TDS Reports Second Quarter 2011 Results

CHICAGO, Aug. 8, 2011 /PRNewswire/ --

Note: Comparisons are year over year unless otherwise noted.

2Q 2011 Highlights

TDS Corporate

• Operating revenues increased 4 percent to $1.3 billion.
• Diluted earnings per share attributable to TDS shareholders increased to $0.87 from $0.38.

U.S. Cellular

• Smartphones sold, as a percent of total devices sold, increased to 39.6 percent from 15.8 percent.
• Service revenues were $1,002.0 million, up 3 percent.
• Postpaid ARPU (average revenue per unit) increased to $51.84 from $50.55.
• Postpaid churn improved to 1.38 percent from 1.43 percent.
• Operating income increased 61 percent to $102.4 million.
• Net loss of 58,000 retail customers, reflecting loss of 41,000 postpaid customers and 17,000 prepaid customers; postpaid customers comprised 95 percent of retail customers.
• Cell sites in service increased 5 percent to 7,770, of which 4,400 are owned towers.

TDS Telecom

• Operating revenues remained stable at $198.9 million.
• Operating income increased 5 percent to $25.9 million.
• ILEC triple play bundle penetration of residential customers grew to 27 percent.
• managedIP stations (ILEC and CLEC) grew to 35,300 from 19,700.

As previously announced, TDS will hold a teleconference Aug. 8, 2011 at 7:30 a.m. CDT. Interested parties may listen to the call live by accessing the Investor Relations page of www.teldta.com.

Telephone and Data Systems, Inc. (NYSE: TDS, TDS.S) reported operating revenues of $1,279.6 million for the second quarter of 2011, an increase of 4 percent from $1,232.2 million in the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $91.1 million and $0.87, respectively, for the second quarter of 2011, compared to $40.3 million and $0.38, respectively, in the comparable period one year ago.

"Attracting more new customers is a high priority for U.S. Cellular and TDS Telecom and we are devoting substantial effort to this challenge," said LeRoy T. Carlson, Jr., TDS president and CEO. "Both companies are focused on improving and successfully executing marketing and sales strategies to compete more effectively.

"U.S. Cellular continued to raise average revenue per customer by increasing smartphone penetration and adoption of data plans. Profitability improved in the quarter, due to a strong increase in inbound roaming revenue and expense control, with fewer gross additions contributing to lower sales and marketing expenses.

"TDS Telecom had a solid quarter, with stable operating revenues and higher operating income. The company continued to grow ILEC data revenues through increases in hosted and managed services revenues and high-speed data customers. We broke ground on the first of 44 broadband expansion stimulus projects to bring high-speed Internet access to more customers in rural areas. TDS Telecom's aggressive commercial sales strategy helped the company achieve a strong year-over-year increase in managedIP stations. And in early July, we expanded our hosted and managed services business significantly with the acquisition of OneNeck IT Services Corporation.

"As announced separately today, to simplify our capital structure, improve market liquidity and provide greater financial flexibility, TDS is proposing to reclassify its outstanding Special Common Shares into Common Shares on a one-for-one basis, while retaining the controlling shareholder vote. We will hold a special shareholder meeting later this year to vote on the proposed amendments."

Second quarter transactions

U.S. Cellular paid $24.6 million in cash to purchase the remaining interest in a wireless business in which it previously held a non-controlling interest.  As a result, the company recorded a $13.4 million pre-tax gain on investments.

Additionally, U.S. Cellular sold $342 million of 6.95 percent senior notes and redeemed $330 million of its 7.5 percent senior notes.  The redemption required U.S. Cellular to write off $8.2 million of previously capitalized debt issuance costs related to the 7.5 percent senior notes.  The $8.2 million was recorded in interest expense.  

Also in the quarter, TDS redeemed $282.5 million of 7.6 percent Series A notes.  This redemption required TDS to write off $7.2 million of previously capitalized debt issuance costs, which was recorded in interest expense.

Guidance for year ending Dec. 31, 2011

Guidance for the year ending Dec. 31, 2011, as of Aug. 8, 2011, is provided below, compared to the previous guidance provided on May 6, 2011.  TDS undertakes no duty to update such information, whether as a result of new information, future events, or otherwise.  There can be no assurance that final results will not differ materially from this guidance.  

