factors” in U.S. Cellular's Annual Report on Form 10-K.

U.S. Cellular may agree to make additional capital contributions and/or advances to Aquinas Wireless and King Street Wireless and/or to their general partners to provide additional funding for the development of licenses granted in various auctions.  U.S. Cellular may finance such amounts with a combination of cash on hand, borrowings under its revolving credit agreement and/or long-term debt.  There is no assurance that U.S. Cellular will be able to obtain additional financing on commercially reasonable terms or at all to provide such financial support.

The limited partnership agreements of Aquinas Wireless and King Street Wireless also provide the general partner with a put option whereby the general partner may require the limited partner, a subsidiary of U.S. Cellular, to purchase its interest in the limited partnership.  The general partner's put options related to its interests in King Street Wireless and Aquinas Wireless will become exercisable in 2019 and 2020, respectively.The put option price is determined pursuant to a formula that takes into consideration fixed interest rates and the market value of U.S. Cellular's Common Shares.  Upon exercise of the put option, the general partner is required to repay borrowings due to U.S. Cellular.  If the general partner does not elect to exercise its put option, the general partner may trigger an appraisal process in which the limited partner (a subsidiary of U.S. Cellular) may have the right, but not the obligation, to purchase the general partner's interest in the limited partnership at a price and on other terms and conditions specified in the limited partnership agreement.  In accordance with requirements under GAAP, U.S. Cellular is required to calculate a theoretical redemption value for all of the put options assuming they are exercisable at the end of each reporting period, even though such exercise is not contractually permitted.  Pursuant to GAAP, this theoretical redemption value, net of amounts payable to U.S. Cellular for loans and accrued interest thereon made by U.S. Cellular to the general partnersthe (“net put value”), was $0.5 million at December 31, 2013 and 2012, respectively. The net put value is recorded as Noncontrolling interests with redemption features in U.S. Cellular's Consolidated Balance Sheet.  Also in accordance with GAAP, changes in the redemption value of the put options, net of interest accrued on the loans, are recorded as a component of Net income attributable to noncontrolling interests, net of tax, in U.S. Cellular's Consolidated Statements of Operations.

U.S. Cellular's capital contributions and advances made to Aquinas Wireless and King Street Wireless and/or their general partners totaled $10.0 million in the year ended December 31, 2012.There were no capital contributions or advances made to Aquinas Wireless or King Street Wireless or their general partners in 2013.

U.S. Cellular currently provides 4G LTE service in conjunction with King Street Wireless. Aquinas Wireless is still in the process of developing long-term business plans.

XML

Consolidated Balance Sheet (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Current assets
Cash and cash equivalents	$ 342,065	$ 378,358
Short-term investments	50,104	100,676
Accounts receivable
Customers and agents, less allowances of $59,206 and $24,290, respectively	467,255	349,424
Roaming	30,136	31,782
Affiliated	980	375
Other, less allowances of $1,032 and $2,612, respectively	88,224	63,639
Inventory, net	238,188	155,886
Income taxes receivable		1,612
Prepaid expenses	65,596	62,560
Net deferred income tax asset	99,105	35,419
Other current assets	19,538	16,745
Total current assets	1,401,191	1,196,476
Assets held for sale	16,027	216,763
Investments
Licenses	1,401,126	1,456,794
Goodwill	387,524	421,743
Investments in unconsolidated entities	265,585	144,531
Long-term investments		50,305
Total investments	2,054,235	2,073,373
Property, plant and equipment
In service and under construction	7,717,512	7,478,428
Less: Accumulated depreciation	4,860,992	4,455,840
Property, plant and equipment, net	2,856,520	3,022,588
Other assets and deferred charges	117,735	78,250
Total assets	6,445,708	6,587,450
Current liabilities
Current portion of long-term debt	166	92
Accounts payable
Affiliated	11,243	10,725
Trade	405,583	310,936
Customer deposits and deferred revenues	256,740	192,113
Accrued taxes	73,820	35,834
Accrued compensation	66,566	90,418
Other current liabilities	192,055	114,881
Total current liabilities	1,006,173	754,999
Liabilities held for sale		19,594
Deferred liabilities and credits
Net deferred income tax liability	836,297	849,818
Other deferred liabilities and credits	315,073	288,441
Long-term debt	878,032	878,858
Commitments and contingencies
Noncontrolling interests with redemption features	536	493
U.S. Cellular shareholders' equity
Series A Common and Common Shares	88,074	88,074
Additional paid-in capital	1,424,729	1,412,453
Treasury Shares at cost	(164,692)	(165,724)
Retained earnings	2,043,095	2,399,052
Total U.S. Cellular shareholders' equity	3,391,206	3,733,855
Noncontrolling interests	18,391	61,392
Total equity	3,409,597	3,795,247
Total liabilities and equity	$ 6,445,708	$ 6,587,450

XML

Intangible Assets

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Intangible Assets

NOTE 6 INTANGIBLE ASSETS

Changes in U.S. Cellular's Licenses and Goodwill are presented below. See Note 5—Acquisitions, Divestitures and Exchanges for information regarding transactions which affected Licenses and Goodwill during the periods.

Licenses
Year Ended December 31,	2013		2012
(Dollars in thousands)
Balance, beginning of year	$	1,456,794	$	1,470,769
Acquisitions		16,540		122,690
Divestitures		(59,419)		-
Transferred to Assets held for sale		(16,027)		(140,599)
Other		3,238		3,934
Balance, end of year	$	1,401,126	$	1,456,794

Goodwill
Year Ended December 31,		2013		2012
(Dollars in thousands)
Assigned value at time of acquisition		$	494,737	$	494,737
	Accumulated impairment losses in prior periods		-		-
	Transferred to Assets held for sale		(72,994)		-
Balance, beginning of year			421,743		494,737
	Divestitures		(505)		-
	Transferred to Assets held for sale		-		(72,994)
	NY1 & NY2 Deconsolidation		(33,714)		-
Balance, end of year		$	387,524	$	421,743

XML

Acquisitions, Divestitures and Exchanges

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Acquisitions, Divestitures and Exchanges

NOTE 5ACQUISITIONS, DIVESTITURES AND EXCHANGES

U.S. Cellular assesses its existing wireless interests on an ongoing basis with a goal of improving the competitiveness of its operations and maximizing its long-term return on investment. As part of this strategy, U.S. Cellular reviews attractive opportunities to acquire additional operating markets and wireless spectrum. In addition, U.S. Cellular may seek to divest outright or include in exchanges for other wireless interests thoseinterests that are not strategic to its long-term success.

Acquisitions did not have a material impact on U.S. Cellular's consolidated financial statements for the periods presented and pro forma results, assuming acquisitions had occurred at the beginning of each period presented, would not be materially different from the results reported.

Divestiture Transaction

On November 6, 2012, U.S. Cellular entered into a Purchase and Sale Agreement with subsidiaries of Sprint Corp., fkaSprint Nextel Corporation (“Sprint”). Pursuant to the Purchase and Sale Agreement, on May 16, 2013, U.S. Cellular transferred customers and certain PCS license spectrum to Sprint in U.S. Cellular's Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets (“Divestiture Markets”) in consideration for $480 million in cash. The Purchase and Sale Agreement also contemplated certain other agreements, together with the Purchase and Sale Agreement collectively referred to as the “Divestiture Transaction.”

