UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.            )

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Filed by a Party other than the Registrant ¨ 

Check the appropriate box:

¨

Preliminary Proxy Statement

¨

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

¨

Definitive Proxy Statement

ý

Definitive Additional Materials

¨

Soliciting Material Pursuant to §240.14a-12

 

Telephone and Data Systems, Inc.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, If other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

ý

No fee required.

¨

Fee computed on table below per Exchange Act Rules 14a 6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

(2)

Aggregate number of securities to which transaction applies:

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0 11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

(4)

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(5)

Total fee paid:

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

(2)

Form, Schedule or Registration Statement No.:

 

(3)

Filing Party:

 

(4)

Date Filed:

 

 


 

 

 

 

EXPLANATORY NOTE

 

The purpose of this Schedule 14A is to file a press release issued by Telephone and Data Systems, Inc. (“TDS”) on May 3, 2013 relating to earnings for the first quarter of 2013. 

 

 

IMPORTANT INFORMATION:  TDS and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from the shareholders of TDS in connection with TDS 2013 annual meeting of shareholders.  Information regarding TDS directors and executive officers and other participants that may be soliciting proxies on behalf of the TDS board of directors and their respective interests in TDS by security holdings or otherwise is set forth TDS’s definitive proxy statement relating to its 2013 annual meeting, as filed with the Securities and Exchange Commission ( “SEC”) on April 19, 2013.  The 2013 proxy statement, other solicitation material and other reports that TDS files with the SEC, when available, can be obtained free of charge at the SEC’s web site at www.sec.gov  or from TDS as provide on its website at www.teldta.com.  TDS SHAREHOLDERS ARE ADVISED TO READ CAREFULLY THE PROXY STATEMENT AND OTHER SOLICITATION MATERIAL FILED BY TDS IN CONNECTION WITH THE TDS 2013 ANNUAL MEETING OF SHAREHOLDERS BEFORE MAKING ANY VOTING DECISION BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION RELATING TO THE ELECTION OF DIRECTORS OF TDS.

 


 

 

Exhibit 99.l   NEWS RELEASE                                                                                                                                                                                                                            

 

 

As previously announced, TDS will hold a teleconference May 3, 2013 at 9:30 a.m. CDT. Interested parties may listen to the call live by accessing the Investor Relations page of www.teldta.com  

 

Contact:

Jane W. McCahon, Vice President, Corporate Relations and Corporate Secretary

(312) 592-5379; jane.mccahon@teldta.com 

 

 

Julie D. Mathews, Manager, Investor Relations

(312) 592-5341; julie.mathews@teldta.com 

 

 

FOR RELEASE: IMMEDIATE

 

TDS REPORTS FIRST QUARTER 2013 RESULTS

U.S. Cellular to offer Apple products later this year; updates 2013 guidance

 

CHICAGO – May 3, 2013Telephone and Data Systems, Inc. [NYSE:TDS] reported operating revenues of $1,308.6 million for the first quarter of 2013, versus $1,305.8 million for the comparable period one year ago. Net income attributable to TDS shareholders and related diluted earnings per share were $1.4 million and $0.01 respectively, for the first quarter of 2013, compared to $52.3 million and $0.48, respectively, in the comparable period one year ago.   

 

As previously announced on Nov. 7, 2012, U.S. Cellular reached a definitive agreement to sell its Chicago, St. Louis, central Illinois and three other markets (the “Divestiture Markets”) to subsidiaries of Sprint Nextel Corporation [NYSE:S] for $480 million (the “Divestiture Transaction”).  The transaction has been approved by the FCC and is expected to close in the second quarter 2013. 

 

“U.S. Cellular and TDS Telecom moved forward aggressively with their strategic initiatives, though higher smartphone subsidies, reductions in regulatory support, and investment spending continued to impact profitability,” said LeRoy T. Carlson, Jr., TDS president and CEO.

 

“U.S. Cellular further expanded customer access to 4G LTE speeds and devices in its core markets, driving growth in smartphone penetration, data use and postpaid ARPU. Through its distribution with Walmart, U.S. Cellular increased net prepaid customer additions. Postpaid gross customer additions in core markets were flat, and elevated churn resulted in a net customer loss. To drive customer growth and reduce churn, U.S. Cellular will begin offering Apple products later this year, adding to its strong portfolio of iconic devices, like the recently launched 4G LTE Samsung Galaxy S® 4. U.S. Cellular continued its efforts to expand distribution in April by offering postpaid service through Sam’s Club locations in 14 states, and the company is aggressively targeting key segments like small and medium businesses.

 

“TDS Telecom continued to build its ILEC residential customer base with TDS TV® and faster broadband speeds, and increased average revenue per ILEC residential connection. The company’s residential strategy is to increase broadband and video penetration through service bundling. TDS Telecom maintained strong sales of its commercial managedIP products, and plans to continue to expand the portfolio. Hosted and managed services revenues were driven primarily by a 2012 acquisition, as the HMS business continues to integrate its offerings to provide comprehensive, end-to-end IT solutions to mid-market customers.  In February, TDS Telecom announced an agreement to acquire cable company Baja Broadband, which will expand the company’s customer base and provide opportunities for future growth.”

