Greetings and welcome to the TDS and U.S. Cellular Second Quarter Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. I would now like to turn the conference over to your host today, Ms. Jane McCahon, Vice President, Corporate Relations for TDS. Please go head, ma'am.

Thank you, Latonya. Good morning everyone 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 Relations sections of the TDS and U.S. Cellular websites. With me today and offering prepared comments from U.S. Cellular, Ken Meyers, President and Chief Executive Officer; Steve Campbell, Executive Vice President, Finance and CFO; and from TDS Telecom, Vicki Villacrez, Vice President Finance and CFO. This call is being simultaneously webcast on the TDS and U.S. Cellular Investor Relations websites. Please see those websites for slides referred to on this call, including other non-GAAP and operating cash flow, adjusted EBITDA reconciliations. The information set forth in the presentation and discussed during this call contains statements about expected future results and financial results that are forward-looking, and subject to risks and uncertainties. Please review the Safe Harbor paragraph in our press releases and the extended versions included in our SEC filings. Shortly after we released our earnings and before the call, TDS and U.S. Cellular filed SEC forms 8-K, including today's press releases, and their SEC forms 10-Q. TDS will be presenting at the Drexel Hamilton Conference in New York on September 9th and we will be hosting analyst meetings at CTIA in Las Vegas on September 10th. TDS will also be in Europe the week of September 28th. And please keep in mind that we have an open door policy, so that if you are ever in the Chicago area not necessarily for Lollapalooza but if you'd like to meet with members of management, the IR team will try to accommodate you, calendars permitting. Now, I'll turn the call over to Ken Meyers.

Good morning and thanks for joining us today. I'm glad to have this opportunity to talk about our second quarter results, a quarter that showed continued growth in our customer base, the top line and on the bottom line, whether you're talking about operating cash flow, adjusted EBITDA or net incomes and earnings per share. The highlights for the quarter, include continued customer growth primarily due to a significant improvement in postpaid churn. This quarter, postpaid churn was 1.34%, a level not seen in eight years. As a result of the churn improvement, we generated 17,000 net adds compared to losing 26,000 lines a year ago and effectively flat gross adds. As Steve will discuss the adds are primarily data centric devices like smartphones and tablets which are taking advantage of our extensive LTE coverage. Gross adds are flat year-over-year or lower than we would've liked driven by declines in consumer traffic in our stores and across electronic retailers generally. So, driving the same level of gross adds on a year-over-year basis despite declines in traffic is a good achievement. We need more to continue to grow our customer base. This means maintaining the low churn levels like we are now seeing and increasing gross adds. This strategic imperative is a driver towards best value positioning. In addition to this position, we continue to run tablet promotions from time to time to simulate store traffic and increase customer satisfaction by giving customers more ways to capture the value they receive from our wireless service. This quarter, connected devices represented 32% of postpaid gross additions or 36,000 net adds. Connected device penetration is now above 9% of our customer base. We have also seen success increasing high margin revenue streams through device protection plans to activation fees and accessory sales. Equipment…

Thanks Ken, and good morning, everyone. I'll begin with a few comments on customer results shown on Slide 6. Postpaid gross addition for the second quarter of 2015 were 191,000, essentially flat with the results of a year ago. Postpaid churn was one of the real highlights for the quarter, 1.34% down from 1.73% last year. I'll say more about postpaid churn in a minute. Due to both higher gross additions and improved churn we achieved postpaid net additions of 17,000 for the quarter. A solid improvement from the net loss of 26,000 postpaid customers a year ago. The mix of our postpaid gross and net additions in the second quarter is shown in the chart at the bottom of the slide. Smartphones represented 60% of gross additions and connected devices represented 32%. These two categories of devices also drove the amount of additions. Prepaid subscriber results also were improved over the year ago. We had 8,000 net additions versus 4,000 net loss last year, while churn improved to 5.2% from 6.5%. The next slide has a chart showing the trend in the postpaid churn rate over the past nine quarters. As you can see, the churn rate has steadily declined over the past several quarters from a high point of 2.29% in the first quarter of 2014 to 1.34% for this past quarter. To repeat Ken's comment earlier, the last time that we reported churn this low was in the first quarter of 2007, more than eight years ago. As stated earlier our gross additions consists primarily of data centric devices with smartphones being the largest component. To shed further light on this activity, Slide 8 shows the trends in smartphone sales and penetration. This drove smartphone penetration to 69% of our base of postpaid handset customers up from…

