EX-99 3 tdsq403exhibit99.htm TDS Q403 EARNINGS RELEASE TDS Q403 Earnings Release

Exhibit 99.1

As previously announced, TDS and its subsidiaries will hold a joint teleconference Feb. 4, 2004, at 10:00 a.m. Chicago time. Interested parties may listen to the call live over the Internet by accessing the conference call page of the Investor Relations section in www.teldta.com.


Contact: Mark A. Steinkrauss, Vice President, Corporate Relations
  (312) 592-5384 mark.steinkrauss@teldta.com

  Ruth E. Venning, Director, Corporate Relations
  (312) 592-5327 ruth.venning@teldta.com

  Julie D. Mathews, Manager, Investor Relations
  (312) 592-5341 julie.mathews@teldta.com


FOR RELEASE: IMMEDIATE

TDS REPORTS FOURTH QUARTER AND FULL YEAR 2003 RESULTS

Feb. 4, 2004 — Chicago, Illinois – Telephone and Data Systems, Inc. [AMEX:TDS] reported operating revenues of $884.4 million for the fourth quarter of 2003, up 8% from $815.6 million in the comparable period a year ago. Operating income decreased 13% to $55.6 million from $63.5 million in the fourth quarter of 2002. Net income available to common and diluted earnings per share for the quarter were $25.7 million and $.44 respectively, compared to net loss available to common and diluted loss per share of $29.6 million and $.50 respectively, in the fourth quarter of 2002. In the fourth quarter of 2002, the company recorded a pre-tax writedown of $41.8 million ($37.3 million net of income taxes of $1.6 million and minority interest of $2.9 million) on the value of certain investments.

For the year, operating revenues were $3.42 billion, up 15% from $2.99 billion in 2002. Operating income decreased 18% to $315.5 million from $386.4 million for the year. Net income available to common and diluted earnings per share for the year were $61.1 million and $1.05 respectively, compared to a net loss available to common and diluted loss per share of $984.8 million and $16.79 respectively, in the year 2002. In 2003, the company recorded a diluted loss per share of $.03 for discontinued operations relating to certain liabilities associated with the merger in 2000 of Aerial Communications, Inc. with VoiceStream Wireless Corporation. In addition, the company recorded a 2003 diluted loss per share of $.20 for the cumulative effect of an accounting change related to Statement of Financial Accounting Standards (SFAS) No. 143. In 2002, the company recorded a pre-tax writedown of $1,888.4 million ($1,135.3 million net of income taxes of $720.5 million and minority interest of $32.7 million) on the value of certain investments. In addition, the company recorded in 2002 a $.06 gain per diluted share related to the cumulative effect of an accounting change related to Staff Accounting Bulletin (“SAB”) No. 101.


Fourth Quarter Events

  • U.S. Cellular recorded a “Loss on Assets Held for Sale” of $22.3 million ($8.2 million net of income taxes of $12.4 million and minority interest of $1.7 million) principally relating to the difference between the book value and the expected proceeds of the South Texas markets to be sold.
     
  • TDS Telecom recorded $7.7 million in operating expenses related to an employee retirement incentive plan for employees eligible for retirement. As of Dec. 31, 2003, 122 employees, or 3.5% of TDS Telecom employees, elected to participate.
     
  • TDS Telecom recorded a “Loss on Assets Disposal” of $4.9 million ($3 million net of income taxes of $1.9 million) principally related to expansion properties that were determined to be impaired. The expenses were related to building leasehold improvements and lease obligations.

President’s Comments

“This quarter marked a solid finish to a very successful year for TDS. Our businesses grew revenues nearly 15% for the year; they executed well on their strategies; and they improved their competitive positioning. Both businesses also introduced a number of new services, including data services at U.S. Cellular, while continuing to deliver high levels of customer service,” said LeRoy T. Carlson, Jr., president and chief executive officer.

“At U.S. Cellular, net customer additions (net adds) totaled 141,000 and total revenues increased 10% in the quarter. Operating profitability improved year over year as well. Postpay churn was a dramatically low 1.4% in the quarter. These strong results were accomplished in nearly all markets, despite continued competition heightened somewhat by the availability of wireless local number portability.

“TDS Telecom’s ILEC wireline business grew its revenues 3% in the quarter. Strong sales of DSL and long distance contributed to revenue growth and offset the effects of a small decline in physical access lines and access revenue pressures. TDS Telecom’s CLEC operations grew revenues 8% while reducing operating expense other than depreciation and amortization, by more than 16%. TDS Telecom’s total wireline operations now serve nearly 1.1 million access line equivalents. Further growth is anticipated for 2004 driven primarily by the CLEC operations,” Carlson said.