 

1

 

 

 


 

 

 

2013 ESTIMATES

 

Estimates of full-year 2013 results for U.S. Cellular, TDS Telecom and TDS are shown below.  Such estimates represent management’s view as of the date of filing of TDS’ Form 10-Q for the quarter ended March 31, 2013.  Such forward-looking statements should not be assumed to be current as of any future date.  TDS 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)

 

 

 

U.S. Cellular (2)

 

TDS Telecom (3)

 

TDS (2)(3)(7)

 

 

 

Previous

Current

 

Previous

Current

 

Previous

Current

(Dollars in millions)

 

 

 

 

 

 

 

 

 

Adjusted operating

  revenues (4)

 

$3,765-$3,885

$3,620-$3,740

 

Unchanged

 $850-$900  

 

$4,660-$4,830

$4,515-$4,685

Adjusted income before

  income taxes (5) (8)

 

$780-$900

$595-$715

 

Unchanged

$220-$250

 

$995-$1,145

$810-$960

Capital expenditures

 

 Approx. $600

 Approx. $735

 

Unchanged

 Approx. $155

 

 Approx. $765

 Approx. $900

 

(1)     These estimates are based on TDS’ current plans, which include an expansion of the multi-year deployment of 4G LTE technology which commenced in 2011; such expansion includes deployment 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.  These estimates also reflect the estimated impacts of selling Apple products and the deconsolidation of certain partnerships that will be accounted for as equity method investments effective April 3, 2013 at U.S. Cellular, and a multi-year deployment of IPTV which commenced in 2011 at TDS Telecom.  New developments or changing conditions (such as, but not limited to, regulatory developments, customer net growth, customer demand for data services, costs to deploy, agreements for content or franchises, or possible acquisitions, dispositions or exchanges) could affect TDS’ plans and, therefore, its 2013 estimated results.

 

(2)     These estimates assume the Divestiture Transaction closes in the second quarter of 2013.  Actual effects could vary significantly from these estimates as a result of a change in the expected timing of the Divestiture Transaction or changes in other terms and conditions of the sale.

 

These estimates reflect U.S. Cellular’s consolidated results for 2013.  Estimated results reflecting U.S. Cellular’s Divestiture Markets and Core Markets are shown in the table below:

 

 

 

2013 Estimated Results

 

 

U.S. Cellular Core

Markets (6)

U.S. Cellular Divestiture

Markets (6)

U.S. Cellular

Consolidated (6)

 

 

Previous

Current

Previous

Current

Previous

Current

(Dollars in millions)

 

 

 

 

 

 

Adjusted operating

  revenues (4)

 $3,600-$3,700  

 $3,475-$3,575  

 $165-$185  

 $145-$165  

 $3,765-$3,885  

 $3,620-$3,740  

Adjusted income before

  income taxes (5) (8)

 $765-$865  

 $560-$660  

 $15-$35  

 $35-$55  

 $780-$900  

 $595-$715  

Capital expenditures

 Approx. $600

 Approx. $730

 —  

$5

 Approx. $600

 Approx. $735

 

(3)     These estimates do not reflect the effects of the acquisition of Baja.

 

(4)     Adjusted operating revenues is a non-GAAP financial measure defined as Operating revenues excluding U.S. Cellular Equipment sales revenues. U.S. Cellular Equipment sales revenues are excluded from Adjusted operating revenues since U.S. Cellular equipment is generally sold at a net loss, and such net loss that results from U.S. Cellular Equipment sales revenues less U.S. Cellular Cost of equipment sold is viewed as a cost of earning service revenues for purposes of assessing business results.  For purposes of developing this guidance, TDS does not calculate an estimate of U.S. Cellular Equipment sales revenues.  TDS believes this measure provides useful information to investors regarding TDS’ results of operations. Adjusted operating revenues is not a measure of financial performance under GAAP and should not be considered as an alternative to Operating revenues as an indicator of the Company’s operating performance.

 

2

 

 

 


 

 

 

(5)     Adjusted income before income taxes is a non-GAAP financial measure defined as Income before income taxes, adjusted for: Depreciation, amortization and accretion, net Gain or loss on sale of business and other exit costs (if any), and Interest expense. 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.  TDS believes Adjusted income before income taxes is a meaningful measure of TDS’ operating results before significant recurring non-cash charges, gains and losses and financing charges (Interest expense) in order to show operating results on a more comparable basis from period to period.  TDS does not intend to imply that any of such amounts that are excluded are non-recurring, infrequent or unusual; such amounts may occur in the future. The following tables provide a reconciliation of Income (loss) before income taxes to Adjusted income before income taxes for 2013 Estimated Results and 2012 actual results:

 

 

 

 

 

2013 Current Estimated Results

 

 

 

 

U.S. Cellular Core

Markets (6)

 

