10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
		OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-09712

UNITED STATES CELLULAR CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware					62-1147325
(State or other jurisdiction of incorporation or organization)					(IRS Employer Identification No.)
8410 West Bryn Mawr, Chicago, Illinois 60631
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number: (773) 399-8900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class					Name of each exchange on which registered
Common Shares, $1 par value					New York Stock Exchange
6.95% Senior Notes Due 2060					New York Stock Exchange
7.25% Senior Notes Due 2063					New York Stock Exchange
7.25% Senior Notes Due 2064					New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.								Yes [ ]	No [x]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.								Yes [ ]	No [x]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.								Yes [x]	No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).								Yes [x]	No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.								[x]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer	[ ]	Accelerated filer	[x]	Non-accelerated filer		[ ]	Smaller reporting company		[ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).								Yes [ ]	No [x]

As of June 30, 2016, the aggregate market value of the registrant's Common Shares held by non-affiliates was approximately $545 million, based upon the closing price of the Common Shares on June 30, 2016 of $39.27, as reported by the New York Stock Exchange.  For purposes hereof, it was assumed that each director, executive officer and holder of 10% or more of any class of voting equity security of U.S. Cellular is an affiliate.

The number of shares outstanding of each of the registrant's classes of common stock, as of January 31, 2017, is 51,843,000 Common Shares, $1 par value, and 33,006,000 Series A Common Shares, $1 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Those sections or portions of the registrant's 2016 Annual Report to Shareholders (“Annual Report”), filed as Exhibit 13 hereto, and of the registrant’s Notice of Annual Meeting of Shareholders and Proxy Statement (“Proxy Statement”) to be filed prior to April 30, 2017 for the 2017 Annual Meeting of Shareholders scheduled to be held May 23, 2017, are herein incorporated by reference into PartsII and III of this report.

United States Cellular Corporation

Annual Report on Form 10-K

For the Period Ended December 31, 2016

TABLE OF CONTENTS

Part I			Page No.
	Item 1.	Business		1
	Item 1A.	Risk Factors		8
	Item 1B.	Unresolved Staff Comments		21
	Item 2.	Properties		21
	Item 3.	Legal Proceedings		21
	Item 4.	Mine Safety Disclosures		21
Part II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		22
	Item 6.	Selected Financial Data		23
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		23
	Item 8.	Financial Statements and Supplementary Data		23
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		23
	Item 9A.	Controls and Procedures		24
	Item 9B.	Other Information		24
Part III
	Item 10.	Directors, Executive Officers and Corporate Governance		25
	Item 11.	Executive Compensation		25
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		25
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		25
	Item 14.	Principal Accountant Fees and Services		25
Part IV
	Item 15.	Exhibits and Financial Statement Schedules		26
	Item 16.	Form 10-K Summary		26

PARTI

Item1. Business

General

United States Cellular Corporation (“U.S.Cellular”) provides wireless telecommunications services to customers with approximately 5.0 million connections in 23 statescollectively representing a total population of 32 million. U.S. Cellular operates in one reportable segment, and all of its wireless operating markets are in the United States.

• U.S. Cellular’s strategy is to attract and retain wireless customers through a value proposition comprised of a high-quality network, outstanding customer service, and competitive devices, plans, and pricing, all provided with a local focus.
• U.S. Cellular Common Shares trade on the New York Stock Exchange (“NYSE”) under the ticker symbol “USM.”
• U.S.Cellular is a majority-owned subsidiary of Telephone and Data Systems,Inc. (NYSE: TDS).  As of December 31, 2016, TDS owns 83% of U.S. Cellular common stock, has the voting power to elect all of the directors of U.S. Cellular and controls over 96% of the voting power in matters other than the election of directors of U.S. Cellular.

• U.S. Cellular was incorporated under the laws of the state of Delaware in 1983.

The map below highlights areas of operation of U.S. Cellular’s consolidated operating markets.

1

Customers, Services and Products

Customers.U.S.Cellular provides service to postpaid and prepaid customers from a variety of demographic segments.  U.S. Cellular focuses on retail consumers, governments, and small-to-mid-size business customers in industries such as construction, retail, agriculture, professional services and real estate. These customers are served primarily through U.S. Cellular’s retail and direct sales channels.  U.S. Cellular builds customer loyalty by offering high-quality network services, outstanding customer-focused support services, competitive pricing, and other benefits as discussed further in “Marketing, Customer Service, and Sales and Distribution Channels.”

Services.U.S.Cellular’s postpaid customers are able to choose from a variety of national plans with voice, messaging and data usage options and pricing that are designed to fit different customer needs, usage patterns and budgets. Helping a customer find the right pricing plan is an important element of U.S.Cellular’s brand positioning. U.S. Cellular offers Shared Connect data plans whichallow customers to share data usage among all users and devices connected to the plan. Business rate plans are designed to meet the unique needs of the business customer. U.S. Cellular’s national plans price all domestic calls as local calls, regardless of where they are made or received in the United States, with no long distance or roaming charges,made possible by roaming agreements with other wireless carriers.  See “System Usage” section below for further discussion related to roaming. U.S. Cellular also offers monthly prepaid service plans, which provide customers unlimited voice and unlimited messaging with a specified amount of high-speed data and unlimited data at lower speeds once the high-speed data limit is reached to ensure customers are never without data access.

U.S. Cellular’s portfolio of smartphones, tablets and other connected devices is a key part of its strategy to deliver wireless devices which allow customers to stay productive, entertained and connected on the go; these devices are backed by U.S. Cellular’s high-speed networks, including a fourth generation (“4G”) Long-Term Evolution(“LTE”) network, whichcovers 99% of its postpaid connections and supports nationwide roaming. U.S. Cellular’s 4G LTE network featuressmartphone messaging, data and internet services that allow customers to access the web and social network sites, e-mail, text, picture and video message, utilize turn-by-turn GPS navigation, and browse and download thousands of applications to customize their wireless devices to fit their lifestyles.

U.S. Cellular also offers advanced wireless solutions to consumers and business and government customers, including a growing suite of connected machine to machine solutions and software applications across the categories of monitor and control (e.g., sensors and cameras), business automation/operations (e.g., e-forms), communication (e.g.,enterprise messaging, back-up router for business continuity services) and asset management (e.g.,telematics, fleet management).  U.S. Cellular intends to continue to further enhance these offerings for consumer and business customers in 2017 and beyond.

Devices and Products.U.S.Cellular offers a comprehensive range of wireless devices such as handsets, tablets, mobile hotspots, home phones and routers for use by its customers. U.S. Cellular offers wireless devices that are compatible with its 4G LTE and third generation (“3G”) networks and are compliant with the Federal Communications Commission (“FCC”) enhanced wireless 911 requirements. In addition, U.S. Cellular also offers a wide range of accessories, including wireless basics such as cases, screen protectors, chargers, and memory cards as well as an ever growing assortment of consumer electronics such as headphones, speakers, and hands-free devices. In addition, U.S. Cellular recently introduced an assortment of home automation products (e.g., cameras, sensors, thermostats).

During 2016, U.S. Cellular offered customers the option to purchase devices under two alternatives:  (1) through equipment installment contracts over a specified time period, where no annual service contract is signed and a discount is provided on their connection charge or (2) alternative plans that are subject to a service contract.  Starting in September 2016, however, new postpaid handset sales to retail consumers are made under equipment installment plans only; business and government customers may continue to purchase equipment under either alternative.  For certain installment plans, after a specified period of time, the customer may have the right to upgrade to a new device prior to reaching the end of the installment term, thus enabling customers to access the latest smartphones and provide a better overall customer experience. 

U.S. Cellular continues to offer device service programs that provide customers a simple process to replace a damaged or defective device through a retail store or via direct mail. U.S. Cellular also offers its Device Protection+ program which includes overnight delivery of a replacement devicefor lost and stolen devices.  In 2016, U.S. Cellular launched Device Protection+ Advanced, which includes 100GB of data backup, TechSupport+, and AppleCare services for Apple iOS customers.

U.S. Cellular offers a full array of both iconic and value smartphones with options for both Android and iOS customers.  U.S. Cellular continues to bolster its expanding smartphone portfolio with the Samsung Galaxy S® 7 and S® 7 Edge, the iPhone® 7 and 7 Plus, the LG V20 and K8, and the Motorola G4 Play.  Along with the iconic devices, U.S. Cellular supports the larger ecosystem of Samsung and Apple devices, such as the Samsung Gear VR, the Samsung Gear S2 and the Apple Watch.  For tablets, U.S. Cellular offers the full complement of iPads, the Samsung Galaxy Tab S2, the LG G Pad F™ 8.0 LTE, and the ZTE ZPad™.  U.S. Cellular’s smartphone offerings play a significant role in attracting customers and driving data service usage and revenues. U.S. Cellular also offers additional products and services that utilize the company’s network, including feature phones, mobile hotspots, LTE wireless routers and home phones.

2

U.S. Cellular purchases wireless devices and accessory products from a number of original equipment manufacturers, including Samsung, Apple, Motorola, LG, Kyocera, ZTE, and Tessco.  U.S. Cellular also has relationships with its suppliers to ensure best possible pricing and identifies opportunities for promotional support. Additionally, in 2016 U.S. Cellular completed multiple auctions to optimize pricing from accessories suppliers and was able to realize lower costs as a result.  U.S. Cellular does not own significant product warehousing and distribution infrastructure; rather, it contracts with third party providers for the majority of its product warehousing, distribution and direct customer fulfillment activities.  U.S. Cellular also contracts with third party providers for services related to its device service programs.

U.S. Cellular continuously monitors the financial condition of its wireless device and accessory suppliers. Since U.S. Cellular has a diversified portfolio of products from more than one supplier, U.S. Cellular does not expect the financial condition of any single supplier to affect its ability to offer a competitive portfolio of wireless devices and accessories for sale to customers.

Marketing, Customer Service, and Sales and Distribution Channels

Marketing and Advertising.U.S.Cellular’s marketing plan is focused on acquiring, retaining and growing customer relationships by maintaining ahigh-quality wireless network, providing outstanding customer service, and offering a comprehensive portfolio of products and services built around customer needs at fair prices with a local focus.

U.S. Cellular believes that creating positive relationships with its customers enhances their wireless experience and builds customer loyalty. U.S. Cellular currently offers several customer-centric programs and services to customers. The Overage Protection service provides customers peace of mind by sending them text message alerts when they come close to reaching their allowable monthly plan minutes, text messages or data usage in order to avoid overage charges. U.S. Cellular also offers a service to customers on Shared Connect data plans to allow them to limit data usage on specific lines – or for the entire account – thereby providing controls to manage account overages. This service, Data Usage Controls, allows customers an easy way to divide their data bucket by line.

U.S.Cellular’s advertising is directed at increasing the public awareness of the U.S. Cellular brand and understanding of the wireless services it offers, to attract potential customers, retain existing customers and increasetheir usage of U.S. Cellular’s services. U.S.Cellular supplements its advertising with a focused public relations program that drives store traffic, supports sales of products and services, and builds brand awareness and preference. The approach combines national and local media relations in mainstream and social media channels with market-wide activities, events, and sponsorships.

U.S. Cellular focuses its charitable giving strategy on supporting initiatives relevant to consumers in its service areas. These initiatives include support of programs that focus on youth in the communities U.S. Cellular serves, such as the Boys and Girls Clubs and 4H Societies of America.

Customer Service.U.S.Cellular manages customer retention by focusing on outstanding customer service through the development of processes that are customer-friendly, extensive training of frontline sales and support associates and the implementation of retention programs.

U.S.Cellular currently operates four regional customer care centers in its operating markets with personnel who are responsible for customer service activities, and a national financial services center with personnel who perform credit and other customer payment activities. U.S. Cellular also contracts with third parties that provide additional customer care and financial services support.

Sales and Distribution Channels.U.S.Cellular supports a multi-faceted distribution program, including retail sales, direct sales, third-party national retailers, and independent agents, plus a website and telesales.

Company retail store locations are designed to market wireless products and services to the consumer and small business segments in a setting familiar to these types of customers. As of December 31, 2016, retail sales associates work in 267 U.S. Cellular-operated retail stores and kiosks.  Direct sales consultants market wireless services to mid-size business and government customers.  Additionally, the U.S.Cellular website enables customers to activate service and purchase wireless devices online.

U.S.Cellular maintains an ongoing training program to improve the effectiveness of retail sales associates and direct sales consultants by focusing their efforts on obtaining customers by facilitating the sale of appropriate packages for the customer’s expected usage and value-added services that meet the individual needs of the customer.

U.S.Cellular has relationships with exclusive and non-exclusive agents (collectively “agents”).  Those agents are independent businesses that obtain customers for U.S.Cellular on a commission basis. At December 31, 2016, U.S.Cellular had contracts with these businesses aggregating 523 locations. U.S.Cellular provides additional support and training to its agents to increase customer satisfaction and to ensure a consistent customer experience. U.S.Cellular’s agents are generally in the business of selling wireless devices, wireless service packages and other related products. No single agent accounted for 10% or more of U.S. Cellular’s operating revenues during the past three years.

U.S. Cellular products and services are also offered through third-party national and on-line retailers.  Wal-Mart, Sam’s Club, and Dollar General offer U.S. Cellular products and services at select retail locations in U.S. Cellular’s service areas.  Further, Amazon offers U.S. Cellular’s postpaid and prepaid services on-line. U.S. Cellular continues to explore new relationships with additional third-party retailers as part of its strategy to expand distribution.

Seasonality.Seasonality in operating expenses may cause operating income to vary from quarter to quarter.  U.S. Cellular’s operating expenses tend to be higher in the fourth quarter due to increased marketing and promotional activities during the holiday season.

3

Competition

The wireless telecommunication industry is highly competitive. U.S.Cellular competes directly with several wireless service providers in each of its markets.  In general, there are between two and four competitors in each wireless market in which U.S. Cellular provides service, excluding resellers and mobile virtual network operators.  In its footprint, U.S. Cellular competes to varying degrees against each of the national wireless companies: Verizon Wireless, AT&T Mobility, Sprint, and T-Mobile USA, in addition to a few smaller regional carriers in specific areas of its footprint.All of the national competitors have substantially greater financial and other resources than U.S.Cellular.  Additionally, U.S. Cellular competes with other companies that use alternative communication technology and services to provide similar products and services.

Since each of these wireless competitors operates on systems using spectrum licensed by the FCC and has comparable technology and facilities, competition among wireless service providers for customers is principally on the basis of types of products and services, price, size of area covered, network quality, network speed and responsiveness of customer service. U.S. Cellular employs a customer satisfaction strategy that includes maintaining an outstanding wireless network throughout its markets. U.S. Cellular owns and operates low-band spectrum (less than 1 GHz) that covers the majority of its footprint and enables more efficient coverage in rural areas (compared to spectrum above 1 GHz), which strengthens its network quality positioning.As discussed below, the FCC is currently completing the auction process for a new tranche of low-band spectrum, the 600 MHz band.  To the extent existing competitors or new entrants acquire such spectrum in U.S. Cellular markets, U.S. Cellular could face increased competition over time from competitors that hold such more-efficient low-band spectrum.

The use of national advertising and promotional programs by the top four wireless service providers is a source of additional competitive and pricing pressures in all U.S. Cellular markets, even if those operators do not provide direct service in a particular market. Over the past year, competition among top carriers has continued to be aggressive, with the top four carriers engaging in rich promotional initiatives including contract buyouts and limited-time and permanent price reductions. In addition, in the current wireless environment, U.S. Cellular’s ability to compete depends on its ability to continue to offer national voice and data plans. U.S. Cellular provides wireless services comparable to the national competitors, but the national wireless companies operate in a wider geographic area and are able to provide such services over a wider area on their own networks than U.S. Cellular can offer on its network. Although U.S. Cellular offers similar coverage area as these competitors, U.S. Cellular incurs roaming charges for data sessions and calls made in portions of the coverage area which are not part of its network, thereby increasing its cost of operations.  U.S. Cellular depends on roaming agreements with other wireless carriers to provide voice and data roaming capabilities in areas not covered by U.S. Cellular’s network.  Similarly, U.S. Cellular provides roaming services on its network to other wireless carriers’ customers who travel within U.S. Cellular’s coverage areas and receives revenue from other carriers for the provision of these services.

Convergence of connectivity is taking place on many levels, including wireless devices that can act as wireless or wireline replacement devices and the incorporation of wireless “hot spot” technology in wireless devices making internet access seamless regardless of location. Although less directly a substitute for other wireless services, wireless data services such as Wi-Fi may be adequate for those who do not need mobile wide-area roaming or full two-way voice services. Technological advances or regulatory changes in the future, such as the rollout and consumer adoption of Wi-Fi calling and Voice over Long-Term Evolution (“VoLTE”) capabilities, may make available other alternatives to current wireless service, thereby creating additional sources of competition that shift consumers’ perceptions and preferences of network strength, speed and reliability.If the trend toward convergence continues, U.S. Cellular is at a competitive disadvantage to larger competitors, including the national wireless carriers, traditional cable companies, mobile virtual network operators (“MVNO”) and other potential large new entrantswith much greater financial and other resources in adapting to such convergence.  

U.S. Cellular’s approach in 2017 and in future years will be to focus on the unique needs and attitudes of its customers towards wireless service.  U.S. Cellular will deliver high-quality products and services at competitive prices and intends to continue to differentiate itself by seeking to provide an overall outstanding customer experience, founded on a high-quality network.  U.S. Cellular’s ability to compete successfully in the futurewill depend upon its ability to anticipate and respond to changes related to new service offerings, consumer preferences, competitors’ pricing strategies and new product offerings, technology, demographic trends, economic conditions and its access to adequate spectrum resources.

System Usage

U.S.Cellular’s main sources of revenues are from its own customers and from customers of other wireless operators who roam on its network.  An inter-carrier roaming agreement is negotiated between the wireless operators to enable customers who are in a wireless service area other than the customer’s home service area to place or receive a call, SMS or use data in that service area. U.S.Cellular has entered into reciprocal roaming agreements with operators of other wireless systems covering virtually all systems with Code Division Multiple Access (“CDMA”) technology in the United States, Canada and Mexico.In addition, U.S. Cellular has entered into 4G LTE roaming agreements with national wireless companies and, as a result, a majority of U.S. Cellular customers currently have access to nationwide 4G LTE service.

When roaming on another wireless carrier’s network, customers will automatically pre-register on the serving carrier’s network allowing customers to make or receive calls, SMS or use data.  The charge for this service is negotiated as part of the roaming agreement between U.S.Cellular and the roaming customer’s carrier.  U.S.Cellular bills this charge to the customer’s home carrier, which then may bill the customer. In many instances, based on competitive factors, carriers, including U.S.Cellular, may or may not charge their customers for roaming.  Since 2010, U.S. Cellular has offered nationwide 3G data roaming services, allowing its customers to access high-speed data across the country.

4

Access Technology and System Design

Technology.Wireless telecommunication systems transmit voice, data, graphics and video through the transmission of signals over networks of radio towers using radio spectrum licensed by the FCC. Access to local, regional, national and worldwide telecommunications networks is provided through system interconnections. A high-quality network, supported by continued investments in that network, will remain an important factor for U.S. Cellular to remain competitive.

4G LTE technology enables more network capacity for more data per user as well as faster access to data.  U.S. Cellular continues to devote efforts to enhance its network capabilities with the deployment of VoLTE technology and plans a multi-year roll out with one market in early 2017.  VoLTE will allow U.S. Cellular’s customers and customers of other wireless carriers that have roaming agreements with U.S. Cellular to utilize U.S. Cellular’s LTE network for voice and data services. U.S. Cellular continues to offer services based on 3G technology and CDMA digital technology across its networks.

Through roaming agreements with other U.S. based wireless carriers, U.S. Cellular’s customers may access CDMA and 4G LTE services in virtually all areas of the United States, as well as CDMA in parts of Canada and Mexico. Another digital technology, Global System for Mobile Communication (“GSM”), has a larger installed base of customers worldwide.  U.S. Cellular customers now have the ability to roam on GSM carriers with voice, data and SMS in Canada, Mexico and internationally. Both CDMA and GSM technologies are being succeeded by 4G LTE technology.

System Design and Construction.U.S.Cellular designs and constructs its systems in a manner it believes will permit it to provide high-quality service to substantially all types of compatible wireless devices. Designs are based on engineering studies which relate to specific markets, in support of the larger network. Network reliability is given careful consideration and extensive backup redundancy is employed in many aspects of U.S. Cellular’s network design. Route diversity, redundant equipment, ring topology and extensive use of emergency standby power also are used to enhance network reliability and minimize service disruption from any particular network element failure.

In accordance with its strategy of building and strengthening its operating market areas, U.S. Cellular has selected high-capacity, carrier-class digital wireless switching systems that are capable of serving multiple markets through a single mobile telephone switching office. Centralized equipment, used for network and data management, is located in high-availability facilities supported by multiple levels of power and network redundancy.  U.S. Cellular’s systems are designed to incorporate Internet Protocol (“IP”) packet-based Ethernet technology, which allows for increased data capacity and a more efficient network.  Interconnection between the mobile telephone switching office and the cell sites utilizes Ethernet technology for nearly all 4G LTE sites, over fiber or microwave links.

U.S. Cellular believes that currently available technologies and appropriate capital additions will allow sufficient capacity on its networks to meet anticipated demand for voice and data services over the next few years.  However, increasing demand for high-speed data may require the acquisition of additional spectrum licenses to provide sufficient capacity and throughput.

Construction of wireless systems is capital-intensive, requiring substantial investment for land and improvements, buildings, towers, mobile telephone switching offices, cell site equipment, transport equipment, engineering and installation. U.S. Cellular primarily uses its own personnel to engineer each wireless system it owns and operates, and engages contractors to construct the facilities.

The costs (inclusive of the costs to acquire licenses) to develop the systems which U.S.Cellular operates have historically been financed primarily through proceeds from debt and equity offerings, with cash generated by operations, and proceeds from the sales of wireless interests and other non-strategic assets.

Business Development Strategy

U.S. Cellular groups its individual markets (geographic service areas as defined by the FCC in which wireless carriers are licensed, for fixed terms, to provide service) into broader geographic market areas to offer customers large service areas that primarily utilize U.S. Cellular’s network. U.S. Cellular’s ownership interests in wireless licenses include both consolidated and investment interests in operating and non-operating licenses covering portions of 32 states and a total population of 50 million at December 31, 2016.

U.S. Cellular’s business development strategy is to obtain interests in and access to wireless licenses in its current operating markets and in areas that are adjacent to or in close proximity to its other wireless licenses, thereby building contiguous operating market areas. U.S. Cellular believes that the acquisition of additional licenses within its current operating markets will enhance its network capacity and speed to meet its customers’ growing demand for data services. U.S. Cellular may continue to make opportunistic acquisitions or exchanges that further strengthen its current operating markets. From time to time, U.S. Cellular has divested outright or included in exchanges for other wireless interests certain consolidated and investment interests that were considered less essential to its current and expected future operations. As part of its business development strategy, U.S. Cellular may periodically be engaged in negotiations relating to the acquisition, exchange or disposition of companies, strategic properties or wireless spectrum. See Note 6 — Acquisitions, Divestitures and Exchangesin the Notes to Consolidated Financial Statements for a description of significant acquisitions, divestitures and exchanges in the years 2014 through 2016.

5

Occasionally, the FCC conducts auctions through which additional spectrum is made available for the provision of wireless services.Historically, U.S. Cellular has participated in certain prior FCC auctions indirectly through its limited partnership interests. Each entity that qualified as a “designated entity” was eligible for bidding credits with respect to most licenses purchased in accordance with the rules defined by the FCC for each auction. In most cases, the bidding credits resulted in a 25% discount from the gross winning bid.In January 2015, the FCC released the results of Auction 97. U.S. Cellular participated in Auction 97 indirectly through its limited partnership interest in Advantage Spectrum L.P. Advantage Spectrum L.P. applied as a “designated entity” and received bid credits resulting in a 25% discount with respect to spectrum purchased in Auction 97.  See Note 13 — Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information.  U.S. Cellular may participate as a bidder, or member of a bidding group, in future auctions.

In July 2016, the FCC announced U.S. Cellular as a qualified bidder in the FCC’s forward auction of 600MHz spectrum licenses, referred to as Auction 1002.  Due to changes in FCC rules, U.S. Cellular did not apply to participate in Auction 1002 by investing in a “designated entity” limited partnership which would have qualified for a discount of 25% on any licenses won in the auction.  Instead, U.S. Cellular applied to participate in the auction directly and will not qualify for any discount on licenses that may be won in the auction.  See Exhibit 13 to this Form 10-K, under “Regulatory Matters – FCC Auction 1002” for a summary of U.S. Cellular’s participation in Auction 1002.

Regulation

U.S. Cellular’s operations are subject to federal, state and local regulation.  Key regulatory considerations are discussed below.  Additional information relating to U.S. Cellular’s regulatory environment is in Risk Factors and incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report section “Regulatory Matters.”

U.S. Cellular provides various wireless services, including voice and data services, pursuant to licenses granted by the FCC.  The construction, operation and transfer of wireless systems in the United States are regulated to varying degrees by the FCC pursuant to the Communications Act of 1934, as amended (“Communications Act”).  The FCC currently does not require wireless carriers to comply with a number of statutory provisions otherwise applicable to common carriers that provide, originate or terminate interstate or international telecommunications. However, the FCC has enacted regulations governing construction and operation of wireless systems, licensing (including renewal of licenses) and technical standards for the provision of wireless services under the Communications Act.

Wireless licenses segmented by geographic areas are granted by the FCC. The completion of acquisitions, involving the transfer of control of all or a portion of a wireless system, requires prior FCC approval. The FCC determines on a case-by-case basis whether an acquisition of wireless licenses is in the public interest. Wireless licenses are grantedgenerally for a ten year term or, in some cases, for a fifteen year term. The FCC establishes the standards for conducting comparative renewal proceedings between a wireless license holder seeking renewal of its license and challengers filing competing applications. All of U.S. Cellular’s licenses for which it applied for renewal since 1995 have been renewed. U.S. Cellular expects to continue to meet the criteria of the FCC’s license renewal process.

As part of its data services, U.S. Cellular provides internet access.Such internet access services may be subject to different regulatory requirements than other wireless services.

Reference is made to Exhibit 13 to this Form 10-K under “Regulatory Matters”for information regarding any significant recent developments and proposals relating to the foregoing regulatory matters.

Although the Communications Act generally pre-empts state and local governments from regulating the entry of, or the rates charged by, wireless carriers, certain state and local governments regulate other terms and conditions of wireless services, including billing, termination of service arrangements, imposition of early termination fees, advertising, network outages, the use of handsets while driving, zoning and land use. Further, the Federal Aviation Administration also regulates the siting, lighting and construction of transmitter towers and antennae.

Debt Securities

The following securities trade on the NYSE: U.S. Cellular’s 6.95% Senior Notes due 2060 trade under the symbol “UZA,” U.S. Cellular’s 7.25% Senior Notes due 2063 trade under the symbol “UZB,” and U.S. Cellular’s 7.25% Senior Notes due 2064 trade under the symbol “UZC.” U.S. Cellular’s 6.7% Senior Notes due 2033 are traded over the counter and are not listed on any stock exchange.

Employees

U.S.Cellular had approximately 6,300 full-time and part-time employees as of December 31, 2016. None of U.S.Cellular’s employees are represented by labor organizations.  U.S. Cellular considers its relationship with its employees to be good.

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Location and Company Information

U.S. Cellular executive offices are located at 8410 West Bryn Mawr Avenue, Chicago, Illinois 60631.  U.S. Cellular’s telephone number is 773-399-8900.  U.S.Cellular’s website address iswww.uscellular.com. U.S. Cellular files with, or furnishes to, the Securities and Exchange Commission (“SEC”) annual reports on Form10-K, quarterly reports on Form10-Q, current reports on Form8-K, as well as various other information. Investors may access, free of charge, through the Investor Relations portion of the website, U.S.Cellular’s annual reports on Form10-K, quarterly reports on Form10-Q, current reports on Form8-K, and amendments to such reports filed or furnished pursuant to Section13(a)or 15(d)of the Exchange Act as soon as reasonably practical after such material is filed electronically with the SEC.  The public may read and copy any materials U.S. Cellular files with the SEC at the SEC’s Public Reference Roomat 100 F Street, NE, Washington D.C. 20549. The public may obtain information on the operation of the Reference Roomby calling the SEC at 1-800-732-0330. The public may also view electronic filings of U.S. Cellular by accessing SEC filings at www.sec.gov.

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Item1A. Risk Factors

PRIVATE SECURITIES LITIGATION REFORMACT OF 1995

SAFE HARBOR CAUTIONARY STATEMENT

This Annual Report on Form10-K,including exhibits, contains statements that are not based on historical facts and represent forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, that address activities, events or developments that U.S. Cellular intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward-looking statements.Such risks, uncertainties and other factors include those set forth below under “Risk Factors” in this Form10-K.  Each of the following risks could have a material adverse effect on U.S. Cellular’s business, financial condition or results of operations; however, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document. Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements. U.S. Cellular undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.You should carefully consider the following risk factors and other information contained in, or incorporated by reference into, this Form10-K to understand the material risks relating to U.S. Cellular’s business.

Risk Factors

1. Intense competition in the markets in which U.S. Cellular operates could adversely affect U.S. Cellular’s revenues or increase its costs to compete.

Competition in the wireless industry is intense and is expected to intensify in the future due to multiple wireless industry factors such as increasing market penetration, decreasing customer churn rates, introduction of new products, new competitors and changing prices. There is competition in pricing; handsets and other devices; network quality, coverage, speed and technologies; distribution; new entrants; and other categories.  In particular, wireless competition includes aggressive promotional pricing to induce customers to switch carriers, which could result in switching activity and churn; data network speed is a competitive differentiator; and there has been a resurgence of new entrants to wireless markets including prepaid brands that have been purchased by national carriers. U.S. Cellular’s ability to compete effectively will depend, in part, on its ability to anticipate and respond to various competitive factors affecting the telecommunications industry. U.S. Cellular anticipates that competition will continue to cause the prices for products and services to decline and the costs to compete to increase. Most of U.S. Cellular’s competitors are national or global telecommunications companies that are larger than U.S. Cellular, possess greater financial and other resources, possess more extensive coverage areas and more spectrum within their coverage areas, and market other services with their communications services that U.S. Cellular does not offer. Further, other companies that currently are less competitive may also add more efficient low-band spectrum to become more competitive in U.S. Cellular’s primary markets.  In particular, to the extent that existing competitors or new entrants acquire low-band (600 MHz) spectrum in FCC Auction 1002 in U.S. Cellular markets, U.S. Cellular could face increased competition over time from competitors which hold more efficient low-band spectrum.  In addition, U.S. Cellular may face competition from technologies that may be introduced in the future. New technologies, services and products that are more commercially effective than the technologies, services and products offered by U.S. Cellular may be developed. Further, new technologies may be proprietary such that U.S. Cellular is not able to adopt such technologies. There can be no assurance that U.S. Cellular will be able to compete successfully in this environment.

Sources of competition to U.S. Cellular’s business typically include two to four competing wireless telecommunications service providers in each market, wireline telecommunications service providers, cable companies, resellers (including MVNO), and providers of other alternate telecommunications services. Many of U.S. Cellular’s wireless competitors and other competitors have substantially greater financial, technical, marketing, sales, purchasing and distribution resources than U.S. Cellular.

If U.S. Cellular does not adapt to compete effectively in such a highly competitive environment, such competitive factors could result in product, service, pricing or cost disadvantages and could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

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2. A failure by U.S. Cellular to successfully execute its business strategy (including planned acquisitions, spectrum acquisitions, divestitures and exchanges) or allocate resources or capital could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular is a regional wireless carrier, but competes primarily against much larger national wireless carriers with much greater resources.  Its business strategy in attempting to attract and retain wireless customers through a value proposition comprised of a high-quality network, outstanding customer service, and competitive devices, plans and pricing, all provided with a local focus has not resulted in, and in the future may not result in, performance that achieves returns in line with or above its cost of capital.  U.S. Cellular’s current forecast indicates that U.S. Cellular will not achieve a return on capital that exceeds its cost of capital in the foreseeable future.  U.S. Cellular also might be unable to adopt technologies, products and services as fast as its larger competitors.  As a result, consumers who are eager to adopt new technologies, products and services more quickly may select U.S. Cellular’s competitors rather than U.S. Cellular as their service provider.  To the extent that U.S. Cellular does not attract or retain these types of customers, U.S. Cellular could be at a competitive disadvantage and have a customer base that generates lower profit margins relative to its competition.

The successful execution of strategy and optimal capital allocation decisions depend on various internal and external factors, many of which are not in U.S. Cellular’s control. U.S. Cellular’s ability to achieve projected financial results by implementing and executing its business strategy and optimally allocating its assets and capital could be affected by such factors. Such factors include but are not limited to pricing practices by competitors, relative scale, purchasing power, roaming and other strategic agreements, wireless device availability, timing of introduction of wireless devices, access to spectrum, emerging technologies and other factors. In addition, there is no assurance that U.S. Cellular’s strategy will be successful. Even if U.S. Cellular executes its business strategy as intended, such strategy may not be successful in the long term at achieving growth in customers, revenues, net income, or generating a return on capital greater than U.S. Cellular’s cost of capital.  A failure by U.S. Cellular to execute its business strategy successfully or to allocate resources or capital optimally could have an adverse effect on U.S. Cellular’s wireless business, financial condition or results of operations.

3. Uncertainty in U.S. Cellular’s future cash flow and liquidity or in the ability to access capital, deterioration in the capital markets, other changes in U.S. Cellular’s performance or market conditions, changes in U.S. Cellular’s credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its construction, development or acquisition programs, reduce the acquisition of spectrum licenses, and/or reduce or cease share repurchases.

U.S. Cellular operates a capital-intensive business.  U.S. Cellular has used internally-generated funds and also has obtained substantial funds from external sources for general corporate purposes.  In the past, U.S. Cellular’s existing cash and investment balances, funds available under its revolving credit facilities, funds from other financing sources, including a term loan and other long-term debt, and cash flows from operating, investing and financing activities, including sales of assets or businesses, provided sufficient liquidity and financial flexibility for U.S. Cellular to meet its normal day-to-day operating needs and debt service requirements, to finance the build-out and enhancement of markets and to fund acquisitions.  There is no assurance that this will be the case in the future.  It may be necessary from time to time to increase the size of the existing revolving credit facility, to put in place new credit facilities, or to obtain other forms of financing in order to fund potential expenditures.  U.S. Cellular’s liquidity would be adversely affected if, among other things, U.S. Cellular is unable to obtain short or long-term financing on acceptable terms, U.S. Cellular makes spectrum license purchases in FCC auctions or from other parties, the LA Partnership discontinues or reduces distributions compared to prior historical levels and/or Eligible Telecommunications Carrier (“ETC”) and/or other regulatory support payments decline.  In addition, although sales of assets or businesses by U.S. Cellular have been an important source of liquidity for U.S. Cellular in recent periods, U.S. Cellular does not expect a similar level of such sales in the future, which will reduce a source of liquidity for U.S. Cellular.  In recent years, U.S. Cellular’s credit rating has declined to sub-investment grade.  In certain recent periods, U.S. Cellular has incurred negative free cash flow (defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment) and this will continue in the future if operating results do not improve or if capital expenditures do not decrease.  U.S. Cellular currently expects to have negative free cash flow in 2017.  U.S. Cellular may require substantial additional capital for, among other uses, funding day-to-day operating needs, working capital, acquisitions of providers of wireless telecommunications services, spectrum license or system acquisitions, system development and network capacity expansion, debt service requirements, the repurchase of shares, or making additional investments.  There can be no assurance that sufficient funds will continue to be available to U.S. Cellular or its subsidiaries on terms or at prices acceptable to U.S. Cellular.  Insufficient cash flows from operating activities, changes in its credit ratings, defaults of the terms of debt or credit agreements, uncertainty of access to capital, deterioration in the capital markets, reduced regulatory capital at banks which in turn limits their ability to borrow and lend, other changes in the performance of U.S. Cellular or in market conditions or other factors could limit or restrict the availability of financing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its acquisition, capital expenditure and business development programs, reduce the acquisition of spectrum licenses, and/or reduce or cease share repurchases.  U.S. Cellular cannot provide assurances that circumstances that could have a material adverse effect on its liquidity or capital resources will not occur.  Any of the foregoing would have an adverse impact on U.S. Cellular’s business, financial condition or results of operations.

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4. U.S. Cellular has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt.

U.S. Cellular has a significant amount of indebtedness and may need to incur additional indebtedness.  U.S. Cellular’s level of indebtedness could have important consequences.  For example, it (i) may limit U.S. Cellular’s ability to obtain additional financing for working capital, capital expenditures or general corporate purposes, particularly if the ratings assigned to its debt securities by rating organizations are revised downward; (ii) will require U.S. Cellular to dedicate a substantial portion of its cash flow from operations to the payment of interest and principal on its debt, reducing the funds available to U.S. Cellular for other purposes including expansion through acquisitions, capital expenditures, marketing spending and expansion of its business; and (iii) may limit U.S. Cellular’s flexibility to adjust to changing business and market conditions and make U.S. Cellular more vulnerable to a downturn in general economic conditions as compared to U.S. Cellular’s competitors.  U.S. Cellular’s ability to make scheduled payments on its indebtedness or to refinance it will depend on its financial and operating performance, which, in turn, is subject to prevailing economic and competitive conditions and other factors beyond its control.  In addition, U.S. Cellular’s leverage may put it at a competitive disadvantage to some of its competitors that are not as leveraged.  U.S. Cellular’s revolving credit facility and the U.S. Cellular term loan facility require U.S. Cellular to comply with certain affirmative and negative covenants, including certain financial covenants.  Depending on actual financial performance of U.S. Cellular, there is a risk that U.S. Cellular could fail to satisfy the required financial covenants.  If U.S. Cellular breaches a financial or other covenant of any of these agreements, it would result in a default under that agreement, and could involve a cross-default under other debt instruments.  This could in turn cause the affected lenders to accelerate the repayment of principal and accrued interest on any outstanding debt under such agreements and, if they choose, terminate the facility.  If appropriate, U.S. Cellular may request the applicable lender for an amendment of financial covenants in the U.S. Cellular revolving credit facility and the U.S. Cellular term loan facility, in order to provide additional financial flexibility to U.S. Cellular, and may also seek other changes to such facilities.  There is no assurance that the lenders will agree to any amendments.  If the lenders agree to amendments, this may result in additional payments or higher interest rates payable to the lenders and/or additional restrictions.  Restrictions in such debt instruments may limit U.S. Cellular’s operating and financial flexibility.

As a result, U.S. Cellular’s level of indebtedness, restrictions contained in debt instruments and/or possible breaches of covenants, defaults, and acceleration of indebtedness could have an adverse effect on U.S. Cellular’s business, financial condition, revenues, results of operations and cash flows. 

5. Changes in roaming practices or other factors could cause U.S. Cellular's roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact U.S. Cellular's ability to service its customers in geographic areas where U.S. Cellular does not have its own network, which could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.

U.S. Cellular’s service revenues include roaming revenues related to the use of U.S. Cellular’s network by other carriers’ customers who travel within U.S. Cellular’s coverage areas. Changes in the network footprints of carriers due to mergers, acquisitions or network expansions could have an adverse effect on U.S. Cellular’s roaming revenues. For example, consolidation among other carriers which have network footprints that currently overlap U.S. Cellular’s network could decrease the amount of roaming revenues for U.S. Cellular.

Similarly, U.S. Cellular's customers can access another carrier’s digital system automatically only if the other carrier allows U.S. Cellular's customers to roam on its network. U.S. Cellular relies on roaming agreements with other carriers to provide roaming capability to its customers in areas of the U.S. and internationally outside of its service areas, including Mexico and Canada, and to improve coverage withinselected areas of U.S. Cellular's network footprint. Such agreements cover traditional voice services as well as data services. Although U.S. Cellular currently has long-term roaming agreements with certain other carriers, these agreements generally are subject to renewal and termination if certain events occur. FCC rulesand orders impose certain requirements on wireless carriers to offer certain roaming arrangements to other carriers. However, carriers frequently disagree on what is required. Although U.S. Cellular has entered into 4G LTE roaming agreements with national carriers, there is no assurance that U.S. Cellular will be able to maintain these agreements and/or enter into new agreements with other carriers to provide roaming services using 4G LTE or other technologies or that it will be able to do so on reasonable or cost-effective terms.

Some competitors may be able to obtain lower roaming rates than U.S. Cellular is able to obtain because they have larger call volumes or may be able to reduce roaming charges by providing service principally over their own networks. In addition, the quality of service that a wireless carrier delivers during a roaming call may be inferior to the quality of service U.S. Cellular provides, the price of a roaming call may not be competitive with prices of other wireless carriers for such call, and U.S. Cellular’s customers may not be able to use some of the advanced features, such as voicemail notification or data applications, that U.S. Cellular’s customers enjoy when making calls on U.S. Cellular’s network. U.S. Cellular’s rate of adoption of new technologies, such as those enabling high-speed data and voice services, could affect its ability to enter into or maintain roaming agreements with other carriers. In addition, U.S. Cellular’s wireless technology may not be compatible with technologies used by other carriers, which may limit the ability of U.S. Cellular to enter into voice or data roaming agreements with such other carriers. Carriers whose customers roam on U.S. Cellular’s network could switch their business to new operators or, over time, to their own networks. Changes in roaming usage patterns, rates for roaming minutes or data usage or relationships with carriers whose customers generate roaming minutes or data use on U.S. Cellular’s network could have an adverse effect on U.S. Cellular’s revenues and revenue growth.  Further, other carriers could negotiate higher roaming rates for accessing their networks, resulting in increased roaming expense for U.S. Cellular.

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To the extent that other carriers expand their networks in U.S. Cellular’s service areas, the roaming arrangements between U.S. Cellular and these other carriers could become less strategic for them. That is, these other carriers will have fewer or less extensive geographic areas where roaming services are required by their customers and, as a result, the roaming arrangements could become less critical to serving their customer base. This presents a risk to U.S. Cellular in that, to the extent U.S. Cellular is not able to enter into economically viable roaming arrangements with these other carriers, this could impact U.S. Cellular’s ability to service its customers in geographic areas where U.S. Cellular does not have its own network.

If U.S. Cellular’s roaming revenues decline, roaming expenses increase, or if U.S. Cellular is unable to obtain or maintain roaming agreements with other carriers that contain pricing and other terms that are competitive and acceptable to U.S. Cellular, and that satisfy U.S. Cellular’s quality and interoperability requirements, its business, financial condition or results of operations could be adversely affected.

6. A failure by U.S. Cellular to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular’s business depends on the ability to use portions of the radio spectrum licensed by the FCC. U.S. Cellular could fail to obtain access to sufficient spectrum capacity in new or existing critical markets, whether through FCC auctions or other transactions, in order to meet the anticipated spectrum requirements associated with increased demand for existing services, especially increases in customer demand for data services, and to enable deployment of next-generation services. U.S. Cellular believes that this increased demand for data services reflects a trend that will continue for the foreseeable future.  However, U.S. Cellular could fail to accurately forecast its future spectrum requirements considering changes in customer usage patterns, technology requirements and the expanded demands of new services.  Such a failure could have an adverse impact on the quality of U.S. Cellular’s services or U.S. Cellular’s ability to roll out such future services in some markets, or could require that U.S. Cellular curtail existing services in order to make spectrum available for next-generation services. Spectrum constrained providers could be effectively capped in increasing market share. As spectrum constrained providers gain customers, they use up their network capacity.  Since they lack spectrum, they can respond to demand only by adding cell sites, which is capital intensive, adds fixed operating costs, is limited by zoning considerations, and ultimately may not be cost effective.

U.S. Cellular may acquire access to spectrum through a number of alternatives, including acquisitions, exchanges and participation in spectrum auctions.U.S. Cellular may participate in spectrum auctions conducted by the FCC in the future.  As required by law, the FCC has conducted auctions for licenses to use some parts of the radio spectrum. The decision to conduct auctions, and the determination of what spectrum frequencies will be made available for auction and the determination of geographic size of licenses, are made by the FCC pursuant to laws that it administers. The FCC may not be able to allocate spectrum sufficient to meet the demands of all those wishing to obtain licenses for new market entry or to expand their spectrum holdings to meet the expanding demand for data services or to address other spectrum constraints. Due to factors such as geographic size of licenses and auction bidders that may raise prices beyond acceptable levels, U.S. Cellular may not be successful in FCC auctions in obtaining access to the spectrum that it believes is necessary to implement its business and technology strategies.

In addition, newly auctioned spectrum may not be compatible with existing spectrum, and vendors may not create suitable products to use such spectrum. Further, access to spectrum licenses won in FCC auctions may not be available on a timely basis. Such access is dependent upon the FCC actually granting licenses won, which can be delayed for various reasons. Furthermore, newly licensed spectrum may not be available for immediate use since the radio operations of incumbent users, including in some cases government agencies, may need to be relocated to other portions of the radio spectrum, and/or the newly licensed spectrum may be subject to sharing and coordination obligations for a period of time. U.S. Cellular also may seek to acquire radio spectrum through purchases and exchanges with other spectrum licensees. However, U.S. Cellular may not be able to acquire sufficient spectrum through these types of transactions, and U.S. Cellular may not be able to complete any of these transactions on favorable terms.

7. To the extent conducted by the FCC, U.S. Cellular may participate in FCC auctions of additional spectrum in the future directly or indirectly and, during certain periods, will be subject to the FCC’s anti-collusion rules, which could have an adverse effect on U.S.Cellular.

From time to time, the FCC conducts auctions through which additional spectrum is made available for the provision of wireless services. U.S. Cellular has participated in such auctions in the past and may participate in other auctions conducted by the FCC in the future.  FCC anti-collusion rulesplace certain restrictions on business communications and disclosures by participants in an FCC auction. These anti-collusion rulesmay restrict the normal conduct of U.S. Cellular’s business, U.S. Cellular’s acquisition, divestiture, exchange and other corporate development activity and/or disclosures by U.S. Cellular relating to an FCC auction.  The restrictions could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

As a result of its application to participate in the FCC’s forward auction of 600 MHz spectrum licenses, referred to as Auction 1002, since February 10, 2016, U.S. Cellular has been subject to FCC anti-collusion rules that place certain restrictions on public disclosures and business communications with other companies relating to U.S. Cellular’s participation.  As a result of the FCC’s announcement of U.S. Cellular as a qualified bidder on July 15, 2016, these restrictions will continue until the down payment deadline for Auction 1002, which will be ten business days after release of the FCC’s Channel Reassignment Public Notice, following the end of the auction.  These anti-collusion rules may restrict the conduct of certain U.S. Cellular activities with other auction applicants as well as with nationwide providers of wireless services which are not applicants.  The restrictions could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations. See Exhibit 13 to this Form 10-K, under “Regulatory Matters – FCC Auction 1002” for a summary of U.S. Cellular’s participation in Auction 1002.

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8. Failure by U.S.Cellular to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect U.S.Cellular’s business, financial condition or results of operations.

U.S. Cellular’s operations are subject to varying degrees of regulation by the FCC, state public utility commissions and other federal, state and local regulatory agencies and legislative bodies. Changes in the administration of the various regulatory agencies and legislative bodies could result in different policies with respect to many federal laws and regulations, including but not limited to changes to fiscal and tax policies, which may include comprehensive tax reform.  New or amended regulatory requirements could increase U.S. Cellular’s costs and divert resources from other initiatives. Adverse decisions, increased regulation, or changes to existing regulation by regulatory bodies could negatively impact U.S. Cellular’s operations by, among other things, changing the amount that can be charged for local, intrastate or interstate access rates, increasing U.S. Cellular’s costs of doing business, permitting greater competition or limiting U.S. Cellular’s ability to engage in certain sales or marketing activities. New regulatory mandates or enforcement may require unexpected or increased capital expenditures, lost revenues, higher operating expenses or other changes. Court decisions and rulemakings could have a substantial impact on U.S. Cellular’s operations, including rulemakings on intercarrier access compensation and state and federal universal service. Litigation and different objectives among federal and state regulators could create uncertainty and delay U.S. Cellular’s ability to respond to new regulations. Further, wireless licenses are subject to renewal by the FCC and could be revoked in the event of a violation of applicable laws or regulatory requirements.  Also, FCC rules relating to net neutrality, broadband consumer privacy and other rules may result in additional costs for compliance and may limit opportunities to derive profits from certain business practices or resources, if not amended or rescinded.

U.S. Cellular attempts to timely and fully comply with all regulatory requirements.  However, U.S. Cellular is unable to predict the future actions of the various legislative and regulatory bodies that govern U.S. Cellular, but such actions could have adverse effects on U.S. Cellular’s business. Any failure by U.S. Cellular to timely or fully comply with any regulatory requirements could adversely affect U.S. Cellular’s financial condition, results of operations or ability to do business.

For additional information about U.S. Cellular’s regulatory environment, see Risk Factor Number 15 below and “Regulatory Matters” in Exhibit 13 to this Form 10-K.

9. An inability to attract people of outstanding potential, to develop their potential through education and assignments, and to retain them by keeping them engaged, challenged and properly rewarded could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.

U.S. Cellular’s business is highly technical and competition for skilled talent in the wireless industry is aggressive. Due to competition for qualified management, technical, sales and other personnel, there can be no assurance that U.S. Cellular will be able to continue to attract and/or retain people of outstanding potential for the development of its business. The loss of the services of existing key personnel as well as the failure to recruit additional qualified personnel in a timely manner could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

10. U.S.Cellular’s assets are concentrated in the U.S.wireless telecommunications industry.  Consequently, its operating results may fluctuate based on factors related primarily to conditions in this industry.

U.S. Cellular’s assets and revenue streams are concentrated in the U.S. wireless telecommunications industry. The U.S. wireless telecommunications industry is facing significant change and an uncertain operating environment. U.S. Cellular’s focus on the U.S. wireless telecommunications industry, together with its positioning relative to larger competitors with greater resources within the industry, may represent increased risk for investors due to the lack of diversification. This could have an adverse effect on U.S. Cellular’s ability to attain and sustain long-term, profitable revenue growth and could have an adverse effect on its business, financial condition or results of operations.

11. U.S. Cellular’s smaller scale relative to larger competitors that may have greater financial and other resources than U.S. Cellular could cause U.S. Cellular to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations.

There has been a trend in the telecommunications and related industries in recent years towards consolidation of service providers through acquisitions, reorganizations and joint ventures. This trend could continue, leading to larger competitors over time. U.S. Cellular has smaller scale efficiencies compared to larger competitors. U.S. Cellular may be unable to compete successfully with larger companies that have substantially greater financial, technical, marketing, sales, purchasing and distribution resources or that offer more services than U.S. Cellular, which could adversely affect U.S. Cellular’s revenues and costs of doing business. Specifically, U.S. Cellular’s smaller scale relative to most of its competitors could have the following impacts, among others:

• Low profit margins and returns on investment that are below U.S. Cellular’s cost of capital;
• Increased operating costs due to lack of leverage with vendors;
• Limited opportunities for strategic partnerships as potential partners are focused on wireless companies with greater scale and scope;
• Limited access to content;
• Limited ability to influence industry standards;
• Reduced ability to invest in research and development of new products and services;
• Vendors may deem U.S. Cellular non-strategic and not develop or sell products and services to U.S. Cellular, particularly where technical requirements differ from those of larger companies;
• Limited access to intellectual property; and
• Other limited opportunities such as for software development or third party distribution.

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U.S. Cellular’s business increasingly depends on access to content for data and access to new wireless devices being developed by vendors. U.S. Cellular’s ability to obtain such access depends in part on other parties. If U.S. Cellular is unable to obtain timely access to new content or wireless devices being developed by vendors, its business, financial condition or results of operations could be adversely affected.

As a result of the foregoing, U.S. Cellular’s smaller scale relative to larger competitors could adversely affect U.S. Cellular’s business, financial condition or results of operations.

12. Changes in various business factors, including changes in demand, customer preferences and perceptions, price competition, churn from customer switching activity and other factors, could have an adverse effect on U.S.Cellular’s business, financial condition or results of operations.

Changes in any of several factors could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations. These factors include, but are not limited to:

• Demand for or usage of services, particularly data services;
• Customer preferences, including type of wireless devices;
• Customer perceptions of network quality and performance;
• The pricing of services, including an increase in price-based competition;
• The overall size and growth rate of U.S.Cellular’s customer base;
• Penetration rates;
• Churn rates;
• Selling expenses;
• Net customer acquisition and retention costs;
• Customers’ ability to pay for wireless service and the potential impact on bad debts expense;
• Roaming agreements and rates;
• Third-party vendor support;
• The mix of products and services offered by U.S.Cellular and purchased by customers; and
• The costs of providing products and services.

13. Advances or changes in technology could render certain technologies used by U.S.Cellular obsolete, could put U.S. Cellular at a competitive disadvantage, could reduce U.S.Cellular’s revenues or could increase its costs of doing business.

The telecommunications industry is experiencing significant changes in technologies and services expected by customers, as evidenced by evolving industry standards, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new services and products, and enhancements and changes in end-user requirements and preferences.Widespread deployment of new technologies could cause the technology used on U.S. Cellular’s wireless networks to become less competitive or obsolete. Further, fixed-mobile convergence services that combine wireline broadband services with mobile services represent a competitive threat.  If the trend toward convergence continues, U.S. Cellular is at a competitive disadvantage to larger competitors, including the national wireless carriers and other potential large new entrants with much greater financial and other resources in adapting to such convergence.  Future technological changes or advancements may enable other wireless technologies to equal or exceed U.S. Cellular’s current levels of service and render its system infrastructure obsolete. For example, the timing, cost, and availability of CDMA enabled devices and other CDMA ecosystem support needs may inhibit U.S. Cellular’s ability to maintain 3G wireless voice services until it is fully replaced by VoLTE.  U.S. Cellular may not be able to respond to such changes and implement new technology on a timely or cost-effective basis, which could reduce its revenues or increase its costs of doing business. If U.S. Cellular cannot keep pace with these technological changes or other changes in the telecommunications industry over time, its financial condition, results of operations or ability to do business could be adversely affected.

14. Complexities associated with deploying new technologies present substantial risk and U.S. Cellular investments in unproven technologies may not produce the benefits that U.S. Cellular expects.

U.S. Cellular has completed the transition to 4G LTE and has implemented 4G LTE roaming agreements with national carriers.  U.S. Cellular will begin commercial deployment of VoLTE in early 2017 and has begun testing 5G technology.  Transition to new technologies involves significant time and cost.  Furthermore, the wireless business experiences rapid technology changes and new services and products.  If U.S. Cellular fails to effectively deploy new wireless technologies, services or products on a timely basis, this could have an adverse impact on U.S. Cellular’s business, financial condition and results of operations.

Furthermore, it is not certain that U.S. Cellular’s investments in various new, unproven technologies and service and product offerings will be effective.  The markets for some of these services, products and solutions may still be emerging and the overall potential for these markets may be uncertain.  If customer demand for these new services, products and solutions does not develop as expected,  U.S. Cellular’s business, financial condition or results of operations could be adversely affected.

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15. U.S. Cellular receives regulatory support and is subject to numerous surcharges and fees from federal, state and local governments, and the applicability and the amount of the support and fees are subject to great uncertainty, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Telecommunications companies may be designated by states, or in some cases by the FCC, as an ETC to receive universal service support payments if they provide specified services in “high cost” areas.  U.S. Cellular has been designated as an ETC in certain states and received $92 million in high cost support for service to high cost areas in 2016.

In 2011, the FCC released an order (“Reform Order”) to: reform its universal service and intercarrier compensation mechanisms; establish a new, broadband-focused support mechanism; and propose further rules to advance reform.  Pursuant to the Reform Order, U.S. Cellular’s ETC support has been phased down by 40% since July 1, 2012.  As provided by the Reform Order, the phasedown is currently suspended and U.S. Cellular will continue to receive 60% of its baseline support until a new fund proposed in the Reform Order is operational.  On February 23, 2017, the FCC adopted an order concerning the Mobility Fund II and the resumption of the phase down.  The text of the order has not been released but the press release issued by the FCC following adoption of the order indicates that the order will establish a Mobility Fund II support mechanism of $453 million annually for ten years to be distributed through a market-based, multi-round reverse auction and that the phase down of unnecessary legacy support from the Federal USF will commence on the first day of the month following the completion of the auction and will conclude two years later.  U.S. Cellular cannot predict at this time when the Mobility Fund II auction will occur, when the phase down period for its existing legacy support from the Federal USF will commence, or whether the Mobility Fund II auction will provide opportunities to the Company to offset any loss in existing support. However, U.S. Cellular currently expects that its legacy support will continue at the existing level for 2017. If the foregoing regulatory support is reduced from current levels, this could have an adverse effect on U.S. Cellular’s business, financial condition or operating results.  With respect to intercarrier compensation, the Reform Order provides for a reduction in the charges that U.S. Cellular pays to wireline phone companies to transport and terminate calls that originate on their networks, which will reduce U.S. Cellular’s operating expenses.  The reductions in intercarrier charges are to increase over the next five to ten years, further reducing U.S. Cellular’s operating expenses.

Telecommunications providers pay a variety of surcharges and fees on their gross revenues from interstate and intrastate services, including USF fees and common carrier regulatory fees.

The division of services between interstate services and intrastate services, including the divisions associated with the Federal USF fees, is a matter of interpretation and may in the future be contested by the FCC or state authorities.  The FCC also may change in the future the basis on which Federal USF fees are charged.  The Federal government and many states also apply transaction-based taxes to sales of telecommunications products and services and to purchases of telecommunications services from various carriers.  In addition, state regulators and local governments have imposed and may continue to impose various surcharges, taxes and fees on telecommunications services.  The applicability of these surcharges and fees to its services is uncertain in many cases and jurisdictions may contest whether U.S. Cellular has assessed and remitted those monies correctly. Periodically, state and federal regulators may increase or change the surcharges and fees U.S. Cellular currently pays. In some instances, U.S. Cellular passes through these charges to its customers. However, Congress, the FCC, state regulatory agencies or state legislatures may limit the ability to pass through transaction-based tax liabilities, regulatory surcharges and regulatory fees imposed on U.S. Cellular to customers. U.S. Cellular may or may not be able to recover some or all of those taxes from its customers and the amount of taxes may deter demand for its services or increase its cost to provide service which could have an adverse effect on its business, financial condition or operating results.

16. Performance under device purchase agreements could have a material adverse impact on U.S. Cellular's business, financial condition or results of operations.

U.S. Cellular has entered into purchase commitments with certain vendors and may enter into similar purchase commitments with other vendors in the future. If U.S. Cellular is unable to sell all of the devices that it is required to purchase under such agreements, or if it is unable to sell them at the prices it projects, its business, financial condition or results of operations could be adversely affected.

17. Changes in U.S.Cellular’s enterprise value, changes in the market supply or demand for wireless licenses, adverse developments in the business or the industry in which U.S.Cellular is involved and/or other factors could require U.S.Cellular to recognize impairments in the carrying value of its licenses, goodwill and/or physical assets.

A large portion of U.S. Cellular’s assets consists of indefinite-lived intangible assets in the form of licenses and goodwill. U.S. Cellular also has substantial investments in long-lived assets such as property, plant and equipment. U.S. Cellular reviews its licenses, goodwill and other long-lived assets for impairment annually or whenever events or circumstances indicate that the carrying amount of such assets may not be fully recoverable. An impairment loss may need to be recognized to the extent the carrying value of the assets exceeds the fair value of such assets. The amount of any such impairment loss could be significant and could have an adverse effect on U.S. Cellular’s reported financial results for the period in which the loss is recognized. The estimation of fair values requires assumptions by management about factors that are uncertain including such things as future cash flows and the appropriate discount rate. Different assumptions for these factors could create materially different results.

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18. Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or licenses and/or expansion of U.S.Cellular’s business could have an adverse effect on U.S.Cellular’s business, financial condition or results of operations.

As part of U.S. Cellular’s operating strategy, U.S. Cellular from time to time may be engaged in the acquisition, divestiture or exchange of companies, businesses, strategic properties, wireless spectrum or other assets. U.S. Cellular may change the markets in which it operates and the services that it provides through such acquisitions, divestitures and/or exchanges.  In general, U.S. Cellular may not disclose the negotiation of such transactions until a definitive agreement has been reached.

These transactions commonly involve a number of risks, including:

• Identification of attractive companies, businesses, properties, spectrum or other assets for acquisition or exchange, and/or the selection of U.S. Cellular’s businesses or assets for divestiture or exchange;
• Competition for acquisition targets and the ability to acquire or exchange businesses at reasonable prices;
• Inability to make acquisitions that would achieve sufficient scale to be competitive with competitors with greater scale;
• Possible lack of buyers for businesses or assets that U.S. Cellular desires to divest and the ability to divest or exchange such businesses or assets at reasonable prices;
• Ability to negotiate favorable terms and conditions for acquisitions, divestitures and exchanges;
• Significant expenditures associated with acquisitions, divestitures and exchanges;
• Legal and regulatory risks associated with new businesses or markets;
• Ability to enter markets in which U.S. Cellular has limited or no direct prior experience and competitors have stronger positions;
• Ability to integrate and manage businesses that are engaged in activities other than traditional wireless service;
• Uncertain revenues and expenses associated with acquisitions, with the result that U.S. Cellular may not realize the growth in revenues, anticipated cost structure, profitability, or return on investment that it expects;
• Difficulty of integrating the technologies, services, products, operations and personnel of the acquired businesses, or of separating such matters for divested businesses or assets;
• Diversion of management’s attention;
• Disruption of ongoing business;
• Impact on U.S. Cellular’s cash and available credit lines for use in financing future growth and working capital needs;
• Inability to retain key personnel;
• Inability to successfully incorporate acquired assets and rights into U.S. Cellular’s service offerings;
• Inability to maintain uniform standards, controls, procedures and policies;
• Possible conditions to approval by the FCC, the Federal Trade Commission and/or the Department of Justice; and
• Impairment of relationships with employees, customers or vendors.

No assurance can be given that U.S. Cellular will be successful with respect to its acquisition, divestiture or exchange strategies or initiatives. If U.S. Cellular is not successful with respect to its acquisitions, divestitures or exchanges, its business, financial condition or results of operations could be adversely affected.

19. U.S. Cellular offers customers the option to purchase certain devices under installment contracts which, compared to fixed-term service contracts, includes risks that U.S. Cellular may possibly incur greater churn, lower cash flows, increased costs and/or increased bad debts expense due to differences in contract terms, which could have an adverse impact on U.S. Cellular’s financial condition or results of operations.

U.S. Cellular sells devices to customers under installment contracts over a specified period of time.  Customers with installment contracts are not required to sign a fixed-term service contract to obtain postpaid service; rather, their service is provided on a month to month basis with no early termination fee.  These device installment contract plans may not meet U.S. Cellular’s customers’ or potential customers’ needs, expectations or demands.  In addition, customers on these device installment contract plans can discontinue their service at any time without penalty, other than the obligation of any residual commitment they may have for unpaid service or for amounts due under the installment contract for the device.  U.S. Cellular could experience a higher churn rate than it expects due to the ability of customers to more easily change service providers, which could adversely affect its results of operations.  U.S. Cellular’s operational and financial performance may be adversely affected if it is unable to grow its customer base and achieve the customer penetration levels that it anticipates with this business model.

Customers who have financed their devices through these device installment contracts pay for their devices in installments over a specified period of time.  Compared to fixed-term service contracts, such plans result in lower cash flows from operating activities in the near term and could have an adverse effect on U.S. Cellular’s liquidity or capital resources.  In addition, suchdevice installment contracts subject U.S. Cellular to increased risks relating to consumer credit issues, which could result in increased costs, including increases to its bad debts expense.  These device installment contracts may be particularly sensitive to changes in general economic conditions, and any declines in the credit quality of U.S. Cellular’s customer base could have a material adverse effect on U.S. Cellular’s financial condition or results of operations.

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20. A failure by U.S.Cellular to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network, support and other systems and infrastructure could have an adverse effect on its operations.

U.S. Cellular’s business plan includes significant construction activities and enhancements to its network, support and other systems and infrastructure. As U.S. Cellular deploys, expands and enhances its network, it may need to acquire additional spectrum. Also, as U.S. Cellular continues to build out and enhance its network, U.S. Cellular must, among other things, continue to:

• Lease, acquire or otherwise obtain rights to cell and switch sites;
• Obtain zoning variances or other local governmental or third-party approvals or permits for network construction;
• Complete and update the radio frequency design, including cell site design, frequency planning and network optimization, for each of U.S. Cellular’s markets; and
• Improve, expand and maintain customer care, network management, billing and other financial and management systems.