Financial Initiatives
During the fourth quarter, TDS repurchased 582,000 shares of stock at an average price of $61.59 for $35.8 million. For the full year, TDS repurchased 1,960,900 shares at an average price of $47.10 for $92.4 million.

“2003 was a year of several financial accomplishments for our companies. First, we made significant progress on our stock repurchase program and, as long as market conditions warrant, we plan to continue stock repurchases in 2004,” said Sandra L. Helton, executive vice president and chief financial officer.

“Second, the company reduced debt in 2003 by redeeming $71 million of medium-term notes and $300 million of its Trust Originated Preferred Securities,” Helton said. “This is in line with our commitment at TDS to maintain a strong balance sheet and our investment-grade credit ratings.

“And finally, U.S. Cellular successfully completed a $444 million senior note offering in December at attractive rates. Proceeds were used to repay short-term debt. In addition, U.S. Cellular improved its liquidity by amending and extending its existing revolver credit facilities to provide up to $700 million.”


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SFAS No. 143
U.S. Cellular adopted Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” effective Jan. 1, 2003. An asset retirement obligation is the cost of closing facilities and removing assets, or performing other remediation to a property as required by contractual agreement. This accounting principle requires entities to record the estimated fair value of a legal liability for an asset retirement obligation in the period it is incurred. Adoption of this standard in the first quarter of 2003 required U.S. Cellular to recognize estimated liabilities related to the future remediation of certain leased properties.

During the fourth quarter of 2003, U.S. Cellular revised the probability that leased cell sites would require remediation and determined that an additional remediation liability was required. As a result of this change, TDS has restated its first-quarter 2003 financial statements to reflect a liability for future remediation of $54.4 million and a charge of $11.8 million, net of taxes and minority interest, as a cumulative effect of an accounting change. This cumulative effect reflects amounts that would have been charged to expense in prior years had SFAS No. 143 been effective for periods prior to Jan. 1, 2003. This change also required additional charges to income for depreciation and non-cash accretion expense in each of the first three quarters of 2003. A summary of these changes is included on page 12. The company will amend and re-file its Forms 10-Q for the quarters ended March 31, June 30 and Sept. 30, 2003 to reflect these changes.

As previously announced, TDS and its subsidiaries will hold a joint teleconference Feb. 4, 2004, at 10:00 a.m. Chicago time. Interested parties may listen to the call live over the Internet at: http://www.firstcallevents.com/service/ajwz396907186gf12.html or connect by telephone at 888/245-6674 pass code 4998907. The conference call will be archived on the conference call section of our web site at www.teldta.com. Certain financial and statistical information contained in the conference call presentation will be posted to the web site, together with reconciliations of GAAP to any non-GAAP information to be disclosed, prior to the commencement of the call. Investors may access this additional information on the conference call page of the Investor Relations section of the TDS web site.

TDS, a FORTUNE 500 company, is a diversified telecommunications corporation founded in 1969. Through its strategic business units, U.S. Cellular and TDS Telecom, TDS operates primarily by providing wireless and local telephone service. TDS builds value for its shareholders by providing excellent communications services in growing, closely related segments of the telecommunications industry. As of Dec. 30, 2003 the company employed approximately 10,900 people and served approximately 5.5 million customers/units in 36 states.

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 USM to start up the operations of the licensed areas involved in the AWE transaction completed in August 2003; the ability of USM to successfully manage and grow the operations of the Chicago MTA; changes in the overall economy; changes in competition in the markets in which TDS and USM operate; advances in telecommunications technology; changes brought about by the implementation of 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 TDS and USM debt securities by nationally accredited ratings organizations; pending and future litigation; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates,


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average service revenue per unit, churn rates, roaming rates and the mix of products and services offered in TDS and USM markets. Investors are encouraged to consider these and other risks and uncertainties that are discussed in documents filed by TDS with the SEC.

For more information about TDS and its subsidiaries, visit the web sites at:

TDS: http://www.teldta.com TDS Telecom: http://www.tdstelecom.com
USM: http://www.uscellular.com TDS Metrocom http://www.tdsmetro.com