U.S. Cellular Divestiture Markets (2)(6)

 

U.S. Cellular Consolidated (6)

 

TDS

Telecom

 

TDS (7)

(Dollars in millions)

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes (8)

 

($30)-$70

 

($215)-($195)

 

($245)-($125)

 

$25-$55

 

($285)-($135)

Depreciation, amortization and

  accretion expense (9)

 

Approx. $540

 

Approx. $250

 

Approx. $790

 

Approx. $195

 

Approx. $990

Interest expense

 

Approx. $50

 

 

Approx. $50

 

 

Approx. $105

Adjusted income before

  income taxes

 

$560-$660

 

$35-$55

 

$595-$715

 

$220-$250

 

$810-$960

 

 

 

Actual Results

 

 

Three Months Ended March 31, 2013

 

Year Ended December 31, 2012

 

 

 

U.S. Cellular Consolidated (6)

 

 

TDS

Telecom

 

 

TDS (7)

 

 

U.S. Cellular Consolidated (6)

 

 

TDS

Telecom

 

 

TDS (7)

(Dollars in millions)

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

$

 18  

 

$

 9  

 

$

 11  

 

$

 205  

 

$

 45  

 

$

 196  

Depreciation, amortization and

  accretion expense (9)

 

 190  

 

 

 50  

 

 

 242  

 

 

 609  

 

 

 193  

 

 

 814  

(Gain) loss on sale of business

  and other exit costs, net

 

 7  

 

 

 —  

 

 

 7  

 

 

 21  

 

 

 —  

 

 

 21  

Interest expense

  (Capitalized interest)

 

 11  

 

 

 (1) 

 

 

 25  

 

 

 42  

 

 

 (1) 

 

 

 87  

Adjusted income before

  income taxes

$

 226  

 

$

 58  

 

$

 285  

 

$

 877  

 

$

 237  

 

$

 1,118  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6)

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 Core Markets and Divestiture Markets represent non-GAAP financial measures.  TDS 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7)

The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments, all of which are not presented above.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8)

This amount does not include any estimate for (Gain) loss on sale of business and other exit costs, net, as the timing of such amount is not readily estimable.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9)

The 2013 estimated amounts for depreciation, amortization and accretion expense in the U.S. Cellular Divestiture Markets include approximately $185 million of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction.  Actual results for the three months ended March 31, 2013 and the year ended December 31, 2012 include $38 million and $20 million, respectively, of incremental accelerated depreciation, amortization and accretion resulting from the Divestiture Transaction.

 

3

 

 

 


 

 

 

Conference Call Information

TDS will hold a conference call on May 3, 2013 at 9:30 a.m. CDT.

·         Access the live call on the Investor Relations page of www.teldta.com  or at

       http://www.media-server.com/m/acs/1b33881ae5323e924285a4a1458e63c1.        

·         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 Investor Relations page of www.teldta.com. The call will be archived on the Conference Calls page of www.teldta.com

 

About TDS

Telephone and Data Systems, Inc. (TDS), a Fortune 500® company, provides wireless; broadband, TV and voice; and hosted and managed services to approximately 7 million customers nationwide through its business units, U.S. Cellular, TDS Telecom and TDS Hosted & Managed Services. Founded in 1969 and headquartered in Chicago, TDS employed 12,300 people as of March 31, 2013.

 

Visit www.teldta.com  for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.

  

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 the 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 access to and pricing of unbundled network elements; 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 and TDS Telecom. Investors are encouraged to consider these and other risks and uncertainties that are discussed in the Form 8-K Current Report used by TDS to furnish this press release to the Securities and Exchange Commission (“SEC”), which are incorporated by reference herein.    

 

For more information about TDS and its subsidiaries, visit:

 

TDS: www.teldta.com                                                                       

U.S. Cellular: www.uscellular.com 

TDS Telecom: www.tdstelecom.com 

 

4

 

 

 


 

 

 

United States Cellular Corporation

Total Markets Summary Operating Data (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

3/31/2013

 

12/31/2012

 

9/30/2012

 

6/30/2012

 

3/31/2012

Retail Customers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Postpaid

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total at end of period (1)

 

 5,060,000  

 

 

 5,134,000  

 

 

 5,175,000  

 

 

 5,213,000  

 

 

 5,261,000  

 

 

Gross additions

 

 191,000  

 

 

 241,000  

 

 

 230,000  

 

 

 199,000  

 

 

 210,000  

 

 

Net additions (losses)

 

 (74,000) 

 

 

 (41,000) 

 

 

 (38,000) 

 

 

 (48,000) 

 

 

 (38,000) 

 

 

ARPU (2)

$

 54.85  

 

$

 54.56  

 

$

 54.34  

 

$

 54.42  

 

$

 54.00  

 

 

Churn rate (3)

 

1.7%

 

 

1.8%

 

 

1.7%

 

 

1.6%

 

 

1.6%

 

 

Smartphone penetration (4) (5)

 

43.5%

 

 

41.8%

 

 

38.6%

 

 

36.8%

 

