On November 6, 2012, U.S. Cellular entered into a Purchase and Sale Agreement with subsidiaries of Sprint Corp., fka Sprint Nextel Corporation (“Sprint”). Pursuant to the Purchase and Sale Agreement, on May 16, 2013, U.S. Cellular transferred customers and certain PCS license spectrum to Sprint in U.S. Cellular's Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets (“Divestiture Markets”) in consideration for $480 million in cash. The Purchase and Sale Agreement also contemplated certain other agreements, together with the Purchase and Sale Agreement collectively referred to as the “Divestiture Transaction.”

Pursuant to the Purchase and Sale Agreement, U.S. Cellular and Sprint also entered into certain other agreements, including customer and network transition services agreements, which require U.S. Cellular to provide customer, billing and network services to Sprint for a period of up to 24 months after the May 16, 2013 closing date. Sprint will reimburse U.S. Cellular for providing such services at an amount equal to U.S. Cellular's estimated costs, including applicable overhead allocations. These services were substantially complete as of March 31, 2014. In addition, these agreements require Sprint to reimburse U.S. Cellular up to $200 million (the “Sprint Cost Reimbursement”) for certain network decommissioning costs, network site lease rent and termination costs, network access termination costs, and employee termination benefits for specified engineering employees. It is estimated that up to $175 million of the Sprint Cost Reimbursement will be recorded in (Gain) loss on sale of business and other exit costs, net and up to $25 million of the Sprint Cost Reimbursement will be recorded in System operations in the Consolidated Statement of Operations. For the nine months ended September 30, 2014, $52.0 million of the Sprint Cost Reimbursement had been received and recorded in Cash received from divestitures in the Consolidated Statement of Cash Flows.

Financial impacts of the Divestiture Transaction are classified in the Consolidated Statement of Operations within Operating income. The table below describes the amounts U.S. Cellular has recognized and expects to recognize in the Consolidated Statement of Operations between the date the Purchase and Sale Agreement was signed and the end of the transition services period.


(Dollars in thousands)			Expected Period of Recognition		Projected Range				Cumulative Amount Recognized as of September 30, 2014		Actual Amount Recognized Nine Months Ended September 30, 2014		Actual Amount Recognized Nine Months Ended September 30, 2013		Actual Amount Recognized Three Months Ended September 30, 2014		Actual Amount Recognized Three Months Ended September 30, 2013
(Gain) loss on sale of business and other exit costs, net
	Proceeds from Sprint
		Purchase price		2013	$	(480,000)	$	(480,000)	$	(480,000)	$	-	$	(480,000)	$	-	$	-
		Sprint Cost Reimbursement		2013-2015		(120,000)		(175,000)		(98,289)		(50,648)		(4,221)		(1,454)		(4,213)
	Net assets transferred			2013		213,593		213,593		213,593		-		213,593		-		-
	Non-cash charges for the write-off and write-down of property under construction and related assets			2012-2015		10,000		15,000		10,965		290		54		(48)		(27)
	Employee related costs including severance, retention and outplacement			2012-2014		13,000		16,000		14,139		(123)		2,462		10		(641)
	Contract termination costs			2012-2015		70,000		100,000		81,377		21,793		18,781		(9,040)		2,176
	Transaction costs			2012-2014		5,000		7,000		6,183		618		4,081		156		362
		Total (Gain) loss on sale of business and other exit costs, net			$	(288,407)	$	(303,407)	$	(252,032)	$	(28,070)	$	(245,250)	$	(10,376)	$	(2,343)

Depreciation, amortization and accretion expense
	Incremental depreciation, amortization and accretion, net of salvage values			2012-2014		215,000		216,000		215,238		16,667		134,000		3,582		45,676
(Increase) decrease in Operating income					$	(73,407)	$	(87,407)	$	(36,794)	$	(11,403)	$	(111,250)	$	(6,794)	$	43,333

Incremental depreciation, amortization and accretion, net of salvage values represents amounts recorded in the specified time periods as a result of a change in estimate for the remaining useful life and salvage value of certain assets and a change in estimate which accelerated the settlement dates of certain asset retirement obligations in conjunction with the Divestiture Transaction. Specifically, for the periods indicated, this is estimated depreciation, amortization and accretion recorded on assets and liabilities of the Divestiture Markets after the execution of the Purchase and Sale Agreement on November 6, 2012 less depreciation, amortization and accretion that would have been recorded on such assets and liabilities in the normal course, absent the Divestiture Transaction.