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TELEPHONE AND DATA SYSTEMS, INC.
SUMMARY OPERATING DATA



Quarter Ended      12/31/2003    9/30/2003    6/30/2003    3/31/2003    12/31/2002  
U.S. Cellular:  
Consolidated Markets:  
    Total population (000s) (1)    46,267    45,817    41,288    41,288    41,048  
    Customer units    4,409,000    4,268,000    4,343,000    4,240,000    4,103,000  
    Net customer unit activations    141,000    66,000    103,000    137,000    160,000  
    Market penetration (1)    9.53 %  9.32 %  10.52 %  10.27 %  10.00 %
    Markets in operation (2)    147    141    150    149    149  
    Cell sites in service    4,184    4,082    4,106    3,987    3,914  
    Average monthly revenue per unit (3)   $ 47.80   $ 49.05   $ 47.38   $ 45.05   $ 47.91  
       Retail service revenue per unit (3)   $ 39.68   $ 39.57   $ 38.69   $ 37.05   $ 38.69  
       Inbound roaming revenue per unit (3)   $ 3.90   $ 4.65   $ 4.41   $ 4.36   $ 5.37  
       Long-distance/other revenue per unit (3)   $ 4.22   $ 4.83   $ 4.28   $ 3.64   $ 3.85  
    Minutes of use (MOU) (4)    462    435    424    377    359  
    Postpay churn rate per month (5)    1.4 %  1.6 %  1.5 %  1.6 %  1.8 %
    Marketing cost per gross  
       customer unit addition (6)   $ 384   $ 405   $ 378   $ 358   $ 369  
    Construction Expenditures (000s)   $ 193,413   $ 135,111   $ 163,076   $ 140,926   $ 281,615  

(1) Market penetration is calculated using 2002 Claritas population estimates for 12/31/03, 9/30/03, 6/30/03 and 3/31/03 and 2001 Claritas estimates for 12/31/02. "Total population" represents the total incremental population of each of U.S. Cellular's consolidated markets, regardless of whether the market has begun marketing operations. The 12/31/03 and 9/30/03 total population counts exclude the population of the 10 markets transferred to AT&T Wireless Services, Inc. in the August 2003 transaction and include the population of the markets acquired from AT&T Wireless Services, Inc. in that transaction. The population of markets in which U.S. Cellular has deferred the transfer of licenses from AT&T Wireless Services, Inc. are not included in the total population counts for any period.
(2) Represents only those markets which have begun marketing operations.
(3) Per unit revenue measurements are derived from Service Revenues as reported in Financial Highlights for each respective quarter as follows:

          Service Revenue per Financial Highlights      620,639    628,440    610,109    564,601    575,387  
          Components:  
              Retail service revenue during quarter   $ 515,171   $ 506,983   $ 498,176   $ 464,341   $ 464,633  
              Inbound roaming revenue during quarter    50,653    59,638    56,840    54,606    64,533  
              Long-distance/other revenue during quarter    54,815    61,819    55,093    45,654    46,221  

          Divided by average customers during quarter (000s)		    4,328    4,271    4,292    4,178    4,003  
          Divided by three months in each quarter    3    3    3    3    3  
 
          Retail service revenue per unit   $ 39.68   $ 39.57   $ 38.69   $ 37.05   $ 38.69  
          Inbound roaming revenue per unit   $ 3.90   $ 4.65   $ 4.41   $ 4.36   $ 5.37  
          Long-distance/other revenue per unit   $ 4.22   $ 4.83   $ 4.28   $ 3.64   $ 3.85  
 
              Average monthly revenue per unit   $ 47.80   $ 49.05   $ 47.38   $ 45.05   $ 47.91  

(4) Average monthly local minutes of use per customer (without roaming)
(5) Postpay churn rate per month is calculated by dividing the average monthly postpay customer disconnects during the quarter by the average postpay customer base for the quarter.
(6) Due to changes in accounting for agent rebates, for all periods shown this measurement is no longer calculable using information from the financial statements as reported. The numerator of this calculation is derived by adding Marketing and Selling Expenses and Cost of Equipment Sold, then subtracting Equipment Sales Revenues, then adding the amount of agent rebates related to the retention of current customers for each respective quarter. The numerator is then divided by the number of gross customer unit activations for each respective quarter to arrive at marketing cost per gross customer unit addition.

