2016 Estimated Results

Current estimates of full-year 2016 results for U.S. Cellular, TDS Telecom, and TDS, which are unchanged from the previous estimates, are shown below. Such estimates represent management’s view as of November 4, 2016. 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.

2016 Estimated Results

U.S. Cellular

TDS Telecom

TDS(2)

Current

(Dollars in millions)

Total operating revenues

$3,900-$4,100

Unchanged

$1,130-$1,180

Unchanged

$5,040-$5,290

Unchanged

Operating cash flow (1)

$525-$650

Unchanged

$270-$310

Unchanged

$800-$965

Unchanged

Adjusted EBITDA (1)

$725-$850

Unchanged

$270-$310

Unchanged

$1,000-$1,165

Unchanged

Capital expenditures (Approximately)

500

Unchanged

180

Unchanged

695

Unchanged

The following tables provide a reconciliation to Operating Cash Flow and Adjusted EBITDA for 2016 estimated results, and actual results for the nine months ended September 30, 2016 and year ended December 31, 2015. In providing 2016 estimated results, TDS has not completed the below reconciliation to net income because it does not provide guidance for income taxes. Although potentially significant, TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, TDS is unable to provide such guidance.

				2016 Estimated Results

				U.S. Cellular		TDS Telecom		TDS(2)
(Dollars in millions)
Net income (loss) (GAAP)				N/A		N/A		N/A
Add back:
	Income tax expense (benefit)			N/A		N/A		N/A
Income (loss) before income taxes
	(GAAP)		$	(5)-120	$	40-80	$	(25)-140
Add back:
	Interest expense			110		–		165
	Depreciation, amortization and
		accretion expense		615		230		855
EBITDA (Non-GAAP)			$	720-845	$	270-310	$	995-1,160
Add back:
	(Gain) loss on sale of business and
		other exit costs, net		–		–		–
	(Gain) loss on license sales and
		exchanges, net		(15)		–		(15)
	(Gain) loss on asset disposals, net			20		–		20
Adjusted EBITDA (Non-GAAP) (1)			$	725-850	$	270-310	$	1,000-1,165
Deduct:
	Equity in earnings of unconsolidated
		entities		140		–		140
	Interest and dividend income			60		–		60
Operating cash flow (Non-GAAP) (1)			$	525-650	$	270-310	$	800-965

			Actual Results

			Nine Months Ended September 30, 2016						Year ended December 31, 2015
			U.S. Cellular		TDS Telecom		TDS (2)		U.S. Cellular*		TDS Telecom		TDS (2)*
(Dollars in millions)
Net income (GAAP)			$	54	$	32	$	58	$	247	$	46	$	263
Add back:
	Income tax expense			39		20		45		156		35		172
Income before income taxes
	(GAAP)		$	93	$	53	$	103	$	404	$	81	$	435
Add back:
	Interest expense			84		2		127		86		1		142
	Depreciation, amortization and
		accretion expense		462		168		636		606		228		844
EBITDA (Non-GAAP)			$	639	$	223	$	866	$	1,096	$	310	$	1,421
Add back:
	(Gain) loss on sale of business and
		other exit costs, net		–		–		(1)		(114)		(10)		(136)
	(Gain) loss on license sales and
		exchanges, net		(16)		–		(16)		(147)		–		(147)
	(Gain) loss on asset disposals, net			16		4		20		16		6		22
Adjusted EBITDA (Non-GAAP) (1)			$	639	$	226	$	869	$	852	$	306	$	1,160
Deduct:
	Equity in earnings of unconsolidated
		entities		110		–		109		140		–		140
	Interest and dividend income			41		2		44		37		2		39
	Other, net			–		–		1		–		–		–
Operating cash flow (Non-GAAP) (1)(3)			$	488	$	225	$	715	$	675	$	304	$	981

* Includes $58 million of revenue related to termination of the rewards points program.
Note: Totals may not foot due to rounding differences.

