UNITED STATES

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K(Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to

Commission file number 001-14157

TELEPHONE AND DATA SYSTEMS, INC.(Exact name of Registrant as specified in its charter)

Delaware 36-2669023(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (312) 630-1900

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registeredCommon Shares, $.01 par value New York Stock Exchange6.625% Senior Notes due 2045 New York Stock Exchange6.875% Senior Notes due 2059 New York Stock Exchange7.000% Senior Notes due 2060 New York Stock Exchange5.875% Senior Notes due 2061 New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Yes NoIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [x] [ ] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. [ ] [x] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

[x] [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter per iod that theregistrant was required to submit and post such files).

[x] [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, tothe best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.

[x]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the ExchangeAct.Large accelerated filer [x] Accelerated filer [ ]Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [ ] Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Yes NoIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] [x]

As of June 30, 2017, the aggregate market values of the registrant’s Common Shares and Series A Common Shares held by non-affiliates were approximately $2 billionand $3 million, respectively. For purposes hereof, it was assumed that each director, executive officer and holder of 10% or more of any class of voting equity security ofTelephone and Data Systems, Inc. (TDS) is an affiliate. The June 30, 2017, closing price of the Common Shares was $27.75 as reported by the New York StockExchange. Because trading in the Series A Common Shares is infrequent, the registrant has assum ed for purposes hereof that each Series A Common Share has amarket value equal to one Common Share because the Series A Common Shares are convertible on a share-for-share basis into Common Shares.

The number of shares outstanding of each of the registrant’s classes of common stock, as of January 31, 2018, is 103,861,000 Common Shares, $.01 par value, and7,258,000 Series A Common Shares, $.01 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Those sections or portions of the registrant's 2017 Annual Report to Shareholders (Annual Report), filed as Exhibit 13 hereto, and of the registrant’s Notice of AnnualMeeting of Shareholders and Proxy Statement (Proxy Statement) to be filed prior to April 30, 2018, for the 2018 Annual Meeting of Shareholders scheduled to be held May24, 2018, are herein incorporated by reference into Parts II and III of this report.

 Telephone and Data Systems, Inc.

Annual Report on Form 10-K

For the Period Ended December 31, 201 7

TABLE OF CONTENTS

  Part I Page No.

Item 1. Business 1 Item 1A. Risk Factors 14 Item 1B. Unresolved Staff Comments 27 Item 2. Properties 27 Item 3. Legal Proceedings 27 Item 4. Mine Safety Disclosures 27

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities

28

Item 6. Selected Financial Data 28

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 28 Item 8. Financial Statements and Supplementary Data 28 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 28 Item 9A. Controls and Procedures 29 Item 9B. Other Information 29

Part III Item 10. Directors, Executive Officers and Corporate Governance 30 Item 11. Executive Compensation 30

Item 12. Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters

30

Item 13. Certain Relationships and Related Transactions, and Director Independence 30 Item 14. Principal Accountant Fees and Services 30

Part IV Item 15. Exhibits and Financial Statement Schedules 31

Item 16. Form 10-K Summary 37

Table of Contents

Telephone and Data Systems, Inc.30 NORTH LASALLE STREET, SUITE 4000,CHICAGO, ILLINOIS 60602TELEPHONE (312) 603-1900

PA RT IIt em 1. BusinessTelephone and Data Systems, Inc. (TDS) is a diversified telecommunications company providing high-quality communications services to customers withapproximately 5.1 million wireless connections and 1.2 million wireline and cable connections at December 31, 2017 . TDS conducts all of its wirelessoperations through its majority-owne d subsidiary, United States Cellular Corporation (U.S. Cellular). As of December 31, 2017 , TDS owned 83% of thecombined total of the outstanding Common Shares and Series A Common Shares of U.S. Cellular and controlled 96% of the combined voting power of bothclasses of U.S. Cellular common stock. TDS provides broadband, video, voice and hosted and managed services, through its wholly-owned subsidiary, TDSTelecommun ications LLC (TDS Telecom). TDS was incorporated in 1968 and changed its state of incorporation from Iowa to Delaware in 1998. TDSCommon Shares trade under the ticker symbol “TDS” on the New York Stock Exchange (NYSE). U.S. Cellular Common Shares trade on the NYSE under theticker symbol “USM.”

Under listing standards of the NYSE, TDS is a “controlled company” as such term is defined by the NYSE. TDS is a controlled company because over 50% ofthe voting power for the election of directors of TDS is held by the trustees of the TDS Voting Trust.

Through December 31, 2017, TDS had four business segments: U.S. Cellular and TDS Telecom’s Wireline, Cable, and Hosted and Managed Services (HMS)operations. TDS operations also include the wholly-owned subsid iary Suttle-Straus, Inc. (Suttle-Straus). Suttle-Straus’ financial results were not significant toTDS’ operations. All of TDS’ segments operate only in the United States, except for HMS, which includes an insignificant foreign operation.

TDS has re - ev aluated internal reporting roles with regard to its HMS business unit and, as a result, will be changing its reportable segments. Effective January1, 2018, HMS will be considered a non-reportable segment and will no longer be reported under TDS Telecom. This change will enable TDS Telecom tocontinue to successfully execute on the Wireline and Cable segments’ shared strategy to be the preferred service provider in its markets. Additionally, HMS willbe able to leverage TDS’ Corporate IT resources, to im prove operations and customer service, and better position itself for growth. Additional information aboutTDS’ segments is incorporated herein by reference from Note 18 — Business Segment Information in TDS’ Annual Report to Shareholders, filed as Exhibit 13hereto.

1

Table of Contents

The map below highlights TDS’ consolidated areas of operations:

2

Table of Contents

U.S. CELLULAR OPERATIONSGeneral

U.S. Cellular, incorporated under the state laws of Delaware in 1983, provides wireless telecommunications services to customers with approximately 5.1million connections in 22 states collecti vely representing a total population of 32 million. U.S. Cellular operates in one reportable segment, and all of itswireless operating markets are in the United States. U.S. Cellular’s strategy is to attract and retain wireles s customers through a value proposition comprised ofa high-quality network , outstanding customer service, and competitive devices, plans and pricing, all provided with a local focus.

Customers, Services and Products

Customers.U.S. Cellular provides service to postpaid and prepaid customers from a variety of demographic segments. U.S. Cellular focuses on retailconsumers, government entities , and small-to-mid-size business customers in industries such as construction, retail, agriculture, professiona l services and realestate. These customers are served primarily through U.S. Cellular’s retail and direct sales channels. U.S. Cellular builds customer loyalty by offering high-quality network services, outstanding customer - foc used support services, com petitive pricing, and other benefits as discussed further in “Marketing, CustomerService, and Sales and Distribution Channels.”

Services.U.S. Cellular’s customers are able to choose from a variety of national plans with voice, messaging and data usage o ptions and pricing that aredesigned to fit different customer needs, usage patterns and budgets. Helping a customer find the right plan is an important element of U.S. Cellular’ s brandpositioning . In early 2017, U.S. Cellular introduced new Total Plans to postpaid customers that include unlimited offerings and no hidden fees such as overagecharges and activation fees. Business rate plans are designed to meet the unique needs of the business customer. U.S. Cellular’s national plans price alldomestic calls as local calls, regardless of where they are made or received in the United States, with no long distance or roaming charges , made possible byroaming agreement s with other wireless carriers . See “Network Technology, Roaming, and System Design” sect ion below for further discussion related toroaming.

U.S. Cellular’s portfolio of smartphones, tablets and other connected devices is a key part of its strategy to deliver wireless devices that allow customers to stayproductive, entertained and connected on the go ; these devices are backed by U.S. Cellular’s high-speed networks, including a fourth generation ( 4G ) Long-Term Evolution ( LTE ) network. U.S. C ellular’s 4G LTE network features smartphone messaging, data and internet services that allow customer s to accessthe web and social network sites, e-mail, text, picture and video message, utilize GPS navigation, and browse and download thousands of applications tocustomize their wireless de vices to fit their lifestyles. U.S. Cellular also offers advance d wireless solutions to consumers and business and governmentcustomers, including a growing suite of connected machine - to - machine (M2M) solutions and software applications across the categories of monitor andcontrol (e.g. , sensors and cameras), business automation/operations (e.g. , e-forms), communication (e.g. , enterprise messaging, back-up router for businesscontinuity services) and asset management (e.g. , telematics, fleet management). U.S. Cellular intends to continue to further enhance these offeri ngs forconsume r and business customers in 2018 and beyond.

DevicesandProducts.U.S. Cellular offers a comprehensive range of wireless devices such as handsets, tablets , mobile hotspots, home phone s androuters for use by its customers. U.S. Cellular offers wireless devices that are compatible with its 4G LTE and third generation ( 3G ) networks and arecompliant with the Federal Co mmunications Commission (FCC) enhanced wireless 911 requiremen ts. In addition, U. S. Cellular also offers a wide range ofaccessories, including wireless basics such as cases, screen protectors , chargers, and memory cards as well as an assortment of consumer electronics suchas headphones, smart speakers, wearables and home automation p roducts (e.g., cameras, sensors, and thermostats) .

Throughout 2017, new postpaid handset sales to retail consumers were made under equipment installment plans (EIP) only; business and governmentcustomers may continue to purchase equipment under alternat ive plans subject to a service contract. For certain inst allment plans, after a specified period oftime or number of payments , the customer may have the right to upgrade to a new device prior to reaching the end of the installment term , thus enabling customers to access the latest smartphones and provide a bet ter overall customer experience.

During 2017, U.S. Cellular began to offer accessories for purchase on installment plans. These plans allow new and existing postpaid customers to purchasecertain a ccessories payable over a specified time period. These accessory installment plans are available through U.S. Cellular company-owned retail stores,telesales channels, and agent channels using direct fulfillment with U.S. Cellular’s inventory.

U.S. Cel lula r continues to offer device service programs that provide customers a simple process to replace a defective device via direct mail. U.S. Cellularalso offers its Trade-In program where U.S. Cellular buys consumers’ used equipment, Device Protection+ progr am , which includes overnight delivery of areplacement device for damaged, lost and stolen devices , Device Protection+ Advanced, which includes 100GB of data backup, TechSupport+, and AppleCareservices for Apple iOS customers.

