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Executives

Ted Carlson - President and CEO

Ken Meyers - Vice President and CFO

Jane McCahon - Vice President, Corporate Relations

Analysts

Batya Levi - UBS Investment Bank

Telephone & Data Systems, Inc. (TDS) Telephone and Data Systems, Inc. and U.S. Cellular Corporation at UBS Media and Communications Conference December 5, 2011 8:00 AM ET

Batya Levi - UBS Investment Bank

Thanks for everyone coming to our conference. This is the 39th Annual Global Media and Communications Conference for UBS. And our first speaker for the morning is going to be TDS and USM. Ted Carlson, the President and CEO of TDS and we have Ken Meyers, Executive Vice President and CFO of TDS.

The format of the conversation is going to be, first, some opening comments made by Ted and Ken, and I am going to go straight to Q&A.

So thank you so much for joining us. I will just – I think the mic is working over there. We can just start off.

Ted Carlson

Great. Well, thank you very much Batya. It’s a great pleasure and honor to be here at the UBS conference. And we look forward to hearing lots of good questions from those of you here with us in the audience today.

And we also have Jane McCahon with us today in-charge of our public relations and investor relations. So if Ken or I can’t answer questions, she will or get back to you with the answers.

I think it’s important to realize that TDS, which is the parent company of both U.S. Cellular and TDS Telecom, U.S. Cellular is also publicly traded, is a company which operates on a customer satisfaction strategy. And what that means is that we, as a company, are trying to provide the best service and taken in its totality of any company in each of those two industries.

So in the wireless business, what that means is offering a higher level of customer satisfaction than our competitors. We measure that through outside third parties. This last year, earlier -- or actually this year early this year, as an example, we were awarded the Consumer Reports award for the best postpay customer experience in the United States.

We’ve been awarded the awards for the best network and best customer service in the north mid-central part of the United States, a number of years in a row. And if you measure us based on something that has been developed over time called the net promoter score, which is taking the people who love you enough, who consider your service to be great that they are willing to tell people about you and subtract the people who don’t like you who are your customers. And you get something called net promoter score.

And on the net promoter score, we have the highest net promoter score by some margin now compared to any of the four national carriers. And that’s something that two years ago, I couldn’t say we were effectively tied with one of them whose name I won’t mention. But since then we have opened up a lead compared to the best of the big four nationals in terms of net promoter score.

So when we talk about customer satisfaction at TDS, it’s not just talk, it’s a reality. Now -- and the same is true over TDS Telecom. And as an example, at TDA Telecom, what you see us doing is doing things that other so-called RLECs, rural local exchange carriers, are not doing.

We have been investing in the high speed network. We have been bringing fiber out to our digital serving areas to bring that fiber within 3000 kilo feet of our customers. And we are going to be because we have been able – we have done that. We’re going to be able to launch internet protocol TV service much as AT&T has launched in the major metro markets with their U-verse service. But we will be able to launch that in a number of small towns and rural communities. In fact, we’ll be planning to launch 19 different systems during 2012 with internet protocol television service.

And we have two of those systems already in operation and in both of those areas we compete with two of the giant cable companies. In the space of three years, we have taken, on average, of about a 32% market share in those two operations after only three years, because of the quality of the experience that we give as a company.

So at TDS, regardless of what part of the business that we are talking about it’s about the customer experience. And we keep our eyes focused on the customers. Ms. Mary Dillon would say, at U.S. Cellular, we look at our business through the lens of the customer’s eyes.

So, and then I’d like Ken just to make a few comments about important event that we’re doing at the corporate level, the share consolidation. And I know, Batya, you would have asked the question about it, but I do want to get it right out here upfront.

Ken Meyers

Thanks Ted. As many of you are aware, we have a proxy statement outstanding right now where we are trying to reclassify the special common shares into common shares. We have actually put the new proposal out as of a week ago today. In that proposal, we are proposing to reclassify the special common into common, special common going one for one basis. The common and series A get 1.087 shares. It’s kind of like doing a merger where the lower securities is your one base and everything else, the premium is recognized.