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) is defined as net income adjusted for the items set forth in the reconciliation above. Operating cash flow is defined as net income adjusted for the items set forth in the reconciliation above. Adjusted EBITDA and Operating cash flow are not measures of financial performance under Generally Accepted Accounting Principles in the United States (“GAAP”) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measure of liquidity. TDS does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future. Management uses Adjusted EBITDA and Operating cash flow as measurements of profitability, and therefore reconciliations to applicable GAAP income measures are deemed appropriate. Management believes Adjusted EBITDA and Operating cash flow are useful measures of TDS’ operating results before significant recurring non-cash charges, gains and losses, and other items as presented below as they provide additional relevant and useful information to investors and other users of TDS’ financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Operating cash flow reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles Adjusted EBITDA and Operating cash flow to the corresponding GAAP measure, Net income or Income (loss) before income taxes.
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.
A reconciliation of Operating cash flow (Non-GAAP) to Operating income (GAAP) for September 30, 2016 actual results can be found on the company's website at investors.tdsinc.com.

United States Cellular Corporation
Summary Operating Data (Unaudited)

As of or for the Quarter Ended					9/30/2016		6/30/2016		3/31/2016			12/31/2015		9/30/2015
Retail Connections
	Postpaid
		Total at end of period				4,484,000		4,490,000		4,454,000		4,409,000		4,341,000
		Gross additions				174,000		197,000		215,000		240,000		200,000
			Feature phones			10,000		8,000		9,000		10,000		14,000
			Smartphones			105,000		107,000		124,000		132,000		119,000
			Connected devices			59,000		82,000		82,000		98,000		67,000
		Net additions (losses)				(6,000)		36,000		45,000		68,000		17,000
			Feature phones			(20,000)		(21,000)		(25,000)		(25,000)		(28,000)
			Smartphones			(7,000)		8,000		20,000		23,000		6,000
			Connected devices			21,000		49,000		50,000		70,000		39,000
		ARPU (1)(8)			$	47.08	$	47.37	$	48.13	$	51.46	$	58.12
		ABPU (Non-GAAP)(2)(8)			$	56.79	$	56.09	$	56.06	$	58.57	$	63.88
		ARPA (3)(8)			$	125.31	$	124.91	$	125.36	$	131.96	$	147.00
		ABPA (Non-GAAP)(4)(8)			$	151.16	$	147.90	$	145.99	$	150.19	$	161.57
		Churn rate (5)				1.34%		1.20%		1.28%		1.31%		1.41%
			Handsets			1.22%		1.10%		1.18%		1.23%		1.33%
			Connected devices			2.04%		1.84%		2.01%		1.95%		2.20%
		Smartphone penetration (6)				78%		77%		75%		74%		72%
	Prepaid
		Total at end of period				480,000		413,000		399,000		387,000		380,000
		Gross additions				132,000		73,000		75,000		69,000		71,000
		Net additions (losses)				67,000		14,000		12,000		7,000		12,000
		ARPU (1)			$	34.39	$	34.58	$	35.51	$	35.54	$	35.64
		Churn rate (5)				4.84%		4.86%		5.37%		5.40%		5.24%
Total connections at end of period (9)						5,030,000		4,973,000		4,926,000		4,876,000		4,807,000
Smartphones sold as a percent of total
	handsets sold					92%		91%		92%		91%		87%
Market penetration at end of period
	Consolidated operating population					31,994,000		31,994,000		31,994,000		31,967,000		31,814,000
	Consolidated operating penetration (7)					16%		16%		15%		15%		15%
Capital expenditures (millions)					$	103	$	93	$	79	$	198	$	135
Total cell sites in service						6,374		6,324		6,306		6,297		6,246
Owned towers						4,015		3,988		3,989		3,978		3,957