5

TELEPHONE AND DATA SYSTEMS, INC.
SUMMARY OPERATING DATA


Quarter Ended      12/31/2003  9/30/2003    6/30/2003    3/31/2003    12/31/2002
TDS Telecom  
    ILEC:  
    Access line equivalents (1)    722,200    721,600    718,800    713,800    711,200  
    Growth in equivalent ILEC access lines  
       from prior quarter-end:  
           Acquisitions    —    —    —    —    —  
           Internal growth    600    2,800    5,000    2,600    (3,200 )
    Access lines    663,800    668,200    669,600    669,900    672,400  
    Average monthly revenue  
       per access line equivalent (2)   $ 77.89   $ 76.25   $ 74.35   $ 74.68   $ 76.34  
    Internet service accounts    112,900    115,600    116,700    118,100    117,600  
    Digital Subscriber Lines (DSL) customers    23,600    19,300    16,200    12,800    9,100  
    Long Distance customers    230,500    218,600    211,900    202,100    197,500  
    Caller I.D. penetration (3)    33.1 %  32.4 %  31.8 %  31.3 %  30.9 %
    Voicemail penetration (3)    13.3 %  13.4 %  13.3 %  13.2 %  13.4 %
    Construction Expenditures (000s)   $ 35,217   $ 32,007   $ 29,288   $ 15,412   $ 35,540  
    CLEC:  
    Access line equivalents - total CLECs    364,800    346,500    323,600    303,900    291,400  
       TDS Metrocom    275,000    260,200    242,300    227,500    220,200  
       USLink    89,800    86,300    81,300    76,400    71,200  
    Internet service accounts    22,200    23,600    23,900    24,500    24,700  
    Percent of access lines on-switch:  
       TDS Metrocom    100.0 %  100.0 %  100.0 %  100.0 %  100.0 %
       U.S. Link    33.1 %  28.5 %  23.1 %  20.7 %  20.6 %
    Digital Subscriber Lines (DSL):  
       TDS Metrocom    20,100    17,600    14,100    13,100    11,800  
    Construction Expenditures (000s)   $ 10,086   $ 7,999   $ 5,504   $ 3,705   $ 16,216  

(1) Access line equivalents are derived by converting high capacity data lines to the estimated capacity of one switched access line. Basic rate ISDN = 2 DS0s; Primary rate ISDN = 23 DS0s; T1 = 24 DS0s; Trunk Lines = 1; DSLs = 1
(2) Per access line equivalent revenue measurements are derived from Operating Revenues for each respective quarter as follows:

     Local Telephone Operations ("ILEC")     $ 168,730   $ 164,650   $ 159,805   $ 159,597   $ 163,254  
     Competitive Local Exchange Carrier Operations    55,115    53,468    52,479    52,439    51,088  
     Intercompany eliminations    (1,804 )  (707 )  (807 )  (532 )  (651 )
 
         TDS Telecom Operating Revenues as reported   $ 222,041   $ 217,411   $ 211,477   $ 211,504   $ 213,691  
 
   
     Local Telephone Operations ("ILEC")   $ 168,730   $ 164,650   $ 159,805   $ 159,597   $ 163,254  
     Divided by average ILEC equivalent access lines  
         during quarter (000s)    722.0    719.8    716.4    712.4    712.8  
     Divided by three months in each quarter    3    3    3    3    3  
   
     Average monthly revenue per ILEC
         access line equivalent		   $ 77.89   $ 76.25   $ 74.35   $ 74.68   $ 76.34  

(3) Caller I.D. and Voicemail penetration is the total residential and business one-party customers purchasing the service divided by the total of these lines equipped for the service.

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TELEPHONE AND DATA SYSTEMS, INC.
FINANCIAL HIGHLIGHTS
 Three Months Ended December 31,
(Unaudited, dollars in thousands, except per share amounts)


Increase (Decrease)
2003 2002 Amount Percent
Operating Revenues                    
     U.S. Cellular   $ 662,388   $ 601,933   $ 60,455    10.0%
     TDS Telecom    222,041    213,691    8,350    3.9%
     884,429    815,624    68,805    8.4%
Operating Expenses  
     U.S. Cellular  
        Expenses excluding Depreciation and Amortization    501,366    465,295    36,071    7.8%
        Depreciation, Amortization and Accretion    114,428    99,117    15,311    15.4%
        Loss on Assets Held for Sale    22,289    —    22,289    N/M  
     638,083    564,412    73,671    13.1%
     TDS Telecom  
        Expenses excluding Depreciation and Amortization    144,914    147,142    (2,228 )  (1.5% )
        Depreciation and Amortization    40,937    40,584    353    0.9%
        Loss on Asset Disposal    4,914    —    4,914    N/M  
     190,765    187,726    3,039    1.6%
           Total Operating Expenses    828,848    752,138    76,710    10.2%
Operating Income  
     U.S. Cellular    24,305    37,521    (13,216 )  (35.2% )
     TDS Telecom    31,276    25,965    5,311    20.5%
     55,581    63,486    (7,905 )  (12.5% )
Other Income (Expense)  
     Interest and Dividend Income    5,095    4,883    212    4.3%
     Investment Income    15,243    11,551    3,692    32.0%
     (Loss) on Marketable Securities and Other Investments    (1,700 )  (41,794 )  40,094    N/M  
     Interest (Expense)    (42,434 )  (40,054 )  (2,380 )  (5.9% )
     Minority Interest in Income of Subsidiary Trust    —    (6,203 )  6,203    N/M  
     Other Income (Expense), Net    2,533    (98 )  2,631    N/M  
     (21,263 )  (71,715 )  50,452    N/M  
Income (Loss) Before Income Taxes    34,318    (8,229 )  42,547    N/M  
     Income Tax Expense    2,904    11,323    (8,419 )  (74.4% )
Income (Loss) Before Minority Interest    31,414    (19,552 )  50,966    N/M  
     Minority Share of (Income), net of tax    (5,624 )  (9,917 )  4,293    N/M  
Net Income (Loss)    25,790    (29,469 )  55,259    N/M  
     Preferred Dividend Requirement    (104 )  (104 )  —    N/M  
Net Income (Loss) Available to Common   $ 25,686   $ (29,573 ) $ 55,259    N/M  
 
