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Last updated on April 18, 2014 at 8:18 EDT

TDS Reports Second Quarter 2012 Results

August 3, 2012

CHICAGO, Aug. 3, 2012 /PRNewswire/ –

Note: Comparisons are year over year unless otherwise noted.

2Q 2012 Highlights

TDS Consolidated

  • Operating revenues increased 3 percent to $1,323.2 million.

U.S. Cellular

  • Smartphones as a percent of total devices sold increased to 51.9 percent from 39.6 percent; smartphone customers increased to 36.8 percent of postpaid customers from 23.1 percent.
  • Postpaid ARPU (average revenue per user) increased 5 percent to $54.42 from $51.84; total ARPU increased 6 percent to $59.05 from $55.69.
  • Service revenues increased 3 percent to $1,029.7 million.
  • Postpaid gross additions increased 9 percent and postpaid churn increased to 1.57 percent, resulting in a net loss of 48,000 postpaid customers. Postpaid customers comprised 94 percent of retail customers.
  • Prepaid gross additions increased 77 percent, driven by the introduction in select Walmart stores of U Prepaid, a new no contract wireless service, and prepaid churn decreased to 6.2 percent, resulting in a net increase of 20,000 prepaid customers.
  • Retail gross additions increased 23 percent; net loss of 28,000 retail customers, compared to a net loss of 58,000 retail customers.
  • Cell sites in service increased 2 percent to 7,932, of which 4,512 are owned towers.
  • 4G LTE network covers 30 percent of customers; expect to reach 58 percent of customers by year end.
  • Investment in the Los Angeles Partnership contributed $19 million to equity in earnings of unconsolidated entities, up from $14 million.

TDS Telecom

  • Operating revenues increased 5 percent to $208.5 million.
  • ILEC triple play (voice, data and video) penetration increased to 30 percent from 27 percent.
  • managedIP connections (ILEC and CLEC) grew 91 percent to 74,600 from 39,000.

As previously announced, TDS will hold a teleconference Aug. 3, 2012 at 9:30 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) reported operating revenues of $1,323.2 million for the second quarter of 2012, an increase of 3 percent from $1,279.6 million in the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $42.3 million and $0.39, respectively, for the second quarter of 2012, compared to $92.0 million and $0.84, respectively, in the comparable period one year ago.

“Both of our primary businesses achieved solid growth in revenues, though higher expenses related mainly to device subsidies, data growth and investment spending caused profitability to decline,” said LeRoy T. Carlson, Jr., TDS president and CEO. “U.S. Cellular had a strong increase in gross retail customer additions and grew its net prepaid customer base. Postpaid churn remained elevated, and the company is working to address this. TDS Telecom added ILEC residential broadband and IPTV customers, and commercial managedIP customers, and increased revenues in its hosted and managed services business.”

“U.S. Cellular continued to increase average revenue per user through growth in smartphone penetration. To attract more customers, the company expanded the scope of its prepaid distribution through entry into more than 400 Walmart stores, and it is evaluating further opportunities to be where customers most want to shop. U.S. Cellular is offering high-demand devices like the 4G LTE Samsung Galaxy S® III on its growing 4G LTE network. To further differentiate itself from competitors and increase consideration, the company launched an innovative marketing campaign, Hello Better, in July that encourages consumers who are frustrated with their providers to switch to U.S. Cellular for a better wireless experience.

“TDS Telecom continued to add high-speed broadband customers and to expand availability of TDS TV®. The company added commercial managedIP connections at a rapid pace, increasing 91 percent. Higher revenue from the hosted and managed services business offset decreases in legacy ILEC and CLEC revenue, and we continued to build the HMS business with the acquisition of solutions provider Vital Support Systems in June. Recent reforms to USF and ICC negatively impacted revenue and earnings in the first half of this year. We expect FCC-authorized recovery mechanisms to help offset additional rate changes set to begin in the second half.”

Guidance for year ending Dec. 31, 2012

Guidance for the year ending Dec. 31, 2012, as of Aug. 3, 2012, is provided below, compared to the previous guidance provided on May 4, 2012. 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.

                                                                   2012 Estimated Results (1)                       Previous Estimates (2)
                                                                    -------------------------                       ---------------------
    U.S. Cellular
            Service revenues                                                                  $4,050-$4,150 million                        Unchanged
            Operating income (3)                                                                  $200-$300 million                        Unchanged
            Depreciation, amortization and accretion expenses,
              and net gain or loss on asset disposals and exchanges
              and loss on impairment of assets (3)                                             Approx. $600 million                        Unchanged
            Adjusted OIBDA (3) (5)                                                                $800-$900 million                        Unchanged
            Capital expenditures                                                               Approx. $850 million                        Unchanged

                                                                    2012 Estimated Results (4)                      Previous Estimates (2)
                                                                    -------------------------                       ---------------------
    TDS Telecom Operations
            Operating revenues                                                                    $850-$880 million                           $810-$840 million
            Operating income                                                                        $50-$70 million                             $55-$85 million
            Depreciation, amortization and accretion expenses,
              and net gain or loss on asset disposals and exchanges
              and loss on impairment of assets (3)                                             Approx. $195 million                        Approx. $190 million
            Adjusted OIBDA (5)                                                                    $245-$265 million                           $245-$275 million
            Capital expenditures                                                                  $170-$190 million                           $150-$180 million
             (1)   These estimates are based on U.S.
                   Cellular's current plans, which
                   include a multi-year deployment
                   of 4G LTE technology which
                   commenced in 2011.  New
                   developments or changing
                   conditions (such as customer net
                   growth, customer demand for data
                   services or possible
                   acquisitions, dispositions or
                   exchanges) could affect U.S.
                   Cellular's plans and, therefore,
                   its 2012 estimated results.
             (2)   The 2012 Estimated Results as
                   disclosed in TDS' Quarterly
                   Report on Form 10-Q for the
                   period ended March 31, 2012.
             (3)   The 2012 Estimated Results do not
                   include any estimate for
                   unrecognized net gains or losses
                   related to disposals and
                   exchanges of assets or losses on
                   impairment of assets (since such
                   transactions and their effects
                   are uncertain).
             (4)   These estimates are based on TDS
                   Telecom's current plans which
                   include a multi-year deployment
                   of IPTV that commenced in 2011.
                   New developments or changing
                   conditions (such as costs to
                   deploy, agreements for content or
                   franchises or possible
                   acquisitions, dispositions or
                   exchanges) could affect TDS
                   Telecom's plans and, therefore,
                   its 2012 estimated results.
             (5)   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 (if any) 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.

Interest expense

Interest expense was down $22 million, primarily due to the write-off of unamortized debt issuance costs in 2011 of $15.4 million, as well as lower interest rates on outstanding debt.