(1)		Average Revenue Per User (“ARPU”) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period. These revenue bases and connection populations are shown below:
			▪	Postpaid ARPU consists of total postpaid service revenues and postpaid connections.
			▪	Prepaid ARPU consists of total prepaid service revenues and prepaid connections.
(2)		Average Billings Per User (“ABPU”) - non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid connections and by the number of months in the period. Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.
(3)		Average Revenue Per Account (“ARPA”) - metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.
(4)		Average Billings Per Account (“ABPA”) - non-GAAP metric is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid accounts and by the number of months in the period. Refer to the end of this release for a reconciliation of this metric to its most comparable GAAP metric.
(5)		Churn rate represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.
(6)		Smartphone penetration is calculated by dividing postpaid smartphone connections by postpaid handset connections.
(7)		Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total population of consolidated operating markets as estimated by Nielsen.
(8)		The quarter ended September 30, 2015 results include the recognition of $58 million in revenue due to the discontinuation of the loyalty rewards points program. The discontinuation had the effect of increasing ARPU/ABPU and ARPA/ABPA by $4.48 and $11.34 for the three months ended September 2015, respectively.
(9)		Includes reseller and other connections.

TDS Telecom
Summary Operating Data (Unaudited)

Quarter Ended			9/30/2016		6/30/2016		3/31/2016		12/31/2015		9/30/2015
TDS Telecom
Wireline
	Residential connections
		Voice (1)		314,600		316,800		318,400		319,800		325,900
		Broadband (2)		232,800		232,200		229,100		228,500		231,600
		IPTV (3)		43,600		41,200		38,300		34,400		30,300
		Wireline residential connections		590,900		590,200		585,800		582,700		587,800

	Total residential revenue per connection (4)		$	44.25	$	43.67	$	43.28	$	41.24	$	42.83

	Commercial connections
		Voice (1)		160,900		164,000		167,400		171,500		176,700
		Broadband (2)		21,700		21,900		22,000		22,400		23,000
		managedIP (5)		151,500		149,000		148,500		147,100		145,900
		Wireline commercial connections		334,000		334,900		337,900		341,000		345,600

	Total Wireline connections			924,900		925,100		923,700		923,700		933,400

Cable
	Cable Connections
		Video (6)		101,100		102,900		104,600		106,800		108,300
		Broadband (7)		130,200		125,700		121,700		117,100		114,600
		Voice (8)		59,800		58,900		58,100		56,400		54,000
		Cable connections		291,000		287,600		284,400		280,300		276,900

Numbers may not foot due to rounding.

(1)		The individual circuits connecting a customer to Wireline’s central office facilities.
(2)		The number of Wireline customers provided high-capacity data circuits via various technologies, including DSL and dedicated internet circuit technologies.
(3)		The number of Wireline customers provided video services using IP networking technology.
(4)		Total residential revenue per connection is calculated by dividing total Wireline residential revenue by the average number of total Wireline residential connections and by the number of months in the period.
(5)		The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.
(6)		Generally, a home or business receiving video programming counts as one video connection. In counting bulk residential or commercial connections, such as an apartment building or hotel, connections are counted based on the number of units/rooms within the building receiving service.
(7)		Billable number of lines into a building for high-speed data services.
(8)		Billable number of lines into a building for voice services.

TDS Telecom
Capital Expenditures (millions)

Quarter Ended	9/30/2016		6/30/2016		3/31/2016		12/31/2015		9/30/2015
Wireline	$	27	$	27	$	27	$	50	$	38
Cable		11		17		13		15		13
HMS		2		2		2		8		5
	$	40	$	46	$	42	$	73	$	56

Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
(Unaudited)
				Three Months Ended September 30,
				2016		2015		2016 vs. 2015
				2016		2015		Increase (Decrease)
(Dollars and shares in millions, except per share amounts)
Operating revenues
	U.S. Cellular			$	1,010	$	1,069	$	(59)	(6)%
	TDS Telecom				287		299		(12)	(4)%
	All Other (1)				4		6		(2)	(37)%
					1,301		1,374		(73)	(5)%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and
			accretion		846		861		(15)	(2)%
		Depreciation, amortization and accretion			155		152		3	2%
		(Gain) loss on asset disposals, net			7		3		4	>100%
		(Gain) loss on sale of business and other exit costs, net			–		(1)		1	N/M
		(Gain) loss on license sales and exchanges, net			(7)		(24)		17	70%
					1,001		991		10	1%
	TDS Telecom
		Expenses excluding depreciation, amortization and
			accretion		217		224		(6)	(3)%
		Depreciation, amortization and accretion			57		57		–	-
		(Gain) loss on asset disposals, net			2		2		(1)	(30)%
		(Gain) loss on sale of business and other exit costs, net			–		–		–	N/M
					276		282		(7)	(2)%
	All Other (1)
		Expenses excluding depreciation and amortization			4		6		(2)	(41)%
		Depreciation and amortization			2		2		–	(6)%
		(Gain) loss on asset disposals, net			(1)		–		(1)	>100%
		(Gain) loss on sale of business and other exit costs, net (2)			–		–		–	>(100)%
					5		8		(3)	(38)%

			Total operating expenses		1,281		1,281		–	-
Operating income (loss)
	U.S. Cellular				9		78		(69)	(88)%
	TDS Telecom				12		17		(5)	(32)%
	All Other (1)				(1)		(2)		1	41%
					20		93		(73)	(79)%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				38		40		(2)	(5)%
	Interest and dividend income				15		10		5	56%
	Interest expense				(42)		(35)		(7)	(20)%
	Other, net				(1)		–		(1)	>100%
		Total investment and other income			10		15		(5)	(25)%
Income before income taxes					30		108		(78)	(72)%
	Income tax expense				14		46		(32)	(69)%
Net income					16		62		(46)	(74)%
	Less: Net income attributable to noncontrolling
		interests, net of tax			3		11		(8)	(70)%
Net income attributable to TDS shareholders					13		51		(38)	(75)%
	TDS Preferred dividend requirement				–		–		–	-
Net income available to common shareholders				$	13	$	51	$	(38)	(75)%

Basic weighted average shares outstanding					110		109		1	1%
Basic earnings per share attributable to TDS shareholders				$	0.12	$	0.47	$	(0.35)	(75)%

Diluted weighted average shares outstanding					111		110		1	1%
Diluted earnings per share attributable to TDS shareholders				$	0.11	$	0.46	$	(0.35)	(75)%

(1)	Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments.
N/M – Percentage change not meaningful

Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
(Unaudited)
				Nine Months Ended September 30,
				2016		2015		2016 vs. 2015
				2016		2015		Increase (Decrease)
(Dollars and shares in millions, except per share amounts)
Operating revenues
	U.S. Cellular			$	2,948	$	3,010	$	(62)	(2)%
	TDS Telecom				868		874		(6)	(1)%
	All Other (1)				10		18		(8)	(43)%
					3,826		3,902		(76)	(2)%
Operating expenses
	U.S. Cellular
		Expenses excluding depreciation, amortization and
			accretion		2,460		2,472		(12)	-
		Depreciation, amortization and accretion			462		450		12	3%
		(Gain) loss on asset disposals, net			16		12		4	33%
		(Gain) loss on sale of business and other exit costs, net			–		(114)		114	100%
		(Gain) loss on license sales and exchanges, net			(16)		(147)		131	89%
					2,922		2,673		249	9%
	TDS Telecom
		Expenses excluding depreciation, amortization and
			accretion		644		640		3	1%
		Depreciation, amortization and accretion			168		170		(2)	(1)%
		(Gain) loss on asset disposals, net			4		3		1	28%
		(Gain) loss on sale of business and other exit costs, net			–		(3)		3	>100%
					816		810		5	1%
	All Other (1)
		Expenses excluding depreciation and amortization			8		16		(8)	(50)%
		Depreciation and amortization			6		8		(2)	(32)%
		(Gain) loss on sale of business and other exit costs, net (2)			(1)		(13)		12	96%
					13		11		2	25%