In doing it the way we are doing it, we are maintaining the dividend per share on all shares. The effect of that is these special common holders will get the same amount of dividends they’re receiving today. The current common shareholders will get 8.7% more dividends, about $2.3 million more annual dividends at the company level.

We have a shareholder vote scheduled for that on January 13. Jane, Ted and I are meeting with shareholders between now and then to discuss this further. And so if anybody has any questions, if you’d kindly contact Jane McCahon, we’ll sit down and talk you about it.

Question-and-Answer Session

Batya Levi - UBS Investment Bank

Okay, great. Maybe I could start off just with that. And now we can go into each segment. Can you talk a little bit about the rationale behind that consolidation of common shares? What do you think it will benefit you by doing so?

Ken Meyers

Well, today the special common shares, though having the exact same economics of the common shares, are trading at anywhere from the smallest to all the way up to almost a 15% discount at various times. And so it’s really a flawed capital structure.

It’s not like we are about to run out and use the shares but a company has to have a solid workable capital structure so that when you issue shares whether it be for benefit plans or even an acquisition. So you aren’t closing an extra layer of economic dilution because you are using undervalued securities.

Batya Levi - UBS Investment Bank

(indiscernible) currency.

Ken Meyers

So by fixing this we’ll have a normal capital structure with the securities we can use at full value.

Batya Levi - UBS Investment Bank

Okay, great. Maybe if we could start off with the wireless side. I guess, about 14 months ago, you announced The Belief Project. About 50% of your customers are under it right now. Can you talk a little bit about what kind of change do you see in metrics when you sign up to Belief in terms of churn, ARPU, maybe reducing the subsidy costs over the longer time? And what do you think as is missing in The Belief Project and how would you like to change it going forward?

Ted Carlson

Well, let me start out and let Ken supplement that one. The Belief Project was – you are right, Batya – was announced maybe 14 months ago, it was actually launched, I think October 1st of last year. So it’s been about a year and two months now. Right, 14 months as you said.

So The Belief Project, as you said, has about half of the customers signed up for it but the rate of customer adoption is still going quite strongly. So over time we would expect that virtually all of our U.S. Cellular postpaid customers would migrate over to The Belief Project. And we’re doing that because we think it raises the level of satisfaction that people have with wireless service.

Now, how can I say that? I can say that because when they move over to Belief plan, typically they’re going to buy more services from us. So there is on average an ARPU increase through The Belief Project. Our ARPU for our postpaid customers is up, in part because of data growth, yes but it’s also up because of people adopting Belief plans where they get things like a phone replacement, or they get things like a discount for paying through a credit card or paying through an automatic bank deposit.

If you pay through automatic bank deposit on our Belief plans, you get a 5% discount. It’s pretty significant for many people. And phone replacement gives people a security factor that they didn’t have before. Some of the earlier Belief plans included a battery swap where people, if their battery is running down, they can just walk into one of our stores and walk out with a fully charged battery. No charge to the customer.

But the most important thing about The Belief plans are the loyalty points that we award. As soon as you join a Belief plan, you get loyalty points. Every month that you’re paying your bill, you will get loyalty points when you recommend someone to U.S. Cellular. You will get more loyalty points if you are on one of the higher tiered Belief plans. And by accumulating loyalty points, you can reduce the amount of months that it takes for you to qualify for handset replacement down to only 10 months.

So many people with the rapid changes in technology that are going on in the wireless world, would love to get faster handset replacement. I mean, that is probably the biggest drawing card for the Belief points. Now you can use Belief points to buy a phone for your children, or add a plan that way or get ringtones and there are other things. But getting that phone sooner the replacement is the most important thing that people are getting with their Belief points.

So one of the things that we’ve seen is not only increase in ARPU from Belief plans, people migrating to them, but we’ve also seen that the people are -- now my jet lag is catching up with me. I was in Israel yesterday morning. So what was the other one?

Batya Levi - UBS Investment Bank

Churn.

Ted Carlson

The churn, right. The churn of the people who are on Belief plans, the people who are out of contract but on Belief plans, the churn is meaningfully lower than the people who have not signed up for the Belief plans. So the loyalty effect of getting those loyalty points is sticky. It’s a glue. Now it took us over a year to design the loyalty program, probably close to two years. So it’s not something that can be easily copied.