U.S. Cellular retained other assets and liabilities related to the Divestiture Markets, including network assets, retail stores and related equipment, and other buildings and facilities. The transaction did not affect spectrum licenses held by U.S. Cellular or variable interest entities (“VIEs”) that were notused in the operations of the DivestitureMarkets. Pursuant to the Purchase and Sale Agreement, U.S. Cellular and Sprint also entered into certain other agreements, including customer and network transition services agreements, whichrequire U.S. Cellular to provide customer, billing and network services to Sprint for a period of up to 24 months after the May 16, 2013 closing date. Sprint will reimburse U.S. Cellular for providing such services at an amount equal to U.S. Cellular'sestimated costs, including applicable overhead allocations. In addition, these agreements require Sprint to reimburse U.S. Cellular up to $200 million (the “Sprint Cost Reimbursement”) for certain network decommissioning costs, network site lease rent and termination costs, network access termination costs, and employeetermination benefits for specified engineering employees.It is estimated that up to $175million of the Sprint Cost Reimbursement will be recorded in (Gain) loss on sale of business and other exit costs, net and up to $25million of the Sprint Cost Reimbursement will be recorded in System operations in the Consolidated Statement of Operations. For the year ended December 31, 2013, $10.6million of the Sprint Cost Reimbursement had been received and recorded in Cash received from divestitures in the Consolidated Statement of Cash Flows.

Financial impacts of the Divestiture Transaction are classified in the Consolidated Statement of Operations within Operating income. The table below describes the amounts U.S. Cellular has recognized and expects to recognize in the Consolidated Statement of Operations between the date the Purchase and Sale Agreement was signed and the end of the transition services period.

(Dollars in thousands)			Expected Period of Recognition	Projected Range				Cumulative Amount Recognized as of December 31, 2013		Actual Amount Recognized Year Ended December 31, 2013		Actual Amount Recognized Three Months Ended December 31, 2013		Actual Amount Recognized Three Months and Year Ended December 31, 2012
(Gain) loss on sale of business and other exit costs, net
	Proceeds from Sprint
		Purchase price	2013	$	(480,000)	$	(480,000)	$	(480,000)	$	(480,000)	$	-	$	-
		Sprint Cost Reimbursement	2013-2014		(120,000)		(175,000)		(47,641)		(47,641)		(43,420)		-
	Net assets transferred		2013		213,593		213,593		213,593		213,593		-		-
	Non-cash charges for the write-off and write-down of property under construction and related assets		2012-2014		10,000		14,000		10,675		3		(51)		10,672
	Employee related costs including severance, retention and outplacement		2012-2014		12,000		18,000		14,262		1,653		(809)		12,609
	Contract termination costs		2012-2014		110,000		160,000		59,584		59,525		40,744		59
	Transaction costs		2012-2014		5,000		6,000		5,565		4,428		347		1,137
		Total (Gain) loss on sale of business and other exit costs, net		$	(249,407)	$	(243,407)	$	(223,962)	$	(248,439)	$	(3,189)	$	24,477
Depreciation, amortization and accretion expense
	Incremental depreciation, amortization and accretion, net of salvage values		2012-2014		200,000		225,000		198,571		178,513		44,513		20,058
(Increase) decrease in Operating income				$	(49,407)	$	(18,407)	$	(25,391)	$	(69,926)	$	41,324	$	44,535

Incremental depreciation, amortization and accretion, net of salvage values represents anticipated amounts to be recorded in the specified time periods as a result of a change in estimate for the remaining useful life and salvage value of certain assets and a change in estimate which accelerated the settlement dates of certain asset retirement obligations in conjunction with the Divestiture Transaction. Specifically, for the years indicated, this is estimated depreciation, amortization and accretion recorded on assets and liabilities of the Divestiture Markets after the November 6, 2012 transaction date less depreciation, amortization and accretion that would have been recorded on such assets and liabilities in the normal course, absent the Divestiture Transaction.

As a result of the transaction, U.S. Cellular recognized the following amounts in the Consolidated Balance Sheet:
				Year Ended December 31, 2013
(Dollars in thousands)		Balance December 31, 2012		Costs Incurred		Cash Settlements (1)		Adjustments (2)		Balance December 31, 2013
Accrued compensation
	Employee related costs including severance, retention, outplacement	$	12,305	$	6,853	$	(11,905)	$	(5,200)	$	2,053
Other current liabilities
	Contract termination costs	$	30	$	22,675	$	(8,713)	$	-	$	13,992
Other deferred liabilities and credits
	Contract termination costs	$	-	$	34,283	$	(3,434)	$	-	$	30,849
				Year Ended December 31, 2012
(Dollars in thousands)		Balance November 6, 2012		Costs Incurred		Cash Settlements (1)		Adjustments (2)		Balance December 31, 2012
Accrued compensation
	Employee related costs including severance, retention, outplacement	$	-	$	12,609	$	(304)	$	-	$	12,305
Other current liabilities
	Contract termination costs	$	-	$	59	$	(29)	$	-	$	30
(1)	Cash settlement amounts are included in either the Net income or changes in Other assets and liabilities line items as part of Cash flows from operating activities on the Consolidated Statement of Cash Flows.
(2)	Adjustment to liability represents changes to previously accrued amounts.

Other Acquisitions, Divestitures and Exchanges

On October 4, 2013, U.S. Cellular sold the majority of its Mississippi Valley non-operating market license (“unbuilt license”) for $308.0 million. At the time of the sale, a $250.6 million gain was recorded in (Gain) loss on license sales and exchangesin the Consolidated Statement of Operations.

On August 14, 2013 U.S. Cellular entered into a definitive agreement to sell the majority of its St. Louis area unbuilt license for $92.3 million. This transaction is subject to regulatory approval and is expected to close in the first quarter of 2014. In accordance with GAAP, the book value of the license has been accounted for and disclosed as “held for sale” in the Consolidated Balance Sheet at December 31, 2013.

On November 20, 2012, U.S. Cellular acquired seven 700 MHz licenses covering portions of Illinois, Michigan, Minnesota, Missouri, Nebraska, Oregon, Washington and Wisconsin for $57.7 million.

On August 15, 2012, U.S. Cellular acquired four 700 MHz licenses covering portions of Iowa, Kansas, Missouri, Nebraska and Oklahoma for $34.0 million.

On March 14, 2012, U.S. Cellular sold the majority of the assets and liabilities of a wireless market for $49.8 million in cash. At the time of the sale, a $4.2 million gain was recorded in (Gain) loss on sale of business and other exit costs, net in the Consolidated Statement of Operations. On May 9, 2011, pursuant to certain required terms of the partnership agreement, U.S. Cellular paid $24.6 million in cash to purchase the remaining ownership interest in this wireless market in which it previously held a 49% noncontrolling interest. In connection with the acquisition of the remaining interest, a $13.4 million gain was recorded to adjust the carrying value of this 49% investment to its fair value of $25.7 million based on an income approach valuation method.  The gain was recorded in Gain (loss) on investments in the Consolidated Statement of Operations in 2011.

On September 30, 2011, U.S. Cellular completed an exchange whereby U.S. Cellular received eighteen 700 MHz spectrum licenses covering portions of Idaho, Illinois, Indiana, Kansas, Nebraska, Oregon and Washington in exchange for two PCS spectrum licenses covering portions of Illinois and Indiana.  The exchange of licenses provided U.S. Cellular with additional spectrum to meet anticipated future capacity and coverage requirements in several of its markets.  No cash, customers, network assets, other assets or liabilities were included in the exchange.  As a result of this transaction, U.S. Cellular recognized a gain of $11.8 million, representing the difference between the fair value of the licenses received, calculated using a market approach valuation method, and the carrying value of the licenses surrendered.  This gain was recorded in (Gain) loss on license sales and exchangesin the Consolidated Statement of Operations for the year ended December 31, 2011. 

