Greetings, and welcome to the TDS and U.S. Cellular Fourth Quarter Operating Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Jane McCahon, Vice President of Corporate Relations for TDS. Thank you. You may begin.

Thank you, Diego. Good morning, and thank you for joining us. I want to make you all aware of the presentation we’ve prepared to accompany our comments this morning, which you can find on the Investor Relation sections of the TDS and U.S. Cellular websites. With me today and offering prepared comments from TDS Kenneth R. Meyers, the Executive Vice President and Chief Financial Officer; from U.S. Cellular Mary Dillon, President and Chief Executive Officer; Steve Campbell, Executive Vice President and Chief Financial Officer; and from TDS Telecom Dave Wittwer, President and Chief Executive Officer; and Vicki Villacrez, Vice President of Finance and Chief Financial Officer. This call is being simultaneously webcast on the Investor Relations section of the TDS and U.S. Cellular website. Please see the websites for slides referred to on this call including non-GAAP reconciliations. The information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the Safe Harbor paragraph in our release and the more extended version that will be included in our SEC filing. Shortly after we released our earnings and our announcement of the Baja acquisition this morning, and before the call, TDS and U.S. Cellular filed SEC Forms 8-K including the press releases we issued this morning. Both companies plan to file their 10-K’s today. We will be attending a number of conferences in the near-term including Morgan Stanley’s conference tomorrow in San Francisco and Deutsche Bank’s on March 4 in Palm Beach. As always, please keep in mind that TDS has an open door policy. So if you are in the Chicago area and would like to meet members of management from TDS Corporate, U.S. Cellular or TDS Telecom, the Investor Relations team will try to accommodate you, calendars permitting. Now I’d like to turn the call over to Ken Meyers.

Thank you, Jane, and good morning, everyone. Thanks for your time today. There are just a few points I’d like to make at the start today. First, you should take note of an important change in how we provide guidance. In addition to these historic metrics of revenue and capital expenditures for both U.S. Cellular and TDS Telecom, we are now also providing guidance at the consolidated level for such measures. In addition, we are now using adjusted income before income taxes as our measure of profitability instead of adjusted operating income before depreciation and amortization, or that ugly word EBITDA, which I can’t pronounce. So we aren’t going to use it anymore. For U.S. Cellular and TDS consolidated, this actually is designed to bring visibility to our share of the earnings and also the distributions we receive from our equity interest in non-consolidated entities; particularly, U.S. Cellular’s 5.5% stake in the Verizon LA partnership. Also, we are trying to provide deeper insight into the performance of U.S. Cellular’s core markets by adjusting for the effects of the divestiture transaction that we announced back in November and we will be focusing our remarks today on those core markets. We have provided data for the divestiture markets and for the total company that stands today so that you can see all of the components. I’ve spoken in the past about opportunities to create shareholder value and what we’re doing. Today’s announcement of our agreement to acquire Baja Broadband is another step in our quest to create value for the long-term. We are looking to improve TDS Telecom’s growth trajectory and profitability. We believe we can do so by adding rural cable and broadband to our portfolio. As Dave Wittwer will discuss later, the strategy capitalizes on what we do well, serve…

Thank you, Ken, and good morning. First on Slide 7, I’d like to review some of our major accomplishments in 2012. Let me start by saying our talented associates enabled U.S. Cellular to maintain its most important differentiator, outstanding customer experiences in a challenging economic and competitive environment. We’re very proud to be recognized again by both Consumer Reports and Forrester for the quality of our customer experience. In both studies we lead all other national postpaid providers. We also took actions to improve our competitive position by entering into an agreement to sell certain underperforming markets in the Midwest to Sprint. We believe this transaction will enable us to be stronger, more focused and over time more profitable. In our core markets which are the markets we will continue to operate upon completion of the divestiture transaction, we were able to increase postpaid gross additions and prepaid net additions through more effective marketing, advertising and promotions and expanded distribution through Wal-Mart. We also increased postpaid ARPU through a continued smartphone penetration and data adoption and by bringing 4G LTE to more of our markets. Importantly, we were able to work with our OEMs to introduce iconic devices like the Samsung Galaxy S3 at the same time as other carriers. Looking at the fourth quarter specifically, we achieved strong sales throughout the holiday selling period with a combination of iconic 4G LTE devices, competitive data plans and strong promotional offers. Now all that said we were challenged in the quarter and the full year by higher subsidies for 4G devices and by higher postpaid churn and I’ll talk in a moment about how we’re directing both of these issues. Now moving to Slide 8. I’d like to talk about our strategy to cell rate growth and improved profitability in 2013.…

