U.S. Cellular Reports Third Quarter 2013 Results

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Nov 01, 2013, 08:07 ET

CHICAGO, Nov. 1, 2013 /PRNewswire/ -- As previously announced, U.S. Cellular will hold a teleconference Nov. 1, 2013 at 9:30 a.m. CDT. Listen to the live call via the Conference Calls page of teldta.com or uscellular.com.

United States Cellular Corporation [NYSE:USM] reported service revenues of $862.3 million for the third quarter of 2013, versus $1,036.4 million for the comparable period one year ago. Net income (loss) attributable to U.S. Cellular shareholders and related diluted earnings (loss) per share were $(9.9) million and $(0.12) respectively, for the third quarter of 2013, compared to $35.5 million and $0.42, respectively, in the comparable period one year ago.

"We have continued to execute on our strategies to improve U.S. Cellular's competitive position and financial foundation," said Kenneth R. Meyers, U.S. Cellular president and CEO. "We're close to bringing 4G LTE to nearly 90 percent of our customers, we have a new billing system in place, and we plan to expand our device portfolio with the launch of the Apple iPhone and iPad on November 8, supported by our recently introduced shared data plans for consumers and businesses. Regrettably, the billing system implementation impacted our ability to provide high-quality service to every customer for a period of time. However, we have made substantial progress in resolving the issues, and we expect the system to provide significant benefits over the long term.

"I believe we're positioned well to achieve improved customer growth in the future, with a fast 4G LTE network, a competitive selection of devices and plans, and effective distribution through our company- and agent-owned stores, uscellular.com, and our national retail partners.

"We have been successful in our sales of non-strategic spectrum, with deals signed or closed generating pre-tax cash proceeds of over $400 million."

2013 ESTIMATES

U.S. Cellular's estimates of full-year 2013 results are shown below. Such estimates represent U.S. Cellular's views as of the date of filing U.S. Cellular's Form 10-Q for the quarter ended September 30, 2013. Such forward‑looking statements should not be assumed to be current as of any future date. U.S. Cellular undertakes no duty to update such information, whether as a result of new information, future events or otherwise. There can be no assurance that final results will not differ materially from such estimated results.

	2013 Estimated Results (1)
	Core Markets (2)		Divestiture Markets (2)(3)		U.S. Cellular Consolidated (2)(3)
	Previous	Current	Previous	Current	Previous	Current
(Dollars in millions)
Service revenues	$3,475 - $3,575	$3,450 - $3,500	$140	Unchanged	$3,615-$3,715	$3,590-$3,640
Adjusted income before income taxes (4)	$560 - $660	Unchanged	$40	Unchanged	$600-$700	Unchanged
Capital expenditures	$730	Unchanged	$5	Unchanged	$735	Unchanged

(1)

These estimates are based on U.S. Cellular's current plans, which include an expansion of the multi-year deployment of 4G LTE technology; such expansion includes deployment on 700 MHz in additional markets as well as deployment on the 850 MHz band to provide additional capacity for future growth in data usage, enable potential future 4G LTE roaming, and support the sale of Apple products. The financial impacts of selling Apple products in 2013 consist of the following:

Increased Service revenues resulting from net incremental customers added and retained as a result of offering Apple products;
Decreased Adjusted income before income taxes as a result of net increases in costs, primarily loss on equipment sales as a result of offering Apple products; and
Increased Capital expenditures related to the deployment on the 850 MHz band to provide additional capacity for future growth in data usage, which includes capacity required to accommodate Apple products.

	These estimates also reflect the impacts of the deconsolidation of certain partnerships as of April 2013. These estimates do not include (i) the reported gain on sale of business and other exit costs, net (ii) the reported gain on investments, or (iii) the actual or expected gains from spectrum license divestitures. New developments or changing conditions (such as, but not limited to, regulatory developments, customer net growth, customer demand for data services or possible acquisitions, dispositions or exchanges) could affect U.S. Cellular's plans and, therefore, its 2013 estimated results.

