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SANDRA L. HELTON
Executive Vice President and CFO, TDS
Wachovia Securities
Media & Communications Fixed Income Conference
April 12, 2005
Safe Harbor
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:
Information discussed in today’s presentation, except historical and factual information, may
represent 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 USM to launch the operations of the licensed areas involved in the
AT&T Wireless transaction completed in August 2003; 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; the impact of local number portability;
changes to access and pricing of unbundled network elements; changes in the
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 nationally accredited ratings organizations; pending and future
litigation; acquisitions/divestitures of properties and/or licenses; and changes in customer
growth rates, average monthly service 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 by TDS and U.S. Cellular with the Securities and Exchange Commission.
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TDS
• Diversified telecommunication company
with 6.1 million customers in 36 states
• U.S. Cellular (82% owned) – wireless
• TDS Telecom (100% owned) – wireline
• ILEC and CLEC operations
• Fortune 500 company
• Strong balance sheet
• Investment grade
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Five-Year Track Record
Year Ended December 31
$ in Millions
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$2000
2001
Operating Revenues
2002
2003
2004
Operating Cash Flow
12/31/04 - Five Year CAGR
Revenues
11.9%
EBITDA
6.6%
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U.S. Cellular
as of 12/31/04
• 7th largest wireless service provider; 2nd largest
regional carrier
• Total population - 44.4 million
• 4.9 million customers
• 11.1% market penetration
• Focused on exceptional customer experience
• Admirably low churn rate
• Pervasive distribution… 1,800 points of presence
• Extensive network ... 4,856 cell sites
• Well positioned in our markets
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6
Postpay Churn < 2%
Seven-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%
1.4%
1.3%
1.2%
1.1%
1.0%
1998
1999
2000
2001
2002
2003
2004
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U.S. Cellular Strategy
• Positioned as a regional carrier
• Differentiate by providing an exceptional
customer experience:
 Network quality
 Broad distribution
 Dedicated people focused on the customer
• Utilize CDMA 1X technology in all markets
• Strategically strengthen regional footprint
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Consumers Union Analysis of FCC
Data - March 28, 2005
(complaints per million customers for CY2004)
U.S. Cellular
Verizon Wireless
39
76
Alltel
Nextel
Sprint PCS
76
103
168
T-Mobile
Cellular One
AT&T / Cingular
185
264
289
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2004 Financial Highlights
U.S. Cellular – Dec. 31, 2004
Service revenues
Operating income
2004
$ 2.65 B
$ 178 M
2003
$2.42 B
$119 M
+ 9%
+49%
EBITDA
Net adds
$ 665 M
627,000
$647 M
447,000
+ 3%
+40%
4Q‘04
Churn - postpay
Retail ARPU
MOU
Cell sites
1.6%
4Q‘03
1.4%
$40.55
568
$40.64
462
4,856
4,184
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Strengthening the 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
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AWE (Cingular) Property Exchange
Improved competitive position in Midwest and Northeast markets
• Excellent fit with USM’s strategy:
• Strengthens regional footprint through
acquisitions or trades
• Builds on strengths and exit other markets
• Built out and launched 3 markets in 2004:
• Oklahoma City; Lincoln, Neb. and
Portland, Maine
• Expect to launch St. Louis market in 3Q ‘05
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Divestitures
Exited markets not strategic to company’s long-term success
• South Texas to AWE - Feb. 2004; $97 M
• 25 MHz licenses; 1.3 M pops, 150 cell sites and
76,000 customers
• High prepaid mix and heavy roaming market
• Alltel sale - Dec. 2004; $81 M
• Two 25 MHz operating markets in FL and OH
• Seven small investment interests in Ohio, N.C.,
Miss., Wis. – 268,000 pops
• Daytona Beach to MetroPCS - Dec. ’04; $8.5 M
• 20 MHz Block C license
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•
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Auction 58
• Participated through partner Carroll Wireless
• Carroll Wireless highest bidder for 17
licenses with a population of 14.4 million.
Licenses are in 11 states and include:
• Oklahoma City
• Portland, Maine
• Indianapolis
• All licenses complement U.S. Cellular’s
existing footprint. Total bid $130M net.
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CDMA 1X Initiative
• Improved voice capacity and coverage;
cost-effective use of wireless spectrum
• Enables offering of high-speed data products
• Completed the 3-year project in 2004
• Ahead of schedule, below planned cost
• Total cost to build CDMA ... ≈ $300 million
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EVDO Trials
• Currently conducting technical trials
• As with any new technology, U.S.