3

Table of Contents

U.S. Cell ular offers a full array of iconic smartphones with options for both Android and iOS customers. U.S. Cellular continues to bolster its expandingsmartphone portfolio with the Samsung Galaxy S® 8/8+ , the iPhone® 8 and 8 Plus and X , the LG G6, V 30 and K8, and the Motorola Z F orce . Along with theiconic devices, U.S. Cellular supports the larger ecosystem of Samsung and Apple devices, such as the Samsung Gear VR, the Samsung Gear S 3 and theApple Watch Series 3 . For tablets, U.S. Cellular offer s the full complement of iPads, the Samsung Galaxy Tab S 3 and various other tablets from LG,Samsung, and ZTE. U.S. Cellular’s smartphone offerings play a significant role in attracting customers and driving data service usage and revenues. U.S.Cellular also offers additional services and products that utilize the company’s network, including feature phones, mobile hotspots, LTE wireless routers andhome phones.

U.S. Cellular purchases wireless devices and accessory products from a number of original eq uipment manufacturers, including Samsung, App le, Motorola,LG, Kyocera, ZTE, Tessco and Superior . U.S. Cellular also has relationships with its suppliers to ensure best possible pricing and identifies opportuni ties forpromotional support. U.S. Cellular does not own significant product warehousing and distribution infrastructure; rather, it contracts with third party providers forthe majority of its product warehousing, distribution and direct customer fulfillment activities. U.S. Cellular also contract s with third party providers for servicesrelated to its device service programs.

U.S. Cellular continuously monitors the financial condition of its wireless device a nd accessory suppliers. Since U.S. Cellular has a diversified portfolio ofproducts from more than one supplier , U.S. Cellular does not expect the financial condition of any single supplier to affect its ability to offer a competitiveportfolio of wireless devices and accessories for sale to customers.

Marketing, Customer Service, and Sales an d Distribution Channels

MarketingandAdvertising.U.S. Cellular’s marketing plan is focused on acquiring, retaining and growing customer relationships by maintaining a high-qualitywireless network, providing outstanding customer service, and offering a comprehensive portfolio of services and products built aroun d customer needs at fairprices with a local focus. U.S. Cellular believes that creating positive relationships with its customers enhances their wireless experience and builds customerloyalty. U.S. Cellular currently offers several customer-centric programs and services to customers.

To attract potential new customers and retain existing customers, and increase their usage of U.S. Cellular’s services , U.S. Cellular’s advertising is directed atincreasing the public awareness of the U.S. Cellular brand, knowledge of the outstanding network that works in places where other carriers do not havecoverage, and understanding of the wireless services it offers. U.S. Cellular supplements its advertisi ng with a focused public relations program that improvesoverall brand sentiment and awareness, encourages engagement , supports sales of services and products , and builds preference and loyalty for the U.S.Cellular brand . The approach combines national a nd local media relations in mainstream and social media channels with market-wide activities, events, andsponsorships.

U.S. Cellular focuses its charitable giving on initiatives relevant to consumers in its service areas. These initiatives include progr ams that focus on STEM(Science, Technology, Engineering and Math) activities for youth in the communities U.S. Cellular serves and often involve collaboration with organizations suchas the Boys and Girls Clubs of America.

CustomerService.U.S. Cellular manages customer retention by focusing on outstanding customer service through the development of processes that arecustomer-friendly, extensive training of frontline sales and support associates and the implementation of retention programs.

U.S. Cellular currently operates four regional customer care centers in its operating markets with personnel who are responsible for customer service activities,and a national financial services center with personnel who perform credit and other customer payment activities. U.S. Cellular also contracts with third partiesthat provide additional customer care and financial services support.

SalesandDistributionChannels.U.S. Cellular supports a multi-faceted distribution program, including retail sale s, direct sales, third-party national retailers,and independent agents, plus a website and telesales.

Company retail store locations are designed to market wireless services and products to the consumer and small business segments in a setting familiar tothese types of customers. As of December 31, 2017 , retail sales associates work in 256 U.S. Cellular-operated retail stores and kiosks. Direct salesrepresentatives sell traditional wi reless services as well as Internet of Things (IoT) and M2M products and solutions to medium- and large-sized businesses andgovernment entities. Additionally, the U.S. Cellular website enables customers to activate service and purchase wireless devices o nline.

U.S. Cellular maintains an ongoing training program to improve the effectiveness of retail sales associates and direct sales representatives by focusing theirefforts on obtaining customers by facilitating the sale of appropriate packages for the cu stomer’s expected usage and value-added services that meet theindividual needs of the customer.

4

Table of Contents

U.S. Cellular has relationships with exclusive and non-exclusive agents (collectively “agents”), which are independent businesses that obtain customers for U.S. Cellular on a commission basis . At December 31, 2017 , U.S. Cellular had contracts with these businesses aggregating 455 locations. U .S. Cellularprovides support and training to its a gents to increase customer satisfaction and to ensure a consistent customer experience. U.S. Cellular’s agents aregenerally in the business of selling wireless devices, wireless service packages and other related products. No single agent accounted for 10% or more of U.S.Cellular’s operating revenues during the past three years.

U.S. Cellular services and products also are offered through third-party national and on-line retailers. Wal-Mart, Sam’s Club, and Dollar General offer U.S.Cellular services a nd products at select retail locations in U.S. Cellular’s service areas. Further, Amazon offers U.S. Cellular’s postpaid and prepaid serviceson-line. U.S. Cellular continues to explore new relationships with additional third-party retailers as part of i ts strategy to expand distribution.

Seasonality.S easonality in operating expenses may cause operating income to vary from quarter to quarter. U.S. Cellular’s operating expenses tend to behigher in the fourth quarter due to increased marketing and promotional activities during t he holiday season.

Competition

The wireless telecommunication industry is highly competitive. U.S. Cellular competes directly with several wireless service providers in each of its markets. In general, there are between two and four competitors in each wireless market in which U.S. Cellular provides service, excluding resellers and mobile virtualnetwork operators (MVNO) . In its footprint, U.S. Cellular competes to varying degrees against each of the national wireless compa nies: Verizon Wireless,AT&T Mobility, Sprint, and T-Mobile USA, in addition to a few smaller regional carriers in specific areas of its footprint. A ll of the national competitors havesubstantially greater financial and other resources than U.S. Cellular . In addition , U.S. Cellular competes with other companies that use alternativecommunication technology and services to provide similar services and products .

Since each of these wireless competitors operates on systems using spectrum licensed by the F CC and has comparable technology and facilities, competitionamong wireless service providers for customers is principally on the basis of types of services and products , price, size of area covered, network quality,network speed and responsiveness of cus tomer service. U.S. Cellular employs a customer satisfaction strategy that includes maintaining an outstandingwireless network throughout its markets. U.S. Cellular owns and operates low-band spectrum (less than 1 GHz) that covers the majority of its fo otp rint andenables more efficient coverage in rural areas (compared to spectrum above 1 GHz), which strengthens its network quality positioning. To the extent existingcompetitors or new entrants acquire such spectrum in U.S. C ellular markets, U.S. Cellu lar c ould face increased competition over time from competitors thathold such more-efficient low-band spectrum.

The use of national advertising and promotional programs by the top four wireless service providers is a source of additional competitive and p ricing pressuresin all U.S. Cellular markets, even if those operators do not provide direct service in a particular market. Over the past year, competition among top carriers hascontinued to be aggressive, with the top four carriers offering unlimited p lans as well as engaging in rich promotional initiatives including device price reductions. In addition, in the current wireless environment, U.S. Cellular’s ability to compete depends on its ability to continue to offer national voice and data plans. U. S.Cellular provides wireless services comparable to the national competitors, but the national wireless companies operate in a wider geographic area and are ableto provide such services over a wider area on their own networks than U.S. Cellular can offer on its network. Although U.S. Cellular offers similar coverage areaas these competitors, U.S. Cellular incurs roaming charges for data sessions and calls made in portions of the coverage area which are not part of its network,thereby increasing its cos t of operations. U.S. Cellular depends on roaming agreements with other wireless carriers to provide voice and data roamingcapabilities in areas not covered by U.S. Cellular’s network. Similarly, U.S. Cellular provides roaming services on its network to other wireless carriers’customers who travel within U.S. Cellular’s coverage areas and receives revenue from other carriers for the provision of these services.

Convergence of connectivity is taking place on many levels, including wirel ess devices that c an act as wireless or wireline replacement devices and theincorporation of wireless “hot spot” technology in wireless devices making internet access seamless regardless of location. Although less directly a substitutefor other wireless services, wireles s data services such as Wi-Fi may be adequate for those who do not need mobile wide-area roaming or full two-way voiceservices. Technological advances or regulatory changes in the future, such as the rollout and consumer adoption of Wi-Fi calling and Voi ce over Long - TermEvolution (VoLTE) capabilities, may make available other alternatives to current wireless service, thereby creating additional sources of competition that shiftconsumers’ perceptions and preferences of network strength, speed and reliabi lity. If the trend toward convergence continues , U.S. Cellular is at a competitivedisadvantage to larger competitors, including the national wireless carriers , traditional cable companies, MVNOs and other potential large new entrants withmuch greater fi nancial and other resources in adapting to such convergence. Cable companies have begun to compete in the wireless market. Most notably,Comcast currently offers wireless services and Charter is expected to begin offering wireless services in 2018.

5

Table of Contents

U.S. Cellular’s approach in 2018 and in future years will be to focus on the unique needs and attitudes of its customers towards wireless service. U.S. Cellularwill deliver high- quality services and products at competitive prices and intends to continue to d ifferentiate itself by seeking to provide an overall outstandingcustom er experience, founded on a high- quality network. U.S. Cellular’s ability to compete successfully in the future will depend upon its ability to anticipateand respond to changes relate d to new service offerings, consumer preferences, competitors’ pricing strategies and new product offerings , technology,demographic trends, economic conditions and its access to adequate spectrum resources.

Network Technology, Roaming, and System Design

Technology.Wireless telecommunication systems transmit voice, data, graphics and video through the transmission of signals over networks of radio towersusing radio spectrum licensed by the FCC. Access to local, regional, national and worldwide telecomm unications networks is provided through systeminterconnections. A high-quality network, supported by continued investments in that network, will remain an important factor for U.S. Cellular to remaincompetitive.

