2018 Estimated Results

U.S. Cellular

TDS Telecom ⁽¹⁾

TDS ⁽¹⁾⁽²⁾

Current ⁽³⁾

Previous

Current ⁽³⁾

Previous

Current ⁽³⁾

Previous

(Dollars in millions)

Total operating revenues

$3,925-$4,025

$3,850-$4,050

$900-$950

Unchanged

$5,055-$5,205

$5,015-$5,265

Adjusted OIBDA ⁽⁴⁾⁽⁵⁾

$700-$800

$625-$775

$290-$320

Unchanged

$985-$1,115

$925-$1,105

Adjusted EBITDA ⁽⁴⁾

$850-$950

$765-$915

$300-$330

Unchanged

$1,145-$1,275

$1,075-$1,255

Capital expenditures

$500-$550

Unchanged

$270

Unchanged

$790-$840

Unchanged

2018 Estimated Results

U.S. Cellular ⁽³⁾

TDS Telecom ⁽¹⁾⁽³⁾

TDS ^(1)(2)(3)

(Dollars in millions)

Net income (GAAP)

N/A

N/A

N/A

Add back:

Income tax expense (benefit)

N/A

N/A

N/A

Income before income taxes (GAAP)

$

110-210

$

80-110

$

90-220

Add back:

Interest expense

110

–

170

Depreciation, amortization and accretion expense

640

220

895

EBITDA (Non-GAAP) ⁽⁴⁾

$

860-960

$

300-330

$

1,155-1,285

Add back or deduct:

(Gain) loss on asset disposals, net

10

–

10

(Gain) loss on license sales and exchanges, net

(20)

–

(20)

Adjusted EBITDA (Non-GAAP) ⁽⁴⁾

$

850-950

$

300-330

$

1,145-1,275

Deduct:

Equity in earnings of unconsolidated entities

135

–

135

Interest and dividend income

15

5

20

Other, net ⁽⁶⁾

–

5

5

Adjusted OIBDA (Non-GAAP) ⁽⁴⁾⁽⁵⁾

$

700-800

$

290-320

$

985-1,115

Actual Results

Six Months Ended June 30, 2018 ⁽³⁾

Year ended December 31, 2017

U.S. Cellular

TDS

Telecom ⁽¹⁾

TDS ⁽¹⁾⁽²⁾

U.S. Cellular

TDS

Telecom ⁽¹⁾

TDS ⁽¹⁾⁽²⁾

(Dollars in millions)

Net income (GAAP)

$

107

$

37

$

101

$

15

$

138

$

157

Add back or deduct:

Income tax expense (benefit)

40

12

45

(287)

(13)

(279)

Income (loss) before income taxes

(GAAP)

$

147

$

48

$

146

$

(272)

$

125

$

(122)

Add back:

Interest expense

58

(1)

86

113

–

170

Depreciation, amortization and accretion expense

317

107

441

615

195

844

EBITDA (Non-GAAP) ⁽⁴⁾

$

522

$

155

$

673

$

456

$

319

$

892

Add back or deduct:

Loss on impairment of goodwill

–

–

–

370

–

262

(Gain) loss on asset disposals, net

2

1

3

17

3

21

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

–

–

–

(1)

–

(1)

(Gain) loss on license sales and exchanges, net

(17)

–

(17)

(22)

–

(22)

Adjusted EBITDA (Non-GAAP) ⁽⁴⁾

$

507

$

156

$

659

$

820

$

323

$

1,152

Deduct:

Equity in earnings of unconsolidated entities

78

–

78

137

–

137

Interest and dividend income

7

3

11

8

5

15

Other, net ⁽⁶⁾

(1)

1

2

–

3

4

Adjusted OIBDA (Non-GAAP) ⁽⁴⁾⁽⁵⁾

$

423

$

152

$

568

$

675

$

314

$

996

Note: Totals may not foot due to rounding differences.

