2018 Estimated Results

U.S. Cellular

TDS Telecom (1)

TDS (1)(2)

Current (3)

Previous

Current (3)

Previous

Current (3)

Previous

(Dollars in millions)

Total operating revenues

$3,925-$4,025

$3,850-$4,050

$900-$950

Unchanged

$5,055-$5,205

$5,015-$5,265

Adjusted OIBDA (4)(5)

$700-$800

$625-$775

$290-$320

Unchanged

$985-$1,115

$925-$1,105

Adjusted EBITDA (4)

$850-$950

$765-$915

$300-$330

Unchanged

$1,145-$1,275

$1,075-$1,255

Capital expenditures

$500-$550

Unchanged

$270

Unchanged

$790-$840

Unchanged

2018 Estimated Results

U.S. Cellular (3)

TDS Telecom (1)(3)

TDS (1)(2)(3)

(Dollars in millions)

Net income (GAAP)

N/A

N/A

N/A

Add back:

Income tax expense (benefit)

N/A

N/A

N/A

Income before income taxes (GAAP)

$

110-210 

$

80-110 

$

90-220 

Add back:

Interest expense

110 

– 

170 

Depreciation, amortization and accretion expense

640 

220 

895 

EBITDA (Non-GAAP) (4)

$

860-960 

$

300-330 

$

1,155-1,285 

Add back or deduct:

(Gain) loss on asset disposals, net

10 

– 

10 

(Gain) loss on license sales and exchanges, net

(20)

– 

(20)

Adjusted EBITDA (Non-GAAP) (4)

$

850-950 

$

300-330 

$

1,145-1,275 

Deduct:

Equity in earnings of unconsolidated entities

135 

– 

135 

Interest and dividend income

15 

5 

20 

Other, net (6)

– 

5 

5 

Adjusted OIBDA (Non-GAAP) (4)(5)

$

700-800 

$

290-320 

$

985-1,115 

Actual Results

Six Months Ended June 30, 2018 (3)

Year ended December 31, 2017

U.S. Cellular

TDS

Telecom (1)

TDS (1)(2)

U.S. Cellular

TDS

Telecom (1)

TDS (1)(2)

(Dollars in millions)

Net income (GAAP)

$

107 

$

37 

$

101 

$

15 

$

138 

$

157 

Add back or deduct:

Income tax expense (benefit)

40 

12 

45 

(287)

(13)

(279)

Income (loss) before income taxes

(GAAP)

$

147 

$

48 

$

146 

$

(272)

$

125 

$

(122)

Add back:

Interest expense

58 

(1)

86 

113 

– 

170 

Depreciation, amortization and

accretion expense

317 

107 

441 

615 

195 

844 

EBITDA (Non-GAAP) (4)

$

522 

$

155 

$

673 

$

456 

$

319 

$

892 

Add back or deduct:

Loss on impairment of goodwill

– 

– 

– 

370 

– 

262 

(Gain) loss on asset disposals, net

2 

1 

3 

17 

3 

21 

(Gain) loss on sale of business and

other exit costs, net

– 

– 

– 

(1)

– 

(1)

(Gain) loss on license sales and

exchanges, net

(17)

– 

(17)

(22)

– 

(22)

Adjusted EBITDA (Non-GAAP) (4)

$

507 

$

156 

$

659 

$

820 

$

323 

$

1,152 

Deduct:

Equity in earnings of unconsolidated

entities

78 

– 

78 

137 

– 

137 

Interest and dividend income

7 

3 

11 

8 

5 

15 

Other, net (6)

(1)

1 

2 

– 

3 

4 

Adjusted OIBDA (Non-GAAP) (4)(5)

$

423 

$

152 

$

568 

$

675 

$

314 

$

996 

Note: Totals may not foot due to rounding differences.

(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

6/30/2018(1)

3/31/2018(1)

12/31/2017

9/30/2017

6/30/2017

Retail Connections

Postpaid

Total at end of period

4,468,000 

4,481,000 

4,518,000 

4,513,000 

4,478,000 

Gross additions

146,000 

129,000 

177,000 

191,000 

174,000 

Feature phones

5,000 

5,000 

5,000 

7,000 

7,000 

Smartphones

106,000 

91,000 

128,000 

132,000 

116,000 

Connected devices

35,000 

33,000 

44,000 

52,000 

51,000 

Net additions (losses)

(13,000)

(37,000)

5,000 

35,000 

23,000 

Feature phones

(12,000)

(15,000)

(15,000)

(15,000)