4G LTE technology enables more network ca pacity for more data per user as well as faster access to data. In addition, U.S. Cellular commercially deployedVoLTE technology for the first time in 2017 in one key market and will continue to build out VoLTE services over the next few years. The next commerciallaunch is expected to occur in several additional operating markets starting in early 2018. VoLTE technology allows customers to utilize a 4G LTE network forboth voice and data services, and enables enhanced services such as high definition v oice, video calling and simultaneous voice and data session s. Inaddition, the deployment of VoLTE technology expands U.S. Cellular’s ability to offer roaming services to other carriers. U.S. Cellular continues to offer servicesbased on 3G technology an d Code Division Multiple Access (CDMA) digital technology across its networks.

Roaming.U.S. Cellular’s main sources of revenues are its own customers and customers of other wireless operators who roam on its network. An inter-carrier roaming agreement i s negotiated between the wireless operators to enable customer s who are in a wireless service area other than the customer’shome service area to place or receive a call or text message, or to use data services, in that service area. U.S. Cellular has ent ered into reciprocal roamingagreements with operators of other wireless systems covering virtua lly all systems with CDMA technology in the United States, Canada and Mexico. Inaddition, U.S. Cellular has entered into reciprocal 4G LTE roaming agreement s with national wireless companies and, as a result, a majority of U.S. Cellularcustomers currently have access to nationwide 4G LTE service.

Another digital technology, Global System for Mobile Communication (GSM), has a larger installed base of customer s worldwide. U.S. Cellular customers nowhave the ability to roam on GS M carriers with voice, data and text messaging in Canada, Mexico and internationally. Both CDMA and GSM technologies arebeing succeeded by 4G LTE and VoLTE technology.

SystemDesignandConstruction.U.S. Cellular designs and constructs its systems in a manner it believes will permit it to provide high-quality service tosubstantially all types of compatible wireless devices. Designs are based on engineering studies which relate t o specific markets, in support of the largernetwork. Network reliability is given careful consideration and extensive backup redundancy is employed in many aspects of U.S. Cellular’s network design. Route diversity, redundant equipment, ring topology an d extensive use of emergency standby power also are used to enhance network reliability and minimizeservice disruption from any particular network element failure.

In accordance with its strategy of building and strengthening its operating market areas, U .S. Cellular has selected high-capacity, carrier-class digital wirelessswitching systems that are capable of serving multiple markets through a single mobile telephone switching office. Centralized equipment, used for network anddata management, is loca ted in high-availability facilities supported by multiple levels of power and network redundancy. U.S. Cellular’s systems are designedto incorporate Internet Protocol (IP) packet-based Ethernet technology, which allows for increased data capacity and a m ore efficient network. Interconnectionbetween the mobile telephone switching office and the cell sites utilizes Ethernet technology for nearly all 4G LTE sites, over fiber or microwave links.

U.S. Cellular believes that currently available technologies and appropriate capital additions will allow sufficient capacity on its networks to meet anticipateddemand for voice and data services over the next few years. However, increasing demand for high-speed data may require the acquisition of additional spectrum licenses to provide sufficient capacity and throughput.

Construction of wireless systems is capital-intensive, requiring substantial investment for land and improvements, buildings, towers, mobile telephone switchingoffices, cell site equipment, trans port equipment, engineering and installation. U.S. Cellular primarily uses its own personnel to engineer each wireless systemit owns and operates, and engages contractors to construct the facilities.

The costs (inclusive of the costs to acquire licenses) to develop the systems which U.S. Cellular operates have historically been financed primarily throughproceeds from debt offerings, with cash generated by operations, and proceeds from the sales of wireless interests and other non-strategic assets.

6

Table of Contents

Business Development Strategy

U.S. C ellular groups its individual markets (geographic service areas as defined by the FCC in which wireless carriers are licensed, for fixed terms, to provideservice) into broader geographic market areas to offer customers large service areas that primarily u tilize U.S. Cellul ar’s network. U.S. Cellular’s interests inwireless licenses include both direct interests whereby U.S. Cellular is the licensee and investment interest s in entities which are licensees; together, thesedirect and investment interests in volve operating and non-operating licenses covering 31 states and a total population of 51 million at December 31, 2017 .

U.S. Cellular’s business development strategy is to obtain interests in or access to wireless licenses in its current operating markets and in areas that areadjacent to or in close proximity to its other wireless licenses, thereby building larger geograph ic operating market areas. U.S. Cellular believes that theacquisition of additional licenses within its current operating markets will enhance its network capacity and speed to meet its customers’ growing demand fordata services . From time to time, U.S . Cellular has divested outright or included in exchanges for other wireless interests certain consolidated and investmentinterests that were considered less essential to its current and expected future operations. As part of its business development str ategy, U.S. Cellular mayperiodically be engaged in negotiations relating to the acquisition, exchange or disposition of companies, strategic properties , investment interests or wirelessspectrum. See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for a description of recent significantacquisitions, divestitures and exchanges.

Occasionally, the FCC conducts auctions through which additional spectrum is made available for the provision of wireless services. Historically, U.S. Cellularhas participated in certain prior FCC auctions both directly and indirectly through its limited partnership interests. Each limited partnership that qualified as a“designated entity” was eligible for bidding credits with respect to most licenses purchased in accordance with the rules defined by the FCC for each auction. Inmost cases, the bidding credits resulted in a 25% discount from the gross winning bid . In July 2016 , the FCC announced U.S. Cellular as a qualified bidder inthe FCC’s forward auction of 600MHz spectrum licenses , referred to as Auction 100 2 . Due to changes in FCC rules, U.S. C ellular did not apply to participatein Auction 100 2 by investing in a “designated entity” limited partnership which would have qualified for a discount of 25% on any licenses won in the auction. Instead, U.S. Cellular applied to participate in the auctio n directly and did not qualify for such discount. The FCC announced by way of public notice that U.S.Cellular was the winning bidder for 188 licenses for an aggregate purchase price of $ 329 million and granted the licenses to U.S. Cellular during the sec ondquarter of 2017. See Exhibit 13 to this Form 10-K, under “Regulatory Matters – FCC Auction 1002” for a summary of U.S. Cellular’s participation in Auction 1002.

7

Table of Contents

TDS TELECOM OPERATIONSGeneral

TDS Telecom operates in 34 states and through its Wireline and Cable operations provides broadband, video and voice services to approximately 1.2 millionconnections. The overall strategy for the Wireline and C able businesses is to offer a wide range of broadband ser vices in order to capitalize on data growthand customers’ needs for higher broadband speeds and leverage that growth by bundling services with video and voice.

HMS provides a comprehensive range of Information T echnology (IT) services including colocat ion, cloud and host ing solutions, manage d services ,Enterprise Resource Planning (ERP) application management, and sales of IT hardware and related maintenance and professional services. As disclosedabove, HMS will no longer be reported under TDS Telecom effective January 1, 2018.

Business Development Strategy

TDS Telecom may seek to grow its operations through the acquisition of businesses that support and complement its existing services and products . TDSTelecom may also seek to divest or exchange int erests that are not strategic to its long-term success. See Note 6 — Acquisitions, Divestitures and Exchangesin the Notes to Consolidated Financial Statements for a description of signi ficant acquisitions, divestitures and exchange s .

Core Network

TDS Telecom has developed and deployed an inter-regional data routing infrastructure using owned and leased fiber capacity which allows it to leverage itsmulti-gigab i t core network across a ll three of its segments . This configuration , along with the continued development of an Internet Protocol (IP) network thatinterconnects substantially all the existing service territories , allows for next generation IP service offerings: IP-based video, commercially hosted IP-voice(managedIP), residential Voice over IP (VoIP), least-cost routing , and comprehensive IP policy management.

The TDS Telecom core network continues to standardiz e equipment and processes to increase efficiency in maintaining its network. TDS Telecom utilizescentralized monitoring and management of its network to reduce costs and improve service reliability. Network standardization has aided TDS Telecom inoperating its 24-hours-a-day / 7-days-per-week Network Management Cen ter, which continuously monitors the network in an effort to proactively identify andcorrect network faults prior to any customer impact.

WirelineOperations

Wireline operations are located in a mix of rural, small town and suburban markets, with the largest concentrations of customers in the Upper Midwest and theSoutheast. As of December 31, 2017 , TDS Telecom operates i ncumbent local exchange carriers (ILEC ) in 25 states and provides telecommunications services as a competitiv e local exchange carrier (CLEC ) in Illinois, Michigan, Minnesota, New Hampshire, and Wisconsin. Wireline operations provide retailtelecommunications services to both residential and commercial customers. Wireline also provides service s to wholesale customers, wh ich are primarilyinterexchange carriers (companies that provide long-distance telephone and data services between local exchange areas) and wireless carriers thatcompensate TDS Telecom for the use of its facilities to originat e and terminate their voice and data transmissions.

Customers, Services and Products

Wireline operations generate revenues by providing the following services and products to residential and commercial customers and carriers:

Broadband : Fiber technology is being deployed to select markets to provide Internet speeds of up to 1 Gigabit per second (Gbps). In certain non-fibermarkets, TDS Telecom has deployed copper bonding technology to increase data speeds reaching up to 100 Megabits per second (Mbps). Pre miumsecurity and support services are available to enhance the customers’ high-speed Internet experience.

Video: TDS TV is a comprehensive all-digital TV service available in select TDS markets that provides customers with connected-home digital video recorders ( DVR ) , video-on-demand (VOD) , TV Everywhere (TVE) and other enhanced applications and features . Where TDS TV is not available, TDSTelecom partner s with a satellite TV provider to offer digital television.

Voice : Call plans includ e local and long-distance telephone service, VoIP and enh anced services like find me follow me , collaboration, instantmessaging and more. Many features are bundled with calling plans to give customers the best value .

Network access services are provided t o interexchange and wireless carriers for transporting data and voice traffic on TDS Telecom’s network .

8

Table of Contents

Wireline’s objective is to be a preferred broadband provider in its markets, focusing its investments on broadband as the core growth component of its s erviceofferings. Wireline believes that its residential and business customers have a strong preference to purchase complementary telecommunications services froma single provider. Wireline has found that by offering and bundling services in high-value based packages with a strong customer service orientation, it can buildcustomer loya lty and reduce customer churn. The Wireline residential customer strategy is to provide broadband, video and voice services through value-added bundling of these service s. The commercial focus is to provide advanced IP-based data and voice services.