(2)	The U.S. Cellular Consolidated amounts represent GAAP financial measures and include the results of both the Core Markets and the Divestiture Markets. The amounts for the Core Markets and Divestiture Markets represent non-GAAP financial measures. U.S. Cellular believes that the amounts for the Core Markets and Divestiture Markets may be useful to investors and other users of its financial information in evaluating the separate results for the Core Markets. Divestiture Markets are comprised of U.S. Cellular's Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets. Core Markets are comprised of all other markets in which U.S. Cellular conducts business including Peoria, Rockford and certain other areas in Illinois, and in Columbia, Joplin, Jefferson City and certain other areas in Missouri. Core Markets as defined also includes any other income or expenses due to U.S. Cellular's direct or indirect ownership interests in other spectrum in the Divestiture Markets which was not included in the sale and other retained assets from the Divestiture Markets.

(3)	These estimates reflect the Divestiture Transaction which closed on May 16, 2013.

(4)	Adjusted income before income taxes is a non-GAAP financial measure defined as Income before income taxes, adjusted for the items set forth in the reconciliation below. Adjusted income before income taxes excludes these items in order to show operating results on a more comparable basis from period to period. In addition, U.S. Cellular may also exclude other items from adjusted income before income taxes if such items help reflect operating results on a more comparable basis. U.S. Cellular does not intend to imply that any such amounts that are excluded are non-recurring, infrequent or unusual; such amounts may occur in the future. Adjusted income before income taxes is not a measure of financial performance under GAAP and should not be considered as an alternative to Income before income taxes as an indicator of the Company's operating performance or as an alternative to Cash flows from operating activities, determined in accordance with GAAP, as an indicator of cash flows or as a measure of liquidity. U.S. Cellular believes Adjusted income before income taxes is a useful measure of U.S. Cellular's operating results before significant recurring non-cash charges, discrete gains and losses and financing charges (Interest expense). The following tables provide a reconciliation of Income (loss) before income taxes to Adjusted income before income taxes for 2013 Estimated Results, nine months ended September 30, 2013 actual results, and 2012 actual results:

	2013 Estimated Results
	Core Markets (2)	Divestiture Markets (2)(3)		U.S. Cellular Consolidated (2)(3)
(Dollars in millions)
Income (loss) before income taxes	$315-$415	$35		$350-$450
Depreciation, amortization and accretion expense (5)	$540	$250		$790
(Gain) loss on sale of business and other exit costs, net	—	($245)		($245)
(Gain) loss from spectrum license divestitures	($325)	—		($325)
(Gain) loss on investments	($20)	—		($20)
Interest expense	$50	—		$50
Adjusted income before income taxes	$560-$660	$40		$600-$700


	U.S. Cellular Consolidated Actual Results
		Nine Months Ended September 30, 2013		Year Ended December 31, 2012


Income before income taxes		$	266	$	205
Depreciation, amortization and accretion expense (5)			593		609
(Gain) loss on sale of business and other exit costs, net			(244)		21
(Gain) loss from spectrum license divestitures			—		—
(Gain) loss on investments			(18)		4
Interest expense			33		42
Adjusted income before income taxes		$	630	$	881

(5)

The 2013 estimated amount for Depreciation, amortization and accretion expense in the Divestiture Markets includes approximately $171 million of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction. Actual results for the nine months ended September 30, 2013 and the year ended December 31, 2012 include $134 million and $20 million, respectively, of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction.

Conference Call Information
U.S. Cellular will hold a conference call on Nov. 1, 2013 at 9:30 a.m. CDT.

Access the live call on the Conference Calls page of uscellular.com or at http://www.videonewswire.com/event.asp?id=96657.
Access the call by phone at 877-407-8029 (US/Canada), no pass code required.

Before the call, certain financial and statistical information to be discussed during the call will be posted to the Conference Calls page of uscellular.com. The call will be archived on the Conference Calls page of uscellular.com.

About U.S. Cellular®
United States Cellular Corporation provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to 4.9 million customers in 23 states. The Chicago-based company had 6,000 full- and part-time associates as of September 30, 2013. At the end of the third quarter of 2013, Telephone and Data Systems, Inc. owned 84 percent of U.S. Cellular. For more information about U.S. Cellular, visit uscellular.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: impacts of any pending acquisition and divestiture transactions, including, but not limited to, the ability to obtain regulatory approvals, successfully complete the transaction and the financial impacts of such transaction; the ability of the company to successfully manage and grow its markets; the overall economy; competition; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the state and federal telecommunications regulatory environment; the value of assets and investments; adverse changes in the ratings afforded TDS and U.S. Cellular debt securities by accredited ratings organizations; industry consolidation; advances in telecommunications technology; uncertainty of access to the capital markets; pending and future litigation; changes in income tax rates, laws, regulations or rulings; acquisitions/divestitures of properties and/or licenses; changes in customer growth rates, average monthly revenue per user, churn rates, roaming revenue and terms, the availability of handset devices, or the mix of products and services offered by U.S. Cellular. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by U.S. Cellular to furnish this press release to the Securities and Exchange Commission ("SEC"), which are incorporated by reference herein.