Any difficulties encountered in completing these activities, as well as problems in vendor equipment availability, technical resources, system performance or system adequacy, could delay expansion of operations and product capabilities in new or existing markets or result in increased costs. Failure to successfully build-out and enhance U.S. Cellular’s network and necessary support facilities and systems in a cost-effective manner, and in a manner that satisfies customer expectations for quality and coverage, could have an adverse effect on U.S. Cellular’s business, business prospects, financial condition or results of operations.

21. Difficulties involving third parties with which U.S. Cellular does business, including changes in U.S. Cellular's relationships with or financial or operational difficulties of key suppliers or independent agents and third party national retailers who market U.S. Cellular’s services, could adversely affect U.S.Cellular’s business, financial condition or results of operations.

U.S. Cellular has relationships with independent agents and third party national retailers who market U.S. Cellular services. If such relationships are seriously harmed or if such parties experience financial difficulties, including bankruptcy, U.S. Cellular’s business, financial condition or results of operations could be adversely affected.

U.S. Cellular depends upon certain vendors to provide it with equipment (including wireless devices), services or content to continue its network construction and upgrades and to operate its business. U.S. Cellular does not have operational or financial control over such key suppliers and has limited influence with respect to the manner in which these key suppliers conduct their businesses. If these key suppliers experience financial difficulties or file for bankruptcy or experience other operational difficulties, they may be unable to provide equipment, services or content to U.S. Cellular on a timely basis, or at all, or they may otherwise fail to honor their obligations to U.S. Cellular.

Regulations regarding the use of “conflict minerals” mined from the Democratic Republic of Congo and adjoining countries may affect some of U.S. Cellular’s suppliers. These regulations may limit the availability of conflict free minerals and, as a result, U.S. Cellular may not be able to obtain products in sufficient quantities or at competitive prices from its vendors who utilize such minerals in the manufacture of products. In such cases, U.S. Cellular may be unable to maintain and upgrade its network or provide products and services to its customers in a competitive manner, or could suffer other disruptions to its business. In that event, U.S. Cellular’s business, financial condition or results of operations could be adversely affected.

In addition, operation of U.S. Cellular’s supply chain and management of its inventory require accurate forecasting of customer growth and demand, which has become increasingly challenging. If overall demand for wireless devices or the mix of demand for wireless devices is significantly different than U.S. Cellular’s expectations, U.S. Cellular could face inadequate or excess supplies of particular models of wireless devices. This could result in lost sales opportunities or an excess supply of inventory. Either of these situations could adversely affect U.S. Cellular’s revenues, costs of doing business, results of operations or financial condition.

Also, U.S. Cellular has other arrangements with third parties, including arrangements pursuant to which U.S. Cellular now outsources certain support functions to third party vendors.  Operational problems associated with such functions, including any failure by the vendor to provide the required level of service under the outsourcing arrangements, could have adverse effects on U.S. Cellular’s business, financial condition or results of operations.

22. U.S.Cellular has significant investments in entities that it does not control.  Losses in the value of such investments could have an adverse effect on U.S.Cellular’s financial condition or results of operations.

U.S. Cellular has significant investments in entities that it does not control, including equity investments and interests in certain variable interest entities. U.S. Cellular’s interests in such entities do not provide U.S. Cellular with control over the business strategy, financial goals, network build-out plans or other operational aspects of these entities. U.S. Cellular cannot provide assurance that these entities will operate in a manner that will increase or maintain the value of U.S. Cellular’s investments, that U.S. Cellular’s proportionate share of income from these investments will continue at the current level in the future or that U.S. Cellular will not incur losses from the holding of such investments. Losses in the values of such investments or a reduction in income from these investments could adversely affect U.S. Cellular’s financial condition or results of operations.  In addition, certain investments have historically contributed significant cash flows to U.S. Cellular and a reduction or suspension of such cash flows could adversely affect U.S. Cellular’s financial condition.

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23. A failure by U.S. Cellular to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular relies extensively on its telecommunication networks and information technology to operate and manage its business, process transactions and summarize and report results. These networks and technology become obsolete over time and must be upgraded, replaced and/or otherwise enhanced over time. Enhancements must be more flexible and dependable than ever before. All of this is capital intensive and challenging. A failure by U.S. Cellular to maintain flexible and capable telecommunication networks or information technology could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

The increased provision of data services has introduced significant new demands on U.S. Cellular’s network and also has increased complexities related to network management. Further, the increased provision of data services on U.S. Cellular’s networks has created an increased level of risk related to quality of service. This is due to the fact that many customers increasingly rely on data communications to execute and validate transactions. As a result, redundancy and geographical diversity of U.S. Cellular’s network facilities are critical to providing uninterrupted service. Also, the speed of repair and maintenance procedures in the event of network interruptions is critical to maintaining customer satisfaction. U.S. Cellular’s ability to maintain high-quality, uninterrupted service to its customers is critical, particularly given the increasingly competitive environment and customers’ ability to choose other service providers.

In addition, U.S. Cellular’s networks and information technology and the networks and information technology of vendors on which U.S. Cellular relies are subject to damage or interruption due to various events, including power outages, computer, network and telecommunications failures, computer viruses, security breaches, hackers and other cyber security risks, catastrophic events, natural disasters, errors or unauthorized actions by employees and vendors, flawed conversion of systems, disruptive technologies and technology changes.

24. U.S. Cellular has experienced and, in the future, expects to experience cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.

U.S. Cellular experiences cyber-attacks of varying degrees on a regular basis.  U.S. Cellular maintains administrative, technical and physical controls, as well as other preventative actions, to reduce the risk of security breaches. Although to date U.S. Cellular has not experienced a material security breach, these efforts may be insufficient to prevent a security breach stemming from future cyber-attacks. If U.S. Cellular’s or its vendors’ networks and information technology are not adequately adapted to changes in technology or are damaged or fail to function properly, and/or if U.S. Cellular’s or its vendors’ security is breached or otherwise compromised, U.S. Cellular could suffer adverse consequences, including theft, destruction or other loss of critical and private data, including customer and/or employee data, interruptions or delays in its operations, inaccurate billings, inaccurate financial reporting, and significant costs to remedy the problems. If U.S. Cellular’s or its vendors’ systems become unavailable or suffer a security breach of customer or other data, U.S. Cellular may be required to expend significant resources and take various actions to address the problems, including notification under data privacy laws and regulations, may be subject to fines, sanctions and litigation, and its reputation and operating results could be adversely affected. Any material disruption in U.S. Cellular’s networks or information technology, including security breaches, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

25. The market price of U.S.Cellular’s Common Shares is subject to fluctuations due to a variety of factors.

Factors that may affect the future market price of U.S. Cellular’s Common Shares include:

• General economic conditions, including conditions in the credit and financial markets;
• Industry conditions;
• Fluctuations in U.S. Cellular’s quarterly customer additions, churn rate, revenues, results of operations or cash flows;
• Variations between U.S. Cellular’s actual financial and operating results and those expected by analysts and investors; and
• Announcements by U.S. Cellular’s competitors.

Any of these or other factors could adversely affect the future market price of U.S. Cellular’s Common Shares, or could cause the future market price of U.S. Cellular’s Common Shares to fluctuate from time to time.

26. Changes in facts or circumstances, including new or additional information, could require U.S.Cellular to record charges in excess of amounts accrued in the financial statements, which could have an adverse effect on U.S.Cellular’s business, financial condition or results of operations.

The preparation of financial statements requires U.S. Cellular to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. U.S. Cellular bases its estimates on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from estimates under different assumptions or conditions. Changes in facts or circumstances, including new or additional information, could require U.S. Cellular to record charges in excess of amounts accrued in the financial statements, if any, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

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27. Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede U.S. Cellular’s access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Disruptions in the credit and financial markets, declines in consumer confidence, increases in unemployment, declines in economic growth and uncertainty about corporate earnings could have a significant negative impact on the U.S. and global financial and credit markets and the overall economy. Such events could have an adverse impact on financial institutions resulting in limited access to capital and credit for many companies. Furthermore, economic uncertainties make it very difficult to accurately forecast and plan future business activities. Changes in economic conditions, changes in financial markets, deterioration in the capital markets or other factors could have an adverse effect on U.S. Cellular’s business, financial condition, revenues, results of operations and cash flows.

28. Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on U.S.Cellular’s business, financial condition or results of operations.

U.S. Cellular is regularly involved in a number of legal and policy proceedings before the FCC and various state and federal courts. Such legal and policy proceedings can be complex, costly, protracted and highly disruptive to business operations by diverting the attention and energies of management and other key personnel.

The assessment of legal and policy proceedings is a highly subjective process that requires judgments about future events. Additionally, amounts ultimately received or paid upon settlement or resolution of litigation and other contingencies may differ materially from amounts accrued in the financial statements. Depending on a range of factors, these or similar proceedings could impose restraints on U.S. Cellular’s current or future manner of doing business. Such potential outcomes could have an adverse effect on U.S. Cellular’s financial condition, results of operations or ability to do business.

29. The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices such as pacemakers, could have an adverse effect on U.S.Cellular’s business, financial condition or results of operations.

Media reports and certain professional studies have suggested that certain radio frequency emissions from wireless devices may be linked to various health problems, including cancer or tumors, and may interfere with various electronic medical devices, including hearing aids and pacemakers. U.S. Cellular is a party to and may in the future be a party to lawsuits against wireless carriers and other parties claiming damages for alleged health effects, including cancer or tumors, arising from wireless phones or radio frequency transmitters. Concerns over radio frequency emissions may discourage use of wireless devices or expose U.S. Cellular to potential litigation. In addition, the FCC or other regulatory authorities may adopt regulations in response to concerns about radio frequency emissions. Any resulting decrease in demand for wireless services, costs of litigation and damage awards or regulation could have an adverse effect on U. S. Cellular’s business, financial condition or results of operations.

In addition, some studies have indicated that some aspects of using wireless devices while driving may impair drivers’ attention in certain circumstances, making accidents more likely. These concerns could lead to potential litigation relating to accidents, deaths or serious bodily injuries, any of which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Numerous state and local legislative bodies have enacted or proposed legislation restricting or prohibiting the use of wireless devices while driving motor vehicles. These enacted or proposed laws or other similar laws, if passed, could have the effect of reducing customer usage and/or increasing costs, which could have an adverse effect on U.S. Cellular’s business, financial condition, or results of operations.

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30. Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent U.S. Cellular from using necessary technology to provide products or services or subject U.S. Cellular to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular faces possible effects of industry litigation relating to patents, other intellectual property or otherwise, that may restrict U.S. Cellular’s access to devices for sale to customers. If technology that U.S. Cellular uses in products or services were determined by a court to infringe a patent or other intellectual property right held by another person, U.S. Cellular could be precluded from using that technology and could be required to pay significant monetary damages. U.S. Cellular also may be required to pay significant royalties to such person to continue to use such technology in the future. The successful enforcement of any intellectual property rights, or U.S. Cellular’s inability to negotiate a license for such rights on acceptable terms, could force U.S. Cellular to cease using the relevant technology and offering services incorporating the technology. Any litigation to determine the validity of claims that U.S. Cellular’s products or services infringe or may infringe intellectual property rights of another, regardless of their merit or resolution, could be costly and divert the effort and attention of U.S. Cellular’s management and technical personnel. Regardless of the merits of any specific claim, U.S. Cellular cannot give assurance that it would prevail in litigation because of the complex technical issues andinherent uncertainties in intellectual property litigation. Although U.S. Cellular generally seeks to obtain indemnification agreements from vendors that provide it with technology, there can be no assurance that any claim of infringement will be covered by an indemnity or that U.S. Cellular will be able to recover all or any of its losses and costs under any available indemnity agreements. Any claims of infringement of intellectual property and proprietary rights of others could prevent U.S. Cellular from using necessary technology to provide its services or subject U.S. Cellular to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

31. There are potential conflicts of interests between TDS and U.S.Cellular.

TDS owns over 80% of the combined total of both classes of common stock of U.S. Cellular, including a majority of the outstanding Common Shares and 100% of the SeriesA Common Shares, and controls over 96% of their combined voting power. As a result, TDS is effectively able to elect all of U.S. Cellular’s fourteen directors and otherwise control the management and operations of U.S. Cellular. Seven of the fourteen directors of U.S. Cellular are also directors of TDS and/or executive officers of TDS and/or U.S. Cellular. Directors and officers of TDS who are also directors or officers of U.S. Cellular, and TDS as U.S. Cellular’s controlling shareholder, are in positions involving the possibility of conflicts of interest with respect to certain transactions concerning U.S. Cellular. When the interests of TDS and U.S. Cellular diverge, TDS may exercise its influence in its own best interests.

U.S. Cellular and TDS have entered into contractual arrangements governing certain transactions and relationships between them. These agreements were executed prior to the initial public offering of U.S. Cellular’s Common Shares and were not the result of arm’s-length negotiations. Accordingly, there is no assurance that the terms and conditions of these agreements are as favorable to U.S. Cellular as could have been obtained from unaffiliated third parties. See “Certain Relationships and Related Transactions” in this Form10-K.

Conflicts of interest may arise between TDS and U.S. Cellular when faced with decisions that could have different implications for U.S. Cellular and TDS, including technology decisions, financial budgets, the payment of distributions by U.S. Cellular, agreements or transactions between TDS and U.S. Cellular, business activities and other matters. TDS also may take action that favors its other businesses and the interests of its shareholders over U.S. Cellular’s wireless business and the interests of U.S. Cellular shareholders and debt holders. Because TDS controls U.S. Cellular, conflicts of interest could be resolved in a manner adverse to U.S. Cellular and its other shareholders or its debt holders.

The U.S. Cellular Restated Certificate of Incorporation provides that, so long as not less than 500,000 SeriesA Common Shares are outstanding, U.S. Cellular, without the written consent of TDS, shall not, directly or indirectly own, invest or otherwise have an interest in, lease, operate or manage any business other than a business engaged solely in the construction of, the ownership of interests in and/or the management of wireless telephone systems. This limitation on the scope of U.S. Cellular’s potential business could hurt the growth of U.S. Cellular’s business. This restriction would preclude U.S. Cellular from pursuing attractive related or unrelated business opportunities unless TDS consents in writing. TDS has no obligation to consent to any business opportunities proposed by U.S. Cellular and may withhold its consent in its own best interests.

32. Certain matters, such as control by TDS and provisions in the U.S.Cellular Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of U.S.Cellular.

The control of U.S. Cellular by TDS may tend to deter non-negotiated tender offers or other efforts to obtain control of U.S. Cellular and thereby deprive shareholders of opportunities to sell shares at prices higher than those prevailing in the market.

The U.S. Cellular Restated Certificate of Incorporation also contains provisions which may serve to discourage or make more difficult a change in control of U.S. Cellular without the support of TDS or without meeting various other conditions. In particular, the authorization of multiple classes of capital stock with different voting rights could prevent shareholders from profiting from an increase in the market value of their shares as a result of a change in control of U.S. Cellular by delaying or preventing such change in control.

The U.S. Cellular Restated Certificate of Incorporation also authorizes the U.S. Cellular Board of Directors to designate and issue Preferred Shares in one or more classes or series from time to time. Generally, no further action or authorization by the shareholders is necessary prior to the designation or issuance of the additional Preferred Shares authorized pursuant to the U.S. Cellular Restated Certificate of Incorporation unless applicable laws or regulations would require such approval in a given instance. Such Preferred Shares could be issued in circumstances that would serve to preserve TDS’ control of U.S. Cellular.

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33. Any of the foregoing events or other events could cause revenues, earnings, capital expenditures and/or any other financial or statistical information to vary from U.S.Cellular’s forward-looking estimates by a material amount.

From time to time, U.S. Cellular may disclose forward-looking information, including estimates of future operating revenues; various measures of income before income taxes; and/or capital expenditures. Any such forward-looking information includes consideration of known or anticipated changes to the extent disclosed, but dynamic market conditions and/or other unknown or unanticipated events, including but not limited to the risks discussed above, could cause such estimates to differ materially from the actual amounts.

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Item1B. Unresolved Staff Comments

None.

Item2. Properties

U.S. Cellular has properties located throughout the United States.  U.S. Cellular’s mobile telephone switching offices, cell sites, call centers and retail stores are located primarily in U.S. Cellular’s operating markets and are either owned or leased by U.S. Cellular, one of its subsidiaries, or the partnership, limited liability company or corporation which holds the license issued by the FCC.

As of December 31, 2016, U.S. Cellular’s Property, plant and equipment, net of accumulated depreciation, totaled $2,470 million.

U.S. Cellular considers the properties owned or leased by it and its subsidiaries to be maintained in good operating condition and suitable and adequate for its business operations.

Item3. Legal Proceedings

U.S.Cellular is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts.  If U.S.Cellular believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss.  If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within that range is better than another, the low end of the range is accrued.  The assessment of the expected outcomes of legal proceedings is a highly subjective process that requires judgments about future events.  The legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financial statement disclosures.  The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements. See Note 12 — Commitments and Contingencies in the Notes to Consolidated Financial Statements for further information.

Item4. Mine Safety Disclosures

Not applicable.

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PARTII

Item5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market, holder, dividend and performance graph information is incorporated by reference from Exhibit13 to this Form 10-K, Annual Report sections entitled “Shareholder Information” and “Consolidated Quarterly Information (Unaudited).”

U.S. Cellular has not paid any cash dividends in recent periods and currently intends to retain all earnings for use in U.S. Cellular’s business.

Information relating to Issuer Purchases of Equity Securities is set forth below.

In November 2009, U.S. Cellular announced by Form 8-K that the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009 and continuing each year thereafter, on a cumulative basis. In December 2016, the U.S. Cellular Board amended this authorization to provide that such amount will be any amount from zero to 1,300,000 beginning on January 1, 2017, as determined by the Pricing Committee, and that if the Pricing Committee did not specify an amount for any year, such amount would be zero for such year. The Pricing Committee did not specify any increase as of January 1, 2017. The Pricing Committee was also authorized to decrease the cumulative amount of the authorization at any time, but has not taken any action to do so at this time. As a result, there was no change to the cumulative amount of the share repurchase authorization as of January 1, 2017. The authorization provides that share repurchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on market prices and other conditions. This authorization does not have an expiration date. U.S. Cellular did not determine to terminate the foregoing Common Share repurchase program, as amended, or cease making further purchases thereunder, during the fourth quarter of 2016.

The following table provides certain information with respect to all purchases made by or on behalf of U.S.Cellular, and any open market purchases made by any “affiliated purchaser” (as defined by the SEC) of U.S.Cellular, of U.S.Cellular Common Shares during the fourth quarter of 2016.

Period	Total Number of Common Shares Purchased	Average Price Paid per Common Share		Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Common Shares that May Yet Be Purchased Under the Plans or Programs
October 1 – 31, 2016	4,135	$	35.01	4,135	6,004,302
November 1 – 30, 2016	103,453		34.43	103,453	5,900,849
December 1 – 31, 2016	–		–	–	5,900,849
Total as of or for the quarter ended December 31, 2016	107,588	$	34.45	107,588	5,900,849

22

Item6. Selected Financial Data

Incorporated by reference from Exhibit13 to this Form10-K, Annual Report section entitled “Selected Consolidated Financial Data,” except for Ratio of earnings to fixed charges, which is incorporated herein by reference from Exhibit12 to this Form10-K.

Item7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Incorporated by reference from Exhibit13 to this Form10-K, Annual Report section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item7A. Quantitative and Qualitative Disclosures About Market Risk

Incorporated by reference from Exhibit13 to this Form10-K, Annual Report section entitled “Market Risk.”

Item8. Financial Statements and Supplementary Data

Incorporated by reference from Exhibit13 to this Form10-K, Annual Report sections entitled “Consolidated Statement of Operations,” “Consolidated Statement of Cash Flows,” “Consolidated Balance Sheet,” “Consolidated Statement of Changes in Equity,” “Notes to Consolidated Financial Statements,” “Management’s Report on Internal Control Over Financial Reporting,” “Report of Independent Registered Public Accounting Firm,” and “Consolidated Quarterly Information (Unaudited).” The Consolidated Statement of Comprehensive Income was not included because comprehensive income for the years ended December 31, 2016, 2015 and 2014 equaled net income.

Item9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

23

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

U.S. Cellular maintains disclosure controls and procedures (as defined in Rules13a-15(e)and 15d-15(e)under the Exchange Act) that are designed to ensure that information required to be disclosed in its reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rulesand forms, and that such information is accumulated and communicated to U.S. Cellular’s management, including its principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As required by SEC Rule13a-15(b), U.S. Cellular carried out an evaluation, under the supervision and with the participation of management, including its principal executive officer and principal financial officer, of the effectiveness of the design and operation of U.S. Cellular’s disclosure controls and procedures as of the end of the period covered by this Annual Report. Based on this evaluation, the principal executive officer and principal financial officer have concluded that U.S. Cellular’s disclosure controls and procedures were effective as of December 31, 2016, at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules13a-15(f)and 15d-15(f)under the Exchange Act. U.S. Cellular’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”). U.S. Cellular’s internal control over financial reporting includes those policies and procedures that (i)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (ii)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and, where required, the board of directors of the issuer; and (iii)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the issuer’s assets that could have a material effect on the interim or annual consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of U.S. Cellular’s management, including its principal executive officer and principal financial officer, U.S. Cellular conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2016, based on the criteria established in the 2013 version ofInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management has concluded that U.S. Cellular maintained effective internal control over financial reporting as of December 31, 2016 based on criteria established in the 2013 version ofInternal Control — Integrated Frameworkissued by the COSO.

The effectiveness of U.S. Cellular’s internal control over financial reporting as of December 31, 2016 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in the firm’s report which is incorporated by reference into Item 8 of this Annual Report on Form10-K from Exhibit13 filed herewith.

Changes in Internal Control over Financial Reporting

There were no changes in U.S. Cellular’s internal control over financial reporting during the fourth quarter of 2016 that have materially affected, or are reasonably likely to materially affect, U.S. Cellular’s internal control over financial reporting.

Item9B. Other Information

None.

24

PARTIII

Item10. Directors, Executive Officers and Corporate Governance

Incorporated by reference from Proxy Statement sections entitled “Election of Directors,” “Corporate Governance,” “Executive Officers” and “Section16(a)Beneficial Ownership Reporting Compliance.”

Item11. Executive Compensation

Incorporated by reference from Proxy Statement section entitled “Executive and Director Compensation.”

Item12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Incorporated by reference from Proxy Statement sections entitled “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance under Equity Compensation Plans.”

Item13. Certain Relationships and Related Transactions, and Director Independence

Incorporated by reference from Proxy Statement sections entitled “Corporate Governance” and “Certain Relationships and Related Transactions.”

Item14. Principal Accountant Fees and Services

Incorporated by reference from Proxy Statement section entitled “Fees Paid to Principal Accountants.”

25

PART IV

Item 15.  Exhibits and Financial Statement Schedules

(a)	The following documents are filed as part of this report:
	(1)	Financial Statements
		Consolidated Statement of Operations		Annual Report*
		Consolidated Statement of Cash Flows		Annual Report*
		Consolidated Balance Sheet		Annual Report*
		Consolidated Statement of Changes in Equity		Annual Report*
		Notes to Consolidated Financial Statements		Annual Report*
		Management's Report on Internal Control Over Financial Reporting		Annual Report*
		Report of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP		Annual Report*
		Consolidated Quarterly Information (Unaudited)		Annual Report*
			*Incorporated by reference from Exhibit 13.
	(2)	Financial Statement Schedules
				Location
		Los Angeles SMSA Limited Partnership and Subsidiary Financial Statements		S-1
			Report of Independent Registered Public Accounting Firm — Ernst & Young LLP	S-2
			Consolidated Balance Sheets	S-3
			Consolidated Statements of Income and Comprehensive Income	S-4
			Consolidated Statements of Changes in Partners’ Capital	S-5
			Consolidated Statements of Cash Flows	S-6
			Notes to Consolidated Financial Statements	S-7
		All other schedules have been omitted because they are not applicable or not required or because the required information is shown in the financial statements or notes thereto.
	(3)	Exhibits
		The exhibits set forth in the accompanying Index to Exhibits are filed as a part of this Report.  Compensatory plans or arrangements are identified in the Index to Exhibits with an asterisk.

Item16.  Form 10-K Summary

None.

26

LOS ANGELES SMSA LIMITED PARTNERSHIP AND SUBSIDIARY
FINANCIAL STATEMENTS

U.S.Cellular owns a 5.5% limited partnership interest in the Los Angeles SMSA Limited Partnership and accounts for such interest by the equity method.  The partnership’s consolidated financial statements were obtained by U.S.Cellular as a limited partner.

S-1

Report of Independent Registered Public Accounting Firm

The Partners of Los Angeles SMSA Limited Partnership

We have audited the accompanying consolidated balance sheets of Los Angeles SMSA LimitedPartnership and Subsidiary (the Partnership) as of December 31, 2016 and 2015, and the relatedconsolidated statements of income and comprehensive income, changes in partners’ capital andcash flows for each of the three years in the period ended December 31, 2016. These financialstatements are the responsibility of the Partnership’s management. Our responsibility is toexpress an opinion on these financial statements based on our audits.

We conducted our December 31, 2016 audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. We conducted our December 31, 2015 and 2014 audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Partnership at December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Certified Public Accountants

Orlando, Florida
February 22, 2017

S-2

Los Angeles SMSA Partnership and Subsidiary
Consolidated Balance Sheets - As of December 31, 2016 and 2015
(Dollars in Thousands)				2016		2015
ASSETS
CURRENT ASSETS:
	Due from affiliate		$	281,846	$	–
	Accounts receivable, net of allowances of $31,093 and $37,090			489,043		407,622
	Unbilled revenue			23,190		22,883
	Prepaid expenses			18,716		11,785
		Total current assets		812,795		442,290
PROPERTY, PLANT AND EQUIPMENT - NET				1,862,892		1,804,877
WIRELESS LICENSES				2,075,448		2,073,751
OTHER ASSETS				228,770		252,751
TOTAL ASSETS			$	4,979,905	$	4,573,669
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
	Accounts payable and accrued liabilities		$	202,284	$	190,807
	Advance billings and other			160,434		166,533
	Financing obligation			12,744		12,494
	Deferred rent			8,382		8,382
	Due to affiliate			–		348,724
		Total current liabilities		383,844		726,940
LONG TERM LIABILITIES:
	Financing obligation			112,552		113,016
	Deferred rent			146,547		150,557
	Other liabilities			158		117
		Total long term liabilities		259,257		263,690
		Total liabilities		643,101		990,630
PARTNERS' CAPITAL
	General Partner's interest			1,734,722		1,433,215
	Limited Partners' interest			2,602,082		2,149,824
		Total partners' capital		4,336,804		3,583,039
TOTAL LIABILITIES AND PARTNERS' CAPITAL			$	4,979,905	$	4,573,669
See notes to consolidated financial statements.

S-3

Los Angeles SMSA Limited Partnership and Subsidiary
Consolidated Statements of Income and Comprehensive Income - For the Years Ended December 31, 2016, 2015 and 2014
(Dollars in Thousands)				2016		2015		2014
OPERATING REVENUES:
	Service revenues		$	3,996,989	$	4,181,377	$	4,317,377
	Equipment revenues			930,690		943,419		650,130
	Other			256,917		221,918		201,427
		Total operating revenues		5,184,596		5,346,714		5,168,934
OPERATING EXPENSES:
	Cost of service (exclusive of depreciation and amortization)			1,070,302		968,132		863,031
	Cost of equipment			1,193,924		1,267,801		1,195,874
	Depreciation and amortization			356,848		360,463		344,887
	Selling, general and administrative			1,278,205		1,397,856		1,470,669
		Total operating expenses		3,899,279		3,994,252		3,874,461
OPERATING INCOME				1,285,317		1,352,462		1,294,473
INTEREST (EXPENSE) INCOME, NET				(6,552)		(3,197)		4,199
NET INCOME AND COMPREHENSIVE INCOME			$	1,278,765	$	1,349,265	$	1,298,672
Allocation of Net Income:
	General Partner		$	511,507	$	539,706	$	519,468
	Limited Partners		$	767,258	$	809,559	$	779,204
See notes to consolidated financial statements.

S-4

Los Angeles SMSA Limited Partnership and Subsidiary
Consolidated Statements of Changes in Partners' Capital - For the Years Ended December 31, 2016, 2015 and 2014
(Dollars in Thousands)
		General Partner		Limited Partners
		AirTouch Cellular Inc.		AirTouch Cellular Inc.		Cellco Partnership		United States Cellular Investment Corporation of Los Angeles		Total Partners' Capital
BALANCE - January 1, 2014		$	814,041	$	860,848	$	248,282	$	111,931	$	2,035,102
	Distributions		(440,000)		(465,300)		(134,200)		(60,500)		(1,100,000)
	Net Income		519,468		549,338		158,438		71,428		1,298,672
BALANCE - December 31, 2014		$	893,509	$	944,886	$	272,520	$	122,859	$	2,233,774
	Net Income		539,706		570,740		164,611		74,208		1,349,265
BALANCE - December 31, 2015		$	1,433,215	$	1,515,626	$	437,131	$	197,067	$	3,583,039
	Distributions		(210,000)		(222,075)		(64,050)		(28,875)		(525,000)
	Net Income		511,507		540,917		156,009		70,332		1,278,765
BALANCE - December 31, 2016		$	1,734,722	$	1,834,468	$	529,090	$	238,524	$	4,336,804
See notes to consolidated financial statements.

S-5

Los Angeles SMSA Limited Partnership and Subsidiary
Consolidated Statements of Cash Flows - For the Years Ended December 31, 2016, 2015 and 2014
(Dollars in Thousands)						2016		2015		2014
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net Income				$	1,278,765	$	1,349,265	$	1,298,672
	Adjustments to reconcile net income to net cash provided by
		operating activities:
		Depreciation and amortization				356,848		360,463		344,887
		Imputed interest on financing obligation				12,284		9,135		–
		Provision for losses on accounts receivable				71,925		79,063		34,370
		Gain on device installment plan receivables sold				–		(7,632)		–
		Changes in certain assets and liabilities:
			Accounts receivable			(153,704)		42,964		(200,950)
			Unbilled revenue			(307)		1,628		(4,441)
			Prepaid expenses			(6,931)		1,403		(8,831)
			Other assets			20,037		(151,954)		(91,809)
			Accounts payable and accrued liabilities			24,685		24,105		32,591
			Advance billings and other			(6,099)		(31,182)		45,017
			Deferred rent			(4,010)		88,115		(4,942)
			Other liabilities			41		4,046		3,610
				Net cash provided by operating activities		1,593,534		1,769,419		1,448,174
CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures					(449,005)		(470,954)		(487,511)
	Fixed asset transfers out					23,453		25,371		27,816
	Acquisition of wireless licenses (including capitalized interest)					(1,697)		(1,994,208)		–
	Collections on deferred purchase price					1,783		–		–
	Change in due from affiliate					(281,846)		(583,060)		111,521
				Net cash used in investing activities		(707,312)		(3,022,851)		(348,174)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Change in due to affiliate					(348,724)		1,137,057		–
	Proceeds from financing obligation					–		126,635		–
	Repayments of financing obligation					(12,498)		(10,260)		–
	Distributions					(525,000)		–		(1,100,000)
				Net cash (used in) provided by financing activities		(886,222)		1,253,432		(1,100,000)
CHANGE IN CASH						–		–		–
CASH - Beginning of year						–		–		–
CASH - End of year					$	–	$	–	$	–
CASH PAID FOR INTEREST					$	2,576	$	24,269	$	–
NONCASH TRANSACTIONS FROM INVESTING ACTIVITIES:
	Accruals for capital expenditures				$	15,621	$	28,829	$	31,019
See notes to consolidated financial statements.

S-6

Los Angeles SMSA Limited Partnership and Subsidiary

Notes to Consolidated Financial Statements – For the Years Ended December 31, 2016, 2015 and 2014.

(Dollars in Thousands)

1.ORGANIZATION AND MANAGEMENT

The Consolidated Financial Statements include the accounts of the Los Angeles SMSA Limited Partnership (“Los Angeles SMSA”) and Los Angeles Edge LLC, a wholly owned subsidiary of Los Angeles SMSA (collectively, the “Partnership”). The principal activity of Los Angeles SMSA, formed in 1984, is to provide cellular service in the Los Angeles metropolitan service area. Los Angeles Edge LLC was formed during 2015 and is a bankruptcy remote special purpose entity, created for the purpose of selling wireless device payment plan receivables to third parties (see Note 3). 

In accordance with the partnership agreement, AirTouch Cellular Inc. an indirect wholly owned subsidiary ofCellco Partnership (“Cellco”), doing business as Verizon Wireless, and general partner of the Partnership is responsible for managing the operations of the Partnership (see Note 8).

The partners and their respective ownership percentages of the Partnership as of December 31, 2016, 2015 and 2014 are as follows:

General Partner:
	AirTouch Cellular Inc.	40.0%
Limited Partners:
	AirTouch Cellular Inc.	42.3%
	Cellco Partnership	12.2%
	United States Cellular Investment Corporation of Los Angeles	5.5%

2.SIGNIFICANT ACCOUNTING POLICIES

Consolidation –The method of accounting applied to consolidated investments involves an evaluation of all significant terms of the investments that explicitly grant or suggest evidence of control or influence over the operations of the investee.  The consolidated financial statements include our subsidiary which is a variable interest entity (VIE) where Los Angeles SMSA is deemed to be the primary beneficiary.  All significant intercompany accounts and transactions have been eliminated (see Note 3).

Use of estimates – The financial statements are prepared using U.S. generally accepted accounting principles (GAAP), which requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates.

Examples of significant estimates include: the allowance for doubtful accounts, the recoverability of property, plant and equipment, the recoverability of intangible assets and other long-lived assets, unbilled revenues, fair values of financial instruments, deferred purchase price, beneficial interest, accrued expenses and contingencies.

Revenue recognition – The Partnership offers products and services to customers through bundled arrangements. These arrangements involve multiple deliverables which may include products, services, or a combination of products and services.

The Partnership earnsrevenue primarily by providing access to and usage of its network as well as the sale of equipment. In general, access revenue is billed one month in advance and recognized when earned. Usage revenue is generally billed in arrears and recognized when service is rendered. Equipment revenue associated with the sale of wireless devices and accessories is generally recognized when the products are delivered to and accepted by the customer, as equipment sales is considered to be a separate earnings process from providing wireless services. For agreements involving the resale of third-party services in which the Partnership is considered the primary obligor in the arrangements, the revenue is recorded gross at the time of sale.

Under the Verizon device payment program, eligible wireless customers purchase wireless devices under a device payment plan agreement. On select devices, certain marketing promotions have been revocably offered to customers to upgrade to a new device after paying down a certain specified portion of the required device payment plan agreement amount as well as trading in their device in good working order. When a customer enters into a device payment plan agreement with the right to upgrade to a new device, the Partnership accounts for this trade-in right as a guarantee obligation. The full amount of the trade-in right’s fair value (not an allocated value) is recognized as a guarantee liability and the remaining allocable consideration is allocated to the device. The value of the guarantee liability effectively results in a reduction to the revenue recognized for the sale of the device. The Partnership may offer customers certain promotions where a customer can trade-in his or her owned device in connection with the purchase of a new device. Under these types of promotions, the customer will receive trade-in credits that are applied to the customer’s monthly bill.  As a result, the Partnership recognizes a trade-in obligation measured at fair value using weighted-average selling prices obtained in recent resales of devices eligible for trade-in.

S-7

In multiple element arrangements that bundle devices and monthly wireless service, revenue is allocated to each unit of accounting using a relative selling price method. At the inception of the arrangement, the amount allocable to the delivered units of accounting is limited to the amount that is not contingent upon the delivery of the monthly wireless service (the noncontingent amount). The Partnership effectively recognizes revenue on the delivered device at the lesser of the amount allocated based on the relative selling price of the device or the noncontingent amount owed when the device is sold.

Roaming revenue reflects service revenue earned by the Partnership when customers not associated with the Partnership operate in the service area of the Partnership and use the Partnership’s network. The roaming rates with third party carriers associated with those customers are based on agreements with such carriers. The roaming rates charged by the Partnership to Cellco are established by Cellco on a periodic basis and may not reflect current market rates (see Note 8).

Other revenues primarily consist of certain fees billed to customers forsurcharges and elected services as well as non-customer related revenues. ThePartnership reports taxes imposed by governmental authorities on revenueproducingtransactions between the Partnership and its customers which ispassed through to the customers on a net basis. Other revenues also includeswitch revenue. This revenue represents revenue earned by the Partnership forswitch services provided to other Cellco owned entities by the Partnership. Theswitch revenue rates charged by the Partnership to Cellco are established byCellco on a periodic basis and may not reflect current market rates (see Note 8).

Operating expenses – Operating expenses include expenses incurred directly by the Partnership, as well as an allocation of selling, general and administrative, and operating costs incurred by Cellco or its affiliates on behalf of the Partnership. Employees of Cellco provide services on behalf of the Partnership. These employees are not employees of the Partnership, therefore operating expenses include direct and allocated charges of salary and employee benefit costs for the services provided to the Partnership. Cellco believes such allocations, principally based on the Partnership’s percentage of certain revenue streams, total customers, customer gross additions or minutes-of-use, are calculated in accordance with the Partnership agreement and are a reasonable method of allocating such costs (see Note 8).

Cost of roaming reflects costs incurred by the Partnership when customers associated with the Partnership operate in a service area not associated with the Partnership and use a network not associated with the Partnership. The roaming rates with third party carriers are based on agreements with such carriers. The roaming rates charged to the Partnership by Cellco are established by Cellco on a periodic basis and may not reflect current market rates (see Note 8).

Cost of equipment is recorded upon sale of the related equipment at Cellco’s cost basis. Inventory is wholly owned by Cellco and is not recorded in the financial statements of the Partnership.

Maintenance and repairs –The cost of maintenance and repairs, including the cost of replacing minor items not constituting substantial betterments, is charged principally to Cost of service as these costs are incurred.

Advertising costs–Costs for advertising products and services as well as other promotional and sponsorship costs are charged to Selling, general and administrative expense in the periods in which they are incurred.

Comprehensive income–Comprehensive income is the same as net income as presented in the accompanying statements of income and comprehensive income.

Income taxes –The Partnership is treated as a pass through entity for income tax purposes and, therefore, is not subject to federal, state or local income taxes. Accordingly, no provision has been recorded for income taxes in the Partnership’s financial statements. The results of operations, including taxable income, gains, losses, deductions and credits, are allocated to and reflected on the income tax returns of the respective partners.

The Partnership files federal and state tax returns. The 2013 through 2016 tax years for the Partnership remain subject to examination by the Internal Revenue Service and state tax jurisdiction. Because the application of tax laws and regulations to many types of transactions is susceptible to varying interpretations, amounts reported in the financial statements could be changed at a later date upon final determination by taxing authorities.

Due to/from affiliate – Due to/from affiliate principally represents the Partnership’s cash position with Cellco. Cellco manages, on behalf of the Partnership, all cash, investing and financing activities, including all transactions associated with the sales of wireless device payment plan agreement receivables, of the Partnership. As such, the change in due to/from affiliate is reflected as an investing activity or a financing activity in the statements of cash flows depending on whether it represents a net asset or net liability for the Partnership.

Additionally, cost of equipment, administrative and operating costs incurred by Cellco on behalf of the Partnership, as well as property, plant and equipment and wireless license transactions with affiliates, are charged to the Partnership through this account. Interest income on due from affiliate is based on the Applicable Federal Rate which was approximately 0.7%, 0.5% and 0.3% for the years ended December 31, 2016, 2015 and 2014, respectively. Interest expense on due to affiliate is calculated by applying Cellco’s average cost of borrowing from Verizon Communications Inc., which was approximately 4.8%, 4.8% and 5.0% for the years ended December 31, 2016, 2015 and 2014, respectively to the outstanding due to/from affiliate balance. Included in Interest (expense) income, net is interest income of $1,390, $0 and $1,706 for the years ended December 31, 2016, 2015 and 2014, respectively, related to due to/from affiliate. Interest expense of $2,683 and $23,878 was incurred during the years ended December 31, 2016 and 2015 respectively, of which all was capitalized.

S-8

Accounts receivable and allowance for doubtful accounts – Accounts receivable are recorded in the financial statements at cost net of allowance for credit losses, with the exception of device payment plan agreement receivables which are initially recorded at fair value. The Partnership maintains allowances for uncollectible accounts receivable, including device payment plan agreement receivables, for estimated losses resulting from the failure or inability of customers to make required payments. The allowance for uncollectible accounts receivable is based on Cellco’s assessment of the collectability of each Partnership’s specific customer accounts and includes consideration of the credit worthiness and financial condition of those customers. The Partnership records an allowance to reduce the receivables to the amount that is reasonably believed to be collectible. The Partnership also records an allowance for all other receivables based on multiple factors including historical experience with bad debts, the general economic environment, and the aging of such receivables. Similar to traditional service revenue accounting treatment, bad debt expense related to device payment plan agreement receivables is recorded based on an estimate of the percentage of device payment plan agreement receivables that will not be collected. This estimate is based on a number of factors including historical write-off experience, credit quality of the customer base and other factors such as macro-economic conditions. Due to the device payment plan agreement receivables being incorporated in the standard Verizon Wireless bill, the collection and risk strategies continue to follow historical practices. The Partnership monitors the aging of accounts receivable, including device payment plan agreement receivables, and writes off account balances if collection efforts are unsuccessful and future collection is unlikely.

Property, plant and equipment –Property, plant and equipment is recorded at cost. Property, plant and equipment are generally depreciated on a straight-line basis.

Leasehold improvements are amortized over the shorter of the estimated life of the improvement or the remaining term of the related lease, calculated from the time the asset was placed in service.

When the depreciable assets are retired or otherwise disposed of, the related cost and accumulated depreciation are deducted from the property, plant and equipment accounts and any gains or losses on disposition are recognized in income. Transfers of property, plant and equipment between Cellco and affiliates are recorded at net book value on the date of the transfer with an offsetting entry included in due to/from affiliate.

Interest associated with the acquisition or construction of network-related assets is capitalized. Capitalized interest is reported as a reduction in interest expense and depreciated as part of the cost of the network-related assets.

In connection with the ongoing review of estimated useful lives of property, plant and equipment during 2016, Cellco determined that the average useful lives of certain leasehold improvements would be increased from 5 to 7 years. This change was immaterial in 2016. While the timing and extent of current deployment plans are subject to ongoing analysis and modification, Cellco and the Partnership believes the current estimates of useful lives are reasonable.

Other assets – Other assets primarily include long term device payment plan agreement receivables, net of allowances of $16,545 and $8,661 at December 31, 2016 and 2015, respectively.

Impairment – All long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If any indications were to become present, the Partnership would test for recoverability by comparing the carrying amount of the asset group to the net undiscounted cash flows expected to be generated from the asset group. If those net undiscounted cash flows do not exceed the carrying amount, the next step would be to determine the fair value of the asset and record an impairment, if any. The Partnership reevaluates the useful life determinations for these long-lived assets each year to determine whether events and circumstances warrant a revision to their remaining useful lives.

Wireless licenses – Intangible assets are wireless licenses that provide the Partnership wireless operations with the exclusive right to utilize designated radio frequency spectrum to provide wireless communications services. In addition, Cellco maintains wireless licenses that provide the Partnership’s operations with the exclusive right to utilize designated radio frequency spectrum to provide wireless communications services. While licenses are issued for only a fixed time, generally ten years, such licenses are subject to renewal by the Federal Communications Commission (FCC). License renewals, which are managed by Cellco, have historically occurred routinely and at nominal cost. Moreover, the Partnership determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of wireless licenses. As a result, wireless licenses are treated as an indefinite-lived intangible asset. The useful life determination for wireless licenses is reevaluated each year to determine whether events and circumstances continue to support an indefinite useful life. The Partnership aggregates wireless licenses into one single unit of accounting, as they are utilized on an integrated basis.

Cellco and the Partnership test the wireless licenses balance for potential impairment annually or more frequently if impairment indicators are present. In 2016 and 2015, the Partnership performed a qualitative assessment to determine whether it is more likely than not that the fair value of wireless licenses was less than the carrying amount. As part of the assessment, several qualitative factors were considered including market transactions, the business enterprise value, macroeconomic conditions (including changes in interest rates and discount rates), industry and market considerations (including industry revenue and EBITDA (Earnings before interest, taxes, depreciation and amortization) margin projections), the projected financial performance, as well as other factors. In 2016, Cellco also performed a qualitative assessment similar to that described for the Partnership. In 2015, Cellco performed a quantitative assessment which consisted of comparing the estimated fair value of its aggregate wireless licenses to the aggregated carrying amount as of the test date.

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Interest expense incurred while qualifying activities are performed to ready wireless licenses for their intended use is capitalized as part of wireless licenses (see Note 4). The capitalization period ends when the development is discontinued or substantially complete and the license is ready for its intended use.

In addition, Cellco believes that under the Partnership agreement it has the right to allocate, based on a reasonable methodology, any impairment loss recognized by Cellco for licenses included in Cellco’s national footprint. Cellco and the Partnership evaluated their wireless licenses for potential impairment as of December 15, 2016 and 2015. These evaluations resulted in no impairment of wireless licenses.

Financial instruments –The Partnership’s trade receivables and payables are short-term in nature, and accordingly, their carrying value as well as the carrying value of the deferred purchase price and beneficial interest approximates fair value. The Partnership receives a beneficial interest, which is the residual amount on the device payment plan agreement receivables in excess of proceeds from the sale of these receivables to Cellco. The Partnership records a deferred purchase price, which is the residual amount on the device payment  plan agreement receivables in excess of proceeds from the sale of these receivables to a third party. The deferred purchase price and the beneficial interest is recorded at fair value based on the remaining device payment amounts expected to be collected, adjusted, as applicable, for the time value of money and by the timing and estimated value of the device trade-in in connection with upgrades. The collection of the deferred purchase price and the beneficial interest is contingent on collections from customers.

Fair value measurements– Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3 - No observable pricing inputs in the market

Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their categorization within the fair value hierarchy.

Distributions – The Partnership is required to make distributions to its partners based upon the Partnership’s operating results, due to/from affiliate status, and financing needs as determined by the General Partner at the date of the distribution.

Variable interest entities (VIEs) – VIEs are entities which lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, have equity investors which do not have the ability to make significant decisions relating to the entity’s operations through voting rights, do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. The assets and liabilities of the VIEs are consolidated when the Partnership is deemed to be the primary beneficiary. The primary beneficiary is the party which has the power to make the decisions that most significantly affect the economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

Recent accounting standards – In August 2016, the accounting standard update related to the classification of certain cash receipts and cash payments was issued. This standard update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice for these issues. Among the updates, this standard update requires cash receipts from payments on a transferor’s beneficial interests in securitized trade receivables to be classified as cash inflows from investing activities. This standard update is effective as of the first quarter of 2018; however, early adoption is permitted. The Partnership is currently evaluating the impact that this standard update will have on the consolidated financial statements. The Partnership expects the amendment relating to beneficial interests in securitization transactions will have an impact on the presentation of collections of the deferred purchase price from sales of wireless device payment plan agreement receivables in the consolidated statements of cash flows.

In June 2016, the standard update related to the measurement of credit losses on financial instruments was issued. This standard update requires that certain financial assets be measured at amortized cost reflecting an allowance for estimated credit losses expected to occur over the life of the assets. The estimate of credit losses must be based on all relevant information including historical information, current conditions and reasonable and supportable forecasts that affect the collectability of the amounts. This standard update is effective as of the first quarter of 2020; however early adoption is permitted. The Partnership is currently evaluating the impact that this standard update will have on the consolidated financial statements.

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In February 2016, the accounting standard update related to leases was issued.  This standard update intends to increase transparency and improve comparability by requiring entities to recognize assets and liabilities on the balance sheet for all leases, with certain exceptions. In addition, through improved disclosure requirements, the standard update will enable users of financial statements to further understand the amount, timing, and uncertainty of cash flows arising from leases. This standard update is effective as of the first quarter of 2019; however early adoption is permitted. The Partnership’s current operating lease portfolio is primarily comprised of spectrum, network, real estate, and equipment leases. Upon adoption of the standard, the balance sheet is expected to include a right of use asset and liability related to substantially all operating lease arrangements.  At Cellco, a cross-functional coordinated implementation team has been established to implement the standard update related to leases. The Partnership is in the process of assessing the impact to its systems, processes and internal controls to meet the standard update’s reporting and disclosure requirements.

In May 2014, the accounting standard update related to the recognition of revenue from contracts with customers was issued. This standard update along with related subsequently issued updates clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP. The standard update also amends current guidance for the recognition of costs to obtain and fulfill contracts with customers such that incremental costs of obtaining and direct costs of fulfilling contracts with customers will be deferred and amortized consistent with the transfer of the related good or service. The standard update intends to provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; and provide more useful information to users of financial statements through improved disclosure requirements. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the standard is applied only to the most current period presented and the cumulative effect of applying the standard would be recognized at the date of initial application. In August 2015, an accounting standard update was issued that delays the effective date of this standard update until the first quarter of 2018, at which time the Partnership plans to adopt the standard.

The Partnership is in the process of evaluating the impact of the standard update. The ultimate impact on revenue resulting from the application of the new standard will be subject to assessments that are dependent on many variables, including, but not limited to, the terms of contractual arrangements and the mix of business. Upon adoption, the Partnership expects that the allocation of revenue between equipment and service for wireless fixed-term service plans will result in more revenue allocated to equipment and recognized earlier as compared with current GAAP. The timing of recognition of sales commission expenses is also expected to be impacted, as a substantial portion of these costs (which are currently expensed) will be capitalized and amortized as described above. The available transition methods will continue to be evaluated. The Partnership’s considerations include, but are not limited to, the comparability of financial statements and the comparability within the industry from application of the new standard to contractual arrangements. The Partnership plans to select a transition method by the second half of 2017. 

At Cellco, a cross-functional coordinated implementation team has been established to implement the standard update related to the recognition of revenue from contracts with customers. The Partnership has identified and is in the process of implementing changes to its systems, processes and internal controls to meet the standard update’s reporting and disclosure requirements.

Reclassifications–The Partnership reclassified certain prior year amounts to conform to the current year presentation.

Subsequent events – Events subsequent to December 31, 2016 have been evaluated through February 22, 2017, the date the financial statements were issued.

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3.    WIRELESS DEVICEPAYMENT PLANS

Under the Verizon device payment program, eligible wireless customers purchase wireless devices under a device payment plan agreement. Customers that activate service on devices purchased under the device payment program pay lower service fees as compared to those under fixed-term service plans, and their device payment plan charge is included in their standard wireless monthly bill.

Wireless device payment plan agreement receivables –The following table displays device payment plan agreement receivables, net, recognized in the accompanying balance sheets:

	2016		2015
Device payment plan agreement receivables, gross	$	272,174	$	159,527
Unamortized imputed interest		(11,544)		(6,534)
Device payment plan agreement receivables, net of unamortized imputed interest		260,630		152,993
Allowance for credit losses		(36,026)		(25,873)
Device payment plan agreement receivables, net	$	224,604	$	127,120
Classified on the consolidated balance sheets:
Accounts receivable, net	$	120,747	$	68,785
Other assets	$	103,857	$	58,335
Device payment plan agreement receivables, net	$	224,604	$	127,120

The Partnership may offer customers certain promotions where a customer can trade-in his or her owned device in connection with the purchase of a new device. Under these types of promotions, the customer will receive trade-in credits that are applied to the customer’s monthly bill. As a result, the Partnership recognizes a trade-in obligation measured at fair value using weighted-average selling prices obtained in recent resales of devices eligible for trade-in. Device payment plan agreement receivables, net does not reflect this trade-in obligation. At December 31, 2016 and 2015, the amount of trade-in obligations was not material.

At the time of sale, the Partnership imputes risk adjusted interest on the device payment plan agreement receivables. Imputed interest is recorded as a reduction to the related accounts receivable. Interest income, which is included within Other revenues on the statements of income and comprehensive income, is recognized over the financed payment term.

When originating device payment plan agreements, the Partnership uses internal and external data sources to create a credit risk score to measure the credit quality of a customer and to determine eligibility for the device payment program.  If a customer is either new to the Partnership or has less than 210 days of customer tenure (a new customer), the credit decision process relies more heavily on external data sources.For a small portion of new customer applications, a traditional credit report is not available from one of the national credit reporting agencies because the potential customer does not have sufficient credit history. In those instances, alternate credit data is used for the risk assessment. If the customer has 210 days or more of customer tenure (an existing customer), the credit decision process relies on internal data sources. The experience has been that the payment attributes of longer tenured customers are highly predictive when considering their ability to pay in the future. External data sources include obtaining a credit report from a national consumer credit reporting agency, if available. Internal data and/or credit data obtained from the credit reporting agencies is used to create a custom credit risk score. The custom credit risk score is generated automatically (except with respect to a small number of applications where the information needs manual intervention) from the applicant’s credit data using Verizon’s proprietary custom credit models, which are empirically derived and demonstrably and statistically sound. The credit risk score measures the likelihood that the potential customer will become severely delinquent and be disconnected for non-payment.

Based on the custom credit risk score, each customer is assigned to a credit class, each of which has a specified required down payment percentage and specified credit limits. Device payment plan agreement receivables originated from customers assigned to credit classes requiring no down payment represent the lowest risk. Device payment plan agreement receivables originated from customers assigned to credit classes requiring a down payment represent a higher risk.

Subsequent to origination, the Partnership monitors delinquency and write-off experience as key credit quality indicators for its portfolio of device payment plan agreements and fixed-term service plans. The extent of collection efforts with respect to a particular customer are based on the results of proprietary custom empirically derived internal behavioral scoring models which analyze the customer’s past performance to predict the likelihood of the customer falling further delinquent. These customer scoring models assess a number of variables, including origination characteristics, customer account history and payment patterns. Based on the score derived from these models, accounts are grouped by risk category to determine the collection strategy to be applied to such accounts. The Partnership continuously monitors collection performance results and the credit quality of device payment plan agreement receivables based on a variety of metrics, including aging. The Partnership considers an account to be delinquent and in default status if there are unpaid charges remaining on the account on the day after the bill’s due date.

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As of December 31, 2016, the balance and aging of the device payment plan agreement receivables on a gross basis was as follows:

Unbilled	$	264,724
Billed:
Current		5,885
Past Due		1,565
Device payment plan agreement receivables, gross		272,174

Activity in the allowance for credit losses for the device payment plan agreement receivables was as follows:

			2016		2015
Balance at January 1		$	25,873	$	3,205
	Bad debt expenses		48,965		43,794
	Write-offs		(24,482)		(14,319)
	Allowance related to receivables sold		(16,829)		(8,758)
	Other		2,499		1,951
Balance at December 31		$	36,026	$	25,873

Customers entering into device payment plan agreements prior to May 31, 2015, have the right to upgrade their device, subject to certain conditions, including making a stated portion of the required device payment plan agreement payments and trading in their device in good working condition. Generally, customers entering into device payment agreements on or after June 1, 2015 are required to repay all amounts due under their device payment agreement before being eligible to upgrade their device. However, on select devices, certain marketing promotions have been revocably offered to customers to upgrade to a new device after paying down a certain specified portion of the device payment plan agreement amount as well as trading in their device in good working order. When a customer enters into a device payment plan agreement with the right to upgrade to a new device or for a device that is subject to an upgrade promotion, the Partnership records a guarantee liability in accordance with the Partnership’s accounting policy. The guarantee liability related to this program, which was $2,840 at December 31, 2016 and $11,526 at December 31, 2015, was included in Advance billings and other on the accompanying consolidated balance sheets.

Sales of wireless device payment plan agreement receivables–During 2015 and 2016, Cellco established programs pursuant to a Receivables Purchase Agreement (RPA) to sell from time to time, on an uncommitted basis, eligible device payment plan receivables to a group of primarily relationship banks (Purchasers) on both a revolving (Revolving Program) and non-revolving (Non-Revolving Program) basis. Additionally, during September of 2016, Cellco entered into a device payment plan agreement receivables financing facility (the “ABS Financing Facility”) with a number of financial institutions. The receivables sold under the RPA and ABS are no longer considered assets of the Partnership.

Cellco continues to bill and collect on the receivables on behalf of the Partnership. Eligible receivables under the RPA exclude device payment plan agreements where a new customer was required to provide a down payment. The sales of receivables under the RPA did not have a material impact on the consolidated statements of income and comprehensive income. The proceeds received from the Purchasers are recorded within cash flows provided by operating activities on the consolidated statements of cash flows.

Receivables Purchase Agreement – Under the Non-Revolving Program, Los Angeles SMSA transfers the eligible receivables to Los Angeles Edge LLC (Seller or SPE). The Seller then sells the receivables to the Purchasers for upfront proceeds and additional consideration upon settlement of the receivables (the deferred purchase price). Under the Revolving Program, Los Angeles SMSA transfers the eligible device payment plan agreement receivables to the Seller. The Seller then sells the eligible receivables on a revolving basis, subject to a maximum funding limit, to the Purchasers. Sales of eligible receivables by the Sellers, once initiated, generally occur and are settled on a monthly basis. Customer payments made towards receivables sold under the Revolving Program will be available to purchase additional eligible device payment plan agreement receivables originated during the revolving period. Cellco elected to end the revolving period in July 2016.

During 2016, the Partnership sold $178,981 of receivables, net of allowances and imputed interest under the Revolving Program. The Partnership received proceeds from new transfers of $132,483 and proceeds from reinvested collections of $36,855, and recorded a deferred purchase price of $23,873.

During 2015, the Partnership sold $418,615 of receivables, net of allowances and imputed interest, under the Non-Revolving Program. In connection with this sale, proceeds from new transfers of $308,659 were received and a deferred purchase price of $117,587 was recorded. During 2015, the Partnership also sold $201,283 of receivables, net of allowances and imputed interest, under the Revolving Program. In connection with this sale, proceeds from new transfers of $168,854 were received and a deferred purchase price of $32,429 was recorded.

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Deferred purchase price –Under the RPA, the deferred purchase price was initially recorded at fair value, based on the remaining device payment amounts expected to be collected, adjusted, as applicable, for the time value of money and by the timing and estimated value of the device trade-in in connection with upgrades. The estimated value of the device trade-in considers prices expected to be offered to us by independent third parties. This estimate contemplates changes in value after the launch of a device. The initial fair value measurements are considered to be Level 3 measurements within the fair value hierarchy. The collection of the deferred purchase price is contingent on collections from customers. At December 31, 2016 and 2015, the Partnership’s deferred purchase price receivable was $95,827 and $148,941, respectively, which is held by the SPE and is included within Other assets on the consolidated balance sheets.

Variable interest entities (VIEs) –Under the RPA, the SPE’s sole business consists of the acquisition of the receivables from Los Angeles SMSA and the resale of the receivables to the Purchasers. The assets of the SPE are not available to be used to satisfy obligations of any Partnership entities other than the SPE’s. It was determined that the SPE is a VIE as it lacks sufficient equity to finance its activities. Given that Los Angeles SMSA has the power to direct the activities of the SPE that most significantly impact the SPE’s economic performance, Los Angeles SMSA is deemed to be the primary beneficiary of the SPE. As a result, the Los Angeles SMSA consolidates the assets and liabilities of the SPE into the consolidated financial statements (see Note 2).Under ABS, there is a Trust entity (the “Trust”) whose sole business consists of holding collected receivables which were previously sold by the Partnership to Cellco affiliates under the terms of the ABS Financing Facility. The activity of servicing the receivables and distribution of the cash collected is the activity that has the most significant impact on the Trust. Cellco is the master and special servicer for the receivables but does not have a direct variable interest in the Trust. The Partnership holds a beneficial interest in the Trust which represents the residual interest in the Trust and as such are variable interests. Since Cellco maintains decision making rights as servicer and has an obligation to absorb losses, it is the primary beneficiary in the Trust.

ABS Financing Facility – Under the terms of the ABS Financing Facility, the counterparties to the facility made advances under asset-backed loans backed by device payment plan agreement receivables for proceeds. There is a two year revolving period, which may be extended, during which Cellco may transfer additional receivables to an ABS Entity. Subject to certain conditions, Cellco may also remove receivables from the ABS Entity. Cellco may prepay the outstanding amounts of the loans without penalty, but in certain cases, with breakage costs. During 2016, the Partnership sold $389,800 of device payment plan agreement receivables, net of allowances and imputed interest to Cellco and received proceeds of $331,454 and recorded a beneficial interest of $58,346, which is included within Other assets on the consolidated balance sheets.

Beneficial interest – Under the ABS Financing Facility, the beneficial interest was initially recorded at fair value, based on the remaining device payment amounts expected to be collected, adjusted, as applicable, for the time value of money. This estimate contemplates changes in value after the launch of a device. The initial fair value measurements are considered to be Level 3 measurements within the fair value hierarchy. The collection of the beneficial interest is contingent on collections from customers. At December 31, 2016, the Partnership’s beneficial interest was $56,359.

Continuing involvement – The Partnership has continuing involvement related to the sold receivables as they may be responsible for absorbing additional credit losses pursuant to the RPA. The Partnership’s maximum exposure to loss related to the sold receivables is limited to the amount of the deferred purchase price, which was $95,827 and $148,941 as of December 31, 2016 and 2015, respectively. The maximum exposure to loss represents an estimated loss that would be incurred under severe, hypothetical circumstances whereby the Partnership would not receive the total portion of the proceeds withheld by the Purchasers. As the Partnership believes the probability of these circumstances occurring is remote, the maximum exposure to loss is not an indication of the Partnership’s expected loss. Additionally, Cellco has continuing involvement with the sold receivables as it services the receivables on behalf of the Partnership under the RPA and ABS Financing Facility. Cellco continues to service the customer and their related receivables, including facilitating customer payment collection. The Partnership has no continuing involvement related to the sold receivables and is not responsible for absorbing additional credit losses pursuant to the ABS Financing Facility. While servicing the receivables, the same policies and procedures are applied to the sold receivables that apply to owned receivables, and Cellco continues to maintain normal relationships with the customers. The credit quality of the customers served was consistent throughout the periods presented.

The outstanding device payment plan agreement receivables derecognized from the Partnership’s consolidated balance sheets, but which Cellco continues to service, was $609,990 and $527,002 (1) at December 31, 2016 and 2015, respectively.

(1)   The Partnership corrected the 2015 information in the preceding Paragraph, which was identified during the preparation of the 2016 consolidated financial statements. Management believes such amounts are immaterial to the previously issued consolidated financial statements.

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4.    WIRELESS LICENSES

Changes in the carrying amount of wireless licenses are as follows:

Balance at January 1, 2015		$	79,543
	Acquisitions		1,972,824
	Capitalized interest on wireless licenses		21,075
	Reclassifications, adjustments and other		309
Balance at December 31, 2015		$	2,073,751
	Acquisitions		–
	Capitalized interest on wireless licenses		1,697
	Reclassifications, adjustments and other		–
Balance at December 31, 2016		$	2,075,448

At December 31, 2016, $1,972,824 of wireless licenses were under development for commercial service for which the Partnership was capitalizing interest costs.

The average remaining renewal period of the Partnership’s wireless license portfolio was 7.0 years as of December 31, 2016.

Spectrum license transaction –On January 29, 2015, the FCC completed an auction of 65 MHz of spectrum, which it identified as the AWS-3 band. Cellco participated in that auction and was the high bidder on the licenses covering the Partnership service area. The licenses were deemed to be right to use assets and were allocated and recorded by the Partnership as wireless licenses. The cash payment made by the Partnership of $1,972,824 is classified within Acquisition of wireless licenses on the statement of cash flows for the year ended December 31, 2015.

5.    PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consist of the following as of December 31, 2016 and 2015:

	2016		2015
Land	$	7,716	$	7,716
Buildings and improvements (15-45 years)		940,411		836,428
Wireless plant and equipment (3-50 years)		4,165,458		3,973,684
Furniture, fixtures and equipment (3-10 years)		63,565		64,269
Leasehold improvements (5-7 years)		428,995		400,313
		5,606,145		5,282,410
Less: accumulated depreciation		(3,743,253)		(3,477,533)
Property, plant and equipment, net	$	1,862,892	$	1,804,877

Capitalized interest cost of $772 and $2,803, and capitalized network engineering costs of $24,656 and $26,754, were recorded during the years ended December 31, 2016 and 2015, respectively. Construction in progress included in certain classifications shown above, principally consists of wireless plant and equipment, amounted to $127,758 and $106,935, as of December 31, 2016 and 2015, respectively. Depreciation expense of $354,329, $353,975, and $343,883 was incurred during the years ended December 31, 2016, 2015 and 2014.