Residential. Wireline residential customer operations provide high-speed data services, video services and voice service. In selected residential markets,Wireline ’s market ing and promotional strategies focus on its Internet Protocol Television ( IPTV ) service offering under the brand TDS TV. This IP based videooffering is intended to counter intensifying competition for video and broadband services . In markets where IPTV is not offered, TDS Telecom has partneredwith a satellite TV provider to allow for triple or double play bundling. Approximately 79% of ILEC customers have at least two services.

Commercial. Wireline commercial customer operations provide broadband, IP- based services, and hosted voice and collaboration services to small to mediumsized businesses. Wireline operations provide commercial customers with secure and reliable Internet access, data connections and advanced voice servicewith VoIP features. Th e Wireline flagship product is managedIP, a fully-hosted software and hardware solution that provides customers with a secure Internetconnection and innovative collaboration features and capabilities. TDS managedIP is available in markets covering 83% of all commercial customers atDecember 31, 2017 . TDS managedIP is also available to customers wh ich have locations outside the traditional W ireline footprint by offering the service overthe customer’s data network.

Wholesale. Wireline operations continue to provide a high level of service to traditional interexchange and wireless carriers. Wireline’s wholesale market focusis on access revenues, which is the compensation received from the interexchange car riers for carrying data and voice traffic on TDS Telecom’s networks. Federal Connect America Fund (CAF) and state Universal Service Fund (USF ) revenues, which support the cost of providing telecommunication services inunderserved high cost areas, are als o included in wholesale service revenues. Beginning in 2017, TDS receives over $75 million per year for 10 years (withincremental funding for transition in the early years for certain states) for operating and maintaining its network along with the oblig ation to provide broadbandservice at various speeds to about 160,000 locations . Continuing regulatory changes may affect the amounts of future Wireline wholesale revenues. Seeadditional information in Risk Factors and information incorporated by refere nce from Exhibit 13 to this Form 10-K, Annual Report section “Regulatory Matters”.

Access Technology a nd System Design

Wireline operates an integrated, highly-reliable network that consists of central office host and remote sites, primarily equipped with d igital and IP switches. Fiber optic and copper cable connect the host central offices with remote switches and ultimately with end customers. Wireline continues to upgrade andexpand its telecommunications network to respond to the needs of its customers for greater bandwidth and advanced technologies . B roadband service isprovided to 96% of Wireline’s ILEC service addresses . The network is transitioning from its legacy circuit-switched network to a highly reliable IP-basedbroadband network to facilita te the integration of broadband, video and voice services.

Wireline pursue s a plan to depl oy fiber-to-the- home technology, which enable s significantly greater broadband speeds to selected residential subdivisions andto commercial customers, when the inv estment i s economically ju stified. Fiber technology i s deployed to provide internet speeds of up to 1 Gbps . Inaddition, in non-fiber markets, data speeds are increased through the use of copper bonding and vectoring technology. Approximately 45% of Wir eline serviceaddresses we re capable of 25 M bps or greater broadband speeds at the end of 201 7.

Competition

The competitive environment in the telecommunications industry has changed significantly as a result of technological advances, customer expectation s , andchanges to regulation. Wireline continues to seek to develop and maintain an efficient cost structure to ensure that it can compete with price-based initiativesfrom competitors. Wireline faces significant challenges, including competition from cable, low-cost voice providers , other wireline and wireless providers as wellas decreases in compensation received for the use of TDS Telecom’s networks.

Wireline has experienced customer connection a nd access minute declines due to competition from wireless carriers offering local and nationwide voice anddata plans, from cable providers offering voice and data services via cable modems, from fiber overbuilders, and from other low cost voice providers .

Cable companies have developed technological improvements that have allowed them to extend their competitive operations beyond major markets and haveenabled them to provide a broader range of data and voice services over their cable networks. Cable c ompanies have aggressively pursued the bundling ofdata, video and voice products at discounted prices to attract customers from traditional telephone companies. In addition, cable companies continue to addvalue to their I nternet offerings by increasing speeds at little to no additional cost to the customer. Wireline estimates that 79% of its ILEC service addressesface active competition from cable providers at December 31, 2017 . Cable companies are increasin gly targeting commercial customers.

9

Table of Contents

Wireless telephone service providers offering feature-rich wireless devices and improved network quality constitute a significant source of voice and broadbandcompetition. A growing segment of customers have chosen to completely forego the use of traditional wireline telephone service and instead rely solely onwireless service for voice communications services. This trend is more pronounced among residential customers, which comprise approximately 65% ofWireline conn ections as of December 31, 2017 . Some small businesses have followed the residential path by choosing wireless service and disconnectingwireline voice service.

While TDS Telecom positions itself as a high-quali ty telecommunications provider, it is also experiencing competition from Regi onal Bell Operating Companies( RBOCs ) in areas where TDS Telecom competes as a CLEC . T he RBOCs are continuing to implement technological changes that could impede TDSTelecom’s a ccess to facilities used to provide CLEC telecommunications services. To mitigate this risk TDS Telecom has refocused the business on servingcustomers who do not require leased facilities .

C ableOperations

TDS Telecom ’s Cable business was developed through multiple strategic acquisitions which operate primarily in Colorado, New Mexico, Oregon, Texas, andUtah. TDS Telecom’s cable business, a natural extension of the Wireline business, operates under two brand names: T DS and BendBroadband.

Through its Cable operations, TDS Telecom seeks to be the leading provider of broadband services in its targeted markets by leveraging its core competenciesin network management and customer focus. The Cable strategy is to expand i ts broadband services and leverage that growth by bundling with video andvoice services. Through investment in plant upgrades, and improvements in progra m ming and cust omer service levels, TDS Telecom intends to strengthenits markets and continue to grow its revenue base.

Customers, Services and Products

Residential. Cable offers advanced broadband, video and voice services. These services are actively bundled at competitive prices to en courage cross-sellingwithin Cable’s customer base and to attract new customers. Approximately 55% of residential customers subscribe to a bundle of services.

Broadband: DOCSIS 3.0 technology is deployed to nearly all of Cable’s service addresses which allows it to offer enhanced transmiss ion speeds . TDS Telecom is offering 6 00 Mbps service in its largest markets. Access to 24/7 technical support and security features is also provided to broadbandcustomers. Plans are under way to roll out DOCSIS 3.1 technology which will offer significa ntly higher speeds of up to 1 Gbps .

Video: C ustomers have access to basic service, premium programming and high-definition television combined with DVR service. Cable introduced“CatchTV,” a branded whole-home DVR solution.

Voice: Telephony service use s IP to transport digitized voice signals over the same private network that brings cable television and broadbandservices to customers. All residential voice service customers have access to direct international calling and can subscribe to various long distanceplans.

Commercial. Business services are delivered over a robust network to provide broadband products, multi-line phone solutions and video. Cable providesadvanced business services, including data networking, Ethernet, broadband access and VoIP services, to small and mediu m sized businesses. TDS Telecomhas also extended its managed IP product line to its Cable operations.

Access Technology a nd System Design

Cable’s telecommunication systems are designed to transmit broadband , video and voice services using a hybrid fiber-coaxial network that consists of opticalfiber transport from a headend facility to nodes where coaxial cable is then used to reach residential and business customers. In certain markets, Cable has anall-fiber network to the home or business. These fiber- rich networks offer substantial bandwidth capacity and, through the use of DOCSIS 3.0 and nextgeneration DOCSIS 3.1 technology, enable Cable to offer robust broadband and voice services as well as traditional and tw o-way video services. All C a blemarkets are connected to TDS Telecom’s core network . This allows Cable to leverage existing internet connectivity, voice services, and support systems ,which enhanc es reliability and redundancy and builds greater dependability as a service provider.

10

Table of Contents

C ompetition

Cable seeks to be the leading provider of broadband and video services in its targeted markets. From a broadband perspective, Cable will compete against theincumbent local telephone providers, which primarily offer DSL-based services. Cable offers a superior, higher bandwidth data product using its DOCSIStechnology. Video competition is primarily from satellite providers, and on a limited basis, telephone companies that offer video services and compete forbroadband and voice customers. Other telecommunications providers, including Internet-based VoIP providers and wireless providers may compete directly forboth residential and commercial voice and broadband service customers. Changes in consumer behavior or new technologies or both could cause consumersto reduce or cancel their cable video services and instead seek to obtain video on demand over the internet or through new technologies. To re maincompetitive in the video business TDS Telecom is developing a next generation video platform called Clou d TV. It will be offered in it s Wireline and Cableoperations. The strategy of the Cable segment is focused on broadband to capitalize on the dat a needs of consumers. Since cable systems are operated undernon-exclusive franchises, competing cable systems may be b uilt in the same area. Cable intends to avoid markets served by such over-builders ormunicipalities which have constructed their own c a ble systems or where other ILEC s provide fiber to the premise broadband and video service offerings.

Hosted and Managed ServicesOperations

HMS offers a wide range of I T services including colocation, cloud and hosting solutions, managed services, ERP ap plication management, and sales of IThardware and related maintenance and professional services . HMS operates a total of eight data centers. It owns two data centers in Iowa, one each inMinnesota, Wisconsin , Colorado and Oregon and it leases two data c enters in Arizona. TDS Telecom’s HMS business was developed through multiplestrategic acquisitions. The HMS business operates under a single, unified brand, OneNeck IT Solutions LLC . HMS leverages the trusted advisor relationshipsbuilt over time to of fer the entire HMS product portfolio to its customers.

The goal of HMS operations is to create, deliver and support a platform of IT products and services tailored for mid- market business customers. Thesebusinesses typically have not outsourced their IT management and represent a market seeking a highly trusted provider relationship. HMS intends to grow itsrelationship with its customers by combining its status as a trusted IT advisor with data center assets and an expansive product set . Furthermore, cloudcomputing presents an opportunity for growth as it changes the way businesses buy computing power and IT services. HMS has a sophisticated sale s team,strong customer servi ce delivery, extensive engineering talent, and deep ties to vendors . HMS seeks to partner with customers to reduce their IT risk profilesand create value .

A sophisticated sales force is critical to success in the hosted and managed services marketplace. With the complexity of the sales process and the high levelinteractions necessary to win customer orders, experienced account executives, sales engineers and support staff are needed to gain the trust of customerslooking to outsource IT functions. HMS continues to enhance i ts sales capabilities to deliver products and services to meet customer demand in all of itsmarkets .

HMS has established a support organization capable of meeting mid-market customer demands for enhanced product offerings. HMS has put in place anintegrated, scalable, service delivery platform intended to exceed the quality commitments made to customers. HMS strives to improve the efficiency and costeffectiveness of its service delivery model through standardization and automatio n of functions to improve profitability while maintaining high customersatisfaction.