And one of the four national carriers had a loyalty program, I don’t know how effective it was. But when they – let’s just put it this way. In the last six months, they dropped. They got rid of it. So we kind of have the field to ourselves in terms of loyalty programs.

Batya Levi - UBS Investment Bank

Okay. That’s helpful. And maybe just shifting to the competitive environment, do you have that Belief loyalty program but some of the national – now three of the nationals carry the iPhone. And you’ve said it before in prior conferences that you made the decision not to carry the iPhone because the risk reward was not there.

Now that the iPhone has been in the marketplace for several weeks, is there any change in your thoughts? Is the competition a bit more than what you had expected originally? And how are you responding to competition from the iPhone?

Ted Carlson

Well, so there is a number of questions here. But first, let me say, no, there is nothing that’s happened in the last few weeks that changes our view at this point in time. You have to remember that the iPhone is a 3G phone, right? And we are about to launch our 4G network. So our number one priority as a company right now is to get that 4G network successfully launched, line up partners to provide us equipment to run on our 4G network and to migrate customers over to the 4G network as quickly as possible. Because being on a 4G network gives people a better customer experience, go back to the concept of customer satisfaction that I talked about.

It also reduces network costs for the carrier, because the 4G network is much more efficient. So you know what, let’s just put it this way that we’re never going to say never about iPhone but the iPhone for us, I think, would need to be at the cutting edge of where we are going as a company, which is 4G, right? And then perhaps there might be an opportunity to consider it. But at this point, we are focused on 4G, we’re making big investments in the 4G network. We are making big investments – I was visiting Amdocs in Israel this past week. Big investments and basically redoing our whole business and operational support system at the cost of – Jane is coughing, I can hear that. Lot of money, let’s just put it that way.

A lot of money. When you change – it’s just like changing nervous system in the body. Okay. It’s a big deal and we are doing that. That is expected to be done by middle 2013. So we have the LTE project. We have this project. And there’s only so many big spending projects that a company can do. You have to put your focus. For us, we have to put our focus where it will generate the most customer satisfaction. It’s not about providing revenues to someone else. It’s about taking care of our customers. So that’s where our focus is.

Batya Levi - UBS Investment Bank

Okay. Some of the small regional players have said that iPhone is the biggest reason for a high churn in their customer base. Do you agree with that? Or it’s a reason why they don’t see gross adds coming into the stores?

Ted Carlson

Well, clearly the iPhone has a brand image today. But if you look at our handset line up, if you look at the top end of our phone selection, I am just going to pick on one here, the Motorola Electrify. Fabulous handset, and you look at every feature about it, it stacks up very, very well, if not better than the iPhone for us. Then you look at our Samsung Galaxy phone, it stacks up very well, feature for feature against last year’s iPhone.

And we have low end but new phones, brand new phones coming from offshore manufacturers obviously but that are sub-$200 phones that stack up very, very well against the two-year old iPhone. So we have great handset selection now. 13 smartphones in our line-up at the end of this year. So we don’t feel that we are at any real disadvantaged. The only disadvantage we have is the iPhone brand image.

Batya Levi - UBS Investment Bank

Right. Okay. You mentioned LTE rollouts, I believe you will be done about 25% of your footprint by the end of this year. And what do you think is the plan for next year? And did you mention that you would plan to complete it by mid ’13?

Ted Carlson

Ken, do you want to take that one?

Ken Meyers

Yeah, we’re completing the engineering work on the first phase of that rollout right now. It will cover between 25% and 30% of our customers. As we think about LTE rollout, it’s going to be a multi-year, three year type of project, we’ll probably do about as much again next year as we are this year. And it will be in 2013 by the time we finish most of our service territories.

Batya Levi - UBS Investment Bank

Okay. And in terms of the smartphone penetration, I believe, it’s about 26% of your base right now. A bit lower than the peers but it also gives you the opportunity to accelerate ARPU growth, lower churn. Can you talk a little bit about how fast do you expect that penetration to grow into next year? Is it going to be staggered as you bring on LTE or is there opportunity to bring them on a 3G and then upgrade them on to 4G when it’s available?