Thank you, Steve and good morning, everyone. TDS Telecom had a sold quarter as we continued to execute on our strategic priorities. For the wireline and cable segments, that means we continue to focus on owning the best price in the market and using that advantage to grow high margin broadband services bundled with our video and voice products. For the HMS segment, we continue to execute the vision we have for profitably serving the ITL sourcing needs of midmarket customers. In our wireline business we continued our focus on providing high-speed data services and related products, which has led to growth and IPTV connections. Our IPTV product called TDS TV leverages our high speed network. TDS TV has been launched in 20 markets enabling 147,000 service addresses or roughly 20% of our total footprint. We expect to launch an additional seven markets over the remainder of 2015 and we are very pleased with the success of our IPTV deployments and will continue to make fibre investments to achieve our goal of approximately 25% of our ILEC service addresses. As a result of continually reviewing all of our operations we agreed to sell three small ILEC territories in North Carolina. Our cause and demographic metrics in these markets did not support the capital investment required to be the most competitive data service provider in these markets going forward. Also on the quarter we continued to move forward with the integration of our cable businesses to further position us for growth and increase broadband penetration and Baja, we've increased the capacity on our broadband network and rolled out new products to improve the customer experience. We've also rebranded our Baja cable markets as TDS for both current and prospective customers. Our recent improvements in the network and product offerings in these…

Thanks Vicki, we also have Jay Ellison, Mike Irizarry and Doug Shuma in the room with us for Q&A. So, operator, we'd like to open up the call for questions at this point.

[Operator Instructions] Our first question comes from Rick Prentiss with Raymond James. Please proceed with your question.

Great. Good morning guys. Obviously very impressive growth on the guidance, really driven by a lot of margin improvement. As you guys think about your path on margins, what else can be done to improve margins and where do you see it heading on the U.S. Cellular side?

Good morning, Rick. Thanks for the question. Given where our margins are now, we've got more work to do, right. More work as well as, we've got to continue to grow revenue first and foremost just given our size, so that's the focus on continuing to grow our customer base and put more products and services on that customer base. At the same time, we continue to work on our cost structure across the whole organization. Everybody in the organization is focussed on that with the objective of continuing to grow margins going forward. Now, we always have different quarters, when we get to the fourth quarter the typical promotional activity, but if we look at it on a year-over-year basis, we have to continue to improve margins.

Okay, and one of the other key drivers of that can be the EIP. I think I heard in the prepared remarks 42% of sales for EIP. It seems to be the industry is moving heavily that way. Where do you see that headed and how could it effect margins?

So, a two part question. In terms of where it's headed, I don't know. It's just that I don't know and the consumers are continuing to pick what plans work best for them. We're at 42% and we aren't driving one over the other, except I think what you will see is perhaps a bifurcation with EIP being extremely attractive to customers as well as to companies and high-end phones and maybe that is effective on lower cost handsets. In terms of the economics, it's a fascinating question, because we always get this one. What would it be if not or, which at a certain level is unanswerable and also what's a really company specific answer, it's a function of how long the financing period is, what their accounting rules, that they have to apply are and in our case, because we have an option for an upgrade after 12 months are only booking a portion of that revenue on the front end. Now, when we work through it this quarter, it had a very minimal impact, like that's arguable whether it's more than a couple of million dollars either way. So, there's a lot of talk about this, but when you, in our case, look at where we are today, I mean, been at it for a year and the percentage of customers and then amount of gross adds and everything else and put it all together, it has a real nominal effect on us right now.

Last question I've got for you is maybe for Jay. From the standpoint of the iPhone. We have the iPhone messaging that you guys have started a new ad campaign, you've had the phone now for kind of a year and a half going on two years. How is the messaging going as far as we know, you have it and to come back?

Yeah, that's a great question. We started our first iPhone TV campaign several months ago, actually in the beginning of this quarter and we are seeing both an improvement of awareness within our customer base of us carrying the iPhone and additionally our non-customers through all of our work on consideration we are seeing again, driven very largely by our TV campaign in conjunction with Apple on our non-customers, awareness of having the iPhone. So, we are very happy with that campaign as well as all of our homework that we have been doing with Apple. So, we're seeing very good progress in that area.

Great. Thanks guys.

Our next question comes from Sergey Dluzhevskiy with Gabelli & Co. Please proceed with your question.

Good morning, guys. First question for Ken on the broadcasting spectrum option. So, it looks like the [indiscernible] can take place in the third quarter of negative or what are your expectations for that option and I do believe there will be sufficient broadcast [indiscernible] given what you're hearing now.