Customers, Services and Products

HMS’ customers span multiple industries including healthcare, financial, manufacturing, retail, and government and are located across the United States. Regional presences encompass states in the Upper Midwest, Great Plains, Rocky Mountains, Northwest, and So uthwest, and are key to establishing thelocally-known trusted a dvisor relationships that mid- market companies desire. HMS primarily targets mid - market companies that are between 200 and 2,000employees in size .

HMS operates fault tolerant, continuously maintain ed data center facilities. Value is provided to its customers through experienced teams that manage missioncritical data centers, cloud, and customer infrastructure 24 hours per day 365 days per year. C ontrols are in place at HMS’ facilities to provide assurances tocustomers that their data is secure and available, and that processing integrity, confidentiality and privacy requirements are met . Data centers are thefoundation for outsourced IT services, which include colocation, cloud and host ing, managed services, and application management.

HMS’ portfolio of hosted and managed services covers servers, voice and data networks, Microsoft Exchange environments, storage, and service deskcapabilities on equipment located both within HMS data cent ers and at customer locations. HMS also has significant expertise in application managementincluding enterprise resource planning systems. These systems can be hosted in HMS data centers, on customer premise s or on cloud computinginfrastructure.

HMS co ntinues to enhance its suite of hybrid-IT solutions including managed services on public clouds, hosted private clouds (branded ReliaCloud) andcustomer-owned private clouds. HMS’ ReliaCloud is an Infrastructure as a Service solution designed to run tradi tional business applications in a secure andcompliant operational framework within a cloud environment. ReliaCloud is a complete, enterprise-class cloud solution that handles scalability and highperformance data management for use in public, private, an d hybrid cloud configurations. The compliant-capable cloud solution is designed for resourceintense applications and databases that require a secure operational framework.

11

Table of Contents

HMS’ solutions provider services include planning, engineering, procurement, sale s, ins tallation, and management of IT- infrastructure solutions from world-class Original Equipment Manufacturers . The breadth and depth of technical certifications held by team members have allowed HMS to achieve the highestlevels of partner status with Cisco Systems, Hewlett-Packard Company, Dell EMC, VMware and Microsoft.

Competition

The IT services market is large and complex, with a diverse array of segments in which performance and market dynamics vary considerably. As a result ofthese dynamics, the IT services market is a highly competitive environment. Market competitors include large technology and other companies that primarilytarget Fortune 500 sized companies as well as smaller independent companies that provide services for mid-sized business customers. HMS ’ strategy is toposition itself not to compete head-to-head with these p roviders, but rather to fill the gap between large business proces s outsourcers and fragmented ITservice providers. However, new entrants may emerge and grow rapidly creating additional sources of competition.

TDS — REGULATION TDS’ operations are subjec t to federal, state and local regulation. Key regulatory considerations are discussed below. Additional information relating to TDS’regulatory environment is in Risk Factors and incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report section “Regulatory Matters.”

U.S. Cellular

TDS provides various wireless services, including voice and data services, pursuant to licenses granted by the FCC. The construction, operation and transfer ofwireless systems in the United States are regulated to varying degrees by the FCC pursuant to the Communications Act of 1934, as a mended (CommunicationsAct). The FCC currently does not require wireless carriers to comply with a number of statutory provisions otherwise applicable to common carriers that provide, originate or terminate interstate or international telecommunications. However, the FCC has enacted regulations governing construction and operation ofwireless systems, licensing (including renewal of licenses) and technical standards for the pro vision of wireless services under the Communications Act.

Wireless licenses segmented by geographic areas are granted by the FCC. The completion of acquisitions, involving the transfer of control of all or a portion ofa wireless system , requires prior FC C approval. The FCC determines on a case-by-case basis whether an acquisition of wireless licenses is in the publicinterest. Wireless licenses are granted generally for a ten year term or, in some cases, for a fifteen year term. The FCC establishes the standards forconducting comparative renewal proceedings between a wireless license holder seeking renewal of its license and challengers filing competing applications. Allof U.S. Cellular’s licenses for which it applied for renewal since 1995 have been renewed. U.S. Cellular expects to continue to meet the criteria of the FCC’slicense renewal process.

As part of its data services, U.S. Cell ular provides internet access. Such internet access services may be subject to different regulatory requirements than otherwireless services.

Reference is made to Exhibit 13 to this Form 10-K under “Regulatory Matters” for information regarding any significant recent developments and proposalsrelating to the foregoing regulatory matters.

Although the Communications Act generally pre-empts state and local governments from regulating the entry of, or the rates charged by, wireless carriers,certain state and local governments regulate other terms and conditions of wireless services, including billing, te rmination of service arrangements, imposition ofearly termination fees, advertising, network outages, the use of handsets while driving, zoning, land use , privacy, data security and consumer protection . Further, the Federal Aviation Administration also r egulates the siting, lighting and construction of transmitter towers and antennae.

Wireline

The FCC generally exercises jurisdiction over all facilities of, and services offered by, TDS Telecom’s ILECs as telecommunications common carriers, to theextent t hey provide, originate or terminate interstate or international telecommunications. State public utility commissions generally exercise jurisdiction overintrastate telecommunications facilities and services. In addition, the Wireline business is subject to various other state and local laws, including laws relating toprivacy, data security and consumer protection.

The Communications Act requires, among other things, that telecommunications common carriers offer interstate services when requested at just andreasonable rates at terms and conditions that are non-discriminatory. Maximum rates for regulated interstate services are prescribed by the FCC. In manystates, local rates paid by end user customers and intrastate access charges paid by carriers co ntinue to be subject to state commission approval.

TDS Telecom’s CLEC operations are subject to similar but reduced regulation compared to ILECs.

In addition to traditional circuit-switched voice service that is fully regulated as a telecommunications comm on carrier service, TDS Telecom also providesinterconnected VoIP, which is currently subject to less regulation.

TDS Telecom also offers broadband services, including internet access. As described mo re fully in Exhibit 13 to this F or m 10-K under “Regulat ory Matters –FCC Rulemaking – Restoring Internet Freedom, ” there are developments and proposals that may result in changes in regulation of such services.

12

Table of Contents

Cable

As a cable multiple systems operator ( MSO ) , Cable is subject to regulation by the FCC, coverin g matters such as technical operations, administrativerequirements, consumer protection, access by people with disabilities, customer privacy and content. The operation of cable systems requires the MSO toobtain franchises from state or local government al authorities to occupy public rights of way with network facilities. These franchises typically are nonexclusiveand limited in time, contain various conditions and limitations, and provide for the payment of fees to the local authority, determined gene rally as a standardpercentage of gross revenues.

TDS’ Cable operations also provide interconnected VoIP and broadband services, including internet access. The interconnected VoIP and internet regulatorymatters and issues described above under “Wireline” are substantially similar for cable providers, including proposals that may result in changes in regulation ofbroadband internet services as described mo re fully in Exhibit 13 to this F orm 10-K under “Regulatory Matters – FCC Rulemaking – Restoring Inter netFreedom .”

HMS

HMS is subject to varying degrees of regulation in each of the jurisdictions in which it operates. Federal, state and local laws and regulations, and theirinterpretation and enforcement may be applicable and may differ significantly among those jurisdictions. These regulations and laws may cover taxation,privacy, data protection, copyrights and other intellectual property, electronic communications and regulations applicable to electronic products and services.

TDS—OTHER ITEMS Debt Securities

The following se curities trade on the NYSE: TDS’ 6.625% Senior Notes due 2045 trade under the symbol “TDI,” TDS’ 6.875% Senior Notes due 2059 tradeunder the symbol “TDE,” TDS’ 7.0% Senior Notes due 2060 trade under the symbol “TDJ” and TDS’ 5.875% Senior Notes due 2061 t rade under the symbol“TDA.”

Employees

TDS had approximately 9,900 f ull -time and part-time employees as of December 31, 2017 , less than 1% of whom were represent ed by labor organizations. TDS considers its relationship with its employees to be good.

Location and Company Information

TDS executive offices are located at 30 North LaSalle Street, Suite 4000, Chicago, Illinois 60602. TDS’ telephone number is 312-630-1900. TDS’ website iswww.tdsinc.com. TDS files with, or furnishes to, the Securities and Exchange Commission ( SEC ) annua l reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, as well as various other information. Anyone may access, free of charge, through the Investor Relations portion of the website,the TDS annual reports on Form 10-K, quart erly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuantto Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act) , as soon as reasonably practical after such materi al iselectronically filed with the SEC. The public may read and copy any materials TDS files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE,Washington D.C. 20549. The public may obtain information on the operation of the Reference Room by calling the SEC at 1-800-732-0330. The public mayalso view electronic filings of TDS by accessing SEC filings at www.sec.gov.

U.S. Cellular executive offices are located at 8410 West Bryn Mawr A venue, Chicago, Illinois 60631. U.S. Cellular’s telephone number is 773-399-8900 . U.S.Cellular’s website address is www.uscellular.com. U.S. Cellular files with, or furnishes to, the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, as well as various other information. Investors may acce ss, free of charge, through the Investor Relations portion of thewebsite, U.S. Cellular’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports filed orfurnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practical after such material is filed electronically with the SEC. Thepublic may read and copy any materials U.S. Cellular files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Was hington D.C. 20549. The public may obtain information on the operation of the Reference Room by calling the SEC at 1-800-732-0330. The public may also view electronic filings ofU.S. Cellular by accessing SEC filings at www.sec.gov.

13

Table of Contents

Item 1A. R isk Factor s

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995SAFE HARBOR CAUTIONARY STATEMENT

This Annual Report on Form 10-K, including exhibits, contains statements that are not based on historical facts and represent forward-looking statements, asthis term is defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, that address activities,events or developments that TDS intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-lookingstatements. The words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify theseforward-looking statements, but are not the excl usive means of identifying them. Such forward-looking statements involve known and unknown risks,uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include those set forth below under “Risk Factors”in this Form 10-K. Each of the following risks could have a material adverse effect on TDS’ bus iness, financial condition or results of operations. However,such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from thoseexpressed in, or implied by, the forwa rd-looking statements contained in this document. Other unknown or unpredictable factors also could have materialadverse effects on future results, performance or achievements. TDS undertakes no obligation to update publicly any forward-looking statemen ts whether as aresult of new information, future events or otherwise. You should carefully consider the following risk factors and other information contained in, or incorporatedby reference into, this Form 10-K to understand the material risks relating to TDS’ business.