U.S. Cellular acquisitions in 2013 and 2012 and the allocation of the purchase price for these acquisitions were as follows:
			Allocation of Purchase Price
(Dollars in thousands)	Purchase Price		Goodwill		Licenses		Intangible Assets Subject to Amortization		Net Tangible Assets/(Liabilities)
2013
Licenses	$	16,540	$	-	$	16,540	$	-	$	-
2012
Licenses	$	122,690	$	-	$	122,690	$	-	$	-

At December 31, 2013 and 2012, the following assets and liabilities were classified in the Consolidated Balance Sheet as "Assets held for sale" and "Liabilities held for sale":
			Current Assets		Licenses		Goodwill		Property, Plant and Equipment		Loss on Assets Held for Sale (1)		Total Assets Held for Sale		Liabilities Held for Sale (2)
(Dollars in thousands)
2013
Divestiture of Spectrum Licenses			$	-	$	16,027	$	-	$	-	$	-	$	16,027	$	-
2012
Divestiture Transaction			$	-	$	140,599	$	72,994	$	-	$	-	$	213,593	$	19,594
Bolingbrook Customer Care Center (3)				-		-		-		4,275		(1,105)		3,170		-
	Total		$	-	$	140,599	$	72,994	$	4,275	$	(1,105)	$	216,763	$	19,594
(1)		Loss on assets held for sale was recorded in (Gain) loss on sale of business and other exit costs, net in the Consolidated Statement of Operations.
(2)		Liabilities held for sale primarily consisted of Customer deposits and deferred revenues.
(3)		Effective January 1, 2013, U.S. Cellular transferred its Bolingbrook Customer Care Center operations to an existing third party vendor.

XML

Related Parties

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Related Parties

NOTE 17 RELATED PARTIES

U.S. Cellular is billed for all services it receives from TDS, pursuant to the terms of various agreements between it and TDS. These billings are included in U.S. Cellular's Selling, general and administrative expenses. Some of these agreements were established at a time prior to U.S. Cellular's initial public offering when TDS owned more than 90% of U.S. Cellular's outstanding capital stock and may not reflect terms that would be obtainable from an unrelated third party through arms-length negotiations. Billings from TDS to U.S. Cellular are based on expenses specifically identified to U.S. Cellular and on allocations of common expenses. Such allocations are based on the relationship of U.S. Cellular's assets, employees, investment in property, plant and equipment and expenses relative to all subsidiaries in the TDS consolidated group. Management believes the method TDS uses to allocate common expenses is reasonable and that all expenses and costs applicable to U.S. Cellular are reflected in its financial statements.Billings to U.S. Cellular from TDS totaled $99.2million, $104.3million and $104.1million in 2013, 2012 and 2011, respectively.

The Audit committee of the Board of Directors of U.S. Cellular is responsible for the review and evaluation of all related party transactions as such term is defined by the rules of the New York Stock Exchange (“NYSE”).

XML

Noncontrolling Interests

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Noncontrolling Interests

NOTE 13 NONCONTROLLING INTERESTS

U.S. Cellular's consolidated financial statements include certain noncontrolling interests that meet the GAAP definition of mandatorily redeemable financial instruments.  These mandatorily redeemable noncontrolling interests represent interests held by third parties in consolidated partnerships and limited liability companies (“LLCs”), where the terms of the underlying partnership or LLC agreement provide for a defined termination date at which time the assets of the subsidiary are to be sold, the liabilities are to be extinguished and the remaining net proceeds are to be distributed to the noncontrolling interest holders and U.S. Cellular in accordance with the respective partnership and LLC agreements.  The termination dates of these mandatorily redeemable noncontrolling interests range from 2085 to 2107.

The estimated aggregate amount that would be due and payable to settle all of these noncontrolling interests assuming an orderly liquidation of the finite-lived consolidated partnerships and LLCs on December 31, 2013, net of estimated liquidation costs, is $24.8 million.  This amount excludes redemption amounts recorded in Noncontrolling interests with redemption features in the Consolidated Balance Sheet.  The estimate of settlement value was based on certain factors and assumptions which are subjective in nature.  Changes in those factors and assumptions could result in a materially larger or smaller settlement amount.  U.S. Cellular currently has no plans or intentions relating to the liquidation of any of the related partnerships or LLCs prior to their scheduled termination dates.  The corresponding carrying value of the mandatorily redeemable noncontrolling interests in finite-lived consolidated partnerships and LLCs at December 31, 2013 was $15.4 million, and is included in Noncontrolling interests in the Consolidated Balance Sheet. The excess of the aggregate settlement value over the aggregate carrying value of these mandatorily redeemable noncontrolling interests is due primarily to the unrecognized appreciation of the noncontrolling interest holders' share of the underlying net assets in the consolidated partnerships and LLCs.  Neither the noncontrolling interest holders' share, nor U.S. Cellular's share, of the appreciation of the underlying net assets of these subsidiaries is reflected in the consolidated financial statements.

XML

Asset Retirement Obligation

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Asset Retirement Obligation

NOTE 9 ASSET RETIREMENT OBLIGATIONS

U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations in its operating markets.Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions. These obligations are included in Other deferred liabilities and credits and Other current liabilities in the Consolidated Balance Sheet.

In2013 and 2012, U.S. Cellular performed a review of the assumptions and estimated costs related to its asset retirement obligations. The results of the reviews (identified as “Revisions in estimated cash outflows”) and other changes in asset retirement obligations during 2013 and 2012, including the Divestiture Transaction,were as follows:

(Dollars in thousands)		2013		2012
Balance, beginning of period		$	179,607	$	143,402
	Additional liabilities accrued		635		5,578
	Revisions in estimated cash outflows (1)		6,268		22,588
	Disposition of assets (2)		(3,534)		(2,674)
	Accretion expense (3)		12,592		10,713
Balance, end of period (4)		$	195,568	$	179,607
(1)	Included increases of $14.9 million as a result of changes in expected settlement dates related to the Divestiture Transaction in 2012.
(2)	Included $2.0 million of incremental disposition costs related to the Divestiture Transaction in 2013.
(3)	Included $1.1 million and $0.2 million of incremental accretion related to the Divestiture Transaction in 2013 and 2012, respectively.
(4)	In 2013, as a result of the accelerated settlement dates of certain asset retirement obligations related to the Divestiture Transaction, U.S. Cellular reclassified $37.7 million of its asset retirement obligations from Other deferred liabilities and credits to Other current liabilities.

XML

Asset Retirement Obligaion (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012
Asset retirement obligation
Asset retirement obligation - beginning balance	$ 179,607	[1]	$ 143,402
Additional liabilities accrued	635		5,578
Revisions in estimated cash outflows	6,268	[2]	22,588	[2]
Disposition of assets	(3,534)	[3]	(2,674)	[3]
Accretion expense	12,592	[4]	10,713	[4]
Asset retirement obligation - ending balance	195,568	[1]	179,607	[1]
Divestiture transaction
Asset retirement obligation
Revisions in estimated cash outflows			14,900
Disposition of assets	(2,000)
Accretion expense	1,100		200
Divestiture transaction | Other current liabilities
Asset retirement obligation
Asset retirement obligation - ending balance	$ 37,700

[1] In 2013, as a result of the accelerated settlement dates of certain asset retirement obligations related to the Divestiture Transaction, U.S. Cellular reclassified $37.7 million of its asset retirement obligations from Other deferred liabilities and credits to Other current liabilities.

[2] Included increases of $14.9 million as a result of changes in expected settlement dates related to the Divestiture Transaction in 2012.

[3] Included $2.0 million of incremental disposition costs related to the Divestiture Transaction in 2013.