U.S. Cellular		Current Estimates		Previous Estimates (1)
	Service revenues	$4,000-$4,100 million		Unchanged
	Operating income (3) (4)	$210-$285 million		$185-$285 million
	Depreciation, amortization and accretion expenses, and
	losses on asset disposals and impairment of assets (3)	Approx. $590 million		Unchanged
	Adjusted OIBDA (2) (4)	$800-$875 million		$775-$875 million
	Capital expenditures (4)	$750-$800 million		Unchanged

TDS Telecom
	Operating revenues	$800-$830 million		$780-$810 million
	Operating income (3)	$85-$115 million		$75-$105 million
	Depreciation, amortization and accretion expenses, and
	losses on asset disposals and impairment of assets (3)	Approx. $185 million		Unchanged
	Adjusted OIBDA (2)	$270-$300 million		$260-$290 million
	Capital expenditures (5)	$175-$200 million		Unchanged

(1)	The 2011 Estimated Results as disclosed in the TDS Quarterly Report on Form 10-Q for the period ended March 31, 2011.
(2)	Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated statement of cash flows.
(3)	The 2011 Estimated Results do not include any estimate for losses on impairment of assets since these cannot be predicted.
(4)	This guidance is based on U.S. Cellular's current plans, which include a multi-year deployment of Long-term Evolution ("LTE") technology commencing in 2011.  As customer demand for data services increases, and competitive conditions in the wireless industry evolve, such as the rate of deployment of LTE technology by other carriers, the timing of U.S. Cellular's deployment of LTE and the timing of other capital expenditures could change. These factors could affect U.S. Cellular's estimated capital expenditures and operating expenses in 2011.
(5)	The capital expenditure guidance does not include federal grants of $105.1 million awarded to TDS Telecom through the Broadband Stimulus program under the American Recovery and Reinvestment Act for 44 projects to be completed between 2011 and 2013.

Stock repurchase summary

The following represents repurchases of TDS Common Shares and TDS Special Common Shares.

	Repurchase Period		# Shares		Cost (in millions)
	2011 (second quarter)		340,965		$	9.9
	2011 (first quarter)		407,281		$	11.6
	2010 (full year)		2,394,476		$	68.1
	2009 (full year)		6,374,741		$	176.6
	2008 (full year)		5,861,822		$	199.6
	Total		15,379,285		$	465.8

Conference call information

TDS will hold a conference call on Aug. 8, 2011 at 7:30 a.m. CDT.

• Access the live call on the Investor Relations page of www.teldta.com or at http://www.videonewswire.com/event.asp?id=81248.
• Access the call by phone at 877/407-8029 (US/Canada), no pass code required.

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Investor Relations page of www.teldta.com. The call will be archived on the Conference Calls page of www.teldta.com.

About TDS

Telephone and Data Systems, Inc. (TDS), a Fortune 500® company, provides wireless, local and long-distance telephone, and broadband services to approximately 7.1 million customers in 36 states through its business units, U.S. Cellular (wireless) and TDS Telecom (wireline). Founded in 1969 and headquartered in Chicago, TDS employed 12,300 people as of June 30, 2011.

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

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates and expectations. These statements are based on current estimates, projections and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: the ability of the company to successfully grow its markets; the overall economy; competition; the access to and pricing of unbundled network elements; the ability to obtain or maintain roaming arrangements with other carriers; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; and changes in customer growth rates, average monthly revenue per unit, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by U.S. Cellular and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K used by TDS to furnish this press release to the SEC, which are incorporated by reference herein.

For more information about TDS and its subsidiaries, visit:

