Transcript No Slide Title

Kenneth R. Meyers
Executive Vice President and CFO, U.S. Cellular
LeRoy T. Carlson, Jr.
President and CEO, TDS
Lehman Brothers
Worldwide Wireless and Wireline Conference
May 22, 2006
Safe Harbor
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: 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, 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: Possible future restatements; the ability of
U.S. Cellular to successfully manage and grow the operations of the Chicago MTA and
newly launched markets; changes in the overall economy; changes in competition in
the markets in which U.S. Cellular and TDS Telecom operate; changes due to industry
consolidation; advances in telecommunications technology, including Voice over
Internet Protocol; changes to access and pricing of unbundled network elements;
changes in the state and federal telecommunications regulatory environment; changes
in the value of investments, including variable prepaid forward contracts; an adverse
change in the ratings afforded TDS and U.S. Cellular debt securities by accredited
ratings organizations; uncertainty of access to the capital markets; pending and future
litigation; acquisitions/divestitures of properties and/or licenses; and changes in
customer growth rates, average monthly revenue per unit, churn rates, roaming rates
and the mix of products and services offered in U.S. Cellular and TDS Telecom markets.
Investors are encouraged to consider these and other risks and uncertainties that are
discussed in documents filed with the SEC.
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U.S. Cellular
as of 3/31/06
• 6th largest wireless service provider; 2nd largest
regional
• Total population - 45 million
• 5.6 million customers
• Extensive network ... Over 5,400 cell sites
• Focused on exceptional customer service
• Pervasive distribution… ~2,000 points of presence
• Well positioned in our markets
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U.S. Cellular Growth Strategies
• Differentiate by driving for an exceptional level of
customer satisfaction:
 Quality network
 Dedicated people focused on the customer
 Wide distribution – more focus on exclusives
 Broad and competitive product offerings
• Compete aggressively at the local/regional level
• Strategically strengthen regional footprint
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Postpay Churn < 2%
Eight-year track record… and still strong
2.0%
1.9%
1.9%
1.8%
1.9%
1.8%
1.8%
1.7%
1.7%
1.5%
1.6%
1.5%
1.5%
2004
2005
1.5%
1.4%
1.3%
1.2%
1.1%
1.0%
1998
1999
2000
2001
2002
2003
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First Quarter Operating Data
Three months ended March 31
2005 Actual
(as restated)
Range of Amounts
Anticipated to be
Reported in 2006
(Preliminary)
Operating Revenues
$ 711.1 M
$830 to $845 M
Operating Income
$ 39.5 M
$ 65 to $ 85 M
ARPU
Retail net adds
Churn - postpay
Cell sites
$44.46
$46.22
123,000
1.5%
122,000
1.5%
4,899
5,438
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Strengthening Footprint
• Acquired Chicago market – 8/02
• Exchanged wireless properties with AT&T Wireless
(now Cingular) – 8/03
• Sold:
– Daytona Beach to MetroPCS – 12/04
– Two small markets and investment interests
to Alltel – 12/04
– South Texas markets to AT&T Wireless – 2/04
• Acquired Missouri 14 market – 4/05
• Exchanged wireless properties with Alltel – 12/05
• Purchased 83% of TN RSA 3 – 4/06
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St. Louis Market
Strengthened footprint – launched 7/28/05




Acquired 2.9 million pops in trade with AWE
Nearly 300 cell sites
Turned-on for roaming since Oct. ’04
Same market launch strategy