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6.    TOWER MONETIZATION TRANSACTION

Prior to the acquisition of the Partnership interest by Cellco in 2000, Vodafone Group PLC (“Vodafone”), then parent company of AirTouch Cellular, entered into agreements to sublease all of its unused space on up to 430 of its communications towers (“Sublease Agreement”) to SpectraSite Holdings, Inc. (“SpectraSite”) in exchange for $155,000. At various closings in 2001 and 2000, SpectraSite leased 274 communications towers owned and operated by the Partnership for $98,465. At December 31, 2016 and 2015, the Partnership has $18,967 and $23,932, respectively, recorded as deferred rent. The Sublease Agreement requires monthly maintenance fees for the existing physical space used by the Partnership’s cellular equipment. The Partnership paid $1,528, $2,152 and $3,944 to SpectraSite pursuant to the Sublease Agreement for the years ended December 31, 2016, 2015 and 2014, respectively, which is included in cost of service in the accompanying statements of income and comprehensive income.

During March 2015, Verizon Communications, the parent company of Cellco, entered into an agreement with American Tower Corporation (ATC) giving ATC exclusive rights to lease and operate approximately 11,300 wireless towers owned and operated by Cellco and its subsidiaries for an upfront payment of $5.0 billion (not in thousands). Verizon Communications also sold 162 towers to ATC for an upfront payment of $0.1 billion (not in thousands). Under the terms of the lease agreements, ATC has exclusive rights to lease and operate the towers over an average term of approximately 28 years. As the leases expire, ATC has fixed-price purchase options to acquire these towers based on their anticipated fair market values at the end of the lease terms. The Partnership has subleased capacity on the towers from ATC for a minimum of 10 years at current market rates, with options to renew. The Partnership participated in this arrangement and has leased 538 towers to ATC for an upfront payment of $221,653 and has sold 1 tower to ATC for an upfront payment of $616. The upfront payment, including the towers sold was $222,269 and was accounted for as deferred rent and as a financing obligation. The $95,634 accounted for as deferred rent was included in cash flows provided by operating activities and relates to the portion of the towers for which the right-of-use has passed to ATC. The deferred rent is being recognized on a straight-line basis over the Partnership’s average lease term of 30 years. At December 31, 2015, a financing obligation in the amount of $126,635 was included in cash flows provided by financing activities, which relates to the portion of the towers that continue to be occupied and used for the Partnership’s network operations. The Partnership makes a sublease payment to ATC for $1.9 per month per site, with annual increases of 2 percent. During 2016 and 2015, the Partnership made $12,498 and $10,260, respectively, of sublease payments to ATC, which is recorded as Repayments of financing obligation.

At December 31, 2016 and 2015, the balance of deferred rent was $89,605 and $93,057, respectively. At December 31, 2016 and 2015, the balance of the financing obligation was $125,296 and $125,510, respectively.

7.    CURRENT LIABILITIES

Accounts payable and accrued liabilities consist of the following as of December 31, 2016 and 2015:

	2016		2015
Accounts payable	$	189,081	$	174,883
Accrued liabilities		13,203		15,924
Accounts payable and accrued liabilities	$	202,284	$	190,807

Advance billings and other consist of the following as of December 31, 2016 and 2015:

	2016		2015
Advance billings	$	139,714	$	142,652
Customer deposits		17,880		12,355
Guarantee liability		2,840		11,526
Advance billings and other	$	160,434	$	166,533

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8.    TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

In addition to fixed asset purchases and right to use licenses substantially all of service revenues, equipment revenues, other revenues, cost of service, cost of equipment, and selling, general and administrative expenses represent transactions processed by affiliates (Cellco and its related parties) on behalf of the Partnership or represent transactions with affiliates. These transactions consist of (1) revenues and expenses that pertain to the Partnership which are processed by Cellco and directly attributed to or directly charged to the Partnership; (2) roaming revenue by customers of other Cellco affiliated markets within the Partnership market or Partnership customers’ cost when roaming in other Cellco affiliated markets; and (3) certain revenues and expenses that are processed or incurred by Cellco which are allocated to the Partnership based on factors such as the Partnership’s percentage of revenue streams, customers, gross customer additions, or minutes of use. These transactions do not necessarily represent arm’s length transactions and may not represent all revenues and costs that would be present if the Partnership operated on a standalone basis. Cellco periodically reviews the methodology and allocation bases for allocating certain revenues, operating costs, selling, general and administrative expenses to the Partnership. Resulting changes, if any, in the allocated amounts have historically not been significant.

Service revenues–Service revenues include monthly customer billings processed by Cellco on behalf of the Partnership and roaming revenues relating to customers of other affiliated markets that are specifically identified to the Partnership. For the years ended December 31, 2016, 2015, and 2014 roaming revenues were $486,262, $438,105 and $369,731, respectively. Service revenues also include long distance, data, and certain revenue reductions including revenue concessions that are processed by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco.

Equipmentrevenues–Equipment revenues include equipment sales processed by Cellco and specifically identified to the Partnership, as well as certain handset and accessory revenues, contra-revenues including equipment concessions, and coupon rebates that are processed by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco.

Other revenues –Other revenues include switch revenue and other fees and surcharges charged to the customer that are specifically identified to the Partnership. For the years ended December 31, 2016, 2015, and 2014 switch revenues were $8,570, $9,234, and $6,614, respectively.

Cost of service–Cost of service includes roaming costs relating to the Partnership’s customers roaming in other affiliated markets. For the years ended December 31, 2016, 2015 and 2014 roaming costs were $619,985, $547,672, and $477,949, respectively. Cost of service also includes cost of telecom, long distance and application content that are incurred by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco. The Partnership has lease agreements for the right to use additional spectrum owned by Cellco. See Note 2 for further information regarding this arrangement.

Cost of equipment–Cost of equipment is recorded at Cellco’s cost basis (see Note 2). Cost of equipment also includes certain costs related to handsets, accessories and other costs incurred by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco.

Selling, general and administrative –Selling, general and administrative expenses include commissions, customer billing, office telecom, customer care, salaries, sales and marketing and advertising expenses that are specifically identified to the Partnership as well as incurred by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco. The Partnership recorded $113,300, $117,409 and $118,342 in advertising costs for the years ended December 31, 2016, 2015 and 2014, respectively.

Property, plant and equipment–Property, plant and equipment includes assets purchased by Cellco and directly charged to the Partnership as well as assets transferred between Cellco and the Partnership (see Note 2).

Wireless licenses – Wireless licenses include the right to use assets that were allocated by Cellco and recorded by the Partnership in exchange for a $1,972,824 payment (see Note 4).

S-17

9.    COMMITMENTS

Cellco, on behalf of the Partnership, and the Partnership itself have entered into operating leases for facilities and equipment used in its operations. Lease contracts include renewal options that include rent expense adjustments based on the Consumer Price Index as well as annual and end-of-lease term adjustments. Rent expense is recorded on a straight-line basis. The noncancellable lease term used to calculate the amount of the straight-line rent expense is generally determined to be the initial lease term, including any optional renewal terms that are reasonably assured of occurring. Leasehold improvements related to these operating leases are amortized over the shorter of their estimated useful lives or the noncancellable lease term. For the years ended December 31, 2016, 2015 and 2014, the Partnership incurred a total of $117,771, $104,515 and $97,285 respectively, as rent expense related to these operating leases, which was included in Cost of service and Selling, general and administrative expenses in the accompanying statements of income and comprehensive income. Aggregate future minimum rental commitments under noncancellable operating leases, excluding renewal options that are not reasonably assured of occurring and remaining tower maintenance fees of $10,182 (see Note 6), for the years shown are as follows:

Years	Amount
2017	$	95,290
2018		84,812
2019		73,290
2020		49,838
2021		27,042
2022 and thereafter		131,324
Total minimum payments	$	461,596

The Partnership has also entered into certain agreements with Cellco, whereas the Partnership leases certain spectrum from Cellco that overlaps the Los Angeles metropolitan service area. Total rent expense under these spectrum leases amounted to $124,943 in 2016, $124,722 in 2015 and $110,044 in 2014, respectively, which is included in Cost of service in the accompanying consolidated statements of income and comprehensive income.

Based on the terms of these leases as of December 31, 2016, future spectrum lease obligations are expected to be as follows:

Years	Amount
2017	$	103,919
2018		93,249
2019		82,781
2020		72,312
2021		72,312
2022 and thereafter		882,177
Total minimum payments	$	1,306,750

The General Partner currently expects that any renewal option in the leases will be exercised.

S-18

10.    CONTINGENCIES

Cellco and the Partnership are subject to lawsuits and other claims including class actions, product liability, patent infringement, intellectual property, antitrust, partnership disputes, and claims involving relations with resellers and agents. Cellco is also currently defending lawsuits filed against it and other participants in the wireless industry alleging various adverse effects as a result of wireless phone usage. Various consumer class action lawsuits allege that Cellco violated certain state consumer protection laws and other statutes and defrauded customers through misleading billing practices or statements. These matters may involve indemnification obligations by third parties and/or affiliated parties covering all or part of any potential damage awards against Cellco and the Partnership and/or insurance coverage. All of the above matters are subject to many uncertainties, and the outcomes are not currently predictable.

The Partnership may be allocated a portion of the damages that may result upon adjudication of these matters if the claimants prevail in their actions. In none of the currently pending matters is the amount of accrual material to the Partnership. An estimate of the reasonably possible loss or range of loss with respect to these matters as of December 31, 2016 cannot be made at this time due to various factors typical in contested proceedings, including (1) uncertain damage theories and demands; (2) a less than complete factual record; (3) uncertainty concerning legal theories and their resolution by courts or regulators; and (4) the unpredictable nature of the opposing party and its demands. The Partnership continuously monitors these proceedings as they develop and will adjust any accrual or disclosure as needed. It is not expected that the ultimate resolution of any pending regulatory or legal matter in future periods will have a material effect on the financial condition of the Partnership, but it could have a material effect on the results of operations for a given reporting period.

11.    RECONCILIATION OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

		Balance at Beginning of the Year		Additions Charged to Operations		Write-offs Net of Recoveries		Balance at End of the Year
Accounts Receivable Allowances:
	2016	$	45,751	$	71,925	$	(70,038)	$	47,638
	2015		24,136		79,063		(57,448)		45,751
	2014		21,600		34,370		(31,834)		24,136
******

S-19

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

UNITED STATES CELLULAR CORPORATION
By:	/s/ Kenneth R. Meyers
	Kenneth R. Meyers President and Chief Executive Officer (principal executive officer)
By:	/s/ Steven T. Campbell
	Steven T. Campbell Executive Vice President-Finance, Chief Financial Officer and Treasurer (principal financial officer)
By:	/s/ Douglas D. Shuma
	Douglas D. Shuma Chief Accounting Officer (principal accounting officer)
By:	/s/ Kristin A. MacCarthy
	Kristin A. MacCarthy Vice President and Controller

Dated: February 24, 2017

Power of Attorney

Each person whose signature appears below constitutes and appoints LeRoy T. Carlson, Jr. as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place, and stead, in any and all capacities to sign any and all amendments to this Annual Report on Form 10-K under the Securities Exchange Act of 1934, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do so and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all the said attorney-in fact and agent or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ LeRoy T. Carlson, Jr.	Director	February 24, 2017
LeRoy T. Carlson, Jr.
/s/ Kenneth R. Meyers	Director	February 24, 2017
Kenneth R. Meyers
/s/ James Barr III	Director	February 24, 2017
James Barr III
/s/ Steven T. Campbell	Director	February 24, 2017
Steven T. Campbell
/s/ Walter C. D. Carlson	Director	February 24, 2017
Walter C. D. Carlson
/s/ J. Samuel Crowley	Director	February 24, 2017
J. Samuel Crowley
/s/ Ronald E. Daly	Director	February 24, 2017
Ronald E. Daly
/s/ Paul-Henri Denuit	Director	February 24, 2017
Paul-Henri Denuit
/s/ Harry J. Harczak, Jr.	Director	February 24, 2017
Harry J. Harczak, Jr.
/s/ Gregory P. Josefowicz	Director	February 24, 2017
Gregory P. Josefowicz
/s/ Peter L. Sereda	Director	February 24, 2017
Peter L. Sereda
/s/ Douglas D. Shuma	Director	February 24, 2017
Douglas D. Shuma
/s/ Cecelia D. Stewart	Director	February 24, 2017
Cecelia D. Stewart
/s/ Kurt B. Thaus	Director	February 24, 2017
Kurt B. Thaus

Index to Exhibits

Exhibit	Description of Documents
Number
3.1	Restated Certificate of Incorporation, is hereby incorporated by reference to Exhibit 3.1 to U.S. Cellular’s Current Report on Form 8-K dated November 10, 2014.
3.2	Restated Bylaws are hereby incorporated by reference to Exhibit3.1 to U.S. Cellular’s Current Report on Form8-K dated August 19, 2014.
4.1	Restated Certificate of Incorporation incorporated herein as Exhibit 3.1.
4.2	Restated Bylaws are incorporated herein as Exhibit3.2.
4.3	Revolving Credit Agreement, among U.S. Cellular, Toronto Dominion (Texas) LLC, as administrative agent, and the other lenders thereto, dated as of June 15, 2016, including Schedules and Exhibits, including the form of the subsidiary Guaranty and Subordination Agreement, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular's Form 8-K dated June 15, 2016.
4.4(a)	Indenture for Senior Debt Securities dated June1, 2002 between U.S.Cellular and The Bank of New York Mellon Trust Company, N.A., formerly known as BNY Midwest Trust Company of New York (“BNY”) is hereby incorporated by reference to Exhibit4.1 to FormS-3 dated May 31, 2013 (File No.333-188971).
4.4(b)	Formof Third Supplemental Indenture dated December3, 2003 between U.S.Cellular and BNY Midwest Trust Company, relating to $444,000,000 of U.S. Cellular’s 6.7% Senior Notes due 2033, is hereby incorporated by reference to Exhibit4.1 to U.S.Cellular’s Current Report on Form8-K dated December3, 2003.
4.4(c)	Formof Fifth Supplemental Indenture dated June21, 2004 between U.S. Cellular and BNY Midwest Trust Company, relating to $100,000,000 of U.S. Cellular’s 6.7% Senior Notes due 2033, is hereby incorporated by reference to Exhibit4.1 to U.S.Cellular’s Current Report on Form8-K dated June21, 2004.
4.4(d)	Form of Sixth Supplemental Indenture dated as of May 9, 2011 between U.S. Cellular and BNY Midwest Trust Company, related to $342,000,000 of U.S. Cellular’s 6.95% Senior Notes due 2060, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Current Report on Form 8-K dated May 9, 2011.
4.4(e)	Form of Seventh Supplemental Indenture dated as of December 8, 2014 between U.S. Cellular and BNY Midwest Trust Company, related to $275,000,000 of U.S. Cellular’s 7.25% Senior Notes due 2063, is hereby incorporated by reference to Exhibit 2 to U.S. Cellular’s Registration Statement on Form 8-A dated December 2, 2014.
4.4(f)	Form of Eighth Supplemental Indenture dated as of November 23, 2015 between U.S. Cellular and BNY Midwest Trust Company, related to $300,000,000 of U.S. Cellular’s 7.25% Senior Notes due 2064, is hereby incorporated by reference to Exhibit 2 to U.S. Cellular’s Registration Statement on Form 8-A dated November 17, 2015.
4.5	Indenture for Subordinated Debt Securities between U.S. Cellular and BNY is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Current Report on Form 8-K dated September 16, 2013.
4.6	Amended and Restated Term Loan Credit Agreement, among U.S. Cellular and CoBank, ACB, as administrative agent, and the other lenders thereto, dated as of June 15, 2016, including Schedules and Exhibits, including the forms of the subsidiary Guaranty and Subordination Agreement, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular's Form 8-K dated June 15, 2016.

9.1	Amendment and Restatement (dated April22, 2005) of Voting Trust Agreement dated June30, 1989 is hereby incorporated by reference to the Exhibitfiled on Amendment No.3 to the Schedule 13D dated May2, 2005 filed by the trustees of such voting trust with respect to TDS Common Shares.
10.1	Tax Allocation Agreement between U.S.Cellular and TDS is hereby incorporated by reference to an exhibit to U.S.Cellular’s Registration Statement on FormS-1 (Registration No.33-16975).
10.2	Cash Management Agreement between U.S.Cellular and TDS is hereby incorporated by reference to an exhibit to U.S.Cellular’s Registration Statement on FormS-1 (Registration No.33-16975).
10.3	Registration Rights Agreement between U.S.Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on FormS-1 (Registration No.33-16975).
10.4	Exchange Agreement between U.S.Cellular and TDS, as amended, is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on FormS-1 (Registration No.33-16975).
10.5	Intercompany Agreement between U.S.Cellular and TDS is hereby incorporated by reference to an exhibit to U.S.Cellular’s Registration Statement on FormS-1 (Registration No.33-16975).
10.6	Employee Benefit Plans Agreement between U.S.Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on FormS-1 (Registration No.33-16975).
10.7	Insurance Cost Sharing Agreement between U.S.Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on FormS-1 (Registration No.33-16975).
10.8(a)*	TDS Supplemental Executive Retirement Plan, as amended and restated, effective January1, 2009 is hereby incorporated by reference to Exhibit10.1 to TDS’ Current Report on Form8-K dated August 27, 2008.
10.8(b)*	Amendment Number One to the TDS Supplemental Executive Retirement Plan, is hereby incorporated by reference to Exhibit 10.2 to TDS’ Current Report on Form 8-K dated March 15, 2012.
10.8(c)*	Amendment Number Two to the TDS Supplemental Executive Retirement Plan, is hereby incorporated by reference to Exhibit 10.3 to TDS’ Current Report on Form 8-K dated November 3, 2014.
10.9*	U.S. Cellular Restated Compensation Plan for Non-Employee Directors is hereby incorporated by reference to Exhibit B to the U.S. Cellular’s Notice of Annual Meeting of Shareholders and Proxy Statement dated April 15, 2013, which was filed with the SEC on Schedule 14A on April 15, 2013.

10.10*	U.S. Cellular 2005 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit C to the U.S. Cellular Notice of Annual Meeting of Shareholders and Proxy Statement dated April 15, 2009, which was filed with the SEC on Schedule 14A on April 15, 2009.
10.11(a)*	U.S. Cellular 2013 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit B to the U.S. Cellular Notice of Annual Meeting of Shareholders and Proxy Statement dated April 12, 2016, which was filed with the SEC on Schedule 14A on April 12, 2016.
10.11(b)*	Amendment No. 1 to U.S. Cellular 2013 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit A to the U.S. Cellular Notice of Annual Meeting of Shareholders and Proxy Statement dated April 12, 2016, which was filed with the SEC on Schedule 14A on April 12, 2016.
10.12*	U.S. Cellular Form of Long-Term Incentive Plan Executive Deferred Compensation Agreement —Phantom Stock Account for officers is hereby incorporated by reference to Exhibit 10.5 to U.S. Cellular’s Current Report on Form 8-K dated May 14, 2013.
10.13(a)*	U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference to Exhibit10.1 to U.S. Cellular’s Current Report on Form8-K dated December10, 2007.
10.13(b)*	First Amendment to U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference to Exhibit10.6 to U.S. Cellular’s Current Report on Form8-K dated December9, 2008.
10.13(c)*	Second Amendment to U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference to Exhibit 10.12(c) to U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2012.

10.13(d)*	Election Formfor U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference to Exhibit 10.12(d) to U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2012.
10.14*	U.S. Cellular Form of Long-Term Incentive Plan Restricted Stock Unit Award Agreement for the President and CEO, is hereby incorporated by reference to Exhibit 10.4 to U.S. Cellular’s Current Report on Form 8-K dated March 14, 2016.
10.15*	U.S. Cellular Form of Long-Term Incentive Plan Stock Option Award Agreement for the President and CEO, is hereby incorporated by reference to Exhibit 10.3 to U.S. Cellular’s Current Report on Form 8-K dated March 14, 2016.
10.16*	Letter Agreement dated October 28, 2013 between U.S. Cellular and Jay Ellison, is hereby incorporated by reference to Exhibit 10.13 to U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2013.
10.17*	U.S. Cellular Form of Long-Term Incentive Plan Stock Option Award Agreement for Officers other than the President and CEO, is hereby incorporated by reference to Exhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated March 14, 2016.
10.18*	U.S. Cellular Form of Long-Term Incentive Plan Restricted Stock Unit Award Agreement for Officers other than the President and CEO, is hereby incorporated by reference to Exhibit 10.2 to U.S. Cellular’s Current Report on Form 8-K dated March 14, 2016.
10.19*	Letter Agreement between U.S. Cellular and Steven T. Campbell dated June 1, 2005 is hereby incorporated by reference to Exhibit 99.2 to U.S. Cellular’s Current Report on Form 8-K dated June 1, 2005.
10.20*	Form of Retention Bonus Letter to “named executive officers” other than the President and CEO is hereby incorporated by reference to Exhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated April 12, 2011.
10.21*	U.S. Cellular 2016 Officer Annual Incentive Plan effective January 1, 2016 is hereby incorporated by reference to Exhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated June 7, 2016.
10.22*	Guidelines for the Determination of Annual Bonus for President and Chief Executive Officer of U.S. Cellular, are hereby incorporated by reference to Exhibit 10.2 to U.S. Cellular’s Current Report on Form 8-K dated August 19, 2014.
10.23*	Letter Agreement dated July 25, 2013 between U.S. Cellular and Kenneth R. Meyers is hereby incorporated by reference to Exhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated July 25, 2013.
10.24**	Master Service Agreement entered into by United States Cellular Corporation and Amdocs Software Systems Limited on August 17, 2010 to develop a Billing and Operational Support System (“B/OSS”) with a new point-of-sale system to consolidate billing on one platform, is hereby incorporated by reference to Exhibit 10.8 to U.S. Cellular’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010.
10.25**	Software License and Maintenance Agreement entered into by United States Cellular Corporation and Amdocs Software Systems Limited on August 17, 2010 to develop a Billing and Operational Support System (“B/OSS”) with a new point-of-sale system to consolidate billing on one platform, is hereby incorporated by reference to Exhibit 10.9 to U.S. Cellular’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010.

10.26**	Master Statement of Work, dated as of November 25, 2014, between U.S. Cellular and Amdocs Software Systems, Ltd., is hereby incorporated by reference from Exhibit 10.26 to U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2014.
10.27*	Letter Agreement dated March 14, 2014 between U.S. Cellular and Deirdre Drake, is hereby incorporated by reference from Exhibit 10.27 to U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2014.
11	Statement regarding computation of earnings per share (included in Note 5 — Earnings Per Share in the Notes to Consolidated Financial Statements in Exhibit13).
12	Statement regarding computation of ratio of earnings to fixed charges for the years ended December31, 2016, 2015, 2014, 2013, and 2012.
13	Incorporated portions of 2016 Annual Report to Shareholders.
21	Subsidiaries of U.S. Cellular.
23.1	Consent of Independent Registered Public Accounting Firm—PricewaterhouseCoopers LLP.
23.2	Consent of Independent Registered Public Accounting Firm—Ernst & Young LLP.
31.1	Principal executive officer certification pursuant to Rule13a-14 of the Securities Exchange Act of 1934.
31.2	Principal financial officer certification pursuant to Rule13a-14 of the Securities Exchange Act of 1934.
32.1	Principal executive officer certification pursuant to Section1350 of Chapter63 of Title18 of the United States Code.
32.2	Principal financial officer certification pursuant to Section1350 of Chapter63 of Title18 of the United States Code.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
*	Indicates a management contract or compensatory plan or arrangement.
**	Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to the Securities Exchange Act of 1934, as amended. The application for confidential treatment has been granted.

EX-12

Exhibit 12

UNITED STATES CELLULAR CORPORATION

RATIO OF EARNINGS TO FIXED CHARGES

For the Year Ended December 31,

		2016		2015		2014		2013		2012
(Dollars in millions)
EARNINGS:
Income (loss) before income taxes1		$	82	$	404	$	(59)	$	258	$	205
Add (deduct):
	Equity in earnings of unconsolidated entities		(140)		(140)		(130)		(132)		(90)
	Distributions from unconsolidated entities		93		60		112		126		84
	Amortization of capitalized interest		6		6		6		4		1
	Income attributable to noncontrolling interests in subsidiaries that do not have fixed charges		(1)		(6)		(2)		(7)		(30)
			40		324		(73)		249		170
Add fixed charges:
	Consolidated interest expense2		113		86		57		44		42
	Interest portion (1/3) of consolidated rent expense		54		51		51		54		61
		$	207	$	461	$	35	$	347	$	273
FIXED CHARGES:
	Consolidated interest expense2	$	113	$	86	$	57	$	44	$	42
	Capitalized interest		1		3		6		18		18
	Interest portion (1/3) of consolidated rent expense		54		51		51		54		61
		$	168	$	140	$	114	$	116	$	121
RATIO OF EARNINGS TO FIXED CHARGES			1.23		3.29		*		2.99		2.26
1	Includes gain on sale of business and other exit costs, net of $114 million, $33 million and $247 million in 2015, 2014 and 2013, respectively, and loss on sale of business and other exit costs, net of $21 million in 2012.
	Includes gain on license sales and exchanges, net of $19 million, $147 million, $113 million and $255 million in 2016, 2015, 2014 and 2013, respectively.
	Includes gain on investments of $19 million in 2013 and loss on investments of $4 million in 2012.
2	Interest expense on income tax contingencies is not included in fixed charges.
*	Earnings in 2014 were inadequate to cover Fixed charges by $79 million.

EX-13

Exhibit 13
United States Cellular Corporation and Subsidiaries
FINANCIAL REPORTS CONTENTS		Page No.
Management’s Discussion and Analysis of Financial Condition and Financial Condition		1
	Executive Overview	1
	Terms used by U.S. Cellular	5
	Operational Overview	6
	Financial Overview	9
	Liquidity and Capital Resources	14
	Contractual and Other Obligations	19
	Consolidated Cash Flow Analysis	20
	Consolidated Balance Sheet Analysis	22
	Application of Critical Accounting Policies and Estimates	23
	Other Items	25
	Regulatory Matters	26
	Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement	27
	Market Risk	30
	Supplemental Information Relating to Non-GAAP Financial Measures	32
Financial Statements		35
	Consolidated Statement of Operations	35
	Consolidated Statement of Cash Flows	36
	Consolidated Balance Sheet – Assets	37
	Consolidated Balance Sheet – Liabilities and Equity	38
	Consolidated Statement of Changes in Equity	39
	Notes to Consolidated Financial Statements	42
Reports of Management		69
Report of Independent Registered Public Accounting Firm		71
Selected Consolidated Financial Data		72
Consolidated Quarterly Information (Unaudited)		73
Shareholder Information		74

United States Cellular Corporation Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with United States Cellular Corporation (“U.S. Cellular”) audited consolidated financial statements and notes for the year ended December 31, 2016 and with the description of U.S. Cellular’s business included herein.  Calculated amounts and percentages are based on the underlying actual numbers rather than the numbers rounded to millions as presented.

This report contains statements that are not based on historical facts, including the words “believes,” “anticipates,” “intends,” “expects” and similar words.  These statements constitute and represent “forward looking statements” as this term is defined in the Private Securities Litigation Reform Act of 1995.  Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward looking statements.  See Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement for additional information.

U.S. Cellular uses certain “non-GAAP financial measures,” and each such measure is identified in the MD&A.  A discussion of the reason U.S. Cellular determines these metrics to be useful and a reconciliation of these measures to their most directly comparable measures determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”) are included in the Supplemental Information Relating to Non-GAAP Financial Measures section within the MD&A of this Form 10-K Report.

1

General

U.S. Cellularowns, operates, and invests in wireless markets throughout the United States. U.S. Cellular is an 83%-owned subsidiary of Telephone and Data Systems, Inc. (“TDS”).  U.S. Cellular’s strategy is to attract and retain wireless customers through a value proposition comprised of a high-quality network, outstanding customer service, and competitive devices, plans, and pricing, all provided with a local focus.

OPERATIONS

• Serves customers with approximately 5.0 million connections including 4.5 million postpaid,0.5 million prepaid and 0.1 million reseller and other connections
• Operates in 23 states
• Employs approximately 6,300 employees
• Headquartered in Chicago, Illinois
• 6,415 cell sites including 4,040 owned towers in service

2

Significant Financial and Operating Matters

The following is a summary of certain selected information contained in the comprehensive MD&A that follows.  The overview does not contain all of the information that may be important.  You should carefully read the entire MD&A and not rely solely on the highlights.

• Net income attributable to U.S. Cellular shareholders was $48 million in 2016, compared to $241 million in 2015. The year-over-year decrease was attributable to several factors including(i)decreased gains from sales and exchanges of businesses and licenses; (ii) industry-wide price competition; and (iii) the impact of the discontinuation of the loyalty rewards program in 2015.  Diluted earnings per share was$0.56in 2016 compared to $2.84 one year ago.
• Total additions to Property, plant and equipment were $446million, including expenditures to (i) improve network supportand billing related systems and platforms; (ii) enhance U.S. Cellular’s network capabilities through the development of VoLTE technology; and (iii) construct new cell sites.

Significant Trends and Developments

U.S. Cellular’s mission is to provide exceptional wireless communication services which enhance consumers’ lives, increase the competitiveness of local businesses, and improve the efficiency of government operations in the mid-sized and rural markets served.

Network and Technology:

• U.S. Cellular deployed 4G LTE as a result of its strategic initiative to enhance its network.  4G LTE reaches 99% of postpaid connections and 98% of cell sites.  The adoption of data-centric smartphones and connected devices is driving significant growth in data traffic.  At the end of the fourth quarterof 2016, 79% of postpaid connections had 4G capable devices, with the LTE network handling 91% of data traffic. 

• U.S. Cellular continues to devote efforts toenhance its network capabilities with the deployment of VoLTE technology and plans a multi-year roll out beginning with one market in early 2017.  VoLTE,when deployed commercially, will enable customers to utilize the LTE network for both voice and data services, and will enable enhanced services such ashigh definition voice, video calling and simultaneous voice and data sessions.  The deployment of VoLTE also will expand U.S. Cellular’s ability to offerroaming services to additional carriers.

• U.S. Cellular is committed to continuous innovation to provide customers in the markets it serves with the latest technology that can enhance their lives and businesses.  During the third quarter of 2016, U.S. Cellular successfully tested 5G technology in both indoor and outdoor environments for the first time.The company plans additional tests geared towards understanding the propagation characteristics of the new technology and contributing to thedevelopment of 5G standards.  When deployed commercially, 5G technology is expected to help address customers’ growing demand for data services aswell as create opportunities for new services requiring high speed and low latency.

3

Asset Management:

• U.S. Cellular continued to enhance its spectrum position and monetize non-strategic assets by entering into multiple agreements with third parties.  Certainof these agreements involve the purchase of licenses for cash, while others involve the exchange of licenses in non-operating markets for other licenses inoperating markets and cash.  As a result of the closing of multiple exchange agreements in 2016, U.S. Cellularreceived $14 million of cash and recognized gains of $19 million. 

• U.S. Cellular participated in FCC Auction 97 indirectly through its limited partnership interest in Advantage Spectrum. Advantage Spectrum was the provisional winning bidder for 124 licenses for an aggregate winning bid of $338 million, after its designated entity discount of 25%. Advantage Spectrum’s bid amount, less the upfront payment of $60 million paid in 2014, was paid to the FCC in March 2015. These licenses were granted by the FCC in July 2016.

• In July 2016, the FCC announced U.S. Cellular as a qualified bidder in the FCC’s forward auction of 600 MHz spectrum licenses, referred to as Auction 1002, which commenced in August 2016.The Clock Phase of the auction was completed in February 2017.  See “Regulatory Matters – FCC Auction 1002” for a summary of U.S. Cellular’s participation in Auction 1002.

See Note 6 — Acquisitions, Divestitures and Exchanges foradditional information related to these transactions.

Products and Services:

• U.S. Cellular is focused on expanding its solutions available to business and government customers, including a growing suite of connected machine-to-machinesolutions and software applications across various categories.  U.S. Cellular will continue to enhance its advanced wireless services and connected solutions for consumer, businessand government customers.

• U.S. Cellular continued to leverage competitive value-based pricing for its plans and services, including equipment installment plan offerings.  Effective in September 2016, new postpaid handset sales to retail consumers are made under equipment installment plans only; business and government customers can still purchase equipment under either installment plans or alternative plans that are subject to a service contract.

• U.S. Cellular offers a wide range of accessories, including wireless basics such as cases, screen protectors, chargers, and memory cards as well as an ever growing assortment of consumer electronics such as headphones, speakers, and hands-free devices.  In addition, the company recently introduced an assortment of home automation products (e.g., cameras, sensors, thermostats).

• U.S. Cellular continues to offer device service programs that provide customers a simple process to replace a damaged or defective device through a retail store or via direct mail. U.S. Cellular also offers its Device Protection+ program which includes overnight delivery of a replacement devicefor lost and stolen devices.  In 2016, U.S. Cellular launched Device Protection+ Advanced, which includes 100GB of data backup, TechSupport+, and AppleCare services for Apple iOS customers.

4

Terms Used by U.S. Cellular

All defined terms in this MD&A are used as defined in the Notes to Consolidated Financial Statements, and additional terms are defined below:

• 4G LTE – fourth generation Long-Term Evolution which is a wireless broadband technology.
• 5G – fifth generation wireless broadband technology.
• Account – represents an individual or business financially responsible for one or multiple associated connections.  An account may include a variety oftypes of connections such as handsets and connected devices.
• Auction 97 – an FCC auction of AWS-3 spectrum licenses that ended in January 2015.
• Auctions 1000, 1001, and 1002 – Auction 1000 is an FCC auction of 600 MHz spectrum licenses that started in 2016 and continued into 2017 involving: (1) a “reverse auction” inwhich broadcast television licensees submit bids to voluntarily relinquish spectrum usage rights in exchange for payments (referred to as Auction 1001);(2) a “repacking” of the broadcast television bands in order to free up certain broadcast spectrum for other uses; and (3) a “forward auction” of licensesfor spectrum cleared through this process to be used for wireless communications (referred to as Auction 1002).
• Churn Rate – represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churnrate for each respective period.
• Connections - individual lines of service associated with each device activated by a customer. This includes smartphones, feature phones, tablets,modems, and machine-to-machine devices.
• Eligible Telecommunications Carrier (“ETC”) – designation by states for providing specified services in “high cost” areas which enables participation in universal service support mechanisms.
• FCC – Federal Communications Commission.
• Gross Additions – represents the total number of new connections added during the period, without regard to connections that were terminated duringthat period.
• Machine-to-Machine or M2M – technology that involves the transmission of data between networked devices, as well as the performance of actions bydevices without human intervention. U.S. Cellular sells and supports M2M solutions to customers, provides connectivity for M2M solutions via the U.S.Cellular network, and has agreements with device manufacturers and software developers which offer M2M solutions.
• Net Additions – represents the total number of new connections added during the period, net of connections that were terminated during that period.
• Postpaid Average Billings per Account (“Postpaid ABPA”) – non-GAAP metric is calculated by dividing total postpaid service revenues plusequipment installment plan billings by the average number of postpaid accounts and by the number of months in the period.
• Postpaid Average Billings per User (“Postpaid ABPU”) – non-GAAP metric is calculated by dividing total postpaid service revenues plus equipmentinstallment plan billings by the average number of postpaid connections and by the number of months in the period.
• Postpaid Average Revenue per Account (“Postpaid ARPA”) – metric is calculated by dividing total postpaid service revenues by the averagenumber of postpaid accounts and by the number of months in the period.
• Postpaid Average Revenue per User (“Postpaid ARPU”) – metric is calculated by dividing total postpaid service revenues by the average number ofpostpaid connections and by the number of months in the period.
• Retail Connections – the sum of postpaid connections and prepaid connections.
• Smartphone Penetration – is calculated by dividing postpaid smartphone connections by postpaid handset connections.
• Universal Service Fund (“USF”) – a system of telecommunications collected fees and support payments managed by the FCC intended to promoteuniversal access to telecommunications services in the United States.
• VoLTE – Voice over Long-Term Evolution is a technology specification that defines the standards and procedures for delivering voice communicationsand related services over 4G LTE networks.

5

Operational Overview

		YTD 2016	YTD 2015	YTD 2014
	Postpaid Connections
	Gross Additions	773,000	831,000	940,000
	Net Additions	73,000	111,000	31,000
	Churn	1.31%	1.39%	1.80%
	Handsets	1.18%	1.30%	1.73%
	Connected Devices	2.11%	2.20%	3.01%
	Connections – end of period	4,482,000	4,409,000	4,298,000
	Prepaid Connections	484,000	387,000	348,000
	Retail Connections – end of period	4,966,000	4,796,000	4,646,000
2016-2015 Commentary Postpaid customers comprised approximately 90% of U.S. Cellular’s retail customers at December 31, 2016.  U.S. Cellular believes the decrease in postpaid net additions in 2016 is a result of competitive pressures and aggressive promotional activity in the marketplace.  Postpaid churn declined year over year due to enhancements in the customer experience and improvement in the overall credit mix of gross additions. 2015-2014 Commentary Postpaid customers comprised approximately 92% of U.S. Cellular’s retail customers at December 31, 2015.  U.S. Cellular believes the increase in postpaid net additionsin 2015 is a result of competitive products and services priced to offer the best value to customers, improved speed to market for product offerings, andexpanded equipment installment plan offerings.  U.S. Cellular also believes postpaid churn declined from 2014 levels due to an improved customer experience and strong retention programs.

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2016-2015 Commentary Smartphones represented 92% of total postpaid handset sales in 2016.  As a result, smartphone penetration increased to 79% ofthe postpaid handset base as of December 31, 2016 versus 74% as of December 31, 2015.  Smartphone customers generally use more data than feature phone customers, thereby driving growth in service revenues. Continued growth in customer usage related to data services and products may result in increased operating expenses and the need for additional investment in spectrum, network capacity and network enhancements. 2015-2014 Commentary Smartphones represented 88% of total postpaid handset sales in 2015.  As a result, smartphone penetration increased to 74%of the postpaid handset base as of December 31, 2015, up from65% as of December 31, 2014.

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Postpaid Revenue

Year Ended December 31,		2016		2015		2014
Average Revenue Per User (ARPU) 1		$	46.96	$	54.50	$	56.75
Average Billings Per User (ABPU) 1,2		$	56.12	$	59.74	$	57.78
Average Revenue Per Account (ARPA) 1		$	124.09	$	136.90	$	133.19
Average Billings Per Account (ABPA) 1,2		$	148.29	$	150.07	$	135.61
1	The discontinuation of the loyalty rewards points program had the effect of increasing Postpaid ARPU/ABPU and Postpaid ARPA/ABPA by $1.12 and $2.82, respectively, in 2015.
2	Postpaid ABPU and Postpaid ABPA are non-GAAP financial measures.  Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of these measures.

2016-2015 Commentary

Postpaid ARPU and Postpaid ARPA decreased in 2016 due primarilyto industry-wide price competition, discounts on shared data plans provided to customers on equipmentinstallment plans and those providing their own device at the time of activation or renewal, and the $58 million impact of the discontinuation of the loyalty rewards points program in 2015.  These factors were partially offset by the impact of continued adoption of smartphones and the related increase in service revenues from data usage.

Equipment installment plans increase equipment sales revenue as customers pay for their wireless devices in installments at a total device price that is generallyhigher than the device price offered to customers in conjunction with alternative plans that are subject to a service contract. Equipment installment plans alsohave the impact of reducing service revenues as many equipment installment plans provide for reduced monthly access charges. In order to show the trends intotal service and equipment revenues received, U.S. Cellular has presented Postpaid ABPU and Postpaid ABPA, which are calculated as Postpaid ARPU and Postpaid ARPA plus average monthly equipment installment plan billings per connection and account, respectively.

Equipment installment plan billings increased in 2016 when compared to 2015 due to increased adoption of equipment installment plansby postpaid customers. Postpaid ABPU and ABPA decreased in 2016 as the increase in equipment installment plan billings was more than offset by thedecline in Postpaid ARPU and ARPA discussed above. U.S. Cellular expects the adoption and penetration of equipment installment plans to continue toincrease as plan offerings shifted more toward equipment installment plans in the third quarter of 2016 as discussed in the Significant Trends and Developments section within this MD&A.

2015-2014 Commentary

Postpaid ARPU decreased in 2015 due to industry-wide price competition and discounts on shared data plans provided to customers on equipment installment plans and those providing their own device at the time of activation or renewal, partially offset by the continued adoption of smartphones and shared data plans.  The increase in postpaid ARPA is the result of increased postpaid connections per account driven by increased connected device penetration. 

U.S. Cellular implemented equipment installment plans on a broad basis in 2014.

8

Financial Overview

Components of Operating Income (Loss)

Year Ended December 31,	2016		2015		2014		2016 vs. 2015	2015 vs. 2014
(Dollars in millions)
Retail service	$	2,700	$	2,994	$	3,013	(10)%	(1)%
Inbound roaming		152		192		224	(21)%	(14)%
Other		178		164		161	8%	2%
Service revenues		3,030		3,350		3,398	(10)%	(1)%
Equipment sales		909		647		495	41%	31%
Total operating revenues		3,939		3,997		3,893	(1)%	3%
System operations (excluding Depreciation,
amortizationand accretion reported below)		760		775		770	(2)%	1%
Cost of equipment sold		1,081		1,053		1,193	3%	(12)%
Selling, general and administrative		1,480		1,494		1,592	(1)%	(6)%
		3,321		3,322		3,555	-	(7)%
Operating cash flow*		618		675		338	(8)%	100%
Depreciation, amortization and accretion		618		607		606	2%	-
(Gain) loss on asset disposals, net		22		16		21	36%	(24)%
(Gain) loss on sale of businessand other exit   costs, net		–		(114)		(33)	100%	>(100)%
(Gain) loss on license salesand exchanges, net		(19)		(147)		(113)	87%	(30)%
Total operating expenses		3,942		3,684		4,036	7%	(9)%
Operating income (loss)	$	(3)	$	313	$	(143)	>(100)%	>100%
Net income (loss)	$	49	$	247	$	(47)	(80)%	>100%
Adjusted EBITDA*	$	816	$	852	$	479	(4)%	77%
Capital expenditures	$	446	$	533	$	558	(16)%	(4)%
*    Represents a non-GAAP financial measure. Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

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Service revenues consist of:

• Retail Service - Charges for access, airtime, roaming, recovery of regulatory costs and value added services, including data services and products
• Inbound Roaming - Charges to other wireless carriers whose customers use U.S. Cellular’s wireless systems when roaming

• Other – Primarily amounts received from the Federal USF and tower rental revenues

Equipment revenues consist of:

• Sales of wireless devices and related accessories to new and existing customers, agents, and third-party distributors

Key components of changes in the statement of operations line items were as follows:

2016-2015 Commentary

Total operating revenues

Service revenues decreased as a result of (i) a continued decrease in retail service revenues and resulting ARPU and ARPA primarily driven by industry-wide price competition and discounts on shared data plans provided to customers on equipment installment plans and those providing their own device at the time of activation or renewal; (ii) the $58 million of revenue recognized in 2015 from unredeemed rewards points upon termination of U.S. Cellular’s rewards program; and (iii) a decrease in inbound roaming revenue driven by lower roaming rates.  Such reductions were partially offset by an increase in average connections base and continued adoption of smartphones.

Federal USF revenue remained flat year over year at $92 million. Pursuant to the FCC's Reform Order (“Reform Order”), U.S. Cellular’s current Federal USF support was to be phased down at the rate of 20% per year beginning July 1, 2012. The Phase II Mobility Fund was not operational as of July 2014 and, therefore, as provided by the Reform Order, the phase down was suspended at 60% of the baseline amount until such time as the FCC takes steps to adopt an order to recommence the phase down. On February 23, 2017, the FCC adopted an order concerning the Mobility Fund II and the resumption of the phase down. The text of the order has not been released but the press release issued by the FCC following adoption of the order indicates that the order will establish a Mobility Fund II support mechanism of $453 million annually for ten years to be distributed through a market-based, multi-round reverse auction and that the phase down of unnecessary legacy support from the Federal USF will commence on the first day of the month following the completion of the auction and will conclude two years later. U.S. Cellular cannot predict at this time when the Mobility Fund II auction will occur, when the phase down period for its existing legacy support from the Federal USF will commence, or whether the Mobility Fund II auction will provide opportunities to the Company to offset any loss in existing support. However, U.S. Cellular currently expects that its legacy support will continue at the existing level for 2017.

Equipment sales revenues increased year over year due primarily to an increase in average revenue per device sold driven by the increase in sales under equipment installment plans, an overall increase in the number of devices sold, and a shift to smartphones.  Equipment installment plan sales contributed $710 million and $351 million in 2016 and 2015, respectively.Equipment installment plan connections represented 44% and 27% of total postpaid connections as of December 31, 2016 and 2015, respectively.

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System operations expenses

System operations expenses decreased by a modest amount in 2016 when compared to 2015.  U.S. Cellular expects system operations expenses to decrease in 2017 due primarily to lower average rates for roaming usage. 

Cost of equipment sold

Cost of equipment sold increased primarily as the result of a shift to smartphone sales and an overallincrease in devices sold, partially offset by a decrease in the average cost per device sold driven by lower cost smartphones and connected devices.  Cost of equipment sold in 2016 included $758 million related to equipment installment plan sales compared to $449 million in 2015.  Loss on equipment, defined as Equipment sales revenues less Cost of equipment sold, was $172 million and $406 million for 2016 and 2015, respectively.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased by a modest amount in 2016 when compared to 2015.  This decrease was attributable to various expense reductions that were partially offset by a $13 million expense recognized in the third quarter of 2016 as a result of the termination of a naming rights agreement.

Depreciation, amortization and accretion expenses

Depreciation, amortization and accretion expenses increased by a modest amount in 2016 when compared to 2015.

(Gain) loss on asset disposals, net

The increase in Loss on asset disposals was primarily driven by more disposals of certain network assets.

(Gain) loss on sale of business and other exit costs, net

The net gain in 2015 was due primarily to a $108 million gain recognized on the sale of towers and certain related contracts, assets and liabilities.See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information.

(Gain) loss on license sales and exchanges, net

The net gains in 2016 and 2015 were due to license exchange transactionswith third parties.See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information

2015-2014 Commentary

Total operating revenues

Service revenues decreased as a result of (i) a decrease in retail service revenues driven by industry-wide price competition, includingdiscounts on shared data plans provided to customers on equipment installment plans and those providing their own device at the time of activation or renewal; and (ii) reductions in inbound roaming revenue driven by lower roaming rates.  Such reductions were partially offset by an increase in the average customer base, continued adoption of shared data plans, and the $58 million of revenue recognized in 2015 from unredeemed rewards points upon termination of U.S. Cellular’s rewards program.

Federal USF revenue remained flat year over year at $92 million.

Equipment sales revenues increased due primarily to an increase in average revenue per device sold driven by the increase in sales under equipment installment plans, a shift to smartphones and connected devices and an increase in accessory sales, partially offset by a decrease in the number of devices sold.  Equipment installment plan sales contributed $351 million and $190 million in 2015 and 2014, respectively.  Equipment installment plan connections represented 27% and 12% of total postpaid connections as of December 31, 2015 and 2014, respectively.

System operations expenses

System operations expenses increased by a modest amount in 2015 when compared to 2014.

Cost of equipment sold

Cost of equipment sold decreased as a result of an overallreduction in devices sold and a decrease in the average cost per device sold driven by the lower cost of smartphones and connected devices.  Cost of equipment sold in 2015 included $449 million related to equipment installment plan sales compared to $280 million in 2014.  Loss on equipmentwas $406 million and $698 million for 2015 and 2014, respectively.

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Selling, general and administrative expenses

Selling, general and administrative expenses decreased due primarily to lower agent and retail commission expenses driven by fewer activations and renewals, lower consulting expenses related to the billing system and customer service operations, and lower rates for roamer administration.  Such reductions were partially offset by increased advertising expenses.

Depreciation, amortization and accretion expenses

Depreciation, amortization and accretion expenses remained relatively flat year over year.

(Gain) loss on asset disposals, net

The decrease in Loss on asset disposals was due primarily to fewer write-offs and disposals of certain network assets.

(Gain) loss on sale of business and other exit costs, net

The net gain in 2015 was due primarily to a $108 million gain recognized on the sale of towers and certain related contracts, assets and liabilities. The net gain in 2014 was due primarily to $29 million of gain related to the impact of the sale of certain customers and licenses to Sprint in 2013.See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information.

(Gain) loss on license sales and exchanges, net

The net gains in 2015 and 2014 were due to license exchange transactionswith third parties. See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information.

Components of Other Income (Expense)

Year Ended December 31,	2016		2015		2014		2016 vs. 2015	2015 vs. 2014
(Dollars in millions)
Operating income (loss)	$	(3)	$	313	$	(143)	>(100)%	>100%
Equity in earnings of unconsolidated entities		140		140		130	-	8%
Interest and dividend income		57		36		12	57%	>100%
Interest expense		(113)		(86)		(57)	(31)%	(50)%
Other, net		1		1		(1)	10%	>100%
Total investment and other income		85		91		84	(7)%	7%
Income (loss) before income taxes		82		404		(59)	(80)%	>100%
Income tax expense (benefit)		33		157		(12)	(79)%	>100%
Net income (loss)		49		247		(47)	(80)%	>100%
Less: Net income (loss) attributable to noncontrolling
interests, net of tax		1		6		(4)	(71)%	>100%
Net income (loss) attributable
to U.S. Cellular shareholders	$	48	$	241	$	(43)	(80)%	>100%

2016-2015 Commentary

Equity in earnings of unconsolidated entities

Equity in earnings of unconsolidated entities represents U.S. Cellular’s share of net income from entities in which it has a noncontrolling interest and that are accounted for by the equity method. U.S. Cellular’s investment in the Los Angeles SMSA Limited Partnership (“LA Partnership”) contributed $71 million and $74 million to Equity in earnings of unconsolidated entities in 2016 and 2015, respectively.

See Note 8 – Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information.

Interest and dividend income

Interest and dividend income increased due to imputed interest income recognized on equipment installment plans of $51million and $34 million in 2016 and 2015, respectively. See Note 3 — Equipment Installment Plans in the Notes to Consolidated Financial Statements for additional information.

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Interest expense

The increase in Interest expense from 2015 to 2016 is primarily driven by U.S. Cellular’s issuance of $300 million of 7.25% Senior Notes due 2064 in November 2015 and borrowing of $225 million on its senior term loan facility that was drawn in July 2015.

Income tax expense

The effective tax rates on Income before income taxes for 2016 and 2015 were 39.7% and 38.7%, respectively.  The effective tax rates for both years are consistent with a normalized tax rate inclusive of federal and state tax.  Discrete items did not have a significant impact on the effective tax rates in either year.

See Note 4 — Income Taxes in the Notes to Consolidated Financial Statements for a discussion of income tax expense and the overall effective tax rate on Income before income taxes.

Net income (loss) attributable to noncontrolling interests, net of tax

The decrease from2015to2016is due tolower income from certain partnerships in2016.

2015-2014 Commentary

Equity in earnings of unconsolidated entities

U.S. Cellular’s investment in the Los Angeles SMSA Limited Partnership (“LA Partnership”) contributed $74 million and $72 million to Equity in earnings of unconsolidated entities in 2015 and 2014, respectively.  See Note 8 – Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information.

Interest and dividend income

Interest and dividend income increased due to imputed interest income recognized on equipment installment plans of $34 million and $9 million in2015 and 2014, respectively. See Note 3 — Equipment Installment Plans in the Notes to Consolidated Financial Statements for additional information.

Interest expense

Interest expense increased from 2014 to 2015 due primarily to U.S. Cellular’s issuance of $275 million of 7.25% Senior Notes due 2063 in December 2014, borrowing of $225 million on its senior term loan facility that was drawn in July 2015, and the issuance of $300 million of 7.25% Senior Notes due 2064 in November 2015.

Income tax expense

The effective tax rates on Income before income taxes for 2015 and 2014 were 38.7% and 20.1%, respectively.  The effective tax rate for 2015 is consistent with a normalized tax rate inclusive of federal and state tax and does not include any significant discrete items.  The effective tax rate for 2014 includes a tax expense of $6 million related to a valuation allowance recorded against certain state deferred tax assets. The effective tax rate in 2014 is lower due to the effect of this item combined with the loss in 2014 in Income (loss) before income taxes.

See Note 4 — Income Taxes in the Notes to Consolidated Financial Statements for a discussion of income tax expense and the overall effective tax rate on Income before income taxes.

Net income (loss) attributable to noncontrolling interests, net of tax

The increase from2014to2015is due to higher income from certain partnerships in2015.

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Liquidity and Capital Resources

Sources of Liquidity

U.S. Cellular operates a capital-intensive business.  Historically, U.S. Cellular has used internally-generated funds and also has obtained substantial funds from external sources for general corporate purposes.  In the past, U.S. Cellular’s existing cash and investment balances, funds available under its revolving credit facility, funds from other financing sources, including a term loan and other long-term debt, and cash flows from operating, investing and financing activities, including sales of assets or businesses, provided sufficient liquidity and financial flexibility for U.S. Cellular to meet its normal day-to-day operating needs and debt service requirements, to finance the build-out and enhancement of markets and to fund acquisitions, primarily of spectrum licenses.  There is no assurance that this will be the case in the future.  See Market Risk for additional information regarding maturities of long-term debt.

Although U.S. Cellular currently has a significant cash balance, in certain recent periods, U.S. Cellular has incurred negative free cash flow (defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment) and this will continue in the future if operating results do not improve or capital expenditures are not reduced.  U.S. Cellular currently expects to have negative free cash flow in 2017.  However, U.S. Cellular believes that existing cash and investment balances, funds available under its revolving credit facility, and expected cash flows from operating and investing activities provide liquidity for U.S. Cellular to meet its normal day-to-day operating needs and debt service requirements for the coming year. 

U.S. Cellular may require substantial additional capital for, among other uses, funding day-to-day operating needs, working capital, acquisitions of providers of wireless telecommunications services, spectrum license or system acquisitions, system development and network capacity expansion, debt service requirements, the repurchase of shares, the payment of dividends, or making additional investments.  It may be necessary from time to time to increase the size of the existing revolving credit facility, to put in place a new credit facility, to explore additional sources of liquidity through the securitization of equipment installment plan receivables, or to obtain other forms of financing in order to fund potential expenditures.  U.S. Cellular’s liquidity would be adversely affected if, among other things, U.S. Cellular is unable to obtain short or long-term financing on acceptable terms, U.S. Cellular makes significant spectrum license purchases, the LA Partnership discontinues or reduces distributions compared to historical levels, or Federal USF and/or other regulatory support payments continue to decline.  In addition, although sales of assets or businesses by U.S. Cellular have been an important source of liquidity in recent periods, U.S. Cellular does not expect a similar level of such sales in the future, which will reduce a source of liquidity.  U.S. Cellular’s credit rating has declined to sub-investment grade beginning in 2014.   

There can be no assurance that sufficient funds will continue to be available to U.S. Cellular or its subsidiaries on terms or at prices acceptable to U.S. Cellular.  Insufficient cash flows from operating activities, further changes in its credit ratings, defaults of the terms of debt or credit agreements, uncertainty of access to capital, deterioration in the capital markets, reduced regulatory capital at banks which in turn limits their ability to borrow and lend, other changes in the performance of U.S. Cellular or in market conditions or other factors could limit or restrict the availability of financing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its acquisition, capital expenditure and business development programs, reduce the acquisition of spectrum licenses, and/or reduce or cease share repurchases and/or the payment of dividends.  U.S. Cellular cannot provide assurance that circumstances that could have a material adverse effect on its liquidity or capital resources will not occur.  Any of the foregoing would have an adverse impact on U.S. Cellular’s businesses, financial condition or results of operations.

Cash and Cash Equivalents

Cash and cash equivalents include cash and money market investments. The primary objective of U.S. Cellular’s Cash and cash equivalents is for use in its operations and acquisition, capital expenditure and business development programs.

At December 31, 2016, U.S. Cellular’s cash and cash equivalents totaled $586 million compared to $715 million at December 31, 2015 and $212 million at December 31, 2014.  The majority of U.S. Cellular’s Cash and cash equivalents was held in bank deposit accounts and in money market funds that invest exclusively in U.S. Treasury Notes or in repurchase agreements fully collateralized by such obligations. U.S. Cellular monitors the financial viability of the money market funds and direct investments in which it invests and believes that the credit risk associated with these investments is low.

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Financing

Revolving Credit Facility

At December 31, 2016, U.S. Cellular had a revolving credit facility available for general corporate purposes.  In June 2016, U.S. Cellular entered into a $300 million revolving credit agreement with certain lenders and other parties.  As a result of the new agreement, U.S. Cellular’s revolving credit agreement due to expire in December 2017 was terminated.  Amounts under the revolving credit facility may be borrowed, repaid and reborrowed from time totime until maturity in June 2021.  As of December 31, 2016, there were no outstanding borrowings under the revolving credit facility, except for letters of credit, and U.S. Cellular’s unused capacity under its revolving credit facility was $298 million. The continued availability of the revolving credit facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and provide representations on certain matters at the time of each borrowing.U.S. Cellular believes that it was in compliance as of December 31, 2016 with all of the financial and other covenants and requirements set forth in its revolving credit facility.

See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information regarding the revolving credit facility.

Term Loan

In January 2015, U.S. Cellular entered into a senior term loan credit facility.  In July 2015, U.S. Cellular borrowed the full amount of $225 million available under this facility in two separate draws.  This term loan credit facility was amended and restated in June 2016.  Principal reductions are due and payable inquarterlyinstallments of $3 million beginning in March 2016 through December 2021, and the remaining unpaid balance will be due and payable in January 2022.This facilitywas entered into for general corporate purposes, including working capital, spectrum purchases and capital expenditures.

The continued availability of the term loan facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and make representations regarding certain matters at the time of each borrowing, that are substantially the same as those in U.S. Cellular’s revolving credit facility described above.  U.S. Cellular believes that it was in compliance at December 31, 2016 with all of the financial and other covenants and requirements set forth in the term loan facility.

See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information regarding the term loan.

Financial Covenants

As noted above, the revolving credit facility and senior term loan facility require U.S. Cellular to comply with certain affirmative and negative covenants, including certain financial covenants.  In particular, under these agreements, beginning June 15, 2016, U.S. Cellular is required to maintain the Consolidated Interest Coverage Ratio at a level not lower than 3.00 to 1.00 as of the end of any fiscal quarter.  U.S. Cellular is also required to maintain the Consolidated Leverage Ratio at a level not to exceed 3.25 to 1.00 as of the end of any fiscal quarter through June 30, 2019.  From July 1, 2019 and thereafter, the Consolidated Leverage Ratio is not to exceed 3.00 to 1.00 as of the end of any fiscal quarter.  U.S. Cellular believes that it was in compliance at December 31, 2016 with all such covenants.  However, depending on U.S. Cellular’s future financial performance, there is a risk that U.S. Cellular could fail to satisfy the financial covenants in the future.  If U.S. Cellular breaches a financial or other covenant of either of these agreements, it would result in a default under that agreement, and could involve a cross-default under other debt instruments.  This could in turn cause the affected lenders to accelerate the repayment of principal and accrued interest on any outstanding debt under such agreements and, if they choose, terminate the facility.  If appropriate, U.S. Cellular may request the applicable lender for an amendment of financial covenants in the U.S. Cellular revolving credit facility and the U.S. Cellular term loan facility, in order to provide additional financial flexibility to U.S. Cellular, and may also seek other changes to such facilities.  There is no assurance that the lenders will agree to any amendments.  If the lenders agree to amendments, this may result in additional payments or higher interest rates payable to the lenders and/or additional restrictions.  Restrictions in such debt instruments may limit U.S. Cellular’s operating and financial flexibility.

Other Long-Term Financing

U.S. Cellular has an effective shelf registration statement on Form S-3 to issue senior or subordinated debt securities. The proceeds from any such issuance may be used for general corporate purposes, including: the possible reduction of other short-term or long-term debt, spectrum purchases, and capital expenditures; in connection with acquisition, construction and development programs; for working capital; to provide additional investments in subsidiaries; or the repurchase of shares. The U.S. Cellular shelf registration statement permits U.S. Cellular to issue at any time and from time to time senior or subordinated debt securities in one or more offerings, up to the amount registered, which is currently $500 million. The ability of U.S. Cellular to complete an offering pursuant to such shelf registration statement is subject to market conditions and other factors at the time.

U.S. Cellular believes that it was in compliance as of December 31, 2016 with all covenants and other requirements set forth in its long-term debt indentures. U.S. Cellular has not failed to make nor does it expect to fail to make any scheduled payment of principal or interest under such indentures.

The long-term debt principal payments due for the next five years represent less than 4% of the total gross long-term debt obligation at December 31, 2016. Refer to Market Risk — Long-Term Debt for additional information regarding required principal payments and the weighted average interest rates related to U.S. Cellular’s Long-term debt.

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U.S. Cellular, at its discretion, may from time to time seek to retire or purchase its outstanding debt through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information on long-term financing.

Credit Ratings

In certain circumstances, U.S. Cellular’s interest cost on its revolving credit and term loan facilities may be subject to increase if its current credit ratings from nationally recognized credit rating agencies are lowered, and may be subject to decrease if the ratings are raised. U.S. Cellular’s facilities do not cease to be available nor do the maturity dates accelerate solely as a result of a downgrade in credit rating. However, a downgrade in U.S. Cellular’s credit rating could adversely affect its ability to renew the facilities or obtain access to other credit facilities in the future.

U.S. Cellular is rated at sub-investment grade. U.S. Cellular’s credit ratings as of December 31, 2016, and the dates such ratings were issued/re-affirmed were as follows:

Rating Agency	Rating	Outlook
Moody's (re-affirmed November 2015)	Ba1	—negative outlook
Standard & Poor's (re-affirmed November 2015)	BB	—stable outlook
Fitch Ratings (re-affirmed August 2016)	BB+	—stable outlook

Capital Requirements

The discussion below is intended to highlight some of the significant cash outlays expected during 2017 and beyond and to highlight the spending incurred in prior years for these items. This discussion does not include cash required to fund normal operations, and is not a comprehensive list of capital requirements.  Significant cash requirements that are not routine or in the normal course of business could arise from time to time.

Capital Expenditures

U.S. Cellular makes substantial investments to acquire, construct and upgrade wireless telecommunications networks and facilities to remain competitive and as a basis for creating long-term value for shareholders. In recent years, rapid changes in technology and new opportunities (such as 4G LTEand VoLTE technology) have required substantial investments in potentially revenue‑enhancing and cost-reducing upgrades of U.S. Cellular’s networks to remain competitive.

Capital expenditures (i.e., additions to property, plant and equipment and system development expenditures), which include the effects of accruals and capitalized interest, in 2016, 2015 and 2014 were as follows:

In 2016, U.S. Cellular made capital expenditures to (i) improve network support and billing related systems and platforms; (ii) enhance its network capabilities through the development of VoLTE technology; and (iii) construct new cell sites. U.S. Cellular’s capital expenditures for 2017 are expected to be approximately $500million. These expenditures are expected to be for the following general purposes: Expand and enhance network coverage, including providing additional capacity to accommodate increased network usage, principally data usage, by current customers; Continue deployment of VoLTE technology in certain markets; Expand and enhance the retail store network; and Develop and enhance office systems.

U.S. Cellular plans to finance its capital expenditures program for 2017 using primarily Cash flows from operating activities, existing cash balances, borrowings under its revolving credit agreement and/or other long-term debt.

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Acquisitions, Divestitures and Exchanges

U.S.Cellular assesses its existing wireless interests on an ongoing basis with a goal of improving the competitiveness of its operations and maximizing its long-term return on capital.  In general, U.S.Cellular may not disclose such transactions until there is a definitive agreement. See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to significant transactions.  As part of this strategy, U.S.Cellular reviews attractive opportunities to acquire additional wireless operating markets and wireless spectrum, including pursuant to FCC auctions.  Cash payments for acquisitions of licenses were $53 million, $286 million and $38 million in 2016, 2015 and 2014, respectively.

Cash received from divestitures in 2016, 2015 and 2014 was as follows:

U.S.Cellular may seek to divest outright or include in exchanges for other wireless interests those interests that are not strategic to its long-term success. As a result, U.S.Cellular may be engaged from time to time in negotiations relating to the acquisition, divestiture or exchange of companies, properties or wireless spectrum.