[4] Included $1.1 million and $0.2 million of incremental accretion related to the Divestiture Transaction in 2013 and 2012, respectively.

XML

Investment in Unconsolidated Entities

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Investment in Unconsolidated Entities

NOTE 7 INVESTMENTS IN UNCONSOLIDATED ENTITIES

Investments in unconsolidated entities consist of amounts invested in wireless entities in which U.S. Cellular holds a noncontrolling interest. These investments are accounted for using either the equity or cost method as shown in the following table:

December 31,		2013		2012
(Dollars in thousands)
Equity method investments:
	Capital contributions, loans, advances and adjustments	$	121,571	$	10,323
	Cumulative share of income		1,152,916		1,017,449
	Cumulative share of distributions		(1,010,513)		(884,852)
			263,974		142,920
Cost method investments			1,611		1,611
Total investments in unconsolidated entities		$	265,585	$	144,531

Equity in earnings of unconsolidated entities totaled $131.9 million, $90.4 million and$83.6 million in 2013, 2012 and 2011, respectively; of those amounts, U.S. Cellular's investment in the Los Angeles SMSA Limited Partnership (“LA Partnership”) contributed $78.4 million,$67.2million and $55.3 million in 2013, 2012 and 2011, respectively. U.S. Cellular held a 5.5% ownership interest in the LA Partnership throughout and at the end of each of these years.

The following tables, which are based on information provided in part by third parties,summarize the combined assets, liabilities and equity, and the combined results of operations of U.S. Cellular's equity method investments:

December 31,		2013		2012
(Dollars in thousands)
Assets
	Current	$	489,659	$	444,100
	Due from affiliates		408,735		298,707
	Property and other		2,026,104		1,896,784
		$	2,924,498	$	2,639,591
Liabilities and Equity
	Current liabilities	$	351,624	$	350,067
	Deferred credits		84,834		80,660
	Long-term liabilities		19,712		21,328
	Long-term capital lease obligations		707		405
	Partners' capital and shareholders' equity		2,467,621		2,187,131
		$	2,924,498	$	2,639,591

Year Ended December 31,		2013		2012		2011
(Dollars in thousands)
Results of Operations
	Revenues	$	6,218,067	$	5,804,466	$	5,519,024
	Operating expenses		4,473,722		4,363,399		4,282,277
	Operating income		1,744,345		1,441,067		1,236,747
	Other income, net		4,842		4,003		4,976
	Net income	$	1,749,187	$	1,445,070	$	1,241,723

NY1 & NY2 Deconsolidation

U.S. Cellular holds a 60.00% interest in St. Lawrence Seaway RSA Cellular Partnership (“NY1”) and a 57.14% interest in New York RSA 2 Cellular Partnership (“NY2”) (together with NY1, the “Partnerships”). The remaining interests in the Partnerships are held by Cellco Partnership d/b/a Verizon Wireless (“Verizon Wireless”). The Partnerships are operated by Verizon Wireless under the Verizon Wireless brand. Prior to April 3, 2013, because U.S. Cellular owned a greater than 50% interest in each of these Partnerships and based on U.S. Cellular's rights under the Partnership Agreements, U.S. Cellular consolidated the financial results of these Partnerships in accordance with GAAP.

On April 3, 2013, U.S. Cellular entered into an agreement relating to the Partnerships. The agreement amends the Partnership Agreements in several ways which provide Verizon Wireless with substantive participating rights that allow Verizon Wireless to make decisions that are in the ordinary course of business of the Partnerships and which are significant to directing and executing the activities of the business. Accordingly, as required by GAAP, U.S. Cellular deconsolidated the Partnerships effective as of April 3, 2013 and thereafter reported them as equity method investments in its consolidated financial statements (“NY1 & NY2 Deconsolidation”). After the NY1 & NY2 Deconsolidation, U.S. Cellular retained the same ownership percentages in the Partnerships and will continue to report the same percentages of income from the Partnerships, which will be recorded in Equity in earnings of unconsolidated entities in the Consolidated Statement of Operations. In addition to the foregoing described arrangements, U.S. Cellular has certain other arm's length, ordinary business relationships with Verizon Wireless and its affiliates.

In accordance with GAAP, as a result of the NY1 & NY2 Deconsolidation, U.S. Cellular's interest in the Partnerships was reflected in Investments in unconsolidated entities at a fair value of $114.8 million as of April 3, 2013. Recording U.S. Cellular's interest in the Partnerships required allocation of the excess of fair value over book value to customer lists, licenses, a favorable contract and goodwill of the Partnerships. Amortization expense related to customer lists and the favorable contract will be recognized over their respective useful lives and is included in Equity in earnings of unconsolidated entities in the Consolidated Statement of Operations. In addition, U.S. Cellular recognized a non-cash pre-tax gain of $18.5 millionin the second quarter of 2013. The gain was recorded in Gain (loss) on investments in the Consolidated Statement of Operations.

The Partnerships were valued using a discounted cash flow approach and a publicly-traded guideline company method. The discounted cash flow approach uses value drivers and risks specific to the industry and current economic factors and incorporates assumptions that market participants would use in their estimates of fair value and may not be indicative of U.S. Cellular specific assumptions.  The most significant assumptions made in this process were the revenue growth rate (shown as a simple average in the table below), the terminal revenue growth rate, discount rate and capital expenditures. The assumptions were as follows:

Key assumptions
Average expected revenue growth rate (next ten years)	2.0	%
Terminal revenue growth rate (after year ten)	2.0	%
Discount rate	10.5	%
Capital expenditures as a percentage of revenue	14.9-18.8	%

The publicly-traded guideline company method develops an indication of fair value by calculating average market pricing multiples for selected publicly-traded companies using multiples of: Revenue and Earnings before Interest, Taxes, and Depreciation and Amortization (EBITDA). The developed multiples were applied to applicable financial measures of the Partnerships to determine fair value. The discounted cash flow approach and publicly-traded guideline company method were weighted to arrive at the total fair value of the Partnerships.

XML

Property, Plant and Equipment

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Property, Plant and Equipment

NOTE 8 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment in service and under construction, and related accumulated depreciation and amortization, as of December 31, 2013 and 2012 were as follows:

December 31,	Useful Lives (Years)	2013		2012
(Dollars in thousands)
Land	N/A	$	36,266	$	33,947
Buildings	20		304,272		341,852
Leasehold and land improvements	1-30		1,197,520		1,188,720
Cell site equipment	6-25		3,306,575		3,100,916
Switching equipment	1-8		1,161,976		1,155,114
Office furniture and equipment	3-5		539,248		535,656
Other operating assets and equipment	5-25		92,456		128,290
System development	3-7		962,698		631,184
Work in process	N/A		116,501		362,749
			7,717,512		7,478,428
Accumulated depreciation and amortization			(4,860,992)		(4,455,840)
		$	2,856,520	$	3,022,588

Depreciation and amortization expense totaled $791.1million, $597.7 million and $565.1 million in 2013, 2012 and 2011, respectively. As a result of the Divestiture Transaction, U.S. Cellular recognized incremental depreciation and amortization in 2012 and 2013. See Note 5—Acquisitions, Divestitures and Exchanges for additional information.

In 2013, 2012 and 2011,(Gain) loss on asset disposals, net included charges of $30.6million, $18.1million and $9.9 million, respectively, related to disposals of assets, trade-ins of older assets for replacement assets and other retirements of assets from service in the normal course of business.

XML

Debt

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Debt

NOTE 10 DEBT

Revolving Credit Facility

At December 31, 2013, U.S. Cellular had a revolving credit facility available for general corporate purposes. Amounts under the revolving credit facility may be borrowed, repaid and reborrowed from time to time until maturity. U.S. Cellular did not borrow under its current or previous revolving credit facilities in 2013, 2012 or 2011 except for letters of credit.