For more information about U.S. Cellular, visit uscellular.com.

United States Cellular Corporation
Total Markets Summary Operating Data (Unaudited)

Quarter Ended			9/30/2013		6/30/2013		3/31/2013		12/31/2012		9/30/2012
Retail Customers
	Postpaid
		Total at end of period		4,343,000		4,412,000		5,060,000		5,134,000		5,175,000
		Gross additions		165,000		165,000		191,000		241,000		230,000
		Net additions (losses)		(60,000)		(120,000)		(74,000)		(41,000)		(38,000)
		ARPU (1)	$	54.64	$	54.18	$	54.85	$	54.56	$	54.34
		Churn rate (2)		1.7%		2.0%		1.7%		1.8%		1.7%
		Smartphone penetration (3) (4)		47.1%		45.5%		43.5%		41.8%		38.6%
	Prepaid
		Total at end of period		370,000		381,000		446,000		423,000		386,000
		Gross additions		65,000		77,000		104,000		107,000		120,000
		Net additions (losses)		(11,000)		(7,000)		23,000		37,000		57,000
		ARPU (1)	$	28.72	$	31.69	$	33.31	$	33.56	$	32.97
		Churn rate (2)		6.8%		6.8%		6.2%		5.8%		5.9%
Total customers at end of period				4,875,000		4,968,000		5,736,000		5,798,000		5,808,000
Billed ARPU (1)			$	50.92	$	50.60	$	51.13	$	50.94	$	50.83
Service revenue ARPU (1)			$	58.36	$	57.45	$	57.63	$	58.00	$	59.57
Smartphones sold as a percent of total devices sold				65.2%		66.0%		61.7%		62.9%		53.0%
Total population
		Consolidated markets (5)		84,025,000		84,025,000		93,943,000		93,244,000		92,996,000
		Consolidated operating markets (5)		31,822,000		31,822,000		47,440,000		46,966,000		46,966,000
Market penetration at end of period
		Consolidated markets (6)		5.8%		5.9%		6.1%		6.2%		6.2%
		Consolidated operating markets (6)		15.3%		15.6%		12.1%		12.3%		12.4%
Capital expenditures (000s)			$	242,500	$	168,500	$	118,400	$	253,100	$	199,100
Total cell sites in service				7,687		7,748		8,027		8,028		7,984
Owned towers in service				4,422		4,411		4,411		4,408		4,377

United States Cellular Corporation
Core Markets Summary Operating Data (Unaudited)
Excludes NY1 & NY2

Quarter Ended			9/30/2013		6/30/2013		3/31/2013		12/31/2012		9/30/2012
Retail Customers
	Postpaid
		Total at end of period		4,343,000		4,412,000		4,463,000		4,496,000		4,515,000
		Gross additions		165,000		165,000		176,000		208,000		196,000
		Net additions (losses)		(60,000)		(53,000)		(33,000)		(19,000)		(23,000)
		ARPU (1)	$	54.64	$	54.44	$	54.21	$	53.91	$	53.67
		Churn rate (2)		1.7%		1.6%		1.6%		1.7%		1.6%
		Smartphone penetration (3) (4)		47.1%		45.5%		43.0%		41.1%		37.8%
	Prepaid
		Total at end of period		370,000		381,000		373,000		342,000		305,000
		Gross additions		65,000		76,000		91,000		87,000		99,000
		Net additions (losses)		(11,000)		8,000		31,000		37,000		59,000
		ARPU (1)	$	28.72	$	31.65	$	32.92	$	33.21	$	32.97
		Churn rate (2)		6.8%		6.0%		5.6%		5.1%		4.8%
Total customers at end of period				4,875,000		4,968,000		5,005,000		5,022,000		5,012,000
Billed ARPU (1)			$	50.92	$	50.98	$	50.93	$	50.71	$	50.59
Service revenue ARPU (1)			$	58.36	$	57.88	$	57.14	$	57.67	$	59.34
Smartphones sold as a percent of total devices sold				65.2%		66.1%		62.1%		62.9%		53.0%
Total population
		Consolidated markets (5)		84,025,000		84,025,000		84,025,000		83,384,000		82,595,000
		Consolidated operating markets (5)		31,822,000		31,822,000		31,822,000		31,445,000		31,110,000
Market penetration at end of period
		Consolidated markets (6)		5.8%		5.9%		6.0%		6.0%		6.1%
		Consolidated operating markets (6)		15.3%		15.6%		15.7%		16.0%		16.1%
Capital expenditures (000s)			$	239,300	$	171,200	$	113,300	$	241,400	$	184,100
Total cell sites in service				6,127		6,113		6,113		6,130		6,089
Owned towers in service				3,859		3,844		3,846		3,847		3,818