Income taxes

In the quarter, TDS’ overall effective tax rate was 39 percent, compared to 9.5 percent. In the second quarter of 2011, income tax expense was reduced by $29.1 million, primarily due to tax benefits from state law changes and other discrete items.

Stock repurchase

TDS did not repurchase any shares during the quarter. TDS determines whether to repurchase shares from time to time based on many considerations, including cash needed for other known or possible requirements, the stock price, market conditions, debt rating considerations, business forecasts, business plans, macroeconomic conditions, share issuances under compensation plans, provisions in governing and legal documents and other legal requirements, and other facts and circumstances. Subject to these considerations, TDS intends to continue to repurchase its shares from time to time when circumstances warrant. To the extent TDS does not complete its existing share authorization by the expiration date in November 2012, it is expected that the TDS board of directors will approve an additional authorization at that time.

Conference call information

TDS will hold a conference call on Aug. 3, 2012 at 9:30 a.m. CDT.

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 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, 2012.

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 manage and 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 on acceptable terms; 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; changes in customer growth rates, average monthly revenue per user, 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 Current Report used by TDS to furnish this press release to the Securities and Exchange Commission (“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                                                              6/30/2012                             3/31/2012              12/31/2011              9/30/2011              6/30/2011
                                                                                ---------                             ---------              ----------              ---------              ---------
     Total population
                                          Consolidated markets (1)                         92,684,000                            92,684,000              91,965,000             91,965,000            91,204,000
                                          Consolidated operating markets (1)               46,966,000                            46,966,000              46,888,000             46,888,000            46,888,000
     Market penetration at end of period
                                          Consolidated markets (2)                                6.3%                                  6.3%                    6.4%                   6.5%                  6.5%
                                          Consolidated operating markets (2)                     12.3%                                 12.4%                   12.6%                  12.7%                 12.7%
     All customers
                                          Total at end of period                            5,799,000                             5,837,000               5,891,000              5,932,000             5,968,000
                                          Gross additions                                     290,000                               285,000                 306,000                299,000               257,000
                                          Net additions (losses)                              (38,000)                              (49,000)                (41,000)               (36,000)              (70,000)
                                          Smartphones sold as a percent of
                                          total devices sold (3)
                                    51.9%                                            54.1%                                 52.5%                   39.9%                  39.6%
     Retail customers
                                          Total at end of period                            5,542,000                             5,570,000               5,608,000              5,621,000             5,644,000
                                          Smartphone penetration (3) (4)                         36.8%                                 34.4%                   30.5%                  26.2%                 23.1%
                                          Gross additions                                     277,000                               273,000                 298,000                284,000               226,000
                                          Net retail additions (losses) (5)                   (28,000)                              (34,000)                (13,000)               (23,000)              (58,000)
                                                Net postpaid additions (losses)               (48,000)                              (38,000)                (20,000)               (34,000)              (41,000)
                                                Net prepaid additions (losses)                 20,000                                 4,000                   7,000                 11,000               (17,000)
     Service revenue components (000s)
                                          Retail service                                     $889,219                              $888,527                $882,091               $871,199              $868,630
                                          Inbound roaming                                      86,363                                80,132                  93,353                107,810                82,760
                                          Other                                                54,160                                55,161                  54,601                 57,600                50,640

     Total service revenues (000s)                                                         $1,029,742                            $1,023,820              $1,030,045             $1,036,609            $1,002,030
     Total ARPU (6)                                                                            $59.05                                $58.21                  $58.13                 $58.09                $55.69
     Billed ARPU (7)                                                                           $50.99                                $50.52                  $49.78                 $48.82                $48.28
     Postpaid ARPU (8)                                                                         $54.42                                $54.00                  $53.35                 $52.41                $51.84
     Postpaid churn rate (9)                                                                      1.6%                                  1.6%                    1.6%                   1.5%                  1.4%
     Capital expenditures (000s)                                                             $183,200                              $201,300                $276,400               $248,000              $162,100
     Cell sites in service                                                                      7,932                                 7,875                   7,882                  7,828                 7,770

    (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(R).
    (3)            Smartphones represent wireless
                   devices which run on an
                   Android(TM), BlackBerry(R), or
                   Windows Mobile(R) operating
                   system, excluding tablets.
    (4)            Smartphone penetration is
                   calculated by dividing postpaid
                   smartphone customers by total
                   postpaid customers.
    (5)            Includes net postpaid additions
                   (losses) and net prepaid
                   additions (losses).
    (6)            Total ARPU -Average monthly
                   service revenue per user
                   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 user 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 user 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
                   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                                                           6/30/2012                                3/31/2012 12/31/2011 9/30/2011 6/30/2011
                                                                            ---------                                --------- ---------- --------- ---------
    TDS Telecom
    ILEC:
                   Residential Connections
                                            Physical access lines (1)         360,100                                  363,500    367,600   373,700   378,500
                                            Broadband connections (2)         222,400                                  219,500    219,600   220,500   217,600
                                            IPTV customers                      5,600                                    4,900      4,600     4,500     4,300
                                                                                -----                                    -----      -----     -----     -----
                                               ILEC Residential Connections   588,100                                  587,900    591,800   598,700   600,400
                                                                              =======                                  =======    =======   =======   =======

                   Commercial Connections
                                            Physical access lines (1)         111,100                                  112,600    114,400   116,500   117,800
                                            Broadband connections (2)          18,400                                   18,200     18,200    17,900    17,600
                                            managedIP connections (3)          13,200                                   10,800      8,600     6,800     5,800
                                                                               ------                                   ------      -----     -----     -----
                                               ILEC Commercial Connections    142,700                                  141,600    141,200   141,200   141,200
                                                                              =======                                  =======    =======   =======   =======

    CLEC:
                   Residential Connections
                                            Physical access lines (1)          27,900                                   29,600     31,800    33,900    36,700
                                            Broadband connections (2)           9,500                                   10,100     11,000    11,700    12,800
                                                                                -----                                   ------     ------    ------    ------
                                               CLEC Residential Connections    37,400                                   39,700     42,800    45,600    49,500
                                                                               ======                                   ======     ======    ======    ======

                   Commercial Connections
                                            Physical access lines (1)         145,100                                  151,100    157,300   163,600   168,100
                                            Broadband connections (2)          12,800                                   13,700     14,600    15,400    15,900
                                            managedIP connections (3)          61,400                                   53,700     44,900    38,000    33,200
                                                                               ------                                   ------     ------    ------    ------
                                               CLEC Commercial Connections    219,300                                  218,500    216,800   217,000   217,200
                                                                              =======                                  =======    =======   =======   =======

    Total ILEC and CLEC customer connections                                  987,500                                  987,700    992,600 1,002,500 1,008,300
                                                                              =======                                  =======    ======= ========= =========

    (1)            Individual circuits connecting
                   customers to TDS Telecom's central
                   office facilities.
    (2)            The number of customers provided high-
                   capacity data circuits via various
                   technologies, including DSL and
                   dedicated Internet circuit
                   technologies.
    (3)            The number of telephone handsets, data
                   lines and IP trunks providing
                   communications using IP networking
                   technology.

