TDS Reports Third Quarter 2011 Results

CHICAGO, Nov. 4, 2011 /PRNewswire/ --

Note: Comparisons are year over year unless otherwise noted.

3Q 2011 Highlights

TDS Consolidated

• Operating revenues increased 5 percent to $1.3 billion.
• Operating income increased 50 percent to $126.9 million.
• Diluted earnings per share attributable to TDS shareholders increased to $0.68 from $0.39.

U.S. Cellular

• Smartphones sold, as a percent of total devices sold, increased to 39.9 percent from 23.6 percent; smartphone customers increased to 26.2 percent of postpaid customers from 12.1 percent.
• Postpaid ARPU (average revenue per unit) increased to $52.41 from $50.82.
• Service revenues increased 5 percent to $1,036.6 million.
• Operating income increased 66 percent to $101.6 million.
• Net loss of 23,000 retail customers, reflecting loss of 34,000 postpaid customers and gain of 11,000 prepaid customers; postpaid customers comprised 95 percent of retail customers.
• Cell sites in service increased 4 percent to 7,828.

TDS Telecom

• Operating revenues increased 4 percent to $210.8 million.
• Operating income increased 2 percent to $25.2 million.
• ILEC triple play penetration increased to 28.5 percent from 24.6 percent.
• managedIP stations (ILEC and CLEC) grew to 39,400 from 23,400.

As previously announced, TDS will hold a teleconference Nov. 4, 2011 at 9:00 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 $1,325.4 million for the third quarter of 2011, an increase of 5 percent from $1,266.4 million in the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $71.3 million and $0.68, respectively, for the third quarter of 2011, compared to $41.4 million and $0.39, respectively, in the comparable period one year ago.

"U.S. Cellular and TDS Telecom are focused on competing more effectively for new customers," said LeRoy T. Carlson, Jr., TDS president and CEO, "while continuing to satisfy and retain their current customers. Both companies are also working to improve operational excellence and efficiency."

"U.S. Cellular increased its margins and profitability, through growth in inbound roaming revenue, and through expense control. Average revenue per customer also grew, as more customers chose smartphones and data plans.

"TDS Telecom had a solid quarter, increasing operating revenues and operating income. ILEC data revenues continued to increase, due mainly to growth in hosted and managed services revenues and high-speed data customers.  TDS Telecom also continued to add managedIP stations in its commercial business.

"The TDS Board of Directors is currently considering potential changes to our share consolidation proposal and anticipates completing this review process in the near future. Management and the TDS Board of Directors continue to believe that the share consolidation is in the best interests of all TDS shareowners and will simplify TDS' capital structure, improve market liquidity and provide greater financial flexibility."

Guidance for year ending Dec. 31, 2011

Guidance for the year ending Dec. 31, 2011, as of Nov. 4, 2011, is provided below, compared to the previous guidance provided on Aug. 8, 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)	$230-$305 million		$210-$285 million
	Depreciation, amortization and accretion expenses,
	and losses on asset disposals and exchanges	Approx. $590 million		Unchanged
	and impairment of assets (3)
	Adjusted OIBDA (2) (4)	$820-$895 million		$800-$875 million
	Capital expenditures (4)	$750-$800 million		Unchanged
TDS Telecom
	Operating revenues	$800-$830 million		Unchanged
	Operating income (3)	$85-$115 million		Unchanged
	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		Unchanged
	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 June 30, 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 and exchanges (if any); and the loss on impairment of assets (if any). This measure also may be commonly referred to by management as operating cash flow. This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated statement of cash flows.
(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 operations, 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 2015.

Stock repurchase summary

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

	Repurchase Period		# Shares		Cost (in millions)
	2011 (YTD)		748,246		$	21.5
	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 Nov. 4, 2011 at 9:00 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=82599.
• 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.