On July 15, 2016, the FCC announced U.S. Cellular as a qualified bidder in the FCC’s forward auction of 600 MHz spectrum licenses, referred to as Auction 1002, which then commenced on August 16, 2016.  In recent FCC auctions, U.S. Cellular has not been a bidder, but has participated as a limited partner in “designated entities” that qualified for a 25% bidding credit on licenses won in the auction.  U.S. Cellular did not invest in a designated entity applicant in Auction 1002, but was itself an applicant and is not eligible for a discount.  Prior to becoming a qualified bidder, U.S. Cellular was required to make an upfront payment, the size of which established its initial bidding eligibility.  Accordingly, in the second quarter of 2016, U.S. Cellular made an upfront payment to the FCC of $143 million.  The Clock Phase of the auction was completed in February 2017.  At that time, U.S. Cellular became committed to purchase 600 MHz spectrum licenses for a minimum amount of $327 million, subject to increase as the FCC completes the Assignment Phase of the auction, which is pending.  U.S. Cellular expects to be obligated to pay for the total committed amount, less the $143 million upfront payment made in June 2016,in the second quarter of 2017 using cash on hand and/or borrowings under its revolving credit agreement.  See “Regulatory Matters — FCC Auction 1002”for a summary of U.S. Cellular’s participation in Auction 1002.

In 2015 and 2016, U.S. Cellular entered into multiple spectrum license purchase agreements.  The aggregate purchase price for these spectrum licenses is $57million, of which $53million closed in the year ended December 31, 2016.  In 2016, U.S. Cellular also entered into multiple agreements with third parties to transfer FCC licenses in non-operating markets and receive FCC licenses in operating markets.  The agreements provide for the transfer of certain AWS and PCS spectrum licenses and approximately $29 million, net, in cash to U.S. Cellular, in exchange for U.S. Cellular transferring certain AWS, PCS and 700 MHz spectrum licenses to the third parties.  Through December 31, 2016, certain of the exchange transactions have closed and U.S. Cellular has received $14million of cash in conjunction with such closed transactions.  The remaining license purchase and exchange transactions are expected to close in the first quarter of 2017.  See Note 6 — Acquisitions, Divestitures and Exchangesin the Notes to Consolidated Financial Statements for additional information related to these transactions.

Variable Interest Entities

U.S.Cellular consolidates certain entities because they are “variable interest entities” under GAAP. See Note 13 — Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information related to these variable interest entities. U.S. Cellular may elect to make additional capital contributions and/or advances to these variable interest entities in future periods in order to fund their operations.

Common Share Repurchase Program

In 2009, the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009 and continuing each year thereafter, on a cumulative basis.  In December 2016, the U.S. Cellular Board amended this authorization to provide that such amount will be any amount from zero to 1,300,000 beginning on January 1, 2017, as determined by the U.S. Cellular Pricing Committee, and that if the Pricing Committee did not specify an amount for any year, such amount would be zero for such year. The Pricing Committee did not specify any increase as of January 1, 2017. The Pricing Committee also was authorized to decrease the cumulative amount of the authorization at any time, but has not taken any action to do so at this time. As a result, there was no change to the cumulative amount of the share repurchase authorization as of January 1, 2017.  As of December 31, 2016, the total cumulative amount of Common Shares authorized to be purchased is 5,900,849.

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Share repurchases made under this authorization were as follows:

Year Ended December 31,	2016		2015		2014
Number of shares		154,449		177,508		496,069
Average cost per share	$	34.55	$	34.86	$	38.19
Dollar amount (in millions)	$	5	$	6	$	19

Depending on its future financial performance, construction, development or acquisition programs, and available sources of financing, U.S. Cellular may not have sufficient liquidity or capital resources to make significant share repurchases.  Therefore, there is no assurance that U.S. Cellular will make any significant share repurchases in the future.

For additional information related to the current repurchase authorization, see Note 15 — Common Shareholders’ Equity in the Notes to Consolidated Financial Statements.

Off-Balance Sheet Arrangements

U.S.Cellular had no transactions, agreements or other contractual arrangements with unconsolidated entities involving “off-balance sheet arrangements,” as defined by SEC rules, that had or are reasonably likely to have a material current or future effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources.

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Contractual and Other Obligations

AtDecember 31, 2016, the resources required for contractual obligations were as follows:

				Payments Due by Period
		Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years
(Dollars in millions)
Long-term debt obligations1		$	1,675	$	11	$	23	$	23	$	1,618
Interest payments on long-term debt obligations			3,690		110		221		221		3,138
Operating leases2			1,357		145		244		193		775
Capital leases			4		–		1		1		2
Purchase obligations3			2,172		823		1,218		83		48
		$	8,898	$	1,089	$	1,707	$	521	$	5,581
1	Includes current and long-term portions of debt obligations.  The total long-term debt obligation differs from Long-term debt, net in the Consolidated Balance Sheet due to capital leases, debt issuance costs and the unamortized discount related to U.S. Cellular’s 6.7% Senior Notes. See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information.
2	Includes future lease costs related to office space, retail sites, cell sites and equipment.  See Note 12 — Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information.
3	Includes obligations payable under non-cancellable contracts, commitments for device purchases, network facilities and transport services, agreements for software licensing, long-term marketing programs, as well as certain agreements, to purchase goods or services, calculated based on termination fees that can be paid to exit the contract.

The table above excludes liabilities related to “unrecognized tax benefits” as defined by GAAP because U.S. Cellular is unable to predict the period of settlement of such liabilities. Such unrecognized tax benefits were $43 million atDecember 31, 2016. See Note4 — Income Taxes in the Notes to Consolidated Financial Statements for additional information on unrecognized tax benefits.

See Note12 — Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information.

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Consolidated Cash Flow Analysis

U.S. Cellular operates a capital‑ and marketing‑intensive business. U.S. Cellular makes substantial investments to acquire wireless licenses and properties and to construct and upgrade wireless telecommunications networks and facilities as a basis for creating long-term value for shareholders. In recent years, rapid changes in technology and new opportunities have required substantial investments in potentially revenue‑enhancing and cost-reducing upgrades to U.S. Cellular’s networks.  U.S. Cellular utilizes cash on hand, cash from operating activities, cash proceeds from divestitures and disposition of investments, short-term credit facilities and long-term debt financing to fund its acquisitions (including spectrum licenses), construction costs, operating expenses and share repurchases. Cash flows may fluctuate from quarter to quarter and year to year due to seasonality, the timing of acquisitions and divestitures, capital expenditures and other factors. The following discussion summarizes U.S. Cellular’s cash flow activities in 2016, 2015 and 2014.

2016 Commentary

U.S. Cellular’s Cash and cash equivalents decreased $129 million in 2016. Net cash provided by operating activities was $501 million in 2016 due primarily to net income of $49 million plus non-cash items of $609 million and distributions received from unconsolidated entities of $93 million, including $29 million in distributions from the LA Partnership.  This was partially offset by changes in working capital items which decreased cash by $250 million.  The decrease in working capital items was due primarily to a $246 million increase in equipment installment plan receivables, which are expected to continue to increase and further require the use of working capital in the near term. 

The net cash provided by operating activities was offset by cash flows used for investing activities of $618 million.  Cash paid in 2016for additions to property, plant and equipment totaled $443million.  In June 2016, U.S. Cellular made a deposit of $143 million to the FCC for its participation in Auction 1002.  Cash paid for acquisitions and licenses in 2016 was $53 million partially offset by Cash received from divestitures and exchanges of $21 million.  See Note 6—Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to these transactions.

Cash flows used for financing activities were $12million in 2016, reflecting ordinary activity such as scheduled repayments of debt.

2015 Commentary

Cash flows from operating activities were $555 million in 2015.  An increase in cash flows from operating activities was due primarily to improved net income and working capital factors.In 2015, increased receivables related to equipment installment plans decreased cash flows from operating activities.

In December 2015, as part of the Protecting Americans from Tax Hikes Act of 2015, bonus depreciation was enacted which allowed U.S. Cellular to accelerate deductions for depreciation, resulting in an overpayment of estimated tax amounts paid during 2015. Primarily as a result of this overpayment, U.S. Cellular has recorded $34 million of Income taxes receivable at December 31, 2015.  U.S. Cellular paid income taxes, net of refunds, of $59 million in 2015.

Cash flows used for investing activities were $549 million in 2015.  Cash paid for additions to property, plant and equipment totaled $581million in2015.

During 2015, a $278million payment was made by Advantage Spectrum L.P. to the FCC for licenses for which it was the provisional winning bidder. See Note6—Acquisitions, Divestitures and Exchangesand Note13— Variable Interest Entitiesin the Notes to Consolidated Financial Statements for additional information.

Cash flows from financing activities were $497 million in 2015.  InJuly 2015, U.S. Cellular borrowed $225 million on itsTermLoan.In November 2015, U.S. Cellular issued $300 million of 7.25% Senior Notes due 2064.

2014 Commentary

Cash flows from operating activities were $172 million in 2014.  Working capital factors which significantly decreased cash flows from operating activities included changes in accounts payable levels as a result of timing differences related to operating expenses and device purchases. In 2014, increased receivables related to equipment installment plans decreased cash flows from operating activities.

In December 2014, as part of the Tax Increase Prevention Act of 2014, bonus depreciation was enacted which allowed U.S. Cellular to accelerate deductions for depreciation resulting in a federal taxable loss in 2014. Primarily as a result of this federal income tax carryback, U.S. Cellular recorded $75 million of Income taxes receivable at December 31, 2014. U.S. Cellular paid income taxes, net of refunds, of $33 million in 2014.

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Cash flows used for investing activities were $471 million in 2014.  Cash paid for additions to property, plant and equipment totaled $605 million in 2014.  Cash received from divestitures in 2014 was $180 million which includes $92 million related to licenses and $71 million related to the Divestiture Transaction.  See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to these divestitures.  U.S. Cellular realized cash proceeds of $50 million in 2014 related to the maturities of its investments in U.S. Treasury Notes and corporate notes.  In 2014, cash used for investing activities includes a $60 million deposit made by Advantage Spectrum, L.P., a variable interest entity consolidated by U.S. Cellular, to the FCC for its participation in Auction 97. See Note 13— Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information.

Cash flows from financing activities were $169 million in 2014.  In December 2014, U.S. Cellular issued $275 million of 7.25% Senior Notes due 2063. 

In September 2014, U.S. Cellular purchased licenses from Airadigm Communications, Inc. (“Airadigm”). TDS owns 100% of the common stock of Airadigm. Upon closing, Airadigm transferred to U.S. Cellular FCC spectrum licenses and certain tower assets in certain markets in Wisconsin, Iowa, Minnesota and Michigan, in consideration for $91 million in cash. Since both parties to this transaction are controlled by TDS, U.S. Cellular recorded the transferred assets at Airadigm’s net book value of $15 million. The $76 million difference between the consideration paid and the net book value of the transferred assets was recorded as an Acquisition of assets in common control transaction cash outflow from financing activities. See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to this transaction.

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Consolidated Balance Sheet Analysis

The following discussion addresses certain captions in the consolidated balance sheet and changes therein.  This discussion is intended to highlight the significant changes and is not intended to fully reconcile the changes.  Changes in financial condition during 2016 are as follows:

Cash and cash equivalents

Cash and cash equivalents decreased $129 million.  See the Consolidated Cash Flow Analysis above for a discussion of cash and cash equivalents.

Other current assets

Other current assets decreased $32 million due primarily to the receipt of a federal income tax refund in March2016.

Other assets and deferred charges

Other assets and deferred charges increased$233 million due to an upfront payment of $143 million to the FCC to establish U.S. Cellular’s initial bidding eligibility for its participation in Auction 1002 and a $112 million increase in the long-term portion of unbilled equipment installment plan receivables, net, due to the offering of longer term equipment installment plan contracts and the increased adoption of such contracts. See Note 3— Equipment Installment Plans and Note 6 —Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to these balances.

Customer deposits and deferred revenues

Customer deposits and deferred revenues decreased $61 million due primarily to amortization of the guarantee liability for equipment installment contracts.

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Application of Critical Accounting Policies and Estimates

U.S. Cellular prepares its consolidated financial statements in accordance with GAAP.  U.S. Cellular’s significant accounting policies are discussed in detail in Note 1 — Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the Notes to Consolidated Financial Statements.

Management believes the application of the following critical accounting policies and the estimates required by such application reflect its most significant judgments and estimates used in the preparation of U.S. Cellular’s consolidated financial statements.  Management has discussed the development and selection of each of the following accounting policies and related estimates and disclosures with the Audit Committee of U.S. Cellular’s Board of Directors.

Intangible Asset Impairment

Licenses and Goodwill represent a significant component of U.S. Cellular’s consolidated assets.  These assets are considered to be indefinite lived assets and are therefore not amortized but tested annually for impairment.  U.S. Cellular performs annual impairment testing of Licenses and Goodwill as of November 1 of each year or more frequently if triggering events are present.  Significant negative events, such as changes in any of the assumptions described below as well as decreases in forecasted cash flows, could result in an impairment in future periods.  Licenses are tested for impairment at the level of reporting referred to as a unit of accounting.  Goodwill is tested for impairment at the level of reporting referred to as a reporting unit.

See Note7—Intangible Assets in the Notes to Consolidated Financial Statements for information related to Licenses and Goodwill activity in 2016 and 2015.

Wireless Licenses

As of November 1, 2016 and 2015, U.S. Cellular performed a qualitative impairment assessment to determine whether it was more likely than not that the fair value of the licenses exceeded their carrying value.  For purposes of its impairment testing of licenses as of November 1, 2016 and 2015, U.S. Cellular separated its FCC licenses into eight units of accounting, including one geographic unit for its developed operating market licenses (“built licenses”) and seven geographic units for its non-operating market licenses (“unbuilt licenses”).  As part of the assessment, U.S. Cellular considered several qualitative factors, including analysts’ estimates of license values, which contemplated recent spectrum auction results, recent U.S. Cellular and other market participant transactions and other industry and market factors.  Based on this assessment, U.S. Cellular concluded that it was more likely than not that the fair value of the licenses in each unit of accounting exceeded the respective carrying values.  Therefore, no impairment of licenses existed and no Step 1 impairment evaluation was completed.

Goodwill

U.S. Cellular has recorded Goodwill as a result of the acquisition of wireless companies.  For purposes of the 2016and 2015 Goodwill impairment tests, U.S. Cellular had one reporting unit.

Based on the results of the annual Goodwill impairment assessment performed as of November 1, 2016, the fair value of U.S. Cellular exceeded its carrying value.  Therefore, no impairment of Goodwill existed. 

A discounted cash flow approach was used to value the reporting unit, using value drivers and risks specific to the industry and current economic factors. The cash flow estimates incorporated assumptions that market participants would use in their estimates of fair value and may not be indicative of U.S. Cellular specific assumptions.  However, the discount rate used in the analysis accounts for any additional risk a market participant might place on integrating U.S. Cellular into its operations at the level of cash flows assumed under this approach.  The most significant assumptions made in this process were therevenue growth rate (shown as a compound annual growth rate in the table below), the terminal revenue growth rate andthe discount rate.  There are uncertainties associated with these key assumptions and potential events and/or circumstances that could have a negative effect on these key assumptions described below. 

Key Assumptions		As of November 1, 2016
Revenue growth rate1		2.1%
Terminal revenue growth rate1		2.0%
Discount rate2		9.5%
1	There are risks that could negatively impact the projected revenue growth rates, including but not limited to the success of new and existing products/services, competition, operational difficulties and customer churn.
2	The weighted average cost of capital is derived based on a set of guideline public companies and is an indicator of the cost of capital for a market participant in U.S. Cellular's industry.  The weighted average cost of capital may increase if borrowing costs rise, market participants weight more of their capital structure towards equity vs. debt, long-term risk free rates increase modestly, or other elements affecting the estimated cost of equity or debt increase.  To the extent that the weighted average cost of capital of market participants increases or U.S. Cellular's risk in relation to its peers increases, this would decrease the estimated fair value of the reporting unit.

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Provided all other assumptions remained the same, for the U.S. Cellular reporting unit, the discount rate would have to increase to 10.3%to yield an estimated fair value of the reporting unit that equalsits carrying value at November 1, 2016.  Further, assuming all other assumptions remained the same, for the U.S. Cellular reporting unit, the terminal growth rate assumption would need to decrease to 0.4%to yieldan estimated fair value equal to the carrying value of the reporting unit at November 1, 2016.

The Goodwill balance of U.S. Cellular as of November 1, 2016 was $370 million.  The estimated fair value of U.S. Cellular’s one reporting unit exceeded its carrying value, as a percentage of carrying value, by 14.2%.

Income Taxes

U.S. Cellular is included in a consolidated federal income tax return with other members of the TDS consolidated group. TDS and U.S. Cellular are parties to a Tax Allocation Agreement which provides that U.S. Cellular and its subsidiaries be included with the TDS affiliated group in a consolidated federal income tax return and in state income or franchise tax returns in certain situations. For financial statement purposes, U.S. Cellular and its subsidiaries calculate their income, income tax and credits as if they comprised a separate affiliated group. Under the Tax Allocation Agreement between TDS and U.S. Cellular, U.S. Cellular remits its applicable income tax payments to TDS.

The amounts of income tax assets and liabilities, the related income tax provision and the amount of unrecognized tax benefits are critical accounting estimates because such amounts are significant to U.S. Cellular’s financial condition and results of operations.

The preparation of the consolidated financial statements requires U.S. Cellular to calculate a provision for income taxes. This process involves estimating the actual current income tax liability together with assessing temporary differences resulting from the different treatment of items for tax purposes. These temporary differences result in deferred income tax assets and liabilities, which are included in U.S. Cellular’s Consolidated Balance Sheet. U.S. Cellular must then assess the likelihood that deferred income tax assets will be realized based on future taxable income and, to the extent management believes that realization is not likely, establish a valuation allowance. Management’s judgment is required in determining the provision for income taxes, deferred income tax assets and liabilities and any valuation allowance that is established for deferred income tax assets.

U.S. Cellular recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.The tax benefits recognized in the financial statements from such a position are measured based on management’s judgment as to the possible outcome that has a greater than 50% cumulative likelihood of being realized upon ultimate resolution.

See Note 4 — Income Taxes in the Notes to Consolidated Financial Statements for details regarding U.S. Cellular’s income tax provision, deferred income taxes and liabilities, valuation allowances and unrecognized tax benefits, including information regarding estimates that impact income taxes.

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Equipment Installment Plans

U.S. Cellular sells devices to customers under installment contracts over a specified time period and, under certain of these plans, offers the customer a trade-in right. Customers on an installment contract who elect to trade-in the device will receive a credit in the amount of the outstanding balance of the installment contract,provided the customer trades-in an eligible used device in good working condition and purchases a new device from U.S. Cellular. Equipment revenue under these contracts is recognized at the time the device is delivered to the end-user customer for the selling price of the device, net of any deferred imputed interest and the value of the trade-in right, if applicable.

Trade-In Right

U.S. Cellular values the trade-in right as a guarantee liability.  This liability is initially measured at fair value and is determined based on assumptions including the probability and timing of the customer upgrading to a new device and the estimated fair value of the used device eligible for trade-in.  U.S. Cellular reevaluates its estimate of the guarantee liability quarterly.  A significant change in any of the aforementioned assumptions used to compute the guarantee liability would impact the amount of revenue recognized under these plans and the timing thereof.  In 2016 and 2015, U.S. Cellular assumed the earliest contractual time of trade-in, or the minimum amount of payments as specified in the device installment contract, for all customers on installment contracts with trade-in rights.

When a customer exercises the trade-in option, the difference between the outstanding receivable balance forgiven and the fair value of the used device is recorded as a reduction to the guarantee liability. If the customer does not exercise the trade-in option at the time he or she is eligible, U.S. Cellular begins amortizing the liability and records this amortization as additional equipment revenue.

Interest

U.S. Cellular equipment installment plans do not provide for explicit interest charges. Because equipment installment plans have a duration of greater than twelve months, U.S. Cellular imputes interest using a market rate and recognizes such interest income over the duration of the plan as a component of Interest and dividend income. Changes in the imputed interest rate would impact the amount of revenue recognized under these plans.

Allowance for doubtful accounts

U.S. Cellular maintains an allowance for doubtful accounts for estimated losses that result from the failure of its customers to make payments due under the equipment installment plans. The allowance is estimated based on historical experience, account aging and other factors that could affect collectability.  When it is probable that an account balance will not be collected, the account balance is charged against the allowance for doubtful accounts.  To the extent that actual loss experience differs significantly from historical trends, the required allowance amounts could differ from the original estimates.

Other Items

Inflation

Management believes that inflation affects U.S. Cellular’s business to no greater or lesser extent than the general economy.

Seasonality

U.S. Cellular’s profitability historically has been lower in the fourth quarter as a result of significant marketing and promotional activity during the holiday season.

Recently Issued Accounting Pronouncements

See Note 1— Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the Notes to Consolidated Financial Statements for information on recently issued accounting pronouncements.

Certain Relationships and Related Transactions

See Note 18 – Certain Relationships and Related Transactions in the Notes to Consolidated Financial Statements.

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Regulatory Matters

FCC Auction 1002

On July 15, 2016, the FCC announced U.S. Cellular as a qualified bidder in the FCC’s forward auction of 600MHz spectrum licenses, referred to as Auction 1002.  The forward auction Clock Phase began on August 16, 2016 and continued in a series of stages into 2017.  The fourth and final stage ended on February 10, 2017.  With the completion of the Clock Phase of the auction, U.S. Cellular is now committed to purchase 600 MHz spectrum licenses for a minimum amount of $327 million, subject to increase as the FCC completes the Assignment Phase of the auction, which is pending.  U.S. Cellular expects to be obligated to pay for the total committed amount, less the $143 million upfront payment made in June 2016, in the second quarter of 2017.  As a result of U.S. Cellular’s application to participate in Auction 1002, since February 10, 2016, U.S. Cellular has been subject to FCC anti-collusion rules that place certain restrictions on public disclosures and business communications with other companies relating to U.S. Cellular’s participation.  These restrictions will continue until the down payment deadline for Auction 1002, which will be ten business days after release of the FCC’s Channel Reassignment Public Notice, following the end of the auction.  These anti-collusion rules may restrict the conduct of certain U.S. Cellular activities with other auction applicants as well as with nationwide providers of wireless services which are not applicants.  The restrictions could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

FCC Reform Order

Pursuant to the FCC's Reform Order (“Reform Order”), U.S. Cellular’s current Federal USF support was to be phased down at the rate of 20% per year beginning July 1, 2012.  The Phase II Mobility Fund was not operational as of July 2014 and, therefore, as provided by the Reform Order, the phase down was suspended at 60% of the baseline amount until such time as the FCC takes steps to adopt an order to recommence the phase down.  On February 23, 2017, the FCC adopted an order concerning the Mobility Fund II and the resumption of the phase down. The text of the order has not been released but the press release issued by the FCC following adoption of the order indicates that the order will establish a Mobility Fund II support mechanism of $453 million annually for ten years to be distributed through a market-based, multi-round reverse auction and that the phase down of unnecessary legacy support from the Federal USF will commence on the first day of the month following the completion of the auction and will conclude two years later. U.S. Cellular cannot predict at this time when the Mobility Fund II auction will occur, when the phase down period for its existing legacy support from the Federal USF will commence, or whether the Mobility Fund II auction will provide opportunities to the Company to offset any loss in existing support.  However, U.S. Cellular currently expects that its legacy support will continue at the existing level for 2017. 

Other Regulatory Considerations

Changes to existing policies with respect to Federal regulations are under review. These changes may include laws relating to telecommunications and FCC regulations. These could involve changes to the classification ofhigh-speed, or broadband, internet access service under Title II of the Communications Act of 1934, the FCC’s Open Internet Order relating to net neutrality, the USF high cost support program and/or intercarrier compensation, broadband privacy rules, or changes in polices of the FCC with respect to interpretation or enforcement of such laws, rules or programs. It is possible that some of these changes could have a material adverse effect, while other changes may have a positive effect on our business, financial condition or results of operations.  Until the specific changes in laws, regulations or policy are known, we are unable to predict the impact on U.S. Cellular’s business, financial condition or results of operations.

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PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

SAFE HARBOR CAUTIONARY STATEMENT

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Annual Report contain statements that are not based on historical facts, including the words “believes,” “anticipates,” “intends,” “expects” and similar words. These statements constitute and represent “forward‑looking statements” as this term is defined in the Private Securities Litigation Reform Act of 1995. Such forward‑looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward‑looking statements. Each of the following risks could have a material adverse effect on U.S. Cellular’s business, financial condition or results of operations; however, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document.  Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements.  Such risks, uncertainties and other factors include, but are not limited to, the following risks.  See “Risk Factors” in U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2016 for a further discussion of these risks.  U.S. Cellular undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.  Readers should evaluate any statements in light of these important factors.

• Intense competition in the markets in which U.S. Cellular operates could adversely affect U.S. Cellular’s revenues or increase its costs to compete.
• A failure by U.S. Cellular to successfully execute its business strategy (including planned acquisitions, spectrum acquisitions, divestitures and exchanges) or allocate resources or capital could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
• Uncertainty in U.S. Cellular’s future cash flow and liquidity or in the ability to access capital, deterioration in the capital markets, other changes in U.S. Cellular’s performance or market conditions, changes in U.S. Cellular’s credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its construction, development or acquisition programs, reduce the acquisition of spectrum licenses, and/or reduce or cease share repurchases.
• U.S. Cellular has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt.
• Changes in roaming practices or other factors could cause U.S. Cellular's roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact U.S. Cellular's ability to service its customers in geographic areas where U.S. Cellular does not have its own network, which could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.
• A failure by U.S. Cellular to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
• To the extent conducted by the FCC, U.S. Cellular may participate in FCC auctions of additional spectrum in the future directly or indirectly and, during certain periods, will be subject to the FCC’s anti-collusion rules, which could have an adverse effect on U.S.Cellular.
• Failure by U.S.Cellular to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect U.S.Cellular’s business, financial condition or results of operations.
• An inability to attract people of outstanding potential, to develop their potential through education and assignments, and to retain them by keeping them engaged, challenged and properly rewarded could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.
• U.S.Cellular’s assets are concentrated in the U.S.wireless telecommunications industry.  Consequently, its operatingresults may fluctuate based on factors related primarily to conditions in this industry.
• U.S. Cellular’s smaller scale relative to larger competitors that may have greater financial and other resources than U.S. Cellular could cause U.S. Cellular to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations.
• Changes in various business factors, including changes in demand, customer preferences and perceptions, price competition, churn from customer switching activity and other factors, could have an adverse effect on U.S.Cellular’s business, financial condition or results of operations.
• Advances or changes in technology could render certain technologies used by U.S.Cellular obsolete, could put U.S. Cellular at a competitive disadvantage, could reduce U.S.Cellular’s revenues or could increase its costs of doing business.

27

• Complexities associated with deploying new technologies present substantial risk and U.S. Cellular investments in unproven technologies may not produce the benefits that U.S. Cellular expects.
• U.S. Cellular receives regulatory support and is subject to numerous surcharges and fees from federal, state and local governments, and the applicability and the amount of the support andfees are subject to great uncertainty, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
• Performance under device purchase agreements could have a material adverse impact on U.S. Cellular's business, financial condition or results of operations.
• Changes in U.S.Cellular’s enterprise value, changes in the market supply or demand for wireless licenses, adverse developments in the business or the industry in which U.S.Cellular is involved and/or other factors could require U.S.Cellular to recognize impairments in the carrying value of its licenses, goodwill and/or physical assets.
• Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or licenses and/or expansion of U.S.Cellular’s business could have an adverse effect on U.S.Cellular’s business, financial condition or results of operations.
• U.S. Cellular offers customers the option to purchase certain devices under installment contracts which, compared to fixed-term service contracts, includes risks that U.S. Cellular may possibly incur greater churn, lower cash flows, increased costs and/or increased bad debts expense due to differences in contract terms, which could have an adverse impact on U.S. Cellular’s financial condition or results of operations.
• A failure by U.S.Cellular to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network, support and other systems and infrastructure could have an adverse effect on its operations.
• Difficulties involving third parties with which U.S. Cellular does business, including changes in U.S. Cellular's relationships with or financial or operational difficulties of key suppliers or independent agents and third party national retailers who market U.S. Cellular’s services, could adversely affect U.S.Cellular’s business, financial condition or results of operations.
• U.S.Cellular has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on U.S.Cellular’s financial condition or results of operations.
• A failure by U.S. Cellular to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
• U.S. Cellular has experienced and, in the future, expects to experience cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.
• The market price of U.S.Cellular’s Common Shares is subject to fluctuations due to a variety of factors.
• Changes in facts or circumstances, including new or additional information, could require U.S.Cellular to record charges in excess of amounts accrued in the financial statements, which could have an adverse effect on U.S.Cellular’s business, financial condition or results of operations.
• Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede U.S. Cellular’s access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
• Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on U.S.Cellular’s business, financial condition or results of operations.
• The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices such as pacemakers, could have an adverse effect on U.S.Cellular’s business, financial condition or results of operations.

28

• Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent U.S. Cellular from using necessary technology to provide products or services or subject U.S. Cellular to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
• There are potential conflicts of interests between TDS and U.S.Cellular.
• Certain matters, such as control by TDS and provisions in the U.S.Cellular Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of U.S.Cellular.
• Any of the foregoing events or other events could cause revenues, earnings, capital expenditures and/or any other financial or statistical information to vary from U.S.Cellular’s forward-looking estimates by a material amount.

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MARKET RISK

Long-Term Debt

As of December 31, 2016, the majority of U.S.Cellular’s long-term debt was in the form of fixed-rate notes with remaining maturities ranging up to 48years.  Fluctuations in market interest rates can lead to significant fluctuations in the fair value of these fixed-rate notes.

The following chart presents the scheduled principal payments on long-term debt by maturity dates at December 31, 2016:

The following table presents the scheduled principal payments on long-term debt and capital lease obligations, and the related weighted average interest rates by maturity dates at December 31, 2016:

		Principal Payments Due by Period
		Long-Term Debt Obligations1		Weighted-Avg. Interest Rates on Long-Term Debt Obligations2
(Dollars in millions)
2017		$	11	3.8%
2018			11	3.8%
2019			11	3.8%
2020			11	3.8%
2021			11	3.8%
After 5 years			1,622	6.7%
Total		$	1,677	6.6%
1	The total long-term debt obligation differs from Long-term debt in the Consolidated Balance Sheet due to unamortized debt issuance costs on all non-revolving debt instruments and the unamortized discount related to the 6.7% Senior Notes.  See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information.
2	Represents the weighted average interest rates at December 31, 2016 for debt maturing in the respective periods.

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Fair Value of Long-Term Debt

At December 31, 2016 and 2015, the estimated fair value of long-term debt obligations, excluding capital lease obligations and the current portion of such long-term debt, was $1,664 million and $1,644 million, respectively.  See Note 2 — Fair Value Measurements in the Notes to Consolidated Financial Statements for additional information.

Other Market Risk Sensitive Instruments

The substantial majority of U.S. Cellular’s other market risk sensitive instruments (as defined in item 305 of SEC Regulation S-K) are short-term, including Cash and cash equivalents.  Accordingly, U.S. Cellular believes that a significant change in interest rates would not have a material effect on such other market risk sensitive instruments.

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Supplemental Information Relating to Non-GAAP Financial Measures

U.S. Cellular sometimes uses information derived from consolidated financial information but not presented in its financial statements prepared in accordance with U.S. GAAP to evaluate the performance of its business.  Certain of these measures are considered “non-GAAP financial measures” under U.S. Securities and Exchange Commission Rules.  Specifically, U.S. Cellular has referred to the following measures in this Form 10-K Report:

• EBITDA
• Adjusted EBITDA
• Operating cash flow
• Free cash flow
• Adjusted free cash flow
• Postpaid ABPU
• Postpaid ABPA

Following are explanations of each of these measures:

Adjusted EBITDA and Operating Cash Flow

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) is defined as net income adjusted for the items set forth in the reconciliation below.  Operating cash flow is defined as net income adjusted for the items set forth in the reconciliation below.  Adjusted EBITDA and Operating cash flow are not measures of financial performance under GAAP and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity.  U.S. Cellular does not intend to imply that any such items set forth in the reconciliation below are non-recurring, infrequent or unusual; such items may occur in the future.  

Management uses Adjusted EBITDA and Operating cash flow as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate.  Management believes Adjusted EBITDA and Operating cash flow are useful measures of U.S. Cellular’s operating results before significant recurring non-cash charges, gains and losses, and other items as presented below as they provide additional relevant and useful information to investors and other users of U.S. Cellular’s financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance.  Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Operating cash flow reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities.  The following table reconciles Adjusted EBITDA and Operating cash flow to the corresponding GAAP measure, Net income.

		2016		2015		2014
(Dollars in millions)
Net income (loss) (GAAP)		$	49	$	247	$	(47)
Add back:
	Income tax expense (benefit)		33		157		(12)
	Interest expense		113		86		57
	Depreciation, amortization and accretion		618		607		606
EBITDA (Non-GAAP)			813		1,097		604
Add back or deduct:
	(Gain) loss on sale of business and other exit costs, net		–		(114)		(33)
	(Gain) loss on license sales and exchanges, net		(19)		(147)		(113)
	(Gain) loss on asset disposals, net		22		16		21
Adjusted EBITDA (Non-GAAP)			816		852		479
Deduct:
	Equity in earnings of unconsolidated entities		140		140		130
	Interest and dividend income		57		36		12
	Other, net		1		1		(1)
Operating cash flow (Non-GAAP)			618		675		338
Deduct:
	Depreciation, amortization and accretion		618		607		606
	(Gain) loss on sale of business and other exit costs, net		–		(114)		(33)
	(Gain) loss on license sales and exchanges, net		(19)		(147)		(113)
	(Gain) loss on asset disposals, net		22		16		21
Operating income (loss) (GAAP)		$	(3)	$	313	$	(143)

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Free Cash Flow and Adjusted Free Cash Flow

The following table presents Free cash flow and Adjusted free cash flow.  Management uses Free cash flow as a liquidity measure and it is defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment.  Adjusted free cash flow is defined as Cash flows from operating activities (which includes cash outflows related to the Sprint decommissioning), as adjusted for cash proceeds from the Sprint Cost Reimbursement (which are included in Cash flows from investing activities in the Consolidated Statement of Cash Flows), less Cash paid for additions to property, plant and equipment.  Free cash flow and Adjusted free cash flow are non-GAAP financial measures which U.S. Cellular believes may be useful to investors and other users of its financial information in evaluating liquidity, specifically, the amount of cash generated by business operations (including cash proceeds from the Sprint Cost Reimbursement), after Cash paid for additions to property, plant and equipment.

		2016		2015		2014
(Dollars in millions)
Cash flows from operating activities (GAAP)		$	501	$	555	$	172
Less: Cash paid for additions to property, plant and equipment			443		581		605
	Free cash flow (Non-GAAP)	$	58	$	(26)	$	(433)
Add: Sprint Cost Reimbursement1			7		30		71
	Adjusted free cash flow (Non-GAAP)	$	65	$	4	$	(362)
1	See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to the Sprint Cost Reimbursement.

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Postpaid ABPU and Postpaid ABPA

U.S. Cellular presents Postpaid ABPU and Postpaid ABPA to reflect the revenue shift from Service revenues to Equipment sales resulting from the increased adoption of equipment installment plans.  Postpaid ABPU and Postpaid ABPA, as previously defined, are non-GAAP financial measures which U.S. Cellular believes are useful to investors and other users of its financial information in showing trends in both service and equipment sales revenues received from customers.

		2016		2015		2014
(Dollars and connection counts in millions)
Calculation of Postpaid ARPU
Postpaid service revenues		$	2,517	$	2,831	$	2,863
Average number of postpaid connections			4.47		4.33		4.20
Number of months in period			12		12		12
	Postpaid ARPU (GAAP metric)	$	46.96	$	54.50	$	56.75
Calculation of Postpaid ABPU
Postpaid service revenues		$	2,517	$	2,831	$	2,863
Equipment installment plan billings			491		272		52
	Total billings to postpaid connections	$	3,008	$	3,103	$	2,915
Average number of postpaid connections			4.47		4.33		4.20
Number of months in period			12		12		12
	Postpaid ABPU (Non-GAAP metric)	$	56.12	$	59.74	$	57.78
Calculation of Postpaid ARPA
Postpaid service revenues		$	2,517	$	2,831	$	2,863
Average number of postpaid accounts			1.69		1.72		1.79
Number of months in period			12		12		12
	Postpaid ARPA (GAAP metric)	$	124.09	$	136.90	$	133.19
Calculation of Postpaid ABPA
Postpaid service revenues		$	2,517	$	2,831	$	2,863
Equipment installment plan billings			491		272		52
	Total billings to postpaid accounts	$	3,008	$	3,103	$	2,915
Average number of postpaid accounts			1.69		1.72		1.79
Number of months in period			12		12		12
	Postpaid ABPA (Non-GAAP metric)	$	148.29	$	150.07	$	135.61

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Financial Statements

United States Cellular Corporation

Consolidated Statement of Operations

Year Ended December 31,			2016		2015		2014
(Dollars and shares in millions, except per share amounts)
Operating revenues
	Service		$	3,030	$	3,350	$	3,398
	Equipment sales			909		647		495
		Total operating revenues		3,939		3,997		3,893
Operating expenses
	System operations (excluding Depreciation, amortization and   accretion reported below)			760		775		770
	Cost of equipment sold			1,081		1,053		1,193
	Selling, general and administrative (including charges from affiliates of   $94 million, $96 million and $91 million in 2016, 2015 and 2014)			1,480		1,494		1,592
	Depreciation, amortization and accretion			618		607		606
	(Gain) loss on asset disposals, net			22		16		21
	(Gain) loss on sale of business and other exit costs, net			–		(114)		(33)
	(Gain) loss on license sales and exchanges, net			(19)		(147)		(113)
		Total operating expenses		3,942		3,684		4,036
Operating income (loss)				(3)		313		(143)
Investment and other income (expense)
	Equity in earnings of unconsolidated entities			140		140		130
	Interest and dividend income			57		36		12
	Interest expense			(113)		(86)		(57)
	Other, net			1		1		(1)
		Total investment and other income		85		91		84
Income (loss) before income taxes				82		404		(59)
	Income tax expense (benefit)			33		157		(12)
Net income (loss)				49		247		(47)
	Less: Net income (loss) attributable to noncontrolling interests, net of tax			1		6		(4)
Net income (loss) attributable to U.S. Cellular shareholders			$	48	$	241	$	(43)
Basic weighted average shares outstanding				85		84		84
Basic earnings (loss) per share attributable to U.S. Cellular shareholders			$	0.56	$	2.86	$	(0.51)
Diluted weighted average shares outstanding				85		85		84
Diluted earnings (loss) per share attributable to U.S. Cellular shareholders			$	0.56	$	2.84	$	(0.51)
The accompanying notes are an integral part of these consolidated financial statements.

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United States Cellular Corporation

Consolidated Statement of Cash Flows

Year Ended December 31,				2016		2015		2014
(Dollars in millions)
Cash flows from operating activities
	Net income (loss)			$	49	$	247	$	(47)
	Add (deduct) adjustments to reconcile net income (loss) to net
	cash flows from operating activities
		Depreciation, amortization and accretion			618		607		606
		Bad debts expense			96		106		101
		Stock-based compensation expense			26		25		22
		Deferred income taxes, net			6		55		58
		Equity in earnings of unconsolidated entities			(140)		(140)		(130)
		Distributions from unconsolidated entities			93		60		112
		(Gain) loss on asset disposals, net			22		16		21
		(Gain) loss on sale of business and other exit costs, net			–		(114)		(33)
		(Gain) loss on license sales and exchanges, net			(19)		(147)		(113)
		Noncash interest expense			2		2		1
		Other operating activities			(2)		–		–
	Changes in assets and liabilities from operations
		Accounts receivable			(23)		(96)		13
		Equipment installment plans receivable			(246)		(134)		(189)
		Inventory			8		118		(29)
		Accounts payable			48		5		(98)
		Customer deposits and deferred revenues			(54)		(37)		34
		Accrued taxes			40		34		(99)
		Accrued interest			(2)		4		1
		Other assets and liabilities			(21)		(56)		(59)
			Net cash provided by operating activities		501		555		172
Cash flows from investing activities
	Cash paid for additions to property, plant and equipment				(443)		(581)		(605)
	Cash paid for acquisitions and licenses				(53)		(286)		(38)
	Cash received from divestitures and exchanges				21		317		180
	Cash received for investments				–		–		50
	Federal Communications Commission deposit				(143)		–		(60)
	Other investing activities				–		1		2
			Net cash used in investing activities		(618)		(549)		(471)
Cash flows from financing activities
	Issuance of long-term debt				–		525		275
	Repayment of long-term debt				(11)		–		–
	Repayment of borrowing under revolving credit facility				–		–		(150)
	Borrowing under revolving credit facility				–		–		150
	Common shares reissued for benefit plans, net of tax payments				6		2		1
	Common shares repurchased				(5)		(6)		(19)
	Payment of debt issuance costs				(2)		(13)		(10)
	Acquisition of assets in common control transaction				–		(2)		(76)
	Distributions to noncontrolling interests				(1)		(6)		(3)
	Payments to acquire additional interest in subsidiaries				–		(2)		–
	Other financing activities				1		(1)		1
			Net cash provided by (used in) financing activities		(12)		497		169
Net increase (decrease) in cash and cash equivalents					(129)		503		(130)
Cash and cash equivalents
	Beginning of period				715		212		342
	End of period			$	586	$	715	$	212
The accompanying notes are an integral part of these consolidated financial statements.

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United States Cellular Corporation

Consolidated Balance Sheet — Assets

December 31,				2016		2015
(Dollars in millions)
Current assets
	Cash and cash equivalents			$	586	$	715
	Accounts receivable
		Customers and agents, less allowances of $51 and $45, respectively			658		608
		Roaming			16		20
		Affiliated			2		–
		Other, less allowances of $1 and $1, respectively			51		44
	Inventory, net				138		149
	Prepaid expenses				84		81
	Other current assets				23		55
			Total current assets		1,558		1,672
Assets held for sale					8		–
Licenses					1,886		1,834
Goodwill					370		370
Investments in unconsolidated entities					413		363
Property, plant and equipment
	In service and under construction				7,712		7,669
	Less: Accumulated depreciation and amortization				5,242		5,020
			Property, plant and equipment, net		2,470		2,649
Other assets and deferred charges					405		172
Total assets1				$	7,110	$	7,060
The accompanying notes are an integral part of these consolidated financial statements.

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United States Cellular Corporation

Consolidated Balance Sheet — Liabilities and Equity

December 31,				2016		2015
(Dollars and shares in millions, except per share amounts)
Current liabilities
	Current portion of long-term debt			$	11	$	11
	Accounts payable
		Affiliated			12		10
		Trade			309		275
	Customer deposits and deferred revenues				190		251
	Accrued taxes				39		28
	Accrued compensation				73		68
	Other current liabilities				84		105
			Total current liabilities		718		748
Deferred liabilities and credits
	Deferred income tax liability, net				826		821
	Other deferred liabilities and credits				302		290
Long-term debt, net					1,618		1,629
Commitments and contingencies
Noncontrolling interests with redemption features					1		1
Equity
	U.S. Cellular shareholders’ equity
		Series A Common and Common Shares
			Authorized 190 shares (50 Series A Common and 140 Common Shares)
			Issued 88 shares (33 Series A Common and 55 Common Shares)
			Outstanding 85 shares (33 Series A Common and 52 Common Shares) and 84 shares (33 Series A Common and 51 Common Shares), respectively
			Par Value ($1.00 per share) ($33 Series A Common and $55 Common Shares), respectively		88		88
		Additional paid-in capital			1,522		1,497
		Treasury shares, at cost, 3 and 4 Common Shares, respectively			(136)		(157)
		Retained earnings			2,160		2,133
			Total U.S. Cellular shareholders' equity		3,634		3,561
	Noncontrolling interests				11		10
		Total equity			3,645		3,571
Total liabilities and equity1				$	7,110	$	7,060
The accompanying notes are an integral part of these consolidated financial statements.
1		The consolidated total assets as of December 31, 2016 and 2015 include assets held by consolidated VIEs of $827 million and $658 million, respectively, which are not available to be used to settle the obligations of U.S. Cellular.  The consolidated total liabilities as of December 31, 2016 and 2015 include certain liabilities of consolidated VIEs of $19 million and $1 million, respectively, for which the creditors of the VIEs have no recourse to the general credit of U.S. Cellular.  See Note 13 — Variable Interest Entities for additional information.

38

United States Cellular Corporation

Consolidated Statement of Changes in Equity

	U.S. Cellular Shareholders
	Series A Common and Common shares		Additional paid-in capital		Treasury shares		Retained earnings		Total U.S. Cellular shareholders' equity		Noncontrolling interests		Total equity
(Dollars in millions)
December 31, 2015	$	88	$	1,497	$	(157)	$	2,133	$	3,561	$	10	$	3,571
Add (Deduct)
Net income attributable to U.S. Cellular shareholders		–		–		–		48		48		–		48
Net income attributable to noncontrolling interests    classified as equity		–		–		–		–		–		2		2
Repurchase of Common Shares		–		–		(5)		-		(5)		–		(5)
Incentive and compensation plans		–		–		26		(21)		5		–		5
Stock-based compensation awards		–		25		–		–		25		–		25
Distributions to noncontrolling interests		–		–		–		–		–		(1)		(1)
December 31, 2016	$	88	$	1,522	$	(136)	$	2,160	$	3,634	$	11	$	3,645
The accompanying notes are an integral part of these consolidated financial statements.

39

United States Cellular Corporation

Consolidated Statement of Changes in Equity

	U.S. Cellular Shareholders
	Series A Common and Common shares		Additional paid-in capital		Treasury shares		Retained earnings		Total U.S. Cellular shareholders' equity		Noncontrolling interests		Total equity
(Dollars in millions)
December 31, 2014	$	88	$	1,473	$	(169)	$	1,910	$	3,302	$	11	$	3,313
Add (Deduct)
Net income attributable to U.S. Cellular shareholders		–		–		–		241		241		–		241
Repurchase of Common Shares		–		–		(6)		-		(6)		–		(6)
Incentive and compensation plans		–		–		18		(16)		2		–		2
Stock-based compensation awards		–		24		–		–		24		–		24
Tax windfall (shortfall) from stock awards		–		(1)		–		–		(1)		–		(1)
Distributions to noncontrolling interests		–		–		–		–		–		(1)		(1)
Acquisition of assets in common control transaction		–		1		–		(2)		(1)		–		(1)
December 31, 2015	$	88	$	1,497	$	(157)	$	2,133	$	3,561	$	10	$	3,571
The accompanying notes are an integral part of these consolidated financial statements.

40

United States Cellular Corporation

Consolidated Statement of Changes in Equity

	U.S. Cellular Shareholders
	Series A Common and Common shares		Additional paid-in capital		Treasury shares		Retained earnings		Total U.S. Cellular shareholders' equity		Noncontrolling interests		Total equity
(Dollars in millions)
December 31, 2013	$	88	$	1,425	$	(165)	$	2,043	$	3,391	$	18	$	3,409
Add (Deduct)
Net loss attributable to U.S. Cellular shareholders		–		–		–		(43)		(43)		–		(43)
Net loss attributable to noncontrolling interests   classified as equity		–		–		–		–		–		(4)		(4)
Repurchase of Common Shares		–		–		(19)		–		(19)		–		(19)
Incentive and compensation plans		–		–		15		(14)		1		–		1
Stock-based compensation awards		–		21		–		–		21		–		21
Tax windfall (shortfall) from stock awards		–		(1)		–		–		(1)		–		(1)
Distributions to noncontrolling interests		–		–		–		–		–		(3)		(3)
Acquisition of assets in common control transaction		–		29		–		(76)		(47)		–		(47)
Adjust investment in subsidiaries for noncontrolling   interest purchases		–		(1)		–		–		(1)		–		(1)
December 31, 2014	$	88	$	1,473	$	(169)	$	1,910	$	3,302	$	11	$	3,313
The accompanying notes are an integral part of these consolidated financial statements.

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United States Cellular Corporation

Notes to Consolidated Financial Statements

Note 1Summary of Significant Accounting Policies and Recent Accounting Pronouncements

United States Cellular Corporation (“U.S. Cellular”), a Delaware Corporation, is an 83%-owned subsidiary of Telephone and Data Systems, Inc. (“TDS”).

Nature of Operations

U.S. Cellular owns, operates and invests in wireless systems throughout the United States. As of December 31, 2016, U.S. Cellular served customers with 5.0 million total connections. U.S. Cellular has one reportable segment.

Principles of Consolidation

The accounting policies of U.S. Cellular conform to accounting principles generally accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Unless otherwise specified, references to accounting provisions and GAAP in these notes refer to the requirements of the FASB ASC. The consolidated financial statements include the accounts of U.S. Cellular, its majority-owned subsidiaries, general partnerships in which U.S. Cellular has a majority partnership interest, and variable interest entities (“VIEs”) in which U.S. Cellular is deemed the primary beneficiary. Both VIE and primary beneficiary represent terms defined by GAAP.  See Note 13 — Variable Interest Entities for additional information relating to U.S. Cellular’s VIEs.  Intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (b) the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates are involved in accounting for goodwill and indefinite-lived intangible assets, income taxes and equipment installment plans.

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consist primarily of amounts owed by customers for wireless services and equipment sales, including sales of certain devices under equipment installment plans, by agents for sales of equipment to them and by other wireless carriers whose customers have used U.S. Cellular’s wireless systems.

The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related to existing billed and unbilled accounts receivable. The allowance is estimated based on historical experience, account aging and other factors that could affect collectability. Accounts receivable balances are reviewed on either an aggregate or individual basis for collectability depending on the type of receivable. When it is probable that an account balance will not be collected, the account balance is charged against the allowance for doubtful accounts. U.S. Cellular does not have any off-balance sheet credit exposure related to its customers.

Inventory

Inventory consists primarily of wireless devices stated at the lower of cost or market, with cost determined using the first-in, first-out method and market determined by replacement cost or estimated net realizable value.

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Licenses

Licenses consist of direct and incremental costs incurred in acquiring Federal Communications Commission (“FCC”) licenses to provide wireless service.

U.S. Cellular has determined that wireless licenses are indefinite-lived intangible assets and, therefore, not subject to amortization based on the following factors:

• Radio spectrum is not a depleting asset.
• The ability to use radio spectrum is not limited to any one technology.
• U.S.Cellular and its consolidated subsidiaries are licensed to use radio spectrum through the FCC licensing process, which enables licensees to utilize specified portions of the spectrum for the provision of wireless service.
• U.S.Cellular and its consolidated subsidiaries are required to renew their FCC licenses every ten years or, in some cases, every fifteen years. To date, all of U.S.Cellular’s license renewal applications have been granted by the FCC. Generally, license renewal applications filed by licensees otherwise in compliance with FCC regulations are routinely granted. If, however, a license renewal application is challenged either by a competing applicant for the license or by a petition to deny the renewal application, the license will be renewed if the licensee can demonstrate its entitlement to a “renewal expectancy.” Licensees are entitled to such an expectancy if they can demonstrate to the FCC that they have provided “substantial service” during their license term and have “substantially complied” with FCC rules and policies. U.S.Cellular believes that it is probable that its future license renewal applications will be granted.

U.S. Cellular performs its annual impairment assessment of Licenses as of November 1 of each year or more frequently if there are events or circumstances that cause U.S. Cellular to believe the carrying value of Licenses exceeds their fair value on a more likely than not basis.  For purposes of its 2016 and 2015 impairment testing of Licenses, U.S. Cellular separated its FCC licenses into eight units of accounting.  The eight units of accounting consisted of one unit of accounting for developed operating market licenses (“built licenses”) and seven geographic non-operating market licenses (“unbuilt licenses”). 

As of November 1, 2016 and 2015, U.S. Cellular performed a qualitative impairment assessment to determine whether it was more likely than not that the fair value of the built and unbuilt licenses exceed their carrying value.  Based on the impairment assessments performed, U.S. Cellular did not have an impairment of its Licenses in 2016 or2015.  See Note 7 — Intangible Assets for additional details related to Licenses.

Goodwill

U.S. Cellular has Goodwill as a result of its acquisitions of wireless businesses.  Such Goodwill represents the excess of the total purchase price over the fair value of net assets acquired in these transactions.

For purposes of conducting its annual Goodwill impairment test as of November 1, 2016 and 2015, U.S. Cellular identified one reporting unit.  A discounted cash flow approach was used to value the reporting unit for purposes of the Goodwill impairment review. Based upon the impairment assessments performed, U.S. Cellular did not have an impairment of its Goodwill in 2016 or2015.  See Note 7 — Intangible Assets for additional details related to Goodwill.

Investments in Unconsolidated Entities

For its equity method investments for which financial information is readily available, U.S. Cellular records its equity in the earnings of the entity in the current period. For its equity method investments for which financial information is not readily available, U.S. Cellular records its equity in the earnings of the entity on a one quarter lag basis.

Property, Plant and Equipment

U.S. Cellular’s Property, plant and equipment is stated at the original cost of construction or purchase including capitalized costs of certain taxes, payroll-related expenses, interest and estimated costs to remove the assets.

Expenditures that enhance the productive capacity of assets in service or extend their useful lives are capitalized and depreciated. Expenditures for maintenance and repairs of assets in service are charged to System operations expense or Selling, general and administrative expense, as applicable.  Retirements and disposals of assets are recorded by removing the original cost of the asset (along with the related accumulated depreciation) from plant in service and charging it, together with net removal costs (removal costs less an applicable accrued asset retirement obligation and salvage value realized), to (Gain) loss on asset disposals, net.

U.S. Cellular capitalizes certain costs of developing new information systems.

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Depreciation and Amortization

Depreciation is provided using the straight-line method over the estimated useful life of the related asset.

U.S. Cellular depreciates leasehold improvement assets associated with leased properties over periods ranging from one to thirty years; such periods approximate the shorter of the assets’ economic lives or the specific lease terms.

Useful lives of specific assets are reviewed throughout the year to determine if changes in technology or other business changes would warrant accelerating the depreciation of those specific assets.  There were no material changes to useful lives of property, plant and equipment in 2016, 2015 or 2014. See Note 9 — Property, Plant and Equipment for additional details related to useful lives.

Impairment of Long-Lived Assets

U.S. Cellular reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired.

U.S. Cellular has one asset group for purposes of assessing property, plant and equipment for impairment based on the fact that the individual operating markets are reliant on centrally operated data centers, mobile telephone switching offices and a network operations center. U.S. Cellular operates a single integrated national wireless network, and the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities represent cash flows generated by this single interdependent network.

Agent Liabilities

U.S. Cellular has relationships with agents, which are independent businesses that obtain customers for U.S. Cellular. At December 31, 2016 and 2015, U.S. Cellular had accrued $57 million and $76 million, respectively, for amounts due to agents. These amounts are included in Other current liabilities in the Consolidated Balance Sheet.

Debt Issuance Costs

Debt issuance costs include underwriters’ and legal fees and other charges related to issuing various borrowing instruments and other long-term agreements, and are amortized over the respective term of each instrument.  U.S. Cellular presents certain debt issuance costs in the balance sheet as an offset to the related debt obligation.  Debt issuance costs related to U.S. Cellular’s revolving credit facility are recorded in Other assets and deferred charges in the Consolidated Balance Sheet.

Asset Retirement Obligations

U.S. Cellular accounts for asset retirement obligations by recording the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligations are incurred. At the time the liability is incurred, U.S. Cellular records a liability equal to the net present value of the estimated cost of the asset retirement obligation and increases the carrying amount of the related long-lived asset by an equal amount. Until the obligation is fulfilled, U.S. Cellular updates its estimates relating to cash flows required and timing of settlement. U.S. Cellular records the present value of the changes in the future value as an increase or decrease to the liability and the related carrying amount of the long-lived asset. The liability is accreted to future value over a period ending with the estimated settlement date of the respective asset retirement obligation.  The carrying amount of the long-lived asset is depreciated over the useful life of the related asset.  Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability is recognized in the Consolidated Statement of Operations.

Treasury Shares

Common Shares repurchased by U.S. Cellular are recorded at cost as treasury shares and result in a reduction of equity. When treasury shares are reissued, U.S. Cellular determines the cost using the first-in, first-out cost method. The difference between the cost of the treasury shares and reissuance price is included in Additional paid-in capital or Retained earnings.

Revenue Recognition

Revenues related to services are recognized as services are rendered. Revenues billed in advance or in arrears of the services being provided are estimated and deferred or accrued, as appropriate.Revenues from sales of equipment and accessories are recognized when U.S. Cellular no longer has any requirements to perform, when title has passed and when the products are accepted by the customer.

Multiple Deliverable Arrangements

U.S. Cellular sells multiple element service and equipment offerings. In these instances, revenues are allocated using the relative selling price method. Under this method, arrangement consideration is allocated to each element on the basis of its relative selling price. Revenue recognized for the delivered items is limited to the amount due from the customer that is not contingent upon the delivery of additional products or services.

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Loyalty Reward Program

In March 2015, U.S. Cellular announced that it would discontinue its loyalty reward program effective September 1, 2015.  All unredeemed reward points expired at that time and the deferred revenue balance of $58 million related to such expired points was recognized as service revenues.

U.S. Cellular followed the deferred revenue method of accounting for its loyalty reward program.  Under this method, revenue allocated to loyalty reward points was deferred.  The amount allocated to the loyalty points was based on the estimated retail price of the products and services for which points were redeemable divided by the number of loyalty points required to receive such products and services.  This was calculated on a weighted average basis and required U.S. Cellular to estimate the percentage of loyalty points that would be redeemed for each product or service. 

Revenue was recognized at the time of customer redemption or when such points were depleted via an account maintenance charge.  U.S. Cellular employed the proportional model to recognize revenues associated with breakage.  Under the proportional model, U.S. Cellular allocated a portion of the estimated future breakage to each redemption and recorded revenue proportionally. 

Equipment Installment Plans

Equipment revenue under equipment installment plan contracts is recognized at the time the device is delivered to the end-user customer for the selling price of the device, net of any deferred imputed interest or trade-in right, if applicable.Imputed interest is reflected as a reduction to the receivable balance and recognized over the duration of the plan as a component of Interest and dividend income. See Note 3 — Equipment Installment Plans for additional information.

Incentives

Discounts and incentives that are deemed cash are recognized as a reduction of Operating revenues concurrently with the associated revenue.

U.S. Cellular issues rebates to its agents and end customers. These incentives are recognized as a reduction to revenue at the time the wireless device sale to the customer occurs. The total potential rebates and incentives are reduced by U.S. Cellular’s estimate of rebates that will not be redeemed by customers based on historical experience of such redemptions.

Activation Fees

U.S. Cellular charges its end customers activation fees in connection with the sale of certain services and equipment. Device activation fees charged at both agent locations and U.S. Cellular company-owned retail stores in connection with equipment installment plan device transactions are deferred and recognized over a period that corresponds with the equipment upgrade eligibility date based on the contract terms. Device activation fees charged at agent locations in connection with subsidized device sales are deferred and recognized over a period that corresponds with the length of the customer’s service contract. Device activation fees charged at U.S. Cellular company-owned retail stores in connection with subsidized device sales are recognized at the time the device is delivered to the customer.

Amounts Collected from Customers and Remitted to Governmental Authorities

U.S. Cellular records amounts collected from customers and remitted to governmental authorities on a net basis within a tax liability account if the tax is assessed upon the customer and U.S. Cellular merely acts as an agent in collecting the tax on behalf of the imposing governmental authority. If the tax is assessed upon U.S. Cellular, then amounts collected from customers as recovery of the tax are recorded in Service revenues and amounts remitted to governmental authorities are recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations. The amounts recorded gross in revenues that are billed to customers and remitted to governmental authorities totaled $64 million, $77 million and $97 million for 2016, 2015 and 2014, respectively.

Eligible Telecommunications Carrier (“ETC”) Revenues

Telecommunications companies may be designated by states, or in some cases by the FCC, as an ETC to receive support payments from the Universal Service Fund if they provide specified services in “high cost” areas. ETC revenues recognized in the reporting period represent the amounts which U.S.Cellular is entitled to receive for such period, as determined and approved in connection with U.S.Cellular’s designation as an ETC in various states.

Advertising Costs

U.S. Cellular expenses advertising costs as incurred. Advertising costs totaled $245 million, $231 million and $205 million in 2016, 2015 and 2014, respectively.

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Income Taxes

U.S. Cellular is included in a consolidated federal income tax return with other members of the TDS consolidated group. For financial statement purposes, U.S. Cellular and its subsidiaries calculate their income, income taxes and credits as if they comprised a separate affiliated group. Under a tax allocation agreement between TDS and U.S. Cellular, U.S. Cellular remits its applicable income tax payments to TDS. U.S. Cellular had a tax payable balance with TDS of $8 million as of December 31, 2016 and a tax receivable balance with TDS of $33 million as of December 31, 2015.

Deferred taxes are computed using the liability method, whereby deferred tax assets are recognized for future deductible temporary differences and operating loss carryforwards, and deferred tax liabilities are recognized for future taxable temporary differences. Bothdeferred tax assets and liabilities are measured using the tax rates anticipated to be in effect when the temporary differences reverse. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. U.S. Cellular evaluates income tax uncertainties, assesses the probability of the ultimate settlement with the applicable taxing authority and records an amount based on that assessment.  Deferred taxes are reported as a net non-current asset or liability by jurisdiction.  Any corresponding valuation allowance to reduce the amount of deferred tax assets is also recorded as non-current.

Stock-Based Compensation and Other Plans

U.S. Cellular has established a long-term incentive plan and a non-employee director compensation plan. These plans are considered compensatory plans and, therefore, recognition of compensation cost for grants made under these plans is required.

U.S. Cellular recognizes stock compensation expense based upon the fair value of the specific awards granted using established valuation methodologies.  The amount of stock compensation cost recognized on either a straight-line basis or graded attribution method is based on the portion of the award that is expected to vest over the requisite service period which generally represents the vesting period.  Stock-based compensation cost recognized has been reduced for estimated forfeitures.  Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  See Note 16—Stock-Based Compensation for additional information.

Defined Contribution Plans

U.S. Cellular participates in a qualified noncontributory defined contribution pension plan sponsored by TDS; such plan provides pension benefits for the employees of U.S. Cellular and its subsidiaries. Under this plan, pension benefits and costs are calculated separately for each participant and are funded currently. Pension costs were $11 million in 2016, 2015 and 2014.

U.S. Cellular also participates in a defined contribution retirement savings plan (“401(k) plan”) sponsored by TDS. Total costs incurred for U.S. Cellular’s contributions to the 401(k) plan were $16 million, $15 million and $15 million in 2016, 2015 and 2014, respectively.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) and has since amended the standard with Accounting Standards Update 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, Accounting Standards Update 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), Accounting Standards Update 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing, Accounting Standards Update 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, and Accounting Standards Update 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.  These standards replace existing revenue recognition rules with a single comprehensive model to use in accounting for revenue arising from contracts with customers.  U.S. Cellular is required to adopt ASU 2014-09, as amended, on January 1, 2018.  Early adoption as of January 1, 2017 is permitted; however, U.S. Cellular did not adopt early.  ASU 2014-09, as amended, impacts U.S. Cellular’s revenue recognition related to the allocation of contract revenues between various services and equipment, and the timing of when those revenues are recognized.  In addition, ASU 2014-09 requires deferral of incremental contract acquisition and fulfillment costs and subsequent expense recognition over the contract period or expected customer life.  U.S. Cellular has identified that new systems, processes and controls are required to adopt ASU 2014-09, as amended.  U.S. Cellular has substantially completed the design and development of new systems to perform revenue recognition accounting under the provisions of ASU 2014-09, as amended, and is currently engaged in the process of testing these new systems.  U.S. Cellular expects to transition to the new standard under the modified retrospective transition method whereby a cumulative effect adjustment is recognized upon adoption and the guidance is applied prospectively.  Upon adoption, the cumulative effect adjustment is expected to include the establishment of contract asset and contract liability accounts with a corresponding adjustment to retained earnings to reflect the reallocation of revenues between service and equipment.  Reallocation impacts generally arise when bundle discounts are provided in a contract arrangement that includes equipment and service performance obligations.  In these cases, the revenue will be reallocated according to the relative stand-alone selling prices of the performance obligations included in the bundle and this may be different than how the revenue is billed to the customer and recognized under current guidance.  In addition, contract cost assets will be established to reflect costs that will be deferred as incremental contract acquisition costs.  Incremental contract acquisition costs generally relate to commission costs paid to sales associates.  U.S. Cellular is evaluating the full effects that adoption of ASU 2014-09, as amended, will have on its financial position and results of operations.

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In July 2015, the FASB issued Accounting Standards Update 2015-11, Inventory: Simplifying the Measurement of Inventory (“ASU 2015-11”), which requires inventory to be measured at the lower of cost or net realizable value.  U.S. Cellular adopted ASU 2015-11 on January 1, 2017.  The adoption of ASU 2015-11 will not have a significant impact on U.S. Cellular’s financial position or results of operations.