 

34.4%

 

Prepaid

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total at end of period

 

 446,000  

 

 

 423,000  

 

 

 386,000  

 

 

 329,000  

 

 

 309,000  

 

 

Gross additions

 

 104,000  

 

 

 107,000  

 

 

 120,000  

 

 

 78,000  

 

 

 63,000  

 

 

Net additions (losses)

 

 23,000  

 

 

 37,000  

 

 

 57,000  

 

 

 20,000  

 

 

 4,000  

 

 

ARPU (2)

$

 33.31  

 

$

 33.56  

 

$

 32.97  

 

$

 33.59  

 

$

 33.17  

 

 

Churn rate (3)

 

6.2%

 

 

5.8%

 

 

5.9%

 

 

6.2%

 

 

6.4%

Total customers at end of period (1)

 

 5,736,000  

 

 

 5,798,000  

 

 

 5,808,000  

 

 

 5,799,000  

 

 

 5,837,000  

Billed ARPU (2)

$

 51.13  

 

$

 50.94  

 

$

 50.83  

 

$

 50.99  

 

$

 50.52  

Service revenue ARPU (2)

$

 57.63  

 

$

 58.00  

 

$

 59.57  

 

$

 59.05  

 

$

 58.21  

Smartphones sold as a percent of total

  devices sold

 

61.7%

 

 

62.9%

 

 

53.0%

 

 

51.9%

 

 

54.1%

Total population

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated markets (6)

 

 93,943,000  

 

 

 93,244,000  

 

 

 92,996,000  

 

 

 92,684,000  

 

 

 92,684,000  

 

 

Consolidated operating markets (6)

 

 47,440,000  

 

 

 46,966,000  

 

 

 46,966,000  

 

 

 46,966,000  

 

 

 46,966,000  

Market penetration at end of period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated markets (7)

 

6.1%

 

 

6.2%

 

 

6.2%

 

 

6.3%

 

 

6.3%

 

 

Consolidated operating markets (7)

 

12.1%

 

 

12.3%

 

 

12.4%

 

 

12.3%

 

 

12.4%

Capital expenditures (000s)

$

 118,400  

 

$

 253,100  

 

$

 199,100  

 

$

 183,200  

 

$

 201,300  

Total cell sites in service

 

 8,027  

 

 

 8,028  

 

 

 7,984  

 

 

 7,932  

 

 

 7,875  

Owned towers in service

 

 4,411  

 

 

 4,408  

 

 

 4,377  

 

 

 4,346  

 

 

 4,318  

 

5

 

 

 


 

 

 

United States Cellular Corporation

Core Markets Summary Operating Data (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

3/31/2013

 

12/31/2012

 

9/30/2012

 

6/30/2012

 

3/31/2012

Retail Customers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Postpaid

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total at end of period (1)

 

 4,639,000  

 

 

 4,672,000  

 

 

 4,688,000  

 

 

 4,708,000  

 

 

 4,736,000  

 

 

Gross additions

 

 184,000  

 

 

 218,000  

 

 

 204,000  

 

 

 176,000  

 

 

 182,000  

 

 

Net additions (losses)

 

 (32,000) 

 

 

 (16,000) 

 

 

 (20,000) 

 

 

 (28,000) 

 

 

 (21,000) 

 

 

ARPU (2)

$

 54.23  

 

$

 53.92  

 

$

 53.68  

 

$

 53.70  

 

$

 53.25  

 

 

Churn rate (3)

 

1.5%

 

 

1.7%

 

 

1.6%

 

 

1.4%

 

 

1.4%

 

 

Smartphone penetration (4) (5)

 

43.0%

 

 

41.1%

 

 

37.8%

 

 

36.0%

 

 

34.3%

 

Prepaid

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total at end of period

 

 373,000  

 

 

 342,000  

 

 

 305,000  

 

 

 246,000  

 

 

 223,000  

 

 

Gross additions

 

 92,000  

 

 

 86,000  

 

 

 100,000  

 

 

 59,000  

 

 

 42,000  

 

 

Net additions (losses)

 

 31,000  

 

 

 38,000  

 

 

 59,000  

 

 

 23,000  

 

 

 5,000  

 

 

ARPU (2)

$

 32.92  

 

$

 33.21  

 

$

 33.09  

 

$

 33.37  

 

$

 32.69  

 

 

Churn rate (3)

 

5.7%

 

 

5.0%

 

 

5.0%

 

 

5.2%

 

 

5.6%

Total customers at end of period (1)

 

 5,225,000  

 

 

 5,238,000  

 

 

 5,223,000  

 

 

 5,196,000  

 

 

 5,210,000  

Billed ARPU (2)

$

 50.65  

 

$

 50.43  

 

$

 50.34  

 

$

 50.43  

 

$

 49.91  

Service revenue ARPU (2)

$

 57.37  

 

$

 57.90  

 

$

 59.66  

 

$

 59.03  

 

$

 58.20  

Smartphones sold as a percent of total

  devices sold

 

62.1%

 