(1)

TDS has re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, has changed its reportable segments.  Effective January 1, 2018, HMS is no longer reported under TDS Telecom.  Prior periods have been recast to conform to the revised presentation.

(2)

The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments (including HMS as indicated in Note (1) above).

(3)

As of January 1, 2018, TDS adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach.  Under this method, the new accounting standard is applied only to the most recent period presented.  As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported, except as specifically stated.

(4)

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above.  EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity.  TDS does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future.  Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate.  Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS' operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of TDS' financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance.  Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities.  The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income (loss) before income taxes.

(5)

Additional information and reconciliations related to Non-GAAP financial measures for June 30, 2018, can be found on TDS' website at investors.tdsinc.com.

(6)

ASU 2017-07, regarding net periodic pension cost and net periodic postretirement benefit cost was adopted as of January 1, 2018, and applied retrospectively.  All prior period numbers have been recast to conform to this standard.

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

6/30/2018⁽¹⁾

3/31/2018⁽¹⁾

12/31/2017

9/30/2017

6/30/2017

Retail Connections

Postpaid

Total at end of period

4,468,000

4,481,000

4,518,000

4,513,000

4,478,000

Gross additions

146,000

129,000

177,000

191,000

174,000

Feature phones

5,000

5,000

5,000

7,000

7,000

Smartphones

106,000

91,000

128,000

132,000

116,000

Connected devices

35,000

33,000

44,000

52,000

51,000

Net additions (losses)

(13,000)

(37,000)

5,000

35,000

23,000

Feature phones

(12,000)

(15,000)

(15,000)

(15,000)

(15,000)

Smartphones

17,000

(1,000)

33,000

44,000

34,000

Connected devices

(18,000)

(21,000)

(13,000)

6,000

4,000

ARPU ⁽²⁾

$

44.74

$

44.34

$

44.12

$

43.41

$

44.60

ABPU (Non-GAAP)⁽³⁾

$

57.75

$

57.10

$

56.69

$

54.71

$

55.19

ARPA ⁽⁴⁾

$

118.57

$

118.22

$

118.05

$

116.36

$

119.73

ABPA (Non-GAAP)⁽⁵⁾

$

153.03

$

152.26

$

151.68

$

146.65

$

148.15

Churn rate ⁽⁶⁾

1.19%

1.23%

1.27%

1.16%

1.13%

Handsets

0.92%

0.97%

1.00%

0.96%

0.91%

Connected devices

2.85%

2.79%

2.84%

2.33%

2.35%

Prepaid

Total at end of period

527,000

525,000

519,000

515,000

484,000

Gross additions

78,000

88,000

83,000

102,000

73,000

Net additions

2,000

6,000

4,000

31,000

3,000

ARPU ⁽²⁾

$

32.32

$

31.78

$

32.42

$

33.12

$

33.52

Churn rate ⁽⁶⁾

4.83%

5.27%

5.09%

4.75%

4.93%

Total connections at end of period ⁽⁷⁾

5,051,000

5,063,000

5,096,000

5,089,000

5,023,000

Market penetration at end of period

Consolidated operating population

31,469,000

31,469,000

31,834,000

31,834,000

32,089,000

Consolidated operating penetration ⁽⁸⁾

16%

16%

16%

16%

16%

Capital expenditures (millions)

$

86

$

70

$

213

$

112

$

84

Total cell sites in service

6,478

6,473

6,460

6,436

6,421

Owned towers

4,105

4,099

4,080

4,051

4,044

(1)

As of January 1, 2018, U.S. Cellular adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach.  Under this method, the new accounting standard is applied only to the most recent period presented.  As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported.

(2)

Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period.  These revenue bases and connection populations are shown below:

▪

Postpaid ARPU consists of total postpaid service revenues and postpaid connections.

▪

Prepaid ARPU consists of total prepaid service revenues and prepaid connections.

(3)

Average Billings Per User (ABPU) - non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid connections and by the number of months in the period.  Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.

(4)

Average Revenue Per Account (ARPA) - metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.