Great network
Broad distribution
Aggressive advertising and marketing
Focus on customer satisfaction
 Off to a good start … >80% of adds are postpaid
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Data – easyedgeSM
• Full range of data services … BREW based
•
•
•
•
Phone download services
Picture messaging
Wireless modem
Data roaming
• Other new offerings
• Walkie-talkie or “Push-to-talk”
• Blackberry Smart Phone
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EVDO Trials
•
•
•
•
2005 Technical trials
2006 Soft launch of Release O (Fall)
2007 Release A availability
As with any new technology, U.S.
Cellular wants to ensure that:
– Technology is supported by value-added
applications customers will want and value
– Ready to fully support the new technology
and any new services or applications it
provides
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USM 2006 Outlook
(Revised May 10, 2006)
• Service revenues … Approx. $3.2 B
• Net additions … 390,000 to 450,000
• Dep, amort & accretion … $585 M
• Operating Income … $230 to $290 M
• CAPX … $580 to $610 M
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USM: Excellent Prospects
• Proven strategy
• Financially strong
• Extensive network and distribution
• Terrific people
• Positive momentum
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TDS
• Diversified telecommunication company
with 6.8 million customers in 36 states
– U.S. Cellular (81% owned) – wireless
– TDS Telecom (100% owned) – wireline
– ILEC and CLEC operations
• Strong balance sheet
• Investment grade
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TDS Telecom (ILEC & CLEC)
Largest Equivalent Access Line States – 12/31/05
Wisconsin
Michigan
Minnesota
Tennessee
Georgia
New Hampshire
Indiana
12/30/05
384,000
140,000
119,000
115,000
58,000
40,000
36,000
% of total
33%
12%
10%
10%
5%
3%
3%
76%
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TDS Telecom – ILEC
as of 3/31/06
• 7th largest independent
• Rural company status
• Modern network
• Excellent regulatory relationships
• Strong local presence
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TDS Telecom - CLEC
• Facilities-based in four states …92% onswitch
• Selling primarily to SME
• Deep penetration in chosen markets
• Provisions principally with AT&T
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TDS Telecom Strategy
• Defend core markets
• Be the broadband provider
• Bundle aggressively
• Trials
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DSL - ILEC
• 106 markets; 75,300 customers; +53%
• 70% of access lines DSL enabled
• Primarily consumer based
• Product bundles
• Offering 4 & 6 MB speeds in some markets
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First Quarter Operating Data
3/31/05
ILEC
Access line equivalents 734,000
DSL
49,300
Long distance
302,400
CLEC
Access line equivalents
DSL
438,000
31,600
3/31/06
742,300 + 1%
75,300 +53%
327,100 + 8%
454,100 + 4%
38,500 +22%
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Video Trials
FTTP Trials - ILEC
1. Complete fiber build-out of subdivision ~4,000
homes
2. Combination FTTP overbuild & advanced DSL
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Fixed Wireless Trial - CLEC
•
•
•
•
Market trial in Wisc.
Eliminates “last mile” loop from RBOC
Un-licensed spectrum
Trialing high-speed data & VOIP
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2006 Outlook-TDS Telecom
(Effective May 10, 2006)
• ILEC
•
•
•
•
Operating revenues … $660 to $675 M
Dep, amort & accretion … $135 M
Operating income … $145 to $160 M
CAPX … $105 to $125 M *
• CLEC
•
•
•
•
Operating revenues … $230 to $240 M
Dep, amort & accretion … $25 M
Operating income (loss) … $(10) to $(5) M
CAPX … $15 to $25 M
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* ~$90 M to support ongoing operations and ~$25 M for strategic initiatives
Special Common Shares
• Provides financial and strategic flexibility
• TDS board has indicated it may at some
point exchange special shares for 19% of
USM that TDS does not own
• Dependent on market and other conditions
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Financially Strong
9/30/05
Cash
Available Credit Facilities
Estimated 2006 Dividends
DT (after German taxes)
TDS VOD
USM VOD
$1,085 M
1,375 M
$
$
$
95 M
2M
8M
~ 2900 owned towers
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TDS Financial Objectives
 7-10% compound annual revenue growth (organic and M&A)
over the five years
11.21% - 5 years ended 2005
 Returning at least the cost of capital

USM WACC
11-12 %

ILEC WACC
~ 9.5 %

CLEC WACC
14-16 %
 Valuation/shareholder returns ≥ comparable companies
 Target an A- rating
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TDS: Excellent Prospects
• Full-service provider with strong, established
wireless and wireline operations
• Strong business units
• Well positioned in existing markets
• Proven business strategies focused on
customer satisfaction, network quality and
competitive product offerings.
• Experienced management teams
• Financially strong
• Dedicated workforce of 11,500 people
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