IMPORTANT INFORMATION: The foregoing information is not a solicitation of a proxy from any TDS shareholder.  This is being done only pursuant to a definitive proxy statement.  Additional information relating to the foregoing is included in TDS' proxy materials filed with the Securities and Exchange Commission ("SEC") and distributed to shareholders.  INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ SUCH MATERIALS BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Shareholders and other investors may access such materials without charge at the SEC's web site (www.sec.gov) and on the TDS web site (www.teldta.com) in the Investor Relations section on the SEC filings page. In addition, shareholders may obtain free copies of the proxy materials by contacting TDS' proxy solicitor, MacKenzie Partners at [phone].  TDS and its executive officers and directors may be deemed to be participants in the solicitation of proxies from TDS shareholders on behalf of the TDS board of directors in connection with the foregoing.  Information concerning such participants and their respective direct or indirect interests in TDS by security holdings or otherwise is included in TDS' definitive proxy statement.

About TDS

Telephone and Data Systems, Inc. (TDS), a Fortune 500® company, provides wireless, local and long-distance telephone, and broadband services to approximately 7 million customers in 36 states through its business units, U.S. Cellular (wireless) and TDS Telecom (wireline). Founded in 1969 and headquartered in Chicago, TDS employed 12,300 people as of September 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			9/30/2011			6/30/2011			3/31/2011			12/31/2010			9/30/2010
Total population
	Consolidated markets (1)		91,965,000			91,204,000			91,090,000			90,468,000			90,468,000
	Consolidated operating markets (1)		46,888,000			46,888,000			46,774,000			46,546,000			46,546,000
Market penetration at end of period
	Consolidated markets (2)		6.5%			6.5%			6.6%			6.7%			6.7%
	Consolidated operating markets (2)		12.7%			12.7%			12.9%			13.0%			13.1%
All customers
	Total at end of period		5,932,000			5,968,000			6,033,000			6,072,000			6,103,000
	Gross additions		299,000			257,000			293,000			327,000			338,000
	Net additions (losses)		(36,000)			(70,000)			(39,000)			(31,000)			(41,000)
	Smartphones sold as a percent of
	total devices sold (3)		39.9%			39.6%			42.5%			39.6%			23.6%
Retail customers
	Total at end of period		5,621,000			5,644,000			5,698,000			5,729,000			5,750,000
	Smartphone penetration (3) (4)		26.2%			23.0%			20.2%			16.6%			12.1%
	Gross additions		284,000			226,000			256,000			292,000			301,000
	Net retail additions (losses) (5)		(23,000)			(58,000)			(31,000)			(21,000)			(25,000)
	Net postpaid additions (losses)		(34,000)			(41,000)			(22,000)			(10,000)			(25,000)
	Net prepaid additions (losses)		11,000			(17,000)			(9,000)			(11,000)			—
Service revenue components (000s)
	Retail service	$	871,199		$	868,630		$	864,602		$	864,905		$	865,766
	Inbound roaming		107,810			82,760			64,386			67,545			72,901
	Other		57,600			50,640			56,125			59,464			44,836
Total service revenues (000s)		$	1,036,609		$	1,002,030		$	985,113		$	991,914		$	983,503
Total ARPU (6)		$	58.09		$	55.69		$	54.29		$	54.37		$	53.53
Billed ARPU (7)		$	48.82		$	48.27		$	47.65		$	47.41		$	47.12
Postpaid ARPU (8)		$	52.41		$	51.84		$	51.21		$	50.99		$	50.82
Postpaid churn rate (9)			1.5%			1.4%			1.4%			1.5%			1.6%
Capital expenditures (000s)		$	248,000		$	162,100		$	95,900		$	203,400		$	124,700
Cell sites in service			7,828			7,770			7,663			7,645			7,524

(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			9/30/2011			6/30/2011			3/31/2011			12/31/2010			9/30/2010
TDS Telecom
	ILEC:
	Equivalent access lines (1)		762,500			764,600			765,300			767,200			773,800
	Physical access lines (2)		490,200			496,300			501,200			507,700			517,000
	High-speed data customers (3)		239,000			235,600			231,800			227,700			225,400
	Long-distance customers		373,300			373,200			370,600			370,100			370,800
	managedIP stations (4)		5,800			5,100			4,300			3,600			3,100
	Capital expenditures (000s)	$	51,500		$	39,100		$	22,100		$	55,700		$	33,000
	CLEC:
	Equivalent access lines (1)		322,600			328,700			331,000			335,400			338,700
	High-speed data customers (3)		30,200			31,500			32,300			33,100			33,900
	managedIP stations (4)		33,600			30,200			27,200			23,800			20,300
	Capital expenditures (000s)	$	4,700		$	6,200		$	4,200		$	6,200		$	5,500

