SHARE Repurchase

The TDS board has authorized a $250 million share repurchase program, with no expiration date. The board authorized management to use its discretion to make purchases, as market conditions warrant, on the open market or at negotiated prices in private transactions.

2013 ESTIMATES

Estimates of full-year 2013 results for U.S. Cellular, TDS Telecom and TDS are shown below. Such estimates represent management’s view as of the date of filing TDS’ Form 10-Q for the quarter ended June 30, 2013. Such forward-looking statements should not be assumed to be current as of any future date. 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 such estimated results.

	2013 Estimated Results (1)
	U.S. Cellular (2)		TDS Telecom		TDS (2)(6)
	Previous	Current	Previous	Current	Previous	Current
(Dollars in millions)
Adjusted operating revenues (3)	$3,620-$3,740	$3,615-$3,715	$850-$900	$890-$930	$4,515-$4,685	$4,550-$4,690
Adjusted income before income taxes (4)	$595-$715	$600-$700	$220-$250	$230-$260	$810-$960	$830-$960
Capital expenditures	Unchanged	$735	$155	$165	$900	$910

(1) These estimates are based on TDS’ current plans, which include an expansion of the multi-year deployment of 4G LTE technology; such expansion includes deployment on 700 MHz in additional markets as well as deployment on the 850 MHz band to provide additional capacity for future growth in data usage, enable potential future 4G LTE roaming, and support the sale of Apple products. The financial impacts of selling Apple products in 2013 consist of the following:

· Increased Adjusted operating revenues resulting from net incremental customers added and retained as a result of offering Apple products;

· Decreased Adjusted income before income taxes as a result of net increases in costs, primarily loss on equipment sales as a result of offering Apple products; and

· Increased Capital expenditures related to the deployment on the 850 MHz band to provide additional capacity for future growth in data usage, which includes capacity required to accommodate Apple products.

These estimates also reflect the impacts of the deconsolidation of certain partnerships as of April 2013 at U.S. Cellular. These estimates do not include (i) the reported gain on sale of business and other exit costs, net (ii) the reported gain on investments, or (iii) the expected gains from pending spectrum license divestitures. In addition, the estimates also reflect the impacts of the acquisition of Baja Broadband, LLC as of August 1, 2013 and of a multi-year deployment of IPTV at TDS Telecom. New developments or changing conditions (such as, but not limited to, regulatory developments, customer net growth, customer demand for data services, costs to deploy, agreements for content or franchises, or possible acquisitions, dispositions or exchanges) could affect TDS’ plans and, therefore, its 2013 estimated results.

(2) These estimates reflect the Divestiture Transaction which closed on May 16, 2013.

These estimates reflect U.S. Cellular’s consolidated results for 2013. Estimated results reflecting U.S. Cellular’s Divestiture Markets and Core Markets are shown in the table below:

	2013 Estimated Results
	U.S. Cellular Core Markets (5)		U.S. Cellular Divestiture Markets (5)		U.S. Cellular Consolidated (5)
	Previous	Current	Previous	Current	Previous	Current
(Dollars in millions)
Adjusted operating revenues (3)	Unchanged	$3,475-$3,575	$145-$165	$140	$3,620-$3,740	$3,615-$3,715
Adjusted income before income taxes (4)	Unchanged	$560-$660	$35-$55	$40	$595-$715	$600-$700
Capital expenditures	Unchanged	$730	Unchanged	$5	Unchanged	$735

(3) Adjusted operating revenues is a non-GAAP financial measure defined as Operating revenues excluding U.S. Cellular Equipment sales revenues. U.S. Cellular Equipment sales revenues are excluded from Adjusted operating revenues since U.S. Cellular equipment is generally sold at a net loss, and such net loss that results from U.S. Cellular Equipment sales revenues less U.S. Cellular Cost of equipment sold is viewed as a cost of earning service revenues for purposes of assessing business results. For purposes of developing this guidance, TDS does not calculate an estimate of U.S. Cellular Equipment sales revenues. TDS believes this measure provides useful information to investors regarding TDS’ results of operations. Adjusted operating revenues is not a measure of financial performance under GAAP and should not be considered as an alternative to Operating revenues as an indicator of the Company’s operating performance.