Risk Factors

1. Intense competition in the markets in which TDS operates could adversely affect TDS’ revenues or increase its costs to compete.

Competition in the wireless industry is intense and is expected to intensify in the future due t o multiple wireless industry factors such as increasing marketpenetration, decreasing customer churn rates, introduction of new products, new competitors and changing prices. There is competition in pricing; handsets andother devices; network quality, c overage, speed and technologies; distribution; new entrants; and other categories. In particular, wireless competition includesaggressive promotional pricing to induce customers to switch carriers, which could result in switch ing activity and churn. TDS ’ ability to compete effectively willdepend, in part, on its ability to anticipate and respond to various competitive factors affecting the telecommunications industry. In addition, the wideningadoption of unlimited plans and other data pricing construc ts across the industry, including U.S. Cellular’s introduction of unlimited plans earlier in 2017, maylimit the industry’s ability to monetize future growth in data usage. TDS anticipates that these competitive factors may cause the prices for services a ndproducts to continue to decline and the costs to compete to increase. Most of TDS’ competitors are national or global telecommunications companies that arelarger than TDS, possess greater financial and other resources, possess more extensive coverage areas and more spectrum within their coverage areas, andmarket other services with their communications services that TDS does not offer. Further, other companies that currently are less competitive may also addmore efficient low-band spectrum to become more competitive in TDS’ primary markets. In particular, to the extent that existing competitors or new entrantsacquired low-band (600 MHz) spectrum in TDS markets, TDS could face incr eased competition over time. In addition, TDS may face competition f romtechnologies that may be introduced in the future. New technologies, services and products that are more commercially effective than the technologies, servicesand products offered by TDS may be developed. Further, new technologies may be proprietary such that TDS is not able to adopt such technologies. Therecan be no assurance that TDS will be able to compete successfully in this environment.

Sources of competition to TDS’ wireless business typically include two to four competing wireless telecommunications service providers in each market, wirelinetelecommunications service providers, cable companies, resellers (including MVNO), and providers of other alternate telecommunications services. Many ofTDS’ wireless competitors and other comp etitors have substantially greater financial, technical, marketing, sales, purchasing and distribution resources thanTDS.

Sources of competition to TDS’ Wireline ILEC business include, but are not limited to, resellers of local exchange services, interexc hange carriers, RBOCs,direct broadcast satellite providers, wireless communications providers, cable companies, access providers, CLECs, fiber overbuilders, VoIP providers andproviders using other emerging technologies. The Wireline CLEC business source s of competition include the sources identified above as well as the ILEC ineach market, which enjoys competitive advantages, including its wireline connection to virtually all of the customers and potential customers of Wireline’s CLECbusiness, its esta blished brand name, its lower overhead costs, and its substantial financial resources. Wireline’s CLEC business is typically required todiscount services to win potential customers. Further, this business may be negatively impacted if it cannot provide levels of bandwidth prospective customersdemand due in large part to lack of availability of IP-based wholesale services at competitive prices. In the future, TDS expects the number of its physicalaccess lines served to continue to be adversely affected by wireless voice and broadband substitution and by cable company competition.

Some of the specific risks presented by certain Wireline competitors include:

Cable companies – continued deployment of broadband technologies such as DOCSIS 3.0 and 3.1 and th eir further evolution that substantiallyincrease broadband speeds, and offering these speeds to customers at relatively low prices, including speed upgrades for no additional charge, andcompetition for video services.

14

Table of Contents

Wireless – the trend of customers “s ubstituting” their wireline voice and broadband connections with a wireless device and wireless voice andbroadband services continues.RBOCs – continue to be formidable competitors given their full suite of services, experience and strong financial resour ces.VoIP providers – are able to offer voice service at a very low price point.Fiber overbuilders – municipalities or other non-profit oriented providers offering the same or higher data speeds at similar or lower price points.Other providers – competi tion to IPTV and broadband from broadcast television, satellite providers and on-line video services.

TDS’ Cable business also provides broadband, video and voice services. Cable’s business faces sources of competition similar to the Wireline business, bu twith some differences. In particular, Cable does not typically compete against another cable company for broadband services, but competes against fiberoverbuilders and ILECs that primarily offer DSL-based services and may also offer fiber-based and oth er premium and enhanced data services. Cable providesVoIP services rather than traditional wireline voice connections and faces competition from other VoIP providers, but also faces competition from ILECsproviding traditional wireline voice connections. With respect to video, Cable also competes against broadcast television, direct broadcast satellite providers,on-line video services, and wireline providers which have begun to upgrade their networks to provide video services in addition to voice and hi gh-speed internetaccess services.

Sources of competition for HMS’ business primarily include large technology and other companies, as well as smaller independent firms that focus on mid-market companies. In addition, new entrants may emerge and grow rapi dly creating additional sources of competition or companies may begin insourcing ITservices. The IT services market is large and complex, with a diverse array of segments in which performance and market dynamics vary considerably. As aresult of these d ynamics the IT services market is a highly competitive environment. Due to the competitive environment, in order to win new customerengagements, HMS may be required to assume greater potential contractual risk obligations, such as risks relating to the c onsequences of data breaches orunauthorized disclosure of confidential customer information. In the event of such incidents, the HMS business could be materially adversely affected.

If TDS does not adapt to compete effectively in such a highly competitiv e environment, such competitive factors could result in product, service, pricing or costdisadvantages and could have an adverse effect on TDS’ business, financial condition or results of operations.

2. A failure by TDS to successfully execute its business s trategy (including planned acquisitions, spectrum acquisitions, divestitures andexchanges) or allocate resources or capital could have an adverse effect on TDS’ business, financial condition or results of operations.

The successful execution of business s trategies, the optimal allocation within TDS’ portfolio of assets and optimal capital allocation decisions depend on variousinternal and external factors, many of which are not in TDS’ control. TDS’ ability to achieve projected financial results by imple menting and executing itsbusiness strategies and optimally allocating its assets and capital could be affected by such factors. Such factors include but are not limited to pricing practicesby competitors, relative scale, purchasing power, roaming and ot her strategic agreements, wireless device availability, timing of introduction of wireless devices,access to spectrum, emerging technologies, programming and retransmission costs, mid-market demand for cloud and hosted services and other factors. Inaddi tion, there is no assurance that U.S. Cellular’s or TDS Telecom’s strategies will be successful. Even if TDS executes its business strategies as intended,such strategies may not be successful in the long term at achieving growth in customers, revenues, n et income, or generating portfolio returns greater thanTDS’ cost of capital. In addition, if at some point a change in asset allocation is desired, TDS may be unable to alter asset allocation to meet growth and returngoals in a timely and efficient mann er. In such case, there would be an adverse effect on TDS’ business, financial condition and results of operations. TDS’current forecast indicates that TDS will not achieve a return on capital that exceeds its cost of capital in the foreseeable future. See Item 1. Business foradditional information on TDS’ business strategy.

U.S. Cellular is a regional wireless carrier, but competes primarily against much larger national wireless carriers with much greater resources. Its businessstrategy in attempt ing to attract and retain wireless customers through a value proposition comprised of a high-quality network, outstanding customer service,and competitive devices, plans and pricing, all provided with a local focus has not resulted in, and in the future m ay not result in, performance that achievesreturns in line with or above its cost of capital. U.S. Cellular’s current forecast indicates that U.S. Cellular will not achieve a return on capital that exceeds its costof capital in the foreseeable future. U.S. Cellular also might be unable to adopt technologies, services and products as fast as its larger competitors. As a result,consumers who are eager to adopt new technologies, services and products more quickly may select U.S. Cellular’s competitors ra ther than U.S. Cellular astheir service provider. To the extent that U.S. Cellular does not attract or retain these types of customers, U.S. Cellular could be at a competitive disadvantageand have a customer base that generates lower profit margins rela tive to its competition.

Wireline and Cable each provide broadband, video and voice services and, as a result, have certain risks in common, but also have certain risks that are specificto that segment. The overall strategy for both the Wireline and Cabl e businesses is to offer the most competitive broadband connection in its markets in orderto capitalize on data growth and the customers’ need for higher broadband speeds. Wireline’s DSL-based services have several limitations compared toDOCSIS technolo gies employed by cable companies. Where it is cost-effective, Wireline is deploying fiber technology which offers advantages over cable toprovide broadband. Wireline is also faced with other significant challenges, including customer connection and acce ss minute declines in traditional wirelinevoice services as well as decreases in intercarrier compensation received for the use of its networks. Wireline must continually adjust its cost structure as aresult of these challenges. A failure to develop an d maintain an efficient cost structure would have an adverse effect on the Wireline and Cable businesses. Wireline and Cable’s current forecasts indicate that Wireline and Cable will not achieve returns on capital that exceed their costs of capital in the foreseeablefuture.

15

Table of Contents

Wireline’s IPTV product and Cable’s video service have significant costs and risks relating to programming and retransmission. Such costs have beenincreasing and these costs may not be able to be fully passed on to customers. In a ddition, both businesses are limited in their ability to obtain programming atfavorable costs and terms due to their small scale . Further, changes in consumer behavior and/or new technologies are causing consumers to reduce or canceltheir video services and instead seek to obtain video on demand over the internet or through new technologies. A wide range of regulatory or other issues alsoaffect both businesses, including matters pertaining to set-top boxes, equipment connectivity, content regulation, c losed captioning, pole attachments, privacy,copyright, technical standards, and municipal entry into video and broadband.

Although Cable’s business development strategy includes evaluating opportunities for possible further acquisitions of desirable cable companies on attractiveterms to increase the scale of its business, there is no assurance that this strategy will be successful .

HMS provides a wide range of IT services and has risks that are not shared with the other business segments. HMS’ business strategy is to create, deliver andsupport a platform of IT products and services tailored for mid-sized business customers and grow the business organically or through acquisitions . HMS’service platform provides the potential for expansion of current products and services to additional markets in or near HMS’ current footprint. There is noassurance that HMS will make any acquisitions of companies to strengthen its operating market areas or enter additional markets. Even if it does so, there is noassurance that any such acquisitions will be successful. HMS’ current forecast indicates that it will not achieve a return on capital that exceeds its cost of capitalin the foreseeable future. The HMS business is faced with a number of risks in it s pursuit of its strategy, including: the rate of outsourcing IT needs and movingto the cloud by mid-sized business customers; the ability to sell recurring revenue services; whether potential customers ascribe sufficient value to HMS’ morecustomized cl oud and hosted services compared to more commodity based offerings of larger competitors; HMS’ limited scale when co mpeting with largercompetitors; and the impact of IT wage inflation on the profitability of on-shore support services.