Basic Average Common Shares Outstanding (000s)    57,397    58,676    (1,279 )  (2.2% )
Basic Earnings (Loss) Per Share   $ 0.45   $ (0.50 ) $ 0.95    N/M  
 
Diluted Average Common Shares Outstanding (000s)    57,726    58,676    (950 )  (1.6% )
Diluted Earnings (Loss) Per Share   $ 0.44   $ (0.50 ) $ 0.94    N/M  

N/M - Percentage change not meaningful


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TELEPHONE AND DATA SYSTEMS, INC.
FINANCIAL HIGHLIGHTS
 Year Ended December 31,
(Unaudited, dollars in thousands, except per share amounts)


Increase (Decrease)
2003 2002 Amount Percent
Operating Revenues                    
     U.S. Cellular   $ 2,555,455   $ 2,184,478   $ 370,977    17.0%
     TDS Telecom    862,433    800,888    61,545    7.7%
     3,417,888    2,985,366    432,522    14.5%
Operating Expenses  
     U.S. Cellular  
        Expenses excluding Depreciation and Amortization    1,908,636    1,552,158    356,478    23.0%
        Depreciation, Amortization and Accretion    432,333    351,154    81,179    23.1%
        Loss on Assets Held for Sale    47,847    —    47,847    N/M  
     2,388,816    1,903,312    485,504    25.5 %
     TDS Telecom  
        Expenses excluding Depreciation and Amortization    545,215    536,408    8,807    1.6%
        Depreciation and Amortization    163,399    159,291    4,108    2.6%
        Loss on Asset Disposal    4,914    —    4,914    N/M  
     713,528    695,699    17,829    2.6%
           Total Operating Expenses    3,102,344    2,599,011    503,333    19.4%
Operating Income  
     U.S. Cellular    166,639    281,166    (114,527 )  (40.7% )
     TDS Telecom    148,905    105,189    43,716    41.6%
     315,544    386,355    (70,811 )  (18.3% )
Other Income (Expense)  
     Interest and Dividend Income    19,918    57,330    (37,412 )  (65.3% )
     Investment Income    53,154    43,675    9,479    21.7%
     (Loss) on Marketable Securities and Other Investments    (10,200 )  (1,888,391 )  1,878,191    N/M  
     Interest (Expense)    (171,391 )  (132,224 )  (39,167 )  (29.6% )
     Minority Interest in Income of Subsidiary Trust    (16,678 )  (24,810 )  8,132    N/M  
     Other Income (Expense), Net    (11,955 )  2,396    (14,351 )  N/M  
     (137,152 )  (1,942,024 )  1,804,872    N/M  
Income (Loss) Before Income Taxes    178,392    (1,555,669 )  1,734,061    N/M  
     Income Tax Expense    79,892    (577,000 )  656,892    N/M  
Income (Loss) Before Minority Interest    98,500    (978,669 )  1,077,169    N/M  
     Minority Share of (Income), net of tax    (23,612 )  (9,068 )  (14,544 )  N/M  
Income (Loss) From Continuing Operations    74,888    (987,737 )  1,062,625    N/M  
Discontinued Operations, net of taxes    (1,609 )  —    (1,609 )  N/M  
Income (Loss) Before Cumulative Effect
    of Accounting Change		    73,279    (987,737 )  1,061,016    N/M  
Cumulative Effect of Accounting Change    (11,789 )  3,366    (15,155 )  N/M  
Net Income (Loss)    61,490    (984,371 )  1,045,861    N/M  
     Preferred Dividend Requirement    (417 )  (427 )  10    N/M  
Net Income (Loss) Available to Common   $ 61,073   $ (984,798 ) $ 1,045,871    N/M  
   
Basic Average Common Shares Outstanding (000s)    57,721    58,644    (923 )  (1.6% )
Basic Earnings (Loss) Per Share  
     Income (Loss) from Continuing Operations   $ 1.29   $ (16.85 ) $ 18.14    N/M  
     Discontinued Operations    (0.03 )  —    (0.03 )  N/M  
     Cumulative Effect of Accounting Change    (0.20 )  0.06    (0.26 )  N/M  
    $ 1.06   $ (16.79 ) $ 17.85    N/M  
   