                       TDS Telecom
               Capital Expenditures (000s)

    Quarter
     Ended  6/30/2012                       3/31/2012 12/31/2011 9/30/2011           6/30/2011
            ---------                       --------- ---------- ---------           ---------
    ILEC                            $32,500              $27,500             $50,300             $36,500   $34,500
    CLEC                              4,900                5,100               7,200               4,700     6,200
    HMS                               5,500                3,100               5,900              15,000     4,600
                                      -----                -----               -----              ------     -----
                                  $42,900              $35,700             $63,400             $56,200   $45,300
                                  =======              =======             =======             =======   =======

                                                                                          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)
                                                                                                                                                                                                            ---------------------
                                                                                                    2012                      2011                   Amount                    Percent
                                                                                                    ----                      ----                   ------                    -------
    Operating revenues
                                           U.S. Cellular                                      $1,104,400                              $1,076,182                                 $28,218                                   3%
                                           TDS Telecom                                           208,519                                 198,896                                   9,623                                   5%
                                           All Other (1)                                          10,250                                   4,562                                   5,688                               >100%

                                                                                                             1,323,169                               1,279,640                                43,529                                 3%
                                                                                                             ---------                               ---------                                ------
    Operating expenses
                                           U.S. Cellular
                                            Expenses
                                            excluding
                                            depreciation,
                                            amortization
                                            and accretion                                        869,980                                 822,587                                  47,393                                   6%
                                            Depreciation,
                                            amortization
                                            and accretion                                        147,555                                 146,577                                     978                                   1%
                                            Loss on asset
                                            disposals and
                                            exchanges,
                                            net                                                    2,702                                   2,922                                    (220)                                (8%)
                                                                                                   -----                                   -----                                    ----
                                                                                                             1,020,237                                 972,086                                48,151                                 5%
                                                                                                             ---------                                 -------                                ------
                                           TDS Telecom
                                            Expenses
                                            excluding
                                            depreciation,
                                            amortization
                                            and accretion                                        148,983                                 128,846                                  20,137                                  16%
                                            Depreciation,
                                            amortization
                                            and accretion                                         47,945                                  43,843                                   4,102                                   9%
                                            Loss on asset
                                            disposals,
                                            net                                                      306                                     317                                     (11)                                (3%)
                                                                                                     ---                                     ---                                     ---
                                                                                                               197,234                                 173,006                                24,228                                14%
                                                                                                               -------                                 -------                                ------
                                           All Other (1)
                                            Expenses
                                            excluding
                                            depreciation
                                            and
                                            amortization                                          11,111                                   4,569                                   6,542                               >100%
                                            Depreciation
                                            and
                                            amortization                                           3,009                                   2,625                                     384                                  15%
                                            Loss on
                                            impairment of
                                            intangible
                                            assets                                                   515                                                    -                                   515                               N/M
                                            (Gain) on
                                            asset
                                            disposals,
                                            net                                                      (13)                                     (1)                                    (12)                              >100%
                                                                                                     ---                                     ---                                     ---
                                                                                                                14,622                                   7,193                                 7,429                             >100%
                                                                                                                ------                                   -----                                 -----

                                                                Total operating expenses                     1,232,093                               1,152,285                                79,808                                 7%
                                                                                                             ---------                               ---------                                ------
    Operating income (loss)
                                           U.S. Cellular                                          84,163                                 104,096                                 (19,933)                               (19%)
                                           TDS Telecom                                            11,285                                  25,890                                 (14,605)                               (56%)
                                           All Other  (1)                                         (4,372)                                 (2,631)                                 (1,741)                               (66%)

                                                                                                                91,076                                 127,355                               (36,279)                             (28%)
                                                                                                                ------                                 -------                               -------
    Investment and other income (expense)
                                            Equity in earnings
                                            of unconsolidated
                                            entities                                              25,392                                  22,590                                   2,802                                  12%
                                            Interest and
                                            dividend income                                        2,352                                   2,093                                     259                                  12%
                                            Gain (loss) on
                                            investment                                            (3,728)                                 13,373                                 (17,101)                         >(100%)
                                           Interest expense                                      (23,139)                                (45,417)                                 22,278                                  49%
                                           Other, net                                               (249)                                  1,306                                  (1,555)                         >(100%)

                                            Total
                                            investment
                                            and other
                                            income
                                            (expense)                                                628                                  (6,055)                                  6,683                               >100%
                                                                                                     ---                                  ------                                   -----
    Income before income taxes                                                                                  91,704                                 121,300                               (29,596)                             (24%)
                                           Income tax expense                                     35,765                                  11,560                                  24,205                               >100%

    Net income                                                                                                  55,939                                 109,740                               (53,801)                             (49%)
                                            Less: Net income
                                            attributable to
                                            noncontrolling
                                            interests, net of
                                            tax                                                  (13,602)                                (17,786)                                  4,184                                  24%

    Net income attributable to TDS shareholders                                                                 42,337                                  91,954                               (49,617)                             (54%)
                                            Preferred dividend
                                            requirement                                              (12)                                    (12)                                                 -                                 -

    Net income available to common shareholders                                                                $42,325                                 $91,942                              $(49,617)                             (54%)
                                                                                                               =======                                 =======                              ========

    Basic weighted average shares outstanding (2)                                                              108,732                                 108,423                                   309                                 -
    Basic earnings per share attributable to TDS
     shareholders (2)                                                                                            $0.39                                   $0.85                                $(0.46)                             (54%)

    Diluted weighted average shares outstanding (2)                                                            109,022                                 109,133                                  (111)                                -
    Diluted earnings per share attributable to TDS
     shareholders (2)                                                                                            $0.39                                   $0.84                                $(0.45)                             (54%)

    (1)            Consists of Suttle Straus
                   printing and distribution
                   operations, Airadigm, corporate
                   operations and intercompany
                   eliminations.
    (2)            On January 13, 2012, TDS
                   shareholders approved a Share
                   Consolidation Amendment to the
                   Restated Certificate of
                   Incorporation of TDS. Average
                   basic and diluted shares
                   outstanding used to calculate
                   earnings per share for the
                   comparative period presented
                   have been retroactively restated
                   to reflect the impact of the
                   increased shares outstanding as
                   a result of the Share
                   Consolidation Amendment.