Thank you, Mary, and good morning, everyone. In November, we announced that we are selling certain of our Midwest markets to Sprint for $480 million. Everything is moving forward with that transaction and we are confident that it will close by mid-2013. As we look at the company, we are focusing on the remaining markets which we consider core. As such, most of my comments today will focus on these core markets while the fourth quarter press release and the 2012 Form 10-K report provide the total company results. U.S. Cellular’s core market results for the quarter reflect a continuation of the trends that we have seen over the past several quarters. We improved postpaid gross additions but are still challenged with retaining postpaid customers in an extremely competitive marketplace. Prepaid gross and net additions improved significantly due to the success of our U Prepaid offering through Wal-Mart. So as shown on Slide 13 postpaid gross additions in the core markets were $218,000, up 4% from $209,000 last year. However, postpaid churn also increased resulting in a postpaid net loss of 16,000 customers for the quarter. Prepaid additions in the core markets were $38,000 up significantly from $6,000 last year and total retail net additions in the core markets were $22,000 compared to $4,000 last year. Next, we showed the trends in smartphone sales penetration and postpaid ARPU in our core markets. During the fourth quarter we sold 571,000 smartphones, which represented 63% of total devices sold. This compares to the fourth quarter of 2011 when we sold 447,000 smartphones or 53% of the total unit sold. 430,000, or fully 75% of the smartphones sold this quarter were 4G LTE devices. Smartphones now represent 41% of our postpaid subscriber base compared to 31% for the same period last year. While…

Thanks, Steve, and good morning, everyone. I’ll briefly highlight our accomplishments in 2012 and then outline our strategic priorities for 2013. I’ll also provide an overview of our intended acquisition of Baja Broadband, which we announced this morning and how it supports our strategy to grow profitably. First, I’ll discuss our performance against our residential strategy on Slide 22. TDS Telecom is focused on attracting broadband and video customers with competitive data speeds and video services. By the end of 2012, 95% of our ILEC access lines had data access and we were offering higher speeds in more markets. These network investments also enabled us to expand our proprietary video service, TDS TV, to a total of ten markets. This video service as well as the Dish Network service we offer in other markets enabled us to add more double and triple play bundled customers. Close to 95% of our TDS TV customers take all three of our services; video, data and voice. In our Commercial business, we continue to achieve strong growth in sales of our managed IP voice and data communications product and we expanded the product line to attract new customer segments. This product line enables small and medium businesses to improve their communications in a challenging economy without making capital investment. So they can focus more of their resources on serving their own customers. The Hosted and Managed Services business was the primary Commercial revenue driver and we continue to integrate our acquisitions to support operational efficiency and future growth. Following our acquisition of Vital Support Systems, we introduced an enterprise cloud solution, ReliaCloud, to capitalize on the increasing demand for secure and reliable outsourced IT services. As we have discussed on previous earnings calls, our revenues and profitability were impacted by reduced regulatory revenues. And…

Thanks, Dave. Good morning, everyone. As shown on Slide 26 our hosted and managed services segment drove TDS Telecom’s revenue growth through acquisition. The number of ILEC and CLEC connections and associated voice revenues continues to decline. However, growth in data, video and managed IP have replaced these losses. Declines in high margin regulatory and wholesale revenues however continue to outpace the gains these initiatives are producing. Consolidated cash expenses were up 14% for the period primarily due to acquisition effect but also due to costs associated with our IT system improvement activities, the expansion of IPTV and developing infrastructure and new products and services for HMS. Turning to Slide 27. In 2012 especially during the second half, we absorbed the initial impact of the FCC order and while we anticipate 2013, which will be the first full year of reform, will have a similar deficit, we are able to implement strategies to help mitigate these losses. Turning to Slide 28. I will discuss the CLEC and ILEC result on a combined basis. Residential revenues declined 1% due mainly to a reduction in residential connections. We saw 2% increase in commercial revenues driven by growth in connections and as expected wholesale revenues decline primarily as a result of changes in regulatory recovery due to the reform order; wholesale rates and an increase in the relative amount of VoIP traffic, coupled with the continued decline in intra-state minutes of use. Cash expenses which included one-time severance charges of $3 million were near even with last year. Cost to provision our network for TDS TV and super high-speed data were higher than we anticipated through the year. As a result we have re-scaled these efforts going forward by focusing on fiber builds in 2013 while selectively reconditioning the copper portions of our…

Thanks, Vicki. Operator, we’d like to take questions at this point.

