-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rnmd0NeBzLyAbHNxkpXXilTcjwWhx4HAZxYf8qYInYU0p5ew5fEoxDW2FsvOfhBl CXvwpIzfAlsZsWP//ulIsA== 0000912057-97-013883.txt : 19970424 0000912057-97-013883.hdr.sgml : 19970424 ACCESSION NUMBER: 0000912057-97-013883 CONFORMED SUBMISSION TYPE: DEFA14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19970423 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELEPHONE & DATA SYSTEMS INC CENTRAL INDEX KEY: 0000096966 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 362669023 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEFA14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08251 FILM NUMBER: 97585767 BUSINESS ADDRESS: STREET 1: 30 NORTH LASALLE STREET SUITE 400 CITY: CHICAGO STATE: IL ZIP: 60602 BUSINESS PHONE: 6088288324 MAIL ADDRESS: STREET 1: 30 NORTH LASALLE STREE SUITE 400 CITY: CHICAGO STATE: IL ZIP: 60602 FORMER COMPANY: FORMER CONFORMED NAME: TELEPHONE SYSTEMS INC STOCK OPTION PLANS DATE OF NAME CHANGE: 19741118 FORMER COMPANY: FORMER CONFORMED NAME: TELEPHONE SYSTEMS INC DATE OF NAME CHANGE: 19740509 DEFA14A 1 DEFA14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant /x/ Filed by a Party other than the Registrant / / Check the appropriate box: / / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) / / Definitive Proxy Statement /X/ Definitive Additional Materials / / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 TELEPHONE AND DATA SYSTEMS, INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) N/A - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): /x/ No fee required. / / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: N/A 2) Aggregate number of securities to which transaction applies: N/A 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): N/A 4) Proposed maximum aggregate value of transaction: N/A 5) Total fee paid: N/A / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: N/A 2) Form, Schedule or Registration Statement No.: N/A 3) Filing Party: N/A 4) Date Filed: N/A TELEPHONE AND DATA SYSTEMS, INC. -------------------------------- Value Creation and Performance April 1997 TDS HISTORY - ----------- X 1969--Founded with 8 Wisconsin Telcos X 1970s--Grew Rapidly as Wireline Company - Focused on building value through upgrading to excellent modern service to customers - Maintained vigorous, highly successful acquisition program X 1980s--Paging (1981) and Cellular (1983) - Extended into new communications technologies - Captured great wireless values while building local telco base X 1990s--Dynamic growth and expansion - Accelerated highly successful service quality and customer growth programs. Extended acquisition into cellular. - Quadrupled cellular pops, nearly doubled telecom access lines - Doubled wireless pops presence with PCS auction (1995) 1A TDS TODAY - --------- TDS ----------------------------------------------------------------- US Cellular-80.9% Aerial-82.8% Telecom-100% Am. Paging-82.1% 25.7M Pops 27.6M Pops 1.0M Pops 76.0M Pops 1.16M Customers Currently .5M Customers .8M Customers $721M Revenues Launching $422M Revenues $102M Revenues 1B TDS GOALS - --------- X Focus on Fast Growing Local Telecommunications Markets in the United States X Extend from Wireline into Wireless Technologies X Rapidly Grow Customers, Revenues, Cash Flow and Earnings X Deliver Excellent Quality and Value Services X Grow Intrinsic Value 15+% Per Year over Long Term X Maintain Financial Strength and Flexibility 2 POSITIONED IN FAST GROWING TELECOM MARKETS - ------------------------------------------ EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC A = Local B = Long-Distance C = Wireless 1985 1995 2005 PROJECTED A = $54 A = $85 A = $140 B = $57 B = $80 B = $120 C = $ 2 C = $25 C = $ 90 $110 Billion $190 Billion $350 Billion X Over 50% of new access lines are wireless Source: Industry Data 3 WIRELESS GROWTH (PERCENT PENETRATION) - ------------------------------------- CELLULAR HAS EXPERIENCED DRAMATIC GROWTH SINCE 1986. PCS IS EXPECTED TO PROVIDE 60% OF WIRELESS ADDITIONS BY 2006. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC - ----------------------------------- Cellular PCS - ----------------------------------- 1986 0% - - ----------------------------------- 1987 0% - - ----------------------------------- 1988 1% - - ----------------------------------- 1989 1% - - ----------------------------------- 1990 2% - - ----------------------------------- 1991 3% - - ----------------------------------- 1992 4% - - ----------------------------------- 1993 6% - - ----------------------------------- 1994 9% - - ----------------------------------- 1995 13% - - ----------------------------------- 1996 16% 0% - ----------------------------------- 1997E 19% 1% - ----------------------------------- 1998E 22% 3% - ----------------------------------- 1999E 24% 4% - ----------------------------------- 2000E 25% 6% - ----------------------------------- 2001E 27% 8% - ----------------------------------- 2002E 28% 10% - ----------------------------------- 2003E 30% 11% - ----------------------------------- 2004E 31% 13% - ----------------------------------- 2005E 32% 15% - ----------------------------------- 2006E 33% 17% - ----------------------------------- Source: DLJ 4 TDS REVENUE MIX - --------------- EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC A = Wireline B = Cellular C = Paging D = PCS 1986 1996 2001 PROJECTED A = 83% A = 33% A = 22% B = 5% B = 58% B = 55% C = 12% C = 9% C = 6% D = 17% $155 Million $1.2 Billion 5 THE "VALUE GAP"--STRATEGIES AND TACTICS - --------------------------------------- INVESTOR CONCERN TDS STRATEGIES AND TACTICS Empire building: X TDS has increased value creation potential by management wants to growing its wireless pops per 1,000 Shares at a grow company size using CAGR of 15.3% Common Shares to acquire assets, diluting shareholders. 