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)
                                                                                                                                                                                               ---------------------
                                                                                   2012                                        2011                            Amount                                  Percent
                                                                                   ----                                        ----                            ------                                  -------
    Operating revenues
                          U.S. Cellular                                      $2,196,521                                                $2,133,274                                                            $63,247                                                   3%
                          TDS Telecom                                           412,594                                                   397,812                                                             14,782                                                   4%
                          All Other (1)                                          19,845                                                     7,235                                                             12,610                                               >100%

                                                                                                              2,628,960                                                 2,538,321                                                         90,639                                              4%
                                                                                                              ---------                                                 ---------                                                         ------
    Operating expenses
                          U.S. Cellular
                           Expenses
                           excluding
                           depreciation,
                           amortization
                           and accretion                                      1,732,424                                                 1,676,554                                                             55,870                                                   3%
                           Depreciation,
                           amortization
                           and accretion                                        294,240                                                   289,917                                                              4,323                                                   1%
                           Loss on asset
                           disposals and
                           exchanges,
                           net                                                      492                                                     3,959                                                             (3,467)                                               (88%)
                                                                                    ---                                                     -----                                                             ------
                                                                                                              2,027,156                                                 1,970,430                                                         56,726                                              3%
                                                                                                              ---------                                                 ---------                                                         ------
                          TDS Telecom
                           Expenses
                           excluding
                           depreciation,
                           amortization
                           and accretion                                        292,403                                                   250,615                                                             41,788                                                  17%
                           Depreciation,
                           amortization
                           and accretion                                         95,388                                                    88,680                                                              6,708                                                   8%
                           Loss on asset
                           disposals,
                           net                                                      426                                                       421                                                                  5                                                   1%
                                                                                    ---                                                       ---                                                                ---
                                                                                                                388,217                                                   339,716                                                         48,501                                             14%
                                                                                                                -------                                                   -------                                                         ------
                          All Other (1)
                           Expenses
                           excluding
                           depreciation
                           and
                           amortization                                          22,057                                                     6,685                                                             15,372                                               >100%
                           Depreciation
                           and
                           amortization                                           6,315                                                     5,261                                                              1,054                                                  20%
                           Loss on
                           impairment of
                           intangible
                           assets                                                   515                                                         -                                                                515                                                 N/M
                           (Gain) loss on
                           asset
                           disposals,
                           net                                                      (18)                                                        1                                                                (19)                                         >(100%)
                                                                                    ---                                                       ---                                                                ---
                                                                                                                 28,869                                                    11,947                                                         16,922                                          >100%
                                                                                                                 ------                                                    ------                                                         ------

                                               Total operating expenses                                       2,444,242                                                 2,322,093                                                        122,149                                              5%
                                                                                                              ---------                                                 ---------                                                        -------
    Operating income (loss)
                          U.S. Cellular                                         169,365                                                   162,844                                                              6,521                                                   4%
                          TDS Telecom                                            24,377                                                    58,096                                                            (33,719)                                               (58%)
                          All Other  (1)                                         (9,024)                                                   (4,712)                                                            (4,312)                                               (92%)

                                                                                                                184,718                                                   216,228                                                        (31,510)                                          (15%)
                                                                                                                -------                                                   -------                                                        -------
    Investment and other income (expense)
                           Equity in earnings
                           of unconsolidated
                           entities                                              48,781                                                    41,978                                                              6,803                                                  16%
                           Interest and
                           dividend income                                        4,535                                                     4,717                                                               (182)                                                (4%)
                           Gain (loss) on
                           investment                                            (3,728)                                                   13,373                                                            (17,101)                                         >(100%)
                          Interest expense                                      (47,603)                                                  (71,926)                                                            24,323                                                  34%
                          Other, net                                                (21)                                                    1,386                                                             (1,407)                                         >(100%)

                           Total
                           investment
                           and other
                           income
                           (expense)                                              1,964                                                   (10,472)                                                            12,436                                               >100%
                                                                                  -----                                                   -------                                                             ------
    Income before income taxes                                                                                  186,682                                                   205,756                                                        (19,074)                                           (9%)
                          Income tax expense                                     63,177                                                    41,719                                                             21,458                                                  51%

    Net income                                                                                                  123,505                                                   164,037                                                        (40,532)                                          (25%)
                           Less: Net income
                           attributable to
                           noncontrolling
                           interests, net of
                           tax                                                  (28,914)                                                  (28,579)                                                              (335)                                                (1%)

    Net income attributable to TDS shareholders                                                                  94,591                                                   135,458                                                        (40,867)                                          (30%)
                           Preferred dividend
                           requirement                                              (25)                                                      (25)                                                                 -                                                   -

    Net income available to common shareholders                                                                 $94,566                                                  $135,433                                                       $(40,867)                                          (30%)
                                                                                                                =======                                                  ========                                                       ========

    Basic weighted average shares outstanding (2)                                                               108,693                                                   108,678                                                             15                                              -
    Basic earnings per share attributable to TDS
     shareholders (2)                                                                                             $0.87                                                     $1.25                                                         $(0.38)                                          (30%)

    Diluted weighted average shares outstanding (2)                                                             108,964                                                   109,385                                                           (421)                                             -
    Diluted earnings per share attributable to TDS
     shareholders (2)                                                                                             $0.86                                                     $1.23                                                         $(0.37)                                          (30%)

    (1)            Consists of Suttle Straus
                   printing and distribution
                   operations, Airadigm, corporate
                   operations and intercompany
                   eliminations.
    (2)            On January 13, 2012, TDS
                   shareholders approved a Share
                   Consolidation Amendment to the
                   Restated Certificate of
                   Incorporation of TDS. Average
                   basic and diluted shares
                   outstanding used to calculate
                   earnings per share for the
                   comparative period presented
                   have been retroactively restated
                   to reflect the impact of the
                   increased shares outstanding as
                   a result of the Share
                   Consolidation Amendment.

N/M – Percentage change not meaningful

                                                        Telephone and Data Systems, Inc.
                                                     Consolidated Balance Sheet Highlights
                                                       (Unaudited, dollars in thousands)

                                                                     ASSETS

                                                     June 30,                               December 31,
                                                          2012                                      2011
                                                          ----                                      ----
    Current assets
                                 Cash and cash
                                 equivalents                                      $613,764                                             $563,275
                                 Short-term
                                 investments                                       150,921                                              246,273
                                 Accounts
                                 receivable
                                 from
                                 customers and
                                 others                                            542,156                                              542,577
                                Inventory                                          189,242                                              130,044
                                 Net deferred
                                 income tax
                                 asset                                              44,598                                               40,898
                                 Prepaid
                                 expenses                                           86,794                                               80,628
                                 Income taxes
                                 receivable                                          9,376                                               85,636
                                 Other current
                                 assets                                             19,224                                               16,349

                                                                                 1,656,075                                            1,705,680

    Assets held for sale                                                                 -                                               49,647