TDS: www.teldta.com

U.S. Cellular: www.uscellular.com

TDS Telecom: www.tdstelecom.com

United States Cellular Corporation
Summary Operating Data (Unaudited)
Quarter Ended			6/30/2011			3/31/2011			12/31/2010			9/30/2010			6/30/2010
Total population
	Consolidated markets (1)		91,204,000			91,090,000			90,468,000			90,468,000			90,468,000
	Consolidated operating markets (1)		46,888,000			46,774,000			46,546,000			46,546,000			46,546,000
Market penetration at end of period
	Consolidated markets (2)		6.5%			6.6%			6.7%			6.7%			6.8%
	Consolidated operating markets (2)		12.7%			12.9%			13.0%			13.1%			13.2%
All customers
	Total at end of period		5,968,000			6,033,000			6,072,000			6,103,000			6,144,000
	Gross additions		257,000			293,000			327,000			338,000			349,000
	Net additions (losses)		(70,000)			(39,000)			(31,000)			(41,000)			(3,000)
	Smartphones sold as a percent of
	total devices sold (3)		39.6%			42.5%			39.6%			23.6%			15.8%
Retail customers
	Total at end of period		5,644,000			5,698,000			5,729,000			5,750,000			5,775,000
	Smartphone penetration (3) (4)		23.0%			20.2%			16.6%			12.0%			10.1%
	Gross additions		226,000			256,000			292,000			301,000			307,000
	Net retail additions (losses) (5)		(58,000)			(31,000)			(21,000)			(25,000)			7,000
	Net postpaid additions (losses)		(41,000)			(22,000)			(10,000)			(25,000)			(22,000)
	Net prepaid additions (losses)		(17,000)			(9,000)			(11,000)			---			29,000
Service revenue components (000s)
	Retail service	$	868,630		$	864,602		$	864,905		$	865,766		$	863,836
	Inbound roaming		82,760			64,386			67,545			72,901			60,902
	Other		50,640			56,125			59,464			44,836			47,838
Total service revenues (000s)		$	1,002,030		$	985,113		$	991,914		$	983,503		$	972,576
Total ARPU (6)		$	55.69		$	54.29		$	54.37		$	53.53		$	52.71
Billed ARPU (7)		$	48.27		$	47.65		$	47.41		$	47.12		$	46.81
Postpaid ARPU (8)		$	51.84		$	51.21		$	50.99		$	50.82		$	50.55
Postpaid churn rate (9)			1.4%			1.4%			1.5%			1.6%			1.4%
Capital expenditures (000s)		$	162,100		$	95,900		$	203,400		$	124,700		$	133,500
Cell sites in service			7,770			7,663			7,645			7,524			7,416

(1)	Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (2) below.
(2)	Market Penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas.
(3)	Smartphones represent wireless devices which run on a Blackberry®, Windows Mobile, or Android operating system.
(4)	Smartphone penetration is calculated by dividing postpaid customers on smartphone service plans by total postpaid customers.
(5)	Includes net postpaid additions (losses) and net prepaid additions (losses).
(6)	Total ARPU - Average monthly service revenue per customer includes retail service, inbound roaming and other service revenues and is calculated by dividing total service revenues by the number of months in the period and by the average total customers during the period.
(7)	Billed ARPU - Average monthly billed revenue per customer is calculated by dividing total retail service revenues by the number of months in the period and by the average total customers during the period. Retail service revenues include revenues attributable to postpaid, prepaid and reseller customers.
(8)	Postpaid ARPU - Average monthly revenue per postpaid customer is calculated by dividing total retail service revenues from postpaid customers by the number of months in the period and by the average postpaid customers during the period.
(9)	Represents the percentage of the retail postpaid customer base that disconnects service each month. This amount represents the average postpaid churn rate for each respective quarterly period.

TDS Telecom
Summary Operating Data (Unaudited)
Quarter Ended			6/30/2011			3/31/2011			12/31/2010			9/30/2010			6/30/2010
TDS Telecom
	ILEC:
	Equivalent access lines (1)		764,600			765,300			767,200			773,800			779,200
	Physical access lines (2)		496,300			501,200			507,700			517,000			525,000
	High-speed data customers (3)		235,600			231,800			227,700			225,400			223,200
	Long-distance customers		373,200			370,600			370,100			370,800			369,100
	managedIP stations (4)		5,100			4,300			3,600			3,100			2,700
	Capital expenditures (000s)	$	39,100		$	22,100		$	55,700		$	33,000		$	28,200
	CLEC:
	Equivalent access lines (1)		328,700			331,000			335,400			338,700			343,100
	High-speed data customers (3)		31,500			32,300			33,100			33,900			35,000
	managedIP stations (4)		30,200			27,200			23,800			20,300			17,000
	Capital expenditures (000s)	$	6,200		$	4,200		$	6,200		$	5,500		$	5,400

(1)	Sum of physical access lines and high-capacity data lines, adjusted to estimate the equivalent number of physical access lines in terms of capacity, plus the number of managedIP stations.
(2)	Individual circuits connecting customers to a telephone company's central office facilities.
(3)	The number of customers provided high-capacity data circuits via various technologies, including DSL, managedIP and dedicated Internet circuit technologies.
(4)	The number of telephone handsets providing communications using packet networking technology.

