Equipment Installment Plans

3 Months Ended

Mar. 31, 2020

Note 4 Equipment Installment Plans

U.S. Cellular sells devices to customers under equipment installment plans 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 trading in the original device in good working condition and signing a new equipment installment contract.

The following table summarizes equipment installment plan receivables as of March 31, 2020 and December 31, 2019.



	March 31, 2020			December 31, 2019
(Dollars in millions)
Equipment installment plan receivables, gross	$	964		$	1,008
Allowance for credit losses	(90		)	(84		)
Equipment installment plan receivables, net	$	874		$	924

Net balance presented in the Consolidated Balance Sheet as:
Accounts receivable — Customers and agents (Current portion)	$	566		$	587
Other assets and deferred charges (Non-current portion)	308			337
Equipment installment plan receivables, net	$	874		$	924

U.S. Cellular uses various inputs, including internal data, information from 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, and the down payment requirement, if any. These credit classes are grouped into four credit categories: lowest risk, lower risk, slight risk and higher risk. A customer's assigned credit class is reviewed periodically and a change is made, if appropriate. An equipment installment plan billed amount is considered past due if not paid within 30 days. The balance and aging of the equipment installment plan receivables on a gross basis by credit category were as follows:



	March 31, 2020										December 31, 2019
	Lowest Risk		Lower Risk		Slight Risk		Higher Risk		Total		Lowest Risk		Lower Risk		Slight Risk		Higher Risk		Total
(Dollars in millions)
Unbilled	$	774	$	95	$	22	$	9	$	900	$	812	$	99	$	23	$	8	$	942
Billed — current	35		5		2		1		43		37		5		2		1		45
Billed — past due	11		6		3		1		21		11		6		3		1		21
Total	$	820	$	106	$	27	$	11	$	964	$	860	$	110	$	28	$	10	$	1,008

The balance of the equipment installment plan receivables as of March 31, 2020 on a gross basis by year of origination were as follows:



	2017		2018		2019		2020		Total
(Dollars in millions)
Lowest Risk	$	15	$	200	$	480	$	125	$	820
Lower Risk	1		19		67		19		106
Slight Risk	—		3		16		8		27
Higher Risk	—		1		6		4		11
Total	$	16	$	223	$	569	$	156	$	964

Activity for the three months ended March 31, 2020 and 2019, in the allowance for credit losses for equipment installment plan receivables was as follows:



	March 31, 2020			March 31, 2019
(Dollars in millions)
Allowance for credit losses, beginning of period	$	84		$	77
Bad debts expense	25			18
Write-offs, net of recoveries	(19		)	(18		)
Allowance for credit losses, end of period	$	90		$	77