 

62.9%

 

 

53.0%

 

 

52.0%

 

 

54.1%

Total population

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated markets (6)

 

 84,625,000  

 

 

 83,864,000  

 

 

 83,075,000  

 

 

 82,763,000  

 

 

 82,763,000  

 

 

Consolidated operating markets (6)

 

 32,422,000  

 

 

 31,925,000  

 

 

 31,590,000  

 

 

 31,590,000  

 

 

 31,590,000  

Market penetration at end of period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated markets (7)

 

6.2%

 

 

6.2%

 

 

6.3%

 

 

6.3%

 

 

6.3%

 

 

Consolidated operating markets (7)

 

16.1%

 

 

16.4%

 

 

16.5%

 

 

16.4%

 

 

16.5%

Capital expenditures (000s)

$

 113,300  

 

$

 241,400  

 

$

 184,100  

 

$

 163,600  

 

$

 179,700  

Total cell sites in service

 

 6,277  

 

 

 6,292  

 

 

 6,251  

 

 

 6,199  

 

 

 6,146  

Owned towers in service

 

 3,846  

 

 

 3,847  

 

 

 3,818  

 

 

 3,787  

 

 

 3,761  

 

 

(1)     Includes 176,000 and 168,000 postpaid customers at March 31, 2013 and 2012, respectively, related to the St. Lawrence Seaway RSA Cellular Partnership (“NY1”) and New York RSA 2 Cellular Partnership (“NY2” and, together with NY1, the “Partnerships”).

(2)     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 retail 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.

(3)     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.

(4)     Smartphones represent wireless devices which run on an AndroidTM, BlackBerry® or Windows Mobile® operating system, excluding tablets.

(5)     Smartphone penetration is calculated by dividing postpaid smartphone customers by total postpaid customers.

(6)     Used only to calculate market penetration of consolidated markets and consolidated operating markets, respectively. See footnote (7) below.

(7)     Market penetration is calculated by dividing the number of wireless customers at the end of the period by the total population of consolidated markets and consolidated operating markets, respectively, as estimated by Claritas®.

 

   

 

6

 

 

 


 

 

TDS Telecom

Summary Operating Data (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

3/31/2013

 

12/31/2012

 

9/30/2012

 

6/30/2012

 

3/31/2012

TDS Telecom

 

 

 

 

 

 

 

 

 

ILEC:

 

 

 

 

 

 

 

 

 

 

 

Residential Connections

 

 

 

 

 

 

 

 

 

 

 

 

Physical access lines (1)

345,500

 

350,100

 

355,800

 

360,100

 

363,500

 

 

 

Broadband connections (2)

221,900

 

221,700

 

223,100

 

222,400

 

219,500

 

 

 

IPTV customers

9,000

 

7,900

 

6,700

 

5,600

 

4,900

 

 

 

   ILEC residential connections

576,400

 

579,700

 

585,600

 

588,100

 

587,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Connections

 

 

 

 

 

 

 

 

 

 

 

 

Physical access lines (1)

106,000

 

107,600

 

109,800

 

111,100

 

112,600

 

 

 

Broadband connections (2)

18,400

 

18,500

 

18,500

 

18,400

 

18,200

 

 

 

managedIP connections (3)

18,400

 

17,200

 

15,000

 

13,200

 

10,800

 

 

 

   ILEC commercial connections

142,800

 

143,300

 

143,300

 

142,700

 

141,600

 

 

 

 

 

 

 

 

 

 

 

 

 

CLEC:

 

 

 

 

 

 

 

 

 

 

 

Residential Connections

 

 

 

 

 

 

 

 

 

 

 

 

Physical access lines (1)

23,000

 

24,600

 

26,200

 

27,900

 

29,600

 

 

 

Broadband connections (2)

7,700

 

8,200

 

8,900

 

9,500

 

10,100

 

 

 

   CLEC residential connections

30,700

 

32,800

 

35,100

 

37,400

 

39,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Connections

 

 

 

 

 

 

 

 

 

 

 

 

Physical access lines (1)

129,700

 

135,500

 

140,300

 

145,100

 

151,100

 

 

 

Broadband connections (2)

10,400

 

11,200

 

12,000

 

12,800

 

13,700

 

 

 

managedIP connections (3)

85,000

 

77,400

 

69,500

 

61,400

 

53,700

 

 

 

   CLEC commercial connections

225,100

 

224,100

 

221,800

 

219,300

 

218,500

 

 

 

 

 

 

 

 

 

 

 

 

 

Total ILEC and CLEC Customer Connections

975,000

 

979,900

 

985,800

 

987,500

 

987,700

 

(1)     Individual circuits connecting customers to TDS Telecom’s central office facilities.

(2)     The number of customers provided high-capacity data circuits via various technologies, including DSL and dedicated Internet circuit technologies.

(3)     The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.