(4) Adjusted income before income taxes is a non-GAAP financial measure defined as Income before income taxes, adjusted for: Depreciation, amortization and accretion, net Gain or loss on sale of business and other exit costs (if any), net Gain or loss on investments (if any), and Interest expense. Adjusted income before income taxes excludes these items in order to show operating results on a more comparable basis from period to period. In the future, TDS may also exclude other items from adjusted income before income taxes if such items may help reflect operating results on a more comparable basis. TDS does not intend to imply that any such amounts that are excluded are non-recurring, infrequent or unusual; such amounts may occur in the future. Adjusted income before income taxes is not a measure of financial performance under GAAP and should not be considered as an alternative to Income before income taxes as an indicator of the Company’s operating performance or as an alternative to Cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows or as a measure of liquidity. The following tables provide a reconciliation of Income (loss) before income taxes to Adjusted income before income taxes for 2013 Estimated Results, six months ended June 30, 2013 actual results, and 2012 actual results:

	2013 Current Estimated Results
	U.S. Cellular Core Markets (5)	U.S. Cellular Divestiture Markets (2)(5)	U.S. Cellular Consolidated (5)	TDS Telecom	TDS (6)
(Dollars in millions)
Income (loss) before income taxes	($10)-$90	$30	$20-$120	$25-$55	$30-$160
Depreciation, amortization and accretion expense (7)	$540	$250	$790	$205	$1,005
(Gain) loss on sale of business and other exit costs, net	—	($240)	($240)	—	($295)
(Gain) loss on investments	($20)	—	($20)	—	($15)
Interest expense	$50	—	$50	—	$105
Adjusted income before income taxes	$560-$660	$40	$600-$700	$230-$260	$830-$960

		Actual Results
		Six Months Ended June 30, 2013						Year Ended December 31, 2012
			U.S. Cellular Consolidated (5)		TDS Telecom		TDS (6)		U.S. Cellular Consolidated (5)		TDS Telecom		TDS (6)
(Dollars in millions)
Income before income taxes		$	282	$	22	$	322	$	205	$	45	$	196
Depreciation, amortization and accretion expense (7)			393		98		497		609		193		814
(Gain) loss on sale of business and other exit costs, net			(242)		—		(296)		21		—		21
(Gain) loss on investments			(19)		—		(15)		4		—		4
Interest expense			21		(1)		48		42		(1)		87
Adjusted income before income taxes		$	435	$	119	$	556	$	881	$	237	$	1,122

(5)	The U.S. Cellular Consolidated amounts represent GAAP financial measures and include the results of both the Core Markets and the Divestiture Markets. The amounts for Core Markets and Divestiture Markets represent non-GAAP financial measures. TDS believes that the amounts for the Core Markets and Divestiture Markets may be useful to investors and other users of its financial information in evaluating the separate results for the Core Markets. Divestiture Markets are comprised of U.S. Cellular's Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets. Core Markets are comprised of all other markets in which U.S. Cellular conducts business including Peoria, Rockford and certain other areas in Illinois, and in Columbia, Joplin, Jefferson City and certain other areas in Missouri. Core Markets as defined also includes any other income or expenses due to U.S. Cellular’s direct or indirect ownership interests in other spectrum in the Divestiture Markets which was not included in the sale and other retained assets from the Divestiture Markets.

(6)	The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments, all of which are not presented above.

(7)	The 2013 estimated amount for Depreciation, amortization and accretion expense in the U.S. Cellular Divestiture Markets includes approximately $168 million of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction. Actual results for the six months ended June 30, 2013 and the year ended December 31, 2012 include $88 million and $20 million, respectively, of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction.