[Operator Instructions] Our first question comes from Ric Prentiss with Raymond James.

A couple questions. First, on the Baja acquisition. On Slide 25 it kind of points out the $212,000 is home-path, $74,000 video, $56,000 broadband. Talk to us a little bit about why you think those markets had such low penetration? What you think you’ll be able to institute and how quickly, to kind of take those up? And what kind of margins are we looking at, there, today?

Dave, do you want to take the first part of that question?

Yes. Absolutely. I think when you look at the video penetration, what makes Baja unique is there is a high penetration of customers that are in homeowners associations. So excluding that, we think there’s room to increase video penetration. But quite frankly, we haven’t been overly aggressive in our planning, in terms of that. We understand all of the fundamentals relative to the satellite competition, et cetera. What we’re more excited about is the data penetration. Baja most recently rolled out DOCSIS 3.0 and so that broadband investment and that capability we believe has significant upside depending on whether you believe that ultimate 80% adoption or 85% adoption or whatever it is we believe there’s a significant opportunity there as well as they’ve been late with voice and we believe there’s a great opportunity to improve that at a reasonable level as well as commercial penetration.

So it sounds like it’s more that you’re not trying to go after satellite TV in those areas or homeowners associations but take somewhat advantage of satellite TV’s lack of a real data offering.

I think that’s fair.

Okay. And then, Ken, maybe you would pick up on this. So it’s $82 million on annual revenues. What kind of margins are we thinking about in this on whether you want to call it, OIBDA, EBITDA or EBIT or whatever we’re calling it these days?

We’re going to defer on the margin question until we update guidance closing at this point in time.

Okay. Second question on the U.S. Cellular side. We had some interesting statistics on the Canadian operator conference calls talking explicitly about iPhones but also Androids and the experience we’re seeing up north of the border there is sub 1% churn even 80 basis points of churn. Begs the question you guys have seen, good churn but not having the iPhone hurting you, is it something that you need to look at addressing this year?

Ric, it’s Mary. Certainly I would start by saying we’re really pleased with our add growth on the postpaid side and the overall net add growth on the prepaid side but churn is not at a level that we need it to be longer term and there’s multiple factors that certainly and we’re working on many of them and certainly the iPhone is more of the drivers of churn. And we know that our customer satisfaction scores remains strong but really competitive in the marketplace in many ways. So what we’re doing really is, I’d say, focusing on making sure that we offer great other iconic devices that we brought to the market this year at the same time as our competitors like the Galaxy S3 and the Motorola ELECTRIFY M and then we’re also continuing to expand our distribution points, be where people want to shop as well as we’re using some pretty sophisticated analytic tools to get at other drivers of churn and put CapEx in place that we think are helping to improve it. So we’re going to continue to work at reducing that churn certainly and that’s a key objective for us in 2013.

Okay. And then last question. Ken, probably back to you on one of your first slides you talked about monetizing the non-strategic assets and the divestiture markets, the towers and the spectrum. Can you talk a little bit about longer term the towers in the core markets? Are towers still considered strategic in your core markets? Is it really wait for the 4G LTE to be rolled out or kind of how you think about that 3,800 or so towers that are core and 550 towers or so that are divested?

Okay, Rick. No current change on our thinking around towers. The 565 I think is a number that are, in the divestiture markets, don’t fit the strategic label anymore and we are looking at different ways to drive value out of those but in terms of the core ones, I don’t see a change. I mean it’s possible that as we go through the monetization effort on the non-core ones we learn something that changes our thinking but right now our thinking is unchanged.

That makes sense. I mean it gives you kind of the no skin on the game experience of saying what did selling a tower do in the divestiture markets.

Good point.

Our next question comes from Michael Rollins with Citi.