A failure by TDS t o execute its business strategies successfully or to allocate resources or capital optimally could have an adverse effect on TDS’ businesses,financial condition or results of operations.

3. Uncertainty in TDS’ future cash flow and liquidity or in the ability to access capital, deterioration in the capital markets, other changes in TDS’performance or market conditions, changes in TDS’ credit ratings or other factors could limit or restrict the availability of financing on terms andprices acceptable to TDS, w hich could require TDS to reduce its construction, development or acquisition programs, reduce the acquisition ofspectrum licenses, and/or reduce or cease share repurchases and/or the payment of dividends.

TDS and its subsidiaries operate capital-intensiv e businesses. Historically, TDS has used internally-generated funds and also has obtained substantial fundsfrom external sources for general corporate purposes. In the past, TDS’ existing cash and investment balances, funds available under its revolving creditfacilities, funds from other financing sources, including a term loan and other long-term debt, and cash flows from operating, certain investing and financingactivities, including sales of assets or businesses, provided sufficient liquidity and fi nancial flexibility for TDS to meet its normal day-to-day operating needs anddebt service requirements, to finance the build-out and enhancement of markets and to fund acquisitions. There is no assurance that this will be the case in thefuture. It may be necessary from time to time to increase the size of the existing revolving credit facilities, to put in place new credit facilities, or to obtain otherforms of financing in order to fund potential expenditures. TDS’ liquidity would be adversely affect ed if, among other things, TDS is unable to obtain short orlong-term financing on acceptable terms, TDS makes significant spectrum license purchases, TDS makes significant business acquisitions, the Los AngelesSMSA Limited Partnership ( LA Partnership ) di scontinues or reduces distributions compared to historical levels , or Federal USF and/or other regulatorysupport payments decline substantially . In addition, although sales of assets or businesses by TDS have been an important source of liquidity in prio r periods,TDS does not expect a similar level of such sales in the future, which will reduce a source of liquidity for TDS. TDS’ credit rating currently is sub-investmentgrade. TDS has incurred negative free cash flow (defined as Cash flows from operat ing activities less Cash paid for additions t o property, plant and equipment)at times in the past and this will occur in the future if operating results do not improve or capital expenditures are not reduced. TDS may require substantialadditional capita l for, among other uses, fund ing day-to-day operating needs including working capital, acquisitions of providers of cable, wireless or wirelinetelecommunications services, IT services or other businesses, spectrum license or system acquisitions, system de velopment and network capacity expansion,debt service requirements, the repurchase of shares, the payment of dividends, or making additional investments. There can be no assurance that sufficientfunds will continue to be available to TDS or its subsidia ries on terms or at prices acceptable to TDS. Insufficient cash flows from operating activities, changesin its credit ratings, defaults of the terms of debt or credit agreements, uncertainty of access to capital, deterioration in the capital markets, red uced regulatorycapital at banks which in turn limits their ability to borrow and lend, other changes in the performance of TDS or in market conditions or other factors could limitor restrict the availability of financing on terms and prices acceptable to TDS, which could require TDS to reduce its acquisition, capital expenditure and businessdevelopment programs, reduce the acquisition of spectrum licenses, and/or reduce or cease share repurchases and/or the payment of dividends . TDS cannotprovide assur ance that circumstances that could have a material adverse effect on its liquidity or capital resources will not occur. Any of the foregoing wouldhave an adverse impact on TDS’ businesses, financial condition or results of operations.

16

Table of Contents

4. TDS has a signifi cant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability tomake payments on its indebtedness, comply with terms of debt covenants and incur additional debt.

TDS has a significant amount of indebtedness and may need to incur additional indebtedness. TDS’ level of indebtedness could have important consequences. For example, it (i) may limit TDS’ ability to obtain additional financing for working capital, capital expenditures or general corp orate purposes, particularly if theratings assigned to its debt securities by rating organizations are revised downward; (ii) will require TDS to dedicate a substantial portion of its cash flow fromoperations to the payment of interest and principal on i ts debt, reducing the funds available to TDS for other purposes including expansion through acquisitions,capital expenditures, marketing spending and expansion of its business; and (iii) may limit TDS’ flexibility to adjust to changing business and market conditionsand make TDS more vulnerable to a downturn in general economic conditions as compared to TDS’ competitors. TDS’ ability to make scheduled payments onits indebtedness or to refinance it will depend on its financial and operating performance, w hich, in turn, is subject to prevailing economic and competitiveconditions and other factors beyond its control. In addition, TDS’ leverage may put it at a competitive disadvantage to some of its competitors that are not asleveraged.

The TDS and U.S. Cellular revolving credit facilities, the U.S. Cellular term loan facility and the U.S. Cellular receivables securitization facility require TDS or U.S.Cellular, as applicable, to comply with certain affirmative and negative covenants, including certain f inancial covenants. Depending on actual financialperformance of TDS and U.S. Cellular, there is a risk that TDS and/or U.S. Cellular could fail to satisfy the required financial covenants. If TDS or U.S. Cellularbreach a financial or other covenant of any of these agreements, it would result in a default under that agreement, and could involve a cross-default under otherdebt instruments. This could in turn cause the affected lenders to accelerate the repayment of principal and accrued interest on any outstanding debt undersuch agreements and, if they choose, terminate the facility. If appropriate, TDS and U.S. Cellular may request the applicable lenders for an amendment offinancial covenants in the TDS and/or U.S. Cellular facilities, in order to pr ovide additional financial flexibility to TDS and U.S. Cellular, and may also seek otherchanges to such facilities. There is no assurance that the lenders will agree to any amendments. If the lenders agree to amendments, this may result inadditional pa yments or higher interest rates payable to the lenders and/or additional restrictions. Restrictions in such debt instruments may limit TDS’ operatingand financial flexibility.

As a result, TDS’ level of indebtedness, restrictions contained in debt instr uments and/or possible breaches of covenants, defaults, and acceleration ofindebtedness could have an adverse effect on TDS’ business, financial condition, revenues, results of operations and cash flows.

5. Changes in roaming practices or other factors could cause TDS’ roaming revenues to decline from current levels, roaming expenses to increasefrom current levels and/or impact TDS’ ability to service its customers in geographic areas where TDS does not have its own network, whichcould have an adverse effect on TDS’ business, financial condition or results of operations.

TDS’ revenues include roaming revenues related to the use of TDS’ network by other wireless carriers’ customers who travel within TDS’ cov erage areas. Changes in FCC rules or actions, industry practices or the network footprints of carriers due to mergers, acquisitions or network expansions could have anadverse effect on TDS’ roaming revenues. For example, consolidation among other carrie rs which have network footprints that currently overlap TDS’ networkcould decrease the amount of roaming revenues for TDS.

Similarly, TDS’ wireless customers can access another carrier’s digital system automatically only if the other carrier allows TDS’ customers to roam on itsnetwork. TDS relies on roaming agreements with other carriers to provide roaming capability to its customers in areas of the U.S. and internationally outside ofits service areas, including Mexico and Canada, and to improve cover age within selected areas of TDS’ network footprint. Such agreements cover traditionalvoice services as well as data services. Although TDS currently has long-term roaming agreements with certain other carriers, these agreements generally aresubject to renewal and termination if certain events occur. FCC rules and orders impose certain requirements on wireless carriers to offer certain roamingarrangements to other carriers. However, carriers frequently disagree on what is required. Although TDS has entered into 4G LTE and VoLTE roamingagreements with national carriers, there is no assurance that TDS will be able to maintain these agreements and/or enter into new agreements with othercarriers to provide roaming services using 4G LTE or other technol ogies , or that it will be able to do so on reasonable or cost effective terms.

Some competitors may be able to obtain lower roaming rates than TDS is able to obtain because they have larger call volumes or may be able to reduceroaming charges by provi ding service principally over their own networks. In addition, the quality of service that a wireless carrier delivers to a TDS customerwhile roaming may be inferior to the quality of service TDS provides, the price of a roaming call may not be competiti ve with prices of other wireless carriers forsuch call, TDS’ customers may not be able to use some of the advanced features, such as voicemail notification or data applications, that TDS customers enjoywhen making calls on TDS’ network, and TDS customers ’ service experience may be negatively impacted, particularly when accessing data services, uponreaching a defined allotment of high-speed usage. TDS’ rate of adoption of new technologies, such as those enabling high-speed data and voice services, couldaffect its ability to enter into or maintain roaming agreements with other carriers. In addition, TDS’ wireless technology may not be compatible with technologiesused by other carriers, which may limit the ability of TDS to enter into voice or data roami ng agreements with such other carriers. Carriers whose customersroam on TDS’ network could switch their business to new operators or, over time, to their own networks. Changes in roaming usage patterns, rates for roamingusage, or roaming relationships with other carriers could have an adverse effect on TDS’ roaming revenues and/or expenses.

17

Table of Contents

To the extent that other carriers expand their networks in TDS’ service areas, the roaming arrangements between TDS and these other carriers could becomeless strate gic for them. That is, these other carriers will have fewer or less extensive geographic areas where roaming services are required by their customersand, as a result, the roaming arrangements could become less critical to serving their customer base. Th is presents a risk to TDS in that, to the extent TDS isnot able to enter into economically viable roaming arrangements with these other carriers, this could impact TDS’ ability to service its customers in geographicareas where TDS does not have its own n etwork.

If TDS’ roaming revenues decline, or its roaming expenses increase, or if TDS is unable to obtain or maintain roaming agreements with other carriers thatcontain pricing and other terms that are competitive and acceptable to TDS and that satisfy TD S’ quality and interoperability requirements, its business, financialcondition or results of operations could be adversely affected.

6. A failure by TDS to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurat ely predict futureneeds for radio spectrum could have an adverse effect on TDS’ business, financial condition or results of operations.