In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”).  This ASU introduces changes to current accounting for equity investments and financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments.  U.S. Cellular is required to adopt ASU 2016-01 on January 1, 2018.  Certain provisions are eligible for early adoption.  The adoption of ASU 2016-01 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”).  ASU 2016-02 requires lessees to record a right-of-use asset and lease liability for almost all leases.  This ASU does not substantially impact lessor accounting.  U.S. Cellular is required to adopt ASU 2016-02 on January 1, 2019.  Early adoption is permitted.  Upon adoption of ASU 2016-02, U.S. Cellular expects a substantial increase to assets and liabilities on its balance sheet.  U.S. Cellular is evaluating the full effects that adoption of ASU 2016-02 will have on its financial position and results of operations.

In March 2016, the FASB issued Accounting Standards Update 2016-04, Liabilities – Extinguishments of Liabilities: Recognition of Breakage from Certain Prepaid Stored-Value Products (“ASU 2016-04”).  ASU 2016-04 requires companies that sell prepaid stored-value products redeemable for goods, services or cash at third-party merchants to recognize breakage (i.e., the value that is ultimately not redeemed by the consumer) in a way that is consistent with how it will be recognized under the new revenue recognition standard.  U.S. Cellular is required to adopt ASU 2016-04 on January 1, 2018.  Early adoption is permitted.  The adoption of ASU 2016-04 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”).  ASU 2016-09 intends to simplify the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  U.S. Cellular adopted ASU 2016-09 on January 1, 2017.  Upon adoption, U.S. Cellular will no longer record adjustments in Additional paid-in capital relating to the tax consequences of share-based payment transactions.  Future tax windfalls and shortfalls will be recognized as discrete items within Income tax expense (benefit) on the Consolidated Statement of Operations in the period in which they occur.  U.S. Cellular has elected to continue to reduce stock compensation expense for estimated forfeitures.  U.S. Cellular’s adoption of this standard is not expected to have a significant impact on its financial position or results of operations, except as it relates to income tax expense, which will be directly impacted in future periods upon the exercise of stock options and the vesting of restricted stock awards.

In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).  ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses.  It also requires additional disclosure relating to the credit quality of trade and other receivables, including information relating to management’s estimate of credit allowances.  U.S. Cellular is required to adopt ASU 2016-13 on January 1, 2020.  Early adoption as of January 1, 2019 is permitted.  U.S. Cellular is evaluating the effects that adoption of ASU 2016-13 will have on its financial position, results of operations and disclosures.

In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”).  ASU 2016-15 provides guidance on eight targeted cash flow classification issues.  U.S. Cellular adopted ASU 2016-15 on December 31, 2016.  U.S. Cellular has historically followed the guidance prescribed by ASU 2016-15 for past transactions and therefore the adoption of ASU 2016-15 had no impact on U.S. Cellular’s statement of cash flows.

In October 2016, the FASB issued Accounting Standards Update 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”).  ASU 2016-16 impacts the accounting for the income tax consequences of intra-entity transfers of assets other than inventory when the transfer occurs between entities in different tax jurisdictions.  U.S. Cellular is required to adopt ASU 2016-16 on January 1, 2018.  Early adoption is permitted.  The adoption of ASU 2016-16 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In October 2016, the FASB issued Accounting Standards Update 2016-17, Consolidation: Interests Held through Related Parties That Are under Common Control (“ASU 2016-17”).  ASU 2016-17 provides guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in an entity held through related parties that are under common control.  U.S. Cellular adopted ASU 2016-17 on January 1, 2017.  The adoption of ASU 2016-17 will not have an impact on U.S. Cellular’s financial position or results of operations.

In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows: Restricted Cash (“ASU 2016-18”).  ASU 2016-18 provides guidance on the placement and reconciliation of restricted cash in the statement of cash flows.  U.S. Cellular is required to adopt ASU 2016-18 on January 1, 2018.  Early adoption is permitted.  The adoption of ASU 2016-18 is not expected to have a significant impact on U.S. Cellular’s statement of cash flows.

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In January 2017, the FASB issued Accounting Standards Update 2017-01, Business Combinations: Clarifying the Definition of a Business (“ASU 2017-01”).  ASU 2017-01 clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  U.S. Cellular is required to adopt ASU 2017-01 on January 1, 2018.  U.S. Cellular adopted ASU 2017-01 on January 1, 2017.  The adoption of ASU 2017-01 did not have an impact on U.S. Cellular’s financial position or results of operations, but it may impact the accounting for future acquisitions and dispositions of businesses and assets.

In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).  ASU 2017-04 eliminates Step 2 of the current goodwill impairment test.  Goodwill impairment loss will be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value.  U.S. Cellular is required to adopt ASU 2017-04 on January 1, 2020.  Early adoption is permitted.  U.S. Cellular is assessing whether it will early adopt ASU 2017-04.  ASU 2017-04 could impact U.S. Cellular’s results of operations upon early adoption or the effective date should it fail the goodwill impairment test.

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Note 2Fair Value Measurements

As of December 31, 2016 and 2015, U.S. Cellular did not have any material financial or nonfinancial assets or liabilities that were required to be recorded at fair value in its Consolidated Balance Sheet in accordance with GAAP.

The provisions of GAAP establish a fair value hierarchy that contains three levels for inputs used in fair value measurements. Level 1 inputs include quoted market prices for identical assets or liabilities in active markets. Level 2 inputs include quoted market prices for similar assets and liabilities in active markets or quoted market prices for identical assets and liabilities in inactive markets. Level 3 inputs are unobservable. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. A financial instrument’s level within the fair value hierarchy is not representative of its expected performance or its overall risk profile and, therefore, Level 3 assets are not necessarily higher risk than Level 2 assets or Level 1 assets.

U.S. Cellular has applied the provisions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayed below.

		Level within the Fair Value Hierarchy	December 31, 2016				December 31, 2015
			Book Value		Fair Value		Book Value		Fair Value
(Dollars in millions)
Cash and cash equivalents		1	$	586	$	586	$	715	$	715
Long-term debt
	Retail	2		917		929		917		929
	Institutional	2		533		532		533		501
	Other	2		203		203		214		214

The fair value of Cash and cash equivalents approximates the book value due to the short-term nature of these financial instruments.  Long-term debt excludes capital lease obligations and the current portion of Long-term debt.  The fair value of “Retail” Long-term debt was estimated using market prices for the 6.95% Senior Notes, 7.25% 2063 Senior Notes and 7.25% 2064 Senior Notes.  U.S. Cellular’s “Institutional” debt consists of the 6.7% Senior Notes which are traded over the counter.  U.S. Cellular’s “Other” debt consists of a senior term loan credit facility.  U.S. Cellular estimated the fair value of its Institutional and Other debt through a discounted cash flow analysis using the interest rates or estimated yield to maturity for each borrowing, which ranged from 3.78% to 6.93% and 3.19% to 7.51% at December 31, 2016 and 2015, respectively.

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Note 3Equipment Installment Plans

U.S. Cellular sells devices to customers under equipment installment contracts over a specified time period. For certain equipment installment plans, after a specified period of time or amount of payments, the customer may have the right to upgrade to a new device and have the remaining unpaid equipment installment contract balance waived, subject to certain conditions, including tradingin the original device in good working condition and signing a new equipment installment contract. U.S. Cellular values this trade-in right as a guarantee liability. The guarantee liability is initially measured at fair value and is determined based on assumptions including the probability and timing of the customer upgrading to a new device and the fair value of the device being traded-in at the time of trade-in. As of December 31, 2016 and 2015, the guarantee liability related to these plans was $33 million and $93 million, respectively, and is reflected in Customer deposits and deferred revenues in the Consolidated Balance Sheet.

U.S. Cellular equipment installment plans do not provide for explicit interest charges. Because equipment installment plans have a duration of greater than twelve months, U.S. Cellular imputes interest.  U.S. Cellular records imputed interest as a reduction to the related accounts receivable and it is recognized over the term of the installment agreement.  Equipment installment plan receivables had a weighted average effective imputed interest rate of 11.2% and 9.7% as of December 31, 2016 and 2015, respectively.

The following table summarizes equipment installment plan receivables as of December 31, 2016 and 2015.

December 31,	2016		2015
(Dollars in millions)
Equipment installment plan receivables, gross	$	628	$	381
Deferred interest		(53)		(23)
Equipment installment plan receivables, net of deferred interest		575		358
Allowance for credit losses		(50)		(26)
Equipment installment plan receivables, net	$	525	$	332
Net balance presented in the Consolidated Balance Sheet as:
Accounts receivable — Due from customers and agents (Current portion)	$	345	$	264
Other assets and deferred charges (Non-current portion)		180		68
Equipment installment plan receivables, net	$	525	$	332

U.S. Cellular uses various inputs, including internal data, information from the credit bureaus and other sources, to evaluate the credit profiles of its customers.  From this evaluation, a credit class is assigned to the customer that determines the number of eligible lines, the amount of credit available, andthe down payment requirement, if any. Customers assigned to credit classes requiring no down payment represent a lower risk category, whereas those assigned to credit classes requiring a down payment represent a higher risk category.The balance and aging of the equipment installment plan receivables on a gross basis by credit category were as follows:

	December 31, 2016						December 31, 2015
	Lower Risk		Higher Risk		Total		Lower Risk		Higher Risk		Total
(Dollars in millions)
Unbilled	$	553	$	38	$	591	$	343	$	11	$	354
Billed — current		23		2		25		17		1		18
Billed — past due		10		2		12		8		1		9
Equipment installment plan receivables, gross	$	586	$	42	$	628	$	368	$	13	$	381

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The activity in the allowance for credit losses balance for the equipment installment plan receivables was as follows:

	2016		2015
(Dollars in millions)
Allowance for credit losses, beginning of year	$	26	$	10
Bad debts expense		63		49
Write-offs, net of recoveries		(39)		(33)
Allowance for credit losses, end of year	$	50	$	26

U.S. Cellular recorded out-of-period adjustments in 2016 due to errors related to equipment installment plan transactions occurring in 2015 (“2016 EIP adjustments”).  The 2016 EIP adjustments had the impact of increasing Equipment sales revenues by $2 million, decreasing bad debts expense, which is a component of Selling, general and administrative expense, by $2 million and increasing Income before income taxes by $4 million in 2016.Additionally, U.S. Cellular recorded out-of-period adjustments in 2015 due to errors related to equipment installment plan transactions (“2015 EIP adjustments”) that were attributable to 2014.  The 2015 EIP adjustments had the impact of reducing Equipment sales revenues and Income before income taxes by $6 million in 2015.  U.S. Cellular has determined that these adjustments were not material to any of the periods impacted.

Note 4Income Taxes

U.S. Cellular is included in a consolidated federal income tax return and in certain state income tax returns with other members of the TDS consolidated group. For financial statement purposes, U.S. Cellular and its subsidiaries compute their income tax expense as if they comprised a separate affiliated group and were not included in the TDS consolidated group.

U.S. Cellular’s current income taxes balances at December 31, 2016 and 2015 were as follows:

December 31,	2016		2015
(Dollars in millions)
Federal income taxes receivable (payable)	$	(8)	$	33
Net state income taxes receivable		–		1

Income tax expense (benefit) is summarized as follows:

Year Ended December 31,			2016		2015		2014
(Dollars in millions)
Current
	Federal		$	29	$	97	$	(79)
	State			(2)		5		9
Deferred
	Federal			1		48		45
	State			5		7		7
	State - valuation allowance adjustment			–		–		6
		Total income tax expense (benefit)	$	33	$	157	$	(12)

A reconciliation of U.S. Cellular’s income tax expense computed at the statutory rate to the reported income tax expense, and the statutory federal income tax expense rate to U.S. Cellular’s effective income tax expense rate is as follows:

Year Ended December 31,		2016				2015				2014
		Amount		Rate		Amount		Rate		Amount		Rate
(Dollars in millions)
Statutory federal income tax expense and rate		$	29	35.0	%	$	141	35.0	%	$	(21)	35.0	%
State income taxes, net of federal benefit1			3	3.6			8	2.1			12	(20.8)
Effect of noncontrolling interests			(1)	(1.1)			3	0.6			(6)	9.8
Other differences, net			2	2.2			5	1.0			3	(3.9)
Total income tax expense (benefit) and rate		$	33	39.7	%	$	157	38.7	%	$	(12)	20.1	%
1	State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to the valuation allowance.  During the third quarter of 2014, U.S. Cellular recorded a $6 million increase to income tax expense related to a valuation allowance recorded against certain state deferred tax assets.

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Significant components of U.S. Cellular’s deferred income tax assets and liabilities at December 31, 2016 and 2015 were as follows:

December 31,		2016		2015
(Dollars in millions)
Deferred tax assets
	Net operating loss (“NOL”) carryforwards	$	88	$	79
	Stock-based compensation		26		24
	Compensation and benefits - other		21		20
	Deferred rent		21		19
	Other		56		79
Total deferred tax assets			212		221
	Less valuation allowance		(65)		(55)
Net deferred tax assets			147		166
Deferred tax liabilities
	Property, plant and equipment		473		517
	Licenses/intangibles		326		306
	Partnership investments		173		162
	Total deferred tax liabilities		972		985
Net deferred income tax liability		$	825	$	819
Presented in the Consolidated Balance Sheet as:
Deferred income tax liability, net		$	826	$	821
Other assets and deferred charges			(1)		(2)
	Net deferred income tax liability	$	825	$	819

At December 31, 2016, U.S. Cellular and certain subsidiaries had $1,845 million of state NOL carryforwards (generating a $70million deferred tax asset) available to offset future taxable income. The state NOL carryforwards expire between 2017 and 2036.  Certain subsidiaries had federal NOL carryforwards (generating an $18million deferred tax asset) available to offset their future taxable income. The federal NOL carryforwards expire between 2018 and 2036. A valuation allowance was established for certain state NOL carryforwards and federal NOL carryforwards since it is more likely than not that a portion of such carryforwards will expire before they can be utilized.

A summary of U.S. Cellular’s deferred tax asset valuation allowance is as follows:

		2016		2015		2014
(Dollars in millions)
Balance at beginning of year		$	55	$	53	$	43
	Charged to income tax expense		10		2		10
Balance at end of year		$	65	$	55	$	53

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

		2016		2015		2014
(Dollars in millions)
Unrecognized tax benefits balance at beginning of year		$	39	$	36	$	29
	Additions for tax positions of current year		12		7		8
	Additions for tax positions of prior years		3		1		–
	Reductions for tax positions of prior years		(1)		–		(1)
	Reductions for lapses in statutes of limitations		(10)		(5)		–
Unrecognized tax benefits balance at end of year		$	43	$	39	$	36

Unrecognized tax benefits are included in Accrued taxes and Other deferred liabilities and credits in the Consolidated Balance Sheet. If these benefits were recognized, they would have reduced income tax expense in 2016, 2015 and 2014 by $29million, $25million and $23million, respectively, net of the federal benefit from state income taxes.

U.S. Cellular recognizes accrued interest and penalties related to unrecognized tax benefits in Income tax expense (benefit). The amounts charged to income tax expense related to interest and penalties resulted in a benefit of $2 million in 2016 and an expense of $1 million and $4 million in 2015 and 2014, respectively. Net accrued liabilities for interest and penalties were $15million and $17million at December 31, 2016 and 2015, respectively, and are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

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U.S. Cellular is included in TDS’ consolidated federal and certain state income tax returns. U.S. Cellular also files certain state and local income tax returns separately from TDS. With only limited exceptions, TDS is no longer subject to federal income tax audits for the years prior to 2013. With only a few exceptions, TDS is no longer subject to state income tax audits for years prior to 2012.

Note 5Earnings Per Share

Basic earnings (loss) per share attributable to U.S. Cellular shareholders is computed by dividing Net income (loss) attributable to U.S. Cellular shareholders by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per share attributable to U.S. Cellular shareholders is computed by dividing Net income (loss) attributable to U.S. Cellular shareholders by the weighted average number of common shares outstanding during the period adjusted to include the effects of potentially dilutive securities.  Potentially dilutive securities primarily include incremental shares issuable upon the exercise of outstanding stock options and the vesting of restricted stock units.

The amounts used in computing earnings (loss) per common share and the effects of potentially dilutive securities on the weighted average number of common shares were as follows:

Year Ended December 31,		2016		2015		2014
(Dollars and shares in millions, except per share amounts)
Net income (loss) attributable to U.S. Cellular shareholders		$	48	$	241	$	(43)
Weighted average number of shares used in basic   earnings (loss) per share			85		84		84
Effect of dilutive securities 1			–		1		–
Weighted average number of shares used in diluted   earnings (loss) per share			85		85		84
Basic earnings (loss) per share attributable to U.S. Cellular   shareholders		$	0.56	$	2.86	$	(0.51)
Diluted earnings (loss) per share attributable to   U.S. Cellular shareholders		$	0.56	$	2.84	$	(0.51)
1	There were no effects of dilutive securities in 2014 due to the net loss for the year.

Certain Common Shares issuable upon the exercise of stock options or vesting of restricted stock units were not included in average diluted shares outstanding for the calculation of Diluted earnings (loss) per share attributable to U.S. Cellular shareholders because their effects were antidilutive.  The number of such Common Shares excluded was 3 million shares, 4 million shares and 4 million shares for 2016, 2015 and 2014 respectively.

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Note 6Acquisitions, Divestitures and Exchanges

Divestiture Transaction

On May 16, 2013, pursuant to a Purchase and Sale Agreement, U.S. Cellular sold customers and certain PCS spectrum licenses to subsidiaries of Sprint Corp. fka Sprint Nextel Corporation (“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.”

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.  As of December 31, 2016, U.S. Cellular had received a cumulative total of $118 million pursuant to the Sprint Cost Reimbursement. Sprint Cost Reimbursement totaling $7 million, $30 million and $71 million had been received and recorded in Cash received from divestitures and exchanges in the Consolidated Statement of Cash Flows in 2016, 2015, and 2014, respectively.

As a result of the Divestiture Transaction, U.S. Cellular recognized gains of $6 million and $29 million in (Gain) loss on sale of business and other exit costs, net, in 2015 and 2014, respectively.

Other Acquisitions, Divestitures and Exchanges

• In July 2016, the FCC announced U.S. Cellular as a qualified bidder in the FCC’s forward auction of 600 MHz spectrum licenses, referred to as Auction 1002, which then commenced in August 2016.  In the second quarter of 2016, U.S. Cellular made an upfront payment to the FCC of $143 million to establish its initial bidding eligibility.  The auction deposit is recorded as a component of Other assets and deferred charges as of December 31, 2016.  The Clock Phase of the auction was completed in February 2017 and based on the results of this phase, U.S. Cellular is committed to purchase 600 MHz spectrum licenses for a minimum amount of $327 million, subject to increase as the FCC completes the Assignment Phase of the auction, which is pending.  U.S. Cellular expects to be obligated to pay for the total committed amount, less the $143 million deposit, in the second quarter of 2017.
• In March 2016, U.S. Cellular entered into an agreement with a third party to transfer FCC licenses in non-operating markets and receive FCC licenses in operating markets.  The agreement provided for the transfer of certain AWS and PCS spectrum licenses to U.S. Cellular in exchange for U.S. Cellular transferring certain PCS spectrum licenses with a carrying value of $8 million and $1 million of cash to the third party.  This transaction closed in the fourth quarter of 2016, at which time U.S. Cellular recorded a gain of $3 million. 
• In February 2016, U.S. Cellular entered into an agreement with a third party to exchange certain 700 MHz licenses for certain AWS and PCS licenses and $28 million of cash.  This license exchange was accomplished in two closings.  The first closing occurred in the second quarter of 2016 at which time U.S. Cellular received $13 million of cash and recorded a gain of $9 million.  The remaining licenses with a carrying value of $8 million were classified as “Assets held for sale” in the Consolidated Balance Sheet as of December 31, 2016.  The second closing occurred in February 2017 at which time U.S. Cellular received cash proceeds of $15 million and expects to recognize a gain. 
• In February 2016, U.S. Cellular entered into an additional agreement with a third party that provided for the transfer of certain AWS spectrum licenses and $2 million in cash to U.S. Cellular, in exchange for U.S. Cellular transferring certain AWS, PCS and 700 MHz licenses with a carrying value of $7 million to the third party.  This transaction closed in the third quarter of 2016, at which time U.S. Cellular recorded a gain of $7 million.
• In 2015 and 2016, U.S. Cellular entered into multiple agreements to purchase spectrum licenses located in U.S. Cellular’s existing operating markets.  The aggregate purchase price for these spectrum licenses is $57 million, of which $53 million closed in 2016.  The remaining agreements are expected to close in early 2017.
• In March 2015, U.S. Cellular exchanged certain of its unbuilt PCS licenses for certain other PCS licenses located in U.S. Cellular’s existing operating markets and $117 million of cash.  As of the transaction date, the licenses received in the transaction had an estimated fair value, per a market approach, of $43 million.  A gain of $125 million was recorded in (Gain) loss on license sales and exchanges, net in the Consolidated Statement of Operations in the first quarter of 2015.
• U.S. Cellular participated in Auction 97 indirectly through its limited partnership interest in Advantage Spectrum.  Advantage Spectrum was the provisional winning bidder for 124 licenses for an aggregate winning bid of $338 million, after its designated entity discount of 25%.  Advantage Spectrum’s bid amount, less the upfront payment of $60 million paid in 2014, was paid to the FCC in March 2015.  These licenses were granted by the FCC in July 2016.  See Note 14 — Variable Interest Entities for additional information.

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• In December 2014, U.S. Cellular entered into an agreement with a third party to sell 595 towers and certain related contracts, assets, and liabilities for $159 million.  This agreement and related transactions are referred to as the “Tower Sale” and were accomplished in two closings.  The first closing occurred in December 2014 and included the sale of 236 towers, without tenants, for $10 million.  On this same date, U.S. Cellular received $8 million in earnest money.  At the time of the first closing, a $4 million gain was recorded.  The second closing for the remaining 359 towers, primarily with tenants, took place in January 2015, at which time U.S. Cellular received $142 million in additional cash proceeds and recorded a gain of $108 million in (Gain) loss on sale of business and other exit costs, net.
• In September 2014, U.S. Cellular entered into an agreement with a third party to exchange certain PCS and AWS licenses for certain other PCS and AWS licenses and $28 million of cash. This license exchange was accomplished in two closings. The first closing occurred in December 2014 at which time U.S. Cellular transferred licenses to the counterparty with a net book value of $11 million, received licenses with an estimated fair value, per a market approach, of $52 million, recorded a $22 million gain and recorded an $18 million deferred credit in Other current liabilities.  The license that was transferred to the counterparty in the second closing had a net book value of $22 million. The second closing occurred in July 2015. At the time of the second closing, U.S. Cellular received $28 million in cash and recognized the deferred credit from the first closing resulting in a total gain of $24 million recorded on this part of the license exchange.
• In May 2014, U.S. Cellular entered into a License Purchase and Customer Recommendation Agreement with Airadigm Communications, Inc. (“Airadigm”), a wholly-owned subsidiary ofTDS. In September 2014, pursuant to the License Purchase and Customer Recommendation Agreement, Airadigm transferred FCC spectrum licenses and certain tower assets in certain markets in Wisconsin, Iowa, Minnesota and Michigan, for $92 million in cash to U.S. Cellular. 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 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.
• In March 2014, U.S. Cellular sold the majority of its St. Louis area non-operating market spectrum license for $92 million. A gain of $76 million was recorded in (Gain) loss on license sales and exchanges, net in the Consolidated Statement of Operations in the first quarter of 2014.
• In February 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 $16 million, which was recorded in (Gain) loss on license sales and exchanges, net in the Consolidated Statement of Operations in the first quarter of 2014.

Note 7Intangible Assets

Activity related to U.S. Cellular's Licenses and Goodwill is presented below.  See Note 6 — Acquisitions, Divestitures and Exchanges for information regarding transactions which affected Licenses during the periods.

Licenses
		2016		2015
(Dollars in millions)
Balance at beginning of year		$	1,834	$	1,443
	Acquisitions		53		346
	Transferred to Assets held for sale		(8)		–
	Exchanges - Licenses received		25		43
	Exchanges - Licenses surrendered		(18)		–
	Other		–		2
Balance at end of year		$	1,886	$	1,834

Goodwill

There were no significant changes to Goodwill during 2016 or 2015.

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Note 8Investments in Unconsolidated Entities

Investments in unconsolidated entities consist of amounts invested in wireless entities in which U.S. Cellular holds a noncontrolling interest. These investments are accounted for using either the equity or cost method as shown in the following table:

December 31,	2016		2015
(Dollars in millions)
Equity method investments:
Capital contributions, loans, advances and adjustments	$	108	$	112
Cumulative share of income		1,577		1,432
Cumulative share of distributions		(1,276)		(1,183)
Total equity method investments		409		361
Cost method investments		4		2
Total investments in unconsolidated entities	$	413	$	363

The following tables, which are based on information provided in part by third parties, summarize the combined assets, liabilities and equity, and results of operations of U.S. Cellular’s equity method investments:

December 31,	2016		2015
(Dollars in millions)
Assets
Current	$	739	$	632
Due from affiliates		387		89
Property and other		4,615		4,555
Total assets	$	5,741	$	5,276
Liabilities and Equity
Current liabilities	$	466	$	808
Deferred credits		184		237
Long-term liabilities		187		147
Long-term capital lease obligations		6		2
Partners' capital and shareholders' equity		4,898		4,082
Total liabilities and equity	$	5,741	$	5,276

Year Ended December31,	2016		2015		2014
(Dollars in millions)
Results of Operations
Revenues	$	6,747	$	6,958	$	6,669
Operating expenses		5,047		5,226		5,036
Operating income		1,700		1,732		1,633
Other income (expense), net		(11)		(7)		1
Net income	$	1,689	$	1,725	$	1,634

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Note 9Property, Plant and Equipment

Property, plant and equipment in service and under construction, and related accumulated depreciation and amortization, as of December 31, 2016 and 2015 were as follows:

December 31,	UsefulLives (Years)	2016		2015
(Dollars in millions)
Land	N/A	$	35	$	36
Buildings	20		297		295
Leasehold and land improvements	1-30		1,153		1,103
Cell site equipment	7-25		3,383		3,383
Switching equipment	5-8		976		960
Office furniture and equipment	3-5		420		502
Other operating assets and equipment	3-5		53		79
System development	1-7		1,217		1,169
Work in process	N/A		178		142
Total property, plant and equipment, gross			7,712		7,669
Accumulated depreciation and amortization			(5,242)		(5,020)
Total property, plant and equipment, net		$	2,470	$	2,649

Depreciation and amortization expense totaled $607 million, $596million and $593million in 2016, 2015 and 2014, respectively.  In 2016, 2015 and 2014, (Gain) loss on asset disposals, net included charges of $22million, $16 million and $21 million, respectively, related to disposals of assets, trade-ins of older assets for replacement assets and other retirements of assets from service in the normal course of business.

Note 10Asset Retirement Obligations

U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations in its operating markets.  Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions.  These obligations are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

In 2016 and 2015, U.S. Cellular performed a review of the assumptions and estimated costs related to its asset retirement obligations.  The results of the reviews (identified as “Revisions in estimated cash outflows”) and other changes in asset retirement obligations during 2016 and 2015 were as follows:

		2016		2015
(Dollars in millions)
Balance at beginning of year		$	158	$	152
	Additional liabilities accrued		1		2
	Revisions in estimated cash outflows		5		(1)
	Disposition of assets		(1)		(6)
	Accretion expense		11		11
Balance at end of year		$	174	$	158

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Note 11Debt

Revolving Credit Facility

At December 31, 2016, U.S. Cellular had a revolving credit facility available for general corporate purposes.  In June 2016, U.S. Cellular entered into a $300 million revolving credit agreement with certain lenders and other parties.  As a result of the new agreement, U.S. Cellular’s revolving credit agreement due to expire in December 2017 was terminated.  Amounts under the revolving credit facility may be borrowed, repaid and reborrowed from time to time until maturity in June 2021.  As of December 31, 2016, there were no outstanding borrowings under the revolving credit facility, except for letters of credit.  Interest expense representing commitment fees on the unused portion of the revolving line of credit was $1million in each of 2016, 2015 and 2014.  The commitment fees are based on the unsecured senior debt ratings assigned to U.S. Cellular by certain ratings agencies.

The following table summarizes the revolving credit facility as of December 31, 2016:

(Dollars in millions)
Maximum borrowing capacity	$	300
Letters of credit outstanding	$	2
Amount borrowed	$	–
Amount available for use	$	298

Borrowings under the revolving credit facility bear interest either at a LIBOR rate plus 1.75% or at an alternative Base Rate as defined in the revolving credit agreement plus 0.75%, at U.S. Cellular’s option.  U.S. Cellular may select a borrowing period of either one, two, three or six months (or other period of twelve months or less if requested by U.S. Cellular and approved by the lenders).  U.S. Cellular’s credit spread and commitment fees on its revolving credit facility may be subject to increase if its current credit rating from nationally recognized credit rating agencies is lowered, and may be subject to decrease if the rating is raised. 

In connection with U.S. Cellular’s revolving credit facility, TDS and U.S. Cellular entered into a subordination agreement dated June 15, 2016 together with the administrative agent for the lenders under U.S. Cellular’s revolving credit agreement.  Pursuant to this subordination agreement, (a) any consolidated funded indebtedness from U.S. Cellular to TDS will be unsecured and (b) any (i) consolidated funded indebtedness from U.S. Cellular to TDS (other than “refinancing indebtedness” as defined in the subordination agreement) in excess of $105 million and (ii) refinancing indebtedness in excess of $250 million will be subordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under U.S. Cellular’s revolving credit agreement.  As of December 31, 2016, U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the revolving credit agreement pursuant to the subordination agreement.

The continued availability of the revolving credit facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and make representations regarding certain matters at the time of each borrowing.  U.S. Cellular believes it was in compliance as of December 31, 2016with all covenants and other requirements set forth in the revolving credit facility.

The revolving credit agreement includes the following financial covenants:

• Consolidated Interest Coverage Ratio may not be less than 3.00 to 1.00 as of the end of any fiscal quarter.
• Consolidated Leverage Ratio may not be greater than the ratios indicated as of the end of any fiscal quarter for each period specified below:

Period	Ratios
From the agreement date of June 15, 2016 through June 30, 2019	3.25 to 1.00
From July 1, 2019 and thereafter	3.00 to 1.00

Certain U.S. Cellular wholly-owned subsidiaries have jointly and severally unconditionally guaranteed the payment and performance of the obligations of U.S. Cellular under the revolving credit agreement pursuant to a guaranty dated June 15, 2016.  Other subsidiaries that meet certain criteria will be required to provide a similar guaranty in the future.  U.S. Cellular believes it was in compliance with all of the financial and other covenants and requirements set forth in its revolving credit facility as ofDecember 31, 2016.

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Term Loan

In July 2015, U.S. Cellular borrowed $225 million on a senior term loan credit facility in two separate draws.  This facility was entered into in January 2015 and amended and restated in June 2016.  The interest rate on outstanding borrowings is reset at three and six month intervals at a rate of LIBOR plus 250 basis points.  This credit facility provides for the draws to be continued on a long-term basis under terms that are readily determinable.  U.S. Cellular has the ability and intent to carry the debt for the duration of the agreement.  Principal reductions are due and payable in quarterly installments of $3 million beginning in March 2016 through December 2021, and the remaining unpaid balance will be due and payable in January 2022.  The senior term loan credit facility contains financial covenants and subsidiary guarantees that are consistent with the revolving credit agreements described above.  This facility was entered into for general corporate purposes, including working capital, spectrum purchases and capital expenditures.U.S. Cellular believes that it was in compliance with all of the financial and other covenants and requirements set forth in its term loan credit facility as of December 31, 2016.

In connection with U.S. Cellular’s term loan credit facility, TDS and U.S. Cellular entered into a subordination agreement in June 2016 together with the administrative agent for the lenders under U.S. Cellular’s term loan credit agreement, which is substantially the same as the subordination agreement in the U.S. Cellular revolving credit facility described above.  As of December 31, 2016, U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the term loan facility pursuant to this subordination agreement.

Other Long-Term Debt

Long-term debt as of December 31, 2016 and 2015 was as follows:

								December 31,
								2016						2015
				Issuance date	Maturity date	Call date (any time on or after)		Principal Amount		Less Unamortized discount and debt issuance costs		Total		Principal Amount		Less Unamortized discount and debt issuance costs	Total
(Dollars in millions)
	Unsecured Senior Notes
			6.700%	Dec 2003 and June 2004	Dec 2033	Dec 2003 and June 2004	$	544	$	15	$	529	$	544	$	15	$	529
			6.950%	May 2011	May 2060	May 2016		342		11		331		342		11		331
			7.250%	Dec 2014	Dec 2063	Dec 2019		275		10		265		275		10		265
			7.250%	Nov 2015	Dec 2064	Dec 2020		300		10		290		300		10		290
		Term Loan		Jul 2015	Jan 2022			214		2		212		225		2		223
	Obligation on capital leases							2		–		2		2		–		2
Total long-term debt							$	1,677	$	48	$	1,629	$	1,688	$	48	$	1,640
	Long-term debt, current										$	11					$	11
	Long-term debt, noncurrent										$	1,618					$	1,629

U.S. Cellular may redeem its 6.95% Senior Notes, 7.25% 2063 Senior Notes and 7.25% 2064 Senior Notes, in whole or in part at any time after the respective call date, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest.  U.S. Cellular may redeem the 6.7% Senior Notes, in whole or in part, at any time prior to maturity at a redemption price equal to the greater of (a) 100% of the principal amount of such notes, plus accrued and unpaid interest, or (b) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semi-annual basis at the Treasury Rate plus 30 basis points. 

Interest on the Senior Notes outstanding at December 31, 2016 is payable quarterly, with the exception of the 6.7% Senior Notes for which interest is payable semi-annually.

The annual requirements for principal payments on long-term debt are approximately $11 million for each year 2017 through 2021.

The covenants associated with U.S. Cellular’s long-term debt obligations, among other things, restrict U.S. Cellular’s ability, subject to certain exclusions, to incur additional liens, enter into sale and leaseback transactions, and sell, consolidate or merge assets.

U.S. Cellular’s long-term debt notes do not contain any provisions resulting in acceleration of the maturities of outstanding debt in the event of a change in U.S. Cellular’s credit rating.  However, a downgrade in U.S. Cellular’s credit rating could adversely affect its ability to obtain long-term debt financing in the future.

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Note 12Commitments and Contingencies

Agreements

During 2016, U.S. Cellular entered into agreements with Apple to purchase certain minimum quantities of Apple iPhone products and fund marketing programs related to the Apple iPhone products over a three-year period beginning in September 2016.  Based on current forecasts, U.S. Cellular estimates that the remaining contractual commitment as of December 31, 2016 under these agreements is approximately $1,351 million.  At this time, U.S. Cellular expects to meet its contractual commitments with Apple.

In November 2014, U.S. Cellular executed a Master Statement of Work (“Master”) and certain other documents with Amdocs Software Systems Limited (“Amdocs”).  The agreement provides that U.S. Cellular will outsource to Amdocs certain support functions for its Billing and Operations Support System (“B/OSS”).  Such functions include application support, billing operations and some infrastructure services.  In October 2016, U.S. Cellular executed two Statements of Work (“SOW”) with Amdocs for continued development and support related to its billing system.  Both the Master and SOW agreements have terms through September 30, 2019, with the Master being subject to five one-year renewal periods at U.S. Cellular’s option.  The estimated amounts to be paid to Amdocs with respect to the Master and SOW agreements during the remaining terms are approximately $53 million and $67 million (exclusive of travel and expenses and subject to certain potential adjustments), respectively. 

Lease Commitments

U.S. Cellular is a party to various lease agreements, both as lessee and lessor, for office space, retail store sites, cell sites and equipment which are accounted for as operating leases.  Certain leases have renewal options and/or fixed rental increases.  Renewal options that are reasonably assured of exercise are included in determining the lease term.  Any rent abatements or lease incentives, in addition to fixed rental increases, are included in the calculation of rent expense and calculated on a straight-line basis over the defined lease term.

As of December 31, 2016, future minimum rental payments required under operating leases and rental receipts expected under operating leases that have noncancellable lease terms in excess of one year were as follows:

	OperatingLeases Future Minimum RentalPayments		OperatingLeases Future Minimum RentalReceipts
(Dollars in millions)
2017	$	145	$	50
2018		129		43
2019		115		33
2020		102		22
2021		91		8
Thereafter		775		1
Total	$	1,357	$	157

Rent expense totaled $161million, $153million and $152million in 2016, 2015 and 2014, respectively.

Indemnifications

U.S. Cellular enters into agreements in the normal course of business that provide for indemnification of counterparties.  The terms of the indemnifications vary by agreement.  The events or circumstances that would require U.S. Cellular to perform under these indemnities are transaction specific; however, these agreements may require U.S. Cellular to indemnify the counterparty for costs and losses incurred from litigation or claims arising from the underlying transaction.  U.S. Cellular is unable to estimate the maximum potential liability for these types of indemnifications as the amounts are dependent on the outcome of future events, the nature and likelihood of which cannot be determined at this time.  Historically, U.S. Cellular has not made any significant indemnification payments under such agreements.

Legal Proceedings

U.S. Cellular is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts.  If U.S. Cellular believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss.  If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within that range is better than another, the low end of the range is accrued.  The assessment of the expected outcomes of legal proceedings is a highly subjective process that requires judgments about future events.  The legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financial statement disclosures.  The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements.

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U.S. Cellular has accrued less than $1 million with respect to legal proceedings and unasserted claims as of December 31, 2016 and 2015.  U.S. Cellular has not accrued any amount for legal proceedings if it cannot estimate the amount of the possible loss or range of loss.  U.S. Cellular is unable to estimate any contingent loss in excess of the amounts accrued.

Note 13Variable Interest Entities

U.S. Cellular adopted the provisions of ASU 2015-02, Consolidation: Amendments to the Consolidation Analysis (“ASU 2015-02”), as of January 1, 2016.  ASU 2015-02 changed consolidation accounting including revising certain criteria for identifying variable interest entities.  As a result, certain consolidated subsidiaries and unconsolidated entities that were not defined as variable interest entities under previous accounting guidance are defined as variable interest entities under the provisions of ASU 2015-02.  U.S. Cellular’s modified retrospective adoption of ASU 2015-02 did not change the group of entities which U.S. Cellular is required to consolidate in its financial statements.  Accordingly, the adoption of ASU 2015-02 did not impact its financial position or results of operations.

Consolidated VIEs

U.S. Cellular consolidates variable interest entities (“VIEs”) in which it has a controlling financial interestas defined by GAAP and is therefore deemed the primary beneficiary.  A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE.  U.S. Cellular reviews these criteria initially at the time it enters into agreements and subsequently when events warranting reconsideration occur.These VIEshave risks similar to those described in the “Risk Factors” in U.S. Cellular’s Form 10-K for the year ended December 31, 2016.

The following VIEs were formed to participate in FCC auctions of wireless spectrum and to fund, establish, and provide wireless service with respect to any FCC licenses won in the auctions:

• Advantage Spectrum L.P. (“Advantage Spectrum”) and Frequency Advantage L.P., the general partner of Advantage Spectrum;
• Aquinas Wireless L.P. (“Aquinas Wireless”); and
• King Street Wireless L.P. (“King Street Wireless”) and King Street Wireless, Inc., the general partner of King Street Wireless.

The power to direct the activities that most significantly impact the economic performance of these VIEs is shared.  Specifically, the general partner of these VIEs has the exclusive right to manage, operate and control the limited partnerships and make all decisions to carry on the business of the partnerships.  The general partner of each partnership needs the consent of the limited partner, an indirect U.S. Cellular subsidiary, to sell or lease certain licenses, to make certain large expenditures, admit other partners or liquidate the limited partnerships.  Although the power to direct the activities of these VIEs is shared, U.S. Cellular has the most significant level of exposure to the variability associated with the economic performance of the VIEs, indicating that U.S. Cellular is the primary beneficiary of the VIEs.  Therefore, in accordance with GAAP, these VIEs are consolidated.

In March 2015, King Street Wireless made a $60 million distribution to its owners.  Of this distribution, $6 million was provided to King Street Wireless, Inc. and $54 million was provided to U.S. Cellular.

FCC Auction 97 ended in January 2015.  U.S. Cellular participated in Auction 97 indirectly through its interest in Advantage Spectrum.  An indirect subsidiary of U.S. Cellular is a limited partner in Advantage Spectrum.  Advantage Spectrum applied as a designated entity, and received bid credits with respect to spectrum purchased in Auction 97.  Advantage Spectrum was the winning bidder for 124 licenses for an aggregate bid of $338 million, after its designated entity discount of 25%.  This amount is classified as Licenses in U.S. Cellular’s Consolidated Balance Sheet at December 31, 2016, and 2015. Advantage Spectrum’s bid amount, less the initial deposit of $60 million paid in 2014, plus certain other charges totaling $2 million, was paid to the FCC in March 2015.  These licenses were granted by the FCC in July 2016.

U.S. Cellular also consolidates other VIEs that are limited partnerships that provide wireless service.  ASU 2015-02 modified the manner in which limited partnerships and similar legal entities are evaluated under the variable interest model.  A limited partnership is a variable interest entity unless the limited partners hold substantive participating rights or kick-out rights over the general partners.  For certain limited partnerships, U.S. Cellular is the general partner and manages the operations.  In these partnerships, the limited partners do not have substantive kick-out or participating rights and, further, such limited partners do not have the authority to remove the general partner.  Therefore, beginning January 1, 2016, these limited partnerships are also recognized as VIEs and are consolidated under the variable interest model.  Prior to the adoption of ASU 2015-02, these limited partnerships were consolidated under the voting interest model.

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The following table presents the classification of the consolidated VIEs’ assets and liabilities in U.S. Cellular’s Consolidated Balance Sheet.

December 31,			2016¹		2015
(Dollars in millions)
Assets
	Cash and cash equivalents		$	2	$	1
	Accounts receivable			44		–
	Other current assets			6		–
	Assets held for sale			2		–
	Licenses2			652		649
	Property, plant and equipment, net			105		8
	Other assets and deferred charges			16		–
		Total assets	$	827	$	658
Liabilities
	Current liabilities		$	21	$	–
	Deferred liabilities and credits			13		1
		Total liabilities	$	34	$	1
1		The increase in amounts from December 31, 2015 are due primarily to the adoption of ASU 2015-02 as disclosed above.  ASU 2015-02 was adopted on a modified retrospective basis and, accordingly, prior year amounts have not been revised to reflect the change in guidance.
2		As disclosed above, payments totaling $338 million were made by Advantage Spectrum to the FCC relating to Auction 97.  These licenses were granted in July 2016.  Although the licenses had not yet been granted as of December 31, 2015, the payments to the FCC were classified as Licenses at such date.

Unconsolidated VIEs

U.S. Cellular manages the operations of and holds a variable interest in certain other limited partnerships, but is not the primary beneficiary of these entities and, therefore, does not consolidate them under the variable interest model outlined in ASU 2015-02.

U.S. Cellular’s total investment in these unconsolidated entities was $6 million and $5 million at December 31, 2016 and 2015, respectively, and is included in Investments in unconsolidated entities in U.S. Cellular’s Consolidated Balance Sheet.  The maximum exposure from unconsolidated VIEs is limited to the investment held by U.S. Cellular in those entities.

Other Related Matters

U.S. Cellular made contributions, loans and/or advances to its VIEs totaling $98 million, $281 million and $61 million in 2016, 2015 and 2014, respectively.  U.S. Cellular may agree to make additional capital contributions and/or advances to these or other VIEs and/or to their general partners to provide additional funding for operations or the development of licenses granted in various auctions.  U.S. Cellular may finance such amounts with a combination of cash on hand, borrowings under its revolving credit agreement and/or other long-term debt.  There is no assurance that U.S. Cellular will be able to obtain additional financing on commercially reasonable terms or at all to provide such financial support.

The limited partnership agreements of Advantage Spectrum, Aquinas Wireless and King Street Wireless also provide the general partner with a put option whereby the general partner may require the limited partner, a subsidiary of U.S. Cellular, to purchase its interest in the limited partnership.The general partner’s put options related to its interests in King Street Wireless and Aquinas Wireless will become exercisable in 2019 and 2020, respectively. The general partner’s put options related to its interest in Advantage Spectrum will become exercisable in 2021 and 2022.The put option price is determined pursuant to a formula that takes into consideration fixed interest rates and the market value of U.S. Cellular’s Common Shares.Upon exercise of the put option, the general partner is required to repay borrowings due to U.S. Cellular.If the general partner does not elect to exercise its put option, the general partner may trigger an appraisal process in which the limited partner (a subsidiary of U.S. Cellular) may have the right, but not the obligation, to purchase the general partner’s interest in the limited partnership at a price and on other terms and conditions specified in the limited partnership agreement.In accordance with requirements under GAAP, U.S. Cellular is required to calculate atheoretical redemption value for all of the put options assuming they are exercisable at the end of each reporting period, even though such exercise is not contractually permitted.Pursuant to GAAP, this theoretical redemption value, net of amounts payable to U.S.Cellular for loans and accrued interest thereon made by U.S.Cellular to the general partners (“net put value”), was $1million atDecember 31, 2016 and2015. The net put value is recorded as Noncontrolling interests with redemption features in U.S. Cellular’s Consolidated Balance Sheet.Also in accordance with GAAP, changes in the redemption value of the put options, net of interest accrued on the loans, are recorded as a component of Net income attributable to noncontrolling interests, net of tax, in U.S. Cellular’s Consolidated Statement of Operations.

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During 2015, U.S. Cellular recorded out-of-period adjustments attributable to the third quarter of 2013 through the second quarter of 2015 related to an agreement with King Street Wireless.  U.S. Cellular determined that these adjustments were not material to the quarterly periods or the annual results for 2015.  These out-of-period adjustments had the impact of reducing Net income by $3 million and Net income attributable to U.S. Cellular shareholders by $4 million in 2015.

Note 14Noncontrolling Interests

U.S. Cellular’s consolidated financial statements include certain noncontrolling interests that meet the GAAP definition of mandatorily redeemable financial instruments. These mandatorily redeemable noncontrolling interests represent interests held by third parties in consolidated partnerships, where the terms of the underlying partnership agreement provide for a defined termination date at which time the assets of the subsidiary are to be sold, the liabilities are to be extinguished and the remaining net proceeds are to be distributed to the noncontrolling interest holders and U.S. Cellular in accordance with the respective partnership agreements. The termination dates of these mandatorily redeemable noncontrolling interests range from 2085 to 2113.

The estimated aggregate amount that would be due and payable to settle all of these noncontrolling interests assuming an orderly liquidation of the finite-lived consolidated partnerships on December 31, 2016, net of estimated liquidation costs, is $22 million. This amount excludes redemption amounts recorded in Noncontrolling interests with redemption features in the Consolidated Balance Sheet. The estimate of settlement value was based on certain factors and assumptions which are subjective in nature. Changes in those factors and assumptions could result in a materially larger or smaller settlement amount. U.S. Cellular currently has no plans or intentions relating to the liquidation of any of the related partnerships prior to their scheduled termination dates. The corresponding carrying value of the mandatorily redeemable noncontrolling interests in finite-lived consolidated partnerships at December 31, 2016 was $11 million, and is included in Noncontrolling interests in the Consolidated Balance Sheet. The excess of the aggregate settlement value over the aggregate carrying value of these mandatorily redeemable noncontrolling interests is due primarily to the unrecognized appreciation of the noncontrolling interest holders’ share of the underlying net assets in the consolidated partnerships. Neither the noncontrolling interest holders’ share, nor U.S. Cellular’s share, of the appreciation of the underlying net assets of these subsidiaries is reflected in the consolidated financial statements.

Note 15Common Shareholders’ Equity

Tax-Deferred Savings Plan

U.S. Cellular has reserved 67,215 Common Shares for issuance under the TDS Tax-Deferred Savings Plan, a qualified profit‑sharing plan pursuant to Sections401(a) and 401(k) of the Internal Revenue Code.  Participating employees have the option of investing their contributions in a U.S. Cellular Common Share fund, a TDS Common Share fund or certain unaffiliated funds.

Series A Common Shares

SeriesA Common Shares are convertible on a share-for-share basis into Common Shares.  In matters other than the election of directors, each SeriesA Common Share is entitled to ten votes per share, compared to one vote for each Common Share.  The SeriesA Common Shares are entitled to elect 75% of the directors (rounded down), and the Common Shares elect 25% of the directors (rounded up).  As of December 31, 2016, a majority of U.S. Cellular’s outstanding Common Shares and all of U.S. Cellular’s outstanding SeriesA Common Shares were held by TDS.

Common Share Repurchase Program

In November 2009, the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009 and continuing each year thereafter, on a cumulative basis. In December 2016, the U.S. Cellular Board amended this authorization to provide that such amount will be any amount from zero to 1,300,000 beginning on January 1, 2017, as determined by the U.S. Cellular Pricing Committee, and that if the Pricing Committee did not specify an amount for any year, such amount would be zero for such year. The Pricing Committee did not specify any increase as of January 1, 2017. The Pricing Committee was also authorized to decrease the cumulative amount of the authorization at any time, but has not taken any action to do so at this time. As a result, there was no change to the cumulative amount of the share repurchase authorization as of January 1, 2017. As of December 31, 2016, the total cumulative amount of Common Shares authorized to be purchased is 5,900,849.  The authorization provides that share repurchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on market prices and other conditions. This authorization does not have an expiration date.

Pursuant to certain employee and non-employee benefit plans, U.S. Cellular reissued the following Treasury Shares:

Year Ended December 31,	2016	2015	2014
(Shares in millions)
Treasury Shares Reissued	1	–	–

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Note 16Stock-Based Compensation

U.S. Cellular has established the following stock‑based compensation plans: Long-Term Incentive Plans and a Non-Employee Director compensation plan.

Under the U.S. Cellular Long-Term Incentive Plans, U.S. Cellular may grant fixed and performance based incentive and non-qualified stock options, restricted stock, restricted stock units, and deferred compensation stock unit awards to key employees.  At December 31, 2016, the only types of awards outstanding are fixed non-qualified stock option awards, restricted stock unit awards, and deferred compensation stock unit awards.

Under the Non-Employee Director compensation plan, U.S. Cellular may grant Common Shares to members of the Board of Directors who are not employees of U.S. Cellular or TDS.

At December 31, 2016, U.S. Cellular had reserved 14,759,000 Common Shares for equity awards granted and to be granted under the Long-Term Incentive Plans and 169,000 Common Shares for issuance under the Non-Employee Director compensation plan.

U.S. Cellular uses treasury stock to satisfy requirements for Common Shares issued pursuant to its various stock-based compensation plans.

Long-Term Incentive Plans – Stock Options – Stock options granted to key employees are exercisable over a specified period not in excess of ten years.  Stock options generally vest over a period of three years from the date of grant.  Stock options outstanding at December 31, 2016 expire between 2017 and 2026.  However, vested stock options typically expire 30days after the effective date of an employee’s termination of employment for reasons other than retirement.  Employees who leave at the age of retirement have 90days (or one year if they satisfy certain requirements) within which to exercise their vested stock options.  The exercise price of options equals the market value of U.S. Cellular Common Shares on the date of grant.

U.S. Cellular estimated the fair value of stock options granted during 2016, 2015 and 2014 using the Black-Scholes valuation model and the assumptions shown in the table below.

	2016	2015	2014
Expected life	4.7 years	4.6 years	4.5 years
Expected annual volatility rate	30.5%	30.1%	28.0%-28.1%
Dividend yield	0%	0%	0%
Risk-free interest rate	1.2%	1.2%	1.4%-1.5%
Estimated annual forfeiture rate	9.4%	9.7%	9.4%

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Pre-vesting forfeitures and expected life are estimated based on historical experience related to similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior.  U.S. Cellular believes that its historical experience provides the best estimates of future pre-vesting forfeitures and future expected life.  The expected volatility assumption is based on the historical volatility of U.S. Cellular’s common stock over a period commensurate with the expected life.  The dividend yield assumption is zero because U.S. Cellular has never paid a dividend, except a special cash dividend in June 2013, and has expressed its intention to retain all future earnings in the business.  The risk-free interest rate assumption is determined using the U.S. Treasury Yield Curve Rate with a term length that approximates the expected life of the stock options.

The fair value of options is recognized as compensation cost using an accelerated attribution method over the requisite service periods of the awards, which is generally the vesting period.

A summary of U.S. Cellular stock options outstanding (total and portion exercisable) and changes during 2016 is presented in the table below:

Common Share Options		Numberof Options	Weighted Average Exercise Price		Aggregate Intrinsic Value (in millions)		Weighted Average Remaining Contractual Life (in years)
Outstanding at December 31, 2015		4,102,000	$	40.62
(1,849,000 exercisable)			$	44.33
	Granted	898,000		45.87
	Exercised	(541,000)		35.34
	Forfeited	(197,000)		39.08
	Expired	(289,000)		50.06
Outstanding at December 31, 2016		3,973,000	$	41.92	$	14	6.8
(1,937,000 exercisable)			$	42.54	$	7	5.0

The weighted average grant date fair value per share of the U.S. Cellular stock options granted in 2016, 2015 and 2014 was $12.77, $9.94 and $10.68, respectively.  The aggregate intrinsic value of U.S. Cellular stock options exercised in 2016, 2015 and 2014 was $4 million, $2 million and $2 million, respectively.  The aggregate intrinsic value at December 31, 2016 presented in the table above represents the total pre-tax intrinsic value (the difference between U.S. Cellular’s closing stock price and the exercise price multiplied by the number of in-the-money options) that would have been received by option holders had all options been exercised on December 31, 2016.

Long-Term Incentive Plans – Restricted Stock Units – Restricted stock unit awards granted to key employees generally vest after three years.  U.S. Cellular estimates the fair value of restricted stock units based on the closing market price of U.S. Cellular shares on the date of grant.  The fair value is then recognized as compensation cost on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

A summary of U.S. Cellular nonvested restricted stock units at December 31, 2016 and changes during the year then ended is presented in the table below:

Common Restricted Stock Units	Number	Weighted Average
		Grant Date
		Fair Value
Nonvested at December 31, 2015	1,194,000	$	36.70
Granted	571,000		43.32
Vested	(348,000)		31.52
Forfeited	(107,000)		39.28
Nonvested at December 31, 2016	1,310,000	$	40.74

The total fair value of restricted stock units that vested during 2016, 2015 and 2014 was $15 million, $13 million and $11 million, respectively.  The weighted average grant date fair value per share of the restricted stock units granted in 2016, 2015 and 2014 was $43.32, $37.24 and $41.24, respectively.

Long-Term Incentive Plans – Deferred Compensation Stock Units – Certain U.S. Cellular employees may elect to defer receipt of all or a portion of their annual bonuses and to receive a company matching contribution on the amount deferred.  All bonus compensation that is deferred by employees electing to participate is immediately vested and is deemed to be invested in U.S. Cellular Common Share stock units.  The amount of U.S. Cellular’s matching contribution depends on the portion of the annual bonus that is deferred.  Participants receive a 25% match for amounts deferred up to 50% of their total annual bonus and a 33% match for amounts that exceed 50% of their total annual bonus; such matching contributions also are deemed to be invested in U.S. Cellular Common Share stock units and vest over three years. 

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The total fair value of deferred compensation stock units that vested during 2016 and 2015 was less than $1 million.  The weighted average grant date fair value per share of the deferred compensation stock units granted in 2016 and 2015 was $41.31 and $35.96, respectively.  There were no deferred compensation stock units granted or that vested during 2014.  As of December 31, 2016, there were 7,000 vested but unissued deferred compensation stock units valued at less than $1 million.

Compensation of Non-Employee Directors – U.S. Cellular issued 13,000, 15,000 and 14,200 Common Shares in 2016, 2015 and 2014, respectively, under its Non-Employee Director compensation plan. 

Stock‑Based Compensation Expense

The following table summarizes stock‑based compensation expense recognized during 2016, 2015 and 2014:

Year Ended December 31,	2016		2015		2014
(Dollars in millions)
Stock option awards	$	11	$	11	$	10
Restricted stock unit awards		14		13		11
Deferred compensation bonus and matching stock unit awards		–		–		–
Awards under Non-Employee Director compensation plan		1		1		1
Total stock-based compensation, before income taxes		26		25		22
Income tax benefit		(10)		(10)		(8)
Total stock-based compensation expense, net of income taxes	$	16	$	15	$	14

The following table provides a summary of the stock-based compensation expense included in the Consolidated Statement of Operations for the years ended:

December 31,	2016		2015		2014
(Dollars in millions)
Selling, general and administrative expense	$	23	$	22	$	19
System operations		3		3		3
Total stock-based compensation expense	$	26	$	25	$	22

At December 31, 2016, unrecognized compensation cost for all U.S. Cellular stock‑based compensation awards was $29million and is expected to be recognized over a weighted average period of 1.8years.

U.S. Cellular’s tax benefits realized from the exercise of stock options and other awards totaled $8 million in 2016.

66

Note 17Supplemental Cash Flow Disclosures

Following are supplemental cash flow disclosures regarding interest paid and income taxes paid.

Year Ended December 31,	2016		2015		2014
(Dollars in millions)
Interest paid	$	113	$	81	$	55
Income taxes paid, net of refunds received		(11)		59		33

Following are supplemental cash flow disclosures regarding transactions related to stock-based compensation awards.  In certain situations, U.S. Cellular withholds shares that are issuable upon the exercise of stock options or the vesting of restricted shares to cover, and with a value equivalent to, the exercise price and/or the amount of taxes required to be withheld from the stock award holder at the time of the exercise or vesting.  U.S. Cellular then pays the amount of the required tax withholdings to the taxing authorities in cash.

Year Ended December 31,	2016		2015		2014
(Dollars in millions)
Common Shares withheld		308,010		228,011		163,355
Aggregate value of Common Shares withheld	$	13	$	8	$	7
Cash receipts upon exercise of stock options		12		7		5
Cash disbursements for payment of taxes		(6)		(5)		(4)
Net cash receipts from exercise of stock
options and vesting of other stock awards	$	6	$	2	$	1

On September 27, 2012, the FCC conducted a single round, sealed bid, reverse auction to award up to $300 million in one-time Mobility Fund Phase I support to successful bidders that commit to provide 3G, or better, wireless service in areas designated as unserved by the FCC. This auction was designated by the FCC as Auction 901. U.S. Cellular and severalof its wholly-owned subsidiariesparticipated in Auction 901 and were winning bidders in eligible areas within10 states and will receive up to $40 million in one-time support from the Mobility Fund. These funds when received reduce the carrying amount of the assets to which they relate or offset operating expenses.  In connection with these winning bids, in June 2013, U.S. Cellular provided $17 million letters of credit to the FCC, of which $2 million remained outstanding as of December 31, 2016.  U.S. Cellular has received $35million in support funds, of which the entire balance has been spent as of December 31, 2016.  U.S. Cellular has set up a receivable in the amount of $2 million as of December 31, 2016 pending final review from the FCC to release funds.

67

Note 18Certain Relationships and Related Transactions

The following persons are partners of Sidley AustinLLP, the principal law firm of U.S. Cellular and its subsidiaries: Walter C.D. Carlson, a director of U.S. Cellular, a director and non-executive Chairman of the Board of Directors of TDS and a trustee and beneficiary of a voting trust that controls TDS; WilliamS. DeCarlo, the General Counsel of TDS and an Assistant Secretary of TDS and certain subsidiaries of TDS; and StephenP. Fitzell, the General Counsel of U.S. Cellular and TDS Telecommunications Corporation and an Assistant Secretary of U.S. Cellular and certain other subsidiaries of TDS. Walter C.D. Carlson does not provide legal services to TDS, U.S. Cellular or their subsidiaries.  U.S. Cellular and its subsidiaries incurred legal costs from Sidley AustinLLP of $6 million in 2016, $9 million in 2015 and $11 million in 2014.

U.S. Cellular is billed for all services it receives from TDS, pursuant to the terms of various agreements between it and TDS.  These billings are included in U.S. Cellular's Selling, general and administrative expenses.  Some of these agreements were established at a time prior to U.S. Cellular's initial public offering when TDS owned more than 90% of U.S. Cellular's outstanding capital stock and may not reflect terms that would be obtainable from an unrelated third party through arms-length negotiations.  Billings from TDS and certain of its subsidiaries to U.S. Cellular are based on expenses specifically identified to U.S. Cellular and on allocations of common expenses.  Such allocations are based on the relationship of U.S. Cellular's assets, employees, investment in property, plant and equipment and expenses relative to all subsidiaries in the TDS consolidated group.  Management believes the method TDS uses to allocate common expenses is reasonable and that all expenses and costs applicable to U.S. Cellular are reflected in its financial statements.  Billings to U.S. Cellular from TDS totaled $94 million, $96 million and $91 million in 2016, 2015and 2014, respectively.

In December 2014, U.S. Cellular entered into an agreement to sell 595 towers outside of its core markets to a third party for $159 million.  The sale of certain of the towers was completed in December 2014, and the sale of the remaining towers was completed in January 2015.  See Note 6 – Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements.  Of the 595 towers, six towers were acquired by U.S. Cellular from Airadigm for a total of $3 million.  These six towers were included as part of the sale of towers by U.S. Cellular in order to avoid the need for two sets of transaction documents.  The value of $3 million paid by U.S. Cellular to Airadigm for such six towers was determined using the same method of valuation that was used to value the towers owned by U.S. Cellular that were sold to the third party.  The Audit Committee of the board of directors reviewed and evaluated this transaction between U.S. Cellular and Airadigm.

In December 2013, TDS initially proposed to have Airadigm sell to U.S. Cellular the FCC spectrum licenses, towers and customers in certain Airadigm markets. Because TDS owns 100% of the common stock of Airadigm and, at the time of the transaction, approximately 84% of the common stock of U.S. Cellular, this proposal was a related party transaction. Accordingly, the U.S. Cellular Board of Directors formed a Special Committee comprised entirely of independent and disinterested directors with exclusive authority to consider, negotiate and, if appropriate, approve any such transaction with Airadigm without any further involvement of the full board. The U.S. Cellular Special Committee engaged independent financial advisors and legal counsel. The transaction was negotiated between representatives of TDS and Airadigm, on the one hand, and the Special Committee and its representatives, on the other hand. The U.S. Cellular Special Committee also received a fairness opinion from its independent financial advisor. Following these events, the Special Committee approved a License Purchase and Customer Recommendation Agreement between U.S. Cellular and 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 $92million in cash. See Note6–Acquisitions, Divestitures and Exchangesin the Notes to Consolidated Financial Statements.

The Audit Committee of the Board of Directors of U.S. Cellular is responsible for the review and evaluation of all related-party transactions as such term is defined by the rules of the New York Stock Exchange.

68

Reports of Management

Management’s Responsibility for Financial Statements

Management of United States Cellular Corporation has the responsibility for preparing the accompanying consolidated financial statements and for their integrity and objectivity.  The statements were prepared in accordance with accounting principles generally accepted in the United States of America and, in management’s opinion, were fairly presented.  The financial statements included amounts that were based on management’s best estimates and judgments.  Management also prepared the other information in the annual report and is responsible for its accuracy and consistency with the financial statements.

PricewaterhouseCoopersLLP, an independent registered public accounting firm, has audited these consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and has expressed herein its unqualified opinion on these financial statements.

/s/ Kenneth R. Meyers	/s/ StevenT. Campbell
Kenneth R. Meyers	StevenT. Campbell
President and Chief Executive Officer	Executive Vice President—Finance, Chief Financial Officer
(principal executive officer)	and Treasurer
	(principal financial officer)
/s/ Douglas D. Shuma	/s/ Kristin A. MacCarthy
Douglas D. Shuma	Kristin A. MacCarthy
Chief Accounting Officer	Vice President and Controller
(principal accounting officer)

69

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules13a-15(f)and 15d-15(f)under the Exchange Act.  U.S. Cellular’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  U.S. Cellular’s internal control over financial reporting includes those policies and procedures that (i)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (ii)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and, where required, the Board of Directors of the issuer; and (iii)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the issuer’s assets that could have a material effect on the interim or annual consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of U.S. Cellular’s management, including its principal executive officer and principalfinancial officer, U.S. Cellular conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2016, based on the criteria established in the 2013 version ofInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Management has concluded that U.S. Cellular maintained effective internal control over financial reporting as of December 31, 2016 based on criteria established in the 2013 version ofInternal Control — Integrated Framework issued by the COSO.

The effectiveness of U.S. Cellular’s internal control over financial reporting as of December 31, 2016 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in the firm’s report included herein.