(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 September 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
												Increase/ (Decrease)
				2011				2010 (1)				Amount				Percent
Operating revenues
	U.S. Cellular			$	1,110,439			$	1,060,781			$	49,658				5%
	TDS Telecom				210,806				202,030				8,776				4%
	All Other (2)				4,178				3,605				573				16%
					1,325,423				1,266,416				59,007				5%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			876,855				854,250				22,605				3%
		Depreciation, amortization and accretion			141,664				143,191				(1,527)				(1%)
		(Gain) loss on asset disposals and exchanges, net			(9,700)				1,981				(11,681)				> (100%)
					1,008,819				999,422				9,397				1%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			139,601				133,412				6,189				5%
		Depreciation, amortization and accretion			45,682				43,645				2,037				5%
		(Gain) loss on asset disposals, net			337				390				(53)				(14%)
					185,620				177,447				8,173				5%
	All Other (2)
		Expenses excluding depreciation and amortization			1,355				2,243				(888)				(40%)
		Depreciation and amortization			2,693				2,610				83				3%
		(Gain) loss on asset disposals, net			12				7				5				71%
					4,060				4,860				(800)				(16%)
			Total operating expenses		1,198,499				1,181,729				16,770				1%
Operating income (loss)
	U.S. Cellular				101,620				61,359				40,261				66%
	TDS Telecom				25,186				24,583				603				2%
	All Other  (2)				118				(1,255)				1,373				> (100%)
					126,924				84,687				42,237				50%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				22,053				24,147				(2,094)				(9%)
	Interest and dividend income				2,199				2,785				(586)				(21%)
	Gain on investment				12,730				—				12,730				N/M
	Interest expense				(22,258)				(28,297)				6,039				21%
	Other, net				115				(438)				553				> (100%)
		Total investment and other income (expense)			14,839				(1,803)				16,642				> (100%)
Income before income taxes					141,763				82,884				58,879				71%
	Income tax expense				53,545				29,354				24,191				82%
Net income					88,218				53,530				34,688				65%
	Less: Net income attributable to noncontrolling interests, net of tax				(16,924)				(12,111)				(4,813)				(40%)
Net income attributable to TDS shareholders					71,294				41,419				29,875				72%
	Preferred dividend requirement				(12)				(12)				—				—
Net income available to common shareholders				$	71,282			$	41,407			$	29,875				72%
Basic weighted average shares outstanding					103,487				104,881				(1,394)				(1%)
Basic earnings per share attributable to TDS shareholders				$	0.69			$	0.39			$	0.30				77%
Diluted weighted average shares outstanding					103,806				105,298				(1,492)				(1%)
Diluted earnings per share attributable to TDS shareholders				$	0.68			$	0.39			$	0.29				74%