Diluted Average Common Shares Outstanding (000s)    57,875    58,644    (769 )  (1.3% )
Diluted Earnings (Loss) Per Share  
     Income (Loss) from Continuing Operations   $ 1.28   $ (16.85 ) $ 18.13    N/M  
     Discontinued Operations    (0.03 )  —    (0.03 )  N/M  
     Cumulative Effect of Accounting Change    (0.20 )  0.06    (0.26 )  N/M  
    $ 1.05   $ (16.79 ) $ 17.84    N/M  

N/M - Percentage change not meaningful


8

TELEPHONE AND DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)

ASSETS



December 31,
2003		 December 31,
2002
Current Assets            
    Cash and cash equivalents   $ 937,651   $ 1,298,936  
    Accounts receivable from customers and other    409,671    448,033  
    Federal Income Tax receivable    —    40,000  
    Materials and supplies, at average cost, and  
       other current assets    157,624    161,043  
     1,504,946    1,948,012  
Investments  
    Wireless license costs, net    1,052,039    1,038,556  
    Wireless license rights    42,037    —  
    Goodwill, net    1,003,124    1,106,451  
    Intangible Assets    24,448    40,087  
    Marketable equity securities    2,772,410    1,944,939  
    Investments in unconsolidated entities    214,885    205,995  
    Notes Receivable    6,476    7,287  
    Other investments    15,439    14,914  
     5,130,858    4,358,229  
Property, Plant and Equipment, net  
    U.S. Cellular    2,271,254    2,148,432  
    TDS Telecom    1,079,732    1,047,811  
     3,350,986    3,196,243  
Other Assets and Deferred Charges  
    Derivative Asset    —    2,630  
    Other Assets and Deferred Charges    83,925    96,914  
     83,925    99,544  
 
 
Assets Held for Sale    100,523    —  
 
 
    $ 10,171,238   $ 9,602,028  

NOTE: Certain December 31, 2002 amounts have been changed to conform to current period presentation.


9a

TELEPHONE AND DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(Unaudited, dollars in thousands)

LIABILITIES AND STOCKHOLDERS' EQUITY


December 31,
2003		 December 31,
2002
Current Liabilities            
    Current portion of long-term debt   $ 23,712   $ 64,482  
    Notes payable    —    461,792  
    Accounts payable    361,010    361,758  
    Advance billings and customer deposits    108,372    95,922  
    Accrued interest    31,884    31,751  
    Accrued taxes    44,889    34,413  
    Accrued compensation    69,290    58,678  
    Other current liabilities    57,788    62,184  
     696,945    1,170,980  
Deferred Liabilities and Credits  
    Deferred taxes    1,232,153    1,097,791  
    Derivative Liability    712,252    61,160  
    Asset Retirement Obligation    124,501    —  
    Other    119,076    124,545  
     2,187,982    1,283,496  
Long-term Debt, excluding current portion  
    Prepaid Forward Contracts    1,672,762    1,656,616  
    Other Long-term Debt    1,994,913    1,641,624  
     3,667,675    3,298,240  
Minority Interest    508,190    489,735  
Company-Obligated Mandatorily Redeemable Preferred  
    Securities of Subsidiary Trust Holding Solely  
    Company Subordinated Debentures    —    300,000  
   
Liabilities Related to Assets Held for Sale    2,427    —  
   
Preferred Shares    3,864    6,954  
   
Common Stockholders' Equity  
    Common Shares, $.01 par value    563    559  
    Series A Common Shares, $.01 par value    64    66  
    Capital in excess of par value    1,843,468    1,832,806  
    Treasury Shares    (493,714 )  (404,169 )
    Accumulated other comprehensive income    296,820    191,704  
    Retained earnings    1,456,954    1,431,657  
     3,104,155    3,052,623  
   
    $ 10,171,238   $ 9,602,028  

NOTE: Certain December 31, 2002 amounts have been changed to conform to current period presentation.