So, to the first part of the question. I'm hearing the same thing you're hearing. We've got a date out there at the end of March and we are on a March right toward that March date. He is pretty clear that he's going to try to get that done and everything is lining up for that. Having said that, this is about the most complex of auction one can imagine with both the forward and reverse auction. A lot of the work is being down even at the industry level trying to help broadcasters understand the opportunity in the hopes of freeing up enough spectrum because I think everybody is pretty aligned with the data group that we've seen and we continue [indiscernible] that spectrum is going to be a very, very critical asset going forward. We need more of it and this is our next best chance at it. So, I'm hopeful that we're going to see a good auction from the standpoint of meaningful participation from the broadcasters so that we can continue to provide the services that consumers and businesses are just clambering for.

Okay. Another question on the wireless side on mobile videos, so Verizon is planning to launch mobile focussed [indiscernible] mobile video game as well. So, those are two of your main wireless competitors. What are your thoughts on mobile video? What is your strategy and do you see opportunities maybe to partner with fixed broadband providers or cable providers in your wireless markets to potentially combat some of those offerings from your competitors?

Great question, Sergey. Exactly how the -- I'm going to call branded video plays out is something we're watching very carefully. My initial response is that there are so many outlets, consumers have today for many different sources of video that, if you try to do a branded one, you're really coming up with a more limited opportunity than they already have. I mean, with all of the different apps whether it's the -- a cable company's app, whether it be Netflix, whether it be Hulu, there are so many different ways that consumers can get in it today that I don't know how well a narrowly defined branded one's going to work, but it's one that we will watch very carefully.

One question on TDS corporate side. There were no repurchases in the second quarter, and so, essentially in the first half, I guess, this question is towards, Doug, so how should I think about the buyback trajectory for the balance of the year and maybe you could comment on some of the reasons in general why you haven't had buybacks in the first half.

Yeah Sergey, good morning. This is Doug. I think we've always said we've been pretty consistent with our capital allocation strategy. We've had the long term objective and there are going to be points in time where there's a short come swing for a lot of reasons. Having said that, I think we're tracking very closely to the 75%, 25% ratio investments in the business versus distribution to shareholders. Some of those things, as we think about obviously, we have an upcoming spectrum auction, we still have our M&A objectives that we are pursuing. So, right now, we want to maintain a lot of financial flexibility. As far as predicting what the back half of the year is, I'm not going to touch that one, because we just don't know what it's going to be.

Okay, and I guess, in terms of M&A objectives, this is also either for Doug or for Vicki. So, in May, I think we saw a new company get into the U.S. cable [indiscernible] 9 times EBITDA, and [indiscernible] probably look for additional consolidation opportunities after the deal closing, so, how -- I mean, what are you seeing out there in terms of cable deal pipeline available for TDS Telecom and [indiscernible]?

So, I'll take that one Sergey. Good morning. I think Altice jumping into the U.S. market, I mean, I think it says a couple of things. One, obviously it's a competitive market for the cable industry and it says it's an attractive one. We are, I certainly can't comment on any specific potential transactions until definitive agreements are in place, but I can say that, we still are bullish on the cable business and we're actively pursuing additional cable acquisitions.

Okay, thank you.

Our next question comes from Barry Sine with Drexel Hamilton. Please proceed with your question.

Good morning, folks. Question on the wireless business on U.S. Cellular. I noticed in your website that you're featuring a promotion where you will undercut the pricing of AT&T and Verizon, but if I look at your publish rates that are on your website, I don't see that much of a difference. Could you kind of elaborate on what you're doing? How much are you undercutting and how much is that impacting ARPU in the quarter?

In the quarter, very, very little. The promotion has just been launched and our strategy fits right underneath Verizon, and what we've got at play here is we don't have the same reach that their national advertising has nor do we have the name awareness. So, in order to get into the consideration you've got to offer the customer something to bring them into the store, and to date, it's had almost no impact on ARPU. I don't expect it to have a significant impact going forward either.

Okay, and then, why not touch on churn. You mentioned a very, very good result and we're seeing that across the industry. I guess that cuts both ways though. On the one hand, it makes it harder for you to win back customers you've lost in recent years as your -- now that you have the network and the quality to back up the stuff. On the other hand, I guess it makes maintaining your base easier and perhaps you want to focus more on getting more revenue out of that base and we talked about adding video to the pack and so on. What's your thoughts as churn becomes lower and lower in the industry on how you continue to grow revenue and EBITDA on this business?

Barry, giving me an easy one? That is clearly a challenge and there are, as you said, there's two types to it. On the churn side, driving customer satisfaction and building loyalty and getting greater share of wallet is one of the strategic underpinnings of this Company and everybody else out there, okay, and we've got marketing programs, aimed at doing that and we've got programs that can execute it in our stores, every time a customer comes in and through our customer contact centres. At the same time just given where we sit today in terms of our size, we need to grow more than just through that additional share of wallet. So, tablets and things like that are all things that expand the share of wallet, but we need to add more wallets. That's behind kind of the pricing position that we've got there. We're getting some traction. We're still seeing 20% to 25% of our gross adds in any quarter, our customer's returning to us, every day is another story. The business that they have left us a couple of years ago because we didn't have a certain device in our line-up but are now off their contract and coming back to us. We need to continue to drive that migration also.

