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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 83%-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 (‘‘Form 10-K’’) for the year ended December 31, 2010.
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 overview 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 approximately 6.1 million customers in five
geographic market areas in 26 states. As of December 31, 2010, U.S. Cellular’s average penetration rate
in its consolidated operating markets was 13.0%. U.S. Cellular operates on a customer satisfaction
strategy, striving to meet or exceed 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 acquire and 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 2010 included the following:
• Total customers were 6,072,000 at December 31, 2010, including 5,729,000 retail customers.
• On October 1, 2010, U.S. Cellular launched The Belief Project which introduced several innovative
service offerings including no contract after the first contract; simplified national rate plans; a loyalty
rewards program; overage protection, caps and forgiveness; a phone replacement program; and
discounts for paperless billing and automatic payment. As of December 31, 2010, nearly 1.2 million
new and existing customers had adopted the new Belief Plans.
• Retail customer net losses were 15,000 in 2010 compared to net additions of 37,000 in 2009. In the
postpaid category, there was a net loss of 66,000 in 2010, compared to net additions of 62,000 in
2009. Prepaid net additions were 51,000 in 2010 compared to a net loss of 25,000 in 2009.
• Postpaid customers comprised approximately 95% of U.S. Cellular’s retail customers as of
December 31, 2010. The postpaid churn rate improved to 1.5% in 2010 compared to 1.6% in 2009.
• Postpaid customers on smartphone service plans increased to 17% as of December 31, 2010
compared to 7% as of December 31, 2009. In addition, smartphones represented 25% of all devices
sold in 2010 compared to 10% in 2009.
• Service revenues of $3,913.0 million decreased $14.1 million year-over-year, primarily due to a
decrease in retail service revenues of $18.7 million (1%). Retail service revenues decreased due to a
decline in the average number of customers of 55,000, partially offset by a slight increase in average
monthly service revenue per customer.
• Cash flows from operating activities were $874.3 million. At December 31, 2010, Cash and cash
equivalents and Short-term investments totaled $441.0 million and there were no outstanding
borrowings under the revolving credit facility.
• Additions to Property, plant and equipment totaled $583.1 million, including expenditures to construct
cell sites, increase capacity in existing cell sites and switches, expand mobile broadband services
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