United States Cellular Corporation
Total Markets Summary Operating Data (Unaudited)

Quarter Ended			6/30/2013		3/31/2013		12/31/2012		9/30/2012		6/30/2012
Retail Customers
	Postpaid
		Total at end of period		4,412,000		5,060,000		5,134,000		5,175,000		5,213,000
		Gross additions		165,000		191,000		241,000		230,000		199,000
		Net additions (losses)		(120,000)		(74,000)		(41,000)		(38,000)		(48,000)
		ARPU (1)	$	54.18	$	54.85	$	54.56	$	54.34	$	54.42
		Churn rate (2)		2.0%		1.7%		1.8%		1.7%		1.6%
		Smartphone penetration (3) (4)		45.5%		43.5%		41.8%		38.6%		36.8%
	Prepaid
		Total at end of period		381,000		446,000		423,000		386,000		329,000
		Gross additions		77,000		104,000		107,000		120,000		78,000
		Net additions (losses)		(7,000)		23,000		37,000		57,000		20,000
		ARPU (1)	$	31.69	$	33.31	$	33.56	$	32.97	$	33.59
		Churn rate (2)		6.8%		6.2%		5.8%		5.9%		6.2%
Total customers at end of period				4,968,000		5,736,000		5,798,000		5,808,000		5,799,000
Billed ARPU (1)			$	50.60	$	51.13	$	50.94	$	50.83	$	50.99
Service revenue ARPU (1)			$	57.45	$	57.63	$	58.00	$	59.57	$	59.05
Smartphones sold as a percent of total devices sold				66.0%		61.7%		62.9%		53.0%		51.9%
Total population
		Consolidated markets (5)		84,025,000		93,943,000		93,244,000		92,996,000		92,684,000
		Consolidated operating markets (5)		31,822,000		47,440,000		46,966,000		46,966,000		46,966,000
Market penetration at end of period
		Consolidated markets (6)		5.9%		6.1%		6.2%		6.2%		6.3%
		Consolidated operating markets (6)		15.6%		12.1%		12.3%		12.4%		12.3%
Capital expenditures (000s)			$	168,500	$	118,400	$	253,100	$	199,100	$	183,200
Total cell sites in service				7,748		8,027		8,028		7,984		7,932
Owned towers in service				4,411		4,411		4,408		4,377		4,346

United States Cellular Corporation
Core Markets Summary Operating Data (Unaudited)
Excludes NY1 & NY2

Quarter Ended			6/30/2013		3/31/2013		12/31/2012		9/30/2012		6/30/2012
Retail Customers
	Postpaid
		Total at end of period		4,412,000		4,463,000		4,496,000		4,515,000		4,538,000
		Gross additions		165,000		176,000		208,000		196,000		167,000
		Net additions (losses)		(53,000)		(33,000)		(19,000)		(23,000)		(30,000)
		ARPU (1)	$	54.44	$	54.21	$	53.91	$	53.67	$	53.73
		Churn rate (2)		1.6%		1.6%		1.7%		1.6%		1.4%
		Smartphone penetration (3) (4)		45.5%		43.0%		41.1%		37.8%		36.0%
	Prepaid
		Total at end of period		381,000		373,000		342,000		305,000		246,000
		Gross additions		76,000		91,000		87,000		99,000		60,000
		Net additions (losses)		8,000		31,000		37,000		59,000		23,000
		ARPU (1)	$	31.65	$	32.92	$	33.21	$	32.97	$	33.23
		Churn rate (2)		6.0%		5.6%		5.1%		4.8%		5.4%
Total customers at end of period				4,968,000		5,005,000		5,022,000		5,012,000		4,989,000
Billed ARPU (1)			$	50.98	$	50.93	$	50.71	$	50.59	$	50.71
Service revenue ARPU (1)			$	57.88	$	57.14	$	57.67	$	59.34	$	58.89
Smartphones sold as a percent of total devices sold				66.1%		62.1%		62.9%		53.0%		52.0%
Total population
		Consolidated markets (5)		84,025,000		84,025,000		83,384,000		82,595,000		82,283,000
		Consolidated operating markets (5)		31,822,000		31,822,000		31,445,000		31,110,000		31,110,000
Market penetration at end of period
		Consolidated markets (6)		5.9%		6.0%		6.0%		6.1%		6.1%
		Consolidated operating markets (6)		15.6%		15.7%		16.0%		16.1%		16.0%
Capital expenditures (000s)			$	171,200	$	113,300	$	241,400	$	184,100	$	163,600
Total cell sites in service				6,113		6,113		6,130		6,089		6,041
Owned towers in service				3,844		3,846		3,847		3,818		3,787

(1) ARPU metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period. These revenue bases and customer populations are shown below:

a. Postpaid ARPU consists of total postpaid service revenues and postpaid customers.

b. Prepaid ARPU consists of total prepaid service revenues and prepaid customers.

c. Billed ARPU consists of total retail service revenues and postpaid, prepaid and reseller customers.

d. Service revenue ARPU consists of total retail service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.