(5)

Average Billings Per Account (ABPA) - non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid accounts and by the number of months in the period.  Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.

(6)

Churn rate represents the percentage of the connections that disconnect service each month.  These rates represent the average monthly churn rate for each respective period.

(7)

Includes reseller and other connections.

(8)

Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total population of consolidated operating markets as estimated by Nielsen.

TDS Telecom

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

6/30/2018

3/31/2018

12/31/2017

9/30/2017

6/30/2017

TDS Telecom

Wireline

Residential connections

Voice ⁽¹⁾

282,200

286,000

290,600

298,200

304,600

Broadband ⁽²⁾

234,300

230,500

228,600

229,900

230,200

Video ⁽³⁾

51,500

50,300

48,600

47,200

46,200

   Wireline residential connections

568,000

566,900

567,700

575,300

581,000

Total residential revenue per connection ⁽⁴⁾

$

47.22

$

47.04

$

46.21

$

46.07

$

46.39

Commercial connections

Voice ⁽¹⁾

137,300

140,100

143,000

146,900

150,500

Broadband ⁽²⁾

20,600

20,600

20,600

20,900

21,000

managedIP ⁽⁵⁾

141,400

143,000

146,500

147,600

149,700

Video ⁽³⁾

400

400

–

–

–

   Wireline commercial connections

299,600

304,000

310,100

315,300

321,200

Total Wireline connections

867,700

870,900

877,800

890,700

902,200

Cable

Cable Connections

Broadband ⁽⁶⁾

159,400

156,800

153,300

143,800

140,300

Video ⁽⁷⁾

101,600

100,700

101,800

97,900

97,900

Voice ⁽⁸⁾

62,000

60,600

59,700

58,500

58,500

managedIP ⁽⁵⁾

700

600

400

400

300

   Cable connections

323,700

318,700

315,100

300,600

297,000

Note:  Totals may not foot due to rounding differences.

(1)

The individual circuits connecting a customer to Wireline's central office facilities.

(2)

The number of Wireline customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies.

(3)

The number of Wireline customers provided video services.

(4)

Total residential revenue per connection is calculated by dividing total Wireline residential revenue by the average number of Wireline residential connections and by the number of months in the period.

(5)

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

(6)

Billable number of lines into a building for high-speed data services.

(7)

Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service.

(8)

Billable number of lines into a building for voice services.

TDS Telecom

Capital Expenditures (Unaudited)

Quarter Ended

6/30/2018

3/31/2018

12/31/2017

9/30/2017

6/30/2017

(Dollars in millions)

Wireline

$

33

$

29

$

55

$

41

$

33

Cable

13

11

20

14

12

Total TDS Telecom ⁽¹⁾

$

46

$

40

$

74

$

56

$

45

Note:  Totals may not foot due to rounding differences.

(1)

TDS has re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, has changed its reportable segments.  Effective January 1, 2018, HMS is no longer reported under TDS Telecom.  Prior periods have been recast to conform to the revised presentation.

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2018 ⁽¹⁾

2017

2018

vs. 2017

2018 ⁽¹⁾

2017

2018

vs. 2017

(Dollars and shares in millions, except per share amounts)

Operating revenues

U.S. Cellular

$

974

$

963

1%

$

1,915

$

1,899

1%

TDS Telecom ⁽²⁾

230

231

-

461

459

-

All Other ⁽²⁾⁽³⁾

51

53

(4)%

104

127

(18)%

1,255

1,247

1%

2,480

2,485

-

Operating expenses

U.S. Cellular

Expenses excluding depreciation, amortization and accretion

769

800

(4)%

1,492

1,543

(3)%

Depreciation, amortization and accretion

159

155

3%

317

307

3%

(Gain) loss on asset disposals, net

1

5

(84)%

2

9

(75)%

(Gain) loss on license sales and exchanges, net

(11)

(2)

>(100)%

(17)

(19)

