Transcript No Slide Title

John E. Rooney
President and CEO
Kenneth R. Meyers
Executive Vice President - Finance and CFO
Morgan Stanley 9th Annual
Global Media & Communications Conference
September 8, 2004
Safe Harbor
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All
information set forth in this news release, 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 licensed areas involved in the AT&T Wireless transaction completed in August 2003;
the ability of the company to successfully 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; the impact of wireless local
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
• 8th largest wireless service provider; 2nd largest
regional carrier
• Total incremental pops - 45.6 million
• Serves 4.7 million customers - 86% digital
• Focused on exceptional customer service
• 10.28% market penetration
• Admirably low churn rate
• Pervasive distribution… 2,300 points of presence
• Extensive network ... 4,420 cell sites
• Well positioned in its regions
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Note: Unless specified, all handout data is as of June 30, 2004.
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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Postpay Churn < 2%
Six-year track record… and still strong
2.0%
1.91%
1.90%
1.84%
1.9%
1.77%
1.8%
1.74%
1.7%
1.53%
1.6%
1.50%
1.5%
1.4%
1.30%
1.3%
1.2%
1.1%
1.0%
1998
1999
2000
2001
2002
2003
Q1 '04 Q2'04
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Strengthening the Footprint
• Proposed sale of two small markets and
investment interests to ALLTEL –
announced Aug. 2004
• Sale of South Texas markets to AT&T
Wireless – Feb. 2004
• Exchange of wireless properties with AT&T
Wireless – Aug. 2003
• Acquisition of Chicago market – Aug. 2002
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Proposed Asset Sale to ALLTEL
Exit markets not strategic to company’s long-term success
• Announced Aug. 4, 2004; expect to close by
year-end
• To sell for $80 million in cash:
• Two 25 MHz operating markets in Florida and Ohio:
460,000 pops; 35 cell sites; 37,000 customers
• Seven investment interests in Ohio, N.C., Miss., Wis. :
268,000 pops
• Operating markets contributed $5.7 million in
revenue in Q2 ‘04
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South Texas Sale to AWE
Exit markets not strategic to company’s long-term success
• Closed Feb. 18, 2004
• Sold 25 MHz licenses in south Texas; 1.3 M
pops, 150 cell sites and 76,000 customers
• Received $97 M in cash
• High prepaid mix and heavy roaming market
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USM & AWE Property Exchange
Improved competitive position in Midwest and Northeast markets
• Announced March 2003
• First tranche closed Aug. 2003
• Excellent fit with USM’s strategy:
 Strengthens regional footprint through
acquisitions or trades
 Builds on strengths and exit other markets
• Have built out and launched three markets:
Oklahoma City; Lincoln, NE; and Portland, ME
 Building out Missouri markets; expect to launch in
2005
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Chicago Update
• Brand awareness up dramatically
• Market share up year-over-year
• Top-notch network
• Increased distribution points
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nd
2
Qtr 2004 Financial Highlights
2nd Qtr ‘04
Service revenues
Operating income
EBITDA
Net adds
Retail ARPU
$ 662.7 M
$ 65.9 M
$ 187.5 M
137,000
$ 41.58
2nd Qtr ‘04
Churn - postpay
MOU
Cell sites
1.5%
542
4,420
2nd Qtr ’03 (restated)
$610.1 M
$ 3.4 M
$161.2 M
103,000
$ 39.69
+ 9%
NM
+16%
+33%
+ 5%
2nd Qtr ’03
1.5%
424
4,106
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Data
• easyedgeSM Download Applications – (BREWTM)
• Applications; games; news; traffic; calendar
• easyedgeSM Picture Messaging – (MMS)
• Take, send or receive photos
• easyedgeSM Wireless Modem Service
• Internet access for laptops; e-mail; calendar
• Available in select areas to business customers
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CDMA 1X Initiative
• Improved voice capacity and coverage;
cost-effective use of wireless spectrum
• 3 year project (2002 - 2004)
• Ahead of schedule and below planned cost
• Total cost to build CDMA ... ≈ $300 million
• ≈ $265 million spent in 2002 - 2003
• Midwest and New England markets are
now CDMA 1X
• Redeploying TDMA equipment
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WNP Update
• Well positioned for WNP:
• Invested $50 million to prepare over 2 years
• Aggressive retention programs in core markets
• Aggressive acquisition programs in newer
markets
• Business as usual … satisfied customers …
no significant issues
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USM 2004 Outlook
• Service revenues … ≈ $2.6 B
• Net additions … 560,000 to 610,000
• Dep, amort & accretion … $500 M
• Operating Income … $150 to $190 M
• CAPX … $655 to $695 M
• All in churn … < 2%
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Financing Activities
Over the last 12 months, we have:
• Redeemed:
• $163.3 M of LYONS
• $250 M of 7.25% notes due 2007
• Sold:
• $300 M 30-year 7.5% notes
• $544 M 30-year 6.7% notes in two tranches
• Amended existing $325 million revolver
• increased to $700 M through June 2007
• terminated $500 M revolver expiring 8/04 18
USM: Excellent Prospects
• Proven Strategy
• Financially Strong
• Extensive network
• Terrific people; dynamic organization
• Positive momentum
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Reconciliation of Additional Disclosures
For the quarter ended June 30, 2004
Quarter Ended at June 30, 2004
Operating cash flow:
Operating income (loss) as reported
$
Add:
Depreciation, amortization and accretion
Loss on Impairment of Intangible Assets
Loss (adjustment) on assets held for sale
Operating cash flow
$
65,870
122,249
(582)
187,537
Quarter Ended at June 30, 2003 (Restated)
Operating cash flow:
Operating income (loss) as reported
$
Add:
Depreciation and Amortization
Loss on Impairment of Intangible Assets
Loss (adjustment) on assets held for sale
Operating cash flow
$
3,441
104,694
49,595
3,500
161,230
The Operating Cash Flow amounts in the tables presented above are not determined in accordance with accounting principles generally accepted in the United States of
America ("U.S. GAAP"). 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, and thus does not reflect funds available for investment or other discretionary uses.
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Operating Cash Flow as presented herein may not be comparable to similarly titled measures reported by other companies.