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United States Cellular Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations
United States Cellular Corporation (‘‘U.S. Cellular’’) owns, operates and invests in wireless markets
throughout the United States. U.S. Cellular is an 82%-owned subsidiary of Telephone and Data
Systems, Inc. (‘‘TDS’’).
The following discussion and analysis should be read in conjunction with U.S. Cellular’s audited
consolidated financial statements and the description of U.S. Cellular’s business included in Item 1 of the
U.S. Cellular Annual Report on Form 10-K for the year ended December 31, 2009.
OVERVIEW
The following is a summary of certain selected information contained in the comprehensive
Management’s Discussion and Analysis of Financial Condition and Results of Operations that follows.
The summary does not contain all of the information that may be important. You should carefully read
the entire Management’s Discussion and Analysis of Financial Condition and Results of Operations and
not rely solely on the overview.
U.S. Cellular provides wireless telecommunications services to more than 6.1 million customers in five
geographic market areas in 26 states. As of December 31, 2009, U.S. Cellular’s average penetration rate
in its consolidated operating markets, calculated by dividing U.S. Cellular’s total customers by the total
population of 46.3 million in such markets, was 13.3%. U.S. Cellular operates on a customer satisfaction
strategy, meeting customer needs by providing a comprehensive range of wireless products and
services, excellent customer support, and a high-quality network. U.S. Cellular’s business development
strategy is to operate controlling interests in wireless licenses in areas adjacent to or in proximity to its
other wireless licenses, thereby building contiguous operating market areas. U.S. Cellular believes that
operating in contiguous market areas will continue to provide it with certain economies in its capital and
operating costs.
Financial and operating highlights in 2009 included the following:
• Total customers were 6,141,000 at December 31, 2009, including 5,744,000 retail customers.
• Retail customer net additions were 37,000 in 2009 compared to 149,000 in 2008. The decrease
year-over-year reflected higher churn rates, due to the weak economy and very competitive industry
conditions which included the initiation of service by unlimited prepay service providers in certain of
U.S. Cellular’s markets.
• Postpay customers comprised approximately 95% of U.S. Cellular’s retail customer base as of
December 31, 2009. Postpay net additions were 62,000 in 2009 compared to 158,000 in 2008. The
postpay churn rate was 1.6% in 2009 compared to 1.5% in 2008.
• Service revenues of $3,927.9 million decreased $12.5 million year-over-year, due primarily to a
decrease of $76.4 million (23%) in inbound roaming revenues. Retail service revenue grew by
$33.2 million (1%) due primarily to an increase in the average monthly retail service revenue per
customer, driven by higher data usage. Data revenues grew 33% year-over-year to $683.0 million.
• Cash flows from operating activities were $881.8 million, a decrease of 4% year-over-year. At
December 31, 2009, Cash and cash equivalents totaled $294.4 million and there were no outstanding
borrowings under the revolving credit facility.
• On June 30, 2009, U.S. Cellular entered into a new $300 million revolving credit agreement with certain
lenders and other parties. As a result, U.S. Cellular’s $700 million revolving credit agreement, which
was due to expire in December 2009, was terminated on June 30, 2009 as a condition of entering into
the new agreement. The new revolving credit agreement provides U.S. Cellular with a $300 million
senior revolving credit facility for working capital, acquisitions and other corporate purposes and to
refinance any existing debt of U.S. Cellular.
• On December 24, 2009, U.S. Cellular redeemed all of its outstanding 8.75% Senior Notes due
November 1, 2032. The $130.0 million aggregate principal amount of the outstanding notes was
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