			Total operating expenses		3,750		3,494		256	7%
Operating income (loss)
	U.S. Cellular (3)				26		337		(311)	(92)%
	TDS Telecom				53		64		(11)	(17)%
	All Other (1)				(3)		7		(10)	>(100)%
					76		408		(332)	(81)%
Investment and other income (expense)
	Equity in earnings of unconsolidated entities				109		110		(1)	(1)%
	Interest and dividend income				44		28		16	57%
	Interest expense				(127)		(103)		(24)	(23)%
	Other, net				1		–		1	>(100)%
		Total investment and other income			27		35		(8)	(24)%
Income before income taxes					103		443		(340)	(77)%
	Income tax expense				45		178		(133)	(75)%
Net income					58		265		(207)	(78)%
	Less: Net income attributable to noncontrolling interests,
		net of tax			9		45		(36)	(79)%
Net income attributable to TDS shareholders					49		220		(171)	(78)%
	TDS Preferred dividend requirement				–		–		–	-
Net income available to common shareholders				$	49	$	220	$	(171)	(78)%

Basic weighted average shares outstanding					110		109		1	N/M
Basic earnings per share attributable to TDS shareholders				$	0.44	$	2.03	$	(1.58)	(78)%
Diluted weighted average shares outstanding					111		110		1	N/M
Diluted earnings per share attributable to TDS shareholders				$	0.44	$	1.99	$	(1.55)	(78)%

(1)	Consists of TDS corporate, intercompany eliminations and all other business operations not included in the U.S. Cellular and TDS Telecom segments.
(2)	Compared to U.S. Cellular, TDS recognized an incremental gain of $12 million on the tower sale as a result of a lower basis in the assets disposed in 2015.
(3)	Year-over-year comparisons are affected by gains of $252 million from sales and exchanges of businesses and licenses in 2015.
N/M – Percentage change not meaningful

Telephone and Data Systems, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
					Nine Months Ended September 30,
					2016		2015
(Dollars in millions)
Cash flows from operating activities
	Net income				$	58	$	265
		Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
			Depreciation, amortization and accretion			636		628
			Bad debts expense			72		83
			Stock-based compensation expense			29		29
			Deferred income taxes, net			11		(40)
			Equity in earnings of unconsolidated entities			(109)		(110)
			Distributions from unconsolidated entities			55		45
			(Gain) loss on asset disposals, net			20		15
			(Gain) loss on sale of business and other exit costs, net			(1)		(130)
			(Gain) loss on license sales and exchanges, net			(16)		(147)
			Noncash interest expense			2		2
			Other operating activities			(3)		(1)
		Changes in assets and liabilities from operations
			Accounts receivable			(9)		(94)
			Equipment installment plans receivable			(160)		(96)
			Inventory			3		90
			Accounts payable			47		125
			Customer deposits and deferred revenues			(41)		(50)
			Accrued taxes			77		212
			Accrued interest			7		11
			Other assets and liabilities			(40)		(110)
				Net cash provided by operating activities		638		727

Cash flows from investing activities
	Cash used for additions to property, plant and equipment					(426)		(558)
	Cash paid for acquisitions and licenses					(46)		(287)
	Cash received from divestitures and exchanges					20		325
	Federal Communications Commission deposit					(143)		–
	Other investing activities					1		6
				Net cash used in investing activities		(594)		(514)