    Investments
                                Licenses                                         1,507,447                                            1,494,014
                                Goodwill                                           816,668                                              797,077
                                 Other
                                 intangible
                                 assets, net                                        65,285                                               50,734
                                 Investments in
                                 unconsolidated
                                 entities                                          213,049                                              173,710
                                 Long-term
                                 investments                                        55,468                                               45,138
                                 Other
                                 investments                                         1,017                                                3,072

                                                                                 2,658,934                                            2,563,745

    Property, plant and equipment, net
                                U.S. Cellular                                    2,883,118                                            2,790,302
                                TDS Telecom                                        928,686                                              936,757
                                Other                                               41,483                                               57,476

                                                                                 3,853,287                                            3,784,535

    Other assets and deferred charges                                              115,435                                               97,398
                                                                                   -------                                               ------

    Total assets                                                                $8,283,731                                           $8,201,005
                                                                                ==========                                           ==========

                                                                         Telephone and Data Systems, Inc.
                                                                       Consolidated Balance Sheet Highlights
                                                                         (Unaudited, dollars in thousands)

                                                                              LIABILITIES AND EQUITY

                                                                                June 30,                                         December 31,
                                                                                     2012                                                2011
                                                                                     ----                                                ----

    Current liabilities
                      Current portion of
                      long-term debt                                               $1,283                                                          $1,509
                     Accounts payable                                             310,610                                                         364,746
                      Customer deposits
                      and deferred
                      revenues                                                    231,743                                                         207,633
                     Accrued interest                                               5,522                                                           7,456
                     Accrued taxes                                                 53,698                                                          41,069
                     Accrued compensation                                          83,080                                                         107,719
                      Other current
                      liabilities                                                 105,640                                                         144,001

                                                                                                               791,576                                                         874,133

    Liabilities held for sale                                                                                        -                                                           1,051

    Deferred liabilities and credits
                      Net deferred income
                      tax liability                                               847,725                                                         808,713
                      Other deferred
                      liabilities and
                      credits                                                     391,898                                                         383,567

    Long-term debt                                                                                           1,529,836                                                       1,529,857

    Noncontrolling interests with redemption features                                                            1,050                                                           1,005

    Equity
                      TDS shareholders'
                      equity
                      Series A Common
                      and Common
                      Shares, par
                      value $.01 per
                      share (1)                                                     1,326                                                           1,326
                      Capital in
                      excess of par
                      value (1)                                                 2,280,802                                                       2,268,711
                      Treasury shares
                      at cost (1)                                                (742,906)                                                       (750,921)
                      Accumulated
                      other
                      comprehensive
                      loss                                                         (8,494)                                                         (8,854)
                      Retained
                      earnings (1)                                              2,514,327                                                       2,451,899
                                                                                ---------                                                       ---------
                                           Total TDS shareholders' equity                                    4,045,055                                                       3,962,161

                     Preferred shares                                                 830                                                             830
                      Noncontrolling
                      interests                                                   675,761                                                         639,688

                     Total equity                                               4,721,646                                                       4,602,679

    Total liabilities and equity                                                                            $8,283,731                                                      $8,201,005
                                                                                      ===                   ==========                                                      ==========

    (1)            The December 31, 2011 amounts
                   reflect the impact of the Share
                   Consolidation Amendment to the
                   Restated Certificate of
                   Incorporation of TDS, as
                   approved by the TDS shareholders
                   on January 13, 2012.

                                                                                                                                     Balance Sheet Highlights
                                                                                                                                          June 30, 2012
                                                                                                                                (Unaudited, dollars in thousands)

                                                    U.S.                                    TDS                      TDS Corporate                Intercompany                                   TDS
                                                  Cellular                                Telecom                       & Other                   Eliminations                              Consolidated
                                                  --------                                -------                       -------                   ------------                              ------------
    Cash and cash equivalents                                                     $437,624                                        $71,861                                           $104,279                         $   ?                                                                  $613,764
    Affiliated cash investments                                 ?                                                                 396,855                          ?                                                                      (396,855)                       ?
    Short-term investments                                                         100,738                        ?                                                                   50,183                             ?                                                                   150,921
                                                                                 -------                       ---                                                                  ------                            ---                                                                  -------
                                                   $538,362                                          $468,716                                         $154,462                                             $(396,855)                                        $764,685
                                                   ========                                          ========                                         ========                                             =========                                         ========

    Licenses, goodwill and other intangible
     assets                                                                   $1,979,109                                       $589,225                                          $(178,934)                        $   ?                                                                $2,389,400
    Investment in unconsolidated entities                                        175,663                                          3,805                                             39,906                                                (6,325)                                          213,049
    Long-term and other investments                                               55,550                                            933                                                  2                             ?                                                                    56,485
                                                                                  ------                                            ---                                                ---                            ---                                                                   ------
                                                                              $2,210,322                                       $593,963                                          $(139,026)                                              $(6,325)                                       $2,658,934
                                                                              ==========                                       ========                                          =========                                               =======                                        ==========

    Property, plant and equipment, net                                        $2,883,118                                       $928,686                                            $41,483                         $   ?                                                                $3,853,287
                                                                              ==========                                       ========                                            =======                       ===  ===                                                               ==========

    Long-term debt:
                           Current
                           portion                                                  $127                                           $190                                               $966                         $   ?                                                                    $1,283
                           Non-current
                           portion                                               880,623                                          1,685                                            647,528                             ?                                                                 1,529,836

                          Total                                                 $880,750                                         $1,875                                           $648,494                         $   ?                                                                $1,531,119
                                                                                ========                                         ======                                           ========                       ===  ===                                                               ==========

    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, 2012 and December 31, 2011.

                                                                                                                                                     June 30,                           December 31,
                                                                                                                                       2012               2011
                                                                                                                                       ----               ----

                      Cash and cash equivalents                                                                                                       $613,764                                         $563,275

                      Amounts included in short-term investments (1) (2)
                      Government-backed securities (3)                                                                                                                         150,921                                          218,829
                      Certificates of deposit                                                                                                                                        -                                           27,444
                                                                                                                                                                                   ---                                           ------
                                                                                                                                                                              $150,921                                         $246,273
                                                                                                                                                                              ========                                         ========

                      Amounts included in long-term investments (1) (4)
                      Government-backed securities (3)                                                                                                                         $55,468                                          $45,138
                                                                                                                                                                               =======                                          =======

    (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 guaranteed under
                   the Federal Deposit Insurance
                   Corporation's Temporary
                   Liquidity Guarantee Program.
    (4)            At June 30, 2012, maturities
                   range between 12 and 21 months.