 

 

 

TDS Telecom

Capital Expenditures (000s)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

3/31/2013

 

 

12/31/2012

 

 

9/30/2012

 

 

6/30/2012

 

 

3/31/2012

ILEC

$

22,400

 

$

43,400

 

$

33,700

 

$

32,500

 

$

27,500

CLEC

 

5,500

 

 

6,100

 

 

5,400

 

 

4,900

 

 

5,100

HMS

 

2,600

 

 

2,300

 

 

4,400

 

 

5,500

 

 

3,100

 

$

30,500

 

$

51,800

 

$

43,500

 

$

42,900

 

$

35,700

 

7

 

 

 


 

 

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

Three Months Ended March 31,

(Unaudited, dollars and shares in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 Increase/ (Decrease)

 

 

 

 

2013

 

2012

 

Amount

Percent

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

U.S. Cellular

$

 1,081,746  

 

$

 1,092,121  

 

$

 (10,375) 

 

(1%)

 

TDS Telecom

 

 217,061  

 

 

 204,075  

 

 

 12,986  

 

6%

 

All Other (1)

 

 9,766  

 

 

 9,595  

 

 

 171  

 

2%

 

 

 

 

 

 1,308,573  

 

 

 1,305,791  

 

 

 2,782  

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

U.S. Cellular

 

 

 

 

 

 

 

 

 

 

 

 

Expenses excluding depreciation, amortization and accretion

 

 878,070  

 

 

 862,444  

 

 

 15,626  

 

2%

 

 

Depreciation, amortization and accretion

 

 189,845  

 

 

 146,685  

 

 

 43,160  

 

29%

 

 

Loss on asset disposals, net

 

 5,434  

 

 

 2,003  

 

 

 3,431  

 

>100%

 

 

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

 

 6,931  

 

 

 (4,213) 

 

 

 11,144  

 

>(100%)

 

 

 

 

 

 1,080,280  

 

 

 1,006,919  

 

 

 73,361  

 

7%

 

TDS Telecom

 

 

 

 

 

 

 

 

 

 

 

 

Expenses excluding depreciation, amortization and accretion

 

 159,486  

 

 

 143,420  

 

 

 16,066  

 

11%

 

 

Depreciation, amortization and accretion

 

 49,491  

 

 

 47,443  

 

 

 2,048  

 

4%

 

 

Loss on asset disposals, net

 

 193  

 

 

 120  

 

 

 73  

 

61%

 

 

 

 

 

 209,170  

 

 

 190,983  

 

 

 18,187  

 

10%

 

All Other (1)

 

 

 

 

 

 

 

 

 

 

 

 

Expenses excluding depreciation and amortization

 

 9,239  

 

 

 10,946  

 

 

 (1,707) 

 

(16%)

 

 

Depreciation and amortization

 

 2,741  

 

 

 3,306  

 

 

 (565) 

 

(17%)

 

 

Gain on asset disposals, net

 

 (11) 

 

 

 (5) 

 

 

 (6) 

 

>100%

 

 

 

 

 

 11,969  

 

 

 14,247  

 

 

 (2,278) 

 

(16%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 1,301,419  

 

 

 1,212,149  

 

 

 89,270  

 

7%

Operating income (loss)

 

 

 

 

 

 

 

 

 

 

 

U.S. Cellular

 

 1,466  

 

 

 85,202  

 

 

 (83,736) 

 

(98%)

 

TDS Telecom

 

 7,891  

 

 

 13,092  

 

 

 (5,201) 

 

(40%)

 

All Other  (1)

 

 (2,203) 

 

 

 (4,652) 

 

 

 2,449  

 

53%

 

 

 

 

 

 7,154  

 

 

 93,642  

 

 

 (86,488) 

 

(92%)

Investment and other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated entities

 

 27,089  

 

 

 23,389  

 

 

 3,700  

 

16%

 

Interest and dividend income

 

 1,578  

 

 

 2,183  

 

 

 (605) 

 

(28%)

 

Interest expense

 

 (24,498) 

 

 

 (24,464) 

 

 

 (34) 

 

 

Other, net

 

 (154) 

 

 

 228  

 

 

 (382) 

 

>(100%)

 

 

Total investment and other income

 

 4,015  

 

 

 1,336  

 

 

 2,679  

 

>100%

Income before income taxes

 

 11,169  

 

 

 94,978  

 

 

 (83,809) 

 

(88%)

 

Income tax expense

 

 4,180  

 

 

 27,412  

 

 

 (23,232) 

 

(85%)

Net income

 

 6,989  

 

 

 67,566  

 

 

 (60,577) 

 

(90%)

 

Less: Net income attributable to noncontrolling interests, net of tax

 

 (5,570) 

 

 

 (15,312) 

 

 

 9,742  

 

64%

Net income attributable to TDS shareholders

 

 1,419  

 

 

 52,254  

 

 

 (50,835) 

 

(97%)

 

Preferred dividend requirement

 

 (12) 

 

 

 (12) 

 

 

 —  

 

 —  

Net income available to common shareholders

$

 1,407  

 

$

 52,242  

 

$

 (50,835) 

 

(97%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 108,255  

 

 

 108,653  

 

 

 (398) 

 

 —  

Basic earnings per share attributable to TDS shareholders

$

 0.01  

 

$

 0.48  

 

$

 (0.47) 

 

(98%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

 108,693  

 

 

 109,098  

 

 

 (405) 

 

 —  

Diluted earnings per share attributable to TDS shareholders

$

 0.01  

 

$

 0.48  

 

$

 (0.47) 

 

(98%)

 

(1)     Consists of Suttle Straus printing and distribution operations, Airadigm, corporate operations and intercompany eliminations.