Telephone and Data Systems, Inc. Consolidated Statement of Operations Highlights
Three Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
												Increase/ (Decrease)
				2011				2010				Amount				Percent
Operating revenues
	U.S. Cellular			$	1,076,182			$	1,029,893			$	46,289				4%
	TDS Telecom				198,896				199,206				(310)				—
	All Other (1)				4,562				3,120				1,442				46%
					1,279,640				1,232,219				47,421				4%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			822,587				820,684				1,903				—
		Depreciation, amortization and accretion			148,283				144,455				3,828				3%
		Loss on asset disposals, net			2,922				1,250				1,672				>100%
					973,792				966,389				7,403				1%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			128,846				131,565				(2,719)				(2%)
		Depreciation, amortization and accretion			43,843				43,149				694				2%
		(Gain) Loss on asset disposals, net			317				(68)				385				>(100)%
					173,006				174,646				(1,640)				(1%)
	All Other (1)
		Expenses excluding depreciation and amortization			4,569				2,117				2,452				>100%
		Depreciation and amortization			2,625				2,654				(29)				(1%)
		(Gain) Loss on asset disposals, net			(1)				32				(33)				>(100)%
					7,193				4,803				2,390				50%
			Total operating expenses		1,153,991				1,145,838				8,153				1%
Operating income (loss)
	U.S. Cellular				102,390				63,504				38,886				61%
	TDS Telecom				25,890				24,560				1,330				5%
	All Other  (1)				(2,631)				(1,683)				(948)				(56%)
					125,649				86,381				39,268				45%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				22,590				25,997				(3,407)				(13%)
	Interest and dividend income				2,093				2,674				(581)				(22%)
	Gain on investment				13,373				—				13,373				N/M
	Interest expense				(45,417)				(29,265)				(16,152)				(55%)
	Other, net				1,306				(1,929)				3,235				>(100)%
		Total investment and other income (expense)			(6,055)				(2,523)				(3,532)				>100%
Income before income taxes					119,594				83,858				35,736				43%
	Income tax expense				10,916				31,469				(20,553)				(65%)
Net income					108,678				52,389				56,289				>100%
	Less: Net income attributable to noncontrolling interests, net of tax				(17,615)				(12,102)				(5,513)				(46%)
Net income attributable to TDS shareholders					91,063				40,287				50,776				>100%
	Preferred dividend requirement				(12)				(12)				—				—
Net income available to common shareholders				$	91,051			$	40,275			$	50,776				>100%
Basic weighted average shares outstanding					103,509				105,520				(2,011)				(2%)
Basic earnings per share attributable to TDS shareholders				$	0.88			$	0.38			$	0.50				>100%
Diluted weighted average shares outstanding					104,062				105,907				(1,845)				(2%)
Diluted earnings per share attributable to TDS shareholders				$	0.87			$	0.38			$	0.49				>100%

(1)	Consists of Suttle Straus printing and distribution operations, corporate operations and intercompany eliminations.
N/M – Percentage change not meaningful

Telephone and Data Systems, Inc. Consolidated Statement of Operations Highlights
Six Months Ended June 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
												Increase/ (Decrease)
				2011				2010				Amount				Percent
Operating revenues
	U.S. Cellular			$	2,133,274			$	2,053,750			$	79,524				4%
	TDS Telecom				397,812				394,711				3,101				1%
	All Other (1)				7,235				6,193				1,042				17%
					2,538,321				2,454,654				83,667				3%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			1,676,554				1,618,508				58,046				4%
		Depreciation, amortization and accretion			293,328				287,688				5,640				2%
		Loss on asset disposals, net			3,959				6,426				(2,467)				(38%)
					1,973,841				1,912,622				61,219				3%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			250,615				257,430				(6,815)				(3%)
		Depreciation, amortization and accretion			88,680				86,572				2,108				2%
		Loss on asset disposals, net			421				277				144				52%
					339,716				344,279				(4,563)				(1%)
	All Other (1)
		Expenses excluding depreciation and amortization			6,685				4,047				2,638				65%
		Depreciation and amortization			5,261				5,387				(126)				(2%)
		(Gain) Loss on asset disposals, net			1				(58)				59				>(100)%
					11,947				9,376				2,571				27%
			Total operating expenses		2,325,504				2,266,277				59,227				3%
Operating income (loss)
	U.S. Cellular				159,433				141,128				18,305				13%
	TDS Telecom				58,096				50,432				7,664				15%
	All Other  (1)				(4,712)				(3,183)				(1,529)				(48%)
					212,817				188,377				24,440				13%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				41,978				50,900				(8,922)				(18%)
	Interest and dividend income				4,717				5,115				(398)				(8%)
	Gain on investment				13,373				—				13,373				N/M
	Interest expense				(73,516)				(58,223)				(15,293)				(26%)
	Other, net				1,386				(2,119)				3,505				>(100)%
		Total investment and other income (expense)			(12,062)				(4,327)				(7,735)				>100%
Income before income taxes					200,755				184,050				16,705				9%
	Income tax expense				39,833				69,392				(29,559)				(43%)
Net income					160,922				114,658				46,264				40%
	Less: Net income attributable to noncontrolling interests, net of tax				(28,237)				(25,957)				(2,280)				(9%)
Net income attributable to TDS shareholders					132,685				88,701				43,984				50%
	Preferred dividend requirement				(25)				(25)				—				—
Net income available to common shareholders				$	132,660			$	88,676			$	43,984				50%
Basic weighted average shares outstanding					103,765				105,728				(1,963)				(2%)
Basic earnings per share attributable to TDS shareholders				$	1.28			$	0.84			$	0.44				52%
Diluted weighted average shares outstanding					104,301				106,071				(1,770)				(2%)
Diluted earnings per share attributable to TDS shareholders				$	1.27			$	0.83			$	0.44				53%