                                                           Telephone and Data Systems, Inc.
                                                         Consolidated Statement of Cash Flows
                                                              Six Months Ended June 30,
                                                          (Unaudited, dollars in thousands)
                                                                                                                  2012                 2011
                                                                                                                  ----                 ----
    Cash flows from operating activities
                                          Net income                                                         $123,505                         $164,037
                                           Add (deduct)
                                           adjustments to
                                           reconcile net income
                                           to net
                                                    cash flows from
                                                    operating
                                                    activities
                                                                      Depreciation, amortization and
                                                                      accretion                                            395,943                          383,858
                                                                     Bad debts expense                                      33,626                           29,906
                                                                     Stock-based compensation expense                       20,955                           18,913
                                                                     Deferred income taxes, net                             29,929                           79,637
                                                                      Equity in earnings of unconsolidated
                                                                      entities                                             (48,781)                         (41,978)
                                                                      Distributions from unconsolidated
                                                                      entities                                               6,973                           47,375
                                                                      Loss on impairment of intangible
                                                                      assets                                                   515                                -
                                                                     Loss on asset disposals, net                              900                            4,381
                                                                     (Gain) loss on investment                               3,728                          (13,373)
                                                                     Noncash interest expense                                1,728                           17,147
                                                                     Other operating activities                              1,010                            1,070
                                           Changes in assets and
                                           liabilities from
                                           operations
                                                                     Accounts receivable                                   (10,197)                         (37,819)
                                                                     Inventory                                             (58,467)                         (48,826)
                                                                     Accounts payable                                      (23,336)                          24,678
                                                                      Customer deposits and deferred
                                                                      revenues                                              22,786                           22,600
                                                                     Accrued taxes                                          89,433                             (459)
                                                                     Accrued interest                                       (1,823)                           1,355
                                                                     Other assets and liabilities                          (81,517)                         (90,291)
                                                                                                                           -------                          -------
                                                                                                                           506,910                          562,211
                                                                                                                           -------                          -------

    Cash flows from investing activities
                                           Cash used for additions
                                           to property, plant and
                                           equipment                                                         (501,211)                        (350,856)
                                           Cash paid for
                                           acquisitions and
                                           licenses                                                           (52,213)                         (22,167)
                                           Cash received from
                                           divestitures                                                        50,036                                -
                                           Cash paid for
                                           investments                                                        (45,000)                         (71,000)
                                           Cash received for
                                           investments                                                        128,444                          213,030
                                           Other investing
                                           activities                                                          (8,916)                            (816)

                                                                                                                          (428,860)                        (231,809)
                                                                                                                          --------                         --------

    Cash flows from financing activities
                                           Repayment of long-term
                                           debt                                                                  (952)                        (613,387)
                                           Issuance of long-term
                                           debt                                                                   358                          643,700
                                           TDS Common Shares and
                                           Special Common Shares
                                           reissued for benefit
                                           plans, net of tax
                                           payments                                                               (39)                           1,055
                                           U.S. Cellular Common
                                           Shares reissued for
                                           benefit
                                           plans, net of tax
                                           payments                                                            (2,465)                           1,264
                                           Repurchase of TDS Common
                                           and Special Common
                                           Shares                                                                              -                          (21,500)
                                           Repurchase of U.S.
                                           Cellular Common Shares                                                              -                          (62,308)
                                          Dividends paid                                                      (26,610)                         (24,343)
                                           Payment of debt issuance
                                           costs                                                                               -                          (21,191)
                                           Distributions to
                                           noncontrolling
                                           interests                                                             (643)                          (1,377)
                                           Other financing
                                           activities                                                           2,790                            2,077

                                                                                                                           (27,561)                         (96,010)
                                                                                                                           -------                          -------

    Cash classified as held for sale                              -                                                         (5,687)

    Net increase in cash and cash equivalents                                                                               50,489                          228,705
    Cash and cash equivalents
                                          Beginning of period                                                 563,275                          341,683

                                          End of period                                                      $613,764                         $570,388
                                                                                                       ===

                                                                                                                                     TDS Telecom Highlights
                                                                                                                                   Three Months Ended June 30,
                                                                                                                                (Unaudited, dollars in thousands)

                                                                                                                                                                                                    Increase (Decrease)
                                                                                                                                                                                                    ------------------
                                                                        2012                                                2011                                              Amount                       Percent
                                                                        ----                                                ----                                              ------                       -------
    Local Telephone Operations
                           Operating
                           revenues
                          Residential                                $70,082                                                           $69,951                                                                     $131                                                  -
                          Commercial                                  24,201                                                            24,856                                                                     (655)                                               (3%)
                          Wholesale                                   49,769                                                            54,574                                                                   (4,805)                                               (9%)
                                                                      ------                                                            ------                                                                   ------
                                                                                                 144,052                                                           149,381                                                                  (5,329)                                           (4%)
                                                                                                 -------                                                           -------                                                                  ------
                           Operating
                           expenses
                           Cost of
                           services and
                           products                                   47,180                                                            47,646                                                                     (466)                                               (1%)
                           Selling,
                           general and
                           administrative
                           expenses                                   43,216                                                            40,076                                                                    3,140                                                  8%
                           Depreciation,
                           amortization
                           and accretion                              37,834                                                            36,116                                                                    1,718                                                  5%
                           Loss on asset
                           disposals,
                           net                                           136                                                               245                                                                     (109)                                              (44%)
                                                                         ---                                                               ---                                                                     ----
                                                                                                 128,366                                                           124,083                                                                   4,283                                              3%
                                                                                                 -------                                                           -------                                                                   -----

                          Operating income                           $15,686                                                           $25,298                                                                  $(9,612)                                              (38%)
                          ------------

    Competitive Local Exchange Carrier Operations
                           Operating
                           revenues
                          Residential                                 $4,338                                                            $5,330                                                                    $(992)                                              (19%)
                          Commercial                                  34,905                                                            35,023                                                                     (118)                                                 -
                          Wholesale                                    4,957                                                             5,243                                                                     (286)                                               (5%)
                                                                       -----                                                             -----                                                                     ----
                                                                                                  44,200                                                            45,596                                                                  (1,396)                                           (3%)
                                                                                                  ------                                                            ------                                                                  ------
                           Operating
                           expenses
                           Cost of
                           services and
                           products                                   22,702                                                            23,029                                                                     (327)                                               (1%)
                           Selling,
                           general and
                           administrative
                           expenses                                   16,769                                                            16,087                                                                      682                                                  4%
                           Depreciation,
                           amortization
                           and accretion                               5,466                                                             5,439                                                                       27                                                  -
                           Loss on asset
                           disposals,
                           net                                            72                                                                47                                                                       25                                                 53%
                                                                         ---                                                               ---                                                                      ---
                                                                                                  45,009                                                            44,602                                                                     407                                              1%
                                                                                                  ------                                                            ------                                                                     ---

                           Operating income
                           (loss)                                      $(809)                                                             $994                                                                  $(1,803)                                           >(100)%
                          ------------