(1)	Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.
(2)	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
Nine Months Ended September 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
												Increase/ (Decrease)
				2011				2010 (1)				Amount				Percent
Operating revenues
	U.S. Cellular			$	3,243,713			$	3,114,531			$	129,182				4%
	TDS Telecom				608,618				596,741				11,877				2%
	All Other (2)				11,413				9,798				1,615				16%
					3,863,744				3,721,070				142,674				4%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			2,553,409				2,472,758				80,651				3%
		Depreciation, amortization and accretion			431,581				427,831				3,750				1%
		(Gain) loss on asset disposals and exchanges, net			(5,741)				8,407				(14,148)				> (100%)
					2,979,249				2,908,996				70,253				2%
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			390,216				390,842				(626)				—
		Depreciation, amortization and accretion			134,362				130,217				4,145				3%
		(Gain) loss on asset disposals, net			758				667				91				14%
					525,336				521,726				3,610				1%
	All Other (2)
		Expenses excluding depreciation and amortization			8,040				6,290				1,750				28%
		Depreciation and amortization			7,954				7,997				(43)				(1%)
		(Gain) loss on asset disposals, net			13				(51)				64				> (100%)
					16,007				14,236				1,771				12%
			Total operating expenses		3,520,592				3,444,958				75,634				2%
Operating income (loss)
	U.S. Cellular				264,464				205,535				58,929				29%
	TDS Telecom				83,282				75,015				8,267				11%
	All Other  (2)				(4,594)				(4,438)				(156)				(4%)
					343,152				276,112				67,040				24%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				64,031				75,047				(11,016)				(15%)
	Interest and dividend income				6,916				7,900				(984)				(12%)
	Gain on investment				26,103				—				26,103				N/M
	Interest expense				(94,184)				(86,520)				(7,664)				(9%)
	Other, net				1,501				(2,557)				4,058				> (100%)
		Total investment and other income (expense)			4,367				(6,130)				10,497				> (100%)
Income before income taxes					347,519				269,982				77,537				29%
	Income tax expense				95,264				99,904				(4,640)				(5%)
Net income					252,255				170,078				82,177				48%
	Less: Net income attributable to noncontrolling interests, net of tax				(45,503)				(38,373)				(7,130)				(19%)
Net income attributable to TDS shareholders					206,752				131,705				75,047				57%
	Preferred dividend requirement				(37)				(37)				—				—
Net income available to common shareholders				$	206,715			$	131,668			$	75,047				57%
Basic weighted average shares outstanding					103,672				105,443				(1,771)				(2%)
Basic earnings per share attributable to TDS shareholders				$	1.99			$	1.25			$	0.74				59%
Diluted weighted average shares outstanding					104,094				105,800				(1,706)				(2%)
Diluted earnings per share attributable to TDS shareholders				$	1.98			$	1.24			$	0.74				60%

(1)	Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.
(2)	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
			September 30,			December 31,
			2011			2010 (1)
Current assets
	Cash and cash equivalents		$	599,545		$	368,134
	Short-term investments			249,816			402,882
	Accounts receivable from customers and others			536,129			512,946
	Inventory			153,077			116,330
	Net deferred income tax asset			37,132			37,079
	Prepaid expenses			80,742			76,935
	Income taxes receivable			60,960			64,985
	Other current assets			17,922			17,384
				1,735,323			1,596,675
Assets held for sale				60,829			—
Investments
	Licenses			1,493,796			1,460,126
	Goodwill			797,084			728,455
	Other intangible assets, net			54,291			30,810
	Investments in unconsolidated entities			195,872			197,922
	Long-term investments			85,676			102,185
	Other investments			5,189			8,988
				2,631,908			2,528,486
Property, plant and equipment, net
	U.S. Cellular			2,654,494			2,574,522
	TDS Telecom			916,458			909,951
	Other			56,311			33,311
				3,627,263			3,517,784
Other assets and deferred charges				107,237			79,623
Total assets			$	8,162,560		$	7,722,568

(1)	Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

Telephone and Data Systems, Inc. Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)
LIABILITIES AND EQUITY
				September 30,				December 31,
				2011				2010 (1)
Current liabilities
	Current portion of long-term debt			$	3,554			$	1,711
	Accounts payable				416,288				344,355
	Customer deposits and deferred revenues				203,367				171,781
	Accrued interest				14,678				4,308
	Accrued taxes				45,682				46,110
	Accrued compensation				76,481				99,020
	Other current liabilities				108,634				144,938
					868,684				812,223
Liabilities held for sale					858				—
Deferred liabilities and credits
	Net deferred income tax liability				771,049				589,092
	Other deferred liabilities and credits				363,291				354,798
Long-term debt					1,528,350				1,499,862
Noncontrolling interests with redemption features					923				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			2,116,063				2,107,929
		Special Common and Common Treasury shares, at cost			(754,302)				(738,695)
		Accumulated other comprehensive loss			(2,923)				(3,208)
		Retained earnings			2,619,055				2,450,599
			Total TDS shareholders' equity		3,979,163				3,817,895
	Preferred shares				830				830
	Noncontrolling interests				649,412				647,013
		Total equity			4,629,405				4,465,738
Total liabilities and equity				$	8,162,560			$	7,722,568