(1)		ARPU metrics are calculated by dividing a revenue base by an average number of customers by the number of months in the period. These revenue bases and customer populations are shown below:
		a.	Postpaid ARPU consists of total postpaid service revenues and postpaid customers.
		b.	Prepaid ARPU consists of total prepaid service revenues and prepaid customers.
		c.	Billed ARPU consists of total postpaid, prepaid, and reseller service revenues and postpaid, prepaid and reseller customers.
		d.	Service revenue ARPU consists of total retail service revenues, inbound roaming and other service revenues and postpaid, prepaid and reseller customers.
(2)		Churn metrics represent the percentage of the postpaid or prepaid customers that disconnect service each month. These metrics represent the average monthly postpaid or prepaid churn rate for each respective period.
(3)		Smartphones represent wireless devices which run on an Android^TM, BlackBerry® or Windows Mobile® operating system, excluding tablets.
(4)		Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.
(5)		Used only to calculate market penetration of consolidated and core markets and consolidated and core operating markets, respectively. See footnote (6) below.
(6)		Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated and core markets and consolidated and core operating markets, respectively, as estimated by Claritas®.

		United States Cellular Corporation
		Consolidated Statement of Operations Highlights
		Three Months Ended September 30,
		(Unaudited, dollars and shares in thousands, except per share amounts)
							Increase (Decrease)
			2013		2012		Amount		Percent
Operating revenues
	Service		$	862,330	$	1,036,370	$	(174,040)	(17%)
	Equipment sales			76,906		103,987		(27,081)	(26%)
		Total operating revenues		939,236		1,140,357		(201,121)	(18%)

Operating expenses
	System operations (excluding Depreciation, amortization and accretion reported below)			177,431		249,245		(71,814)	(29%)
	Cost of equipment sold			193,392		248,029		(54,637)	(22%)
	Selling, general and administrative			410,468		438,526		(28,058)	(6%)
	Depreciation, amortization and accretion			200,985		145,151		55,834	38%
	Loss on asset disposals, net			1,701		11,262		(9,561)	(85%)
	(Gain) loss on sale of business and other exit costs, net			(1,534)		65		(1,599)	>(100%)
		Total operating expenses		982,443		1,092,278		(109,835)	(10%)

Operating income (loss)				(43,207)		48,079		(91,286)	>(100%)

Investment and other income (expense)
	Equity in earnings of unconsolidated entities			37,360		24,816		12,544	51%
	Interest and dividend income			1,095		935		160	17%
	Interest expense			(11,329)		(9,501)		(1,828)	(19%)
	Other, net			47		200		(153)	(77%)
		Total investment and other income (expense)		27,173		16,450		10,723	65%

Income (loss) before income taxes				(16,034)		64,529		(80,563)	>(100%)
	Income tax expense (benefit)			(6,433)		22,389		(28,822)	>(100%)

Net income (loss)				(9,601)		42,140		(51,741)	>(100%)
	Less: Net income attributable to noncontrolling interests, net of tax			258		6,689		(6,431)	(96%)
Net income (loss) attributable to U.S. Cellular shareholders			$	(9,859)	$	35,451	$	(45,310)	>(100%)

Basic weighted average shares outstanding				84,005		84,737		(732)	(1%)
Basic earnings (loss) per share attributable to U.S. Cellular shareholders			$	(0.12)	$	0.42	$	(0.54)	>(100%)