/s/ Kenneth R. Meyers	/s/ StevenT. Campbell
Kenneth R. Meyers	StevenT. Campbell
President and Chief Executive Officer	Executive Vice President—Finance, Chief Financial Officer
(principal executive officer)	and Treasurer
	(principal financial officer)
/s/ Douglas D. Shuma	/s/ Kristin A. MacCarthy
Douglas D. Shuma	Kristin A. MacCarthy
Chief Accounting Officer	Vice President and Controller
(principal accounting officer)

70

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of United States Cellular Corporation:

In our opinion, based on our audits and the report of other auditors, the accompanying consolidated balance sheets and the related consolidated statements of operations, changes in equity, and cash flows present fairly, in all material respects, the financial position of United States Cellular Corporation and its subsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, based on our audit, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.  Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We did not audit the financial statements of Los Angeles SMSA Limited Partnership and Subsidiary, a 5.5% owned entity accounted for by the equity method of accounting. The consolidated financial statements of United States Cellular Corporation reflect an investment in this partnership of $240,100,000 and $197,600,000 as of December 31, 2016 and 2015, respectively, and equity earnings of $71,400,000, $74,000,000 and $71,800,000 for each of the three years in the period ended December 31, 2016. The financial statements of Los Angeles SMSA Limited Partnership and Subsidiary were audited by other auditors whose report thereon has been furnished to us, and our opinion on the financial statements expressed herein, insofar as it relates to the amounts included for Los Angeles SMSA Limited Partnership and Subsidiary, is based solely on the report of the other auditors. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits and the report of other auditors provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 24, 2017

71

United States Cellular Corporation

Selected Consolidated Financial Data

Year Ended or at December 31,		2016		2015		2014		2013		2012
(Dollars and shares in millions, except per share amounts)
Statement of Operations data
Service revenues		$	3,030	$	3,350	$	3,398	$	3,595	$	4,099
Equipment sales			909		647		495		324		353
Operating revenues			3,939		3,997		3,893		3,919		4,452
(Gain) loss on sale of business and other
exit costs, net			–		(114)		(33)		(247)		21
(Gain) loss on license sales and exchanges, net			(19)		(147)		(113)		(255)		–
Operating income (loss)			(3)		313		(143)		147		157
Equity in earnings of unconsolidated
entities			140		140		130		132		90
Gain (loss) on investments			–		–		–		19		(4)
Income (loss) before income taxes			82		404		(59)		258		205
Net income (loss)			49		247		(47)		145		141
Net income (loss) attributable to
noncontrolling interests, net of tax			1		6		(4)		4		30
Net income (loss) attributable to
U.S. Cellular shareholders		$	48	$	241	$	(43)	$	140	$	111
Basic weighted average shares outstanding			85		84		84		84		85
Basic earnings (loss) per share attributable
to U.S. Cellular shareholders		$	0.56	$	2.86	$	(0.51)	$	1.67	$	1.31
Diluted weighted average shares
outstanding1			85		85		84		85		85
Diluted earnings (loss) per share attributable
to U.S. Cellular shareholders1		$	0.56	$	2.84	$	(0.51)	$	1.65	$	1.30
Special dividend per share to U.S. Cellular
shareholders1		$	–	$	–	$	–	$	5.75	$	–
Balance Sheet data
Total assets		$	7,110	$	7,060	$	6,462	$	6,430	$	6,572
Net long-term debt, excluding current portion			1,618		1,629		1,127		863		863
Total U.S. Cellular shareholders' equity		$	3,634	$	3,561	$	3,302	$	3,391	$	3,734
1	On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75 per share, for an aggregate amount of $482 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013.  Outstanding U.S. Cellular stock options and restricted stock unit awards were equitably adjusted for the special cash dividend.  The impact of such adjustments on the earnings per share calculation was reflected in all prior periods presented.

72

United States Cellular Corporation

Consolidated Quarterly Information (Unaudited)

		Quarter Ended
2016		March 31		June 30		September 30		December 31
(Dollars in millions, except per share amounts)
Operating revenues		$	958	$	980	$	1,010	$	991
(Gain) loss on asset disposals, net			5		5		7		6
(Gain) loss on license sales and exchanges, net1			–		(9)		(7)		(3)
Operating income (loss)			(1)		18		9		(29)
Net income (loss)			9		27		18		(5)
Net income (loss) attributable to U.S. Cellular shareholders		$	9	$	27	$	17	$	(6)
Basic weighted average shares outstanding			84		85		85		85
Diluted weighted average shares outstanding			85		85		85		85
Basic earnings (loss) per share attributable
to U.S. Cellular shareholders		$	0.10	$	0.32	$	0.20	$	(0.07)
Diluted earnings (loss) per share attributable
to U.S. Cellular shareholders		$	0.10	$	0.32	$	0.20	$	(0.07)
Stock price
U.S. Cellular Common Shares2
	High	$	45.80	$	45.87	$	41.73	$	44.82
	Low		32.72		35.66		35.86		33.30
	Close	$	45.69	$	39.27	$	36.34	$	43.72
		Quarter Ended
2015		March 31		June 30		September 30		December 31
(Dollars in millions, except per share amounts)
Operating revenues		$	965	$	976	$	1,069	$	987
(Gain) loss on asset disposals, net			4		5		3		4
(Gain) loss on sale of business and other exit costs, net1			(111)		(2)		(1)		–
(Gain) loss on license sales and exchanges, net1			(123)		–		(24)		–
Operating income (loss)			250		8		78		(24)
Net income (loss)			165		20		65		(3)
Net income (loss) attributable to U.S. Cellular shareholders		$	160	$	19	$	64	$	(2)
Basic weighted average shares outstanding			84		84		84		84
Diluted weighted average shares outstanding			85		85		85		84
Basic earnings (loss) per share attributable
to U.S. Cellular shareholders		$	1.90	$	0.23	$	0.75	$	(0.02)
Diluted earnings (loss) per share attributable
to U.S. Cellular shareholders		$	1.89	$	0.23	$	0.75	$	(0.02)
Stock price
U.S. Cellular Common Shares2
	High	$	40.19	$	39.90	$	39.50	$	43.49
	Low		34.10		35.78		34.27		34.42
	Close	$	35.72	$	37.67	$	35.43	$	40.81
Due to rounding, the sum of quarterly results may not equal the total for the year.
1	See Note 6 — Acquisitions, Divestitures and Exchanges for additional information on (Gain) loss on sale of business and other exit costs, net and (Gain) loss on license sales and exchanges, net.
2	The high, low and closing sales prices as reported by the New York Stock Exchange (“NYSE”).

73

United States Cellular Corporation

Shareholder Information

Stock and Dividend Information

U.S. Cellular's Common Shares are listed on the New York Stock Exchange under the symbol “USM” and in the newspapers as “US Cellu.”  As of January 31, 2017, the last trading day of the month, U.S. Cellular's Common Shares were held by approximately295 record owners.  All of the SeriesA Common Shares were held by TDS.  No public trading market exists for the SeriesA Common Shares.  The SeriesA Common Shares are convertible on a share-for-share basis into Common Shares.

U.S. Cellular has not paid any cash dividends, except for a special cash dividend of $5.75 per share in June 2013, and currently intends to retain all earnings for use in U.S. Cellular’s business.

See “Consolidated Quarterly Information (Unaudited)” for information on the high and low trading prices of the USM Common Shares for 2016 and 2015.

Stock Performance Graph

The following chart provides a comparison of U.S. Cellular’s cumulative total return to shareholders (stock price appreciation plus dividends) during the previous five years to the returns of the Standard& Poor's 500 Composite Stock Price Index and the Dow Jones U.S. Telecommunications Index.  As of December 31, 2016, the Dow Jones U.S. Telecommunications Index was composed of the following companies:  AT&TInc., CenturyLinkInc., Frontier Communications Corp., Level3 CommunicationsInc., SBA Communications Corp., Sprint Corp., T-Mobile US Inc., Telephone and Data Systems,Inc. (TDS) and Verizon CommunicationsInc.

Note: Cumulative total return assumes reinvestment of dividends.

	2011		2012		2013		2014		2015		2016
U.S. Cellular (NYSE: USM)	$	100	$	80.77	$	112.31	$	106.97	$	109.60	$	117.42
S&P 500 Index		100		116.00		153.57		174.60		177.01		198.18
Dow Jones U.S. Telecommunications Index		100		118.79		135.57		138.81		143.69		178.12

Assumes $100.00 invested at the close of trading on the last trading day preceding the first day of 2011, in U.S. Cellular Common Shares, S&P500 Index and the Dow Jones U.S. Telecommunications Index.

74

Investor relations

U.S. Cellular’s annual report, SEC filings and news releases are available to investors, securities analysts and other members of the investment community. These reports are provided, without charge, upon request to our Corporate Office. Investors may also access these and other reports through the Investor Relations portion of the U.S. Cellular website (www.uscellular.com).

Questions regarding lost, stolen or destroyed certificates, consolidation of accounts, transferring of shares and name or address changes should be directed to:

Julie Mathews, IRC, Director — Investor Relations
Telephone and Data Systems,Inc.
30 North LaSalle Street, Suite4000
Chicago, IL 60602
312.592.5341
312.630.9299 (fax)
julie.mathews@tdsinc.com

General inquiries by investors, securities analysts and other members of the investment community should be directed to:

Jane W. McCahon, Senior Vice President — Corporate Relations and Corporate Secretary
Telephone and Data Systems,Inc.
30 North LaSalle Street, Suite4000
Chicago, IL 60602
312.592.5379
312.630.9299 (fax)
jane.mccahon@tdsinc.com

Directors and executive officers

See “Election of Directors” and “Executive Officers” sections of the Proxy Statement issued in 2017 for the 2017 Annual Meeting.

Principal counsel
Sidley AustinLLP, Chicago, Illinois

Transfer agent
Computershare Trust Company, N.A.
211 Quality Circle, Suite 210

College Station, TX 77845
312.360.5326

Independent registered public accounting firm
PricewaterhouseCoopersLLP

Visit U.S. Cellular's website atwww.uscellular.com

75

EX-21

Exhibit 21

UNITED STATES CELLULAR CORPORATION

SUBSIDIARY COMPANIES

December 31, 2016

SUBSIDIARY COMPANIES	STATE OF ORGANIZATION
BANGOR CELLULAR TELEPHONE, L.P.	DELAWARE
BARAT WIRELESS, INC.	DELAWARE
BARAT WIRELESS, L.P.	DELAWARE
CALIFORNIA RURAL SERVICE AREA #1, INC.	CALIFORNIA
CARROLL PCS, INC.	DELAWARE
CARROLL WIRELESS, L.P.	DELAWARE
CEDAR RAPIDS CELLULAR TELEPHONE, L.P.	DELAWARE
CELLVEST, INC.	DELAWARE
CENTRAL CELLULAR TELEPHONES, LTD.	ILLINOIS
CHAMPLAIN CELLULAR, INC.	NEW YORK
COMMUNITY CELLULAR TELEPHONE COMPANY	TEXAS
CROWN POINT CELLULAR, INC.	NEW YORK
DUBUQUE CELLULAR TELEPHONE, L.P.	DELAWARE
EASTERN NORTH CAROLINA CELLULAR JOINT VENTURE	DELAWARE
HARDY CELLULAR TELEPHONE COMPANY	DELAWARE
HUMPHREYS COUNTY CELLULAR, INC.	DELAWARE
INDIANA RSA # 5, INC.	INDIANA
INDIANA RSA NO. 4 LIMITED PARTNERSHIP	INDIANA
INDIANA RSA NO. 5 LIMITED PARTNERSHIP	INDIANA
IOWA RSA # 3, INC.	DELAWARE
IOWA RSA # 9, INC.	DELAWARE
IOWA RSA # 12, INC.	DELAWARE
JACKSONVILLE CELLULAR PARTNERSHIP	NORTH CAROLINA
JACKSONVILLE CELLULAR TELEPHONE COMPANY	NORTH CAROLINA
KANSAS #15 LIMITED PARTNERSHIP	DELAWARE
KENOSHA CELLULAR TELEPHONE, L.P.	DELAWARE
LAB465, LLC	ILLINOIS
MADISON CELLULAR TELEPHONE COMPANY	WISCONSIN
MAINE RSA # 1, INC.	MAINE
MAINE RSA # 4, INC.	MAINE
MCDANIEL CELLULAR TELEPHONE COMPANY	DELAWARE
MINNESOTA INVCO OF RSA # 7, INC.	DELAWARE
NEWPORT CELLULAR, INC.	NEW YORK
NH #1 RURAL CELLULAR, INC.	NEW HAMPSHIRE
OREGON RSA #2, INC.	OREGON
PCS WISCONSIN, LLC	WISCONSIN
RACINE CELLULAR TELEPHONE COMPANY	WISCONSIN
TENNESSEE NO. 3, LIMITED PARTNERSHIP	TENNESSEE
TEXAHOMA CELLULAR LIMITED PARTNERSHIP	TEXAS
TEXAS INVCO OF RSA # 6, INC.	DELAWARE
TOWNSHIP CELLULAR TELEPHONE, INC.	DELAWARE
UNITED STATES CELLULAR INVESTMENT CO. OF OKLAHOMA CITY, INC.	OKLAHOMA
UNITED STATES CELLULAR INVESTMENT COMPANY, LLC	DELAWARE
UNITED STATES CELLULAR INVESTMENT CORPORATION OF LOS ANGELES	INDIANA
UNITED STATES CELLULAR OPERATING COMPANY LLC	DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY OF BANGOR	MAINE
UNITED STATES CELLULAR OPERATING COMPANY OF CEDAR RAPIDS	DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY OF CHICAGO, LLC	DELAWARE

UNITED STATES CELLULAR OPERATING COMPANY OF DUBUQUE	IOWA
UNITED STATES CELLULAR OPERATING COMPANY OF KNOXVILLE	TENNESSEE
UNITED STATES CELLULAR OPERATING COMPANY OF MEDFORD	OREGON
UNITED STATES CELLULAR OPERATING COMPANY OF YAKIMA	WASHINGTON
UNITED STATES CELLULAR TELEPHONE COMPANY (GREATER KNOXVILLE), L.P.	TENNESSEE
USCC DISTRIBUTION CO., LLC	DELAWARE
USCC FINANCIAL L.L.C.	ILLINOIS
USCC PURCHASE, LLC	DELAWARE
USCC REAL ESTATE CORPORATION	DELAWARE
USCC SERVICES, LLC	DELAWARE
USCC WIRELESS INVESTMENT, INC.	DELAWARE
USCCI CORPORATION	DELAWARE
USCIC OF FRESNO	CALIFORNIA
USCOC NEBRASKA/KANSAS, INC.	DELAWARE
USCOC NEBRASKA/KANSAS, LLC	DELAWARE
USCOC OF CENTRAL ILLINOIS, LLC	ILLINOIS
USCOC OF CHICAGO REAL ESTATE HOLDINGS, LLC	DELAWARE
USCOC OF CUMBERLAND, LLC	DELAWARE
USCOC OF GREATER IOWA, LLC	DELAWARE
USCOC OF GREATER MISSOURI, LLC	DELAWARE
USCOC OF GREATER NORTH CAROLINA, LLC	DELAWARE
USCOC OF GREATER OKLAHOMA, LLC	OKLAHOMA
USCOC OF JACK/WIL, INC.	DELAWARE
USCOC OF JACKSONVILLE, LLC	DELAWARE
USCOC OF LACROSSE, LLC	WISCONSIN
USCOC OF OREGON RSA # 5, INC.	DELAWARE
USCOC OF PENNSYLVANIA RSA NO. 10-B2, INC.	DELAWARE
USCOC OF RICHLAND, INC.	WASHINGTON
USCOC OF ROCHESTER, INC.	DELAWARE
USCOC OF SOUTH CAROLINA RSA # 4, INC.	SOUTH CAROLINA
USCOC OF TEXAHOMA, INC.	TEXAS
USCOC OF VIRGINIA RSA # 3, INC.	VIRGINIA
USCOC OF WASHINGTON-4, INC.	DELAWARE
USCOC OF WILMINGTON, LLC	DELAWARE
VERMONT RSA NO. 2-B2, INC.	DELAWARE
WASHINGTON RSA # 5, INC.	WASHINGTON
WESTELCOM CELLULAR, INC.	NEW YORK
WESTERN SUB-RSA LIMITED PARTNERSHIP	DELAWARE
WILMINGTON CELLULAR PARTNERSHIP	NORTH CAROLINA
WILMINGTON CELLULAR TELEPHONE COMPANY	NORTH CAROLINA
YAKIMA MSA LIMITED PARTNERSHIP	DELAWARE

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No.333-209673), Form S-4 (No.33-41826) and Form S-8 (Nos.333-42366, 333-105675, 333-161119, 333-188966, 333-190331 and 333-211485) of United States Cellular Corporation of our report dated February 24, 2017, relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 24, 2017

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements of United States Cellular Corporation:

(1)  Registration Statement (Form S-3 No. 333-209673),

(2)  Registration Statement (Form S-4 No. 33-41826),

(3)  Registration Statement (Form S-8 No. 333-42366),

(4)  Registration Statement (Form S-8 No. 333-105675),

(5)  Registration Statement (Form S-8 No. 333-161119),

(6)  Registration Statement (Form S-8 No.  333-188966),

(7)  Registration Statement (Form S-8 No. 333-190331); and

(8)  Registration Statement (Form S-8 No. 333-211485);

of our report dated February 22, 2017, with respect to the consolidated financial statements of Los Angeles SMSA Limited Partnership and Subsidiary included in this Annual Report (Form 10-K) of United States Cellular Corporation for the year ended December 31, 2016.

/s/ Ernst & Young LLP

Certified Public Accountants

Orlando, Florida

February 24, 2017

EX-31.1

Exhibit 31.1

Certification of principalexecutive officer

I, Kenneth R. Meyers, certify that:

1. I have reviewed this annual report on Form 10-K of United States Cellular Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

1. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
2. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
3. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
4. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

1. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  February 24, 2017

/s/ Kenneth R. Meyers

Kenneth R. Meyers

President and Chief Executive Officer

(principal executive officer)

EX-31.2

Exhibit 31.2

Certification of principalfinancial officer

I, Steven T. Campbell, certify that:

1. I have reviewed this annual report on Form 10-K of United States Cellular Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

1. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
2. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
3. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
4. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

1. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:February 24, 2017

/s/ Steven T. Campbell

Steven T. Campbell

Executive Vice President-Finance,

Chief Financial Officer and Treasurer

(principal financial officer)

EX-32.1

Exhibit 32.1

Certification Pursuant to Section 1350 of Chapter 63

of Title 18 of the United States Code

I, Kenneth R. Meyers, the principal executive officerof United States Cellular Corporation, certify that (i) the annual report on Form 10-K for the year ended December 31, 2016fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of United States Cellular Corporation.

/s/ Kenneth R. Meyers

Kenneth R. Meyers

February 24, 2017

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to United States Cellular Corporation and will be retained by United States Cellular Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification Pursuant to Section 1350 of Chapter 63

of Title 18 of the United States Code

I, Steven T. Campbell, the principal financial officer of United States Cellular Corporation, certify that (i) the annual report on Form 10-K for the year ended December 31, 2016fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of United States Cellular Corporation.

/s/ Steven T. Campbell

Steven T. Campbell

February 24, 2017

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to United States Cellular Corporation and will be retained by United States Cellular Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2016	Jan. 31, 2017	Jun. 30, 2016
Entity Registrant Name	United States Cellular Corporation
Entity Central Index Key	0000821130
Document Type	10-K
Document Period End Date	Dec. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 544,925,835
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Trading Symbol	USM
Common Shares
Entity Common Stock, Shares Outstanding		51,843,000
Series A Common Shares
Entity Common Stock, Shares Outstanding		33,006,000

XML

Consolidated Statement Of Operations - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating revenues
Service	$ 3,030	$ 3,350	$ 3,398
Equipment sales	909	647	495
Total operating revenues	3,939	3,997	3,893
Operating expenses
System operations (excluding Depreciation, amortization and accretion reported below)	760	775	770
Cost of equipment sold	1,081	1,053	1,193
Selling, general and administrative (including charges from affiliates of $94 million, $96 million and $91 million in 2016, 2015 and 2014)	1,480	1,494	1,592
Depreciation, amortization and accretion	618	607	606
(Gain) loss on asset disposals, net	22	16	21
(Gain) loss on sale of business and other exit costs, net		(114)	(33)
(Gain) loss on license sales and exchanges, net	(19)	(147)	(113)
Total operating expenses	3,942	3,684	4,036
Operating income (loss)	(3)	313	(143)
Investment and other income (expense)
Equity in earnings of unconsolidated entities	140	140	130
Interest and dividend income	57	36	12
Interest expense	(113)	(86)	(57)
Other, net	1	1	(1)
Total investment and other income	85	91	84
Income (loss) before income taxes	82	404	(59)
Income tax expense (benefit)	33	157	(12)
Net income (loss)	49	247	(47)
Less: Net income (loss) attributable to noncontrolling interests, net of tax	1	6	(4)
Net income (loss) attributable to U.S. Cellular shareholders	$ 48	$ 241	$ (43)
Basic weighted average shares outstanding	85	84	84
Basic earnings (loss) per share attributable to U.S. Cellular shareholders	$ 0.56	$ 2.86	$ (0.51)
Diluted weighted average shares outstanding	85	85	84
Diluted earnings (loss) per share attributable to U.S. Cellular shareholders	$ 0.56	$ 2.84	$ (0.51)

XML

Consolidated Statement Of Operations Parenthetical - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating expenses
Selling, general and administrative, charges from affiliates	$ 94	$ 96	$ 91

XML

Consolidated Statement of Cash Flows - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities
Net income (loss)	$ 49	$ 247	$ (47)
Add (deduct) adjustments to reconcile net income (loss) to net cash flows from operating activities
Depreciation, amortization and accretion	618	607	606
Bad debts expense	96	106	101
Stock-based compensation expense	26	25	22
Deferred income taxes, net	6	55	58
Equity in earnings of unconsolidated entities	(140)	(140)	(130)
Distributions from unconsolidated entities	93	60	112
(Gain) loss on asset disposals, net	22	16	21
(Gain) loss on sale of business and other exit costs, net		(114)	(33)
(Gain) loss on license sales and exchanges, net	(19)	(147)	(113)
Noncash interest expense	2	2	1
Other operating activities	(2)
Changes in assets and liabilities from operations
Accounts receivable	(23)	(96)	13
Equipment installment plans receivable	(246)	(134)	(189)
Inventory	8	118	(29)
Accounts payable	48	5	(98)
Customer deposits and deferred revenues	(54)	(37)	34
Accrued taxes	40	34	(99)
Accrued interest	(2)	4	1
Other assets and liabilities	(21)	(56)	(59)
Net cash provided by operating activities	501	555	172
Cash flows from investing activities
Cash paid for additions to property, plant and equipment	(443)	(581)	(605)
Cash paid for aquisitions and licenses	(53)	(286)	(38)
Cash received from divestitures and exchanges	21	317	180
Cash received for investments			50
Federal Communications Commission deposit	(143)		(60)
Other investing activities		1	2
Net cash used in investing activities	(618)	(549)	(471)
Cash flows from financing activities
Issuance of long-term debt		525	275
Repayment of long-term debt	(11)
Repayment of borrowing under revolving credit facility			(150)
Borrowing under revolving credit facility			150
Common shares reissued for benefit plans, net of tax payments	6	2	1
Common shares repurchased	(5)	(6)	(19)
Payment of debt issuance costs	(2)	(13)	(10)
Acquisition of assets in common control transaction		(2)	(76)
Distributions to noncontrolling interests	(1)	(6)	(3)
Payments to acquire additional interest in subsidiaries		(2)
Other financing activities	1	(1)	1
Net cash provided by (used in) financing activities	(12)	497	169
Net increase (decrease) in cash and cash equivalents	(129)	503	(130)
Cash and cash equivalents
Beginning of period	715	212	342
End of period	$ 586	$ 715	$ 212

XML

Consolidated Balance Sheet - USD ($) $ in Millions		Dec. 31, 2016	Dec. 31, 2015
Current assets
Cash and cash equivalents		$ 586	$ 715
Accounts receivable
Customers and agents less allowances of $51 and $45, respectively		658	608
Roaming		16	20
Affiliated		2
Other less allowances of $1 and $1, respectively		51	44
Inventory, net		138	149
Prepaid expenses		84	81
Other current assets		23	55
Total current assets		1,558	1,672
Assets held for sale		8
Licenses		1,886	1,834
Goodwill		370	370
Investments in unconsolidated entities		413	363
Property, plant and equipment
In service and under construction		7,712	7,669
Less: Accumulated depreciation and amortization		5,242	5,020
Property, plant and equipment, net		2,470	2,649
Other assets and deferred charges		405	172
Total assets	[1]	7,110	7,060
Current liabilities
Current portion of long-term debt		11	11
Accounts payable
Affiliated		12	10
Trade		309	275
Customer deposits and deferred revenues		190	251
Accrued taxes		39	28
Accrued compensation		73	68
Other current liabilities		84	105
Total current liabilities		718	748
Deferred liabilities and credits
Deferred income tax liability, net		826	821
Other deferred liabilities and credits		302	290
Long-term debt, net		1,618	1,629
Commitments and contingencies
Noncontrolling interests with redemption features		1	1
U.S. Cellular shareholders' equity
Series A Common and Common Shares Authorized 190 shares (50 Series A Common and 140 Common Shares) Issued 88 shares (33 Series A Common and 55 Common Shares) Outstanding 85 shares (33 Series A Common and 52 Common Shares) and 84 shares (33 Series A Common and 51 Common Shares), respectively Par Value ($1.00 per share) ($33 Series A Common and $55 Common Shares)		88	88
Additional paid-in capital		1,522	1,497
Treasury shares, at cost, 3 and 4 Common Shares, respectively		(136)	(157)
Retained earnings		2,160	2,133
Total U.S. Cellular shareholders' equity		3,634	3,561
Noncontrolling interests		11	10
Total equity		3,645	3,571
Total liabilities and equity	[1]	$ 7,110	$ 7,060

[1] The consolidated total assets as of December 31, 2016 and 2015 include assets held by consolidated VIEs of $827 million and $658 million, respectively, which are not available to be used to settle the obligations of U.S. Cellular. The consolidated total liabilities as of December 31, 2016 and 2015 include certain liabilities of consolidated VIEs of $19 million and $1 million, respectively, for which the creditors of the VIEs have no recourse to the general credit of U.S. Cellular. See Note 13 — Variable Interest Entities for additional information.

XML

Consolidated Balance Sheet Parenthetical - USD ($) shares in Millions, $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Current assets
Customers and agents, allowances	$ 51	$ 45
Other, allowances	$ 1	$ 1
U.S. Cellular shareholders' equity
Authorized shares	190	190
Issued shares	88	88
Outstanding shares	85	84
Par value	$ 88	$ 88
Treasury shares	3	4
Variable Interest Entities VIE's
Total VIE assets that can be used to settle only the VIEs' obligations	$ 827	$ 658
Total VIE liabilities for which creditors have no recourse	$ 19	$ 1
Series A Common Shares
U.S. Cellular shareholders' equity
Authorized shares	50	50
Issued shares	33	33
Outstanding shares	33	33
Par value per share	$ 1.00	$ 1.00
Par value	$ 33	$ 33
Common Shares
U.S. Cellular shareholders' equity
Authorized shares	140	140
Issued shares	55	55
Outstanding shares	52	51
Par value per share	$ 1.00	$ 1.00
Par value	$ 55	$ 55
Treasury shares	3	4

XML

Consolidated Statement of Changes in Equity - USD ($) $ in Millions	Total	Series A Common and Common shares	Additional paid-in capital	Treasury shares	Retained earnings	Total U.S. Cellular shareholders' equity	Noncontrolling interests
Beginning balance at Dec. 31, 2013	$ 3,409	$ 88	$ 1,425	$ (165)	$ 2,043	$ 3,391	$ 18
Net income (loss) attributable to U.S. Cellular shareholders	(43)				(43)	(43)
Net income (loss) attributable to noncontrolling interests classified as equity	(4)						(4)
Repurchase of Common Shares	(19)			(19)		(19)
Incentive and compensation plans	1			15	(14)	1
Stock-based compensation awards	21		21			21
Tax windfall (shortfall) from stock awards	(1)		(1)			(1)
Distributions to noncontrolling interests	(3)						(3)
Acquisition of assets in common control transaction	(47)		29		(76)	(47)
Adjust investment in subsidiaries for noncontrolling interest purchases	(1)		(1)			(1)
Ending balance at Dec. 31, 2014	3,313	88	1,473	(169)	1,910	3,302	11
Net income (loss) attributable to U.S. Cellular shareholders	241				241	241
Repurchase of Common Shares	(6)			(6)		(6)
Incentive and compensation plans	2			18	(16)	2
Stock-based compensation awards	24		24			24
Tax windfall (shortfall) from stock awards	(1)		(1)			(1)
Distributions to noncontrolling interests	(1)						(1)
Acquisition of assets in common control transaction	(1)		1		(2)	(1)
Ending balance at Dec. 31, 2015	3,571	88	1,497	(157)	2,133	3,561	10
Net income (loss) attributable to U.S. Cellular shareholders	48				48	48
Net income (loss) attributable to noncontrolling interests classified as equity	2						2
Repurchase of Common Shares	(5)			(5)		(5)
Incentive and compensation plans	5			26	(21)	5
Stock-based compensation awards	25		25			25
Distributions to noncontrolling interests	(1)						(1)
Ending balance at Dec. 31, 2016	$ 3,645	$ 88	$ 1,522	$ (136)	$ 2,160	$ 3,634	$ 11

XML

Summary of Significant Accounting Policies and Recent Accounting Pronouncements

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Note 1Summary of Significant Accounting Policies and Recent Accounting Pronouncements

United States Cellular Corporation (“U.S. Cellular”), a Delaware Corporation, is an 83%-owned subsidiary of Telephone and Data Systems, Inc. (“TDS”).

Nature of Operations

U.S. Cellular owns, operates and invests in wireless systems throughout the United States. As of December 31, 2016, U.S. Cellular served customers with 5.0 million total connections. U.S. Cellular has one reportable segment.

Principles of Consolidation

The accounting policies of U.S. Cellular conform to accounting principles generally accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Unless otherwise specified, references to accounting provisions and GAAP in these notes refer to the requirements of the FASB ASC. The consolidated financial statements include the accounts of U.S. Cellular, its majority-owned subsidiaries, general partnerships in which U.S. Cellular has a majority partnership interest, and variable interest entities (“VIEs”) in which U.S. Cellular is deemed the primary beneficiary. Both VIE and primary beneficiary represent terms defined by GAAP.  See Note 13 — Variable Interest Entities for additional information relating to U.S. Cellular’s VIEs.  Intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (b) the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates are involved in accounting for goodwill and indefinite-lived intangible assets, income taxes and equipment installment plans.

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consist primarily of amounts owed by customers for wireless services and equipment sales, including sales of certain devices under equipment installment plans, by agents for sales of equipment to them and by other wireless carriers whose customers have used U.S. Cellular’s wireless systems.

The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related to existing billed and unbilled accounts receivable. The allowance is estimated based on historical experience, account aging and other factors that could affect collectability. Accounts receivable balances are reviewed on either an aggregate or individual basis for collectability depending on the type of receivable. When it is probable that an account balance will not be collected, the account balance is charged against the allowance for doubtful accounts. U.S. Cellular does not have any off-balance sheet credit exposure related to its customers.

Inventory

Inventory consists primarily of wireless devices stated at the lower of cost or market, with cost determined using the first-in, first-out method and market determined by replacement cost or estimated net realizable value.

Licenses

Licenses consist of direct and incremental costs incurred in acquiring Federal Communications Commission (“FCC”) licenses to provide wireless service.

U.S. Cellular has determined that wireless licenses are indefinite-lived intangible assets and, therefore, not subject to amortization based on the following factors:

• Radio spectrum is not a depleting asset.
• The ability to use radio spectrum is not limited to any one technology.
• U.S.Cellular and its consolidated subsidiaries are licensed to use radio spectrum through the FCC licensing process, which enables licensees to utilize specified portions of the spectrum for the provision of wireless service.
• U.S.Cellular and its consolidated subsidiaries are required to renew their FCC licenses every ten years or, in some cases, every fifteen years. To date, all of U.S.Cellular’s license renewal applications have been granted by the FCC. Generally, license renewal applications filed by licensees otherwise in compliance with FCC regulations are routinely granted. If, however, a license renewal application is challenged either by a competing applicant for the license or by a petition to deny the renewal application, the license will be renewed if the licensee can demonstrate its entitlement to a “renewal expectancy.” Licensees are entitled to such an expectancy if they can demonstrate to the FCC that they have provided “substantial service” during their license term and have “substantially complied” with FCC rules and policies. U.S.Cellular believes that it is probable that its future license renewal applications will be granted.

U.S. Cellular performs its annual impairment assessment of Licenses as of November 1 of each year or more frequently if there are events or circumstances that cause U.S. Cellular to believe the carrying value of Licenses exceeds their fair value on a more likely than not basis.  For purposes of its 2016 and 2015 impairment testing of Licenses, U.S. Cellular separated its FCC licenses into eight units of accounting.  The eight units of accounting consisted of one unit of accounting for developed operating market licenses (“built licenses”) and seven geographic non-operating market licenses (“unbuilt licenses”). 

As of November 1, 2016 and 2015, U.S. Cellular performed a qualitative impairment assessment to determine whether it was more likely than not that the fair value of the built and unbuilt licenses exceed their carrying value.  Based on the impairment assessments performed, U.S. Cellular did not have an impairment of its Licenses in 2016 or2015.  See Note 7 — Intangible Assets for additional details related to Licenses.

Goodwill

U.S. Cellular has Goodwill as a result of its acquisitions of wireless businesses.  Such Goodwill represents the excess of the total purchase price over the fair value of net assets acquired in these transactions.

For purposes of conducting its annual Goodwill impairment test as of November 1, 2016 and 2015, U.S. Cellular identified one reporting unit.  A discounted cash flow approach was used to value the reporting unit for purposes of the Goodwill impairment review.  Based upon the impairment assessments performed, U.S. Cellular did not have an impairment of its Goodwill in 2016 or2015.  See Note 7 — Intangible Assets for additional details related to Goodwill.

Investments in Unconsolidated Entities

For its equity method investments for which financial information is readily available, U.S. Cellular records its equity in the earnings of the entity in the current period. For its equity method investments for which financial information is not readily available, U.S. Cellular records its equity in the earnings of the entity on a one quarter lag basis.

Property, Plant and Equipment

U.S. Cellular’s Property, plant and equipment is stated at the original cost of construction or purchase including capitalized costs of certain taxes, payroll-related expenses, interest and estimated costs to remove the assets.

Expenditures that enhance the productive capacity of assets in service or extend their useful lives are capitalized and depreciated. Expenditures for maintenance and repairs of assets in service are charged to System operations expense or Selling, general and administrative expense, as applicable.  Retirements and disposals of assets are recorded by removing the original cost of the asset (along with the related accumulated depreciation) from plant in service and charging it, together with net removal costs (removal costs less an applicable accrued asset retirement obligation and salvage value realized), to (Gain) loss on asset disposals, net.

U.S. Cellular capitalizes certain costs of developing new information systems.

Depreciation and Amortization

Depreciation is provided using the straight-line method over the estimated useful life of the related asset.

U.S. Cellular depreciates leasehold improvement assets associated with leased properties over periods ranging from one to thirty years; such periods approximate the shorter of the assets’ economic lives or the specific lease terms.

Useful lives of specific assets are reviewed throughout the year to determine if changes in technology or other business changes would warrant accelerating the depreciation of those specific assets.  There were no material changes to useful lives of property, plant and equipment in 2016, 2015 or 2014. See Note 9 — Property, Plant and Equipment for additional details related to useful lives.

Impairment of Long-Lived Assets

U.S. Cellular reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired.

U.S. Cellular has one asset group for purposes of assessing property, plant and equipment for impairment based on the fact that the individual operating markets are reliant on centrally operated data centers, mobile telephone switching offices and a network operations center. U.S. Cellular operates a single integrated national wireless network, and the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities represent cash flows generated by this single interdependent network.

Agent Liabilities

U.S. Cellular has relationships with agents, which are independent businesses that obtain customers for U.S. Cellular. At December 31, 2016 and 2015, U.S. Cellular had accrued $57 million and $76 million, respectively, for amounts due to agents. These amounts are included in Other current liabilities in the Consolidated Balance Sheet.

Debt Issuance Costs

Debt issuance costs include underwriters’ and legal fees and other charges related to issuing various borrowing instruments and other long-term agreements, and are amortized over the respective term of each instrument.  U.S. Cellular presents certain debt issuance costs in the balance sheet as an offset to the related debt obligation.  Debt issuance costs related to U.S. Cellular’s revolving credit facility are recorded in Other assets and deferred charges in the Consolidated Balance Sheet.

Asset Retirement Obligations

U.S. Cellular accounts for asset retirement obligations by recording the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligations are incurred. At the time the liability is incurred, U.S. Cellular records a liability equal to the net present value of the estimated cost of the asset retirement obligation and increases the carrying amount of the related long-lived asset by an equal amount. Until the obligation is fulfilled, U.S. Cellular updates its estimates relating to cash flows required and timing of settlement. U.S. Cellular records the present value of the changes in the future value as an increase or decrease to the liability and the related carrying amount of the long-lived asset. The liability is accreted to future value over a period ending with the estimated settlement date of the respective asset retirement obligation.  The carrying amount of the long-lived asset is depreciated over the useful life of the related asset.  Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability is recognized in the Consolidated Statement of Operations.

Treasury Shares

Common Shares repurchased by U.S. Cellular are recorded at cost as treasury shares and result in a reduction of equity. When treasury shares are reissued, U.S. Cellular determines the cost using the first-in, first-out cost method. The difference between the cost of the treasury shares and reissuance price is included in Additional paid-in capital or Retained earnings.

Revenue Recognition

Revenues related to services are recognized as services are rendered. Revenues billed in advance or in arrears of the services being provided are estimated and deferred or accrued, as appropriate.Revenues from sales of equipment and accessories are recognized when U.S. Cellular no longer has any requirements to perform, when title has passed and when the products are accepted by the customer.

Multiple Deliverable Arrangements

U.S. Cellular sells multiple element service and equipment offerings. In these instances, revenues are allocated using the relative selling price method. Under this method, arrangement consideration is allocated to each element on the basis of its relative selling price. Revenue recognized for the delivered items is limited to the amount due from the customer that is not contingent upon the delivery of additional products or services.

Loyalty Reward Program

In March 2015, U.S. Cellular announced that it would discontinue its loyalty reward program effective September 1, 2015.  All unredeemed reward points expired at that time and the deferred revenue balance of $58 million related to such expired points was recognized as service revenues.

U.S. Cellular followed the deferred revenue method of accounting for its loyalty reward program.  Under this method, revenue allocated to loyalty reward points was deferred.  The amount allocated to the loyalty points was based on the estimated retail price of the products and services for which points were redeemable divided by the number of loyalty points required to receive such products and services.  This was calculated on a weighted average basis and required U.S. Cellular to estimate the percentage of loyalty points that would be redeemed for each product or service. 

Revenue was recognized at the time of customer redemption or when such points were depleted via an account maintenance charge.  U.S. Cellular employed the proportional model to recognize revenues associated with breakage.  Under the proportional model, U.S. Cellular allocated a portion of the estimated future breakage to each redemption and recorded revenue proportionally. 

Equipment Installment Plans

Equipment revenue under equipment installment plan contracts is recognized at the time the device is delivered to the end-user customer for the selling price of the device, net of any deferred imputed interest or trade-in right, if applicable.Imputed interest is reflected as a reduction to the receivable balance and recognized over the duration of the plan as a component of Interest and dividend income. See Note 3 — Equipment Installment Plans for additional information.

Incentives

Discounts and incentives that are deemed cash are recognized as a reduction of Operating revenues concurrently with the associated revenue.

U.S. Cellular issues rebates to its agents and end customers. These incentives are recognized as a reduction to revenue at the time the wireless device sale to the customer occurs. The total potential rebates and incentives are reduced by U.S. Cellular’s estimate of rebates that will not be redeemed by customers based on historical experience of such redemptions.

Activation Fees

U.S. Cellular charges its end customers activation fees in connection with the sale of certain services and equipment. Device activation fees charged at both agent locations and U.S. Cellular company-owned retail stores in connection with equipment installment plan device transactions are deferred and recognized over a period that corresponds with the equipment upgrade eligibility date based on the contract terms. Device activation fees charged at agent locations in connection with subsidized device sales are deferred and recognized over a period that corresponds with the length of the customer’s service contract. Device activation fees charged at U.S. Cellular company-owned retail stores in connection with subsidized device sales are recognized at the time the device is delivered to the customer.

Amounts Collected from Customers and Remitted to Governmental Authorities

U.S. Cellular records amounts collected from customers and remitted to governmental authorities on a net basis within a tax liability account if the tax is assessed upon the customer and U.S. Cellular merely acts as an agent in collecting the tax on behalf of the imposing governmental authority. If the tax is assessed upon U.S. Cellular, then amounts collected from customers as recovery of the tax are recorded in Service revenues and amounts remitted to governmental authorities are recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations. The amounts recorded gross in revenues that are billed to customers and remitted to governmental authorities totaled $64 million, $77 million and $97 million for 2016, 2015 and 2014, respectively.

Eligible Telecommunications Carrier (“ETC”) Revenues

Telecommunications companies may be designated by states, or in some cases by the FCC, as an ETC to receive support payments from the Universal Service Fund if they provide specified services in “high cost” areas. ETC revenues recognized in the reporting period represent the amounts which U.S.Cellular is entitled to receive for such period, as determined and approved in connection with U.S.Cellular’s designation as an ETC in various states.

Advertising Costs

U.S. Cellular expenses advertising costs as incurred. Advertising costs totaled $245 million, $231 million and $205 million in 2016, 2015 and 2014, respectively.

Income Taxes

U.S. Cellular is included in a consolidated federal income tax return with other members of the TDS consolidated group. For financial statement purposes, U.S. Cellular and its subsidiaries calculate their income, income taxes and credits as if they comprised a separate affiliated group. Under a tax allocation agreement between TDS and U.S. Cellular, U.S. Cellular remits its applicable income tax payments to TDS. U.S. Cellular had a tax payable balance with TDS of $8 million as of December 31, 2016 and a tax receivable balance with TDS of $33 million as of December 31, 2015.

Deferred taxes are computed using the liability method, whereby deferred tax assets are recognized for future deductible temporary differences and operating loss carryforwards, and deferred tax liabilities are recognized for future taxable temporary differences. Bothdeferred tax assets and liabilities are measured using the tax rates anticipated to be in effect when the temporary differences reverse. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. U.S. Cellular evaluates income tax uncertainties, assesses the probability of the ultimate settlement with the applicable taxing authority and records an amount based on that assessment.  Deferred taxes are reported as a net non-current asset or liability by jurisdiction.  Any corresponding valuation allowance to reduce the amount of deferred tax assets is also recorded as non-current.

Stock-Based Compensation and Other Plans

U.S. Cellular has established a long-term incentive plan and a non-employee director compensation plan. These plans are considered compensatory plans and, therefore, recognition of compensation cost for grants made under these plans is required.

U.S. Cellular recognizes stock compensation expense based upon the fair value of the specific awards granted using established valuation methodologies.  The amount of stock compensation cost recognized on either a straight-line basis or graded attribution method is based on the portion of the award that is expected to vest over the requisite service period which generally represents the vesting period.  Stock-based compensation cost recognized has been reduced for estimated forfeitures.  Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  See Note 16—Stock-Based Compensation for additional information.

Defined Contribution Plans

U.S. Cellular participates in a qualified noncontributory defined contribution pension plan sponsored by TDS; such plan provides pension benefits for the employees of U.S. Cellular and its subsidiaries. Under this plan, pension benefits and costs are calculated separately for each participant and are funded currently. Pension costs were $11 million in 2016, 2015 and 2014.

U.S. Cellular also participates in a defined contribution retirement savings plan (“401(k) plan”) sponsored by TDS. Total costs incurred for U.S. Cellular’s contributions to the 401(k) plan were $16 million, $15 million and $15 million in 2016, 2015 and 2014, respectively.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) and has since amended the standard with Accounting Standards Update 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, Accounting Standards Update 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), Accounting Standards Update 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing, Accounting Standards Update 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, and Accounting Standards Update 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.  These standards replace existing revenue recognition rules with a single comprehensive model to use in accounting for revenue arising from contracts with customers.  U.S. Cellular is required to adopt ASU 2014-09, as amended, on January 1, 2018.  Early adoption as of January 1, 2017 is permitted; however, U.S. Cellular did not adopt early.  ASU 2014-09, as amended, impacts U.S. Cellular’s revenue recognition related to the allocation of contract revenues between various services and equipment, and the timing of when those revenues are recognized.  In addition, ASU 2014-09 requires deferral of incremental contract acquisition and fulfillment costs and subsequent expense recognition over the contract period or expected customer life.  U.S. Cellular has identified that new systems, processes and controls are required to adopt ASU 2014-09, as amended.  U.S. Cellular has substantially completed the design and development of new systems to perform revenue recognition accounting under the provisions of ASU 2014-09, as amended, and is currently engaged in the process of testing these new systems.  U.S. Cellular expects to transition to the new standard under the modified retrospective transition method whereby a cumulative effect adjustment is recognized upon adoption and the guidance is applied prospectively.  Upon adoption, the cumulative effect adjustment is expected to include the establishment of contract asset and contract liability accounts with a corresponding adjustment to retained earnings to reflect the reallocation of revenues between service and equipment.  Reallocation impacts generally arise when bundle discounts are provided in a contract arrangement that includes equipment and service performance obligations.  In these cases, the revenue will be reallocated according to the relative stand-alone selling prices of the performance obligations included in the bundle and this may be different than how the revenue is billed to the customer and recognized under current guidance.  In addition, contract cost assets will be established to reflect costs that will be deferred as incremental contract acquisition costs.  Incremental contract acquisition costs generally relate to commission costs paid to sales associates.  U.S. Cellular is evaluating the full effects that adoption of ASU 2014-09, as amended, will have on its financial position and results of operations.

In July 2015, the FASB issued Accounting Standards Update 2015-11, Inventory: Simplifying the Measurement of Inventory (“ASU 2015-11”), which requires inventory to be measured at the lower of cost or net realizable value.  U.S. Cellular adopted ASU 2015-11 on January 1, 2017.  The adoption of ASU 2015-11 will not have a significant impact on U.S. Cellular’s financial position or results of operations.

In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”).  This ASU introduces changes to current accounting for equity investments and financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments.  U.S. Cellular is required to adopt ASU 2016-01 on January 1, 2018.  Certain provisions are eligible for early adoption.  The adoption of ASU 2016-01 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”).  ASU 2016-02 requires lessees to record a right-of-use asset and lease liability for almost all leases.  This ASU does not substantially impact lessor accounting.  U.S. Cellular is required to adopt ASU 2016-02 on January 1, 2019.  Early adoption is permitted.  Upon adoption of ASU 2016-02, U.S. Cellular expects a substantial increase to assets and liabilities on its balance sheet.  U.S. Cellular is evaluating the full effects that adoption of ASU 2016-02 will have on its financial position and results of operations.

In March 2016, the FASB issued Accounting Standards Update 2016-04, Liabilities – Extinguishments of Liabilities: Recognition of Breakage from Certain Prepaid Stored-Value Products (“ASU 2016-04”).  ASU 2016-04 requires companies that sell prepaid stored-value products redeemable for goods, services or cash at third-party merchants to recognize breakage (i.e., the value that is ultimately not redeemed by the consumer) in a way that is consistent with how it will be recognized under the new revenue recognition standard.  U.S. Cellular is required to adopt ASU 2016-04 on January 1, 2018.  Early adoption is permitted.  The adoption of ASU 2016-04 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”).  ASU 2016-09 intends to simplify the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  U.S. Cellular adopted ASU 2016-09 on January 1, 2017.  Upon adoption, U.S. Cellular will no longer record adjustments in Additional paid-in capital relating to the tax consequences of share-based payment transactions.  Future tax windfalls and shortfalls will be recognized as discrete items within Income tax expense (benefit) on the Consolidated Statement of Operations in the period in which they occur.  U.S. Cellular has elected to continue to reduce stock compensation expense for estimated forfeitures.  U.S. Cellular’s adoption of this standard is not expected to have a significant impact on its financial position or results of operations, except as it relates to income tax expense, which will be directly impacted in future periods upon the exercise of stock options and the vesting of restricted stock awards.

In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).  ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses.  It also requires additional disclosure relating to the credit quality of trade and other receivables, including information relating to management’s estimate of credit allowances.  U.S. Cellular is required to adopt ASU 2016-13 on January 1, 2020.  Early adoption as of January 1, 2019 is permitted.  U.S. Cellular is evaluating the effects that adoption of ASU 2016-13 will have on its financial position, results of operations and disclosures.

In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”).  ASU 2016-15 provides guidance on eight targeted cash flow classification issues.  U.S. Cellular adopted ASU 2016-15 on December 31, 2016.  U.S. Cellular has historically followed the guidance prescribed by ASU 2016-15 for past transactions and therefore the adoption of ASU 2016-15 had no impact on U.S. Cellular’s statement of cash flows.

In October 2016, the FASB issued Accounting Standards Update 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”).  ASU 2016-16 impacts the accounting for the income tax consequences of intra-entity transfers of assets other than inventory when the transfer occurs between entities in different tax jurisdictions.  U.S. Cellular is required to adopt ASU 2016-16 on January 1, 2018.  Early adoption is permitted.  The adoption of ASU 2016-16 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In October 2016, the FASB issued Accounting Standards Update 2016-17, Consolidation: Interests Held through Related Parties That Are under Common Control (“ASU 2016-17”).  ASU 2016-17 provides guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in an entity held through related parties that are under common control.  U.S. Cellular adopted ASU 2016-17 on January 1, 2017.  The adoption of ASU 2016-17 will not have an impact on U.S. Cellular’s financial position or results of operations.

In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows: Restricted Cash (“ASU 2016-18”).  ASU 2016-18 provides guidance on the placement and reconciliation of restricted cash in the statement of cash flows.  U.S. Cellular is required to adopt ASU 2016-18 on January 1, 2018.  Early adoption is permitted.  The adoption of ASU 2016-18 is not expected to have a significant impact on U.S. Cellular’s statement of cash flows.

In January 2017, the FASB issued Accounting Standards Update 2017-01, Business Combinations: Clarifying the Definition of a Business (“ASU 2017-01”).  ASU 2017-01 clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  U.S. Cellular is required to adopt ASU 2017-01 on January 1, 2018.  U.S. Cellular adopted ASU 2017-01 on January 1, 2017.  The adoption of ASU 2017-01 did not have an impact on U.S. Cellular’s financial position or results of operations, but it may impact the accounting for future acquisitions and dispositions of businesses and assets.

In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).  ASU 2017-04 eliminates Step 2 of the current goodwill impairment test.  Goodwill impairment loss will be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value.  U.S. Cellular is required to adopt ASU 2017-04 on January 1, 2020.  Early adoption is permitted.  U.S. Cellular is assessing whether it will early adopt ASU 2017-04.  ASU 2017-04 could impact U.S. Cellular’s results of operations upon early adoption or the effective date should it fail the goodwill impairment test.

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Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 2Fair Value Measurements

As of December 31, 2016 and 2015, U.S. Cellular did not have any material financial or nonfinancial assets or liabilities that were required to be recorded at fair value in its Consolidated Balance Sheet in accordance with GAAP.

The provisions of GAAP establish a fair value hierarchy that contains three levels for inputs used in fair value measurements. Level 1 inputs include quoted market prices for identical assets or liabilities in active markets. Level 2 inputs include quoted market prices for similar assets and liabilities in active markets or quoted market prices for identical assets and liabilities in inactive markets. Level 3 inputs are unobservable. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. A financial instrument’s level within the fair value hierarchy is not representative of its expected performance or its overall risk profile and, therefore, Level 3 assets are not necessarily higher risk than Level 2 assets or Level 1 assets.

U.S. Cellular has applied the provisions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayed below.

		Level within the Fair Value Hierarchy	December 31, 2016				December 31, 2015
			Book Value		Fair Value		Book Value		Fair Value
(Dollars in millions)
Cash and cash equivalents		1	$	586	$	586	$	715	$	715
Long-term debt
	Retail	2		917		929		917		929
	Institutional	2		533		532		533		501
	Other	2		203		203		214		214

The fair value of Cash and cash equivalents approximates the book value due to the short-term nature of these financial instruments.  Long-term debt excludes capital lease obligations and the current portion of Long-term debt.  The fair value of “Retail” Long-term debt was estimated using market prices for the 6.95% Senior Notes, 7.25% 2063 Senior Notes and 7.25% 2064 Senior Notes.  U.S. Cellular’s “Institutional” debt consists of the 6.7% Senior Notes which are traded over the counter.  U.S. Cellular’s “Other” debt consists of a senior term loan credit facility.  U.S. Cellular estimated the fair value of its Institutional and Other debt through a discounted cash flow analysis using the interest rates or estimated yield to maturity for each borrowing, which ranged from 3.78% to 6.93% and 3.19% to 7.51% at December 31, 2016 and 2015, respectively.

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Equipment Installment Plans

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Equipment Installment Plans

Note 3Equipment Installment Plans

U.S. Cellular sells devices to customers under equipment installment contracts over a specified time period. For certain equipment installment plans, after a specified period of time or amount of payments, the customer may have the right to upgrade to a new device and have the remaining unpaid equipment installment contract balance waived, subject to certain conditions, including tradingin the original device in good working condition and signing a new equipment installment contract. U.S. Cellular values this trade-in right as a guarantee liability. The guarantee liability is initially measured at fair value and is determined based on assumptions including the probability and timing of the customer upgrading to a new device and the fair value of the device being traded-in at the time of trade-in. As of December 31, 2016 and 2015, the guarantee liability related to these plans was $33 million and $93 million, respectively, and is reflected in Customer deposits and deferred revenues in the Consolidated Balance Sheet.

U.S. Cellular equipment installment plans do not provide for explicit interest charges. Because equipment installment plans have a duration of greater than twelve months, U.S. Cellular imputes interest.  U.S. Cellular records imputed interest as a reduction to the related accounts receivable and it is recognized over the term of the installment agreement.  Equipment installment plan receivables had a weighted average effective imputed interest rate of 11.2% and 9.7% as of December 31, 2016 and 2015, respectively.

The following table summarizes equipment installment plan receivables as of December 31, 2016 and 2015.

December 31,	2016		2015
(Dollars in millions)
Equipment installment plan receivables, gross	$	628	$	381
Deferred interest		(53)		(23)
Equipment installment plan receivables, net of deferred interest		575		358
Allowance for credit losses		(50)		(26)
Equipment installment plan receivables, net	$	525	$	332
Net balance presented in the Consolidated Balance Sheet as:
Accounts receivable — Due from customers and agents (Current portion)	$	345	$	264
Other assets and deferred charges (Non-current portion)		180		68
Equipment installment plan receivables, net	$	525	$	332

U.S. Cellular uses various inputs, including internal data, information from the credit bureaus and other sources, to evaluate the credit profiles of its customers.  From this evaluation, a credit class is assigned to the customer that determines the number of eligible lines, the amount of credit available, andthe down payment requirement, if any. Customers assigned to credit classes requiring no down payment represent a lower risk category, whereas those assigned to credit classes requiring a down payment represent a higher risk category.  The balance and aging of the equipment installment plan receivables on a gross basis by credit category were as follows:

	December 31, 2016						December 31, 2015
	Lower Risk		Higher Risk		Total		Lower Risk		Higher Risk		Total
(Dollars in millions)
Unbilled	$	553	$	38	$	591	$	343	$	11	$	354
Billed — current		23		2		25		17		1		18
Billed — past due		10		2		12		8		1		9
Equipment installment plan receivables, gross	$	586	$	42	$	628	$	368	$	13	$	381

The activity in the allowance for credit losses balance for the equipment installment plan receivables was as follows:

	2016		2015
(Dollars in millions)
Allowance for credit losses, beginning of year	$	26	$	10
Bad debts expense		63		49
Write-offs, net of recoveries		(39)		(33)
Allowance for credit losses, end of year	$	50	$	26

U.S. Cellular recorded out-of-period adjustments in 2016 due to errors related to equipment installment plan transactions occurring in 2015 (“2016 EIP adjustments”).  The 2016 EIP adjustments had the impact of increasing Equipment sales revenues by $2 million, decreasing bad debts expense, which is a component of Selling, general and administrative expense, by $2 million and increasing Income before income taxes by $4 million in 2016.Additionally, U.S. Cellular recorded out-of-period adjustments in 2015 due to errors related to equipment installment plan transactions (“2015 EIP adjustments”) that were attributable to 2014.  The 2015 EIP adjustments had the impact of reducing Equipment sales revenues and Income before income taxes by $6 million in 2015.  U.S. Cellular has determined that these adjustments were not material to any of the periods impacted.

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Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Note 4Income Taxes

U.S. Cellular is included in a consolidated federal income tax return and in certain state income tax returns with other members of the TDS consolidated group. For financial statement purposes, U.S. Cellular and its subsidiaries compute their income tax expense as if they comprised a separate affiliated group and were not included in the TDS consolidated group.

U.S. Cellular’s current income taxes balances at December 31, 2016 and 2015 were as follows:

December 31,	2016		2015
(Dollars in millions)
Federal income taxes receivable (payable)	$	(8)	$	33
Net state income taxes receivable		–		1

Income tax expense (benefit) is summarized as follows:

Year Ended December 31,			2016		2015		2014
(Dollars in millions)
Current
	Federal		$	29	$	97	$	(79)
	State			(2)		5		9
Deferred
	Federal			1		48		45
	State			5		7		7
	State - valuation allowance adjustment			–		–		6
		Total income tax expense (benefit)	$	33	$	157	$	(12)

A reconciliation of U.S. Cellular’s income tax expense computed at the statutory rate to the reported income tax expense, and the statutory federal income tax expense rate to U.S. Cellular’s effective income tax expense rate is as follows:

Year Ended December 31,		2016				2015				2014
		Amount		Rate		Amount		Rate		Amount		Rate
(Dollars in millions)
Statutory federal income tax expense and rate		$	29	35.0	%	$	141	35.0	%	$	(21)	35.0	%
State income taxes, net of federal benefit1			3	3.6			8	2.1			12	(20.8)
Effect of noncontrolling interests			(1)	(1.1)			3	0.6			(6)	9.8
Other differences, net			2	2.2			5	1.0			3	(3.9)
Total income tax expense (benefit) and rate		$	33	39.7	%	$	157	38.7	%	$	(12)	20.1	%
1	State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to the valuation allowance.  During the third quarter of 2014, U.S. Cellular recorded a $6 million increase to income tax expense related to a valuation allowance recorded against certain state deferred tax assets.

Significant components of U.S. Cellular’s deferred income tax assets and liabilities at December 31, 2016 and 2015 were as follows:

December 31,		2016		2015
(Dollars in millions)
Deferred tax assets
	Net operating loss (“NOL”) carryforwards	$	88	$	79
	Stock-based compensation		26		24
	Compensation and benefits - other		21		20
	Deferred rent		21		19
	Other		56		79
Total deferred tax assets			212		221
	Less valuation allowance		(65)		(55)
Net deferred tax assets			147		166
Deferred tax liabilities
	Property, plant and equipment		473		517
	Licenses/intangibles		326		306
	Partnership investments		173		162
	Total deferred tax liabilities		972		985
Net deferred income tax liability		$	825	$	819
Presented in the Consolidated Balance Sheet as:
Deferred income tax liability, net		$	826	$	821
Other assets and deferred charges			(1)		(2)
	Net deferred income tax liability	$	825	$	819

At December 31, 2016, U.S. Cellular and certain subsidiaries had $1,845 million of state NOL carryforwards (generating a $70million deferred tax asset) available to offset future taxable income. The state NOL carryforwards expire between 2017 and 2036.  Certain subsidiaries had federal NOL carryforwards (generating an $18million deferred tax asset) available to offset their future taxable income. The federal NOL carryforwards expire between 2018 and 2036. A valuation allowance was established for certain state NOL carryforwards and federal NOL carryforwards since it is more likely than not that a portion of such carryforwards will expire before they can be utilized.

A summary of U.S. Cellular’s deferred tax asset valuation allowance is as follows:

		2016		2015		2014
(Dollars in millions)
Balance at beginning of year		$	55	$	53	$	43
	Charged to income tax expense		10		2		10
Balance at end of year		$	65	$	55	$	53

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

		2016		2015		2014
(Dollars in millions)
Unrecognized tax benefits balance at beginning of year		$	39	$	36	$	29
	Additions for tax positions of current year		12		7		8
	Additions for tax positions of prior years		3		1		–
	Reductions for tax positions of prior years		(1)		–		(1)
	Reductions for lapses in statutes of limitations		(10)		(5)		–
Unrecognized tax benefits balance at end of year		$	43	$	39	$	36

Unrecognized tax benefits are included in Accrued taxes and Other deferred liabilities and credits in the Consolidated Balance Sheet. If these benefits were recognized, they would have reduced income tax expense in 2016, 2015 and 2014 by $29million, $25million and $23million, respectively, net of the federal benefit from state income taxes.

U.S. Cellular recognizes accrued interest and penalties related to unrecognized tax benefits in Income tax expense (benefit). The amounts charged to income tax expense related to interest and penalties resulted in a benefit of $2 million in 2016 and an expense of $1 million and $4 million in 2015 and 2014, respectively. Net accrued liabilities for interest and penalties were $15million and $17million at December 31, 2016 and 2015, respectively, and are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

U.S. Cellular is included in TDS’ consolidated federal and certain state income tax returns. U.S. Cellular also files certain state and local income tax returns separately from TDS. With only limited exceptions, TDS is no longer subject to federal income tax audits for the years prior to 2013. With only a few exceptions, TDS is no longer subject to state income tax audits for years prior to 2012.

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Earnings Per Share

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Earnings per Share

Note 5Earnings Per Share

Basic earnings (loss) per share attributable to U.S. Cellular shareholders is computed by dividing Net income (loss) attributable to U.S. Cellular shareholders by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per share attributable to U.S. Cellular shareholders is computed by dividing Net income (loss) attributable to U.S. Cellular shareholders by the weighted average number of common shares outstanding during the period adjusted to include the effects of potentially dilutive securities.  Potentially dilutive securities primarily include incremental shares issuable upon the exercise of outstanding stock options and the vesting of restricted stock units.

The amounts used in computing earnings (loss) per common share and the effects of potentially dilutive securities on the weighted average number of common shares were as follows:

Year Ended December 31,		2016		2015		2014
(Dollars and shares in millions, except per share amounts)
Net income (loss) attributable to U.S. Cellular shareholders		$	48	$	241	$	(43)
Weighted average number of shares used in basic   earnings (loss) per share			85		84		84
Effect of dilutive securities 1			–		1		–
Weighted average number of shares used in diluted   earnings (loss) per share			85		85		84
Basic earnings (loss) per share attributable to U.S. Cellular   shareholders		$	0.56	$	2.86	$	(0.51)
Diluted earnings (loss) per share attributable to   U.S. Cellular shareholders		$	0.56	$	2.84	$	(0.51)
1	There were no effects of dilutive securities in 2014 due to the net loss for the year.

Certain Common Shares issuable upon the exercise of stock options or vesting of restricted stock units were not included in average diluted shares outstanding for the calculation of Diluted earnings (loss) per share attributable to U.S. Cellular shareholders because their effects were antidilutive.  The number of such Common Shares excluded was 3 million shares, 4 million shares and 4 million shares for 2016, 2015 and 2014 respectively.

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Acquisitions, Divestitures and Exchanges

12 Months Ended

Dec. 31, 2016

Acquisitions, Divestitures and Exchanges [Abstract]

Acquisitions, Divestitures and Exchanges

Note 6Acquisitions, Divestitures and Exchanges

Divestiture Transaction

On May 16, 2013, pursuant to a Purchase and Sale Agreement, U.S. Cellular sold customers and certain PCS spectrum licenses to subsidiaries of Sprint Corp. fka Sprint Nextel Corporation (“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.”

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.  As of December 31, 2016, U.S. Cellular had received a cumulative total of $118 million pursuant to the Sprint Cost Reimbursement. Sprint Cost Reimbursement totaling $7 million, $30 million and $71 million had been received and recorded in Cash received from divestitures and exchanges in the Consolidated Statement of Cash Flows in 2016, 2015, and 2014, respectively.

As a result of the Divestiture Transaction, U.S. Cellular recognized gains of $6 million and $29 million in (Gain) loss on sale of business and other exit costs, net, in 2015 and 2014, respectively.