(15,000)

Smartphones

17,000 

(1,000)

33,000 

44,000 

34,000 

Connected devices

(18,000)

(21,000)

(13,000)

6,000 

4,000 

ARPU (2)

$

44.74 

$

44.34 

$

44.12 

$

43.41 

$

44.60 

ABPU (Non-GAAP)(3)

$

57.75 

$

57.10 

$

56.69 

$

54.71 

$

55.19 

ARPA (4)

$

118.57 

$

118.22 

$

118.05 

$

116.36 

$

119.73 

ABPA (Non-GAAP)(5)

$

153.03 

$

152.26 

$

151.68 

$

146.65 

$

148.15 

Churn rate (6)

1.19%

1.23%

1.27%

1.16%

1.13%

Handsets

0.92%

0.97%

1.00%

0.96%

0.91%

Connected devices

2.85%

2.79%

2.84%

2.33%

2.35%

Prepaid

Total at end of period

527,000 

525,000 

519,000 

515,000 

484,000 

Gross additions

78,000 

88,000 

83,000 

102,000 

73,000 

Net additions

2,000 

6,000 

4,000 

31,000 

3,000 

ARPU (2)

$

32.32 

$

31.78 

$

32.42 

$

33.12 

$

33.52 

Churn rate (6)

4.83%

5.27%

5.09%

4.75%

4.93%

Total connections at end of period (7)

5,051,000 

5,063,000 

5,096,000 

5,089,000 

5,023,000 

Market penetration at end of period

Consolidated operating population

31,469,000 

31,469,000 

31,834,000 

31,834,000 

32,089,000 

Consolidated operating penetration (8)

16%

16%

16%

16%

16%

Capital expenditures (millions)

$

86 

$

70 

$

213 

$

112 

$

84 

Total cell sites in service

6,478 

6,473 

6,460 

6,436 

6,421 

Owned towers

4,105 

4,099 

4,080 

4,051 

4,044 

(1)

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

(2)

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

▪

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

▪

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

Includes reseller and other connections.

(8)

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

TDS Telecom

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

6/30/2018

3/31/2018

12/31/2017

9/30/2017

6/30/2017

TDS Telecom

Wireline

Residential connections

Voice (1)

282,200 

286,000 

290,600 

298,200 

304,600 

Broadband (2)

234,300 

230,500 

228,600 

229,900 

230,200 

Video (3)

51,500 

50,300 

48,600 

47,200 

46,200 

   Wireline residential connections

568,000 

566,900 

567,700 

575,300 

581,000 

Total residential revenue per connection (4)

$

47.22 

$

47.04 

$

46.21 

$

46.07 

$

46.39 

Commercial connections

Voice (1)

137,300 

140,100 

143,000 

146,900 

150,500 

Broadband (2)

20,600 

20,600 

20,600 

20,900 

21,000 

managedIP (5)

141,400 

143,000 

146,500 

147,600 

149,700 

Video (3)

400 

400 

– 

– 

– 

   Wireline commercial connections

299,600 

304,000 

310,100 

315,300 

321,200 

Total Wireline connections

867,700 

870,900 

877,800 

890,700 

902,200 

Cable

Cable Connections

Broadband (6)

159,400 

156,800 

153,300 

143,800 

140,300 

Video (7)

101,600 

100,700 

101,800 

97,900 

97,900 

Voice (8)

62,000 

60,600 

59,700 

58,500 

58,500 

managedIP (5)

700 

600 

400 

400 

300 

   Cable connections

323,700 

318,700 

315,100 

300,600 

297,000 

Note:  Totals may not foot due to rounding differences.

(1)

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

(2)

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

(3)

The number of Wireline customers provided video services.

(4)

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

(5)

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

(6)

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

(7)

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

(8)

Billable number of lines into a building for voice services.

TDS Telecom

Capital Expenditures (Unaudited)

Quarter Ended

6/30/2018

3/31/2018

12/31/2017

9/30/2017

6/30/2017

(Dollars in millions)

Wireline

$

33 

$

29 

$

55 

$

41 

$

33 

Cable

13 

11 

20 

14 

12 

Total TDS Telecom (1)

$

46 

$

40 

$

74 

$

56 

$

45 

Note:  Totals may not foot due to rounding differences.

(1)

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

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2018 (1)

2017

2018

vs. 2017

2018 (1)

2017

2018

vs. 2017

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

Operating revenues

U.S. Cellular

$

974 

$

963 

1%

$

1,915 

$

1,899 

1%