(1)	Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

Balance Sheet Highlights
September 30, 2011
(Unaudited, dollars in thousands)
			U.S.			TDS			TDS Corporate			Intercompany			TDS
			Cellular			Telecom			& Other			Eliminations			Consolidated
Cash and cash equivalents			$	504,952		$	2,925		$	91,668		$	-		$	599,545
Affiliated cash investments				-			458,441			-			(458,441)			-
Short-term investments				110,761			53,584			85,471			-			249,816
			$	615,713		$	514,950		$	177,139		$	(458,441)		$	849,361
Licenses, goodwill and other intangible assets			$	1,965,712		$	556,051		$	(176,592)		$	-		$	2,345,171
Investment in unconsolidated entities				160,374			3,807			41,577			(9,886)			195,872
Long-term and other investments				49,256			1,229			40,380			-			90,865
			$	2,175,342		$	561,087		$	(94,635)		$	(9,886)		$	2,631,908
Property, plant and equipment, net			$	2,654,494		$	916,458		$	56,311		$	-		$	3,627,263
Long-term debt:
	Current portion		$	101		$	209		$	3,244		$	-		$	3,554
	Non-current portion			880,411			1,828			646,111			-			1,528,350
		Total	$	880,512		$	2,037		$	649,355		$	-		$	1,531,904
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 September 30, 2011 and December 31, 2010.
					September 30,			December 31,
					2011			2010
	Cash and cash equivalents				$	599,545		$	368,134
	Amounts included in short-term investments (1) (2)
		Government-backed securities (3)				196,232			305,612
		Certificates of deposit				53,584			97,270
					$	249,816		$	402,882
	Amounts included in long-term investments (1) (4)
		Government-backed securities (3)			$	85,676		$	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 September 30, 2011, maturities range between 13 and 23 months from the balance sheet date.

Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
Nine Months Ended September 30,
(Unaudited, dollars in thousands)
					2011			2010 (1)
Cash flows from operating activities
	Net income				$	252,255		$	170,078
		Add (deduct) adjustments to reconcile net income to net
			cash flows from operating activities
				Depreciation, amortization and accretion		573,897			566,045
				Bad debts expense		49,101			61,087
				Stock-based compensation expense		27,792			26,055
				Deferred income taxes, net		160,436			56,839
				Equity in earnings of unconsolidated entities		(64,031)			(75,047)
				Distributions from unconsolidated entities		52,385			59,519
				(Gain) loss on asset disposals and exchanges, net		(4,970)			9,023
				Gain on investment		(26,103)			-
				Noncash interest expense		17,973			4,143
				Other operating activities		1,630			502
		Changes in assets and liabilities from operations
				Accounts receivable		(69,690)			(48,891)
				Inventory		(36,387)			32,571
				Accounts payable		69,929			(49,034)
				Customer deposits and deferred revenues		31,191			2,363
				Accrued taxes		2,011			(42,843)
				Accrued interest		10,519			9,343
				Other assets and liabilities		(74,673)			(16,973)
						973,265			764,780
Cash flows from investing activities
	Additions to property, plant and equipment					(643,396)			(486,138)
	Cash paid for acquisitions and licenses					(105,184)			(28,264)
	Cash paid for investments					(101,000)			(433,750)
	Cash received for investments					268,686			40,765
	Other investing activities					(3,703)			1,681
						(584,597)			(905,706)
Cash flows from financing activities
	Repayment of long-term debt					(613,933)			(2,182)
	Issuance of long-term debt					643,700			-
	TDS Common Shares and Special Common Shares
		reissued for benefit plans, net of tax payments				1,402			1,183
	U.S. Cellular Common Shares reissued for benefit
		plans, net of tax payments				1,755			738
	Repurchase of TDS Common and Special Common Shares					(21,500)			(50,543)
	Repurchase of U.S. Cellular Common Shares					(62,294)			(40,520)
	Dividends paid					(36,496)			(35,502)
	Payment of debt issuance costs					(21,650)			—
	Distributions to noncontrolling interests					(1,676)			(5,828)
	Other financing activities					(35,328)			(7,404)
						(146,020)			(140,058)
Cash classified as held for sale						(11,237)			-
Net increase (decrease) in cash and cash equivalents						231,411			(280,984)
Cash and cash equivalents
	Beginning of period					368,134			670,992
	End of period				$	599,545		$	390,008