8%

918

958

(4)%

1,794

1,840

(2)%

TDS Telecom ⁽²⁾

Expenses excluding depreciation, amortization and accretion ⁽⁴⁾

158

152

4%

308

300

3%

Depreciation, amortization and accretion

53

48

11%

107

97

11%

(Gain) loss on asset disposals, net

1

1

37%

1

1

(8)%

212

200

6%

417

398

5%

All Other ⁽²⁾⁽³⁾

Expenses excluding depreciation and amortization ⁽⁴⁾

57

53

5%

112

120

(8)%

Depreciation and amortization

8

8

(6)%

17

18

(5)%

64

62

4%

128

138

(8)%

Total operating expenses

1,194

1,220

(2)%

2,339

2,376

(2)%

Operating income (loss)

U.S. Cellular

56

5

>100%

121

59

>100%

TDS Telecom ⁽²⁾⁽⁴⁾

18

31

(41)%

43

61

(29)%

All Other ^(2)(3)(4)

(13)

(9)

(53)%

(23)

(11)

>(100)%

61

27

>100%

141

109

29%

Investment and other income (expense)

Equity in earnings of unconsolidated entities

40

33

23%

78

65

20%

Interest and dividend income

6

4

65%

11

8

48%

Interest expense

(43)

(43)

(1)%

(86)

(85)

(1)%

Other, net ⁽⁴⁾

1

1

(33)%

2

2

(39)%

Total investment and other income (expense) ⁽⁴⁾

4

(5)

>100%

5

(10)

>100%

Income before income taxes

65

22

>100%

146

99

47%

Income tax expense

21

10

>100%

45

44

1%

Net income

44

12

>100%

101

55

84%

Less: Net income attributable to noncontrolling interests, net of tax

11

2

>100%

29

8

>100%

Net income available to TDS common shareholders

$

33

$

10

>100%

$

72

$

47

52%

Basic weighted average shares outstanding

112

111

1%

112

110

1%

Basic earnings per share available to TDS common shareholders

$

0.30

$

0.09

>100%

$

0.65

$

0.43

51%

Diluted weighted average shares outstanding

113

112

1%

113

112

1%

Diluted earnings per share available to TDS common shareholders

$

0.29

$

0.09

>100%

$

0.63

$

0.42

50%

Note:  Totals may not foot due to rounding differences.

(1)

As of January 1, 2018, TDS adopted the new revenue recognition standard, ASC 606, using a modified retrospective approach. Under this method, the new accounting standard is applied only to the most recent period presented. As a result, 2018 amounts include the impacts of ASC 606, but 2017 amounts remain as previously reported, except as specifically stated.

(2)

TDS has re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, has changed its reportable segments.  Effective January 1, 2018, HMS is no longer reported under TDS Telecom.  Prior periods have been recast to conform to the revised presentation.

(3)

Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments.

(4)

ASU 2017-07, regarding net periodic pension cost and net periodic postretirement benefit cost was adopted January 1, 2018, and applied retrospectively.  All prior period numbers have been recast to conform to this standard.

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

(Unaudited)

Six Months Ended

June 30,

2018 ⁽¹⁾

2017

(Dollars in millions)

Cash flows from operating activities

Net income

$

101

$

55

Add (deduct) adjustments to reconcile net income to net cash flows from operating activities

Depreciation, amortization and accretion

441

422

Bad debts expense

43

49

Stock-based compensation expense

23

22

Deferred income taxes, net

25

(22)

Equity in earnings of unconsolidated entities

(78)

(65)

Distributions from unconsolidated entities

70

65

(Gain) loss on asset disposals, net

3

10

(Gain) loss on license sales and exchanges, net

(17)

(19)

Noncash interest

2

1

Changes in assets and liabilities from operations

Accounts receivable

51

5

Equipment installment plans receivable

(47)

(107)

Inventory

(8)

2

Accounts payable

(50)

(59)

Customer deposits and deferred revenues

(25)

(10)

Accrued taxes

(5)