Other Acquisitions, Divestitures and Exchanges

• In July 2016, the FCC announced U.S. Cellular as a qualified bidder in the FCC’s forward auction of 600 MHz spectrum licenses, referred to as Auction 1002, which then commenced in August 2016.  In the second quarter of 2016, U.S. Cellular made an upfront payment to the FCC of $143 million to establish its initial bidding eligibility.  The auction deposit is recorded as a component of Other assets and deferred charges as of December 31, 2016.  The Clock Phase of the auction was completed in February 2017 and based on the results of this phase, U.S. Cellular is committed to purchase 600 MHz spectrum licenses for a minimum amount of $327 million, subject to increase as the FCC completes the Assignment Phase of the auction, which is pending.  U.S. Cellular expects to be obligated to pay for the total committed amount, less the $143 million deposit, in the second quarter of 2017.
• In March 2016, U.S. Cellular entered into an agreement with a third party to transfer FCC licenses in non-operating markets and receive FCC licenses in operating markets.  The agreement provided for the transfer of certain AWS and PCS spectrum licenses to U.S. Cellular in exchange for U.S. Cellular transferring certain PCS spectrum licenses with a carrying value of $8 million and $1 million of cash to the third party.  This transaction closed in the fourth quarter of 2016, at which time U.S. Cellular recorded a gain of $3 million. 
• In February 2016, U.S. Cellular entered into an agreement with a third party to exchange certain 700 MHz licenses for certain AWS and PCS licenses and $28 million of cash.  This license exchange was accomplished in two closings.  The first closing occurred in the second quarter of 2016 at which time U.S. Cellular received $13 million of cash and recorded a gain of $9 million.  The remaining licenses with a carrying value of $8 million were classified as “Assets held for sale” in the Consolidated Balance Sheet as of December 31, 2016.  The second closing occurred in February 2017 at which time U.S. Cellular received cash proceeds of $15 million and expects to recognize a gain. 
• In February 2016, U.S. Cellular entered into an additional agreement with a third party that provided for the transfer of certain AWS spectrum licenses and $2 million in cash to U.S. Cellular, in exchange for U.S. Cellular transferring certain AWS, PCS and 700 MHz licenses with a carrying value of $7 million to the third party.  This transaction closed in the third quarter of 2016, at which time U.S. Cellular recorded a gain of $7 million.
• In 2015 and 2016, U.S. Cellular entered into multiple agreements to purchase spectrum licenses located in U.S. Cellular’s existing operating markets.  The aggregate purchase price for these spectrum licenses is $57 million, of which $53 million closed in 2016.  The remaining agreements are expected to close in early 2017.
• In March 2015, U.S. Cellular exchanged certain of its unbuilt PCS licenses for certain other PCS licenses located in U.S. Cellular’s existing operating markets and $117 million of cash.  As of the transaction date, the licenses received in the transaction had an estimated fair value, per a market approach, of $43 million.  A gain of $125 million was recorded in (Gain) loss on license sales and exchanges, net in the Consolidated Statement of Operations in the first quarter of 2015.
• U.S. Cellular participated in Auction 97 indirectly through its limited partnership interest in Advantage Spectrum.  Advantage Spectrum was the provisional winning bidder for 124 licenses for an aggregate winning bid of $338 million, after its designated entity discount of 25%.  Advantage Spectrum’s bid amount, less the upfront payment of $60 million paid in 2014, was paid to the FCC in March 2015.  These licenses were granted by the FCC in July 2016.  See Note 14 — Variable Interest Entities for additional information.
• In December 2014, U.S. Cellular entered into an agreement with a third party to sell 595 towers and certain related contracts, assets, and liabilities for $159 million.  This agreement and related transactions are referred to as the “Tower Sale” and were accomplished in two closings.  The first closing occurred in December 2014 and included the sale of 236 towers, without tenants, for $10 million.  On this same date, U.S. Cellular received $8 million in earnest money.  At the time of the first closing, a $4 million gain was recorded.  The second closing for the remaining 359 towers, primarily with tenants, took place in January 2015, at which time U.S. Cellular received $142 million in additional cash proceeds and recorded a gain of $108 million in (Gain) loss on sale of business and other exit costs, net.
• In September 2014, U.S. Cellular entered into an agreement with a third party to exchange certain PCS and AWS licenses for certain other PCS and AWS licenses and $28 million of cash. This license exchange was accomplished in two closings. The first closing occurred in December 2014 at which time U.S. Cellular transferred licenses to the counterparty with a net book value of $11 million, received licenses with an estimated fair value, per a market approach, of $52 million, recorded a $22 million gain and recorded an $18 million deferred credit in Other current liabilities.  The license that was transferred to the counterparty in the second closing had a net book value of $22 million. The second closing occurred in July 2015. At the time of the second closing, U.S. Cellular received $28 million in cash and recognized the deferred credit from the first closing resulting in a total gain of $24 million recorded on this part of the license exchange.
• In May 2014, U.S. Cellular entered into a License Purchase and Customer Recommendation Agreement with Airadigm Communications, Inc. (“Airadigm”), a wholly-owned subsidiary ofTDS. In September 2014, pursuant to the License Purchase and Customer Recommendation Agreement, Airadigm transferred FCC spectrum licenses and certain tower assets in certain markets in Wisconsin, Iowa, Minnesota and Michigan, for $92 million in cash to U.S. Cellular. 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 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.
• In March 2014, U.S. Cellular sold the majority of its St. Louis area non-operating market spectrum license for $92 million. A gain of $76 million was recorded in (Gain) loss on license sales and exchanges, net in the Consolidated Statement of Operations in the first quarter of 2014.
• In February 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 $16 million, which was recorded in (Gain) loss on license sales and exchanges, net in the Consolidated Statement of Operations in the first quarter of 2014.

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Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Note 7Intangible Assets

Activity related to U.S. Cellular's Licenses and Goodwill is presented below.  See Note 6 — Acquisitions, Divestitures and Exchanges for information regarding transactions which affected Licenses during the periods.

Licenses
		2016		2015
(Dollars in millions)
Balance at beginning of year		$	1,834	$	1,443
	Acquisitions		53		346
	Transferred to Assets held for sale		(8)		–
	Exchanges - Licenses received		25		43
	Exchanges - Licenses surrendered		(18)		–
	Other		–		2
Balance at end of year		$	1,886	$	1,834

Goodwill

There were no significant changes to Goodwill during 2016 or 2015.

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Investments in Unconsolidated Entities

12 Months Ended

Dec. 31, 2016

Investments in Unconsolidated Entities [Abstract]

Investments in Unconsolidated Entities

Note 8Investments in Unconsolidated Entities

Investments in unconsolidated entities consist of amounts invested in wireless entities in which U.S. Cellular holds a noncontrolling interest. These investments are accounted for using either the equity or cost method as shown in the following table:

December 31,	2016		2015
(Dollars in millions)
Equity method investments:
Capital contributions, loans, advances and adjustments	$	108	$	112
Cumulative share of income		1,577		1,432
Cumulative share of distributions		(1,276)		(1,183)
Total equity method investments		409		361
Cost method investments		4		2
Total investments in unconsolidated entities	$	413	$	363

The following tables, which are based on information provided in part by third parties, summarize the combined assets, liabilities and equity, and results of operations of U.S. Cellular’s equity method investments:

December 31,	2016		2015
(Dollars in millions)
Assets
Current	$	739	$	632
Due from affiliates		387		89
Property and other		4,615		4,555
Total assets	$	5,741	$	5,276
Liabilities and Equity
Current liabilities	$	466	$	808
Deferred credits		184		237
Long-term liabilities		187		147
Long-term capital lease obligations		6		2
Partners' capital and shareholders' equity		4,898		4,082
Total liabilities and equity	$	5,741	$	5,276

Year Ended December31,	2016		2015		2014
(Dollars in millions)
Results of Operations
Revenues	$	6,747	$	6,958	$	6,669
Operating expenses		5,047		5,226		5,036
Operating income		1,700		1,732		1,633
Other income (expense), net		(11)		(7)		1
Net income	$	1,689	$	1,725	$	1,634

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Property, Plant and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Note 9Property, Plant and Equipment

Property, plant and equipment in service and under construction, and related accumulated depreciation and amortization, as of December 31, 2016 and 2015 were as follows:

December 31,	UsefulLives (Years)	2016		2015
(Dollars in millions)
Land	N/A	$	35	$	36
Buildings	20		297		295
Leasehold and land improvements	1-30		1,153		1,103
Cell site equipment	7-25		3,383		3,383
Switching equipment	5-8		976		960
Office furniture and equipment	3-5		420		502
Other operating assets and equipment	3-5		53		79
System development	1-7		1,217		1,169
Work in process	N/A		178		142
Total property, plant and equipment, gross			7,712		7,669
Accumulated depreciation and amortization			(5,242)		(5,020)
Total property, plant and equipment, net		$	2,470	$	2,649

Depreciation and amortization expense totaled $607 million, $596million and $593million in 2016, 2015 and 2014, respectively.  In 2016, 2015 and 2014, (Gain) loss on asset disposals, net included charges of $22million, $16 million and $21 million, respectively, related to disposals of assets, trade-ins of older assets for replacement assets and other retirements of assets from service in the normal course of business.

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Asset Retirement Obligation

12 Months Ended

Dec. 31, 2016

Asset Retirement Obligations [Abstract]

Asset Retirement Obligation

Note 10Asset Retirement Obligations

U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations in its operating markets.  Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions.  These obligations are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

In 2016 and 2015, U.S. Cellular performed a review of the assumptions and estimated costs related to its asset retirement obligations.  The results of the reviews (identified as “Revisions in estimated cash outflows”) and other changes in asset retirement obligations during 2016 and 2015 were as follows:

		2016		2015
(Dollars in millions)
Balance at beginning of year		$	158	$	152
	Additional liabilities accrued		1		2
	Revisions in estimated cash outflows		5		(1)
	Disposition of assets		(1)		(6)
	Accretion expense		11		11
Balance at end of year		$	174	$	158

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Debt

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Debt

Note 11Debt

Revolving Credit Facility

At December 31, 2016, U.S. Cellular had a revolving credit facility available for general corporate purposes.  In June 2016, U.S. Cellular entered into a $300 million revolving credit agreement with certain lenders and other parties.  As a result of the new agreement, U.S. Cellular’s revolving credit agreement due to expire in December 2017 was terminated.  Amounts under the revolving credit facility may be borrowed, repaid and reborrowed from time to time until maturity in June 2021.  As of December 31, 2016, there were no outstanding borrowings under the revolving credit facility, except for letters of credit.  Interest expense representing commitment fees on the unused portion of the revolving line of credit was $1million in each of 2016, 2015 and 2014.  The commitment fees are based on the unsecured senior debt ratings assigned to U.S. Cellular by certain ratings agencies.

The following table summarizes the revolving credit facility as of December 31, 2016:

(Dollars in millions)
Maximum borrowing capacity	$	300
Letters of credit outstanding	$	2
Amount borrowed	$	–
Amount available for use	$	298

Borrowings under the revolving credit facility bear interest either at a LIBOR rate plus 1.75% or at an alternative Base Rate as defined in the revolving credit agreement plus 0.75%, at U.S. Cellular’s option.  U.S. Cellular may select a borrowing period of either one, two, three or six months (or other period of twelve months or less if requested by U.S. Cellular and approved by the lenders).  U.S. Cellular’s credit spread and commitment fees on its revolving credit facility may be subject to increase if its current credit rating from nationally recognized credit rating agencies is lowered, and may be subject to decrease if the rating is raised. 

In connection with U.S. Cellular’s revolving credit facility, TDS and U.S. Cellular entered into a subordination agreement dated June 15, 2016 together with the administrative agent for the lenders under U.S. Cellular’s revolving credit agreement.  Pursuant to this subordination agreement, (a) any consolidated funded indebtedness from U.S. Cellular to TDS will be unsecured and (b) any (i) consolidated funded indebtedness from U.S. Cellular to TDS (other than “refinancing indebtedness” as defined in the subordination agreement) in excess of $105 million and (ii) refinancing indebtedness in excess of $250 million will be subordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under U.S. Cellular’s revolving credit agreement.  As of December 31, 2016, U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the revolving credit agreement pursuant to the subordination agreement.

The continued availability of the revolving credit facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and make representations regarding certain matters at the time of each borrowing.  U.S. Cellular believes it was in compliance as of December 31, 2016with all covenants and other requirements set forth in the revolving credit facility.

The revolving credit agreement includes the following financial covenants:

• Consolidated Interest Coverage Ratio may not be less than 3.00 to 1.00 as of the end of any fiscal quarter.
• Consolidated Leverage Ratio may not be greater than the ratios indicated as of the end of any fiscal quarter for each period specified below:

Period	Ratios
From the agreement date of June 15, 2016 through June 30, 2019	3.25 to 1.00
From July 1, 2019 and thereafter	3.00 to 1.00

Certain U.S. Cellular wholly-owned subsidiaries have jointly and severally unconditionally guaranteed the payment and performance of the obligations of U.S. Cellular under the revolving credit agreement pursuant to a guaranty dated June 15, 2016.  Other subsidiaries that meet certain criteria will be required to provide a similar guaranty in the future.  U.S. Cellular believes it was in compliance with all of the financial and other covenants and requirements set forth in its revolving credit facility as of December 31, 2016.

Term Loan

In July 2015, U.S. Cellular borrowed $225 million on a senior term loan credit facility in two separate draws.  This facility was entered into in January 2015 and amended and restated in June 2016.  The interest rate on outstanding borrowings is reset at three and six month intervals at a rate of LIBOR plus 250 basis points.  This credit facility provides for the draws to be continued on a long-term basis under terms that are readily determinable.  U.S. Cellular has the ability and intent to carry the debt for the duration of the agreement.  Principal reductions are due and payable in quarterly installments of $3 million beginning in March 2016 through December 2021, and the remaining unpaid balance will be due and payable in January 2022.  The senior term loan credit facility contains financial covenants and subsidiary guarantees that are consistent with the revolving credit agreements described above.  This facility was entered into for general corporate purposes, including working capital, spectrum purchases and capital expenditures.U.S. Cellular believes that it was in compliance with all of the financial and other covenants and requirements set forth in its term loan credit facility as of December 31, 2016.

In connection with U.S. Cellular’s term loan credit facility, TDS and U.S. Cellular entered into a subordination agreement in June 2016 together with the administrative agent for the lenders under U.S. Cellular’s term loan credit agreement, which is substantially the same as the subordination agreement in the U.S. Cellular revolving credit facility described above.  As of December 31, 2016, U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the term loan facility pursuant to this subordination agreement.

Other Long-Term Debt

Long-term debt as of December 31, 2016 and 2015 was as follows:

								December 31,
								2016						2015
				Issuance date	Maturity date	Call date (any time on or after)		Principal Amount		Less Unamortized discount and debt issuance costs		Total		Principal Amount		Less Unamortized discount and debt issuance costs	Total
(Dollars in millions)
	Unsecured Senior Notes
			6.700%	Dec 2003 and June 2004	Dec 2033	Dec 2003 and June 2004	$	544	$	15	$	529	$	544	$	15	$	529
			6.950%	May 2011	May 2060	May 2016		342		11		331		342		11		331
			7.250%	Dec 2014	Dec 2063	Dec 2019		275		10		265		275		10		265
			7.250%	Nov 2015	Dec 2064	Dec 2020		300		10		290		300		10		290
		Term Loan		Jul 2015	Jan 2022			214		2		212		225		2		223
	Obligation on capital leases							2		–		2		2		–		2
Total long-term debt							$	1,677	$	48	$	1,629	$	1,688	$	48	$	1,640
	Long-term debt, current										$	11					$	11
	Long-term debt, noncurrent										$	1,618					$	1,629

U.S. Cellular may redeem its 6.95% Senior Notes, 7.25% 2063 Senior Notes and 7.25% 2064 Senior Notes, in whole or in part at any time after the respective call date, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest.  U.S. Cellular may redeem the 6.7% Senior Notes, in whole or in part, at any time prior to maturity at a redemption price equal to the greater of (a) 100% of the principal amount of such notes, plus accrued and unpaid interest, or (b) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semi-annual basis at the Treasury Rate plus 30 basis points. 

Interest on the Senior Notes outstanding at December 31, 2016 is payable quarterly, with the exception of the 6.7% Senior Notes for which interest is payable semi-annually.

The annual requirements for principal payments on long-term debt are approximately $11 million for each year 2017 through 2021.

The covenants associated with U.S. Cellular’s long-term debt obligations, among other things, restrict U.S. Cellular’s ability, subject to certain exclusions, to incur additional liens, enter into sale and leaseback transactions, and sell, consolidate or merge assets.

U.S. Cellular’s long-term debt notes do not contain any provisions resulting in acceleration of the maturities of outstanding debt in the event of a change in U.S. Cellular’s credit rating.  However, a downgrade in U.S. Cellular’s credit rating could adversely affect its ability to obtain long-term debt financing in the future.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 12Commitments and Contingencies

Agreements

During 2016, U.S. Cellular entered into agreements with Apple to purchase certain minimum quantities of Apple iPhone products and fund marketing programs related to the Apple iPhone products over a three-year period beginning in September 2016.  Based on current forecasts, U.S. Cellular estimates that the remaining contractual commitment as of December 31, 2016 under these agreements is approximately $1,351 million.  At this time, U.S. Cellular expects to meet its contractual commitments with Apple.

In November 2014, U.S. Cellular executed a Master Statement of Work (“Master”) and certain other documents with Amdocs Software Systems Limited (“Amdocs”).  The agreement provides that U.S. Cellular will outsource to Amdocs certain support functions for its Billing and Operations Support System (“B/OSS”).  Such functions include application support, billing operations and some infrastructure services.  In October 2016, U.S. Cellular executed two Statements of Work (“SOW”) with Amdocs for continued development and support related to its billing system.  Both the Master and SOW agreements have terms through September 30, 2019, with the Master being subject to five one-year renewal periods at U.S. Cellular’s option.  The estimated amounts to be paid to Amdocs with respect to the Master and SOW agreements during the remaining terms are approximately $53 million and $67 million (exclusive of travel and expenses and subject to certain potential adjustments), respectively. 

Lease Commitments

U.S. Cellular is a party to various lease agreements, both as lessee and lessor, for office space, retail store sites, cell sites and equipment which are accounted for as operating leases.  Certain leases have renewal options and/or fixed rental increases.  Renewal options that are reasonably assured of exercise are included in determining the lease term.  Any rent abatements or lease incentives, in addition to fixed rental increases, are included in the calculation of rent expense and calculated on a straight-line basis over the defined lease term.

As of December 31, 2016, future minimum rental payments required under operating leases and rental receipts expected under operating leases that have noncancellable lease terms in excess of one year were as follows:

	OperatingLeases Future Minimum RentalPayments		OperatingLeases Future Minimum RentalReceipts
(Dollars in millions)
2017	$	145	$	50
2018		129		43
2019		115		33
2020		102		22
2021		91		8
Thereafter		775		1
Total	$	1,357	$	157

Rent expense totaled $161million, $153million and $152million in 2016, 2015 and 2014, respectively.

Indemnifications

U.S. Cellular enters into agreements in the normal course of business that provide for indemnification of counterparties.  The terms of the indemnifications vary by agreement.  The events or circumstances that would require U.S. Cellular to perform under these indemnities are transaction specific; however, these agreements may require U.S. Cellular to indemnify the counterparty for costs and losses incurred from litigation or claims arising from the underlying transaction.  U.S. Cellular is unable to estimate the maximum potential liability for these types of indemnifications as the amounts are dependent on the outcome of future events, the nature and likelihood of which cannot be determined at this time.  Historically, U.S. Cellular has not made any significant indemnification payments under such agreements.

Legal Proceedings

U.S. Cellular is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts.  If U.S. Cellular believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss.  If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within that range is better than another, the low end of the range is accrued.  The assessment of the expected outcomes of legal proceedings is a highly subjective process that requires judgments about future events.  The legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financial statement disclosures.  The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements.

U.S. Cellular has accrued less than $1 million with respect to legal proceedings and unasserted claims as of December 31, 2016 and 2015.  U.S. Cellular has not accrued any amount for legal proceedings if it cannot estimate the amount of the possible loss or range of loss.  U.S. Cellular is unable to estimate any contingent loss in excess of the amounts accrued.

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Variable Interest Entities

12 Months Ended

Dec. 31, 2016

Variable Interest Entities [Abstract]

Variable Interest Entities

Note 13Variable Interest Entities

U.S. Cellular adopted the provisions of ASU 2015-02, Consolidation: Amendments to the Consolidation Analysis (“ASU 2015-02”), as of January 1, 2016.  ASU 2015-02 changed consolidation accounting including revising certain criteria for identifying variable interest entities.  As a result, certain consolidated subsidiaries and unconsolidated entities that were not defined as variable interest entities under previous accounting guidance are defined as variable interest entities under the provisions of ASU 2015-02.  U.S. Cellular’s modified retrospective adoption of ASU 2015-02 did not change the group of entities which U.S. Cellular is required to consolidate in its financial statements.  Accordingly, the adoption of ASU 2015-02 did not impact its financial position or results of operations.

Consolidated VIEs

U.S. Cellular consolidates variable interest entities (“VIEs”) in which it has a controlling financial interestas defined by GAAP and is therefore deemed the primary beneficiary.  A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE.  U.S. Cellular reviews these criteria initially at the time it enters into agreements and subsequently when events warranting reconsideration occur.These VIEshave risks similar to those described in the “Risk Factors” in U.S. Cellular’s Form 10-K for the year ended December 31, 2016.

The following VIEs were formed to participate in FCC auctions of wireless spectrum and to fund, establish, and provide wireless service with respect to any FCC licenses won in the auctions:

• Advantage Spectrum L.P. (“Advantage Spectrum”) and Frequency Advantage L.P., the general partner of Advantage Spectrum;
• Aquinas Wireless L.P. (“Aquinas Wireless”); and
• King Street Wireless L.P. (“King Street Wireless”) and King Street Wireless, Inc., the general partner of King Street Wireless.

The power to direct the activities that most significantly impact the economic performance of these VIEs is shared.  Specifically, the general partner of these VIEs has the exclusive right to manage, operate and control the limited partnerships and make all decisions to carry on the business of the partnerships.  The general partner of each partnership needs the consent of the limited partner, an indirect U.S. Cellular subsidiary, to sell or lease certain licenses, to make certain large expenditures, admit other partners or liquidate the limited partnerships.  Although the power to direct the activities of these VIEs is shared, U.S. Cellular has the most significant level of exposure to the variability associated with the economic performance of the VIEs, indicating that U.S. Cellular is the primary beneficiary of the VIEs.  Therefore, in accordance with GAAP, these VIEs are consolidated.

In March 2015, King Street Wireless made a $60 million distribution to its owners.  Of this distribution, $6 million was provided to King Street Wireless, Inc. and $54 million was provided to U.S. Cellular.

FCC Auction 97 ended in January 2015.  U.S. Cellular participated in Auction 97 indirectly through its interest in Advantage Spectrum.  An indirect subsidiary of U.S. Cellular is a limited partner in Advantage Spectrum.  Advantage Spectrum applied as a designated entity, and received bid credits with respect to spectrum purchased in Auction 97.  Advantage Spectrum was the winning bidder for 124 licenses for an aggregate bid of $338 million, after its designated entity discount of 25%.  This amount is classified as Licenses in U.S. Cellular’s Consolidated Balance Sheet at December 31, 2016, and 2015. Advantage Spectrum’s bid amount, less the initial deposit of $60 million paid in 2014, plus certain other charges totaling $2 million, was paid to the FCC in March 2015.  These licenses were granted by the FCC in July 2016.

U.S. Cellular also consolidates other VIEs that are limited partnerships that provide wireless service.  ASU 2015-02 modified the manner in which limited partnerships and similar legal entities are evaluated under the variable interest model.  A limited partnership is a variable interest entity unless the limited partners hold substantive participating rights or kick-out rights over the general partners.  For certain limited partnerships, U.S. Cellular is the general partner and manages the operations.  In these partnerships, the limited partners do not have substantive kick-out or participating rights and, further, such limited partners do not have the authority to remove the general partner.  Therefore, beginning January 1, 2016, these limited partnerships are also recognized as VIEs and are consolidated under the variable interest model.  Prior to the adoption of ASU 2015-02, these limited partnerships were consolidated under the voting interest model.

The following table presents the classification of the consolidated VIEs’ assets and liabilities in U.S. Cellular’s Consolidated Balance Sheet.

December 31,			2016¹		2015
(Dollars in millions)
Assets
	Cash and cash equivalents		$	2	$	1
	Accounts receivable			44		–
	Other current assets			6		–
	Assets held for sale			2		–
	Licenses2			652		649
	Property, plant and equipment, net			105		8
	Other assets and deferred charges			16		–
		Total assets	$	827	$	658
Liabilities
	Current liabilities		$	21	$	–
	Deferred liabilities and credits			13		1
		Total liabilities	$	34	$	1
1		The increase in amounts from December 31, 2015 are due primarily to the adoption of ASU 2015-02 as disclosed above.  ASU 2015-02 was adopted on a modified retrospective basis and, accordingly, prior year amounts have not been revised to reflect the change in guidance.
2		As disclosed above, payments totaling $338 million were made by Advantage Spectrum to the FCC relating to Auction 97.  These licenses were granted in July 2016.  Although the licenses had not yet been granted as of December 31, 2015, the payments to the FCC were classified as Licenses at such date.

Unconsolidated VIEs

U.S. Cellular manages the operations of and holds a variable interest in certain other limited partnerships, but is not the primary beneficiary of these entities and, therefore, does not consolidate them under the variable interest model outlined in ASU 2015-02.

U.S. Cellular’s total investment in these unconsolidated entities was $6 million and $5 million at December 31, 2016 and 2015, respectively, and is included in Investments in unconsolidated entities in U.S. Cellular’s Consolidated Balance Sheet.  The maximum exposure from unconsolidated VIEs is limited to the investment held by U.S. Cellular in those entities.

Other Related Matters

U.S. Cellular made contributions, loans and/or advances to its VIEs totaling $98 million, $281 million and $61 million in 2016, 2015 and 2014, respectively.  U.S. Cellular may agree to make additional capital contributions and/or advances to these or other VIEs and/or to their general partners to provide additional funding for operations or the development of licenses granted in various auctions.  U.S. Cellular may finance such amounts with a combination of cash on hand, borrowings under its revolving credit agreement and/or other long-term debt.  There is no assurance that U.S. Cellular will be able to obtain additional financing on commercially reasonable terms or at all to provide such financial support.

The limited partnership agreements of Advantage Spectrum, Aquinas Wireless and King Street Wireless also provide the general partner with a put option whereby the general partner may require the limited partner, a subsidiary of U.S. Cellular, to purchase its interest in the limited partnership.The general partner’s put options related to its interests in King Street Wireless and Aquinas Wireless will become exercisable in 2019 and 2020, respectively. The general partner’s put options related to its interest in Advantage Spectrum will become exercisable in 2021 and 2022.The put option price is determined pursuant to a formula that takes into consideration fixed interest rates and the market value of U.S. Cellular’s Common Shares.Upon exercise of the put option, the general partner is required to repay borrowings due to U.S. Cellular.If the general partner does not elect to exercise its put option, the general partner may trigger an appraisal process in which the limited partner (a subsidiary of U.S. Cellular) may have the right, but not the obligation, to purchase the general partner’s interest in the limited partnership at a price and on other terms and conditions specified in the limited partnership agreement.In accordance with requirements under GAAP, U.S. Cellular is required to calculate atheoretical redemption value for all of the put options assuming they are exercisable at the end of each reporting period, even though such exercise is not contractually permitted.Pursuant to GAAP, this theoretical redemption value, net of amounts payable to U.S.Cellular for loans and accrued interest thereon made by U.S.Cellular to the general partners (“net put value”), was $1million atDecember 31, 2016 and2015. The net put value is recorded as Noncontrolling interests with redemption features in U.S. Cellular’s Consolidated Balance Sheet.Also in accordance with GAAP, changes in the redemption value of the put options, net of interest accrued on the loans, are recorded as a component of Net income attributable to noncontrolling interests, net of tax, in U.S. Cellular’s Consolidated Statement of Operations.

During 2015, U.S. Cellular recorded out-of-period adjustments attributable to the third quarter of 2013 through the second quarter of 2015 related to an agreement with King Street Wireless.  U.S. Cellular determined that these adjustments were not material to the quarterly periods or the annual results for 2015.  These out-of-period adjustments had the impact of reducing Net income by $3 million and Net income attributable to U.S. Cellular shareholders by $4 million in 2015.

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Noncontrolling Interests

12 Months Ended

Dec. 31, 2016

Noncontrolling Interests [Abstract]

Noncontrolling Interests

Note 14Noncontrolling Interests

U.S. Cellular’s consolidated financial statements include certain noncontrolling interests that meet the GAAP definition of mandatorily redeemable financial instruments. These mandatorily redeemable noncontrolling interests represent interests held by third parties in consolidated partnerships, where the terms of the underlying partnership agreement provide for a defined termination date at which time the assets of the subsidiary are to be sold, the liabilities are to be extinguished and the remaining net proceeds are to be distributed to the noncontrolling interest holders and U.S. Cellular in accordance with the respective partnership agreements. The termination dates of these mandatorily redeemable noncontrolling interests range from 2085 to 2113.

The estimated aggregate amount that would be due and payable to settle all of these noncontrolling interests assuming an orderly liquidation of the finite-lived consolidated partnerships on December 31, 2016, net of estimated liquidation costs, is $22 million. This amount excludes redemption amounts recorded in Noncontrolling interests with redemption features in the Consolidated Balance Sheet. The estimate of settlement value was based on certain factors and assumptions which are subjective in nature. Changes in those factors and assumptions could result in a materially larger or smaller settlement amount. U.S. Cellular currently has no plans or intentions relating to the liquidation of any of the related partnerships prior to their scheduled termination dates. The corresponding carrying value of the mandatorily redeemable noncontrolling interests in finite-lived consolidated partnerships at December 31, 2016 was $11 million, and is included in Noncontrolling interests in the Consolidated Balance Sheet. The excess of the aggregate settlement value over the aggregate carrying value of these mandatorily redeemable noncontrolling interests is due primarily to the unrecognized appreciation of the noncontrolling interest holders’ share of the underlying net assets in the consolidated partnerships. Neither the noncontrolling interest holders’ share, nor U.S. Cellular’s share, of the appreciation of the underlying net assets of these subsidiaries is reflected in the consolidated financial statements.

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Common Shareholders' Equity

12 Months Ended

Dec. 31, 2016

Stockholders' Equity Note [Abstract]

Common Shareholder's Equity

Note 15Common Shareholders’ Equity

Tax-Deferred Savings Plan

U.S. Cellular has reserved 67,215 Common Shares for issuance under the TDS Tax-Deferred Savings Plan, a qualified profit‑sharing plan pursuant to Sections401(a) and 401(k) of the Internal Revenue Code.  Participating employees have the option of investing their contributions in a U.S. Cellular Common Share fund, a TDS Common Share fund or certain unaffiliated funds.

Series A Common Shares

SeriesA Common Shares are convertible on a share-for-share basis into Common Shares.  In matters other than the election of directors, each SeriesA Common Share is entitled to ten votes per share, compared to one vote for each Common Share.  The SeriesA Common Shares are entitled to elect 75% of the directors (rounded down), and the Common Shares elect 25% of the directors (rounded up).  As of December 31, 2016, a majority of U.S. Cellular’s outstanding Common Shares and all of U.S. Cellular’s outstanding SeriesA Common Shares were held by TDS.

Common Share Repurchase Program

In November 2009, the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009 and continuing each year thereafter, on a cumulative basis. In December 2016, the U.S. Cellular Board amended this authorization to provide that such amount will be any amount from zero to 1,300,000 beginning on January 1, 2017, as determined by the U.S. Cellular Pricing Committee, and that if the Pricing Committee did not specify an amount for any year, such amount would be zero for such year. The Pricing Committee did not specify any increase as of January 1, 2017. The Pricing Committee was also authorized to decrease the cumulative amount of the authorization at any time, but has not taken any action to do so at this time. As a result, there was no change to the cumulative amount of the share repurchase authorization as of January 1, 2017. As of December 31, 2016, the total cumulative amount of Common Shares authorized to be purchased is 5,900,849.  The authorization provides that share repurchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on market prices and other conditions. This authorization does not have an expiration date.

Pursuant to certain employee and non-employee benefit plans, U.S. Cellular reissued the following Treasury Shares:

Year Ended December 31,	2016	2015	2014
(Shares in millions)
Treasury Shares Reissued	1	–	–

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2016

Share-based Compensation [Abstract]

Stock-Based Compensation

Note 16Stock-Based Compensation

U.S. Cellular has established the following stock‑based compensation plans: Long-Term Incentive Plans and a Non-Employee Director compensation plan.

Under the U.S. Cellular Long-Term Incentive Plans, U.S. Cellular may grant fixed and performance based incentive and non-qualified stock options, restricted stock, restricted stock units, and deferred compensation stock unit awards to key employees.  At December 31, 2016, the only types of awards outstanding are fixed non-qualified stock option awards, restricted stock unit awards, and deferred compensation stock unit awards.

Under the Non-Employee Director compensation plan, U.S. Cellular may grant Common Shares to members of the Board of Directors who are not employees of U.S. Cellular or TDS.

At December 31, 2016, U.S. Cellular had reserved 14,759,000 Common Shares for equity awards granted and to be granted under the Long-Term Incentive Plans and 169,000 Common Shares for issuance under the Non-Employee Director compensation plan.

U.S. Cellular uses treasury stock to satisfy requirements for Common Shares issued pursuant to its various stock-based compensation plans.

Long-Term Incentive Plans – Stock Options – Stock options granted to key employees are exercisable over a specified period not in excess of ten years.  Stock options generally vest over a period of three years from the date of grant.  Stock options outstanding at December 31, 2016 expire between 2017 and 2026.  However, vested stock options typically expire 30days after the effective date of an employee’s termination of employment for reasons other than retirement.  Employees who leave at the age of retirement have 90days (or one year if they satisfy certain requirements) within which to exercise their vested stock options.  The exercise price of options equals the market value of U.S. Cellular Common Shares on the date of grant.

U.S. Cellular estimated the fair value of stock options granted during 2016, 2015 and 2014 using the Black-Scholes valuation model and the assumptions shown in the table below.

	2016	2015	2014
Expected life	4.7 years	4.6 years	4.5 years
Expected annual volatility rate	30.5%	30.1%	28.0%-28.1%
Dividend yield	0%	0%	0%
Risk-free interest rate	1.2%	1.2%	1.4%-1.5%
Estimated annual forfeiture rate	9.4%	9.7%	9.4%

Pre-vesting forfeitures and expected life are estimated based on historical experience related to similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior.  U.S. Cellular believes that its historical experience provides the best estimates of future pre-vesting forfeitures and future expected life.  The expected volatility assumption is based on the historical volatility of U.S. Cellular’s common stock over a period commensurate with the expected life.  The dividend yield assumption is zero because U.S. Cellular has never paid a dividend, except a special cash dividend in June 2013, and has expressed its intention to retain all future earnings in the business.  The risk-free interest rate assumption is determined using the U.S. Treasury Yield Curve Rate with a term length that approximates the expected life of the stock options.

The fair value of options is recognized as compensation cost using an accelerated attribution method over the requisite service periods of the awards, which is generally the vesting period.

A summary of U.S. Cellular stock options outstanding (total and portion exercisable) and changes during 2016 is presented in the table below:

Common Share Options		Numberof Options	Weighted Average Exercise Price		Aggregate Intrinsic Value (in millions)		Weighted Average Remaining Contractual Life (in years)
Outstanding at December 31, 2015		4,102,000	$	40.62
(1,849,000 exercisable)			$	44.33
	Granted	898,000		45.87
	Exercised	(541,000)		35.34
	Forfeited	(197,000)		39.08
	Expired	(289,000)		50.06
Outstanding at December 31, 2016		3,973,000	$	41.92	$	14	6.8
(1,937,000 exercisable)			$	42.54	$	7	5.0

The weighted average grant date fair value per share of the U.S. Cellular stock options granted in 2016, 2015 and 2014 was $12.77, $9.94 and $10.68, respectively.  The aggregate intrinsic value of U.S. Cellular stock options exercised in 2016, 2015 and 2014 was $4 million, $2 million and $2 million, respectively.  The aggregate intrinsic value at December 31, 2016 presented in the table above represents the total pre-tax intrinsic value (the difference between U.S. Cellular’s closing stock price and the exercise price multiplied by the number of in-the-money options) that would have been received by option holders had all options been exercised on December 31, 2016.

Long-Term Incentive Plans – Restricted Stock Units – Restricted stock unit awards granted to key employees generally vest after three years.  U.S. Cellular estimates the fair value of restricted stock units based on the closing market price of U.S. Cellular shares on the date of grant.  The fair value is then recognized as compensation cost on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

A summary of U.S. Cellular nonvested restricted stock units at December 31, 2016 and changes during the year then ended is presented in the table below:

Common Restricted Stock Units	Number	Weighted Average
		Grant Date
		Fair Value
Nonvested at December 31, 2015	1,194,000	$	36.70
Granted	571,000		43.32
Vested	(348,000)		31.52
Forfeited	(107,000)		39.28
Nonvested at December 31, 2016	1,310,000	$	40.74

The total fair value of restricted stock units that vested during 2016, 2015 and 2014 was $15 million, $13 million and $11 million, respectively.  The weighted average grant date fair value per share of the restricted stock units granted in 2016, 2015 and 2014 was $43.32, $37.24 and $41.24, respectively.

Long-Term Incentive Plans – Deferred Compensation Stock Units – Certain U.S. Cellular employees may elect to defer receipt of all or a portion of their annual bonuses and to receive a company matching contribution on the amount deferred.  All bonus compensation that is deferred by employees electing to participate is immediately vested and is deemed to be invested in U.S. Cellular Common Share stock units.  The amount of U.S. Cellular’s matching contribution depends on the portion of the annual bonus that is deferred.  Participants receive a 25% match for amounts deferred up to 50% of their total annual bonus and a 33% match for amounts that exceed 50% of their total annual bonus; such matching contributions also are deemed to be invested in U.S. Cellular Common Share stock units and vest over three years. 

The total fair value of deferred compensation stock units that vested during 2016 and 2015 was less than $1 million.  The weighted average grant date fair value per share of the deferred compensation stock units granted in 2016 and 2015 was $41.31 and $35.96, respectively.  There were no deferred compensation stock units granted or that vested during 2014.  As of December 31, 2016, there were 7,000 vested but unissued deferred compensation stock units valued at less than $1 million.

Compensation of Non-Employee Directors – U.S. Cellular issued 13,000, 15,000 and 14,200 Common Shares in 2016, 2015 and 2014, respectively, under its Non-Employee Director compensation plan. 

Stock‑Based Compensation Expense

The following table summarizes stock‑based compensation expense recognized during 2016, 2015 and 2014:

Year Ended December 31,	2016		2015		2014
(Dollars in millions)
Stock option awards	$	11	$	11	$	10
Restricted stock unit awards		14		13		11
Deferred compensation bonus and matching stock unit awards		–		–		–
Awards under Non-Employee Director compensation plan		1		1		1
Total stock-based compensation, before income taxes		26		25		22
Income tax benefit		(10)		(10)		(8)
Total stock-based compensation expense, net of income taxes	$	16	$	15	$	14

The following table provides a summary of the stock-based compensation expense included in the Consolidated Statement of Operations for the years ended:

December 31,	2016		2015		2014
(Dollars in millions)
Selling, general and administrative expense	$	23	$	22	$	19
System operations		3		3		3
Total stock-based compensation expense	$	26	$	25	$	22

At December 31, 2016, unrecognized compensation cost for all U.S. Cellular stock‑based compensation awards was $29million and is expected to be recognized over a weighted average period of 1.8years.

U.S. Cellular’s tax benefits realized from the exercise of stock options and other awards totaled $8 million in 2016.

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Supplemental Cash Flow Disclosures

12 Months Ended

Dec. 31, 2016

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Disclosures

Note 17Supplemental Cash Flow Disclosures

Following are supplemental cash flow disclosures regarding interest paid and income taxes paid.

Year Ended December 31,	2016		2015		2014
(Dollars in millions)
Interest paid	$	113	$	81	$	55
Income taxes paid, net of refunds received		(11)		59		33

Following are supplemental cash flow disclosures regarding transactions related to stock-based compensation awards.  In certain situations, U.S. Cellular withholds shares that are issuable upon the exercise of stock options or the vesting of restricted shares to cover, and with a value equivalent to, the exercise price and/or the amount of taxes required to be withheld from the stock award holder at the time of the exercise or vesting.  U.S. Cellular then pays the amount of the required tax withholdings to the taxing authorities in cash.

Year Ended December 31,	2016		2015		2014
(Dollars in millions)
Common Shares withheld		308,010		228,011		163,355
Aggregate value of Common Shares withheld	$	13	$	8	$	7
Cash receipts upon exercise of stock options		12		7		5
Cash disbursements for payment of taxes		(6)		(5)		(4)
Net cash receipts from exercise of stock
options and vesting of other stock awards	$	6	$	2	$	1

On September 27, 2012, the FCC conducted a single round, sealed bid, reverse auction to award up to $300 million in one-time Mobility Fund Phase I support to successful bidders that commit to provide 3G, or better, wireless service in areas designated as unserved by the FCC. This auction was designated by the FCC as Auction 901. U.S. Cellular and severalof its wholly-owned subsidiariesparticipated in Auction 901 and were winning bidders in eligible areas within10 states and will receive up to $40 million in one-time support from the Mobility Fund. These funds when received reduce the carrying amount of the assets to which they relate or offset operating expenses.  In connection with these winning bids, in June 2013, U.S. Cellular provided $17 million letters of credit to the FCC, of which $2 million remained outstanding as of December 31, 2016.  U.S. Cellular has received $35million in support funds, of which the entire balance has been spent as of December 31, 2016.  U.S. Cellular has set up a receivable in the amount of $2 million as of December 31, 2016 pending final review from the FCC to release funds.

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Certain Relationships and Related Transactions

12 Months Ended

Dec. 31, 2016

Related Party Transactions [Abstract]

Certain Relationships and Related Transactions

Note 18Certain Relationships and Related Transactions

The following persons are partners of Sidley AustinLLP, the principal law firm of U.S. Cellular and its subsidiaries: Walter C.D. Carlson, a director of U.S. Cellular, a director and non-executive Chairman of the Board of Directors of TDS and a trustee and beneficiary of a voting trust that controls TDS; WilliamS. DeCarlo, the General Counsel of TDS and an Assistant Secretary of TDS and certain subsidiaries of TDS; and StephenP. Fitzell, the General Counsel of U.S. Cellular and TDS Telecommunications Corporation and an Assistant Secretary of U.S. Cellular and certain other subsidiaries of TDS. Walter C.D. Carlson does not provide legal services to TDS, U.S. Cellular or their subsidiaries.  U.S. Cellular and its subsidiaries incurred legal costs from Sidley AustinLLP of $6 million in 2016, $9 million in 2015 and $11 million in 2014.

U.S. Cellular is billed for all services it receives from TDS, pursuant to the terms of various agreements between it and TDS.  These billings are included in U.S. Cellular's Selling, general and administrative expenses.  Some of these agreements were established at a time prior to U.S. Cellular's initial public offering when TDS owned more than 90% of U.S. Cellular's outstanding capital stock and may not reflect terms that would be obtainable from an unrelated third party through arms-length negotiations.  Billings from TDS and certain of its subsidiaries to U.S. Cellular are based on expenses specifically identified to U.S. Cellular and on allocations of common expenses.  Such allocations are based on the relationship of U.S. Cellular's assets, employees, investment in property, plant and equipment and expenses relative to all subsidiaries in the TDS consolidated group.  Management believes the method TDS uses to allocate common expenses is reasonable and that all expenses and costs applicable to U.S. Cellular are reflected in its financial statements.  Billings to U.S. Cellular from TDS totaled $94 million, $96 million and $91 million in 2016, 2015and 2014, respectively.

In December 2014, U.S. Cellular entered into an agreement to sell 595 towers outside of its core markets to a third party for $159 million.  The sale of certain of the towers was completed in December 2014, and the sale of the remaining towers was completed in January 2015.  See Note 6 – Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements.  Of the 595 towers, six towers were acquired by U.S. Cellular from Airadigm for a total of $3 million.  These six towers were included as part of the sale of towers by U.S. Cellular in order to avoid the need for two sets of transaction documents.  The value of $3 million paid by U.S. Cellular to Airadigm for such six towers was determined using the same method of valuation that was used to value the towers owned by U.S. Cellular that were sold to the third party.  The Audit Committee of the board of directors reviewed and evaluated this transaction between U.S. Cellular and Airadigm.

In December 2013, TDS initially proposed to have Airadigm sell to U.S. Cellular the FCC spectrum licenses, towers and customers in certain Airadigm markets. Because TDS owns 100% of the common stock of Airadigm and, at the time of the transaction, approximately 84% of the common stock of U.S. Cellular, this proposal was a related party transaction. Accordingly, the U.S. Cellular Board of Directors formed a Special Committee comprised entirely of independent and disinterested directors with exclusive authority to consider, negotiate and, if appropriate, approve any such transaction with Airadigm without any further involvement of the full board. The U.S. Cellular Special Committee engaged independent financial advisors and legal counsel. The transaction was negotiated between representatives of TDS and Airadigm, on the one hand, and the Special Committee and its representatives, on the other hand. The U.S. Cellular Special Committee also received a fairness opinion from its independent financial advisor. Following these events, the Special Committee approved a License Purchase and Customer Recommendation Agreement between U.S. Cellular and 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 $92 million in cash. See Note6–Acquisitions, Divestitures and Exchangesin the Notes to Consolidated Financial Statements.

The Audit Committee of the Board of Directors of U.S. Cellular is responsible for the review and evaluation of all related-party transactions as such term is defined by the rules of the New York Stock Exchange.

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Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Significant Accounting Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Nature of Operations

U.S. Cellular owns, operates and invests in wireless systems throughout the United States. As of December 31, 2016, U.S. Cellular served customers with 5.0 million total connections. U.S. Cellular has one reportable segment.

Principles of Consolidation

The accounting policies of U.S. Cellular conform to accounting principles generally accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Unless otherwise specified, references to accounting provisions and GAAP in these notes refer to the requirements of the FASB ASC. The consolidated financial statements include the accounts of U.S. Cellular, its majority-owned subsidiaries, general partnerships in which U.S. Cellular has a majority partnership interest, and variable interest entities (“VIEs”) in which U.S. Cellular is deemed the primary beneficiary. Both VIE and primary beneficiary represent terms defined by GAAP.  See Note 13 — Variable Interest Entities for additional information relating to U.S. Cellular’s VIEs.  Intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (b) the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates are involved in accounting for goodwill and indefinite-lived intangible assets, income taxes and equipment installment plans.

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less.

Accounts Receivable

Accounts receivable consist primarily of amounts owed by customers for wireless services and equipment sales, including sales of certain devices under equipment installment plans, by agents for sales of equipment to them and by other wireless carriers whose customers have used U.S. Cellular’s wireless systems.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related to existing billed and unbilled accounts receivable. The allowance is estimated based on historical experience, account aging and other factors that could affect collectability. Accounts receivable balances are reviewed on either an aggregate or individual basis for collectability depending on the type of receivable. When it is probable that an account balance will not be collected, the account balance is charged against the allowance for doubtful accounts. U.S. Cellular does not have any off-balance sheet credit exposure related to its customers.

Inventory

Inventory consists primarily of wireless devices stated at the lower of cost or market, with cost determined using the first-in, first-out method and market determined by replacement cost or estimated net realizable value.

Intangible Assets

Licenses

Licenses consist of direct and incremental costs incurred in acquiring Federal Communications Commission (“FCC”) licenses to provide wireless service.

U.S. Cellular has determined that wireless licenses are indefinite-lived intangible assets and, therefore, not subject to amortization based on the following factors:

• Radio spectrum is not a depleting asset.
• The ability to use radio spectrum is not limited to any one technology.
• U.S.Cellular and its consolidated subsidiaries are licensed to use radio spectrum through the FCC licensing process, which enables licensees to utilize specified portions of the spectrum for the provision of wireless service.
• U.S.Cellular and its consolidated subsidiaries are required to renew their FCC licenses every ten years or, in some cases, every fifteen years. To date, all of U.S.Cellular’s license renewal applications have been granted by the FCC. Generally, license renewal applications filed by licensees otherwise in compliance with FCC regulations are routinely granted. If, however, a license renewal application is challenged either by a competing applicant for the license or by a petition to deny the renewal application, the license will be renewed if the licensee can demonstrate its entitlement to a “renewal expectancy.” Licensees are entitled to such an expectancy if they can demonstrate to the FCC that they have provided “substantial service” during their license term and have “substantially complied” with FCC rules and policies. U.S.Cellular believes that it is probable that its future license renewal applications will be granted.

U.S. Cellular performs its annual impairment assessment of Licenses as of November 1 of each year or more frequently if there are events or circumstances that cause U.S. Cellular to believe the carrying value of Licenses exceeds their fair value on a more likely than not basis.  For purposes of its 2016 and 2015 impairment testing of Licenses, U.S. Cellular separated its FCC licenses into eight units of accounting.  The eight units of accounting consisted of one unit of accounting for developed operating market licenses (“built licenses”) and seven geographic non-operating market licenses (“unbuilt licenses”). 

As of November 1, 2016 and 2015, U.S. Cellular performed a qualitative impairment assessment to determine whether it was more likely than not that the fair value of the built and unbuilt licenses exceed their carrying value.  Based on the impairment assessments performed, U.S. Cellular did not have an impairment of its Licenses in 2016 or2015.  See Note 7 — Intangible Assets for additional details related to Licenses.

Goodwill

U.S. Cellular has Goodwill as a result of its acquisitions of wireless businesses.  Such Goodwill represents the excess of the total purchase price over the fair value of net assets acquired in these transactions.

For purposes of conducting its annual Goodwill impairment test as of November 1, 2016 and 2015, U.S. Cellular identified one reporting unit.  A discounted cash flow approach was used to value the reporting unit for purposes of the Goodwill impairment review.  Based upon the impairment assessments performed, U.S. Cellular did not have an impairment of its Goodwill in 2016 or2015.  See Note 7 — Intangible Assets for additional details related to Goodwill.

Investments in Unconsolidated Entities

For its equity method investments for which financial information is readily available, U.S. Cellular records its equity in the earnings of the entity in the current period. For its equity method investments for which financial information is not readily available, U.S. Cellular records its equity in the earnings of the entity on a one quarter lag basis.

Property, Plant and Equipment

U.S. Cellular’s Property, plant and equipment is stated at the original cost of construction or purchase including capitalized costs of certain taxes, payroll-related expenses, interest and estimated costs to remove the assets.

Expenditures that enhance the productive capacity of assets in service or extend their useful lives are capitalized and depreciated. Expenditures for maintenance and repairs of assets in service are charged to System operations expense or Selling, general and administrative expense, as applicable.  Retirements and disposals of assets are recorded by removing the original cost of the asset (along with the related accumulated depreciation) from plant in service and charging it, together with net removal costs (removal costs less an applicable accrued asset retirement obligation and salvage value realized), to (Gain) loss on asset disposals, net.

U.S. Cellular capitalizes certain costs of developing new information systems.

Depreciation and amortization

Depreciation is provided using the straight-line method over the estimated useful life of the related asset.

U.S. Cellular depreciates leasehold improvement assets associated with leased properties over periods ranging from one to thirty years; such periods approximate the shorter of the assets’ economic lives or the specific lease terms.

Useful lives of specific assets are reviewed throughout the year to determine if changes in technology or other business changes would warrant accelerating the depreciation of those specific assets.  There were no material changes to useful lives of property, plant and equipment in 2016, 2015 or 2014. See Note 9 — Property, Plant and Equipment for additional details related to useful lives.

Impairment of Long-lived Assets

U.S. Cellular reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired.

U.S. Cellular has one asset group for purposes of assessing property, plant and equipment for impairment based on the fact that the individual operating markets are reliant on centrally operated data centers, mobile telephone switching offices and a network operations center. U.S. Cellular operates a single integrated national wireless network, and the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities represent cash flows generated by this single interdependent network.

Agent Liabilities

U.S. Cellular has relationships with agents, which are independent businesses that obtain customers for U.S. Cellular. At December 31, 2016 and 2015, U.S. Cellular had accrued $57 million and $76 million, respectively, for amounts due to agents. These amounts are included in Other current liabilities in the Consolidated Balance Sheet.

Debt Issuance Costs

Debt issuance costs include underwriters’ and legal fees and other charges related to issuing various borrowing instruments and other long-term agreements, and are amortized over the respective term of each instrument.  U.S. Cellular presents certain debt issuance costs in the balance sheet as an offset to the related debt obligation.  Debt issuance costs related to U.S. Cellular’s revolving credit facility are recorded in Other assets and deferred charges in the Consolidated Balance Sheet.

Asset Retirement Obligations

U.S. Cellular accounts for asset retirement obligations by recording the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligations are incurred. At the time the liability is incurred, U.S. Cellular records a liability equal to the net present value of the estimated cost of the asset retirement obligation and increases the carrying amount of the related long-lived asset by an equal amount. Until the obligation is fulfilled, U.S. Cellular updates its estimates relating to cash flows required and timing of settlement. U.S. Cellular records the present value of the changes in the future value as an increase or decrease to the liability and the related carrying amount of the long-lived asset. The liability is accreted to future value over a period ending with the estimated settlement date of the respective asset retirement obligation.  The carrying amount of the long-lived asset is depreciated over the useful life of the related asset.  Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability is recognized in the Consolidated Statement of Operations.

Treasury Shares

Common Shares repurchased by U.S. Cellular are recorded at cost as treasury shares and result in a reduction of equity.  When treasury shares are reissued, U.S. Cellular determines the cost using the first-in, first-out cost method.  The difference between the cost of the treasury shares and reissuance price is included in Additional paid-in capital or Retained earnings.

Revenue Recognition

Revenues related to services are recognized as services are rendered. Revenues billed in advance or in arrears of the services being provided are estimated and deferred or accrued, as appropriate.Revenues from sales of equipment and accessories are recognized when U.S. Cellular no longer has any requirements to perform, when title has passed and when the products are accepted by the customer.

Multiple Deliverable Arrangements

U.S. Cellular sells multiple element service and equipment offerings. In these instances, revenues are allocated using the relative selling price method. Under this method, arrangement consideration is allocated to each element on the basis of its relative selling price. Revenue recognized for the delivered items is limited to the amount due from the customer that is not contingent upon the delivery of additional products or services.

Loyalty Reward Program

In March 2015, U.S. Cellular announced that it would discontinue its loyalty reward program effective September 1, 2015.  All unredeemed reward points expired at that time and the deferred revenue balance of $58 million related to such expired points was recognized as service revenues.

U.S. Cellular followed the deferred revenue method of accounting for its loyalty reward program.  Under this method, revenue allocated to loyalty reward points was deferred.  The amount allocated to the loyalty points was based on the estimated retail price of the products and services for which points were redeemable divided by the number of loyalty points required to receive such products and services.  This was calculated on a weighted average basis and required U.S. Cellular to estimate the percentage of loyalty points that would be redeemed for each product or service. 

Revenue was recognized at the time of customer redemption or when such points were depleted via an account maintenance charge.  U.S. Cellular employed the proportional model to recognize revenues associated with breakage.  Under the proportional model, U.S. Cellular allocated a portion of the estimated future breakage to each redemption and recorded revenue proportionally. 

Equipment Installment Plans

Equipment revenue under equipment installment plan contracts is recognized at the time the device is delivered to the end-user customer for the selling price of the device, net of any deferred imputed interest or trade-in right, if applicable.Imputed interest is reflected as a reduction to the receivable balance and recognized over the duration of the plan as a component of Interest and dividend income. See Note 3 — Equipment Installment Plans for additional information.

Incentives

Discounts and incentives that are deemed cash are recognized as a reduction of Operating revenues concurrently with the associated revenue.

U.S. Cellular issues rebates to its agents and end customers. These incentives are recognized as a reduction to revenue at the time the wireless device sale to the customer occurs. The total potential rebates and incentives are reduced by U.S. Cellular’s estimate of rebates that will not be redeemed by customers based on historical experience of such redemptions.

Activation Fees

U.S. Cellular charges its end customers activation fees in connection with the sale of certain services and equipment. Device activation fees charged at both agent locations and U.S. Cellular company-owned retail stores in connection with equipment installment plan device transactions are deferred and recognized over a period that corresponds with the equipment upgrade eligibility date based on the contract terms. Device activation fees charged at agent locations in connection with subsidized device sales are deferred and recognized over a period that corresponds with the length of the customer’s service contract. Device activation fees charged at U.S. Cellular company-owned retail stores in connection with subsidized device sales are recognized at the time the device is delivered to the customer.

Amounts Collected from Customers and Remitted to Governmental Authorities

U.S. Cellular records amounts collected from customers and remitted to governmental authorities on a net basis within a tax liability account if the tax is assessed upon the customer and U.S. Cellular merely acts as an agent in collecting the tax on behalf of the imposing governmental authority. If the tax is assessed upon U.S. Cellular, then amounts collected from customers as recovery of the tax are recorded in Service revenues and amounts remitted to governmental authorities are recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations. The amounts recorded gross in revenues that are billed to customers and remitted to governmental authorities totaled $64 million, $77 million and $97 million for 2016, 2015 and 2014, respectively.

Eligible Telecommunications Carrier (“ETC”) Revenues

Telecommunications companies may be designated by states, or in some cases by the FCC, as an ETC to receive support payments from the Universal Service Fund if they provide specified services in “high cost” areas. ETC revenues recognized in the reporting period represent the amounts which U.S.Cellular is entitled to receive for such period, as determined and approved in connection with U.S.Cellular’s designation as an ETC in various states.

Advertising Costs

U.S. Cellular expenses advertising costs as incurred. Advertising costs totaled $245 million, $231 million and $205 million in 2016, 2015 and 2014, respectively.

Income Taxes

U.S. Cellular is included in a consolidated federal income tax return with other members of the TDS consolidated group. For financial statement purposes, U.S. Cellular and its subsidiaries calculate their income, income taxes and credits as if they comprised a separate affiliated group. Under a tax allocation agreement between TDS and U.S. Cellular, U.S. Cellular remits its applicable income tax payments to TDS. U.S. Cellular had a tax payable balance with TDS of $8 million as of December 31, 2016 and a tax receivable balance with TDS of $33 million as of December 31, 2015.

Deferred taxes are computed using the liability method, whereby deferred tax assets are recognized for future deductible temporary differences and operating loss carryforwards, and deferred tax liabilities are recognized for future taxable temporary differences. Bothdeferred tax assets and liabilities are measured using the tax rates anticipated to be in effect when the temporary differences reverse. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. U.S. Cellular evaluates income tax uncertainties, assesses the probability of the ultimate settlement with the applicable taxing authority and records an amount based on that assessment.  Deferred taxes are reported as a net non-current asset or liability by jurisdiction.  Any corresponding valuation allowance to reduce the amount of deferred tax assets is also recorded as non-current.

Stock-Based Compensation and Other Plans

U.S. Cellular has established a long-term incentive plan and a non-employee director compensation plan. These plans are considered compensatory plans and, therefore, recognition of compensation cost for grants made under these plans is required.

U.S. Cellular recognizes stock compensation expense based upon the fair value of the specific awards granted using established valuation methodologies.  The amount of stock compensation cost recognized on either a straight-line basis or graded attribution method is based on the portion of the award that is expected to vest over the requisite service period which generally represents the vesting period.  Stock-based compensation cost recognized has been reduced for estimated forfeitures.  Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  See Note 16—Stock-Based Compensation for additional information.

Defined Contribution Plans

U.S. Cellular participates in a qualified noncontributory defined contribution pension plan sponsored by TDS; such plan provides pension benefits for the employees of U.S. Cellular and its subsidiaries. Under this plan, pension benefits and costs are calculated separately for each participant and are funded currently. Pension costs were $11 million in 2016, 2015 and 2014.

U.S. Cellular also participates in a defined contribution retirement savings plan (“401(k) plan”) sponsored by TDS. Total costs incurred for U.S. Cellular’s contributions to the 401(k) plan were $16 million, $15 million and $15 million in 2016, 2015 and 2014, respectively.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) and has since amended the standard with Accounting Standards Update 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, Accounting Standards Update 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), Accounting Standards Update 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing, Accounting Standards Update 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, and Accounting Standards Update 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.  These standards replace existing revenue recognition rules with a single comprehensive model to use in accounting for revenue arising from contracts with customers.  U.S. Cellular is required to adopt ASU 2014-09, as amended, on January 1, 2018.  Early adoption as of January 1, 2017 is permitted; however, U.S. Cellular did not adopt early.  ASU 2014-09, as amended, impacts U.S. Cellular’s revenue recognition related to the allocation of contract revenues between various services and equipment, and the timing of when those revenues are recognized.  In addition, ASU 2014-09 requires deferral of incremental contract acquisition and fulfillment costs and subsequent expense recognition over the contract period or expected customer life.  U.S. Cellular has identified that new systems, processes and controls are required to adopt ASU 2014-09, as amended.  U.S. Cellular has substantially completed the design and development of new systems to perform revenue recognition accounting under the provisions of ASU 2014-09, as amended, and is currently engaged in the process of testing these new systems.  U.S. Cellular expects to transition to the new standard under the modified retrospective transition method whereby a cumulative effect adjustment is recognized upon adoption and the guidance is applied prospectively.  Upon adoption, the cumulative effect adjustment is expected to include the establishment of contract asset and contract liability accounts with a corresponding adjustment to retained earnings to reflect the reallocation of revenues between service and equipment.  Reallocation impacts generally arise when bundle discounts are provided in a contract arrangement that includes equipment and service performance obligations.  In these cases, the revenue will be reallocated according to the relative stand-alone selling prices of the performance obligations included in the bundle and this may be different than how the revenue is billed to the customer and recognized under current guidance.  In addition, contract cost assets will be established to reflect costs that will be deferred as incremental contract acquisition costs.  Incremental contract acquisition costs generally relate to commission costs paid to sales associates.  U.S. Cellular is evaluating the full effects that adoption of ASU 2014-09, as amended, will have on its financial position and results of operations.

In July 2015, the FASB issued Accounting Standards Update 2015-11, Inventory: Simplifying the Measurement of Inventory (“ASU 2015-11”), which requires inventory to be measured at the lower of cost or net realizable value.  U.S. Cellular adopted ASU 2015-11 on January 1, 2017.  The adoption of ASU 2015-11 will not have a significant impact on U.S. Cellular’s financial position or results of operations.

In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”).  This ASU introduces changes to current accounting for equity investments and financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments.  U.S. Cellular is required to adopt ASU 2016-01 on January 1, 2018.  Certain provisions are eligible for early adoption.  The adoption of ASU 2016-01 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”).  ASU 2016-02 requires lessees to record a right-of-use asset and lease liability for almost all leases.  This ASU does not substantially impact lessor accounting.  U.S. Cellular is required to adopt ASU 2016-02 on January 1, 2019.  Early adoption is permitted.  Upon adoption of ASU 2016-02, U.S. Cellular expects a substantial increase to assets and liabilities on its balance sheet.  U.S. Cellular is evaluating the full effects that adoption of ASU 2016-02 will have on its financial position and results of operations.

In March 2016, the FASB issued Accounting Standards Update 2016-04, Liabilities – Extinguishments of Liabilities: Recognition of Breakage from Certain Prepaid Stored-Value Products (“ASU 2016-04”).  ASU 2016-04 requires companies that sell prepaid stored-value products redeemable for goods, services or cash at third-party merchants to recognize breakage (i.e., the value that is ultimately not redeemed by the consumer) in a way that is consistent with how it will be recognized under the new revenue recognition standard.  U.S. Cellular is required to adopt ASU 2016-04 on January 1, 2018.  Early adoption is permitted.  The adoption of ASU 2016-04 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”).  ASU 2016-09 intends to simplify the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  U.S. Cellular adopted ASU 2016-09 on January 1, 2017.  Upon adoption, U.S. Cellular will no longer record adjustments in Additional paid-in capital relating to the tax consequences of share-based payment transactions.  Future tax windfalls and shortfalls will be recognized as discrete items within Income tax expense (benefit) on the Consolidated Statement of Operations in the period in which they occur.  U.S. Cellular has elected to continue to reduce stock compensation expense for estimated forfeitures.  U.S. Cellular’s adoption of this standard is not expected to have a significant impact on its financial position or results of operations, except as it relates to income tax expense, which will be directly impacted in future periods upon the exercise of stock options and the vesting of restricted stock awards.

In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).  ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses.  It also requires additional disclosure relating to the credit quality of trade and other receivables, including information relating to management’s estimate of credit allowances.  U.S. Cellular is required to adopt ASU 2016-13 on January 1, 2020.  Early adoption as of January 1, 2019 is permitted.  U.S. Cellular is evaluating the effects that adoption of ASU 2016-13 will have on its financial position, results of operations and disclosures.