U.S. Cellular's interest cost on its revolving credit facility is subject to increase if its current credit ratings from nationally recognized credit rating agenciesis lowered, and is subject to decrease if the ratings are raised. The credit facility would not cease to be available nor would the maturity date accelerate solely as a result of a downgrade in U.S. Cellular's credit rating. However, a downgrade in U.S. Cellular's credit rating could adversely affect its ability to renew the credit facilities or obtain access to other credit facilities in the future.

The maturity date of any borrowings under the U.S. Cellular revolving credit facility would accelerate in the event of a change in control.

The following table summarizes the terms of the revolving credit facility as of December 31, 2013:
(Dollars in millions)
Maximum borrowing capacity			$	300.0
Letters of credit outstanding (1)			$	17.6
Amount borrowed			$	-
Amount available for use			$	282.4
Borrowing rate: One-month London Interbank Offered Rate ("LIBOR") plus contractual spread (2)				1.67	%
	LIBOR			0.17	%
	Contractual spread			1.50	%
Range of commitment fees on amount available for use (3)
	Low			0.13	%
	High			0.30	%
Agreement date				December 2010
Maturity date				December 2017
Fees incurred attributable to the Revolving Credit Facility are as follows:
	Fees incurred as a percent of Maximum borrowing capacity for 2013			0.25	%
	Fees incurred, amount
		2013	$	0.8
		2012	$	1.1
		2011	$	1.2
(1)	In June 2013, U.S. Cellular provided $17.4 million in letters of credit to the FCC in connection with U.S. Cellular's winning bids in Auction 901. See Note 16 — Supplemental Cash Flow Disclosures for additional information on Auction 901.
(2)	Borrowings under the revolving credit facility bear interest at LIBOR plus a contractual spread based on U.S. Cellular’s credit rating or, at U.S. Cellular’s option, an alternate “Base Rate” as defined in the revolving credit agreement. U.S. Cellular may select a borrowing period of either one, two, three or six months (or other period of twelve months or less if requested by U.S. Cellular and approved by the lenders). If U.S. Cellular provides notice of intent to borrow less than three business days in advance of a borrowing, interest on borrowing is at the Base Rate plus the contractual spread.
(3)	The revolving credit facility has commitment fees based on the unsecured senior debt ratings assigned to U.S. Cellular by certain ratings agencies.

The continued availability of the revolving credit facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and make representations regarding certain matters at the time of each borrowing. U.S. Cellular believes it was in compliance as of December 31, 2013 with all covenants and other requirements set forth in the revolving credit facility.

In connection with U.S. Cellular's revolving credit facility, TDS and U.S. Cellular entered into a subordination agreement dated December 17, 2010 together with the administrative agent for the lenders under U.S. Cellular's revolving credit agreement. Pursuant to this subordination agreement, (a) any consolidated funded indebtedness from U.S. Cellular to TDS will be unsecured and (b) any (i) consolidated funded indebtedness from U.S. Cellular to TDS (other than “refinancing indebtedness” as defined in the subordination agreement) in excess of $105,000,000, and (ii) refinancing indebtedness in excess of $250,000,000, will be subordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under U.S. Cellular's revolving credit agreement. As of December 31, 2013, U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the revolving credit agreement pursuant to the subordination agreement.

At December 31, 2013, U.S. Cellular had recorded $2.7million of issuance costs related to the revolving credit facility which is included in Other assets and deferred charges in the Consolidated Balance Sheet.

Long-Term Debt
Long-term debt as of December 31, 2013 and 2012 was as follows:
December 31,
(Dollars in thousands)			Issuance date	Maturity date	Call date	2013		2012
	Unsecured Senior Notes
		6.7%	December 2003 and June 2004	December 2033	December 2003	$	544,000	$	544,000
		Less: 6.7% Unamortized discount					(11,551)		(11,806)
							532,449		532,194
		6.95%	May 2011	May 2060	May 2016		342,000		342,000
	Obligation on capital leases						3,749		4,756
Total long-term debt						$	878,198	$	878,950
	Long-term debt, current					$	166	$	92
	Long-term debt, noncurrent					$	878,032	$	878,858

U.S. Cellular may redeem the 6.7% Senior Notes, in whole or in part, at any time prior to maturity at a redemption price equal to the greater of (a) 100% of the principal amount of such notes, plus accrued and unpaid interest, or (b) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semi-annual basis at the Treasury Rate plus 30 basis points. U.S. Cellular may redeem the 6.95% Senior Notes, in whole or in part at any time after the call date, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest.

Interest on the 6.7% Senior Notes is payable semi-annually, and on the 6.95% Senior Notes is payable quarterly.

Capitalized debt issuance costs for Unsecured Senior Notes totaled $16.3 million and are included in Other assets and deferred charges (a long-term asset account). These costs are amortized over the life of the notes using the effective interest method.

U.S. Cellular does not have any annual requirements for principal payments on long-term debt over the next five years (excluding capital lease obligations).

The covenants associated with U.S. Cellular's long-term debt obligations, among other things, restrict U.S. Cellular'sability, subject to certain exclusions, to incur additional liens, enter into sale and leaseback transactions, and sell, consolidate or merge assets.

U.S. Cellular's long-term debt indentures do not contain any provisions resulting in acceleration of the maturities of outstanding debt in the event of a change in U.S. Cellular's credit rating. However, a downgrade in U.S. Cellular's credit rating could adversely affect its ability to obtain long-term debt financing in the future.

XML

Commitments and Contingencies, additional lease informaton (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Commitments and Contingencies Disclosure [Abstract]
Rent expense	$ 162.1	$ 183.9	$ 171.6
Rent revenue	$ 45.7	$ 41.7	$ 39.2

XML

Commitments and Contingencies, legal accruals and unasserted claims (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Loss Contingency Estimate
Accrual for legal proceedings and unasserted claims	$ 0.3	$ 1.7

XML

Commitments and Contingencies minimum lease obligations (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract]
Operating leases	U.S. Cellular is a party to various lease agreements, both as lessee and lessor, for office space, retail store sites, cell sites and equipment which are accounted for as operating leases. Certain leases have renewal options and/or fixed rental increases. Renewal options that are reasonably assured of exercise are included in determining the lease term. Any rent abatements or lease incentives, in addition to fixed rental increases, are included in the calculation of rent expense and calculated on a straight-line basis over the defined lease term.
Operating Leases Future Minimum Payments Due Abstract
Operating Leases - Future Minimum Rental Payments 2014	$ 152,349
Operating Leases - Future Minimum Rental Payments 2015	134,852
Operating Leases - Future Minimum Rental Payments 2016	116,397
Operating Leases - Future Minimum Rental Payments 2017	97,098
Operating Leases - Future Minimum Rental Payments 2018	79,166
Operating Leases - Future Minimum Rental Payments After 2018	783,730
Operating Leases - Future Minimum Rental Payments Total	1,363,592
Operating Leases Future Minimum Payments Receivable Abstract
Operating Leases - Future Minimum Rental Receipts 2014	46,357
Operating Leases - Future Minimum Rental Receipts 2015	36,847
Operating Leases - Future Minimum Rental Receipts 2016	26,201
Operating Leases - Future Minimum Rental Receipts 2017	17,226
Operating Leases - Future Minimum Rental Receipts 2018	6,521
Operating Leases - Future Minimum Rental Receipts After 2018	227
Operating Leases - Future Minimum Rental Receipts Total	$ 133,379

XML

Asset Retirement Obligations (Table)

12 Months Ended

Dec. 31, 2013

Asset Retirement Obligation [Abstract]

Asset retirement obligations

(Dollars in thousands)		2013		2012
Balance, beginning of period		$	179,607	$	143,402
	Additional liabilities accrued		635		5,578
	Revisions in estimated cash outflows (1)		6,268		22,588
	Disposition of assets (2)		(3,534)		(2,674)
	Accretion expense (3)		12,592		10,713
Balance, end of period (4)		$	195,568	$	179,607
(1)	Included increases of $14.9 million as a result of changes in expected settlement dates related to the Divestiture Transaction in 2012.
(2)	Included $2.0 million of incremental disposition costs related to the Divestiture Transaction in 2013.
(3)	Included $1.1 million and $0.2 million of incremental accretion related to the Divestiture Transaction in 2013 and 2012, respectively.
(4)	In 2013, as a result of the accelerated settlement dates of certain asset retirement obligations related to the Divestiture Transaction, U.S. Cellular reclassified $37.7 million of its asset retirement obligations from Other deferred liabilities and credits to Other current liabilities.