(1)	Consists of Suttle Straus printing and distribution operations, corporate operations and intercompany eliminations.
N/M – Percentage change not meaningful

Telephone and Data Systems, Inc. Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
ASSETS
			June 30,			December 31,
			2011			2010
Current assets
	Cash and cash equivalents		$	584,436		$	368,134
	Short-term investments			270,896			402,882
	Accounts receivable from customers and others			519,102			512,946
	Inventory			165,156			116,330
	Net deferred income tax asset			47,970			37,079
	Prepaid expenses			89,997			76,935
	Income taxes receivable			63,978			64,386
	Other current assets			17,390			17,384
				1,758,925			1,596,076
Assets held for sale				53,910			—
Investments
	Licenses			1,462,926			1,460,126
	Goodwill			728,455			728,455
	Other intangible assets			26,316			30,810
	Investments in unconsolidated entities			177,963			197,922
	Long-term investments			90,900			102,185
	Other investments			8,701			8,988
				2,495,261			2,528,486
Property, plant and equipment, net
	U.S. Cellular			2,582,045			2,615,072
	TDS Telecom			897,117			909,951
	Other			38,776			33,311
				3,517,938			3,558,334
Other assets and deferred charges				94,874			79,623
Total assets			$	7,920,908		$	7,762,519

Telephone and Data Systems, Inc. Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
LIABILITIES AND EQUITY
				June 30,				December 31,
				2011				2010
Current liabilities
	Current portion of long-term debt			$	1,919			$	1,711
	Accounts payable				344,026				344,355
	Customer deposits and deferred revenues				194,381				171,781
	Accrued interest				5,546				2,718
	Accrued taxes				44,830				46,110
	Accrued compensation				75,912				99,020
	Other current liabilities				97,122				144,938
					763,736				810,633
Liabilities held for sale					871				—
Deferred liabilities and credits
	Net deferred income tax liability				688,311				585,468
	Other deferred liabilities and credits				402,143				404,892
Long-term debt					1,530,369				1,499,862
Noncontrolling interests with redemption features					863				855
Equity
	TDS shareholders' equity
		Series A Common, Special Common and Common Shares,    par value $.01			1,270				1,270
		Capital in excess of par value			2,108,280				2,107,929
		Special Common and Common Treasury shares, at cost			(756,284)				(738,695)
		Accumulated other comprehensive loss			(2,972)				(3,208)
		Retained earnings			2,553,863				2,446,626
			Total TDS shareholders' equity		3,904,157				3,813,922
	Preferred shares				830				830
	Noncontrolling interests				629,628				646,057
		Total equity			4,534,615				4,460,809
Total liabilities and equity				$	7,920,908			$	7,762,519