During the third quarter of 2014, U.S. Cellular recorded $3.6 million of Depreciation, amortization and accretion expense for the Divestiture Markets due to higher asset retirement obligation remediation estimates.

		As a result of the transaction, U.S. Cellular recognized the following amounts in the Consolidated Balance Sheet:

					Nine Months Ended September 30, 2014
(Dollars in thousands)			Balance December 31, 2013		Costs Incurred		Cash Settlements (1)		Adjustments (2)		Balance September 30, 2014
Accrued compensation
	Employee related costs including severance, retention, outplacement		$	2,053	$	99	$	(1,121)	$	(221)	$	810
Accounts payable - trade
	Contract termination costs		$	-	$	4,018	$	-	$	(1,070)	$	2,948
Other current liabilities
	Contract termination costs		$	13,992	$	12,703	$	(19,390)	$	1,367	$	8,672
Other deferred liabilities and credits
	Contract termination costs		$	30,849	$	24,171	$	(3,380)	$	(29,707)	$	21,933

(1)		Cash settlement amounts are included in either the Net income, changes in Accounts payable - trade or changes in Other assets and liabilities line items as part of Cash flows from operating activities on the Consolidated Statement of Cash Flows.
(2)		Adjustment to liability represents changes to previously accrued amounts.

In September 2014, U.S. Cellular entered into definitive agreements with third parties to transfer certain of its non-operating market licenses (“unbuilt licenses”) representing approximately 148 million MHz/pops. In exchange, the third parties will transfer to U.S. Cellular licenses representing approximately 46 million MHz/pops located in U.S. Cellular's operating markets plus $145 million of cash. These transactions are subject to regulatory approvals and are expected to close in 2015. In accordance with GAAP, the book value of the licenses have been accounted for and disclosed as “Assets held for sale” in the Consolidated Balance Sheet at September 30, 2014. U.S. Cellular expects to record a gain upon consummation of these transactions.

On May 23, 2014, U.S. Cellular entered into a License Purchase and Customer Recommendation Agreement with Airadigm Communications, Inc. (“Airadigm”). TDS owns 100% of the common stock of Airadigm. Pursuant to the License Purchase and Customer Recommendation Agreement, on September 10, 2014, Airadigm transferred to U.S. Cellular Federal Communications Commission (“FCC”) spectrum licenses and certain tower assets in certain markets in Wisconsin, Iowa, Minnesota and Michigan, in consideration for $91.5 million in cash. Since both parties to this transaction are controlled by TDS, upon closing, U.S. Cellular recorded the transferred assets at Airadigm's net book value of $15.2 million. The difference between the consideration paid and the net book value of the transferred assets was recorded as a reduction of U.S. Cellular's Retained earnings. In addition, a deferred tax asset was recorded for the difference between the consideration paid and the net book value of the transferred assets, which increased U.S. Cellular's Additional paid-in capital.

On March 5, 2014, U.S. Cellular sold the majority of its St. Louis area non-operating market spectrum license for $92.3 million. A gain of $75.8 million was recorded in (Gain) loss on license sales and exchanges in the Consolidated Statement of Operations in the first quarter of 2014.

On February 14, 2014, U.S. Cellular completed an exchange whereby U.S. Cellular received one E block PCS spectrum license covering Milwaukee, WI in exchange for one D block PCS spectrum license covering Milwaukee, WI. The exchange of licenses provided U.S. Cellular with spectrum to meet anticipated future capacity and coverage requirements. No cash, customers, network assets, other assets or liabilities were included in the exchange. As a result of this transaction, U.S. Cellular recognized a gain of $15.7 million, representing the difference between the $15.9 million fair value of the license surrendered, calculated using a market approach valuation method, and the $0.2 million carrying value of the license surrendered. This gain was recorded in (Gain) loss on license sales and exchanges in the Consolidated Statement of Operations in the first quarter of 2014.