Ted Carlson

Well, it’s very interesting. I would – at the current sell-through rate, it’s about 40%. So of the new phones that we are putting out, about 40% of those phones are smartphones. And it’s been running that way for about three quarters now. And that actually surprised me, I thought the rate would have gone up farther. But it becomes back to the philosophy that we have is that the customer comes first. This is not about putting somebody, so to speak, into an iPhone that doesn’t want an iPhone, or know how to use an iPhone. That is, we’re not going to over sell our customer just to get them on to a data plan when they are not comfortable being on a data plan, and they’re maybe not comfortable with a very complex handset or iPhone.

This is about bringing the customer into the new world at a pace that they can spend manage without taking anything away from their satisfaction level. It’s about building from where they are and gradually leading them forward. So again, we have a lot of customers that are family members, a lot of people who subscribe to U.S. Cellular are families. We call them family organizers.

And then we have another group called personal planners. A lot of these people are quite happy with the feature phone today where they can access social media on a limited basis with a limited data plan. And they are not quite ready yet for an iPhone. Now many of them say, not an iPhone, but for a smartphone -- many of them say that their next phone will be a smartphone. So we’ll see. But we give the – we do a lot of questions of the customer when they come into our stores so that we are not trying to just force up-sell.

So I can see us obviously going from 26% up to 40% because that’s the sell-through rate we have today. And I think that rate will go higher for us as it has been for some of the others in the industry. But we won’t force because we want that high level of customer satisfaction. We want our customers to trust us that they haven’t been oversold.

Batya Levi - UBS Investment Bank

Okay. What are your results about tiered pricing? Again, there is some differences in the nationals, and some of them are doing it, some of them are not. Is this an opportunity for you to offer unlimited data pricing and get customers in, or maybe an opportunity to increase ARPU?

Ted Carlson

Ken?

Ken Meyers

I think that long term tiered pricing is the only way you’re going to be able to justify the investment in capacity and technology to support the data river that’s out there. It’s a matter of timing, in our case, being in the midst of a billing conversion right now, we’ll get most of that behind us before we can actually have that capability. I think it’s a necessary part of anybody’s long term revenue plan.

Batya Levi - UBS Investment Bank

Do you think you would want to complete the LTE buildouts before you move that route?

Ken Meyers

It’s not so much the LTE buildout as much as just the billing capability.

Batya Levi - UBS Investment Bank

Okay. And you have been mostly a player focused on the postpaid markets. What are your thoughts on prepaid? We’re seeing some of the nationals taking a stab on prepaid, just not as much as to cannibalize the postpaid base but to see if there is any unturned opportunity on the prepaid side. What do you think about that? And if you are more regional focused on the Belief plan, do you think that would fit into the prepaid market as well?

Ted Carlson

Well, we’ve made some steps forward on the prepaid. We’ve taken off the – which I might call the sign-up fees recently and we’ve actually had some, for us in the prepaid markets, some reasonable success there recently. But our focus is in the postpaid market. When you are working at a high level of customer satisfaction strategy, you have to be realistic about the nature of the prepaid market. Many people who are going after prepaid phones are folks that are in very limited budgets and they are not, maybe, that interested, handset replacement in a quick timeframe. They, maybe, are not interested in discounts for credit cards or bank payments.

They are really interested in minimizing the amount that they pay to have wireless service, because wireless has become a necessity in leading daily life. So that’s a different group. And while we will address that group by having some attractive offerings, it’s very difficult to position the company to do both successfully. One, being a very high touch, extremely high quality where we have to do better than the four nationals in terms of customer satisfaction. And another being a very low price, low touch, low service level operation and to run those out of the same business. I mean, they really require almost different cultures.

And the culture at U.S. Cellular is a culture that is all about customer satisfaction. So it kind of doesn’t really fit a large prepaid business. We would almost have to run it separately if we were to develop it into a really big business.