Cash flows from financing activities
	Issuance of long-term debt					2		225
	Repayment of long-term debt					(9)		(1)
	TDS Common Shares reissued for benefit plans, net of tax payments					7		11
	U.S. Cellular Common Shares reissued for benefit plans, net of tax payments					4		(1)
	Repurchase of TDS Common Shares					(3)		–
	Repurchase of U.S. Cellular Common Shares					(2)		(4)
	Dividends paid to TDS shareholders					(49)		(46)
	Payment of debt issuance costs					(4)		(3)
	Distributions to noncontrolling interests					(1)		(6)
	Other financing activities					11		5
				Net cash provided by (used in) financing activities		(44)		180

Net increase (decrease) in cash and cash equivalents						–		393

Cash and cash equivalents
	Beginning of period					985		472
	End of period				$	985	$	865

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

ASSETS


			September 30,		December 31,
			2016		2015
(Dollars in millions)
Current assets
	Cash and cash equivalents		$	985	$	985
	Accounts receivable from customers and others, net			824		803
	Inventory, net			148		158
	Prepaid expenses			113		112
	Income taxes receivable			6		70
	Other current assets			34		30
		Total current assets		2,110		2,158

Assets held for sale				16		–

Licenses				1,876		1,844
Goodwill				766		766
Franchise rights				244		244
Other intangible assets, net				36		47
Investments in unconsolidated entities				459		402
Other investments				1		–

Property, plant and equipment, net				3,549		3,764

Other assets and deferred charges				392		197

Total assets			$	9,449	$	9,422

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

LIABILITIES AND EQUITY


				September 30,		December 31,
				2016		2015
(Dollars in millions)
Current liabilities
	Current portion of long-term debt			$	12	$	14
	Accounts payable				366		349
	Customer deposits and deferred revenues				242		288
	Accrued interest				19		12
	Accrued taxes				48		41
	Accrued compensation				115		113
	Other current liabilities				85		127
		Total current liabilities			887		944

Deferred liabilities and credits
	Deferred income tax liability, net				910		900
	Other deferred liabilities and credits				461		433

Long-term debt					2,436		2,440

Noncontrolling interests with redemption features					1		1

Equity
	TDS shareholders' equity
		Series A Common and Common Shares, par value $.01			1		1
		Capital in excess of par value			2,373		2,365
		Treasury shares, at cost			(703)		(727)
		Accumulated other comprehensive income (loss)			–		–
		Retained earnings			2,477		2,487
			Total TDS shareholders' equity		4,148		4,126

	Preferred shares				1		1
	Noncontrolling interests				605		577

		Total equity			4,754		4,704

Total liabilities and equity				$	9,449	$	9,422

Balance Sheet Highlights
(Unaudited)

		September 30, 2016
		U.S.		TDS		TDS Corporate		Intercompany		TDS
		Cellular		Telecom		& Other		Eliminations		Consolidated
(Dollars in millions)
Cash and cash equivalents		$	674	$	41	$	270	$	–	$	985
Affiliated cash investments			–		392		–		(392)		–
		$	674	$	433	$	270	$	(392)	$	985

Licenses, goodwill and other intangible
	assets	$	2,236	$	824	$	(138)	$	–	$	2,922
Investment in unconsolidated entities			420		4		40		(5)		459
		$	2,656	$	828	$	(98)	$	(5)	$	3,381


Property, plant and equipment, net		$	2,458	$	1,067	$	25	$	(1)	$	3,549

Long-term debt:
	Current portion	$	11	$	–	$	1	$	–	$	12
	Non-current portion		1,621		2		813		–		2,436
		$	1,632	$	2	$	814	$	–	$	2,448

TDS Telecom Highlights
(Unaudited)
			Three Months Ended September 30,
			2016		2015		2016 vs. 2015
			2016		2015		Increase (Decrease)
Wireline
Operating revenues
	Residential		$	78	$	76	$	3	4%
	Commercial			53		55		(2)	(4)%
	Wholesale			43		44		(1)	(2)%
		Total service revenues		174		175		–	-
	Equipment sales			–		–		–	(9)%
				175		175		–	-
Operating expenses
	Cost of services			67		64		3	4%
	Cost of equipment sold			1		1		–	25%
	Selling, general and administrative expenses			50		50		–	-
	Depreciation, amortization and accretion			41		41		(1)	(1)%
	(Gain) loss on asset disposals, net			1		2		(1)	(65)%
				159		157		1	1%