(1)	Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

TDS Telecom Highlights
Three Months Ended September 30,
(Unaudited, dollars in thousands)
												Increase (Decrease)
				2011				2010				Amount			Percent
Local Telephone Operations
	Operating revenues
		Voice		$	42,725			$	45,363			$	(2,638)			(6%)
		Data			47,905				32,473				15,432			48%
		Network access			67,927				69,032				(1,105)			(2%)
		Miscellaneous			9,730				10,518				(788)			(7%)
					168,287				157,386				10,901			7%
	Operating expenses
		Cost of services and products			59,528				51,820				7,708			15%
		Selling, general and administrative expenses			43,388				43,195				193			—
		Depreciation, amortization and accretion			40,085				37,528				2,557			7%
		Loss on asset disposals, net			225				312				(87)			(28%)
					143,226				132,855				10,371			8%
	Operating income			$	25,061			$	24,531			$	530			2%
Competitive Local Exchange Carrier Operations
		Revenues		$	45,011			$	47,038			$	(2,027)			(4%)
		Expenses (excluding Depreciation, amortization
		and accretion)			39,177				40,791				(1,614)			(4%)
		Depreciation, amortization and accretion			5,597				6,117				(520)			(9%)
		Loss on asset disposals, net			112				78				34			44%
					44,886				46,986				(2,100)			(4%)
	Operating income			$	125			$	52			$	73			>100%
Intercompany revenues				$	(2,492)			$	(2,394)			$	(98)			(4%)
Intercompany expenses					(2,492)				(2,394)				(98)			(4%)
Total TDS Telecom operating income				$	25,186			$	24,583			$	603			2%

TDS Telecom Highlights
Nine Months Ended September 30,
(Unaudited, dollars in thousands)
												Increase (Decrease)
				2011				2010				Amount			Percent
Local Telephone Operations
	Operating revenues
		Voice		$	128,811			$	135,659			$	(6,848)			(5%)
		Data			121,055				92,764				28,291			30%
		Network access			200,419				203,925				(3,506)			(2%)
		Miscellaneous			29,824				29,452				372			1%
					480,109				461,800				18,309			4%
	Operating expenses
		Cost of services and products			157,051				147,614				9,437			6%
		Selling, general and administrative expenses			124,178				129,099				(4,921)			(4%)
		Depreciation, amortization and accretion			117,836				111,433				6,403			6%
		Loss on asset disposals, net			568				344				224			65%
					399,633				388,490				11,143			3%
	Operating income			$	80,476			$	73,310			$	7,166			10%
Competitive Local Exchange Carrier Operations
		Revenues		$	135,935			$	142,106			$	(6,171)			(4%)
		Expenses (excluding Depreciation, amortization
		and accretion)			116,413				121,294				(4,881)			(4%)
		Depreciation, amortization and accretion			16,526				18,784				(2,258)			(12%)
		Loss on asset disposals, net			190				323				(133)			(41%)
					133,129				140,401				(7,272)			(5%)
	Operating income			$	2,806			$	1,705			$	1,101			65%
Intercompany revenues				$	(7,426)			$	(7,165)			$	(261)			(4%)
Intercompany expenses					(7,426)				(7,165)				(261)			(4%)
Total TDS Telecom operating income				$	83,282			$	75,015			$	8,267			11%

Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)
Three Months Ended September 30, 2011					U.S. Cellular			TDS Telecom (1)			All Other (2)			Consolidated Total
	Operating revenues				$	1,110,439		$	210,806		$	4,178		$	1,325,423
	Deduct:
		U.S. Cellular equipment sales revenue				73,830
			Service revenues			1,036,609
	Operating income (loss)					101,620			25,186			118			126,924
	Add (Deduct):
		Depreciation, amortization and accretion				141,664			45,682			2,693			190,039
		Loss on impairment of intangible assets				-			-			-			-
		(Gain) loss on asset disposals and exchanges				(9,700)			337			12			(9,351)
			Adjusted OIBDA (3)		$	233,584		$	71,205		$	2,823		$	307,612
			Adjusted OIBDA margin (4)			22.5%			33.8%
Three Months Ended September 30, 2010					U.S. Cellular (6)			TDS Telecom (1)			All Other (2)			Consolidated Total (6)
	Operating revenues				$	1,060,781		$	202,030		$	3,605		$	1,266,416
	Deduct:
		U.S. Cellular equipment sales revenue				77,278
			Service revenues			983,503
	Operating income (loss)					61,359			24,583			(1,255)			84,687
	Add (Deduct):
		Depreciation, amortization and accretion				143,191			43,645			2,610			189,446
		Loss on impairment of intangible assets				-			-			-			-
		(Gain) loss on asset disposals and exchanges				1,981			390			7			2,378
			Adjusted OIBDA (3)		$	206,531		$	68,618		$	1,362		$	276,511
			Adjusted OIBDA margin (4)			21.0%			34.0%
					TDS Consolidated
Three Months Ended September 30,					2011			2010 (6)
	Cash flows from operating activities				$	435,602		$	262,434
	Deduct:
		Capital expenditures				304,685			168,188
			Free cash flow (5)		$	130,917		$	94,246

Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)
Nine Months Ended September 30, 2011					U.S. Cellular			TDS Telecom (1)			All Other (2)			Consolidated Total
	Operating revenues				$	3,243,713		$	608,618		$	11,413		$	3,863,744
	Deduct:
		U.S. Cellular equipment sales revenue				219,961
			Service revenues			3,023,752
	Operating income (loss)					264,464			83,282			(4,594)			343,152
	Add (Deduct):
		Depreciation, amortization and accretion				431,581			134,362			7,954			573,897
		Loss on impairment of intangible assets				-			-			-			-
		(Gain) loss on asset disposals and exchanges				(5,741)			758			13			(4,970)
			Adjusted OIBDA (3)		$	690,304		$	218,402		$	3,373		$	912,079
			Adjusted OIBDA margin (4)			22.8%			35.9%
Nine Months Ended September 30, 2010					U.S. Cellular (6)			TDS Telecom (1)			All Other (2)			Consolidated Total (6)
	Operating revenues				$	3,114,531		$	596,741		$	9,798		$	3,721,070
	Deduct:
		U.S. Cellular equipment sales revenue				193,444
			Service revenues			2,921,087
	Operating income (loss)					205,535			75,015			(4,438)			276,112
	Add (Deduct):
		Depreciation, amortization and accretion				427,831			130,217			7,997			566,045
		Loss on impairment of intangible assets				-			-			-			-
		(Gain) loss on asset disposals and exchanges				8,407			667			(51)			9,023
			Adjusted OIBDA (3)		$	641,773		$	205,899		$	3,508		$	851,180
			Adjusted OIBDA margin (4)			22.0%			34.5%
					TDS Consolidated
Nine Months Ended September 30,					2011			2010 (6)
	Cash flows from operating activities				$	973,265		$	764,780
	Deduct:
		Capital expenditures				643,396			486,138
			Free cash flow (5)		$	329,869		$	278,642

(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 and exchanges (if any); and the loss on impairment of assets (if any).  This measure also may be commonly referred to by management as operating cash flow.  This measure should not be confused with Cash flows from operating activities, which is a component of the Consolidated Statement of Cash flows. Adjusted OIBDA excludes the net gain or loss on asset disposals and exchanges 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.
(6)	Amounts have been adjusted. See "Revision of Prior Period Amounts" section for additional details.

Revision of Prior Period Amounts

In preparing its financial statements for the nine months ended September 30, 2011, TDS discovered certain errors related to accounting for asset retirement obligations and asset retirement costs. These errors resulted in the overstatement of Total operating expenses, Property, plant and equipment, net and Other deferred liabilities and credits in the first and second quarter 2011 interim financial statements and in the 2010, 2009 and 2008 annual periods reported in the Company's December 31, 2010 financial statements.   The beginning retained earnings balance presented in the December 31, 2010 annual financial statements was also understated as a result of these errors.  In accordance with SEC Staff Accounting Bulletin Nos. 99 and 108 ("SAB 99" and "SAB 108"), TDS evaluated these errors and determined that they were immaterial to each of the reporting periods affected and, therefore, amendments of previously filed reports were not required. However, if the adjustments to correct the cumulative errors had been recorded in the third quarter 2011, TDS believes the impact would have been significant to the third quarter results and would have impacted comparisons to prior periods. As permitted by SAB 108, revisions for these immaterial amounts to previously reported annual and quarterly results are reflected in the financial information herein and will be reflected in future filings containing such financial information. In addition, TDS has recorded adjustments to prior-year amounts to correct other immaterial items.