(2) Churn metrics represent the percentage of the postpaid or prepaid customers that disconnect service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.

(3) Smartphones represent wireless devices which run on an Android^TM, BlackBerry® or Windows Mobile® operating system, excluding tablets.

(4) Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(5) Used only to calculate market penetration of consolidated and core markets and consolidated and core operating markets, respectively. See footnote (6) below.

(6) Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated and core markets and consolidated and core operating markets, respectively, as estimated by Claritas®.

TDS Telecom
Summary Operating Data (Unaudited)

Quarter Ended			6/30/2013	3/31/2013	12/31/2012	9/30/2012	6/30/2012
TDS Telecom
ILEC:
	Residential Connections
		Physical access lines (1)	342,200	345,500	350,100	355,800	360,100
		Broadband connections (2)	224,500	221,900	221,700	223,100	222,400
		IPTV customers	10,500	9,000	7,900	6,700	5,600
		ILEC residential connections	577,200	576,400	579,700	585,600	588,100

	Commercial Connections
		Physical access lines (1)	104,100	106,000	107,600	109,800	111,100
		Broadband connections (2)	18,500	18,400	18,500	18,500	18,400
		managedIP connections (3)	19,900	18,400	17,200	15,000	13,200
		ILEC commercial connections	142,500	142,800	143,300	143,300	142,700

CLEC:
	Residential Connections
		Physical access lines (1)	21,800	23,000	24,600	26,200	27,900
		Broadband connections (2)	7,200	7,700	8,200	8,900	9,500
		CLEC residential connections	29,000	30,700	32,800	35,100	37,400

	Commercial Connections
		Physical access lines (1)	125,000	129,700	135,500	140,300	145,100
		Broadband connections (2)	9,700	10,400	11,200	12,000	12,800
		managedIP connections (3)	92,000	85,000	77,400	69,500	61,400
		CLEC commercial connections	226,700	225,100	224,100	221,800	219,300

Total ILEC and CLEC Customer Connections			975,400	975,000	979,900	985,800	987,500

(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		6/30/2013		3/31/2013		12/31/2012		9/30/2012		6/30/2012
ILEC	$	29,400	$	22,400	$	43,400	$	33,700	$	32,500
CLEC		3,900		5,500		6,100		5,400		4,900
HMS		2,300		2,600		2,300		4,400		5,500
	$	35,600	$	30,500	$	51,800	$	43,500	$	42,900

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)
				2013		2012		Amount		Percent
Operating revenues
	U.S. Cellular			$	995,130	$	1,104,400	$	(109,270)		(10%)
	TDS Telecom				223,460		208,519		14,941		7%
	All Other (1)				9,576		10,250		(674)		(7%)
					1,228,166		1,323,169		(95,003)		(7%)
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			813,464		869,980		(56,516)		(6%)
		Depreciation, amortization and accretion			202,580		147,555		55,025		37%
		Loss on asset disposals, net			9,018		2,702		6,316		>100%
		(Gain) loss on sale of business and other exit costs, net			(249,024)		—		(249,024)		N/M
					776,038		1,020,237		(244,199)		(24%)
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			162,954		148,983		13,971		9%
		Depreciation, amortization and accretion			48,756		47,945		811		2%
		(Gain) loss on asset disposals, net			(682)		306		(988)		>(100%)
					211,028		197,234		13,794		7%
	All Other (1)
		Expenses excluding depreciation and amortization			10,033		11,111		(1,078)		(10%)
		Depreciation and amortization			2,867		3,009		(142)		(5%)
		Loss on impairment of assets			—		515		(515)		N/M
		Gain on asset disposals, net			(17)		(13)		(4)		(31%)
		(Gain) loss on sale of business and other exit costs, net			(54,010)		—		(54,010)		N/M
					(41,127)		14,622		(55,749)		>(100%)