Okay, and my last question. You mentioned that you've now assigned an LTE roaming agreement. Wondering if you could elaborate on that. When does that start? It sounds like you're not able to reveal who the customer is, although there's only so many, I guess, choices there.

At the right time we will. Where we're at right now is -- yes we're in the implementation stages. That implementation takes work by the respective engineering organizations to connect because of the way this data flows on the network as opposed to what voice does and we expect to be launching that to our customer base within the next 60 to 90 days and there are other changes in connection with that. So, when we get there, we'll make a larger announcement, but it's just the first of what I expect to be multiple. We're working on others every day.

And should that positively impact your inbound roaming revenue?

I don't know that it's going to have much of an impact right away. These things take time for a customer -- for companies to move their customers and everything else. I think it's going to have a more direct impact on our customers' experience going forward.

All right. Thank you very much.

Our next question comes from Simon Flannery with Morgan Stanley. Please proceed with your question.

Great. Thank you very much. Good morning. Vicki it was nice to see some of the wireline broadband momentum. It was in stark contrast to what we saw out of the bells over the last couple of weeks and certainly cable seems to be having a very good quarter. So, can you just talk about what's going on, on the ground in sort of the broadband wars and what you're -- I think you gave us some snaps on the take rates, so it looks like people are going up to higher speeds, but how are you winning versus the cable companies? Then I'm not sure, maybe this is for Doug, but TDS' equity have outperformed U.S. Cellular maybe 20% or so this year, so, is there any consideration down the road of revisiting potentially collapsing the corporate structure and revisiting buying in the minority? Thank you.

Yeah Simon, I'll go first. On the wireline broadband side, yes, we saw some nice growth in the second quarter and it's driven for two parts. One is our investment that we're making in fibre, in our most attractive markets. That is really driving nice growth, not only in the IPTV, but in the broadband as well and we're seeing over 95% of our customers that are taking IPTVs are taking a triple-play. So, they're taking all three services. The second part of that equation is really the growth of being driven by a broadband stimulus market, the investments that we've made in -- we've finished 43 of our 44 markets and so we're seeing really nice growth there, and as we look forward, we are working on our bonding strategy, which will also provide upgraded broadband speeds across our wireline.

Then Simon, I'll take part two of that. Good morning. Yeah, as far as [indiscernible] from the capital structure there's absolutely nothing imminent. If there were, we would've had to disclose that to you. Having said that, we get that question a lot and it's something we do think about and it's something we keep our eyes on and analyse periodically. So, if there's any plans we will let you know.

Our next question comes from Arun Chandra with Credit Suisse. Please proceed with your question.

Hi, thanks for taking my questions. First, just wanted to ask in terms of the LA partnership and just wanted to figure out what the timing would be for the resumption of the dividends?

I'm sorry. You're going to have to say that again. I didn't hear you.

Oh sorry. The LA partnership, just wanted to understand what the timing would be for the resumption of the dividends?

Well there's not specific time, if I look at the historical distributions out of there, our estimate is end of 2016 is probably the most likely scenario.

Got it. Thank you and then, as far as sort of EBITDA margin improvement potential, how should we think about sort of your margin expectations? Are you managing towards any specific targets on EBITDA margins in the wireless side?

I've got a lot of them, very specific targets. When asked earlier today I didn't give a number. I'm going to stay behind that wall to your question too. We've got a job to do, which is we need to improve our margins and we've got our whole organization allied around that and continue to march forward on a year-over-year basis and that's commitment, but I don't have a number for you.

Okay great and I appreciate that and then finally, as far as spectrum -- potential spectrum purchases in IP, at the broadcast auction, any color in terms of how you expect to fund that at this point?

I think that we've already talked about drawing down a term loan we put in place, and that was done in preparation of the upcoming option, yeah. We got an unused line of credit on top of that, that Steve had mentioned in his comments. Those are the most likely sources that we'd be using.

Okay so between the borrowings if you've already down in your term loan as well as your remaining availability, you'd think that should be sufficient at this point?

At this point, yes sir.

Great. Thank you.

Thank you. At this time, I would like to turn the call back over to management for closing comments.

Great. Again, thanks for joining us today and if you have follow up questions, please let us know. Have a great weekend.

This concludes today's teleconference. You may disconnect your lines at this time and have a great day.