Cellular wants to ensure that:
• technology is supported by value-added
applications customers will want and value
• USM is ready to fully support the new
technology and any new services or
applications it supports
• Plan to launch market trials in 2006
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Data – easyedgeSM
• easyedgeSM Phone Download Applications (BREWTM)
• Applications: games, news, traffic, calendar
• Launched nWebSM Nov. 2004 – enables Internet access
• Launched AOL® Instant MessengerTM service March 2005
• easyedgeSM Picture Messaging (MMS)
• Take, send or receive photos
• easyedgeSM Wireless Modem Service
• Wireless Internet access for laptops; e-mail; calendar
• Available in select areas to business customers
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Service Enhancements in 2005
• easyedgeSM
• Enabling easyedge customers to send images to
non-U.S. Cellular customers
• Expanding Picture Messaging to include ability to send
video
• “Smart phone” service
• Phone with PDA and e-mail features
• Push-to-talk service
• Planning to launch in 2005 for business and retail
customers
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USM 2005 Outlook
(Revised March 18, 2005)
• Service revenues … +/- $2.9 B
• Net additions … 475,000 to 525,000
• Dep, amort & accretion … $530 M
• Operating Income … $180 to $220 M
• CAPX … $570 to $610 M
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USM: Excellent Prospects
• Proven strategy
• Financially strong
• Extensive network and distribution
• Terrific people; dynamic organization
• Positive momentum
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TDS
• Diversified telecommunication company
with 6.1 million customers in 36 states
• U.S. Cellular (82% owned) - wireless
• TDS Telecom (100% owned) – wireline
• ILEC and CLEC operations
• Fortune 500 company
• Strong balance sheet
• Investment grade
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TDS Telecom - ILEC
• 7th largest independent U.S. telco
• Rural company status
• 730,400 access line equivalents in 28 states
• 101,300 Internet (dial-up) accounts
• 41,900 DSL – mostly residential
• 295,000 long-distance lines
• Vertical services
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TDS Telecom - CLEC
• Principally a facilities-based company in
five states …88% on-switch
• 426,800 access line equivalents
• Targeted selling with emphasis on small
and medium businesses
• Deep penetration in chosen markets
• Provisions principally with one RBOC (SBC)
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2004 Financial Highlights
TDS Telecom – Dec. 31, 2004
(millions)
ILEC
Revenues
Operating Income
2004
$658.5
187.1
2003
$652.8
174.9
+ 1%
+ 7%
CLEC
Revenues
Operating (loss)
$228.7
(144.1)
$ 213.5
(26.0)
+ 7%
NM
722.2
364.8
+ 1%
+17%
Access Line Equivalents (thousands)
ILEC
730.4
CLEC
426.8
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TDS Telecom’s Overall Strategy
Repositioning as a Broadband Communications Company
• Provide outstanding customer service
• Be the preferred broadband provider
in its markets
• Protect and grow current markets
• Develop and market new products
and services, with strong focus on
data and triple-play
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% Likely to Switch Local Carrier
Our Competitive Advantage:
Customer Satisfaction
Higher
Third-Party Validation
40%
Sprint
30%
CenturyTel
ALLTEL
Frontier
20%
Comcast
MCI
TDS Telecom
Qwest
McLeodUSA
BellSouth
Verizon
AT&T
Talk America
SBC
TDS Metrocom
10%
Cin. Bell
0%
600
Lower
650
700
750
Overall Satisfaction Index Score
Cox
800
Higher
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Fortifying and Developing Existing
Markets
• Trialing new technologies …
• Fiber to the Premise (FTTP)
• Voice Over IP (VOIP)
• Wireless data
• … toward offering robust triple-play and
other new products and services
• Enhancing existing services
• focused on increasing market share,
deepening penetration and profitability
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DSL Facts - ILEC
• 81 markets, 41,900 customers, fast growth
• DSL lines – up 78% YOY 2004 to 2003
• Market share exceeded cable in late 2004
• Primarily consumer based
• Product bundles:
• DISH satellite / DSL; long distance / DSL, etc.
• DSL modems Wi-Fi enabled
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2005 Outlook - TDS Telecom
(Effective February 9, 2005)
• ILEC
•
•
•
•
Operating revenues … $655 to $665 M
Dep, amort & accretion … $135 M
Operating income … $170 to $180 M
CAPX … $120 to $130 M
• CLEC
•
•
•
•
Operating revenues … $240 to $250 M
Dep, amort & accretion … $30 M
Operating income (loss) … $(15) to $(10) M
CAPX … $30 to $35 M
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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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Reconciliation of Additional Disclosures
For the year ended December 31, 2004
Year Ended at Dec. 31, 2004
Operating cash flow:
Operating income (loss) as reported
Add:
Depreciation, amortization and accretion
Loss on impairment of intangible assets
Loss on impairment of assets
(Gain) loss on assets held for sale
Operating cash flow
U.S. Cellular
TDS Telecom
ILEC
CLEC
(Dollars in thousands )
$
177,762
$
187,082
$
497,942
(10,806)
664,898 $
131,665
318,747
Year Ended at Dec. 31, 2003
U.S. Cellular
$
$
Total
(144,093) $
38,349
29,440
87,910
11,606
$
TDS Telecom
ILEC
CLEC
(Dollars in thousands )
220,751
667,956
29,440
87,910
(10,806)
995,251
Total
Operating cash flow:
Operating income (loss) as reported
Add:
Depreciation, amortization and accretion
Loss on impairment of intangible assets
Loss on impairment of assets
(Gain) loss on assets held for sale
Operating cash flow
$
118,983
$
432,333
49,595
45,908
646,819
$
174,882
$
130,036
351
305,269
$
$
(25,977) $
33,363
4,563
11,949
$
267,888
595,732
49,595
4,914
45,908
964,037
The Operating Cash Flow amounts in the tables presented above are not determined in accordance with generally accepted accounting principles
(GAAP) in the United States of America. Management uses Operating Cash Flow 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. Operating Cash Flow is used as
an analytical indicator of income generated to service debt and fund capital expenditures. In addition, multiples of current or projected Operating Cash
Flow are used to estimate current or prospective enterprise value. Operating Cash Flow does not give effect to cash used for debt service requirements,
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and thus does not reflect funds available for investment or other discretionary uses. Operating Cash Flow as presented herein may not be comparable
to
similarly titled measures reported by other companies.
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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