In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”).  ASU 2016-15 provides guidance on eight targeted cash flow classification issues.  U.S. Cellular adopted ASU 2016-15 on December 31, 2016.  U.S. Cellular has historically followed the guidance prescribed by ASU 2016-15 for past transactions and therefore the adoption of ASU 2016-15 had no impact on U.S. Cellular’s statement of cash flows.

In October 2016, the FASB issued Accounting Standards Update 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”).  ASU 2016-16 impacts the accounting for the income tax consequences of intra-entity transfers of assets other than inventory when the transfer occurs between entities in different tax jurisdictions.  U.S. Cellular is required to adopt ASU 2016-16 on January 1, 2018.  Early adoption is permitted.  The adoption of ASU 2016-16 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In October 2016, the FASB issued Accounting Standards Update 2016-17, Consolidation: Interests Held through Related Parties That Are under Common Control (“ASU 2016-17”).  ASU 2016-17 provides guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in an entity held through related parties that are under common control.  U.S. Cellular adopted ASU 2016-17 on January 1, 2017.  The adoption of ASU 2016-17 will not have an impact on U.S. Cellular’s financial position or results of operations.

In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows: Restricted Cash (“ASU 2016-18”).  ASU 2016-18 provides guidance on the placement and reconciliation of restricted cash in the statement of cash flows.  U.S. Cellular is required to adopt ASU 2016-18 on January 1, 2018.  Early adoption is permitted.  The adoption of ASU 2016-18 is not expected to have a significant impact on U.S. Cellular’s statement of cash flows.

In January 2017, the FASB issued Accounting Standards Update 2017-01, Business Combinations: Clarifying the Definition of a Business (“ASU 2017-01”).  ASU 2017-01 clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  U.S. Cellular is required to adopt ASU 2017-01 on January 1, 2018.  U.S. Cellular adopted ASU 2017-01 on January 1, 2017.  The adoption of ASU 2017-01 did not have an impact on U.S. Cellular’s financial position or results of operations, but it may impact the accounting for future acquisitions and dispositions of businesses and assets.

In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).  ASU 2017-04 eliminates Step 2 of the current goodwill impairment test.  Goodwill impairment loss will be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value.  U.S. Cellular is required to adopt ASU 2017-04 on January 1, 2020.  Early adoption is permitted.  U.S. Cellular is assessing whether it will early adopt ASU 2017-04.  ASU 2017-04 could impact U.S. Cellular’s results of operations upon early adoption or the effective date should it fail the goodwill impairment test.

Variable Interest Entities

U.S. Cellular consolidates variable interest entities (“VIEs”) in which it has a controlling financial interestas defined by GAAP and is therefore deemed the primary beneficiary.  A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE.  U.S. Cellular reviews these criteria initially at the time it enters into agreements and subsequently when events warranting reconsideration occur.These VIEshave risks similar to those described in the “Risk Factors” in U.S. Cellular’s Form 10-K for the year ended December 31, 2016.

Legal proceedings

U.S. Cellular is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts.  If U.S. Cellular believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss.  If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within that range is better than another, the low end of the range is accrued.  The assessment of the expected outcomes of legal proceedings is a highly subjective process that requires judgments about future events.  The legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financial statement disclosures.  The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements.

U.S. Cellular has accrued less than $1 million with respect to legal proceedings and unasserted claims as of December 31, 2016 and 2015.  U.S. Cellular has not accrued any amount for legal proceedings if it cannot estimate the amount of the possible loss or range of loss.  U.S. Cellular is unable to estimate any contingent loss in excess of the amounts accrued.

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Fair Value Measurements (Table)

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Fair value measurements

U.S. Cellular has applied the provisions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayed below.

		Level within the Fair Value Hierarchy	December 31, 2016				December 31, 2015
			Book Value		Fair Value		Book Value		Fair Value
(Dollars in millions)
Cash and cash equivalents		1	$	586	$	586	$	715	$	715
Long-term debt
	Retail	2		917		929		917		929
	Institutional	2		533		532		533		501
	Other	2		203		203		214		214

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Equipment Installment Plans (Table)

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Equipment installment plan receivables

The following table summarizes equipment installment plan receivables as of December 31, 2016 and 2015.

December 31,	2016		2015
(Dollars in millions)
Equipment installment plan receivables, gross	$	628	$	381
Deferred interest		(53)		(23)
Equipment installment plan receivables, net of deferred interest		575		358
Allowance for credit losses		(50)		(26)
Equipment installment plan receivables, net	$	525	$	332
Net balance presented in the Consolidated Balance Sheet as:
Accounts receivable — Due from customers and agents (Current portion)	$	345	$	264
Other assets and deferred charges (Non-current portion)		180		68
Equipment installment plan receivables, net	$	525	$	332

Equipment installment plan receivables credit categories

  The balance and aging of the equipment installment plan receivables on a gross basis by credit category were as follows:

	December 31, 2016						December 31, 2015
	Lower Risk		Higher Risk		Total		Lower Risk		Higher Risk		Total
(Dollars in millions)
Unbilled	$	553	$	38	$	591	$	343	$	11	$	354
Billed — current		23		2		25		17		1		18
Billed — past due		10		2		12		8		1		9
Equipment installment plan receivables, gross	$	586	$	42	$	628	$	368	$	13	$	381

Equipment installment plans allowance for credit losses

The activity in the allowance for credit losses balance for the equipment installment plan receivables was as follows:

	2016		2015
(Dollars in millions)
Allowance for credit losses, beginning of year	$	26	$	10
Bad debts expense		63		49
Write-offs, net of recoveries		(39)		(33)
Allowance for credit losses, end of year	$	50	$	26

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income taxes receivable (payable)

U.S. Cellular’s current income taxes balances at December 31, 2016 and 2015 were as follows:

December 31,	2016		2015
(Dollars in millions)
Federal income taxes receivable (payable)	$	(8)	$	33
Net state income taxes receivable		–		1

Income tax expense (benefit)

Income tax expense (benefit) is summarized as follows:

Year Ended December 31,			2016		2015		2014
(Dollars in millions)
Current
	Federal		$	29	$	97	$	(79)
	State			(2)		5		9
Deferred
	Federal			1		48		45
	State			5		7		7
	State - valuation allowance adjustment			–		–		6
		Total income tax expense (benefit)	$	33	$	157	$	(12)

Income tax reconciliation

A reconciliation of U.S. Cellular’s income tax expense computed at the statutory rate to the reported income tax expense, and the statutory federal income tax expense rate to U.S. Cellular’s effective income tax expense rate is as follows:

Year Ended December 31,		2016				2015				2014
		Amount		Rate		Amount		Rate		Amount		Rate
(Dollars in millions)
Statutory federal income tax expense and rate		$	29	35.0	%	$	141	35.0	%	$	(21)	35.0	%
State income taxes, net of federal benefit1			3	3.6			8	2.1			12	(20.8)
Effect of noncontrolling interests			(1)	(1.1)			3	0.6			(6)	9.8
Other differences, net			2	2.2			5	1.0			3	(3.9)
Total income tax expense (benefit) and rate		$	33	39.7	%	$	157	38.7	%	$	(12)	20.1	%
1	State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to the valuation allowance.  During the third quarter of 2014, U.S. Cellular recorded a $6 million increase to income tax expense related to a valuation allowance recorded against certain state deferred tax assets.

Deferred income tax assets and liabilities

Significant components of U.S. Cellular’s deferred income tax assets and liabilities at December 31, 2016 and 2015 were as follows:

December 31,		2016		2015
(Dollars in millions)
Deferred tax assets
	Net operating loss (“NOL”) carryforwards	$	88	$	79
	Stock-based compensation		26		24
	Compensation and benefits - other		21		20
	Deferred rent		21		19
	Other		56		79
Total deferred tax assets			212		221
	Less valuation allowance		(65)		(55)
Net deferred tax assets			147		166
Deferred tax liabilities
	Property, plant and equipment		473		517
	Licenses/intangibles		326		306
	Partnership investments		173		162
	Total deferred tax liabilities		972		985
Net deferred income tax liability		$	825	$	819
Presented in the Consolidated Balance Sheet as:
Deferred income tax liability, net		$	826	$	821
Other assets and deferred charges			(1)		(2)
	Net deferred income tax liability	$	825	$	819

Deferred tax valuation allowance

A summary of U.S. Cellular’s deferred tax asset valuation allowance is as follows:

		2016		2015		2014
(Dollars in millions)
Balance at beginning of year		$	55	$	53	$	43
	Charged to income tax expense		10		2		10
Balance at end of year		$	65	$	55	$	53

Income tax unrecognized benefits summary

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

		2016		2015		2014
(Dollars in millions)
Unrecognized tax benefits balance at beginning of year		$	39	$	36	$	29
	Additions for tax positions of current year		12		7		8
	Additions for tax positions of prior years		3		1		–
	Reductions for tax positions of prior years		(1)		–		(1)
	Reductions for lapses in statutes of limitations		(10)		(5)		–
Unrecognized tax benefits balance at end of year		$	43	$	39	$	36

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Earnings per share

The amounts used in computing earnings (loss) per common share and the effects of potentially dilutive securities on the weighted average number of common shares were as follows:

Year Ended December 31,		2016		2015		2014
(Dollars and shares in millions, except per share amounts)
Net income (loss) attributable to U.S. Cellular shareholders		$	48	$	241	$	(43)
Weighted average number of shares used in basic   earnings (loss) per share			85		84		84
Effect of dilutive securities 1			–		1		–
Weighted average number of shares used in diluted   earnings (loss) per share			85		85		84
Basic earnings (loss) per share attributable to U.S. Cellular   shareholders		$	0.56	$	2.86	$	(0.51)
Diluted earnings (loss) per share attributable to   U.S. Cellular shareholders		$	0.56	$	2.84	$	(0.51)
1	There were no effects of dilutive securities in 2014 due to the net loss for the year.

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Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2016

Licenses

Licenses

Licenses
		2016		2015
(Dollars in millions)
Balance at beginning of year		$	1,834	$	1,443
	Acquisitions		53		346
	Transferred to Assets held for sale		(8)		–
	Exchanges - Licenses received		25		43
	Exchanges - Licenses surrendered		(18)		–
	Other		–		2
Balance at end of year		$	1,886	$	1,834

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Investment in Unconsolidated Entities (Tables)

12 Months Ended

Dec. 31, 2016

Equity Method Investment, Summarized Financial Information

Equity and cost method investments

Investments in unconsolidated entities consist of amounts invested in wireless entities in which U.S. Cellular holds a noncontrolling interest. These investments are accounted for using either the equity or cost method as shown in the following table:

December 31,	2016		2015
(Dollars in millions)
Equity method investments:
Capital contributions, loans, advances and adjustments	$	108	$	112
Cumulative share of income		1,577		1,432
Cumulative share of distributions		(1,276)		(1,183)
Total equity method investments		409		361
Cost method investments		4		2
Total investments in unconsolidated entities	$	413	$	363

Equity method investments, summarized financial position

The following tables, which are based on information provided in part by third parties, summarize the combined assets, liabilities and equity, and results of operations of U.S. Cellular’s equity method investments:

December 31,	2016		2015
(Dollars in millions)
Assets
Current	$	739	$	632
Due from affiliates		387		89
Property and other		4,615		4,555
Total assets	$	5,741	$	5,276
Liabilities and Equity
Current liabilities	$	466	$	808
Deferred credits		184		237
Long-term liabilities		187		147
Long-term capital lease obligations		6		2
Partners' capital and shareholders' equity		4,898		4,082
Total liabilities and equity	$	5,741	$	5,276

Equity method investments, summarized results of operations

Year Ended December31,	2016		2015		2014
(Dollars in millions)
Results of Operations
Revenues	$	6,747	$	6,958	$	6,669
Operating expenses		5,047		5,226		5,036
Operating income		1,700		1,732		1,633
Other income (expense), net		(11)		(7)		1
Net income	$	1,689	$	1,725	$	1,634

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Property, Plant and Equipment (Table)

12 Months Ended

Dec. 31, 2016

Disclosure [Text Block]

Property, plant and equipment

Property, plant and equipment in service and under construction, and related accumulated depreciation and amortization, as of December 31, 2016 and 2015 were as follows:

December 31,	UsefulLives (Years)	2016		2015
(Dollars in millions)
Land	N/A	$	35	$	36
Buildings	20		297		295
Leasehold and land improvements	1-30		1,153		1,103
Cell site equipment	7-25		3,383		3,383
Switching equipment	5-8		976		960
Office furniture and equipment	3-5		420		502
Other operating assets and equipment	3-5		53		79
System development	1-7		1,217		1,169
Work in process	N/A		178		142
Total property, plant and equipment, gross			7,712		7,669
Accumulated depreciation and amortization			(5,242)		(5,020)
Total property, plant and equipment, net		$	2,470	$	2,649

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Asset Retirement Obligations (Table)

12 Months Ended

Dec. 31, 2016

Asset Retirement Obligations [Abstract]

Asset retirement obligations

In 2016 and 2015, U.S. Cellular performed a review of the assumptions and estimated costs related to its asset retirement obligations.  The results of the reviews (identified as “Revisions in estimated cash outflows”) and other changes in asset retirement obligations during 2016 and 2015 were as follows:

		2016		2015
(Dollars in millions)
Balance at beginning of year		$	158	$	152
	Additional liabilities accrued		1		2
	Revisions in estimated cash outflows		5		(1)
	Disposition of assets		(1)		(6)
	Accretion expense		11		11
Balance at end of year		$	174	$	158

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Debt (Table)

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Debt instrument facilities

The following table summarizes the revolving credit facility as of December 31, 2016:

(Dollars in millions)
Maximum borrowing capacity	$	300
Letters of credit outstanding	$	2
Amount borrowed	$	–
Amount available for use	$	298

Long-term debt

Long-term debt as of December 31, 2016 and 2015 was as follows:

								December 31,
								2016						2015
				Issuance date	Maturity date	Call date (any time on or after)		Principal Amount		Less Unamortized discount and debt issuance costs		Total		Principal Amount		Less Unamortized discount and debt issuance costs	Total
(Dollars in millions)
	Unsecured Senior Notes
			6.700%	Dec 2003 and June 2004	Dec 2033	Dec 2003 and June 2004	$	544	$	15	$	529	$	544	$	15	$	529
			6.950%	May 2011	May 2060	May 2016		342		11		331		342		11		331
			7.250%	Dec 2014	Dec 2063	Dec 2019		275		10		265		275		10		265
			7.250%	Nov 2015	Dec 2064	Dec 2020		300		10		290		300		10		290
		Term Loan		Jul 2015	Jan 2022			214		2		212		225		2		223
	Obligation on capital leases							2		–		2		2		–		2
Total long-term debt							$	1,677	$	48	$	1,629	$	1,688	$	48	$	1,640
	Long-term debt, current										$	11					$	11
	Long-term debt, noncurrent										$	1,618					$	1,629

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Lease Commitments

As of December 31, 2016, future minimum rental payments required under operating leases and rental receipts expected under operating leases that have noncancellable lease terms in excess of one year were as follows:

	OperatingLeases Future Minimum RentalPayments		OperatingLeases Future Minimum RentalReceipts
(Dollars in millions)
2017	$	145	$	50
2018		129		43
2019		115		33
2020		102		22
2021		91		8
Thereafter		775		1
Total	$	1,357	$	157

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Variable Interest Entities (Tables)

12 Months Ended

Dec. 31, 2016

Variable Interest Entities [Abstract]

Consolidated VIE assets and liabilities

The following table presents the classification of the consolidated VIEs’ assets and liabilities in U.S. Cellular’s Consolidated Balance Sheet.

December 31,			2016¹		2015
(Dollars in millions)
Assets
	Cash and cash equivalents		$	2	$	1
	Accounts receivable			44		–
	Other current assets			6		–
	Assets held for sale			2		–
	Licenses2			652		649
	Property, plant and equipment, net			105		8
	Other assets and deferred charges			16		–
		Total assets	$	827	$	658
Liabilities
	Current liabilities		$	21	$	–
	Deferred liabilities and credits			13		1
		Total liabilities	$	34	$	1
1		The increase in amounts from December 31, 2015 are due primarily to the adoption of ASU 2015-02 as disclosed above.  ASU 2015-02 was adopted on a modified retrospective basis and, accordingly, prior year amounts have not been revised to reflect the change in guidance.
2		As disclosed above, payments totaling $338 million were made by Advantage Spectrum to the FCC relating to Auction 97.  These licenses were granted in July 2016.  Although the licenses had not yet been granted as of December 31, 2015, the payments to the FCC were classified as Licenses at such date.

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Common Shareholders' Equity (Table)

12 Months Ended

Dec. 31, 2016

Stockholders' Equity Note [Abstract]

Common shareholders' equity

Pursuant to certain employee and non-employee benefit plans, U.S. Cellular reissued the following Treasury Shares:

Year Ended December 31,	2016	2015	2014
(Shares in millions)
Treasury Shares Reissued	1	–	–

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Stock-Based Compensation (Table)

12 Months Ended

Dec. 31, 2016

Stock-based compensation

Stock-based compensation, fair value assumptions

U.S. Cellular estimated the fair value of stock options granted during 2016, 2015 and 2014 using the Black-Scholes valuation model and the assumptions shown in the table below.

	2016	2015	2014
Expected life	4.7 years	4.6 years	4.5 years
Expected annual volatility rate	30.5%	30.1%	28.0%-28.1%
Dividend yield	0%	0%	0%
Risk-free interest rate	1.2%	1.2%	1.4%-1.5%
Estimated annual forfeiture rate	9.4%	9.7%	9.4%

Summary of stock options

A summary of U.S. Cellular stock options outstanding (total and portion exercisable) and changes during 2016 is presented in the table below:

Common Share Options		Numberof Options	Weighted Average Exercise Price		Aggregate Intrinsic Value (in millions)		Weighted Average Remaining Contractual Life (in years)
Outstanding at December 31, 2015		4,102,000	$	40.62
(1,849,000 exercisable)			$	44.33
	Granted	898,000		45.87
	Exercised	(541,000)		35.34
	Forfeited	(197,000)		39.08
	Expired	(289,000)		50.06
Outstanding at December 31, 2016		3,973,000	$	41.92	$	14	6.8
(1,937,000 exercisable)			$	42.54	$	7	5.0

Summary of nonvested restricted stock units

A summary of U.S. Cellular nonvested restricted stock units at December 31, 2016 and changes during the year then ended is presented in the table below:

Common Restricted Stock Units	Number	Weighted Average
		Grant Date
		Fair Value
Nonvested at December 31, 2015	1,194,000	$	36.70
Granted	571,000		43.32
Vested	(348,000)		31.52
Forfeited	(107,000)		39.28
Nonvested at December 31, 2016	1,310,000	$	40.74

Stock-based compensation

The following table summarizes stock‑based compensation expense recognized during 2016, 2015 and 2014:

Year Ended December 31,	2016		2015		2014
(Dollars in millions)
Stock option awards	$	11	$	11	$	10
Restricted stock unit awards		14		13		11
Deferred compensation bonus and matching stock unit awards		–		–		–
Awards under Non-Employee Director compensation plan		1		1		1
Total stock-based compensation, before income taxes		26		25		22
Income tax benefit		(10)		(10)		(8)
Total stock-based compensation expense, net of income taxes	$	16	$	15	$	14

Stock-based compensation, allocation by financial statement line item

The following table provides a summary of the stock-based compensation expense included in the Consolidated Statement of Operations for the years ended:

December 31,	2016		2015		2014
(Dollars in millions)
Selling, general and administrative expense	$	23	$	22	$	19
System operations		3		3		3
Total stock-based compensation expense	$	26	$	25	$	22

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Supplemental Cash Flow Disclosures (Table)

12 Months Ended

Dec. 31, 2016

Supplemental Cash Flow Information [Abstract]

Supplemental cash flow disclosures

Following are supplemental cash flow disclosures regarding interest paid and income taxes paid.

Year Ended December 31,	2016		2015		2014
(Dollars in millions)
Interest paid	$	113	$	81	$	55
Income taxes paid, net of refunds received		(11)		59		33

Stock-based compensation supplemental cash flows

Following are supplemental cash flow disclosures regarding transactions related to stock-based compensation awards.  In certain situations, U.S. Cellular withholds shares that are issuable upon the exercise of stock options or the vesting of restricted shares to cover, and with a value equivalent to, the exercise price and/or the amount of taxes required to be withheld from the stock award holder at the time of the exercise or vesting.  U.S. Cellular then pays the amount of the required tax withholdings to the taxing authorities in cash.

Year Ended December 31,	2016		2015		2014
(Dollars in millions)
Common Shares withheld		308,010		228,011		163,355
Aggregate value of Common Shares withheld	$	13	$	8	$	7
Cash receipts upon exercise of stock options		12		7		5
Cash disbursements for payment of taxes		(6)		(5)		(4)
Net cash receipts from exercise of stock
options and vesting of other stock awards	$	6	$	2	$	1

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Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Number of connections	5,000,000
Number of reportable segments	1
Agent liability	$ 57	$ 76
Amounts recorded gross in revenues that are billed to customers and remitted to governmental authorities	64	77	$ 97
Advertising costs	245	231	205
Service	$ 3,030	3,350	3,398
TDS
Summary of Significant Accounting Policies and Recent Accounting Pronouncements
TDS ownership of U.S. Cellular	83.00%
Income taxes receivable		33
Income taxes payable	$ 8
401(k)
Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Defined contribution cost	16	15	15
Pension
Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Defined contribution cost	$ 11	11	$ 11
Loyalty Rewards Program
Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Service		$ 58

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Fair Value Measurements (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Financial Instruments
Cash and cash equivalents	$ 586	$ 715	$ 212	$ 342
Retail | Minimum
Financial Instruments
Fair value assumption, interest rate	3.78%	3.19%
Retail | Maximum
Financial Instruments
Fair value assumption, interest rate	6.93%	7.51%
Fair Value | Level 1
Financial Instruments
Cash and cash equivalents	$ 586	$ 715
Fair Value | Level 2 | Retail
Financial Instruments
Long-term debt	929	929
Fair Value | Level 2 | Institutional
Financial Instruments
Long-term debt	532	501
Fair Value | Level 2 | Other
Financial Instruments
Long-term debt	203	214
Book Value
Financial Instruments
Cash and cash equivalents	586	715
Book Value | Retail
Financial Instruments
Long-term debt	917	917
Book Value | Institutional
Financial Instruments
Long-term debt	533	533
Book Value | Other
Financial Instruments
Long-term debt	$ 203	$ 214

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Equipment Installment Plan Receivables, EIP Receivables (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Equipment installment plans [Line Items]
Equipment installment plan receivables, gross	$ 628	$ 381
Deferred interest	(53)	(23)
Equipment installment plan receivables, net of deferred interest	575	358
Allowance for credit losses	(50)	(26)
Equipment installment plan receivables, net	525	332
Accounts receivable - Due from customers and agents
Equipment installment plans [Line Items]
Equipment installment plan receivables, net	345	264
Other assets and deferred charges
Equipment installment plans [Line Items]
Equipment installment plan receivables, net	$ 180	$ 68

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Equipment Installment Plan Receivables, Gross Receivables by Credit Category (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Equipment installment plan receivables, gross	$ 628	$ 381
Unbilled
Financing Receivable, Recorded Investment [Line Items]
Equipment installment plan receivables	591	354
Billed
Financing Receivable, Recorded Investment [Line Items]
Equipment installment plan receivables	25	18
Equipment installment plan receivables, past due	12	9
Lower Risk
Financing Receivable, Recorded Investment [Line Items]
Equipment installment plan receivables, gross	586	368
Lower Risk | Unbilled
Financing Receivable, Recorded Investment [Line Items]
Equipment installment plan receivables	553	343
Lower Risk | Billed
Financing Receivable, Recorded Investment [Line Items]
Equipment installment plan receivables	23	17
Equipment installment plan receivables, past due	10	8
Higher Risk
Financing Receivable, Recorded Investment [Line Items]
Equipment installment plan receivables, gross	42	13
Higher Risk | Unbilled
Financing Receivable, Recorded Investment [Line Items]
Equipment installment plan receivables	38	11
Higher Risk | Billed
Financing Receivable, Recorded Investment [Line Items]
Equipment installment plan receivables	2	1
Equipment installment plan receivables, past due	$ 2	$ 1

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Equipment Installment Plan Receivables, Unamortized Imputed Discount and Allowance for Credit Losses (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of year	$ 26
Allowance for credit losses, end of year	50	$ 26
Equipment Installment Plan Receivable
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Allowance for credit losses, beginning of year	26	10
Bad debts expense	63	49
Write-offs, net of recoveries	(39)	(33)
Allowance for credit losses, end of year	$ 50	$ 26

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Equipment Installment Plan Receivables, Narrative (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Equipment installment plans [Line Items]
Guarantee liability	$ 33	$ 93
Imputed interest rate	11.20%	9.70%
2016 Equipment installment plans out-of-period adjustment
Equipment installment plans [Line Items]
Out-of-period adjustment description	U.S. Cellular recorded out-of-period adjustments in 2016 due to errors related to equipment installment plan transactions occurring in 2015 (“2016 EIP adjustments”). The 2016 EIP adjustments had the impact of increasing Equipment sales revenues by $2 million, decreasing bad debts expense, which is a component of Selling, general and administrative expense, by $2 million and increasing Income before income taxes by $4 million in 2016.
2016 Equipment installment plans out-of-period adjustment | Equipment Sales Revenues [Member]
Equipment installment plans [Line Items]
Out-of-period adjustment	$ 2
2016 Equipment installment plans out-of-period adjustment | Selling, general and administrative expense
Equipment installment plans [Line Items]
Out-of-period adjustment	(2)
2016 Equipment installment plans out-of-period adjustment | Income before income taxes
Equipment installment plans [Line Items]
Out-of-period adjustment	$ 4
2015 Equipment installment plans out-of-period adjustment
Equipment installment plans [Line Items]
Out-of-period adjustment description	Additionally, U.S. Cellular recorded out-of-period adjustments in 2015 due to errors related to equipment installment plan transactions (“2015 EIP adjustments”) that were attributable to 2014. The 2015 EIP adjustments had the impact of reducing Equipment sales revenues and Income before income taxes by $6 million in 2015. U.S. Cellular has determined that these adjustments were not material to any of the periods impacted.
2015 Equipment installment plans out-of-period adjustment | Equipment Sales Revenues [Member]
Equipment installment plans [Line Items]
Out-of-period adjustment		$ (6)
2015 Equipment installment plans out-of-period adjustment | Income before income taxes
Equipment installment plans [Line Items]
Out-of-period adjustment		$ (6)

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Income Taxes, Balances (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Federal
Income Tax [Line Items]
Income taxes receivable		$ 33
Income taxes (payable)	$ (8)
State
Income Tax [Line Items]
Income taxes receivable		$ 1

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Income Taxes, Expense (Benefit) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income tax expense (benefit)
Current federal income tax expense (benefit)	$ 29	$ 97	$ (79)
Current state income tax expense	(2)	5	9
Deferred federal income tax expense (benefit)	1	48	45
Deferred state income tax expense (benefit)	5	7	7
State - valuation allowance adjustment			6
Total income tax expense (benefit)	$ 33	$ 157	$ (12)

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Income Taxes, Expense Reconciliation (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income tax expense reconciliation
Statutory federal income tax expense		$ 29	$ 141	$ (21)
State income taxes, net of federal benefit	[1]	3	8	12
Effect of noncontrolling interests		(1)	3	(6)
Other differences, net		2	5	3
Total income tax expense (benefit)		$ 33	$ 157	$ (12)

[1] State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to the valuation allowance. During the third quarter of 2014 U.S. Cellular recorded a $6 million increase to income tax expense related to a valuation allowance recorded against certain state deferred tax assets.

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Income Taxes, Rate Reconciliation (Details)		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income tax rate reconciliation
Statutory federal income tax rate		35.00%	35.00%	35.00%
State income taxes, net of federal benefit	[1]	3.60%	2.10%	(20.80%)
Effect of noncontrolling interests		(1.10%)	0.60%	9.80%
Other differences, net		2.20%	1.00%	(3.90%)
Total income tax rate		39.70%	38.70%	20.10%

[1] State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to the valuation allowance. During the third quarter of 2014 U.S. Cellular recorded a $6 million increase to income tax expense related to a valuation allowance recorded against certain state deferred tax assets.

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Income Taxes, Components of Deferred Income Tax (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Deferred tax assets
Net operating loss ("NOL") carryforwards	$ 88	$ 79
Stock-based compensation	26	24
Compensation and benefits - other	21	20
Deferred rent	21	19
Other	56	79
Total deferred tax assets	212	221
Less valuation allowance	(65)	(55)
Net deferred tax assets	147	166
Deferred tax liabilities
Property, plant and equipment	473	517
Licenses/intangibles	326	306
Partnership investments	173	162
Total deferred tax liabilities	972	985
Net deferred income tax liability	825	819
Deferred income tax liability, net
Deferred tax liabilities
Net deferred income tax liability	826	821
Other assets and deferred charges
Deferred tax liabilities
Net deferred income tax liability	$ (1)	$ (2)

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Income Taxes, Net Operating Losses (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($)
State
Operating Loss Carryforwards [Line Items]
State NOL carryforwards	$ 1,845
Deferred tax asset for State NOL carryforwards	$ 70
State | Minimum
Operating Loss Carryforwards [Line Items]
Expiration of NOL carryforwards	Dec. 31, 2017
State | Maximum
Operating Loss Carryforwards [Line Items]
Expiration of NOL carryforwards	Dec. 31, 2036
Federal
Operating Loss Carryforwards [Line Items]
Deferred tax asset for Federal NOL carryforward	$ 18
Federal | Minimum
Operating Loss Carryforwards [Line Items]
Expiration of NOL carryforwards	Dec. 31, 2018
Federal | Maximum
Operating Loss Carryforwards [Line Items]
Expiration of NOL carryforwards	Dec. 31, 2036

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Income Taxes, Deferred Tax Valuation Allowance (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Deferred tax valuation allowance, rollfoward
Balance at beginning of year	$ 55
Balance at end of year	65	$ 55
Deferred tax asset valuation allowance
Deferred tax valuation allowance, rollfoward
Balance at beginning of year	55	53	$ 43
Charged to income tax expense	10	2	10
Balance at end of year	$ 65	$ 55	$ 53

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Income Taxes, Unrecognized Tax Benefits (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Summary of unrecognized income tax benefits
Unrecognized tax benefit balance at beginning of year	$ 39	$ 36	$ 29
Additions for tax positions of current year	12	7	8
Additions for tax positions of prior years	3	1
Reductions for tax positions of prior years	(1)		(1)
Reductions for lapses in statutes of limitations	(10)	(5)
Unrecognized tax benefit balance at end of year	$ 43	$ 39	$ 36

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Income Taxes, Narrative (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Net accrued interest and penalties	$ 15	$ 17
Interest and penalties expense related to unrecognized income tax benefits	(2)	1	$ 4
Effect of unrecognized tax benefit on income tax expense	$ 29	$ 25	$ 23
State
Income Tax Disclosure [Abstract]
All audit periods prior to this year are closed	2012
Federal
Income Tax Disclosure [Abstract]
All audit periods prior to this year are closed	2013

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Earnings per share
Net income (loss) attributable to U.S. Cellular shareholders		$ 48	$ 241	$ (43)
Weighted average number of shares used in basic earnings (loss) per share		85	84	84
Effects of dilutive securities	[1]		1
Weighted average number of shares used in diluted earnings (loss) per share		85	85	84
Basic earnings (loss) per share attributable to U.S. Cellular shareholders		$ 0.56	$ 2.86	$ (0.51)
Diluted earnings (loss) per share attributable to U.S. Cellular shareholders		$ 0.56	$ 2.84	$ (0.51)
Earnings per share, Other disclosures
Antidilutive securities		3	4	4

[1] There were no effects of dilutive securities in 2014 due to the net loss for the year.

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Acquisitions, Divestitures and Exchanges (Details) $ in Millions		1 Months Ended								3 Months Ended			12 Months Ended			50 Months Ended
	May 16, 2013 USD ($)	Feb. 28, 2017 USD ($)	Jul. 31, 2015 USD ($)	Mar. 31, 2015 USD ($)	Jan. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Sep. 30, 2014 USD ($)	Mar. 31, 2014 USD ($)	Feb. 28, 2014 USD ($)	Dec. 31, 2016 USD ($)	Sep. 30, 2016 USD ($)	Jun. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2016 USD ($)	Feb. 29, 2016 USD ($)
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges													$ 21	$ 317	$ 180
Gain on sale of business and other exit costs														114	33
Gain on license sales and exchanges													19	147	113
Assets held for sale										$ 8			8			$ 8
Cash paid for acquisitions and licenses													53	286	38
Federal Communications Commission deposit													143		60
Other current liabilities										84			84	105		84
Aggregate license acquisitions
Acquisitions, divestitures and exchanges
Cash paid for acquisitions and licenses													53
License acquisition agreement amount										57			57			57
Auction 1002
Acquisitions, divestitures and exchanges
Federal Communications Commission deposit												$ 143
Total commitment amount										327			327			327
Auction 97
Acquisitions, divestitures and exchanges
Federal Communications Commission deposit														60
Licenses won				124
Total winning bid				$ 338
Designated entity auction discount				25.00%
Airadigm Communications, Inc.
Acquisitions, divestitures and exchanges
Purchase price							$ 92
Book value transferred assets							15
License exchange 1
Acquisitions, divestitures and exchanges
Net cash to be received																	$ 28
Assets held for sale										8			8			8
License exchange 1, first closing
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges												13
Gain on license sales and exchanges												$ 9
License exchange 1, second closing
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges		$ 15
License exchange 2
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges											$ 2
Gain on license sales and exchanges											7
Carrying value of licenses disposed of in exchange											$ 7
License exchange 3
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges										1
Gain on license sales and exchanges										3
Carrying value of licenses disposed of in exchange										$ 8
License exchange 4
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges				$ 117
Gain on license sales and exchanges				125
Fair value of Licenses received in exchange				$ 43
License exchange 5
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges							$ 28
License exchange 5, first closing
Acquisitions, divestitures and exchanges
Gain on license sales and exchanges						$ 22
Carrying value of licenses disposed of in exchange						11
Fair value of Licenses received in exchange						52
Other current liabilities						18									18
License exchange 5, second closing
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges			$ 28
Gain on license sales and exchanges			24
Carrying value of licenses disposed of in exchange			$ 22
License exchange 6
Acquisitions, divestitures and exchanges
Gain on license sales and exchanges									$ 16
Divestiture transaction
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges	$ 480
Gain on sale of business and other exit costs														6	$ 29
Tower sale
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges						$ 159
Number of towers						595									595
Tower sale, first closing
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges						$ 10
Gain on sale of business and other exit costs						$ 4
Number of towers						236									236
Tower sale, second closing
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges					$ 142
Gain on sale of business and other exit costs					$ 108
Number of towers					359
St. Louis
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges								$ 92
Gain on sale of business and other exit costs								$ 76
Sprint Cost Reimbursement | Divestiture transaction
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges													$ 7	$ 30	$ 71	118
Sprint Cost Reimbursement | Maximum | Divestiture transaction
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges																$ 200
Earnest money received | Tower sale, first closing
Acquisitions, divestitures and exchanges
Cash received (paid) from divestitures and exchanges						$ 8

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Intangible Assets (Details) - Licenses - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Licenses
Balance, beginning of period	$ 1,834	$ 1,443
Acquisitions	53	346
Transferred to Assets held for sale	(8)
Exchanges - Licenses received	25	43
Exchanges - Licenses surrendered	(18)
Other		2
Balance, end of period	$ 1,886	$ 1,834

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Investments in Unconsolidated Entities (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Equity and cost method investments
Capital contributions, loans, advances and adjustments	$ 108	$ 112
Cumulative share of income	1,577	1,432
Cumulative share of distributions	(1,276)	(1,183)
Total equity method investments	409	361
Cost method investments	4	2
Total investments in unconsolidated entities	413	363
Equity method investments, combined assets
Current	739	632
Due from affiliates	387	89
Property and other	4,615	4,555
Total assets	5,741	5,276
Equity method investments, combined liabilities and equity
Current liabilities	466	808
Deferred credits	184	237
Long-term liabilities	187	147
Long-term capital lease obligations	6	2
Partners' capital and shareholders' equity	4,898	4,082
Total liabilities and equity	5,741	5,276
Equity method investments, combined income statements
Revenues	6,747	6,958	$ 6,669
Operating expenses	5,047	5,226	5,036
Operating income	1,700	1,732	1,633
Other income (expense), net	(11)	(7)	1
Net income	$ 1,689	$ 1,725	$ 1,634

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Property, Plant and Equipment (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment
Land	$ 35	$ 36
Buildings	297	295
Leasehold and land improvements	1,153	1,103
Cell site equipment	3,383	3,383
Switching equipment	976	960
Office furniture and equipment	420	502
Other operating assets and equipment	53	79
System development	1,217	1,169
Work in process	178	142
Property, plant and equipment, gross	7,712	7,669
Accumulated depreciation and amortization	(5,242)	(5,020)
Property, plant and equipment, net	2,470	2,649
Depreciation and amortization expense	607	596	$ 593
(Gain) loss on asset disposals, net	$ 22	$ 16	$ 21
Buildings
Property, Plant and Equipment
Useful life	20 years
Leasehold and land improvements | Minimum
Property, Plant and Equipment
Useful life	1 year
Leasehold and land improvements | Maximum
Property, Plant and Equipment
Useful life	30 years
Cell site equipment | Minimum
Property, Plant and Equipment
Useful life	7 years
Cell site equipment | Maximum
Property, Plant and Equipment
Useful life	25 years
Switching equipment | Minimum
Property, Plant and Equipment
Useful life	5 years
Switching equipment | Maximum
Property, Plant and Equipment
Useful life	8 years
Office furniture and equipment | Minimum
Property, Plant and Equipment
Useful life	3 years
Office furniture and equipment | Maximum
Property, Plant and Equipment
Useful life	5 years
Other operating assets and equipment | Minimum
Property, Plant and Equipment
Useful life	3 years
Other operating assets and equipment | Maximum
Property, Plant and Equipment
Useful life	5 years
System development | Minimum
Property, Plant and Equipment
Useful life	1 year
System development | Maximum
Property, Plant and Equipment
Useful life	7 years

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Asset Retirement Obligaion (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Asset retirement obligation
Asset retirement obligation - Balance at beginning of year	$ 158	$ 152
Additional liabilities accrued	1	2
Revisions in estimated cash outflows	5	(1)
Disposition of assets	(1)	(6)
Accretion expense	11	11
Asset retirement obligation - Balance at end of year	$ 174	$ 158

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Debt, revolving credit facilities (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Jul. 01, 2019
Revolving credit
Maximum borrowing capacity	$ 300
Letters of credit outstanding	2
Amount available for use	298
Unused commitment fees	$ 1	$ 1	$ 1
Agreement date	Jun. 15, 2016
Maturity date	Jun. 15, 2021
Interest Coverage Ratio	3.00
Leverage Ratio	3.25
Subordination agreement description	In connection with U.S. Cellular’s revolving credit facility, TDS and U.S. Cellular entered into a subordination agreement dated June 15, 2016 together with the administrative agent for the lenders under U.S. Cellular’s revolving credit agreement. Pursuant to this subordination agreement, (a) any consolidated funded indebtedness from U.S. Cellular to TDS will be unsecured and (b) any (i) consolidated funded indebtedness from U.S. Cellular to TDS (other than “refinancing indebtedness” as defined in the subordination agreement) in excess of $105 million and (ii) refinancing indebtedness in excess of $250 million will be subordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under U.S. Cellular’s revolving credit agreement. As of December 31, 2016, U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the revolving credit agreement pursuant to the subordination agreement.
Revolver compliance	U.S. Cellular believes it was in compliance as of December 31, 2016 with all covenants and other requirements set forth in the revolving credit facility.
Future period
Revolving credit
Leverage Ratio				3.00
U.S. Cellular Revolving credit facility | LIBOR rate
Revolving credit
Contractual spread	1.75%
U.S. Cellular Revolving credit facility | Alternative Base Rate
Revolving credit
Contractual spread	0.75%

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Debt, term loan facility (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Term loan
Principal Amount	$ 1,677	$ 1,688
U.S. Cellular Term loan facility
Term loan
Principal Amount	214	$ 225
Term Loan periodic payment amount	$ 3
Frequency of periodic Term Loan payment	quarterly
Date of debt issuance	Jul. 20, 2015
Maturity date of debt issued	Jan. 21, 2022
Payment terms	In July 2015, U.S. Cellular borrowed $225 million on a senior term loan credit facility in two separate draws. This facility was entered into in January 2015 and amended and restated in June 2016. The interest rate on outstanding borrowings is reset at three and six month intervals at a rate of LIBOR plus 250 basis points. This credit facility provides for the draws to be continued on a long-term basis under terms that are readily determinable. U.S. Cellular has the ability and intent to carry the debt for the duration of the agreement. Principal reductions are due and payable in quarterly installments of $3 million beginning in March 2016 through December 2021, and the remaining unpaid balance will be due and payable in January 2022. The senior term loan credit facility contains financial covenants and subsidiary guarantees that are consistent with the revolving credit agreements described above. This facility was entered into for general corporate purposes, including working capital, spectrum purchases and capital expenditures.
Subordination agreement description	In connection with U.S. Cellular’s term loan credit facility, TDS and U.S. Cellular entered into a subordination agreement in June 2016 together with the administrative agent for the lenders under U.S. Cellular’s term loan credit agreement, which is substantially the same as the subordination agreement in the U.S. Cellular revolving credit facility described above. As of December 31, 2016, U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the term loan facility pursuant to this subordination agreement.
Term loan compliance	U.S. Cellular believes that it was in compliance with all of the financial and other covenants and requirements set forth in its term loan credit facility as of December 31, 2016.
U.S. Cellular Term loan facility | LIBOR rate
Term loan
Contractual spread	2.50%

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Debt, long-term debt (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Long-term debt
Principal Amount	$ 1,677	$ 1,688
Unamortized discount and debt issuance costs	48	48
Total long-term debt	1,629	1,640
Current portion of long-term debt	11	11
Long-term debt, net	1,618	1,629
Long-term debt maturities
Scheduled principal payments 2017	11
Scheduled principal payments 2018	11
Scheduled principal payments 2019	11
Scheduled principal payments 2020	11
Scheduled principal payments 2021	$ 11
6.7% Senior Notes
Long-term debt
Interest rate on debt	6.70%
Maturity date of debt issued	Dec. 15, 2033
Principal Amount	$ 544	544
Unamortized discount and debt issuance costs	15	15
Long term debt	$ 529	529
6.7% Senior Notes | Minimum
Long-term debt
Date of debt issuance	Dec. 08, 2003
Call date of debt issued	Dec. 08, 2003
6.7% Senior Notes | Maximum
Long-term debt
Date of debt issuance	Jun. 28, 2004
Call date of debt issued	Jun. 28, 2004
6.95% Senior Notes
Long-term debt
Interest rate on debt	6.95%
Date of debt issuance	May 09, 2011
Maturity date of debt issued	May 15, 2060
Call date of debt issued	May 15, 2016
Principal Amount	$ 342	342
Unamortized discount and debt issuance costs	11	11
Long term debt	$ 331	331
7.25% Senior Notes due 2063
Long-term debt
Interest rate on debt	7.25%
Date of debt issuance	Dec. 08, 2014
Maturity date of debt issued	Dec. 01, 2063
Call date of debt issued	Dec. 08, 2019
Principal Amount	$ 275	275
Unamortized discount and debt issuance costs	10	10
Long term debt	$ 265	265
7.25% Senior Notes due 2064
Long-term debt
Interest rate on debt	7.25%
Date of debt issuance	Nov. 23, 2015
Maturity date of debt issued	Dec. 01, 2064
Call date of debt issued	Dec. 01, 2020
Principal Amount	$ 300	300
Unamortized discount and debt issuance costs	10	10
Long term debt	$ 290	290
U.S. Cellular Term loan facility
Long-term debt
Date of debt issuance	Jul. 20, 2015
Maturity date of debt issued	Jan. 21, 2022
Principal Amount	$ 214	225
Unamortized discount and debt issuance costs	2	2
Long term debt	212	223
Obligation on capital leases
Long-term debt
Principal Amount	2	2
Obligation on capital leases	$ 2	$ 2

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Commitments and Contingencies, Narrative (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating Leases, Rent Expense
Rent expense	$ 161	$ 153	$ 152
Maximum
Loss Contingency, Estimate
Accrual for legal proceedings and unasserted claims	$ 1	$ 1
Apple
Purchase Commitments
Purchase commitment agreement description	During 2016, U.S. Cellular entered into agreements with Apple to purchase certain minimum quantities of Apple iPhone products and fund marketing programs related to the Apple iPhone products over a three-year period beginning in September 2016. Based on current forecasts, U.S. Cellular estimates that the remaining contractual commitment as of December 31, 2016 under these agreements is approximately $1,351 million. At this time, U.S. Cellular expects to meet its contractual commitments with Apple.
Purchase commitment period	3 years
Purchase commitment remaining estimated payments	$ 1,351
Amdocs
Purchase Commitments
Purchase commitment agreement description	In November 2014, U.S. Cellular executed a Master Statement of Work (“Master”) and certain other documents with Amdocs Software Systems Limited (“Amdocs”). The agreement provides that U.S. Cellular will outsource to Amdocs certain support functions for its Billing and Operations Support System (“B/OSS”). Such functions include application support, billing operations and some infrastructure services. In October 2016, U.S. Cellular executed two Statements of Work (“SOW”) with Amdocs for continued development and support related to its billing system. Both the Master and SOW agreements have terms through September 30, 2019, with the Master being subject to five one-year renewal periods at U.S. Cellular’s option. The estimated amounts to be paid to Amdocs with respect to the Master and SOW agreements during the remaining terms are approximately $53 million and $67 million (exclusive of travel and expenses and subject to certain potential adjustments), respectively.
Amdocs statements of work
Purchase Commitments
Purchase commitment period	3 years
Purchase commitment remaining estimated payments	$ 67
Amdocs master statement
Purchase Commitments
Purchase commitment period	5 years
Purchase commitment remaining estimated payments	$ 53

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Commitments and Contingencies, Minimum lease obligations (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Operating leases description	U.S. Cellular is a party to various lease agreements, both as lessee and lessor, for office space, retail store sites, cell sites and equipment which are accounted for as operating leases. Certain leases have renewal options and/or fixed rental increases. Renewal options that are reasonably assured of exercise are included in determining the lease term. Any rent abatements or lease incentives, in addition to fixed rental increases, are included in the calculation of rent expense and calculated on a straight-line basis over the defined lease term.
Operating Leases Future Minimum Payments Due
2017	$ 145
2018	129
2019	115
2020	102
2021	91
Thereafter	775
Total	1,357
Operating Leases Future Minimum Receipts
2017	50
2018	43
2019	33
2020	22
2021	8
Thereafter	1
Total	$ 157

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Variable Interest Entities (Details) $ in Millions		1 Months Ended	12 Months Ended
		Mar. 31, 2015 USD ($)	Dec. 31, 2016 USD ($)		Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)
Assets
Cash and cash equivalents			$ 586		$ 715	$ 212	$ 342
Accounts receivable			658		608
Other current assets			23		55
Assets held for sale			8
Licenses			1,886		1,834
Property, plant and equipment, net			2,470		2,649
Other assets and deferred charges			405		172
Liabilities
Current liabilities			718		748
Variable Interest Entities, Other Disclosures
Federal Communications Commission deposit			143			60
Capital contributions, loans or advances			98		281	61
Investments in unconsolidated entities			413		363
Noncontrolling interests with redemption features			$ 1		1
King Street Wireless out-of-period adjustment
Variable Interest Entities, Other Disclosures
Out-of-period adjustment description			During 2015, U.S. Cellular recorded out-of-period adjustments attributable to the third quarter of 2013 through the second quarter of 2015 related to an agreement with King Street Wireless. U.S. Cellular determined that these adjustments were not material to the quarterly periods or the annual results for 2015. These out-of-period adjustments had the impact of reducing Net income by $3 million and Net income attributable to U.S. Cellular shareholders by $4 million in 2015
Net income | King Street Wireless out-of-period adjustment
Variable Interest Entities, Other Disclosures
Out-of-period adjustment					(3)
Net income attributable to U.S. Cellular shareholders | King Street Wireless out-of-period adjustment
Variable Interest Entities, Other Disclosures
Out-of-period adjustment					(4)
Consolidated Variable Interest Entities
Assets
Cash and cash equivalents			$ 2	[1]	1
Accounts receivable	[1]		44
Other current assets	[1]		6
Assets held for sale	[1]		2
Licenses	[2]		652	[1]	649
Property, plant and equipment, net			105	[1]	8
Other assets and deferred charges	[1]		16
Total assets			827	[1]	658
Liabilities
Current liabilities	[1]		21
Deferred liabilities and credits			13	[1]	1
Total liabilities			34	[1]	1
Unconsolidated Variable Interest Entities
Variable Interest Entities, Other Disclosures
Investments in unconsolidated entities			$ 6		$ 5
Advantage Spectrum L.P.
Variable Interest Entities, Other Disclosures
Federal Communications Commission deposit						$ 60
Licenses won		124
Total winning bid		$ 338
Designated entity auction discount		25.00%
Other auction charges		$ 2
King Street Wireless L.P.
Variable Interest Entities, Other Disclosures
Cash distributions paid		60
King Street Wireless, L.P. distribution paid to U.S. Cellular		54
King Street Wireless, L.P. distribution paid to King Street Wireless, Inc.		$ 6

[1] The increase in amounts from December 31, 2015 are due primarily to the adoption of ASU 2015-02 as disclosed above. ASU 2015-02 was adopted on a modified retrospective basis and, accordingly, prior year amounts have not been revised to reflect the change in guidance.

[2] As disclosed above, payments totaling $338 million were made by Advantage Spectrum to the FCC relating to Auction 97. These licenses were granted in July 2016. Although the licenses had not yet been granted as of December 31, 2015, the payments to the FCC were classified as Licenses at such date.

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Noncontrolling Interests (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($)
Redeemable noncontrolling interest
Termination date range of mandatorily redeemable noncontrolling interests - begin	2085
Termination date range of mandatorily redeemable noncontrolling interests - end	2113
Settlement value of mandatorily redeemable noncontrolling interests	$ 22
Carrying value of mandatorily redeemable noncontrolling interests	$ 11

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Common Shareholders' Equity (Details)	12 Months Ended
	Dec. 31, 2016 shares
Share repurchases
Common share repurchase authorization	In November 2009, the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009 and continuing each year thereafter, on a cumulative basis.  In December 2016, the U.S. Cellular Board amended this authorization to provide that such amount will be any amount from zero to 1,300,000 beginning on January 1, 2017, as determined by the U.S. Cellular Pricing Committee, and that if the Pricing Committee did not specify an amount for any year, such amount would be zero for such year.  The Pricing Committee did not specify any increase as of January 1, 2017.  The Pricing Committee was also authorized to decrease the cumulative amount of the authorization at any time, but has not taken any action to do so at this time.  As a result, there was no change to the cumulative amount of the share repurchase authorization as of January 1, 2017.  As of December 31, 2016, the total cumulative amount of Common Shares authorized to be purchased is 5,900,849. The authorization provides that share repurchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on market prices and other conditions.  This authorization does not have an expiration date.
Series A Common Shares
Common shareholders' equity, other disclosures
Voting rights for number of board of directors	75%
Common Shares
Common shareholders' equity, other disclosures
Voting rights for number of board of directors	25%
Common Shares | 401(k)
Common shareholders' equity, other disclosures
Shares reserved	67,215
Common Shares | Treasury shares
Common shareholders' equity, other disclosures
Shares reissued	1,000,000
Share repurchases
Repurchase expiration	This authorization does not have an expiration date.
Repurchase authorization, cumulative shares authorized	5,900,849
Common Shares | Treasury shares | Maximum
Share repurchases
Repurchase authorization, additional number of shares per year	1,300,000

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Stock-Based Compensation Overview, Expense and Valuation Model (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock-based compensation
Stock-based compensation expense	$ 26	$ 25	$ 22
Income tax benefit	(10)	(10)	(8)
Total stock-based compensation expense, net of income taxes	16	15	14
Unrecognized compensation cost for all stock-based compensation awards	$ 29
Weighted average period for recognition of unrecognized compensation cost for all stock-based compensation awards	1 year 11 months
Tax benefit from exercise of stock options and other awards	$ 8
System operations
Stock-based compensation
Stock-based compensation expense	3	3	3
Selling, general and administrative expense
Stock-based compensation
Stock-based compensation expense	$ 23	22	19
Long-Term Incentive Plans
Stock-based compensation, overview
Terms of Award	Under the U.S. Cellular Long-Term Incentive Plans, U.S. Cellular may grant fixed and performance based incentive and non-qualified stock options, restricted stock, restricted stock units, and deferred compensation stock unit awards to key employees. At December 31, 2016, the only types of awards outstanding are fixed non-qualified stock option awards, restricted stock unit awards, and deferred compensation stock unit awards.
Long-Term Incentive Plans | Stock Options
Stock-based compensation, overview
Terms of Award	Stock options granted to key employees are exercisable over a specified period not in excess of ten years. Stock options generally vest over a period of three years from the date of grant. Stock options outstanding at December 31, 2016 expire between 2017 and 2026. However, vested stock options typically expire 30 days after the effective date of an employee’s termination of employment for reasons other than retirement. Employees who leave at the age of retirement have 90 days (or one year if they satisfy certain requirements) within which to exercise their vested stock options. The exercise price of options equals the market value of U.S. Cellular Common Shares on the date of grant.
Stock-based compensation
Stock-based compensation expense	$ 11	11	10
Long-Term Incentive Plans | Stock Options | Minimum
Stock-based compensation, overview
Stock options expiration date	Apr. 03, 2017
Long-Term Incentive Plans | Stock Options | Maximum
Stock-based compensation, overview
Stock options expiration date	Apr. 01, 2026
Long-Term Incentive Plans | Restricted Stock Units
Stock-based compensation, overview
Terms of Award	Restricted stock unit awards granted to key employees generally vest after three years. U.S. Cellular estimates the fair value of restricted stock units based on the closing market price of U.S. Cellular shares on the date of grant. The fair value is then recognized as compensation cost on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.
Stock-based compensation
Stock-based compensation expense	$ 14	13	11
Long-Term Incentive Plans | Deferred Compensation Stock Units
Stock-based compensation, overview
Terms of Award	Certain U.S. Cellular employees may elect to defer receipt of all or a portion of their annual bonuses and to receive a company matching contribution on the amount deferred. All bonus compensation that is deferred by employees electing to participate is immediately vested and is deemed to be invested in U.S. Cellular Common Share stock units. The amount of U.S. Cellular’s matching contribution depends on the portion of the annual bonus that is deferred. Participants receive a 25% match for amounts deferred up to 50% of their total annual bonus and a 33% match for amounts that exceed 50% of their total annual bonus; such matching contributions also are deemed to be invested in U.S. Cellular Common Share stock units and vest over three years.
Non-Employee Directors' Plan
Stock-based compensation
Stock-based compensation expense	$ 1	$ 1	$ 1
Common Shares | Long-Term Incentive Plans
Stock-based compensation
Shares reserved	14,759,000
Common Shares | Long-Term Incentive Plans | Stock Options
Black Scholes valuation model assumptions
Expected life	4 years 8 months	4 years 7 months	4 years 6 months
Expected annual volatility rate, minimum	30.50%	30.10%	28.00%
Expected annual volatility rate, maximum	30.50%	30.10%	28.10%
Dividend yield	0.00%	0.00%	0.00%
Risk-free interest rate, minimum	1.20%	1.20%	1.40%
Risk-free interest rate, maximum	1.20%	1.20%	1.50%
Estimated annual forfeiture rate	9.40%	9.70%	9.40%
Common Shares | Non-Employee Directors' Plan
Stock-based compensation
Shares reserved	169,000

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Stock-Based Compensation Option Rollforward (Details) - Common Shares - Long-Term Incentive Plans - Stock Options - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock compensation, stock option rollforward schedule, number of options
Outstanding, begin of period	4,102,000
Exercisable options, begin of period	1,849,000
Granted options	898,000
Exercised options	(541,000)
Forfeited options	(197,000)
Expired options	(289,000)
Outstanding, end of period	3,973,000	4,102,000
Exercisable options, end of period	1,937,000	1,849,000
Stock compensation, stock option rollforward schedule, other information
Options outstanding, begin of period - weighted average exercise price	$ 40.62
Options exercisable, begin of period - weighted average exercise price	44.33
Options granted, weighted average exercise price	45.87
Options exercised, weighted average exercise price	35.34
Options forfeited, weighted average exercise price	39.08
Options expired, weighted average exercise price	50.06
Options outstanding, end of period - weighted average exercise price	41.92	$ 40.62
Options exercisable, end of period - weighted average exercise price	42.54	44.33
Options granted, weighted average grant date fair value	$ 12.77	$ 9.94	$ 10.68
Aggregate intrinsic value, options exercised	$ 4	$ 2	$ 2
Aggregate intrinsic value, options outstanding	14
Aggregate intrinsic value, options exercisable	$ 7
Weighted average remaining contractual life, outstanding	6 years 10 months
Weighted average remaining contractual life, exercisable	5 years

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Stock-Based Compensation Nonvested Shares and Other (Details) - Common Shares - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Long-Term Incentive Plans | Restricted Stock Units
Stock based compensation, Nonvested shares rollforward, number of shares
Nonvested stock units, begin of period - Number of shares	1,194,000
Granted number of shares	571,000
Vested number of shares	(348,000)
Forfeited number of shares	(107,000)
Nonvested stock units, end of period - Number of shares	1,310,000	1,194,000
Stock based compensation, Nonvested shares weighted average grant date fair value
Nonvested stock units - begin of period weighted average grant date fair value	$ 36.70
Granted weighted average grant date fair value	43.32	$ 37.24	$ 41.24
Vested weighted average grant date fair value	31.52
Forfeited weighted average grant date fair value	39.28
Nonvested stock units - end of period weighted average grant date fair value	$ 40.74	$ 36.70
Fair value of vested stock units	$ 15	$ 13	$ 11
Long-Term Incentive Plans | Deferred Compensation Stock Units
Stock based compensation, Nonvested shares weighted average grant date fair value
Granted weighted average grant date fair value	$ 41.31	$ 35.96
Shares issued and granted under stock compensation plans
Vested number of shares, unissued	7,000
Long-Term Incentive Plans | Deferred Compensation Stock Units | Maximum
Stock based compensation, Nonvested shares weighted average grant date fair value
Fair value of vested stock units	$ 1	$ 1
Shares issued and granted under stock compensation plans
Vested number of shares, unissued, fair value	$ 1
Non-Employee Directors' Plan
Shares issued and granted under stock compensation plans
Shares issued	13,000	15,000	14,200

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Supplemental Cash Flow Disclosures (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($) shares	Dec. 31, 2015 USD ($) shares	Dec. 31, 2014 USD ($) shares	Jun. 30, 2013 USD ($)
Supplemental cash flow disclosures
Interest paid	$ 113	$ 81	$ 55
Income taxes paid, net of refunds received	(11)	59	33
Letters of credit outstanding	2
Other assets and deferred charges	405	172
Supplemental cash flows, stock based compensation
Cash receipts upon exercise of stock options	12	7	5
Cash disbursements for payments of taxes	(6)	(5)	(4)
Net cash receipts from exercise of stock options and vesting of other stock awards	$ 6	$ 2	$ 1
Auction 901 Mobility Funds
Supplemental cash flow disclosures
FCC auction date	Sep. 27, 2012
FCC auction amount received	$ 35
FCC auction number of states won	10
Letters of credit outstanding	$ 2			$ 17
Other assets and deferred charges	2
Maximum | Auction 901 Mobility Funds
Supplemental cash flow disclosures
FCC auction amount	300
FCC auction amount awarded	$ 40
Common Shares
Supplemental cash flows, stock based compensation
Shares withheld | shares	308,010	228,011	163,355
Aggregate value of shares withheld	$ 13	$ 8	$ 7

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Certain Relationships and Related Transactions (Details) $ in Millions		1 Months Ended	12 Months Ended
	Sep. 10, 2014 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013
Certain relationships and related transactions
Billings to U.S. Cellular from TDS			$ 94	$ 96	$ 91
Cash received from divestitures and exchanges			21	317	$ 180
Tower sale
Certain relationships and related transactions
Number of towers		595			595
Cash received from divestitures and exchanges		$ 159
Sidley Austin LLP
Certain relationships and related transactions
Legal expense			$ 6	9	$ 11
Description of related transaction			The following persons are partners of Sidley Austin LLP, the principal law firm of U.S. Cellular and its subsidiaries: Walter C.D. Carlson, a director of U.S. Cellular, a director and non-executive Chairman of the Board of Directors of TDS and a trustee and beneficiary of a voting trust that controls TDS; William S. DeCarlo, the General Counsel of TDS and an Assistant Secretary of TDS and certain subsidiaries of TDS; and Stephen P. Fitzell, the General Counsel of U.S. Cellular and TDS Telecommunications Corporation and an Assistant Secretary of U.S. Cellular and certain other subsidiaries of TDS. Walter C.D. Carlson does not provide legal services to TDS, U.S. Cellular or their subsidiaries. U.S. Cellular and its subsidiaries incurred legal costs from Sidley Austin LLP of $6 million in 2016, $9 million in 2015 and $11 million in 2014.
Airadigm Communications, Inc.
Certain relationships and related transactions
Description of related transaction			In December 2013, TDS initially proposed to have Airadigm sell to U.S. Cellular the FCC spectrum licenses, towers and customers in certain Airadigm markets.  Because TDS owns 100% of the common stock of Airadigm and, at the time of the transaction, approximately 84% of the common stock of U.S. Cellular, this proposal was a related party transaction.  Accordingly, the U.S. Cellular Board of Directors formed a Special Committee comprised entirely of independent and disinterested directors with exclusive authority to consider, negotiate and, if appropriate, approve any such transaction with Airadigm without any further involvement of the full board.  The U.S. Cellular Special Committee engaged independent financial advisors and legal counsel.  The transaction was negotiated between representatives of TDS and Airadigm, on the one hand, and the Special Committee and its representatives, on the other hand.  The U.S. Cellular Special Committee also received a fairness opinion from its independent financial advisor.  Following these events, the Special Committee approved a License Purchase and Customer Recommendation Agreement between U.S. Cellular and 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 $92 million in cash.  See Note 6 – Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements.
Purchase price	$ 92
TDS ownership percentage						100.00%
Airadigm Communications, Inc. | Tower sale
Certain relationships and related transactions
Description of related transaction			In December 2014, U.S. Cellular entered into an agreement to sell 595 towers outside of its core markets to a third party for $159 million. The sale of certain of the towers was completed in December 2014, and the sale of the remaining towers was completed in January 2015. See Note 6 – Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements. Of the 595 towers, six towers were acquired by U.S. Cellular from Airadigm for a total of $3 million. These six towers were included as part of the sale of towers by U.S. Cellular in order to avoid the need for two sets of transaction documents. The value of $3 million paid by U.S. Cellular to Airadigm for such six towers was determined using the same method of valuation that was used to value the towers owned by U.S. Cellular that were sold to the third party. The Audit Committee of the board of directors reviewed and evaluated this transaction between U.S. Cellular and Airadigm.
Number of towers purchased		6			6
Purchase price		$ 3
TDS
Certain relationships and related transactions
Description of related transaction			U.S. Cellular is billed for all services it receives from TDS, pursuant to the terms of various agreements between it and TDS. These billings are included in U.S. Cellular's Selling, general and administrative expenses. Some of these agreements were established at a time prior to U.S. Cellular's initial public offering when TDS owned more than 90% of U.S. Cellular's outstanding capital stock and may not reflect terms that would be obtainable from an unrelated third party through arms-length negotiations. Billings from TDS and certain of its subsidiaries to U.S. Cellular are based on expenses specifically identified to U.S. Cellular and on allocations of common expenses. Such allocations are based on the relationship of U.S. Cellular's assets, employees, investment in property, plant and equipment and expenses relative to all subsidiaries in the TDS consolidated group. Management believes the method TDS uses to allocate common expenses is reasonable and that all expenses and costs applicable to U.S. Cellular are reflected in its financial statements. Billings to U.S. Cellular from TDS totaled $94 million, $96 million and $91 million in 2016, 2015 and 2014, respectively.
Billings to U.S. Cellular from TDS			$ 94	$ 96	$ 91
TDS ownership percentage			83.00%