			Total operating expenses		945,939		1,232,093		(286,154)		(23%)
Operating income (loss)
	U.S. Cellular				219,092		84,163		134,929		>100%
	TDS Telecom				12,432		11,285		1,147		10%
	All Other (1)				50,703		(4,372)		55,075		>(100%)
					282,227		91,076		191,151		>100%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				35,605		25,392		10,213		40%
	Interest and dividend income				2,600		2,352		248		11%
	Gain (loss) on investments				14,518		(3,728)		18,246		>(100%)
	Interest expense				(23,749)		(23,139)		(610)		(3%)
	Other, net				(197)		(249)		52		21%
		Total investment and other income			28,777		628		28,149		>100%
Income before income taxes					311,004		91,704		219,300		>100%
	Income tax expense				132,607		35,765		96,842		>100%
Net income					178,397		55,939		122,458		>100%
	Less: Net income attributable to noncontrolling interests, net of tax				(22,320)		(13,602)		(8,718)		(64%)
Net income attributable to TDS shareholders					156,077		42,337		113,740		>100%
	Preferred dividend requirement				(12)		(12)		—		—
Net income available to common shareholders				$	156,065	$	42,325	$	113,740		>100%

Basic weighted average shares outstanding					108,385		108,732		(347)		—
Basic earnings per share attributable to TDS shareholders				$	1.44	$	0.39	$	1.05		>100%

Diluted weighted average shares outstanding					108,913		109,022		(109)		—
Diluted earnings per share attributable to TDS shareholders				$	1.42	$	0.39	$	1.03		>100%

(1) Consists of Non-Reportable Segment, corporate operations and intercompany eliminations between U.S. Cellular, TDS Telecom, the Non-Reportable Segment and corporate operations. TDS recognized an incremental $53.5 million upon closing of the Divesture Transaction as a result of lower asset basis in assets disposed.

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)
				2013		2012		Amount		Percent
Operating revenues
	U.S. Cellular			$	2,076,876	$	2,196,521	$	(119,645)		(5%)
	TDS Telecom				440,521		412,594		27,927		7%
	All Other (1)				19,342		19,845		(503)		(3%)
					2,536,739		2,628,960		(92,221)		(4%)
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and accretion			1,691,534		1,732,424		(40,890)		(2%)
		Depreciation, amortization and accretion			392,425		294,240		98,185		33%
		Loss on asset disposals, net			14,452		4,705		9,747		>100%
		(Gain) loss on sale of business and other exit costs, net			(242,093)		(4,213)		(237,880)		>100%
					1,856,318		2,027,156		(170,838)		(8%)
	TDS Telecom
		Expenses excluding depreciation, amortization and accretion			322,440		292,403		30,037		10%
		Depreciation, amortization and accretion			98,247		95,388		2,859		3%
		(Gain) loss on asset disposals, net			(489)		426		(915)		>(100%)
					420,198		388,217		31,981		8%
	All Other (1)
		Expenses excluding depreciation and amortization			19,272		22,057		(2,785)		(13%)
		Depreciation and amortization			5,608		6,315		(707)		(11%)
		Loss on impairment of assets			—		515		(515)		N/M
		Gain on asset disposals, net			(28)		(18)		(10)		(56%)
		(Gain) loss on sale of business and other exit costs, net			(54,010)		—		(54,010)		N/M
					(29,158)		28,869		(58,027)		>(100%)

			Total operating expenses		2,247,358		2,444,242		(196,884)		(8%)
Operating income (loss)
	U.S. Cellular				220,558		169,365		51,193		30%
	TDS Telecom				20,323		24,377		(4,054)		(17%)
	All Other (1)				48,500		(9,024)		57,524		>(100%)
					289,381		184,718		104,663		57%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				62,694		48,781		13,913		29%
	Interest and dividend income				4,178		4,535		(357)		(8%)
	Gain (loss) on investments				14,518		(3,728)		18,246		>(100%)
	Interest expense				(48,247)		(47,603)		(644)		(1%)
	Other, net				(351)		(21)		(330)		>100%
		Total investment and other income			32,792		1,964		30,828		>100%
Income before income taxes					322,173		186,682		135,491		73%
	Income tax expense				136,787		63,177		73,610		>100%
Net income					185,386		123,505		61,881		50%
	Less: Net income attributable to noncontrolling interests, net of tax				(27,890)		(28,914)		1,024		4%
Net income attributable to TDS shareholders					157,496		94,591		62,905		67%
	Preferred dividend requirement				(25)		(25)		—		—
Net income available to common shareholders				$	157,471	$	94,566	$	62,905		67%