	Operating income		$	16	$	18	$	(2)	(10)%

Cable
Operating revenues
	Residential		$	37	$	35	$	2	6%
	Commercial			9		9		–	4%
		Total operating revenues		46		44		2	5%

Operating expenses
	Cost of services			23		20		4	20%
	Selling, general and administrative expenses			13		14		(1)	(10)%
	Depreciation, amortization and accretion			9		9		–	6%
	(Gain) loss on asset disposals, net			1		–		–	>100%
				46		43		3	8%

	Operating income		$	–	$	1	$	(1)	(98)%

HMS
Operating revenues
	Service revenues		$	29	$	30	$	(1)	(5)%
	Equipment sales			39		51		(13)	(25)%
				68		82		(14)	(17)%
Operating expenses
	Cost of services			21		21		–	(1)%
	Cost of equipment sold			33		43		(11)	(25)%
	Selling, general and administrative expenses			12		12		(1)	(7)%
	Depreciation, amortization and accretion			7		7		–	5%
				72		84		(11)	(14)%

	Operating (loss)		$	(5)	$	(2)	$	(3)	>(100)%

Intercompany revenues			$	(1)	$	(1)	$	–	1%
Intercompany expenses				(1)		(1)		–	1%

Total TDS Telecom operating income			$	12	$	17	$	(5)	(32)%

Numbers may not foot due to rounding.

TDS Telecom Highlights
(Unaudited)
			Nine Months Ended September 30,
			2016		2015		2016 vs. 2015
			2016		2015		Increase (Decrease)
(Dollars in millions)
Wireline
Operating revenues
	Residential		$	232	$	224	$	7	3%
	Commercial			160		166		(6)	(4)%
	Wholesale			130		135		(5)	(3)%
		Total service revenues		522		526		(4)	(1)%
	Equipment sales			1		1		–	(1)%
				523		527		(4)	(1)%
Operating expenses
	Cost of services			192		189		3	2%
	Cost of equipment sold			2		2		–	(3)%
	Selling, general and administrative expenses			148		145		3	2%
	Depreciation, amortization and accretion			119		124		(5)	(4)%
	(Gain) loss on asset disposals, net			2		3		(2)	(52)%
	(Gain) loss on sale of business and other exit costs, net			–		(3)		3	>100%
				462		460		2	-

	Operating income		$	61	$	67	$	(6)	(9)%

Cable
Operating revenues
	Residential		$	108	$	105	$	4	3%
	Commercial			28		27		1	4%
		Total operating revenues		137		132		4	3%

Operating expenses
	Cost of services			69		59		10	17%
	Selling, general and administrative expenses			37		41		(3)	(8)%
	Depreciation, amortization and accretion			27		26		1	5%
	(Gain) loss on asset disposals, net			2		(1)		2	>100%
				136		126		10	8%

	Operating income		$	1	$	6	$	(6)	(92)%

HMS
Operating revenues
	Service revenues		$	91	$	88	$	2	3%
	Equipment sales			121		130		(9)	(7)%
				212		218		(6)	(3)%
Operating expenses
	Cost of services			61		63		(2)	(3)%
	Cost of equipment sold			101		109		(8)	(7)%
	Selling, general and administrative expenses			37		36		1	2%
	Depreciation, amortization and accretion			22		20		2	10%
				221		228		(7)	(3)%

	Operating (loss)		$	(9)	$	(10)	$	1	9%

Intercompany revenues			$	(3)	$	(3)	$	–	(1)%
Intercompany expenses				(3)		(3)		–	(1)%

Total TDS Telecom operating income			$	53	$	64	$	(11)	(17)%

Numbers may not foot due to rounding.