 

N/M – Percentage change not meaningful

 

8

 

 

 


 

 

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 March 31,

 

 December 31,

 

 

2013

 

2012

Current assets

 

 

 

 

 

 

Cash and cash equivalents

$

 766,700  

 

$

 740,481  

 

Short-term investments

 

 125,595  

 

 

 115,700  

 

Accounts receivable from customers and others

 

 506,710  

 

 

 574,328  

 

Inventory

 

 143,832  

 

 

 160,692  

 

Net deferred income tax asset

 

 44,288  

 

 

 43,411  

 

Prepaid expenses

 

 86,879  

 

 

 86,385  

 

Income taxes receivable

 

 11,301  

 

 

 9,625  

 

Other current assets

 

 30,498  

 

 

 32,815  

 

 

 

 1,715,803  

 

 

 1,763,437  

 

 

 

 

 

 

 

Assets held for sale

 

 160,073  

 

 

 163,242  

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

Licenses

 

 1,494,189  

 

 

 1,480,039  

 

Goodwill

 

 797,194  

 

 

 797,194  

 

Other intangible assets, net

 

 55,557  

 

 

 58,522  

 

Investments in unconsolidated entities

 

 201,171  

 

 

 179,921  

 

Long-term investments

 

 40,142  

 

 

 50,305  

 

Other investments

 

 778  

 

 

 824  

 

 

 

 2,589,031  

 

 

 2,566,805  

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

 

 

 

 

U.S. Cellular

 

 2,948,508  

 

 

 3,022,588  

 

TDS Telecom

 

 918,861  

 

 

 934,188  

 

Other

 

 39,226  

 

 

 40,490  

 

 

 

 3,906,595  

 

 

 3,997,266  

 

 

 

 

 

 

 

Other assets and deferred charges

 

 130,321  

 

 

 133,150  

 

 

 

 

 

 

 

Total assets

$

 8,501,823  

 

$

 8,623,900  

 

9

 

 

 


 

 

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 March 31,

 

 December 31,

 

 

 

 

2013

 

2012

Current liabilities

 

 

 

 

 

 

 

Current portion of long-term debt

$

 1,318  

 

$

 1,233  

 

 

Accounts payable

 

 335,065  

 

 

 377,291  

 

 

Customer deposits and deferred revenues

 

 231,478  

 

 

 222,345  

 

 

Accrued interest

 

 15,774  

 

 

 6,565  

 

 

Accrued taxes

 

 55,944  

 

 

 48,237  

 

 

Accrued compensation

 

 75,324  

 

 

 134,932  

 

 

Other current liabilities

 

 102,208  

 

 

 134,005  

 

 

 

 

 

 817,111  

 

 

 924,608  

 

 

 

 

 

 

 

 

 

Liabilities held for sale

 

 18,360  

 

 

 19,594  

 

 

 

 

 

 

 

 

 

Deferred liabilities and credits

 

 

 

 

 

 

 

Net deferred income tax liability

 

 867,954  

 

 

 862,580  

 

 

Other deferred liabilities and credits

 

 445,614  

 

 

 438,727  

 

 

 

 

 

 

 

 

 

Long-term debt

 

 1,721,338  

 

 

 1,721,571  

 

 

 

 

 

 

 

 

 

Noncontrolling interests with redemption features

 

 466  

 

 

 493  

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

TDS shareholders' equity

 

 

 

 

 

 

 

Series A Common and Common Shares, par value $.01

 

 1,327  

 

 

 1,327  

 

 

Capital in excess of par value

 

 2,302,785  

 

 

 2,304,122  

 

 

Treasury shares, at cost

 

 (747,831) 

 

 

 (750,099) 

 

 

Accumulated other comprehensive loss

 

 (8,303) 

 

 

 (8,132) 

 

 

Retained earnings

 

 2,449,720  

 

 

 2,464,318  

 

 

 

   Total TDS shareholders' equity

 

 3,997,698  

 

 

 4,011,536  

 

 

 

 

 

 

 

 

 

 

Preferred shares

 

 825  

 

 

 825  

 

Noncontrolling interests

 

 632,457  

 

 

 643,966  

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

 4,630,980  

 

 

 4,656,327  

 

 

 

 

 

 

 

 

 

Total liabilities and equity

$

 8,501,823  

 

$

 8,623,900  

 

10

 

 

 


 

 

 

Balance Sheet Highlights

March 31, 2013

(Unaudited, dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

TDS

 

TDS Corporate

 