Balance Sheet Highlights
June 30, 2011
(Unaudited, dollars in thousands)
			U.S.			TDS			TDS Corporate			Intercompany			TDS
			Cellular			Telecom			& Other			Eliminations			Consolidated
Cash and cash equivalents			$	428,625		$	5,028		$	150,783		$	-		$	584,436
Affiliated cash investments				-			423,931			-			(423,931)			-
Short-term investments				96,085			73,990			100,821			-			270,896
			$	524,710		$	502,949		$	251,604		$	(423,931)		$	855,332
Licenses, goodwill and other intangible assets			$	1,950,174		$	462,228		$	(194,705)		$	-		$	2,217,697
Investment in unconsolidated entities				142,377			3,806			41,102			(9,322)			177,963
Long-term and other investments				44,323			1,327			53,951			-			99,601
			$	2,136,874		$	467,361		$	(99,652)		$	(9,322)		$	2,495,261
Property, plant and equipment, net			$	2,582,045		$	897,117		$	38,776		$	-		$	3,517,938
Long-term debt:
	Current portion		$	101		$	237		$	1,581		$	-		$	1,919
	Non-current portion			880,300			1,887			648,182			-			1,530,369
		Total	$	880,401		$	2,124		$	649,763		$	-		$	1,532,288
Preferred shares			$	-		$	-		$	830		$	-		$	830

Telephone and Data Systems, Inc. Schedule of Cash and Cash Equivalents and Investments (Unaudited, dollars in thousands) The following table presents TDS' cash and cash equivalents and investments at June 30, 2011 and December 31, 2010.
					June 30,			December 31,
					2011			2010
	Cash and cash equivalents				$	584,436		$	368,134
	Amounts included in short-term investments (1) (2)
		Government-backed securities (3)				196,656			305,612
		Certificates of deposit				74,240			97,270
					$	270,896		$	402,882
	Amounts included in long-term investments (1) (4)
		Government-backed securities (3)			$	90,900		$	102,185

(1)	Designated as held-to-maturity investments and recorded at amortized cost in the Consolidated Balance Sheet.
(2)	Maturities are less than twelve months from the respective balance sheet dates.
(3)	Includes U.S. treasuries and corporate notes that are guaranteed under the FDIC's Temporary Liquidity Guarantee Program.
(4)	At June 30, 2011, maturities range between 12 and 24 months from the balance sheet date.

Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
Six Months Ended June 30,
(Unaudited, dollars in thousands)
					2011			2010
Cash flows from operating activities
	Net income				$	160,922		$	114,658
		Add (deduct) adjustments to reconcile net income to net
			cash flows from operating activities
				Depreciation, amortization and accretion		387,269			379,647
				Bad debts expense		29,906			39,633
				Stock-based compensation expense		18,913			16,743
				Deferred income taxes, net		79,637			(28,881)
				Equity in earnings of unconsolidated entities		(41,978)			(50,900)
				Distributions from unconsolidated entities		47,375			48,740
				Loss on asset disposals, net		4,381			6,645
				Gain on investment		(13,373)			—
				Noncash interest expense		17,147			2,715
				Other operating activities		1,070			666
		Changes in assets and liabilities from operations
				Accounts receivable		(37,819)			(20,985)
				Inventory		(48,826)			32,177
				Accounts payable		(448)			(35,572)
				Customer deposits and deferred revenues		22,600			4,217
				Accrued taxes		(2,345)			24,209
				Accrued interest		2,945			102
				Other assets and liabilities		(89,713)			(31,468)
						537,663			502,346
Cash flows from investing activities
	Additions to property, plant and equipment					(338,711)			(317,950)
	Cash paid for acquisitions and licenses					(22,167)			(28,264)
	Cash paid for investments					(71,000)			(385,000)
	Cash received for investments					213,030			15,661
	Other investing activities					(816)			1,479
						(219,664)			(714,074)
Cash flows from financing activities
	Repayment of long-term debt					(613,387)			(1,280)
	Issuance of long-term debt					643,700			—
	TDS Common Shares and Special Common Shares
		reissued for benefit plans, net of tax payments				1,055			845
	U.S. Cellular Common Shares reissued for benefit
		plans, net of tax payments				1,264			144
	Repurchase of TDS Common and Special Common Shares					(21,500)			(31,092)
	Repurchase of U.S. Cellular Common Shares					(62,308)			(21,423)
	Dividends paid					(24,343)			(23,732)
	Payment of debt issuance costs					(21,191)			—
	Distributions to noncontrolling interests					(1,377)			(4,314)
	Other financing activities					2,077			65
						(96,010)			(80,787)
Cash classified as held for sale						(5,687)			—
Net increase (decrease) in cash and cash equivalents						216,302			(292,515)
Cash and cash equivalents
	Beginning of period					368,134			670,992
	End of period				$	584,436		$	378,477