First just a question for Mary and then I’ll move over to Ken. Mary, can you talk about as you look at your 2013 guidance, what’s embedded for your assumption in terms of the percent at smartphone sales in terms of that mix over the course of the year?

Michael, I will need to check that. We certainly are expecting to continue to increase penetration of smartphones in our base as well as the increasing shifts towards the LTE phones but let me get back through the specific on that, okay?

Okay. And then, Ken, if I could just ask a couple of questions. First, as you look at the acquisition, the cable acquisition for the TDS Telecom business, how does that affect your perception as to whether or not TDS Telecom is able to be a standalone entity and at some debt level, whatever you would choose, could be an investment grade credit? Does this transaction mean to be a stepped at ability forward for you guys?

Mike, as usual a very deep question. I don’t - we didn’t enter it as a way to make TDS Telecom a standalone entity. What we did is we entered this area quite frankly to leverage the capabilities that we have in that business to add another growth avenue for that business. I mean, it may have the effect that you suggest but it’s more about capitalizing all the assets that we have there today. In terms of investment grade -- from the conversations I’ve had with the agencies to date, this transaction isn’t large enough in and by itself to move the needle on about anything. All right. It’s a -- from the conversation I’ve had or have been reported to me, an interesting move, but it doesn’t move the needle.

And the other question is, can you review for us just how much cash availability is perceived by management and the board in terms of, if you look at the liquidity position of the company today, the target leverage ratio you’d want to use, the proceeds from pending asset divestitures and how does this transaction effect the use of that cash? And then the final part of that, if I could just throw in one other part, is how does the board decide whether to buy a cable asset at presumably some higher multiple to where the TDS business traded in total and where the sum-of-parts business for TDS Telecom may imply? Thanks.

Wow. Let’s start with the first thing, in terms of use of proceeds. When I think of use of proceeds, we’ve got two pools we’re dealing with. At the U.S. Cellular level where this divestiture transaction is going to be building even more cash, I don’t see it changing at all. As we’ve said, that is a board level decision. It’s one that we would expect to have a position on by the time we get to closing. It’s something that we’re working with the board on. And as the cash, primarily with that transaction and/or any follow-up monetization transactions billed at U.S. Cellular, that’s something that the board at U.S. Cellular will take a position on. Okay. So as we’re expecting that a little bit later this year, we’ll be back to you with that. At the TDS level, it’s a great question to get into, you’ve got a business that’s trading at one level of cash flow multiples and you’re looking at something else. That’s almost like a self-fulfilling prophecy, if we just keep looking at just TDS. All right. I mean TDS is where it’s at. It’s got a real strong balance sheet. We’ve got some real strong assets that we want to leverage and to do that, we have to do it with acquisitions. Acquisitions are going to be at whatever the market price is. Our view is, if we can find the right types of acquisitions that, by leveraging other assets, we can generate a return that is above what our cost of that money is, we will do those. And over time, we expect that those will show themselves through the income statement and the valuation that comes out of the street. We don’t control the last part. We control the first part of that equation.

And so is it fair then to say, Ken, that the decision to buy the cable assets is mutually exclusive from the proceeds that you’re getting at the wireless levels? So that the question would be whether the money you’re spending on the cable deal takes away from the use of that cash for whatever you decide at the wireless level. But what it sounds like you’re saying is maybe the decisions are actually separate and that this doesn’t change that opportunity in terms of how to use cash at the wireless level?

Absolutely.

Our next question comes from James Moorman with S&P Capital IQ.

Just got a question in regards to your billing migration. When you look at all the work you’ve done on the billing system, it sounds like it’s going to be done by the end of 2013. Do you kind of foresee that you might move to offer services, I guess similar to what AT&T and Verizon have done with kind of family of device type plans because they already they’ve had pretty high receptions and I think both are averaging around three devices per person. So is this an avenue that you may look to go to when you finish the billing system?

Yes. I would say that one of the great things about this new billing system is the ability to be more flexible in bringing things to the marketplace so I’ll just ask Dave to add to that and what we plan to do.

This is Dave Kimbell. Absolutely we’re exploring a number of different options as we think about the new capabilities our billing system will enable for us including a family data or shared data type program that we would expect to have in place in time for the holidays this year and we anticipate that having a real positive impact on our ARPU across the business.