The Consolidated Balance Sheet at December 31, 2010 was revised to reflect the cumulative effect of these errors which resulted in an increase to Retained earnings of $4.0 million.  In accordance with SAB 108, the Consolidated Balance Sheet, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows have been revised as follows:

	Consolidated Balance Sheet -- December 31, 2010
						As previously
		(Dollars in thousands)				reported (1)				Adjustment				Revised
		Income taxes receivable			$	64,386			$	599			$	64,985
		Total current assets				1,596,076				599				1,596,675
		Property, plant and equipment, net				3,558,334				(40,550)				3,517,784
		Total assets				7,762,519				(39,951)				7,722,568
		Accrued interest				2,718				1,590				4,308
		Total current liabilities				810,633				1,590				812,223
		Net deferred income tax liability				585,468				3,624				589,092
		Other deferred liabilities and credits				404,892				(50,094)				354,798
		Retained earnings				2,446,626				3,973				2,450,599
		Total TDS shareholders' equity				3,813,922				3,973				3,817,895
		Noncontrolling interests				646,057				956				647,013
		Total equity				4,460,809				4,929				4,465,738
		Total liabilities and equity				7,762,519				(39,951)				7,722,568
	Consolidated Statement of Operations -- Three Months Ended September 30, 2010
						As previously
		(Dollars in thousands)				reported (2)				Adjustment				Revised
		Depreciation, amortization and accretion			$	190,972			$	(1,526)			$	189,446
		Total operating expenses				1,183,255				(1,526)				1,181,729
		Operating income				83,161				1,526				84,687
		Income before income taxes				81,358				1,526				82,884
		Income tax expense				28,775				579				29,354
		Net income				52,583				947				53,530
		Net income attributable to noncontrolling interests, net of tax				(11,958)				(153)				(12,111)
		Net income attributable to TDS shareholders				40,625				794				41,419
		Net income available to common shareholders				40,613				794				41,407
		Basic earnings per share attributable to TDS shareholders				0.39				-				0.39
		Diluted earnings per share attributable to TDS shareholders				0.38				0.01				0.39
	Consolidated Statement of Operations -- Nine Months Ended September 30, 2010
						As previously
		(Dollars in thousands)				reported (2)				Adjustment				Revised
		Depreciation, amortization and accretion			$	570,619			$	(4,574)			$	566,045
		Total operating expenses				3,449,532				(4,574)				3,444,958
		Operating income				271,538				4,574				276,112
		Income before income taxes				265,408				4,574				269,982
		Income tax expense				98,167				1,737				99,904
		Net income				167,241				2,837				170,078
		Net income attributable to noncontrolling interests, net of tax				(37,915)				(458)				(38,373)
		Net income attributable to TDS shareholders				129,326				2,379				131,705
		Net income available to common shareholders				129,289				2,379				131,668
		Basic earnings per share attributable to TDS shareholders				1.23				0.02				1.25
		Diluted earnings per share attributable to TDS shareholders				1.22				0.02				1.24
	Consolidated Statement of Cash Flows -- Nine Months Ended September 30, 2010
						As previously
		(Dollars in thousands)				reported (2)				Adjustment				Revised
		Net income			$	167,241			$	2,837			$	170,078
		Depreciation, amortization and accretion				570,619				(4,574)				566,045
		Deferred income taxes, net				55,102				1,737				56,839
		Cash flows from operating activities				764,780				-				764,780

(1)	In Annual Report on Form 10-K for the year ended December 31, 2010, filed on February 25, 2011.
(2)	In Quarterly Report on Form 10-Q for the period ended September 30, 2010, filed on November 4, 2010.

SOURCE Telephone and Data Systems, Inc.

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