Basic weighted average shares outstanding					108,320		108,693		(373)		—
Basic earnings per share attributable to TDS shareholders				$	1.45	$	0.87	$	0.58		67%

Diluted weighted average shares outstanding					108,827		108,964		(137)		—
Diluted earnings per share attributable to TDS shareholders				$	1.44	$	0.86	$	0.58		67%

N/M – Percentage change not meaningful

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

ASSETS


		June 30,		December 31,
		2013		2012
Current assets
	Cash and cash equivalents	$	1,246,415	$	740,481
	Short-term investments		110,352		115,700
	Accounts receivable from customers and others		485,596		574,328
	Inventory		168,700		160,692
	Net deferred income tax asset		56,822		43,411
	Prepaid expenses		93,383		86,385
	Income taxes receivable		9		9,625
	Other current assets		32,375		32,815
			2,193,652		1,763,437

Assets held for sale			78,389		163,242

Investments
	Licenses		1,418,832		1,480,039
	Goodwill		759,885		797,194
	Other intangible assets, net		52,592		58,522
	Investments in unconsolidated entities		312,046		179,921
	Long-term investments		40,120		50,305
	Other investments		738		824
			2,584,213		2,566,805

Property, plant and equipment, net
	U.S. Cellular		2,823,509		3,022,588
	TDS Telecom		906,904		934,188
	Other		38,520		40,490
			3,768,933		3,997,266

Other assets and deferred charges			129,578		133,150

Total assets		$	8,754,765	$	8,623,900

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

LIABILITIES AND EQUITY


				June 30,		December 31,
				2013		2012
Current liabilities
		Current portion of long-term debt		$	1,899	$	1,233
		Accounts payable			393,906		377,291
		Customer deposits and deferred revenues			228,259		222,345
		Accrued interest			8,599		6,565
		Accrued taxes			190,836		48,237
		Accrued compensation			95,677		134,932
		Other current liabilities			114,910		134,005
					1,034,086		924,608

Liabilities held for sale					559		19,594

Deferred liabilities and credits
		Net deferred income tax liability			855,623		862,580
		Other deferred liabilities and credits			460,991		438,727

Long-term debt					1,720,642		1,721,571

Noncontrolling interests with redemption features					512		493

Equity
	TDS shareholders' equity
		Series A Common and Common Shares, par value $.01			1,327		1,327
		Capital in excess of par value			2,299,091		2,304,122
		Treasury shares, at cost			(738,397)		(750,099)
		Accumulated other comprehensive loss			(8,438)		(8,132)
		Retained earnings			2,586,567		2,464,318
			Total TDS shareholders' equity		4,140,150		4,011,536

	Preferred shares				825		825
	Noncontrolling interests				541,377		643,966

		Total equity			4,682,352		4,656,327

Total liabilities and equity				$	8,754,765	$	8,623,900

Balance Sheet Highlights
June 30, 2013
(Unaudited, dollars in thousands)


			U.S.		TDS		TDS Corporate		Intercompany		TDS
			Cellular		Telecom		& Other		Eliminations		Consolidated
Cash and cash equivalents			$	467,421	$	92,257	$	686,737	$	―	$	1,246,415
Affiliated cash investments				―		397,972		―		(397,972)		―
Short-term investments				110,352		―		―		―		110,352
			$	577,773	$	490,229	$	686,737	$	(397,972)	$	1,356,767

Licenses, goodwill and other intangible assets			$	1,783,572	$	577,367	$	(129,630)	$	―	$	2,231,309
Investment in unconsolidated entities				276,363		3,809		38,985		(7,111)		312,046
Long-term and other investments				40,120		738		―		―		40,858
			$	2,100,055	$	581,914	$	(90,645)	$	(7,111)	$	2,584,213