XML

Income Taxes, Additional Disclosures (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Disclosure
Net accrued interest and penalties, total	$ 12.3	$ 12.8
Accrued interest and penalties related to unrecognized income tax benefits	$ 0.6	$ (2.2)	$ (2.6)
State
Income Tax Disclosure
Open tax years by major tax jurisdiction	2009
Federal
Income Tax Disclosure
Open tax years by major tax jurisdiction	2011

XML

Stock Based Compensation

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Stock Based Compensation

NOTE 15 STOCK-BASED COMPENSATION

U.S. Cellular has established the following stock-based compensation plans: long-term incentive plans and a Non-Employee Director compensation plan, and had an employee stock purchase plan that was terminated in the fourth quarter of 2011. In addition, U.S. Cellular employees were eligible to participate in the TDS employee stock purchase plan before that plan also was terminated in the fourth quarter of 2011.

Under the U.S. Cellular Long-Term Incentive Plans, U.S. Cellular may grant fixed and performance based incentive and non-qualified stock options, restricted stock, restricted stock units, and deferred compensation stock unit awards to key employees. At December 31, 2013, the only types of awards outstanding are fixed non-qualified stock option awards, restricted stock unit awards, and deferred compensation stock unit awards.

On June 25, 2013, U.S. Cellular paid a special cash dividend to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013. Outstanding U.S. Cellular stock options, restricted stock unit awards and deferred compensation stock units were equitably adjusted for the special cash dividend. The impact of such adjustments are fully reflected for all years presented. See Note 4 – Earnings Per Share for additional information.

At December 31, 2013, U.S. Cellular had reserved 10,139,000 Common Shares for equity awards granted and to be granted under the Long-Term Incentive Plans. No Common Shares were reserved for issuance to employees under any employee stock purchase plan since this plan was terminated in the fourth quarter of 2011.

U.S. Cellular also has established a Non-Employee Director compensationplan under which it has reserved 212,000 Common Shares at December 31, 2013for issuance as compensation to members of the Board of Directors who are not employees of U.S. Cellular or TDS.

U.S. Cellular uses treasury stock to satisfy requirements for Common Shares issued pursuant to its various stock-based compensation plans.

Long-Term Incentive Plans—Stock Options—Stock options granted to key employees are exercisable over a specified period not in excess of ten years. Stock options generally vest over a period of three years from the date of grant. Stock options outstanding at December 31, 2013 expire between 2014 and 2023. However, vested stock options typically expire 30 days after the effective date of an employee's termination of employment for reasons other than retirement. Employees who leave at the age of retirement have 90 days (or one year if they satisfy certain requirements) within which to exercise their vested stock options. The exercise price of options equals the market value of U.S. Cellular Common Shares on the date of grant.

U.S. Cellular estimated the fair value of stock options granted during 2013, 2012, and 2011 using the Black-Scholes valuation model and the assumptions shown in the table below.

	2013	2012	2011
Expected life	4.6-9.0 years	4.5 years	4.3 years
Expected volatility	29.2%-39.6%	40.7%-42.6%	43.4%-44.8%
Dividend yield	0%	0%	0%
Risk-free interest rate	0.7%-2.4%	0.5%-0.9%	0.7%-2.0%
Estimated annual forfeiture rate	0.0%-8.1%	0.0%-9.1%	0.0%-7.8%

A summary of U.S. Cellular stock options outstanding (total and portion exercisable) and changes during the three years ended December 31,2013, is presented in the table below:

Common Share Options		Number of Options	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding at December 31, 2010		2,627,000	$	42.28
(1,333,000 exercisable)				47.18
	Granted	694,000		44.34	$	16.66
	Exercised	(201,000)		32.32			$	2,099,000
	Forfeited	(83,000)		39.42
	Expired	(203,000)		49.32
Outstanding at December 31, 2011		2,834,000	$	43.07
(1,533,000 exercisable)				46.23
	Granted	677,000		34.91	$	12.61
	Exercised	(47,000)		29.82			$	205,000
	Forfeited	(117,000)		38.45
	Expired	(133,000)		46.17
Outstanding at December 31, 2012		3,214,000	$	41.58
(1,928,000 exercisable)			$	43.99
	Granted	1,213,000		32.45	$	11.53
	Exercised	(892,000)		34.78			$	6,787,000
	Forfeited	(574,000)		34.17
	Expired	(247,000)		48.35
Outstanding at December 31, 2013		2,714,000	$	42.22			$	13,015,000	6.80
(1,359,000 exercisable)			$	46.91			$	2,632,000	4.60

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between U.S. Cellular's closing stock price and the exercise price multiplied by the number of in-the-money options) that was received by the option holders upon exercise or that would have been received by option holders had all options been exercised on December 31, 2013.

Long-Term Incentive Plans—Restricted Stock Units—U.S. Cellular grants restricted stock unit awards, which generally vest after three years, to key employees.

U.S. Cellular estimates the fair value of restricted stock units based on the closing market price of U.S. Cellular shares on the date of grant. The fair value is then recognized as compensation cost on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

A summary of U.S. Cellular nonvested restricted stock units at December 31, 2013 and changes during the year then ended is presented in the table below:

Common Restricted Stock Units	Number	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2012	1,139,000	$	38.40
Granted	601,000		32.06
Vested	(238,000)		42.26
Forfeited	(332,000)		35.63
Nonvested at December 31, 2013	1,170,000	$	36.46

The total fair value of restricted stock units that vested during 2013,2012 and 2011 was$8.8 million, $8.9 million and $9.5 million, respectively, as of the respective vesting dates. The weighted average grant date fair value of restricted stock units granted in 2013, 2012 and 2011 was $32.06, $34.09 and $42.33, respectively.

Long-Term Incentive Plans—Deferred Compensation Stock Units—Certain U.S. Cellular employees may elect to defer receipt of all or a portion of their annual bonuses and to receive a company matching contribution on the amount deferred. All bonus compensation that is deferred by employees electing to participate is immediately vested and is deemed to be invested in U.S. Cellular Common Share stock units. The amount of U.S. Cellular's matching contribution depends on the portion of the annual bonus that is deferred. Participants receive a 25% match for amounts deferred up to 50% of their total annual bonus and a 33% match for amounts that exceed 50% of their total annual bonus; such matching contributions also are deemed to be invested in U.S. Cellular Common Share stock units.

The total fair value of deferred compensation stock units that vested was less than $0.1 million during 2013, 2012 and 2011. The weighted average grant date fair value of deferred compensation stock units granted in 2013, 2012 and 2011 was $31.50, $36.34 and $41.79, respectively. As of December 31, 2013, there were 12,000 vested but unissued deferred compensation stock units valued at $0.5 million.