Batya Levi - UBS Investment Bank

Okay. And in the last couple of weeks, there have been a lot of changes in the announcements in the U.S. wireless markets. We had Sprint and Clearwire announced many wholesale deals, Verizon buying spectrum from SpectrumCo but also announcing a relationship to sell each other’s product. AT&T, T-Mo, I think it’s yet to be seen what the outcome would be.

Can you give your thoughts general in the U.S. wireless markets, how do you think it’s – we’re going to see ourselves in the next couple of years? And how is USM positioned? Do you think you’re positioned in a way to capture some share in the regional markets or would you like to get bigger – do you have any interest in becoming national by buying some of the divested assets that could be possible? How do you think about the company going forward?

Ted Carlson

Well, I am going to let Ken talk about possibly buying divested assets. But I guess, in terms of my opinion, we’re not opposed to the AT&T, T-Mo deal. We have never been opposed as a company. We just felt that if that deal were allowed to go through, there would have to be changes in the industry environment protections around things like roaming relationships, things around handset exclusivity. So that the rest of us who have to compete with even bigger giants would have a fair chance to compete.

Yes, we are interested in gaining share on a regional basis. We think that by delivering the highest customer satisfaction, customers over time, when they understand that, will migrate to us. Now what we found in the last year and a half since Mary Dillon has joined us is that our customers really appreciate us to a great degree, they are very loyal to us. The customers of our competitors don’t yet really understand the great things that we do that we have the top network, that we have the top customer service, that we have a great handset lineup, that we have loyalty program going for us.

So what we have to do is educate the people who are the customers of our competitors about what we have to offer so that they will become aware of us in the first place and then consider us, because a typical customer when they are willing to shop for a new supplier for wireless service, they’ll only shop two stores. So we have to raise our level of awareness and then the desire to consider us so that we become one of the two stores that they shop. And that means extremely targeted advertising messages that focus on the fact that we do give the greatest customer satisfaction. We now call that the happiest customers in wireless, we can prove it. And the message has started to get through but it takes a while for that message to sink in, in people’s minds. And then we think we’ll be able to grow our share in our existing markets.

And then Ken, would you want to talk about possible divestments and –

Ken Meyers

Well, our kind of first level is, as Ted said, with all the different moves that are going on in the industry, our focus stays on the customer. Okay, and we can’t control who’s going to divest something else or whether somebody else is going to buy something else. But when those opportunities come up, we’ve got our core M&A strategy which is we will constantly look at chances to strengthen our current operations. We’ll look at opportunities to expand them in an edge-out manner where we can leverage our network in presence that’s already there. But to go to a corner of the country where we don’t operate at all today and try to build name awareness today isn’t one of our priorities.

Batya Levi - UBS Investment Bank

Maybe ask it differently, just looking at your LTE buildouts and the expected smartphone penetration, increased data usage and if you look at the spectrum available to you right now, when do you think you will need to grab additional spectrum?

Ken Meyers

I think in many of our markets, we have a sufficient spectrum for what our needs are, what we see as our needs today and even mid term as we go through this technology change. We have a portfolio of 850 – starts with 850 cellular spectrum in lot of our markets. Some PCS, some AWS through partnership arrangements as well as 700. There are some markets where we like to see more. We’ve recently been in the third party market buying 10 megahertz of 700 spectrum in this market or that market trying to continue to strengthen the portfolio. But in most of our markets, I think we are fine right now.

Batya Levi - UBS Investment Bank

Okay. Maybe shifting gears to the wireline side but it’s kind of wireless is in there as well. The recent FCC, ICC and USF order, we’ve had the summary from the Chairman when it was voted on about a month ago. But the big report came out just recently. I don’t know if you wanted to touch on, were there any surprises in the detailed reports? Is it as expected as you’ve sort of thought about it? And if you could just remind us your overall exposure on both sides, USM and TDS.

Ted Carlson

Ken?

Ken Meyers

So on the wireless side, we get about $160 million in ETC revenue today. That will have -- about 10% of that will be at risk next year. Okay. Mostly (ph) down 20% a year, starting halfway through next year. And that will trickle through, right through revenues mostly to operating cash flow. But it doesn’t go through to free cash flow in the same way, because in most places where we qualify for ETC, we’ve made commitments to build networks out. And to the extent of the commitment from the USF changes, so does the commitment to build, right? So we have -- in our capital budget, we have a line item literally that says ETC cell sites. That’s going to go away. So it doesn’t have the same effect when it gets down to free cash flow. Number one.