Diluted weighted average shares outstanding				84,005		85,348		(1,343)	(2%)
Diluted earnings (loss) per share attributable to U.S. Cellular shareholders			$	(0.12)	$	0.42	$	(0.54)	>(100%)

United States Cellular Corporation
Consolidated Statement of Operations Highlights
Nine Months Ended September 30,
(Unaudited, dollars and shares in thousands, except per share amounts)
							Increase (Decrease)
			2013		2012		Amount		Percent
Operating revenues
	Service		$	2,769,645	$	3,089,932	$	(320,287)	(10%)
	Equipment sales			246,467		246,946		(479)	—
		Total operating revenues		3,016,112		3,336,878		(320,766)	(10%)

Operating expenses
	System operations (excluding Depreciation, amortization and accretion reported below)			585,997		725,636		(139,639)	(19%)
	Cost of equipment sold			652,153		626,765		25,388	4%
	Selling, general and administrative			1,234,675		1,315,823		(81,148)	(6%)
	Depreciation, amortization and accretion			593,410		439,391		154,019	35%
	Loss on asset disposals, net			16,153		15,967		186	1%
	(Gain) loss on sale of business and other exit costs, net			(243,627)		(4,148)		(239,479)	>100%
		Total operating expenses		2,838,761		3,119,434		(280,673)	(9%)

Operating income				177,351		217,444		(40,093)	(18%)

Investment and other income (expense)
	Equity in earnings of unconsolidated entities			99,797		71,584		28,213	39%
	Interest and dividend income			2,967		2,823		144	5%
	Gain (loss) on investments			18,527		(3,728)		22,255	>(100%)
	Interest expense			(32,393)		(35,272)		2,879	8%
	Other, net			153		173		(20)	(12%)
		Total investment and other income		89,051		35,580		53,471	>100%

Income before income taxes				266,402		253,024		13,378	5%
	Income tax expense			121,618		82,624		38,994	47%

Net income				144,784		170,400		(25,616)	(15%)
	Less: Net income attributable to noncontrolling interests, net of tax			6,338		19,772		(13,434)	(68%)
Net income attributable to U.S. Cellular shareholders			$	138,446	$	150,628	$	(12,182)	(8%)

Basic weighted average shares outstanding				83,897		84,671		(774)	(1%)
Basic earnings per share attributable to U.S. Cellular shareholders			$	1.65	$	1.78	$	(0.13)	(7%)

Diluted weighted average shares outstanding				84,676		85,261		(585)	(1%)
Diluted earnings per share attributable to U.S. Cellular shareholders			$	1.64	$	1.77	$	(0.13)	(7%)

United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)

ASSETS


		September 30,		December 31,
		2013		2012
Current assets
	Cash and cash equivalents	$	183,101	$	378,358
	Short-term investments		45,162		100,676
	Accounts receivable from customers and others		560,915		445,220
	Inventory		142,560		155,886
	Income taxes receivable		—		1,612
	Prepaid expenses		71,047		62,560
	Net deferred income tax asset		54,475		35,419
	Other current assets		19,051		16,745
			1,076,311		1,196,476

Assets held for sale			78,413		216,763

Investments
	Licenses		1,397,888		1,456,794
	Goodwill		387,360		421,743
	Customer lists, net		—		102
	Investments in unconsolidated entities		309,481		144,531
	Long-term investments		40,099		50,305
			2,134,828		2,073,475

Property, plant and equipment
	In service and under construction		7,571,429		7,478,428
	Less: Accumulated depreciation		4,696,836		4,455,840
			2,874,593		3,022,588

Other assets and deferred charges			95,709		78,148

Total assets		$	6,259,854	$	6,587,450

United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited, dollars in thousands)

LIABILITIES AND EQUITY


			September 30,		December 31,
			2013		2012
Current liabilities
	Current portion of long-term debt		$	102	$	92
	Accounts payable
		Affiliated		11,069		10,725
		Trade		334,047		310,936
	Customer deposits and deferred revenues			212,733		192,113
	Accrued taxes			102,510		35,834
	Accrued compensation			58,282		90,418
	Other current liabilities			133,637		114,881
				852,380		754,999

Liabilities held for sale				471		19,594

Deferred liabilities and credits
	Net deferred income tax liability			829,247		849,818
	Other deferred liabilities and credits			294,675		288,441