    Hosted and Managed Services Operations
                          Revenues                                   $22,876                                                            $6,625                                                                  $16,251                                              >100%
                                                                     -------                                                            ------                                                                  -------
                           Operating
                           expenses
                           Cost of
                           services and
                           products                                   15,090                                                             2,193                                                                   12,897                                              >100%
                           Selling,
                           general and
                           administrative
                           expenses                                    6,635                                                             2,521                                                                    4,114                                              >100%
                           Depreciation,
                           amortization
                           and accretion                               4,645                                                             2,288                                                                    2,357                                              >100%
                           Loss on asset
                           disposals,
                           net                                            98                                                                25                                                                       73                                              >100%
                                                                         ---                                                               ---                                                                      ---
                                                                                                  26,468                                                             7,027                                                                  19,441                                          >100%
                                                                                                  ------                                                             -----                                                                  ------

                          Operating loss                             $(3,592)                                                            $(402)                                                                 $(3,190)                                           >(100)%
                          ------------

    Intercompany revenues                                                                        $(2,609)                                                          $(2,706)                                                                    $97                                              4%
    Intercompany expenses                                                                         (2,609)                                                           (2,706)                                                                     97                                              4%
                                                                                                  ------                                                            ------                                                                     ---

    Total TDS Telecom operating income                                                           $11,285                                                           $25,890                                                                $(14,605)                                          (56%)
                                                                         ===                     =======                                                           =======                                                                ========

                                                                                                                                     TDS Telecom Highlights
                                                                                                                                    Six Months Ended June 30,
                                                                                                                                (Unaudited, dollars in thousands)

                                                                                                                                                                                                    Increase (Decrease)
                                                                                                                                                                                                    ------------------
                                                                        2012                                                2011                                              Amount                       Percent
                                                                        ----                                                ----                                              ------                       -------
    Local Telephone Operations
                           Operating
                           revenues
                          Residential                               $139,481                                                          $139,664                                                                    $(183)                                                 -
                          Commercial                                  48,331                                                            50,227                                                                   (1,896)                                               (4%)
                          Wholesale                                  101,305                                                           109,064                                                                   (7,759)                                               (7%)
                                                                     -------                                                           -------                                                                   ------
                                                                                                 289,117                                                           298,955                                                                  (9,838)                                           (3%)
                                                                                                 -------                                                           -------                                                                  ------
                           Operating
                           expenses
                           Cost of
                           services and
                           products                                   96,348                                                            93,048                                                                    3,300                                                  4%
                           Selling,
                           general and
                           administrative
                           expenses                                   84,730                                                            75,558                                                                    9,172                                                 12%
                           Depreciation,
                           amortization
                           and accretion                              75,612                                                            73,316                                                                    2,296                                                  3%
                           Loss on asset
                           disposals,
                           net                                           202                                                               286                                                                      (84)                                              (29%)
                                                                         ---                                                               ---                                                                      ---
                                                                                                 256,892                                                           242,208                                                                  14,684                                              6%
                                                                                                 -------                                                           -------                                                                  ------

                          Operating income                           $32,225                                                           $56,747                                                                 $(24,522)                                              (43%)
                          ------------

    Competitive Local Exchange Carrier Operations
                           Operating
                           revenues
                          Residential                                 $9,126                                                           $11,827                                                                  $(2,701)                                              (23%)
                          Commercial                                  69,246                                                            69,040                                                                      206                                                  -
                          Wholesale                                    9,872                                                            10,057                                                                     (185)                                               (2%)
                                                                       -----                                                            ------                                                                     ----
                                                                                                  88,244                                                            90,924                                                                  (2,680)                                           (3%)
                                                                                                  ------                                                            ------                                                                  ------
                           Operating
                           expenses
                           Cost of
                           services and
                           products                                   45,266                                                            45,501                                                                     (235)                                               (1%)
                           Selling,
                           general and
                           administrative
                           expenses                                   33,029                                                            31,735                                                                    1,294                                                  4%
                           Depreciation,
                           amortization
                           and accretion                              10,955                                                            10,929                                                                       26                                                  -
                           Loss on asset
                           disposals,
                           net                                           125                                                                78                                                                       47                                                 60%
                                                                         ---                                                               ---                                                                      ---
                                                                                                  89,375                                                            88,243                                                                   1,132                                              1%
                                                                                                  ------                                                            ------                                                                   -----

                           Operating income
                           (loss)                                    $(1,131)                                                           $2,681                                                                  $(3,812)                                           >(100)%
                          ------------

    Hosted and Managed Services Operations
                          Revenues                                   $40,434                                                           $12,867                                                                  $27,567                                              >100%
                                                                     -------                                                           -------                                                                  -------
                           Operating
                           expenses
                           Cost of
                           services and
                           products                                   24,864                                                             4,475                                                                   20,389                                              >100%
                           Selling,
                           general and
                           administrative
                           expenses                                   13,367                                                             5,232                                                                    8,135                                              >100%
                           Depreciation,
                           amortization
                           and accretion                               8,821                                                             4,435                                                                    4,386                                                 99%
                           Loss on asset
                           disposals,
                           net                                            99                                                                57                                                                       42                                                 74%
                                                                         ---                                                               ---                                                                      ---
                                                                                                  47,151                                                            14,199                                                                  32,952                                          >100%
                                                                                                  ------                                                            ------                                                                  ------

                          Operating loss                             $(6,717)                                                          $(1,332)                                                                 $(5,385)                                           >(100)%
                          ------------

    Intercompany revenues                                                                        $(5,201)                                                          $(4,934)                                                                  $(267)                                           (5%)
    Intercompany expenses                                                                         (5,201)                                                           (4,934)                                                                   (267)                                           (5%)
                                                                                                  ------                                                            ------                                                                    ----

    Total TDS Telecom operating income                                                           $24,377                                                           $58,096                                                                $(33,719)                                          (58%)
                                                                         ===                     =======                                                           =======                                                                ========

                                                                                                                                                    Telephone and Data Systems, Inc.
                                                           Financial Measures and Reconciliations
                                                                                                                                                   (Unaudited, dollars in thousands)
                                                                                                                                                                                                                                                                                                     Consolidated
                                                                                                                                                                                                                                                                                                         Total
                                                                                                                                                                                                                                                                                                         -----
    Three Months Ended June 30, 2012                                                                                  U.S. Cellular                                   TDS Telecom (1)                          All Other (2)
    --------------------------------                                                                                  -------------                                   --------------                            ------------

                          Operating revenues                                                                              $1,104,400                                                         $208,519                                                  $10,250                                         $1,323,169
                          Deduct:
                           U.S. Cellular equipment
                           sales revenue                                                                                      74,658
                                                                                                                              ------
                                                       Service revenues                                                                                    1,029,742
                                                                                                                                                           =========