6 TDS--POPS/ACCESS LINES/PAGERS PER 1,000 SHARES - ---------------------------------------------- December 31, 1989 1996 CAGR ---- ---- ---- Cellular Pops 260 335 3.7% PCS Pops 0 370 -------------------- Total Wireless 260 705 15.3% -------------------- -------------------- Wireline Access Lines 9 8 -1.7% -------------------- -------------------- Pagers 7 10 5.2% -------------------- -------------------- 7 THE "VALUE GAP"--STRATEGIES AND TACTICS INVESTOR CONCERN TDS STRATEGIES AND TACTICS Capital structure: TDS's complex TDS capital structure facilitates and capital structure imposes encourages a strong balance sheet and liquidity and other limitations. financial flexibility X Net long-term assets per share have grown at a CAGR of 14.1% since 1989. X TDS's operating cash flow per share has grown at a CAGR of 14.5% since 1991 and is projected to grow at a CAGR of 20.4% from 1994 to 1997. 8 TDS BALANCE SHEET DATA - ---------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE) DECEMBER 31, 1989 1996 CAGR ---- ---- ---- Investments $326,973 $1,942,604 29.0% Fixed Assets, net 471,021 1,828,889 21.4% ---------------------------------- Total Long-term Assets 797,994 3,771,493 24.8% Less: Long-Term Debt 269,762 1,018,851 20.9% ---------------------------------- Net Long-term Assets $528,232 $2,752,642 26.6% ---------------------------------- ---------------------------------- Common and Series A Shares Outstanding 29,566 61,087 10.9% Net Long-term Assets Per Share $ 17.87 $ 45.06 14.1% 9 TDS CASH FLOW - ------------- (EXCLUDES AERIAL COMMUNICATIONS START-UP COSTS. DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS.) YEAR ENDED DEC. 31, 1991 1996 CAGR ---- ---- ---- Operating Cash Flow* US Cellular $ 2,438 $196,205 140.5% TDS Telecom 108,667 192,325 12.1% American Paging 1,297 (2,849) --------------------------- $112,402 $385,681 28.0% --------------------------- --------------------------- Common and Series A Shares Outstanding 34,964 61,087 11.8% Operating Cash Flow per share $ 3.21 $ 6.31 14.5% *Operating Income plus Depreciation and Amortization 10 TDS CASH FLOW - ------------- (EXCLUDES AERIAL COMMUNICATIONS START-UP COSTS. DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS.) YEAR ENDED DEC. 31, 1994 1997E CAGR ---- ---- ---- Operating Cash Flow* US Cellular $ 82,839 $300,000 53.6% TDS Telecom 159,562 200,000 7.8% American Paging 17,009 4,000 -38.3% --------------------------- $259,410 $504,000 24.8% --------------------------- --------------------------- Common and Series A Shares Outstanding 54,825 61,000 3.6% Operating Cash Flow per share $ 4.73 $ 8.26 20.4% *Operating Income plus Depreciation and Amortization 11 THE "VALUE GAP"--STRATEGIES AND TACTICS --------------------------------------- INVESTOR CONCERN TDS STRATEGIES AND TACTICS Conservative financing: TDS' conservative approach to financing: there is no benefit to X Protects against recent financial maintaining a strong risks in the wireless industry. balance sheet. X Preserves financial flexibility. X Enables TDS to maintain an investment grade debt rating. 12 RECENT EVENTS IN THE WIRELESS INDUSTRY -------------------------------------- X Pocket Communications Files Chapter 11 X Nextwave Requests Financial Relief from FCC 13 FINANCING STRATEGY - ------------------ X Preserve Appropriate Financial Flexibility X Maintain Investment Grade Rating X Keep Business Units' Financing Separate X Retain Income Tax Consolidation X Enhance Stock Price - Grow intrinsic value 15+% per share per year - Avoid actions damaging to stock price 14 THE "VALUE GAP"--STRATEGIES AND TACTICS --------------------------------------- INVESTOR CONCERN TDS STRATEGIES AND TACTICS Management is not concerned Recent TDS Actions: about stock price: shareholder X Numerous meetings with major shareholders. concerns have not been X Added another independent director to addressed. board of directors. X Initiated Share Repurchase Program -> Purchased nearly 800,000 TDS Shares in Q1'97 -> Purchased 350,000 USM Shares in Q1'97 X Engaged in Continuing Evaluation of TDS Corporate Structure X Changed Management Team at American Paging X Completed $935 Million in Aerial Financing X Reported Record Q1'97 Results 15 Cellular Providers January 2, 1996 - April 18, 1997 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC - ------------------------------------------------------------------------------- DOLLARS - ------------------------------------------------------------------------------- DATE ATI PWIR VCELA USM S&P TDS - ------------------------------------------------------------------------------- 1/2/96 100.000 100.000 100.000 100.000 100.000 100.000 - ------------------------------------------------------------------------------- 2/8/96 113.656 80.233 101.220 106.296 105.693 111.635 - ------------------------------------------------------------------------------- 3/19/96 115.859 90.698 98.780 102.963 104.988 117.296 - ------------------------------------------------------------------------------- 4/26/96 112.335 96.221 107.927 103.333 105.273 118.239 - ------------------------------------------------------------------------------- 6/5/96 110.132 103.198 117.378 94.444 109.297 112.264 - ------------------------------------------------------------------------------- 7/15/96 92.952 86.047 110.366 85.556 101.461 106.289 - ------------------------------------------------------------------------------- 8/21/96 99.119 90.116 96.341 91.852 107.143 104.403 - ------------------------------------------------------------------------------- 9/30/96 97.357 92.267 94.512 89.630 110.729 101.258 - ------------------------------------------------------------------------------- 11/6/96 93.392 71.512 80.488 88.148 116.732 93.082 - ------------------------------------------------------------------------------- 12/16/96 90.749 75.581 84.146 82.593 116.150 31.509 - ------------------------------------------------------------------------------- 1/24/97 83.260 44.767 71.341 78.889 124.131 89.308 - ------------------------------------------------------------------------------- 3/5/97 95.154 66.279 68.902 78.519 129.201 101.887 - ------------------------------------------------------------------------------- 4/17/97 82.819 59.884 50.915 72.593 122.722 94.654 - ------------------------------------------------------------------------------- -16- PCS Providers July 1, 1996 - April 18, 1997 EDGAR Representation of Data Points Used in Printed Graphic - ------------------------------------------------------------------------------ DOLLARS - ------------------------------------------------------------------------------ DATE AERL ICEL OMPT WWCA S&P TDS - ------------------------------------------------------------------------------ 7/1/96 100.00 100.00 100.00 100.00 100.00 100.00 - ------------------------------------------------------------------------------ 8/6/96 88.04 79.75 112.15 84.39 98.00 88.46 - ------------------------------------------------------------------------------ 9/11/96 83.70 79.14 93.93 76.59 98.73 91.76 - ------------------------------------------------------------------------------ 10/16/96 77.17 88.96 129.91 83.24 104.22 84.62 - ------------------------------------------------------------------------------ 11/20/96 59.78 77.30 99.07 67.05 110.07 81.69 - ------------------------------------------------------------------------------ 12/27/96 68.48 60.74 75.23 62.43 111.97 80.22 - ------------------------------------------------------------------------------ 2/3/97 59.78 61.35 85.05 67.05 116.40 83.24 - ------------------------------------------------------------------------------ 3/11/97 50.00 56.44 57.94 58.96 120.04 88.19 - ------------------------------------------------------------------------------ 4/17/97 46.74 55.21 27.34 54.34 112.71 82.69 - ------------------------------------------------------------------------------ -17- STRENGTHENING TDS BOARD OF DIRECTORS ------------------------------------ X Management's Criteria - CEO or COO of a public company or major subsidiary - Substantial marketing experience - Good experience in consumer products X Spencer Stuart Search Found George Off - Co-Founded Catalina Marketing in 1983 - Five years as Catalina President, last 3 as CEO - 30 years experience in marketing: consumer products, retail marketing technology and data base marketing - Completely independent director - Joined TDS Board in January 1997 - Already a significant contributor to TDS Board. # Member of Audit Committee # Member of Stock Option Compensation Committee 18 TDS GOALS - --------- X Focus on Fast Growing Local Telecommunications Markets in the United States X Extend from Wireline into Wireless Technologies X Rapidly Grow Customers, Revenues, Cash Flow and Earnings X Deliver Excellent Quality and Value Services X Grow Intrinsic Value 15+% Per Year over Long Term X Maintain Financial Strength and Flexibility 19 PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR CAUTIONARY STATEMENT ----------------------------- This presentation contains "forward-looking" statements, as defined in the Private Securities Litigation Reform Act of 1995, that are based on current expectations, estimates and projections. Statements that are not historical facts, including statements about the Company's beliefs and expectations are forward-looking statements. These statements contain potential risks and uncertainties and, therefore, actual results may differ materially. TDS undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise. Important factors that may affect these projections or expectations include, but are not limited to: changes in the overall economy; changes in competition in markets in which TDS operates; advances in telecommunications technology; changes in the telecommunications regulatory environment; pending and future litigation; availability of future financing; start-up of PCS operations; and unanticipated changes in growth in cellular customers, penetration rates, churn rates and the mix of products and services offered in our markets. Readers should evaluate any statements in light of these important factors. 20 -----END PRIVACY-ENHANCED MESSAGE-----