Number two, there is the interconnection charges that the wireless company pay today are going to go down over time, offsetting that. Plus, there is the broadband availability of funds – about $500 million fund that – all the rules, I don’t think we understand yet. Okay. We obviously will be looking to qualify for that where it makes sense.

On the other side, on the wireline side, we get about $90 million in USF support through various mechanisms. And the initial response from our wireline team is that these rules weren’t as bad as we thought they were going to be. We have got longer kind of rollout periods. And we’ll phase in over time. We have other support mechanisms that are available to us. And so I think 2012 could have some transition effect at both businesses but I don’t think that from the wireline side that long term we see this is that detrimental at all.

Batya Levi - UBS Investment Bank

On the termination side, access side, inter carrier compensation and termination access fees that you have been collecting, is there some exposure there as well?

Ken Meyers

I can’t quantify at this time.

Batya Levi - UBS Investment Bank

Okay. Just looking at the wireline business in general, you have mentioned the IPTV deployments. Can you talk a little bit about how do you think IPTV broadband is – how are you positioned in the competitive marketplace? What do you see from the cable guys and will you be able to continue to lower line losses as you increase penetration of these two products?

Ted Carlson

So how are we trying to position ourselves? Our objective in the wireline side has been to obtain a dominant share in our RLEC territory of the broadband business. And we estimate that if you look at our entire RLEC territory, we have about a 60% share to Cable’s 40%. So that’s kind of the reverse of what you would find in the national RLEC market.

But that’s by conscious intent and we have felt that over the long term the business on the RLEC side it has to evolve from a voice business to a data business. And now we are taking the third step of the evolution, which is the data business evolving into the video business as the data speeds reach the level where we can support IPTV. We are adopting the Microsoft Mediaroom approach, and the Microsoft Mediaroom, again coming back to customer experience, offers a better experience on average than the national average cable companies are able to offer at this time.

So we think we’ve got – we’re building out our networks to enable IPTV, and we’re going with Microsoft Mediaroom which will give us a great customer experience. So our anticipation is that we should be where we launch to get to that kind of 30% share over a period of years of the video business. Now that is in addition to working with the DISH network. We’ve achieved almost a 30% share across our entire RLEC base by partnering with DISH where we sell DISH along with our broadband, and with our voice services.

And where we get that triple play, whether it’s with DISH, or with our own IPTV, we are able to reduce our customer churn down to around half of 1% whereas the single service churn is around 2%. So yes, the answer is you’re absolutely right. This is another approach to getting a bigger share of the video business and as we get a bigger share of the video business, we drive down our churn in the voice business, as well as drive down our churn in the data business.

Batya Levi - UBS Investment Bank

Okay. On the business side, enterprise side, you’ve made a series of acquisitions getting more access to hosted and managed services. Can you talk a little bit about what kind of demand you’re seeing there? How big could that business be for you in the future?

Ted Carlson

Ken, do you want to take that one?

Ken Meyers

So we have made three acquisitions now in the space of two predominantly co-location companies and one more of the service provider. Our goal is to build a integrated operation that can provide a full suite of services to mid-sized businesses. We like what we see in that space, so we think that it leverages a lot of things that we are really good at. Delivering reliability, delivering in a network environment, we think that – so we like the space, we like the opportunities.

How big it can get, that’s – when your strategy is get a lot of acquisition orientation to it, I don’t know that I can put a size on it yet. But we would like to continue to invest in that area and if prices allow themselves to make it a meaningful side of our business.

Batya Levi - UBS Investment Bank

And how about fiber to the cell opportunity? Are you investing in that as well?

Ted Carlson

Well, we’ve looked at fiber to the cell opportunities in many of the cells that, at least U.S. Cellular has in the TDS Telecom service territory are at a great distance from where the rest of our customers are. So that they don’t really fit with our IPTV strategy.