Compensation of Non-Employee Directors—U.S. Cellular issued 13,000, 7,600and 6,600Common Shares in2013, 2012 and 2011, respectively, under its Non-Employee Director compensation plan.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense recognized during 2013, 2012 and 2011:

Year Ended December 31,	2013		2012		2011
(Dollars in thousands)
Stock option awards	$	5,810	$	8,471	$	9,549
Restricted stock unit awards		9,485		12,300		10,037
Deferred compensation bonus and matching stock unit awards		2		240		12
Awards under employee stock purchase plan		-		-		255
Awards under Non-Employee Director compensation plan		547		455		330
Total stock-based compensation, before income taxes		15,844		21,466		20,183
Income tax benefit		(5,984)		(8,121)		(7,581)
Total stock-based compensation expense, net of income taxes	$	9,860	$	13,345	$	12,602

The following table provides a summary of the stock-based compensation expense included in the Consolidated Statement of Operations for the years ended:

December 31,		2013		2012		2011
(Dollars in thousands)
Selling, general and administrative expense	$	12,933	$	18,437	$	17,538
System operations		2,911		3,029		2,645
Total stock-based compensation expense	$	15,844	$	21,466	$	20,183

At December 31, 2013, unrecognized compensation cost for all U.S. Cellular stock-based compensation awards was $24.5 million and is expected to be recognized over a weighted average period of 2.3 years.

U.S. Cellular's tax benefits realized from the exercise of stock options and other awards totaled $6.1 million in 2013.

XML

Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Table)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Accounts receivable, allowance for doubtful accounts receivable

The changes in the allowance for doubtful accounts during the years ended December 31, 2013, 2012 and 2011 were as follows:
		2013		2012		2011
(Dollars in thousands)
Beginning balance		$	26,902	$	23,537	$	25,816
	Additions, net of recoveries		98,864		67,372		62,157
	Deductions		(65,528)		(64,007)		(64,436)
Ending balance		$	60,238	$	26,902	$	23,537

XML

Income Taxes, Deferred Tax Valuation Allowance (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Deferred tax valuation allowance, rollfoward
Deferred tax assets, valuation allowance, current	$ 3,000,000
Deferred tax assets valuation allowance noncurrent	40,392,000	40,208,000
Deferred tax asset valuation allowance
Deferred tax valuation allowance, rollfoward
Balance at beginning of period	41,295,000	30,261,000	29,891,000
Charged to income tax expense	(1,527,000)	3,033,000	(1,450,000)
Charged to other accounts	3,607,000	8,001,000	1,820,000
Balance at end of period	$ 43,375,000	$ 41,295,000	$ 30,261,000

XML

Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Details) (USD $)	12 Months Ended
	Dec. 31, 2013 number	Dec. 31, 2012	Dec. 31, 2011
Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Number of customers	4,800,000
Short-term investments	$ 50,104,000	$ 100,676,000
Long-term investments		50,305,000
Agent liability	121,300,000	88,200,000
Amounts recorded gross in revenues that are billed to customers and remitted to governmental authorities	114,700,000	135,700,000	125,200,000
Advertising costs	199,900,000	227,000,000	257,800,000
Accumulated amortization of deferred charges	26,000,000	12,700,000
TDS
Summary of Significant Accounting Policies and Recent Accounting Pronouncements
TDS ownership of U.S. Cellular	84.00%
Income taxes (payable)	(34,800,000)	(1,100,000)
401(k)
Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Defined contribution cost	15,400,000	17,100,000	15,500,000
Pension
Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Defined contribution cost	10,400,000	12,400,000	11,600,000
Allowance for doubtful accounts
Accounts receivable
Allowance for doubtful accounts, beginning balance	26,902,000	23,537,000	25,816,000
Additions, net of recoveries	98,864,000	67,372,000	62,157,000
Deductions	(65,528,000)	(64,007,000)	(64,436,000)
Allowance for doubtful accounts, ending balance	60,238,000	26,902,000	23,537,000
Loyalty Rewards Program
Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Change in accounting estimate, financial effect	As of December 31, 2013, U.S. Cellular estimated loyalty reward points breakage based on actuarial estimates and recorded a $7.4 million change in estimate, which reduced Customer deposits and deferred revenues in the Consolidated Balance Sheet and increased Service revenues in the Consolidated Statement of Operations.
Deferred revenue	116,200,000	56,600,000
Loyalty Rewards Program | Special issuance
Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Deferred revenue	$ 43,500,000

XML

Consolidated Balance Sheet Parenthetical (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Current assets
Customers and agents, allowances	$ 59,206	$ 24,290
Other, allowances	1,032	2,612
U.S. Cellular shareholders' equity
Authorized shares	190,000	190,000
Issued shares	88,074	88,074
Outstanding shares	84,205	84,168
Par value	88,074	88,074
Treasury shares	3,869	3,906
Common Shares
U.S. Cellular shareholders' equity
Authorized shares	140,000	140,000
Issued shares	55,068	55,068
Outstanding shares	51,199	51,162
Par value per share	$ 1.00	$ 1.00
Par value	55,068	55,068
Treasury shares	3,869	3,906
Series A Common Shares
U.S. Cellular shareholders' equity
Authorized shares	50,000	50,000
Issued shares	33,006	33,006
Outstanding shares	33,006	33,006
Par value per share	$ 1.00	$ 1.00
Par value	$ 33,006	$ 33,006

XML

Earnings Per Share

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Earnings per Share

NOTE 4 EARNINGS PER SHARE

Basic earnings per share attributable to U.S. Cellular shareholders is computed by dividing Net income attributable to U.S. Cellular shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share attributable to U.S. Cellular shareholders is computed by dividing Net income attributable to U.S. Cellular shareholders by the weighted average number of common shares outstanding during the period adjusted to include the effects of potentially dilutive securities. Potentially dilutive securities primarily include incremental shares issuable upon exercise of outstanding stock options and the vesting of restricted stock units.

The amounts used in computing earnings per common share and the effects of potentially dilutive securities on the weighted average number of common shares were as follows:

Year ended December 31,		2013		2012		2011
(Dollars and shares in thousands, except earnings per share)
Net income attributable to U.S. Cellular shareholders		$	140,038	$	111,006	$	175,041
Weighted average number of shares used in basic earnings per share			83,968		84,645		84,877
Effect of dilutive securities:
	Stock options		211		184		224
	Restricted stock units		551		401		347
Weighted average number of shares used in diluted earnings per share			84,730		85,230		85,448
Basic earnings per share attributable to U.S. Cellular shareholders		$	1.67	$	1.31	$	2.06
Diluted earnings per share attributable to U.S. Cellular shareholders		$	1.65	$	1.30	$	2.05

Certain Common Shares issuable upon the exercise of stock options or vesting of restricted stock units were not included in average diluted shares outstanding for the calculation of Diluted earnings per share attributable to U.S. Cellular shareholders because their effects were antidilutive. The number of such Common Shares excluded, if any, is shown in the table below.

Year Ended December 31,	2013	2012	2011
(Shares in thousands)
Stock options	2,010	2,123	1,591
Restricted stock units	190	369	250

On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75 per share, for an aggregate amount of $482.3 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013. Outstanding U.S. Cellular stock options and restricted stock unit awards were equitably adjusted for the special cash dividend. The impact of such adjustments on the earnings per share calculation was fully reflected for all years presented.