Property, plant and equipment, net			$	2,823,509	$	906,904	$	38,520	$	―	$	3,768,933

Long-term debt:
	Current portion		$	100	$	70	$	1,729	$	―	$	1,899
	Non-current portion			879,121		724		840,797		―		1,720,642
		Total	$	879,221	$	794	$	842,526	$	―	$	1,722,541

Preferred shares			$	―	$	―	$	825	$	―	$	825

Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
Six Months Ended June 30,
(Unaudited, dollars in thousands)
				2013		2012
Cash flows from operating activities
	Net income			$	185,386	$	123,505
		Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
			Depreciation, amortization and accretion		496,280		395,943
			Bad debts expense		35,187		33,626
			Stock-based compensation expense		12,902		20,955
			Deferred income taxes, net		(21,246)		29,929
			Equity in earnings of unconsolidated entities		(62,694)		(48,781)
			Distributions from unconsolidated entities		47,635		6,973
			Loss on impairment of assets		—		515
			Loss on asset disposals, net		13,935		5,074
			(Gain) loss on sale of business and other exit costs, net		(296,103)		(4,174)
			(Gain) loss on investments		(14,518)		3,728
			Noncash interest expense		997		1,728
			Other operating activities		505		1,010
		Changes in assets and liabilities from operations
			Accounts receivable		(5,781)		(10,197)
			Inventory		(8,105)		(58,467)
			Accounts payable		58,204		(23,336)
			Customer deposits and deferred revenues		7,897		22,786
			Accrued taxes		150,425		89,433
			Accrued interest		2,172		(1,823)
			Other assets and liabilities		(81,586)		(81,517)
					521,492		506,910

Cash flows from investing activities
	Cash used for additions to property, plant and equipment				(384,281)		(501,211)
	Cash paid for acquisitions and licenses				(14,150)		(52,213)
	Cash received from divestitures				480,000		50,036
	Cash paid for investments				—		(45,000)
	Cash received for investments				15,000		128,444
	Other investing activities				14,127		(8,916)
					110,696		(428,860)

Cash flows from financing activities
	Repayment of long-term debt				(605)		(952)
	Issuance of long-term debt				—		358
	TDS Common Shares and Special Common Shares reissued for benefit plans, net of tax payments				776		(39)
	U.S. Cellular Common Shares reissued for benefit plans, net of tax payments				(2,206)		(2,465)
	Repurchase of U.S. Cellular Common Shares				(18,425)		—
	Dividends paid to TDS shareholders				(27,598)		(26,610)
	U.S. Cellular dividends paid to noncontrolling public shareholders				(75,235)		—
	Payment of debt issuance costs				(23)		—
	Distributions to noncontrolling interests				(3,292)		(643)
	Other financing activities				354		2,790
					(126,254)		(27,561)

Net increase in cash and cash equivalents					505,934		50,489
Cash and cash equivalents
	Beginning of period				740,481		563,275
	End of period			$	1,246,415	$	613,764

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

							Increase (Decrease)
			2013		2012		Amount		Percent
Local Telephone Operations
	Operating revenues
		Residential	$	69,516	$	70,082	$	(566)	(0)
		Commercial		24,266		24,201		65	—
		Wholesale		48,691		49,769		(1,078)	(2%)
				142,473		144,052		(1,579)	(1%)
	Operating expenses
		Cost of services and products		46,621		47,180		(559)	(0)
		Selling, general and administrative expenses		41,274		43,216		(1,942)	(4%)
		Depreciation, amortization and accretion		37,972		37,834		138	—
		(Gain) loss on asset disposals and exchanges, net		(850)		136		(986)	>(100)%
				125,017		128,366		(3,349)	(3%)

	Operating income		$	17,456	$	15,686	$	1,770	11%

Competitive Local Exchange Carrier Operations
	Operating revenues
		Residential	$	3,395	$	4,338	$	(943)	(22%)
		Commercial		35,022		34,905		117	—
		Wholesale		3,716		4,957		(1,241)	(25%)
				42,133		44,200		(2,067)	(5%)
	Operating expenses
		Cost of services and products		22,183		22,702		(519)	(2%)
		Selling, general and administrative expenses		15,850		16,769		(919)	(5%)
		Depreciation, amortization and accretion		5,221		5,466		(245)	(4%)
		Loss on asset disposals and exchanges, net		85		72		13	18%
				43,339		45,009		(1,670)	(4%)

