US Cellular 2012 Annual Report Download - page 13

The Retained Assets include all assets other than the Subject Assets, including cash, accounts
receivable, inventory, naming rights, real estate, 561 owned cell sites including towers, network
equipment, stores, retail equipment, furniture and fixtures, and all other assets, including corporate and
other facilities located in the Divestiture Markets. The Retained Liabilities include all liabilities other than
the Subject Liabilities, including accounts payable, accrued expenses, liabilities to employees, taxes, and
obligations under benefit plans, contracts, leases and asset retirement obligations.
The transaction is subject to FCC approval, compliance with the Hart-Scott-Rodino Act and other
conditions. Subject to the satisfaction or (if permitted) waiver of all conditions, the transaction is expected
to close in mid-2013.
Selected pro forma information related to the Divestiture Transaction is as follows:
Divestiture Core
As Reported Markets(1) Markets
(Dollars in millions)
As of or for the year ended December 31, 2012
Postpaid customers(2) ......................... 5,134,000 463,000 4,671,000
Prepaid customers(2) .......................... 423,000 81,000 342,000
Reseller customers(2) .......................... 241,000 16,000 225,000
Total customers .............................. 5,798,000 560,000 5,238,000
Market penetration in consolidated operating markets(2) . 12.3% 3.7% 16.4%
Postpaid churn rate(2) ......................... 1.67% 2.95% 1.53%
U.S. Cellular Service revenues .................... $ 4,099 $ 427 $ 3,672
U.S. Cellular Capital expenditures ................. $ 837 $ 68 $ 769
As of or for the year ended December 31, 2011
U.S. Cellular Service revenues .................... $ 4,054 $ 468 $ 3,586
U.S. Cellular Capital expenditures ................. $ 783 $ 67 $ 716
As of or for the year ended December 31, 2010
U.S. Cellular Service revenues .................... $ 3,913 $ 513 $ 3,400
U.S. Cellular Capital expenditures ................. $ 583 $ 68 $ 515
(1) The As-Reported amounts of Service revenues and Capital expenditures represent GAAP
financial measures and the Divestiture Markets and Core Markets amounts represent non-GAAP
financial measures. U.S. Cellular believes that the amounts under Divestiture Markets and Core
Markets may be useful to investors and other users of its financial information in evaluating the
pro forma amounts for the Core Markets.
(2) See ‘‘Results of Operations’’ for a further description of customers, market penetration and
churn rate.
The Divestiture Transaction contemplates that five agreements will be entered into as of the closing: a
Customer Transition Services Agreement, a Network Transition Services Agreement, a Spectrum Manager
Lease Agreement, a Brand License Agreement, and an amendment to the Sprint/U.S. Cellular Intercarrier
Roaming Agreement.
At closing, the Subject Customers will cease to be customers of U.S. Cellular and will become customers
of Sprint. Pursuant to the Customer Transition Services Agreement, on and after closing, U.S. Cellular will
provide customer service and billing to, and collect accounts receivable from, the Subject Customers on
behalf of Sprint for a period of up to 24 months following the closing. Sprint will reimburse U.S. Cellular
at an amount equal to U.S. Cellular’s cost, including applicable overhead allocations, for providing such
services and will provide notice to U.S. Cellular when to discontinue them.
Pursuant to the Network Transition Services Agreement, U.S. Cellular will retain and continue to operate
the Retained Assets to provide network services to Sprint in the Divestiture Markets for a period of up to
24 months following the closing. Sprint will reimburse U.S. Cellular at an amount equal to U.S. Cellular’s
cost, including applicable overhead allocations, for providing such services and for actual cell site rent
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