TDS Telecom Highlights
Three Months Ended June 30,
(Unaudited, dollars in thousands)
												Increase (Decrease)
				2011				2010				Amount			Percent
Local Telephone Operations
	Operating revenues
		Voice		$	42,916			$	45,738			$	(2,822)			(6%)
		Data			36,998				31,993				5,005			16%
		Network access			66,320				66,951				(631)			(1%)
		Miscellaneous			9,772				9,576				196			2%
					156,006				154,258				1,748			1%
	Operating expenses
		Cost of services and products			49,839				49,302				537			1%
		Selling, general and administrative expenses			42,597				44,167				(1,570)			(4%)
		Depreciation, amortization and accretion			38,404				36,847				1,557			4%
		Loss on asset disposals, net			270				(228)				498			>100%
					131,110				130,088				1,022			1%
	Operating income			$	24,896			$	24,170			$	726			3%
Competitive Local Exchange Carrier Operations
		Revenues		$	45,596			$	47,325			$	(1,729)			(4%)
		Expenses (excluding Depreciation, amortization
		and accretion)			39,116				40,473				(1,357)			(3%)
		Depreciation, amortization and accretion			5,439				6,302				(863)			(14%)
		Loss on asset disposals, net			47				160				(113)			(71%)
					44,602				46,935				(2,333)			(5%)
	Operating income			$	994			$	390			$	604			>100%
Intercompany revenues				$	(2,706)			$	(2,377)			$	(329)			(14%)
Intercompany expenses					(2,706)				(2,377)				(329)			(14%)
Total TDS Telecom operating income				$	25,890			$	24,560			$	1,330			5%

TDS Telecom Highlights
Six Months Ended June 30,
(Unaudited, dollars in thousands)
												Increase (Decrease)
				2011				2010				Amount			Percent
Local Telephone Operations
	Operating revenues
		Voice		$	86,086			$	90,296			$	(4,210)			(5%)
		Data			73,150				60,291				12,859			21%
		Network access			132,492				134,893				(2,401)			(2%)
		Miscellaneous			20,094				18,934				1,160			6%
					311,822				304,414				7,408			2%
	Operating expenses
		Cost of services and products			97,523				95,794				1,729			2%
		Selling, general and administrative expenses			80,790				85,904				(5,114)			(6%)
		Depreciation, amortization and accretion			77,751				73,905				3,846			5%
		Loss on asset disposals, net			343				32				311			>100%
					256,407				255,635				772			—
	Operating income			$	55,415			$	48,779			$	6,636			14%
Competitive Local Exchange Carrier Operations
		Revenues		$	90,924			$	95,068			$	(4,144)			(4%)
		Expenses (excluding Depreciation, amortization
		and accretion			77,236				80,503				(3,267)			(4%)
		Depreciation, amortization and accretion			10,929				12,667				(1,738)			(14%)
		Loss on asset disposals, net			78				245				(167)			(68%)
					88,243				93,415				(5,172)			(6%)
	Operating income			$	2,681			$	1,653			$	1,028			62%
Intercompany revenues				$	(4,934)			$	(4,771)			$	(163)			(3%)
Intercompany expenses					(4,934)				(4,771)				(163)			(3%)
Total TDS Telecom operating income				$	58,096			$	50,432			$	7,664			15%

Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)
Three Months Ended June 30, 2011					U.S. Cellular			TDS Telecom (1)			All Other (2)			Consolidated Total
	Operating revenues				$	1,076,182		$	198,896		$	4,562		$	1,279,640
	Deduct:
		U.S. Cellular equipment sales revenue				74,152
			Service revenues			1,002,030
	Operating income (loss)					102,390			25,890			(2,631)			125,649
	Add (Deduct):
		Depreciation, amortization and accretion				148,283			43,843			2,625			194,751
		Loss on impairment of intangible assets				—			—			—			—
		(Gain) Loss on asset disposals				2,922			317			(1)			3,238
			Adjusted OIBDA (3)		$	253,595		$	70,050		$	(7)		$	323,638
			Adjusted OIBDA margin (4)			25.3%			35.2%
Three Months Ended June 30, 2010					U.S. Cellular			TDS Telecom (1)			All Other (2)			Consolidated Total
	Operating revenues				$	1,029,893		$	199,206		$	3,120		$	1,232,219
	Deduct:
		U.S. Cellular equipment sales revenue				57,317
			Service revenues			972,576
	Operating income (loss)					63,504			24,560			(1,683)			86,381
	Add (Deduct):
		Depreciation, amortization and accretion				144,455			43,149			2,654			190,258
		Loss on impairment of intangible assets				—			—			—			—
		(Gain) Loss on asset disposals				1,250			(68)			32			1,214
			Adjusted OIBDA (3)		$	209,209		$	67,641		$	1,003		$	277,853
			Adjusted OIBDA margin (4)			21.5%			34.0%
					TDS Consolidated
Three Months Ended June 30,					2011			2010
	Cash flows from operating activities				$	275,873		$	291,686
	Deduct:
		Capital expenditures				211,248			171,328
			Free cash flow (5)		$	64,625		$	120,358

Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)
Six Months Ended June 30, 2011					U.S. Cellular			TDS Telecom (1)			All Other (2)			Consolidated Total
	Operating revenues				$	2,133,274		$	397,812		$	7,235		$	2,538,321
	Deduct:
		U.S. Cellular equipment sales revenue				146,131
			Service revenues			1,987,143
	Operating income (loss)					159,433			58,096			(4,712)			212,817
	Add (Deduct):
		Depreciation, amortization and accretion				293,328			88,680			5,261			387,269
		Loss on impairment of intangible assets				—			—			—			—
		Loss on asset disposals				3,959			421			1			4,381
			Adjusted OIBDA (3)		$	456,720		$	147,197		$	550		$	604,467
			Adjusted OIBDA margin (4)			23.0%			37.0%
Six Months Ended June 30, 2010					U.S. Cellular			TDS Telecom (1)			All Other (2)			Consolidated Total
	Operating revenues				$	2,053,750		$	394,711		$	6,193		$	2,454,654
	Deduct:
		U.S. Cellular equipment sales revenue				116,166
			Service revenues			1,937,584
	Operating income (loss)					141,128			50,432			(3,183)			188,377
	Add (Deduct):
		Depreciation, amortization and accretion				287,688			86,572			5,387			379,647
		Loss on impairment of intangible assets				—			—			—			—
		(Gain) Loss on asset disposals				6,426			277			(58)			6,645
			Adjusted OIBDA (3)		$	435,242		$	137,281		$	2,146		$	574,669
			Adjusted OIBDA margin (4)			22.5%			34.8%
					TDS Consolidated
Six Months Ended June 30,					2011			2010
	Cash flows from operating activities				$	537,663		$	502,346
	Deduct:
		Capital expenditures				338,711			317,950
			Free cash flow (5)		$	198,952		$	184,396

(1)	Includes ILEC and CLEC intercompany eliminations.
(2)	Consists of a non-reportable segment (Suttle-Straus), corporate operations and, intercompany eliminations between U.S. Cellular, TDS Telecom and corporate investments. Amounts in this column are presented only to reconcile to consolidated totals and may not otherwise be meaningful.
(3)	Adjusted OIBDA is a segment measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance.  Adjusted OIBDA is defined as operating income excluding the effects of: depreciation, amortization and accretion (OIBDA); the net gain or loss on asset disposals (if any); and the loss on impairment of assets (if any).  This measure also may be commonly referred to by management as operating cash flow.  This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and loss on impairment of assets, if any, in order to show operating results on a more comparable basis from period to period. TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual, and accordingly, they may be incurred in the future. TDS believes this measure provides useful information to investors regarding TDS' financial condition and results of operations because it highlights certain key cash and non-cash items and their impacts on cash flows from operating activities.
(4)	Adjusted OIBDA margin is defined as adjusted OIBDA divided by service revenues (U.S. Cellular) and operating revenues (TDS Telecom).  Equipment revenues are excluded from the denominator of the U.S. Cellular calculation since equipment is generally sold at a net loss, and such net loss is included in adjusted OIBDA as a cost of earning service revenues for purposes of assessing business results. TDS believes that this calculation method is consistent with the method used by certain investors to assess U.S. Cellular's business results.  Adjusted OIBDA margin may also be commonly referred to by management as operating cash flow margin.
(5)	Free cash flow is defined as cash flows from operating activities minus capital expenditures. Free cash flow is a non-GAAP financial measure.  TDS believes that free cash flow as reported by TDS may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.

SOURCE Telephone and Data Systems, Inc.

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