Intercompany

 

TDS

 

 

 

Cellular

 

Telecom

 

& Other

 

Eliminations

 

Consolidated

Cash and cash equivalents

$

 419,696  

 

$

 87,459  

 

$

 259,545  

 

$

 ―  

 

$

 766,700  

Affiliated cash investments

 

 ―  

 

 

 374,137  

 

 

 ―  

 

 

 (374,137) 

 

 

 ―  

Short-term investments

 

 110,585  

 

 

 ―  

 

 

 15,010  

 

 

 ―  

 

 

 125,595  

 

 

$

 530,281  

 

$

 461,596  

 

$

 274,555  

 

$

 (374,137) 

 

$

 892,295  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses, goodwill and other intangible assets

$

 1,892,755  

 

$

 580,138  

 

$

 (125,953) 

 

$

 ―  

 

$

 2,346,940  

Investment in unconsolidated entities

 

 165,529  

 

 

 3,814  

 

 

 38,634  

 

 

 (6,806) 

 

 

 201,171  

Long-term and other investments

 

 40,142  

 

 

 778  

 

 

 ―  

 

 

 ―  

 

 

 40,920  

 

 

 

$

 2,098,426  

 

$

 584,730  

 

$

 (87,319) 

 

$

 (6,806) 

 

$

 2,589,031  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

$

 2,948,508  

 

$

 918,861  

 

$

 39,226  

 

$

 ―  

 

$

 3,906,595  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion

$

 93  

 

$

 83  

 

$

 1,142  

 

$

 ―  

 

$

 1,318  

 

Non-current portion

 

 878,975  

 

 

 737  

 

 

 841,626  

 

 

 ―  

 

 

 1,721,338  

 

 

Total

$

 879,068  

 

$

 820  

 

$

 842,768  

 

$

 ―  

 

$

 1,722,656  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares

$

 ―  

 

$

 ―  

 

$

 825  

 

$

 ―  

 

$

 825  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 


 

 

 

 

Telephone and Data Systems, Inc.

Schedule of Cash and Cash Equivalents and Investments

(Unaudited, dollars in thousands)

 

The following table presents TDS’ cash and cash equivalents and investments at March 31, 2013 and December 31, 2012.

 

 

 

March 31,

 

December 31,

 

2013

 

2012

 

 

 

 

 

 

 

Cash and cash equivalents

$

 766,700  

 

$

 740,481  

Amounts included in short-term investments (1) (2)

 

 

 

 

 

 

Government-backed securities (3)

 

 125,595  

 

 

 115,700  

 

Certificates of deposit

 

 ―  

 

 

 ―  

 

 

$

 125,595  

 

$

 115,700  

 

 

 

 

 

 

 

Amounts included in long-term investments (1) (4)

 

 

 

 

 

 

Government-backed securities (3)

 

 40,142  

 

 

 50,305  

Total cash and cash equivalents and investments

$

 932,437  

 

$

 906,486  

 

(1)     Designated as held-to-maturity investments and are recorded at amortized cost in the Consolidated Balance Sheet.

(2)     Maturities are less than twelve months from the respective balance sheet dates.

(3)     Includes U.S treasury securities and corporate notes guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.

(4)     Maturities are 20 months from the balance sheet date.

 

 

 

 

   

 

12

 

 

 


 

 

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

Three Months Ended March 31,

(Unaudited, dollars in thousands)

 

 

 

 

 

2013

 

2012

Cash flows from operating activities

 

 

 

 

 

 

Net income

$

 6,989  

 

$

 67,566  

 

 

Add (deduct) adjustments to reconcile net income to net cash flows

  from operating activities

 

 

 

 

 

 

 

 

 

Depreciation, amortization and accretion

 

 242,077  

 

 

 197,434  

 

 

 

 

Bad debts expense

 

 17,874  

 

 

 15,105  

 

 

 

 

Stock-based compensation expense

 

 7,585  

 

 

 10,330  

 

 

 

 

Deferred income taxes, net

 

 3,009  

 

 

 6,187  

 

 

 

 

Equity in earnings of unconsolidated entities

 

 (27,089) 

 

 

 (23,389) 

 

 

 

 

Distributions from unconsolidated entities

 

 8,089  

 

 

 2,938  

 

 

 

 

Loss on asset disposals, net

 

 5,616  

 

 

 2,079  

 

 

 

 

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

 

 6,931  

 

 

 (4,174) 

 

 

 

 

Noncash interest expense

 

 497  

 

 

 862  

 

 

 

 

Other operating activities

 

 256  

 

 

 852  

 

 

Changes in assets and liabilities from operations

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 34,038  

 

 

 38,941  

 

 

 

 

Inventory

 

 16,860  

 

 

 (4,842) 

 

 

 

 

Accounts payable

 

 (3,203) 

 

 

 (25,372) 

 

 

 

 

Customer deposits and deferred revenues

 

 7,904  

 

 

 10,745  

 

 

 

 

Accrued taxes

 

 5,309  

 

 

 82,014