	Operating loss		$	(1,206)	$	(809)	$	(397)	(49%)

Hosted and Managed Services Operations
		Revenues	$	41,374	$	22,876	$	18,498	81%
	Operating expenses
		Cost of services and products		30,185		15,090		15,095	>100%
		Selling, general and administrative expenses		9,361		6,635		2,726	41%
		Depreciation, amortization and accretion		5,563		4,645		918	20%
		Loss on asset disposals and exchanges, net		83		98		(15)	(15%)
				45,192		26,468		18,724	71%

	Operating loss		$	(3,818)	$	(3,592)	$	(226)	(6%)

Intercompany revenues			$	(2,520)	$	(2,609)	$	89	3%
Intercompany expenses				(2,520)		(2,609)		89	3%

Total TDS Telecom operating income			$	12,432	$	11,285	$	1,147	10%

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

							Increase (Decrease)
			2013		2012		Amount		Percent
Local Telephone Operations
	Operating revenues
		Residential	$	138,902	$	139,481	$	(579)	—
		Commercial		48,550		48,331		219	—
		Wholesale		96,541		101,305		(4,764)	(5%)
				283,993		289,117		(5,124)	(2%)
	Operating expenses
		Cost of services and products		94,216		96,348		(2,132)	(2%)
		Selling, general and administrative expenses		83,113		84,730		(1,617)	(2%)
		Depreciation, amortization and accretion		76,548		75,612		936	1%
		(Gain) loss on asset disposals and exchanges, net		(728)		202		(930)	>(100)%
				253,149		256,892		(3,743)	(1%)

	Operating income		$	30,844	$	32,225	$	(1,381)	(4%)

Competitive Local Exchange Carrier Operations
	Operating revenues
		Residential	$	7,013	$	9,126	$	(2,113)	(23%)
		Commercial		70,130		69,246		884	1%
		Wholesale		7,544		9,872		(2,328)	(24%)
				84,687		88,244		(3,557)	(4%)
	Operating expenses
		Cost of services and products		44,145		45,266		(1,121)	(2%)
		Selling, general and administrative expenses		31,782		33,029		(1,247)	(4%)
		Depreciation, amortization and accretion		10,668		10,955		(287)	(3%)
		Loss on asset disposals and exchanges, net		126		125		1	1%
				86,721		89,375		(2,654)	(3%)

	Operating loss		$	(2,034)	$	(1,131)	$	(903)	(80%)

Hosted and Managed Services Operations
		Revenues	$	76,938	$	40,434	$	36,504	90%
	Operating expenses
		Cost of services and products		54,999		24,864		30,135	>100%
		Selling, general and administrative expenses		19,282		13,367		5,915	44%
		Depreciation, amortization and accretion		11,031		8,821		2,210	25%
		Loss on asset disposals and exchanges, net		113		99		14	14%
				85,425		47,151		38,274	81%

	Operating loss		$	(8,487)	$	(6,717)	$	(1,770)	(26%)

Intercompany revenues			$	(5,097)	$	(5,201)	$	104	2%
Intercompany expenses				(5,097)		(5,201)		104	2%

Total TDS Telecom operating income			$	20,323	$	24,377	$	(4,054)	(17%)

Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)

			TDS Consolidated

			Three Months Ended				Six Months Ended
			June 30,				June 30,
			2013		2012		2013		2012

	Cash flows from operating activities		$	275,140	$	224,665	$	521,492	$	506,910
	Deduct:
	Cash used for additions to property, plant and equipment			207,963		258,600		384,281		501,211
		Free cash flow (1)	$	67,177	$	(33,935)	$	137,211	$	5,699

(1) 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.

		June 30,		December 31,
		2013		2012

Cash and cash equivalents		$	1,246,415	$	740,481

Amounts included in short-term investments (1) (2)
	U.S. Treasury Notes		110,352		115,700

Amounts included in long-term investments (1) (3)
	U.S. Treasury Notes		40,120		50,305

Total cash and cash equivalents and investments		$	1,396,887	$	906,486