So far, we haven’t been able to make the economics work well. So we haven’t gone into it. Now it doesn’t mean we’re not looking at it. We are looking at it but to this point, we haven’t felt that it was a highly desirable rate of return investment.

Batya Levi - UBS Investment Bank

Okay. Are there any questions from the audience? There is one over here.

Ted Carlson

Okay.

Batya Levi - UBS Investment Bank

I think there is a mic right behind you.

Unidentified Analyst

Hi, thank you. There has been a lot of talk of consumption-based pricing on the data side but it’s been generally theoretical. And very few in the United States have made the jump to actually doing it. Can you talk about some of the strategies you may employ in terms of the actual tactics, because it’s been sort of two years away, probably for about five years? Thank you.

Ted Carlson

Well, quite frankly I don’t know that we have looked at a pure consumption based, kind of like your water meter or your electric meter, right? Or the old telephone where you paid by the number of calls that you’ve made. And if you know we are in the world that people are doing that and they are successful, I would love it if you would share it with me after the session.

You have to remember that U.S. Cellular, even though it’s very innovative, we also have to be very careful that from a customer perception viewpoint that we do no vary dramatically from, let’s say, the pricing paradigm that is in the marketplace and to some degree we are a price taker in terms of price plans. It doesn’t mean we can’t be unique but if our price plans start to drift too much from the national carriers, then people may not be willing to give us that consideration that I talked about to get people to come into our stores and shop us. So I am sure that, that’s part of what’s on our mind.

So in the area of pricing, to some degree, we will take a follower approach and wait and see until a national carrier maybe has ploughed that ground before we would step in. But I would be very interested in knowing what you’ve heard and we’ll have somebody at U.S. Cellular take a look at it because we are always open to new ideas.

Batya Levi - UBS Investment Bank

Any other questions? Maybe I could just throw in one last question about, generally, the ownership structure. Some of the regional players that have both wireline and wireless units have decided to unleash value and spin off the two sides so that there are two different companies. What are your thoughts about that? Is that something that you would consider? Or on the flip side, would you actually think about consolidating USM and TDS under one stub?

Ted Carlson

Let me talk about the first part. Because I think it’s important to understand why -- some of the reasons why we have these two companies that are in the same industry, why they are under the same ownership structure. And I think the most important one is financial stability. From – and it’s not just about the rating agencies, it’s – to some degree it’s about the rating agencies. The rating agencies give you credit for your size. And so if we split these apart, each of the pieces would be smaller in the eyes of the rating agencies. And each of the pieces would become therefore weaker in the eyes of the agencies than a consolidated company is in its put together form.

I think also from the standpoint – and it’s not just about size, it’s also about the fact that people’s opinions of the wireless industry and the wireline industry kind of go up and down. And because they go up and down, and they don’t go up and down at the same time, you have kind of an offsetting wave effect. So the two waves of peaks and valleys tend to generally speaking offset each other. So it dampens out the waves in terms of people’s opinion about the company.

Now I think that also applies on the stock market side. There is a wave effect. Sometimes wireless companies are in favor, sometimes they are out of favor because people perceive the competitive world is too challenging or the technology replacement is too large, you name it. But there are always waves that go on. And by dampening out the waves, by having two businesses, we benefit strictly in terms of stability in marketplace.

So now in terms of the stub at U.S. Cellular, I’m going to ask Ken to address that.

Ken Meyers

I think as many of you are aware, we actually looked at that back a few years ago. It wasn’t any formal offer but we were looking at it, we announced we were looking at it. We actually announced that we were stopping that so that we could execute some share repurchase programs. And since that time we’ve actually bought in about 13% of the special common shares, spent somewhere close to $600 million buying in those shares.

When we announced that we were ending our work on that project, we said that we could look at it in the future but at the time we are putting it on the shelf. We are involved in the reclassification of the shares right now. And so no work is being done on anything else until we get that done.

Whether we look at it in the future or not, a separate question.

Batya Levi - UBS Investment Bank

Okay. Great. Thank you so much for joining us.

Ken Meyers

Batya, thank you so much for your time today.

Ted Carlson

Thank you. Thank you, Batya.

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