Long-term debt				878,939		878,858

Noncontrolling interests with redemption features				540		493

Equity
U.S. Cellular shareholders' equity
	Series A Common and Common Shares, par value $1 per share			88,074		88,074
	Additional paid-in capital			1,421,261		1,412,453
	Treasury shares			(168,454)		(165,724)
	Retained earnings			2,042,254		2,399,052
		Total U.S. Cellular shareholders' equity		3,383,135		3,733,855

Noncontrolling interests				20,467		61,392

	Total equity			3,403,602		3,795,247

Total liabilities and equity			$	6,259,854	$	6,587,450

United States Cellular Corporation Schedule of Cash and Cash Equivalents and Investments (Unaudited, dollars in thousands)

The following table presents U.S. Cellular's cash and cash equivalents and investments at September 30, 2013 and December 31, 2012.

		September 30,		December 31,
		2013		2012

Cash and cash equivalents		$	183,101	$	378,358

Amounts included in short-term investments (1)(2)
	U.S. Treasury Notes		45,162		100,676

Amounts included in long-term investments (1)(3)
	U.S. Treasury Notes		40,099		50,305

Total cash and cash equivalents and investments		$	268,362	$	529,339

(1) Designated as held-to-maturity investments and are recorded at amortized cost on the Consolidated Balance Sheet.
(2) Maturities are less than twelve months from the respective balance sheet dates.
(3) At September 30, 2013, maturities range between 14 and 15 months.

United States Cellular Corporation
Consolidated Statement of Cash Flows
Nine Months Ended September 30,
(Unaudited, dollars in thousands)

			2013		2012
Cash flows from operating activities
	Net income		$	144,784	$	170,400
	Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
		Depreciation, amortization and accretion		593,410		439,391
		Bad debts expense		52,184		51,293
		Stock-based compensation expense		11,143		15,924
		Deferred income taxes, net		(38,515)		52,865
		Equity in earnings of unconsolidated entities		(99,797)		(71,584)
		Distributions from unconsolidated entities		49,612		45,211
		Loss on asset disposals, net		16,153		15,967
		(Gain) loss on sale of business and other exit costs, net		(243,627)		(4,148)
		(Gain) loss on investments		(18,527)		3,728
		Noncash interest expense		792		1,331
		Other operating activities		590		863
	Changes in assets and liabilities from operations
		Accounts receivable		(214,114)		(67,302)
		Inventory		13,236		(69,423)
		Accounts payable - trade		32,202		(28,902)
		Accounts payable - affiliate		345		(4,785)
		Customer deposits and deferred revenues		22,538		26,687
		Accrued taxes		45,780		99,556
		Accrued interest		9,385		9,508
		Other assets and liabilities		(81,341)		(77,821)
				296,233		608,759

Cash flows from investing activities
	Cash used for additions to property, plant and equipment			(522,180)		(611,431)
	Cash paid for licenses			(16,540)		(57,957)
	Cash received from divestitures			484,300		49,932
	Cash paid for investments			—		(45,000)
	Cash received for investments			65,000		50,000
	Other investing activities			583		(5,030)
				11,163		(619,486)

Cash flows from financing activities
	Repayment of long-term debt			(393)		(343)
	Common shares reissued for benefit plans, net of tax payments			2,840		(2,299)
	Common shares repurchased			(18,544)		—
	Dividends paid			(482,270)		—
	Distributions to noncontrolling interests			(3,447)		(1,491)
	Other financing activities			(839)		284
				(502,653)		(3,849)

Net decrease in cash and cash equivalents				(195,257)		(14,576)

Cash and cash equivalents
	Beginning of period			378,358		424,155
	End of period		$	183,101	$	409,579

United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited, dollars in thousands)

			Three Months Ended				Nine Months Ended
			September 30,				September 30,
				2013		2012		2013		2012

	Cash flows from operating activities		$	(152,352)	$	196,522	$	296,233	$	608,759
	Deduct:
	Cash used for additions to property, plant and equipment			199,023		181,206		522,180		611,431
		Free cash flow (1)	$	(351,375)	$	15,316	$	(225,947)	$	(2,672)

(1)	Free cash flow is defined as Cash flows from operating activities less Cash used for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure. U.S. Cellular believes that free cash flow as reported by U.S. Cellular may be useful to investors and other users of its financial information in evaluating the amount of cash generated by business operations, after consideration of capital expenditures.