[Operator Instructions] Our next question comes from Ric Prentiss with Raymond James.

We’re not busy enough today. I got to keep it going. Couple more if I could. On the Midwest market divestitures, can you update us on the process of getting that approved? It’s a very crowded FCC/DOJ right now obviously with T-Mobile and PCS, Sprint-Softbank, Sprint Clearwire, maybe DISH Clearwire, ATI selling the Alltell asset to AT&T. Just maybe an update and of course the new presidential election occurred and now an FCC change out might be occurring. How do we think through the process of how long to take to close that transaction?

So, Ric, this is Steve. We’re actually pretty pleased with what we’ve been hearing on the regulatory front. We have had a number of discussions, both with the Department of Justice and the FCC. We at this point, based on informal advice, expect that we may get clearance in the next 60 days or so, maybe sooner. And so we think we’re on track to close this transaction by mid-year as we’ve said. Those informal discussions have indicated that our transaction probably doesn’t get caught up in the swirl with some of those other major transactions. So in summary we’re pretty pleased with what we’re seeing. We don’t think the regulatory approvals, from what we know now, are going to be an impediment at all to getting closed by mid-year.

That’s great news actually. And then, maybe, Mary, for you. A lot of discussion in looking at T-Mobile’s thoughts about financing or installment, however you want to frame that as far as handset price might be in the future. The Canadians have some different ways of they doing it. What are your thoughts about handset pricing and what changes that are might be coming to the U.S. and what you’ve looked at?

Yeah, Ric, I would just say we’re certainly looking at that very closely. It’s certainly a pretty fluid topic and an interesting one. Handset subsidies are still quite popular with our base. Getting them to shift to a different mindset may be a challenge but it’s something we’re interested in and we are exploring.

And then final one, back on the cable side. How much due diligence have you guys done on the properties on the network quality? We’ve seen some other telecom companies buy into the cable extension of core competency and then find that, oh my gosh, there’s more CapEx and OpEx spending than we thought when we bought the thing. How comfortable are you that the CapEx has been spent and is there any indication what the CapEx might be once you buy Baja?

Dave?

Yes, I would tell you that whenever TDS buys something, Ric, sellers always tell us no one else has ever asked for that. We’re an extremely thorough buyer. We obviously operate a network intensive business so we understand that. One of the key things that we look for is obviously understanding the customer quality. Understanding the demographics and the growth potential but more importantly what the network capability is today as well as how the network has been engineered and built for future growth. So we spent time in market, we spent time with their information to do that. We’ve hired external engineers to help us. And now post definitive agreement, we’re actually going to be contracting with a firm who will be doing some additional testing beyond the testing that we did. So we’re pretty comfortable with it and we understand they’re not all created equal. You have to be very careful. And I think TDS is a very careful buyer.

Right. And then thoughts about what level of CapEx intensity might be required there?

This is Vicki. We’re not disclosing that number right now. As Dave said, we’ve got a lot more to look at, but we certainly have included that estimate into our evaluations. As you know, the plant’s recently been upgraded, so our capital requirements that we see are more modest and I think going forward, there is a plan around to reduce the number of head-outs and so we’ve made provisions in our analysis. So we’re excited about the returns that we’re going to see from this business.

Nothing - the stuff that we’ve seen there, Ric, suggests a need for what I would call, out of line levels of capital spending. They are -- they’ve been in an investment mode and we’re now acquiring this to capitalize on some of those investments.

That’s what I was getting at, Ken. It was just that I was getting the sense that you were coming in after that money’s been spent, so it should be kind of more normal course with the upside of being able to sell into that asset that’s been built.

And quite frankly, capitalize on Telecom’s experience with their bundling success.

Right. Right. And I appreciate the comments back earlier, because if the wireless Midwest market’s been closed in 60 days back to Mike’s comments about is TDS separate from USM, I think a lot of investors are trying to figure out what is happening with the proceeds from the Midwest market sale, so it helped having that kind of bright line clarity of USM is somewhat different than TDS on the spending.

Okay, Diego. I think we’ve reached the end of our time this morning. So thank you, everyone, for joining us and if you have follow-up questions, please reach out to us. Thanks so much.

Thank you. Ladies and gentlemen, this does conclude today’s conference. All parties may disconnect. Have a great day.