XML

Investment in Unconsolidated Entities, Deconsolidation (Details) (USD $)					12 Months Ended		12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 St. Lawrence Seaway RSA Cellular Partnership	Dec. 31, 2013 New York RSA 2 Cellular Partnership	Dec. 31, 2013 St. Lawrence Seaway RSA Cellular Partnership and New York RSA 2 Cellular Partnership	Apr. 03, 2013 St. Lawrence Seaway RSA Cellular Partnership and New York RSA 2 Cellular Partnership	Dec. 31, 2013 Discounted cash flow valuation approach	Dec. 31, 2013 Discounted cash flow valuation approach Minimum	Dec. 31, 2013 Discounted cash flow valuation approach Maximum
Fair Value Inputs
Average expected revenue growth rate (next ten years)							2.00%
Terminal revenue growth rate (after year ten)							2.00%
Discount rate							10.50%
Capital expenditures as a percentage of revenue								14.90%	18.80%
Deconsolidation of New York Partnerships
Date of deconsolidation					Apr. 03, 2013
Ownership interest in equity method investment			60.00%	57.14%
Investments in unconsolidated entities	$ 265,585,000	$ 144,531,000				$ 114,800,000
Deconsolidation description					On April 3, 2013, U.S. Cellular entered into an agreement relating to the Partnerships. The agreement amends the Partnership Agreements in several ways which provide Verizon Wireless with substantive participating rights that allow Verizon Wireless to make decisions that are in the ordinary course of business of the Partnerships and which are significant to directing and executing the activities of the business. Accordingly, as required by GAAP, U.S. Cellular deconsolidated the Partnerships effective as of April 3, 2013 and thereafter reported them as equity method investments in its consolidated financial statements (“NY1 & NY2 Deconsolidation”). After the NY1 & NY2 Deconsolidation, U.S. Cellular retained the same ownership percentages in the Partnerships and will continue to report the same percentages of income from the Partnerships, which will be recorded in Equity in earnings of unconsolidated entities in the Consolidated Statement of Operations. In addition to the foregoing described arrangements, U.S. Cellular has certain other arm’s length, ordinary business relationships with Verizon Wireless and its affiliates.
Deconsolidation gain					$ 18,500,000

XML

Common Shareholders' Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Common shareholders' equity, other disclosures
Dividend payable date	Jun. 25, 2013
Dividend date of record	Jun. 11, 2013
Series A Common and Common Shares, dividends per share paid	$ 5.75
Series A Common and Common Shares, dividends paid	$ 482,270
Share repurchases
Amount	18,544	20,045	62,294
Common share repurchase authorization	On November 17, 2009, the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009 and continuing each year thereafter, on a cumulative basis. These purchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on market prices and other conditions. This authorization does not have an expiration date.
Repurchase expiration	This authorization does not have an expiration date.
Treasury Shares
Share repurchases
Amount	18,544	20,045	62,294
Common Shares
Common shareholders' equity, other disclosures
Voting rights, board of directors	25%
Share repurchases
Number of shares acquired	499,000	571,000	1,276,000
Average cost per share	$ 37.19	$ 35.11	$ 48.82
Amount	$ 18,544	$ 20,045	$ 62,294
Common share repurchase authorization	On November 17, 2009, the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009 and continuing each year thereafter, on a cumulative basis. These purchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on market prices and other conditions.
Repurchase authorization, additional number of shares	1,300,000
Common Shares | 401(k)
Common shareholders' equity, other disclosures
Shares reserved	67,215
Common Shares | Treasury Shares
Common shareholders' equity, other disclosures
Shares reissued	535,578	182,195	286,211
Series A Common Shares
Common shareholders' equity, other disclosures
Voting rights, board of directors	75%

XML

Fair Value Measurements (Table)

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures

Fair value measurements

			December 31, 2013				December 31, 2012
		Level within the Fair Value Hierarchy	Book Value			Fair Value	Book Value		Fair Value
(Dollars in thousands)
Cash and cash equivalents		1	$	342,065	$	342,065	$	378,358	$	378,358
Short-term investments
	U.S. Treasury Notes	1		50,104		50,104		100,676		100,676
Long-term investments
	U.S. Treasury Notes	1		-		-		50,305		50,339
Long-term debt
	6.95% Senior Notes	1		342,000		309,852		342,000		376,610
	6.7% Senior Notes	2		532,449		507,697		532,194		582,744

XML

Related Parties (Details) (TDS, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
TDS
Related Party Transactions
Description of related transaction	U.S. Cellular is billed for all services it receives from TDS, pursuant to the terms of various agreements between it and TDS. These billings are included in U.S. Cellular's Selling, general and administrative expenses. Some of these agreements were established at a time prior to U.S. Cellular's initial public offering when TDS owned more than 90% of U.S. Cellular's outstanding capital stock and may not reflect terms that would be obtainable from an unrelated third party through arms-length negotiations. Billings from TDS to U.S. Cellular are based on expenses specifically identified to U.S. Cellular and on allocations of common expenses. Such allocations are based on the relationship of U.S. Cellular's assets, employees, investment in property, plant and equipment and expenses relative to all subsidiaries in the TDS consolidated group. Management believes the method TDS uses to allocate common expenses is reasonable and that all expenses and costs applicable to U.S. Cellular are reflected in its financial statements.
Billings to U.S. Cellular from TDS	$ 99.2	$ 104.3	$ 104.1

XML

Common Shareholders' Equity (Table)

12 Months Ended

Dec. 31, 2013

Common Shareholders' Equity

Share repurchases

Year Ended December 31,		Number of Shares	Average Cost Per Share		Total Cost
(Dollar amounts and shares in thousands)
2013
	U.S. Cellular Common Shares	499	$	37.19	$	18,544
2012
	U.S. Cellular Common Shares	571	$	35.11	$	20,045
2011
	U.S. Cellular Common Shares	1,276	$	48.82	$	62,294

XML

Common Shareholders' Equity

12 Months Ended

Dec. 31, 2013

Disclosure Text Block

Common Shareholders' Equity

NOTE 14 COMMON SHAREHOLDERS' EQUITY

Tax-Deferred Savings Plan

U.S. Cellular has reserved 67,215Common Shares for issuance under the TDS Tax-Deferred Savings Plan, a qualified profit-sharing plan pursuant to Sections 401(a) and 401(k) of the Internal Revenue Code. Participating employees have the option of investing their contributions in a U.S. Cellular Common Share fund, a TDS Common Share fundor certain unaffiliated funds.

Series A Common Shares

Series A Common Shares are convertible on a share-for-share basis into Common Shares. In matters other than the election of directors, each Series A Common Share is entitled to ten votes per share, compared to one vote for each Common Share. The Series A Common Shares are entitled to elect 75% of the directors (rounded down), and the Common Shares elect 25% of the directors (rounded up). As of December 31, 2013, a majority of U.S. Cellular'soutstanding Common Shares and all of U.S. Cellular's outstanding Series A Common Shares were held by TDS.

Common Share Repurchase Program

On November 17, 2009, the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009 and continuing each year thereafter, on a cumulative basis. These purchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on market prices and other conditions. This authorization does not have an expiration date.

Share repurchases made under this authorization were as follows:

Year Ended December 31,		Number of Shares	Average Cost Per Share		Total Cost
(Dollar amounts and shares in thousands)
2013
	U.S. Cellular Common Shares	499	$	37.19	$	18,544
2012
	U.S. Cellular Common Shares	571	$	35.11	$	20,045
2011
	U.S. Cellular Common Shares	1,276	$	48.82	$	62,294

Pursuant to certain employee and non-employee benefit plans, U.S. Cellular reissued535,578,182,195,and 286,211Treasury Shares in 2013, 2012 and 2011, respectively.

Dividend

On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75per share, for an aggregate amount of $482.3 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013.