                          Operating income (loss)                                                                             84,163                                                           11,285                                                   (4,372)                                            91,076
                          Add (Deduct):
                           Depreciation,
                           amortization and
                           accretion                                                                                         147,555                                                           47,945                                                    3,009                                            198,509
                           Loss on impairment of
                           intangible assets                                                                                       -                                                                -                                                      515                                                515
                           (Gain) loss on asset
                           disposals and
                           exchanges                                                                                           2,702                                                              306                                                      (13)                                             2,995
                                                                                                                               -----                                                              ---                                                      ---                                              -----
                                                       Adjusted OIBDA (3)                                                                                   $234,420                                                         $59,536                                              $(861)                                                 $293,095
                                                                                                                                                            ========                                                         =======                                              =====                                                  ========

                                                       Adjusted OIBDA margin (4)                                                                                22.8%                                                           28.6%

                                                                                                                                                                                                                                                                                                     Consolidated
                                                                                                                                                                                                                                                                                                         Total
                                                                                                                                                                                                                                                                                                         -----
    Three Months Ended June 30, 2011                                                                                  U.S. Cellular                                   TDS Telecom (1)                          All Other (2)
    --------------------------------                                                                                  -------------                                   --------------                            ------------

                          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)                                                                            104,096                                                           25,890                                                   (2,631)                                           127,355
                          Add (Deduct):
                           Depreciation,
                           amortization and
                           accretion                                                                                         146,577                                                           43,843                                                    2,625                                            193,045
                           Loss on impairment of
                           intangible assets                                                                                       -                                                                -                                                        -                                                  -
                           (Gain) loss on asset
                           disposals and
                           exchanges                                                                                           2,922                                                              317                                                       (1)                                             3,238
                                                                                                                               -----                                                              ---                                                      ---                                              -----
                                                       Adjusted OIBDA (3)                                                                                   $253,595                                                         $70,050                                                $(7)                                                 $323,638
                                                                                                                                                            ========                                                         =======                                                ===                                                  ========

                                                       Adjusted OIBDA margin (4)                                                                                25.3%                                                           35.2%

                                                                                                                    TDS Consolidated
                                                                                                                    ----------------
    Three Months Ended June 30,                                                                                                 2012                                             2011
    ---------------------------                                                                                                 ----                                             ----

                           Cash flows from operating
                           activities                                                                                       $224,665                                                         $229,169
                          Deduct:
                           Cash used for additions to
                           property, plant,
                             and equipment                                                                                   258,600                                                          192,959

                                                       Free cash flow (5)                                                                                   $(33,935)                                                        $36,210
                                                                                                                                                            ========                                                         =======

                                                                                                                                                     Telephone and Data Systems, Inc.
                                                                                                                                                  Financial Measures and Reconciliations
                                                                                                                                                    (Unaudited, dollars in thousands)
                                                                                                                                                                                                                                                                                                       Consolidated
                                                                                                                                                                                                                                                                                                           Total
                                                                                                                                                                                                                                                                                                           -----
    Six Months Ended June 30, 2012                                                                                      U.S. Cellular                                   TDS Telecom (1)                          All Other (2)
    ------------------------------                                                                                      -------------                                   --------------                            ------------

                          Operating revenues                                                                                $2,196,521                                                         $412,594                                                  $19,845                                         $2,628,960
                          Deduct:
                           U.S. Cellular equipment
                           sales revenue                                                                                       142,959
                                                                                                                               -------
                                                       Service revenues                                                                                      2,053,562
                                                                                                                                                             =========

                          Operating income (loss)                                                                              169,365                                                           24,377                                                   (9,024)                                           184,718
                          Add (Deduct):
                           Depreciation,
                           amortization and
                           accretion                                                                                           294,240                                                           95,388                                                    6,315                                            395,943
                           Loss on impairment of
                           intangible assets                                                                                         -                                                                -                                                      515                                                515
                           (Gain) loss on asset
                           disposals and
                           exchanges                                                                                               492                                                              426                                                      (18)                                               900
                                                                                                                                   ---                                                              ---                                                      ---                                                ---
                                                       Adjusted OIBDA (3)                                                                                     $464,097                                                        $120,191                                            $(2,212)                                                 $582,076
                                                                                                                                                              ========                                                        ========                                            =======                                                  ========

                                                       Adjusted OIBDA margin (4)                                                                                  22.6%                                                           29.1%

                                                                                                                                                                                                                                                                                                       Consolidated
                                                                                                                                                                                                                                                                                                           Total
                                                                                                                                                                                                                                                                                                           -----
    Six Months Ended June 30, 2011                                                                                      U.S. Cellular                                   TDS Telecom (1)                          All Other (2)
    ------------------------------                                                                                      -------------                                   --------------                            ------------

                          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)                                                                              162,844                                                           58,096                                                   (4,712)                                           216,228
                          Add (Deduct):
                           Depreciation,
                           amortization and
                           accretion                                                                                           289,917                                                           88,680                                                    5,261                                            383,858
                           Loss on impairment of
                           intangible assets                                                                                         -                                                                -                                                        -                                                  -
                           Loss on asset disposals
                           and exchanges                                                                                         3,959                                                              421                                                        1                                              4,381
                                                                                                                                 -----                                                              ---                                                      ---                                              -----
                                                       Adjusted OIBDA (3)                                                                                     $456,720                                                        $147,197                                               $550                                                  $604,467
                                                                                                                                                              ========                                                        ========                                               ====                                                  ========

                                                       Adjusted OIBDA margin (4)                                                                                  23.0%                                                           37.0%

                                                                                                                      TDS Consolidated
                                                                                                                      ----------------
    Six Months Ended June 30,                                                                                                     2012                                             2011
    -------------------------                                                                                                     ----                                             ----

                           Cash flows from operating
                           activities                                                                                         $506,910                                                         $562,211
                          Deduct:
                           Cash used for additions to
                           property, plant
                            and equipment                                                                                      501,211                                                          350,856

                                                       Free cash flow (5)                                                                                       $5,699                                                        $211,355
                                                                                                                                                                ======                                                        ========

    (1)            Includes ILEC, CLEC and HMS
                   intercompany eliminations.
    (2)            Consists of Suttle-Straus and
                   Airadigm (as of September 23,
                   2011), which represents TDS' Non-
                   Reportable Segment, corporate
                   operations and intercompany
                   eliminations between U.S.
                   Cellular, TDS Telecom and
                   corporate operations. 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.
    (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 negative margin, and the net
                   equipment subsidy is effectively a
                   cost for purposes of assessing
                   business results and is already
                   reflected in adjusted OIBDA. 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
                   less Cash used for additions to
                   property, plant and equipment.
                   Free cash flow is a non-GAAP
                   financial measure.  TDS believes
                   that free cash flow as reported by
                   TDS is 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.


Source: PR Newswire