9b

BALANCE SHEET HIGHLIGHTS
DECEMBER 31, 2003
(Unaudited, dollars in thousands)




U.S.
Cellular
TDS
Telecom 		TDS Corporate
& Other
Intercompany
Eliminations
TDS
Consolidated
Cash and Cash Equivalents     $ 9,822   $ 323,030   $ 604,799   $ —   $ 937,651  
Affiliated Cash Investments    26    502,964    —    (502,990 )  —  
Notes Receivable--Affiliates    —    —    523,060    (523,060 )  —  
    $ 9,848   $ 825,994   $ 1,127,859   $ (1,026,050 ) $ 937,651  
   
Cellular License, Goodwill and Intangibles, net   $ 1,663,967   $ 457,681   $ —   $ —   $ 2,121,648  
Marketable Equity Securities    260,188    70,609    2,441,613    —    2,772,410  
Investment in Unconsolidated Entities    170,569    19,606    33,378    (8,668 )  214,885  
Notes Receivable    6,476    —    —    —    6,476  
Long-term Notes Receivable - Affiliates    —    —    400    (400 )  —  
Other Investments    —    15,439    —    —    15,439  
    $ 2,101,200   $ 563,335   $ 2,475,391   $ (9,068 ) $ 5,130,858  
   
Property, Plant and  
  Equipment, net   $ 2,271,254   $ 1,079,732   $ —   $ —   $ 3,350,986  
   
Notes Payable:  
        external   $ —   $ —   $ —   $ —   $ —  
        cash management    —    —    502,990    (502,990 )  —  
        intercompany    —    418,060    —    (418,060 )  —  
    $ —   $ 418,060   $ 502,990   $ (921,050 ) $ —  
   
Prepaid Forward Contracts   $ 159,856   $ 41,182   $ 1,471,724   $ —   $ 1,672,762  
   
Long-term Debt:  
  Current Portion   $ 108,000   $ 18,474   $ 2,238   $ (105,000 ) $ 23,712  
  Affiliated    —    400    —    (400 )  —  
  Non-current Portion    984,488    245,550    764,875    —    1,994,913  
     Total   $ 1,092,488   $ 264,424   $ 767,113   $ (105,400 ) $ 2,018,625  
   
Preferred Shares   $ —   $ —   $ 3,864   $ —   $ 3,864  
   
Total Outstanding Debt and  
        Preferred Shares   $ 1,252,344   $ 723,666   $ 2,745,691   $ (1,026,450 ) $ 3,695,251  
   
Construction Expenditures:  
   Quarter Ended 12/31/03   $ 193,413   $ 45,303   $ 726        $ 239,442  
   Twelve Months Ended 12/31/03   $ 632,526   $ 139,218   $ 5,223        $ 776,967  

10

TDS Telecom Highlights
Three Months Ended December 31
 (Unaudited, dollars in thousands)


Increase (Decrease)
2003 2002 Amount Percent
Local Telephone Operations                    
       Operating Revenues  
           Local Service   $ 50,389   $ 48,912   $ 1,477    3.0%
           Network Access and Long-Distance    93,777    89,489    4,288    4.8%
           Miscellaneous    24,564    24,853    (289 )  (1.2% )
     168,730    163,254    5,476    3.4%
       Operating Expenses  
           Network Operations    48,123    39,827    8,296    20.8%
           Customer Operations    25,740    26,620    (880 )  (3.3% )
           Corporate Expenses    22,827    21,591    1,236    5.7%
           Depreciation and Amortization    32,237    32,823    (586 )  (1.8% )
           Loss on Asset Disposal    351    —    351    N/M  
     129,278    120,861    8,417    7.0%
            
       Operating Income   $ 39,452   $ 42,393   $ (2,941 )  (6.9% )
   
Competitive Local Exchange Carrier Operations  
       Revenues   $ 55,115   $ 51,088   $ 4,027    7.9%
   
       Expenses excluding Depreciation and Amortization    50,028    59,755    (9,727 )  (16.3% )
       Depreciation and Amortization    8,700    7,761    939    12.1%
       Loss on Asset Disposal    4,563    —    4,563    N/M  
     63,291    67,516    (4,225 )  (6.3% )
   
       Operating (Loss)   $ (8,176 ) $ (16,428 ) $ 8,252    50.2%
   
Total TDS Telecom Operating Income   $ 31,276   $ 25,965   $ 5,311    20.5%


TDS Telecom Highlights
Year Ended December 31
 (Unaudited, dollars in thousands)


Increase (Decrease)
2003 2002 Amount Percent
Local Telephone Operations                    
       Operating Revenues  
           Local Service   $ 199,552   $ 192,511   $ 7,041    3.7%
           Network Access and Long-Distance    362,917    346,597    16,320    4.7%
           Miscellaneous    90,313    87,679    2,634    3.0%
     652,782    626,787    25,995    4.1%
       Operating Expenses  
           Network Operations    167,342    142,618    24,724    17.3%
           Customer Operations    95,221    94,302    919    1.0%
           Corporate Expenses    84,950    91,721    (6,771 )  (7.4% )
           Depreciation and Amortization    130,036    130,232    (196 )  (0.2% )
           Loss on Asset Disposal    351    —    351    N/M  
     477,900    458,873    19,027    4.1%
            
