Transcript No Slide Title

KENNETH R. MEYERS
Executive Vice President
& Chief Financial Officer
UBS Eighth Annual
Global Communications Conference
November 17, 2003
Safe Harbor
All information set forth in this presentation, 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 and projections, 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:
changes in circumstances or events that may affect the ability of the Company to start up
the operations of the properties involved in the AWE transaction; the ability of the
Company to manage and grow the operations of the Chicago MTA; changes in the overall
economy; changes in competition in the markets in which the Company operates;
advances in telecommunications technology; changes brought about by the
implementation of wireless number portability; changes in the telecommunications
regulatory environment; changes in the value of investments, including variable prepaid
forward contracts; changes in the capital markets that could adversely impact the
availability, cost and terms of financing; an adverse change in the ratings afforded our
debt securities by nationally accredited ratings organizations; pending and future litigation;
acquisitions/divestitures of properties and/or licenses; changes in customer growth rates,
retail service revenue per unit, churn rates, roaming rates and the mix of products and
services offered in the Company’s markets. Investors are encouraged to consider these
and other risks and uncertainties that are discussed in documents filed by the Company
with the Securities and Exchange Commission.
.
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U.S. Cellular
Sept. 30, 2003
• Eighth largest wireless service provider
• Total licensed pops - 45.8 million
• Serves 4.3 million customers - 85% digital
• Focused on exceptional customer service
• 96% of customers postpay
• Extensive network ... 4,100 cell sites
• Broad distribution … 2,300 distribution points
• Admirably low churn rate
• Well positioned given recently acquired
Chicago market and AWE exchange
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U.S. Cellular Strategy
• Positioned as a regional carrier
• Differentiate with exceptional customer service
 Network quality
 Broad distribution
 Dedicated people
• Deploy CDMA 1XRTT technology in all markets
• Strategically strengthen regional footprint
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Third Quarter Accomplishments
• CDMA 1X overlays in Oklahoma and Missouri
markets
• Exchange of properties with AWE
• Conversion of billing system in Chicago
• Integration of data billing platform
• Rollout of data product
• Strong churn performance and cash flow growth
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Third Quarter Financial Highlights
(millions)
Service revenues
Operating income
Net adds
Churn - postpay
Retail ARPU
MOU
Cell sites
3Q ‘0 3
$ 628.4
97.0
3Q ‘02
$561.2
62.7
66,000
76,000
1.6%
2%
$39.57
$38.95
435
327
4,082
3,750
+12%
+55%
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• easyedgeSM Phone Service - BREWTM
technology; ring tones, games,
entertainment; picture transfer; breaking
news
• easyedgeSM Wireless Modem Service Internet access for laptop or PDA; email,
calendars, Internet and corporate resources
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Launches
easyedgeSM Phone Service
• Knoxville & Iowa
• Chicago
• Wisconsin, Central and Western Illinois
• Ft. Wayne and South Bend, Indiana
• Missouri, Nebraska, New England
and Oklahoma
easyedgeSM Modem Service
• Knoxville, Iowa, Wisconsin and Chicago
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Critical Success Factors
•
•
•
•
Front line sales – 8-hour training
Call center tech support – 8-hour training
All other call centers - huddle training
All associates - easyedge phone
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CDMA Progress
• Ahead of schedule and below planned cost
• 3 years to complete (2002 - 2004)
• Total cost to build CDMA... $385 - $410 M
• ≈ $265M spent in 2002-2003
• Iowa, Wisconsin, Illinois, New England and N. Missouri
are converted to CDMA 1XRTT ( ~80% of all pops
covered by CDMA)
• Remaining Midwest markets and Oklahoma to be
completed in 2003
• Redeploying TDMA equipment
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USM & AWE Exchange
• Announced March 10, 2003
• First tranche closed August 1, 2003
• Excellent fit with USM’s strategy:
• To strengthen its regional footprint through
acquisitions or trades
• To build on strengths and exit other markets
• Opportunity to substantially improve
competitive position in Midwest and
Northeast markets
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USM & AWE - First Tranche
USM Acquired:
• 14 licenses … 10 & 20 MHz PCS
• 5.9 M incremental contiguous pops & 3.9 M overlap pops
• Minority interests in 6 USM-controlled markets
• $34 M cash
USM Exchanged:
• 10 “A” block 25 MHz cellular licenses in FL & GA covering
1.5M pops
• 141,000 customers
• 205 cell sites
• $90 M PP&E
• FL/GA 2002 revs of $107 M; OCF ≈ $40M
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WNP - We’re Ready !
• November 24, 2003
• Still some uncertainty due to lack of
uniform rules
• Spent ≈ $50M to date
• Aggressive retention of existing
customers
• Aggressive acquisition in new markets
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WNP – USM Set to be a Winner
• Commitment to exceptional customer service
• Long-term contracts with termination fees
• Outstanding network
• Good coverage
• Signal quality
• Competitive promotional campaigns
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Chicago Update
• Rapid increases in awareness
• Market share up yoy
• Enhancing network
• Heavy focus on employee training
• Increasing distribution points
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2003 Outlook
• Service revenues - $2.35 - $2.4 B
• Net additions - 450,000 to 475,000
• Depr/Amortization - $435 - $440 M
• Operating Income* - $180 - $200 M
• CAPX - $650 to $670 M
• Improved retail ARPU
• All in churn - ≈ 2%
*Includes $26 M in operating expenses related to loss on assets for sale related
to completed AWE exchange
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Excellent Prospects
• Solid fundamentals with successful
track record
• Focus on service and network quality
• Drive profitable growth
• Data - easyedgeSM
• Strengthening competitive position –
AWE exchange
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Reconciliation of Additional Disclosures
Quarter Ended at September 30, 2003
Operating cash flow:
Operating income (loss) as reported
Add:
Depreciation and amortization
(Gain) on assets held for sale
Operating cash flow
Quarter Ended at September 30, 2002
Operating cash flow:
Operating income (loss) as reported
Add:
Depreciation and amortization
(Gain) on assets held for sale
Operating cash flow
U.S. Cellular
$
97,031
$
102,164
(1,442)
197,753
U.S. Cellular
$
62,697
$
102,876
165,573
The Adjusted EBITDA measurements provided above is the sum of operating income (loss), depreciation, amortization of deferred charges and customer
lists and loss on assets held for sale. Adjusted EBITDA is not presented as an alternative measure of operating results or cash flows from operations as
determined in accordance with accounting principles accepted in the United States of America. Management uses Adjusted EBITDA to evaluate the
operating performance of its business, and it is a measure of performance used by some investors, security analysts and others to make informed
investment decisions. Adjusted EBITDA is used as an analytical indicator of income generated to service debt and fund capital expenditures.In addition,
multiples of current or projected Adjusted EBITDA are used to estimate current or prospective enterprise value. Adjusted EBITDA does not give effect to
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cash used for debt service requirements, and thus does not reflect funds available for investment or other discretionary uses. Adjusted EBITDA as
presented herein may not be comparable to similarly titled measures reported by other companies.
Kenneth R. Meyers
Executive Vice President
& Chief Financial Officer
UBS
Eighth Annual Global Communications
Conference
November 17, 2003