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

Free Cash Flow and Adjusted Free Cash Flow

		Three Months Ended September 30,				Nine Months Ended September 30,
		2016		2015		2016		2015
(Dollars in millions)
Cash flows from operating activities (GAAP)		$	238	$	188	$	638	$	727
Less: Cash used for additions to property, plant and equipment			145		199		426		558
	Free cash flow		93		(11)		212		169
Add: Sprint Cost Reimbursement			2		4		5		28
	Adjusted free cash flow (Non-GAAP)(1)	$	95	$	(7)	$	217	$	197

(1)	Management uses Free cash flow as a liquidity measure and it is defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment. Adjusted free cash flow is defined as Cash flows from operating activities (which includes cash outflows related to the Sprint decommissioning), as adjusted for cash proceeds from the Sprint Cost Reimbursement (which are included in Cash flows from investing activities in the Consolidated Statement of Cash Flows), less Cash paid for additions to property, plant and equipment. Sprint decommissioning and Sprint Cost Reimbursement are further defined and discussed in our Annual Report on Form 10-K for the year ended December 31, 2015. Free cash flow and Adjusted free cash flow are non-GAAP financial measures which TDS believes may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations (including cash proceeds from the Sprint Cost Reimbursement), after Cash paid for additions to property, plant and equipment.

Postpaid ABPU and Postpaid ABPA

U.S. Cellular presents Postpaid ABPU and Postpaid ABPA to reflect the revenue shift from Service revenues to Equipment and product sales resulting from the increased adoption of equipment installment plans. Postpaid ABPU and Postpaid ABPA, as previously defined, are non-GAAP financial measures which U.S. Cellular believes are useful to investors and other users of its financial information in showing trends in both service and equipment revenues received from customers.


For the Quarter Ended			9/30/2016		6/30/2016		3/31/2016		12/31/2015		9/30/2015
(Dollars and connection counts in millions)
Calculation of Postpaid ARPU
Postpaid service revenues		$	635	$	636	$	639	$	674	$	755
Average number of postpaid connections			4.49		4.48		4.43		4.37		4.33
Number of months in period			3		3		3		3		3
	Postpaid ARPU (GAAP metric)	$	47.08	$	47.37	$	48.13	$	51.46	$	58.12

Calculation of Postpaid ABPU
Postpaid service revenues		$	635	$	636	$	639	$	674	$	755
Equipment installment plan billings			131		118		105		93		75
	Total billings to postpaid connections	$	766	$	754	$	744	$	767	$	830
Average number of postpaid connections			4.49		4.48		4.43		4.37		4.33
Number of months in period			3		3		3		3		3
	Postpaid ABPU (Non-GAAP metric)	$	56.79	$	56.09	$	56.06	$	58.57	$	63.88

Calculation of Postpaid ARPA
Postpaid service revenues		$	635	$	636	$	639	$	674	$	755
Average number of postpaid accounts			1.69		1.70		1.70		1.70		1.71
Number of months in period			3		3		3		3		3
	Postpaid ARPA (GAAP metric)	$	125.31	$	124.91	$	125.36	$	131.96	$	147.00

Calculation of Postpaid ABPA
Postpaid service revenues		$	635	$	636	$	639	$	674	$	755
Equipment installment plan billings			131		118		105		93		75
	Total billings to postpaid accounts	$	766	$	754	$	744	$	767	$	830
Average number of postpaid accounts			1.69		1.70		1.70		1.70		1.71
Number of months in period			3		3		3		3		3
	Postpaid ABPA (Non-GAAP metric)	$	151.16	$	147.90	$	145.99	$	150.19	$	161.57

Repurchase Period	# Shares	Cost (in millions)
2016 (year-to-date through September 30, 2016)	111,700	$	3
2015 (full year)	–	$	–
Total	111,700	$	3