       Operating Income   $ 174,882   $ 167,914   $ 6,968    4.1%
   
Competitive Local Exchange Carrier Operations  
       Revenues   $ 213,501   $ 176,602   $ 36,899    20.9%
   
       Expenses excluding Depreciation and Amortization    201,552    210,268    (8,716 )  (4.1% )
       Depreciation and Amortization    33,363    29,059    4,304    14.8%
       Loss on Asset Disposal    4,563    —    4,563    N/M  
     239,478    239,327    151    0.1%
   
       Operating (Loss)   $ (25,977 ) $ (62,725 ) $ 36,748    58.6%
   
Total TDS Telecom Operating Income   $ 148,905   $ 105,189   $ 43,716    41.6%

N/M - Percentage change not meaningful.


11

TELEPHONE AND DATA SYSTEMS, INC.
SUMMARY OF INCOME STATEMENT AND RELATED EFFECTS OF 2003 ACCOUNTING CHANGES

Three Months Ended March 31, 2003 Three Months Ended June 30, 2003 Three Months Ended September 30, 2003 Nine Months Ended September 30, 2003
As Reported Effects of 2003 Accounting
Changes 		As Adjusted As Reported Effects of 2003 Accounting
Changes 		As Adjusted As Reported Effects of 2003 Accounting
Changes 		As Adjusted As Reported Effects of 2003 Accounting
Changes 		As Adjusted
Operating Expenses (000s)                                                    
    US Cellular  
    Depreciation, Amortization and Accretion  
       Changes related to SFAS 143 - reclassification of  
         retail/office leases       $ (1,321 )         $ —           $ —           $ (1,321 )    
       Changes related to SFAS 143 - depreciation for period        349            359            374            1,082      
       Changes related to SFAS 143 - accretion for period        1,046            1,064            1,096            3,206      
       Total   $ 109,503   $ 74   $ 109,577   $ 103,271   $ 1,423   $ 104,694   $ 102,164   $ 1,470   $ 103,634   $ 314,938   $ 2,967   $ 317,905  
   
Operating Income (000s)  
       Changes related to SFAS 143 - reclassification of  
         retail/office leases       $ 1,321           $ —           $ —           $ 1,321      
       Changes related to SFAS 143 - depreciation for period        (349 )          (359 )          (374 )          (1,082 )    
       Changes related to SFAS 143 - accretion for period        (1,046 )          (1,064 )          (1,096 )          (3,206 )    
       Total   $ 33,866   $ (74 ) $ 33,792   $ 93,545   $ (1,423 ) $ 92,122   $ 135,519   $ (1,470 ) $ 134,049   $ 262,930   $ (2,967 ) $ 259,963  
   
Income tax expense (benefit) [income taxes related to above  
    impact on operating income] (000s)   $ 3,855   $ (31 ) $ 3,824   $ 24,214   $ (591 ) $ 23,623   $ 50,142   $ (601 ) $ 49,541   $ 78,211   $ (1,223 ) $ 76,988  
   
Minority share of income [minority partner's share of impact  
    on operating income at US Cellular and minority  
    shareholder's share of impact on net income  
    at US Cellular] (000s)   $ (188 ) $ 31   $ (157 ) $ (6,466 ) $ 172   $ (6,294 ) $ (11,717 ) $ 180   $ (11,537 ) $ (18,371 ) $ 383   $ (17,988 )
   
Income (loss) before cumulative effect of a change in  
    accounting principle (000s)   $ (5,000 ) $ (12 ) $ (5,012 ) $ 20,156   $ (660 ) $ 19,496   $ 33,694   $ (689 ) $ 33,005   $ 48,850   $ (1,361 ) $ 47,489  
   
Cumulative effect of accounting change (000s)   $ —   $ (11,789 ) $ (11,789 ) $ —   $ —   $ —   $ —   $ —   $ —   $ —   $ (11,789 ) $ (11,789 )
   
Net income (loss) (000s)   $ (5,000 ) $ (11,801 ) $ (16,801 ) $ 20,156   $ (660 ) $ 19,496   $ 33,694   $ (689 ) $ 33,005   $ 48,850   $ (13,150 ) $ 35,700  
   
Basic earnings per share from cumulative effect of a  
    change in accounting principle   $ —   $ (0.20 ) $ (0.20 ) $ —   $ —   $ —   $ —   $ —   $ —   $ —   $ (0.20 ) $ (0.20 )
   
 Basic earnings per share   $ (0.09 ) $ (0.20 ) $ (0.29 ) $ 0.35   $ (0.01 ) $ 0.34   $ 0.58   $ (0.01 ) $ 0.57   $ 0.84   $ (0.23 ) $ 0.61  

12