TDS’ wireless business depends on the ability to use portions of the radio spectrum licensed by the FCC. TDS could fai l to obtain access to sufficient spectrumcapacity, including spectrum needed to support 5G technology, in new or existing critical markets, whether through FCC auctions or other transactions, in orderto meet the anticipated spectrum requirements associat ed with increased demand for existing services, especially increases in customer demand for dataservices, and to enable deployment of next-generation services. TDS believes that this increased demand for data services reflects a trend that will continue forthe foreseeable future. Data usage, including usage under unlimited plans, could exceed current forecasts resulting in a need for increased investment inspectrum or network. TDS could fail to accurately forecast its future spectrum requirements cons idering changes in plan offerings, customer usage patterns,technology requirements and the expanded demands of new services. Such a failure could have an adverse impact on the quality of TDS’ services or TDS’ability to roll out such future services in s ome markets, or could require that TDS curtail existing services in order to make spectrum available for next-generation services. S pectrum constrained providers could be effectively capped in increasing market share. As spectrum constrained providers ga incustomers, they use up their network capacity. Since they lack spectrum, they can respond to demand only by adding cell sites, which is capital intensive, addsfixed operating costs, is limited by zoning considerations, and ultimately may not be cost e ffective.

TDS may acquire access to spectrum through a number of alternatives, including acquisitions, exchanges and participation in spectrum auctions. TDS mayparticipate in spectrum auctions conducted by the FCC in the future. As required by law, th e FCC has conducted auctions for licenses to use some parts of theradio spectrum. The decision to conduct auctions, and the determination of what spectrum frequencies will be made available for auction and the determinationof geographic size of licenses , are made by the FCC pursuant to laws that it administers. The FCC may not be able to allocate spectrum sufficient to meet thedemands of all those wishing to obtain licenses for new market entry or to expand their spectrum holdings to meet the expanding demand for data services or toaddress other spectrum constraints . Due to factors such as geographic size of licenses and auction bidders that may raise prices beyond acceptable levels,TDS may not be successful in FCC auctions in obtaining access to the spectrum that it believes is necessary to implement its business and technologystrategies.

In addition, newly auctioned spectrum may not be compatible with existing spectrum, and vendors may not create suitable products to use such spectrum. Further, access to spectrum licenses won in FCC auctions may not be available on a timely basis. Such access is dependent upon the FCC actually grantinglicenses won, which can be delayed for various reasons. Furthermore, newly licensed spectrum may not be availa ble for immediate use since the radiooperations of incumbent users, including in some cases government agencies, may need to be relocated to other portions of the radio spectrum, and/or thenewly licensed spectrum may be subject to sharing and coordinatio n obligations. TDS also may seek to acquire radio spectrum through purchases andexchanges with other spectrum licensees. However, TDS may not be able to acquire sufficient spectrum through these types of transactions, and TDS may notbe able to complete any of these transactions on favorable terms.

7. To the extent conducted by the FCC, TDS ma y participate in FCC auctions for additional spectrum or for funding in certain Universal Serviceprograms in the future directly or indirectly and, during certain per iods, will be subject to the FCC’s anti-collusion rules, which could have anadverse effect on TDS.

From time to time, the FCC conducts auctions through which additional spectrum is made available for the provision of wireless services. TDS has participatedin such auctions in the past and may participate in other auctions conducted by the FCC in the fu ture. The FCC is also planning on conducting a series ofauctions concerning dispersal of Universal Service Funding shortly. FCC anti-collusion rules place certain restrictions on business communications anddisclosures by participants in an FCC auction. These anti-collusion rules may restrict the normal conduct of TDS’ business, TDS’ acquisition, divestiture,exchange and other corporate development activity and/or disclosures by TDS relating to an FCC auction. The restrictions could have an adverse ef fect onTDS’ business, financial condition or results of operations.

18

Table of Contents

8. F ailure by TDS to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto couldadversely affect TDS’ business, financial conditi on or results of operations.

TDS’ operations are subject to varying degrees of regulation by the FCC, state public utility commissions and other federal, state and local regulatory agenciesand legislative bodies. Changes in the administration of the vari ous regulatory agencies and legislative bodies could result in different policies with respect tomany federal laws and regulations, including but not limited to changes to fiscal and tax policies. New or amended regulatory requirements could increase TDS ’costs and divert resources from other initiatives. Adverse decisions, increased regulation, or changes to existing regulation by regulatory bodies couldnegatively impact TDS’ operations by, among other things, permitting greater competition or limiting TDS’ ability to engage in certain sales or marketing activities, or retention and recruitment of skilled resources . New regulatory mandates or enforcement may require unexpected or increased capital expenditures , lostrevenues, higher operating expenses or other changes. Court decisions and rulemakings could have a substantial impact on TDS’ operations, includingrulemakings on broadband access to the internet, intercarrier access compensation, state and federal support funding , and treatment of VoIP tra ffic orunbundled network elements. Litigation and different objectives among federal and state regulators could create uncertainty and delay TDS’ ability to respond tonew regulations . Further, wireless licenses are subject to renewal by the FCC and cou ld be revoked in the event of a violation of applicable laws or regulatoryrequirements. Also, FCC rules relating to net neutrality and other rules may result in additional costs for compliance and may limit opportunities to derive profitsfrom certain bu siness practices or resources, if not amended or rescinded. For additional information related to TDS’ regulatory environment, includinginformation related to net neutrality, see Risk Factor Number 15 below and “Regulatory Matters” in Exhibit 13 to this Form 10-K.

TDS attempts to timely and fully comply with all regulatory requirements. However, TDS is unable to predict the future actions of the various legislative andregulatory bodies that govern TDS, but such actions could have adverse effects on TDS’ business. Any failure by TDS to timely or fully comply with anyregulatory requirements could adversely affect TDS’ financial condition, results of operations or ability to do business.

9. An inability to attract people of outstanding potential, to develop their potential through education and assignments, and to retain them bykeeping them engaged, challenged and properly rewarded could have an adverse effect on TDS' business, financial condition or results ofoperations.

TDS’ businesses are highly technica l and competition for skilled talent in the telecommunications and IT services industries is intense. Due to competitionand/or limited supply for qualified management, technical, sales and other personnel, there can be no assurance that TDS will be able to continue to attractand/or retain people of outstanding potential for the development of its business. The loss of the services of existing key personnel as well as the failure torecruit additional qualified personnel in a timely manner could have an adverse effect on TDS’ business, financial condition or results of operations.

10. TDS’ assets and revenue are concentrated primarily in the U.S. telecommunications industry. Consequently, its operating results may fluctuatebased on factors related primari ly to conditions in this industry.

The U.S. telecommunications industry is facing significant change and an uncertain operating environment. TDS’ focus on the U.S. telecommunicationsindustry, together with its positioning relative to larger competitors w ith greater resources within the industry, may represent increased risk for investors due tothe lack of diversification. This could have an adverse effect on TDS’ ability to attain and sustain long-term, profitable revenue growth and could have an adverse effect on its business, financial condition or results of operations.

11. TDS’ smaller scale relative to larger competitors that may have greater financial and other resources than TDS could cause TDS to be unable tocompete successfully, which could adverse ly affect its business, financial condition or results of operations.

There has been a trend in the telecommunications, IT services and related industries towards consolidation of service providers through acquisitions,reorganizations , joint ventures , and the advent of hyperscale public cloud services . This trend could continue, leading to larger competitors over time. TDShas smaller scale efficiencies compared to larger competitors. TDS may be unable to compete successfully with larger companies that have substantiallygreater financial, technical, marketing, sales, purchasing and distribution resources or that offer more services than TDS, which could adversely affect TDS’revenues and costs of doing business. Specifically, TDS’ smaller scale relativ e to most of its competitors could have the following impacts, among others:

Low profit margins and returns on investment that are below TDS’ cost of capital;Increased operating costs due to lack of leverage with vendors;Limited opportunities for strateg ic partnerships as potential partners are focused on wireless, wireline, cable and IT services companies with greaterscale and scope;Limited access to content and programming;Limited ability to influence industry standards;Reduced ability to invest in research and development of new services and products;Vendors may deem TDS non-strategic and not develop or sell services and products to TDS, particularly where technical requirements differ from thoseof larger companies;Limited access to intellectual property; andOther limited opportunities such as for software development or third party distribution.

19

Table of Contents

TDS’ telecommunications businesses increasingly depend on access to content for data and access to new wireless devices being developed by vendors. TDS’ability to obtain such access depends in part on other parties. If TDS is unable to obtain timely access to new content or wireless devices being developed byvendors, its business, financial condition or results of operations could be adversely affe cted.

As a result of the foregoing, TDS’ smaller scale relative to larger competitors could adversely affect TDS’ business, financial condition or results of operations.

12. Changes in various business factors, including changes in demand, customer preferences and perceptions, price competition, churn fromcustomer switching activity and other factors, could have an adverse effect on TDS’ business, financial condition or results of operations.

Changes in any of several factors could have an adverse effect on T DS’ business, financial condition or results of operations. These factors include, but are notlimited to:

Demand for or usage of services, particularly data services , due to the introduction of unlimited plans ;Customer preferences, including internet sp eed and type of wireless devices;Customer perceptions of network quality and performance;The pricing of services, including an increase in price-based competition;Access to and cost of programming;The overall size and growth rate of TDS’ customer base;Penetration rates;Churn rates;Selling expenses;Net customer acquisition and retention costs;Customers’ ability to pay for services and the potential impact on bad debts expense;Roaming agreements and rates;Third-party vendor support;Capacity constr aints;The mix of services and products offered by TDS and purchased by customers;The costs of providing services and products; andMid-market demand for cloud and hosted services.

13. Advances or changes in technology could render certain technologies used by TDS obsolete, could put TDS at a competitive disadvantage,could reduce TDS’ revenues or could increase its costs of doing business.

The telecommunications and IT services industries are experiencing significant changes in technologies and services expe cted by customers. In thetelecommunications industry, this is evidenced by evolving industry standards, ongoing improvements in the capaci ty and quality of digital technology, shorterdevelopment cycles for new services and products, and enhancements and changes in end-user requirements and preferences. Widespread deployment ofnew technologies, including 5G technology, could cause the technology used on TDS’ wireless networks, traditional circuit-switched or IP-based networks, andcable networks to beco me less competitive or obsolete. Also, high-speed wireless networks (wireless broadband) represent a product offering and opportunityfor TDS’ wireless business, but also represent a risk for TDS’ Wireline and Cable businesses as customers may elect to su bstitute their wireline broadbandconnection for wireless broadband. Further, fixed-mobile convergence services that combine wireline broadband services with mobile services represent acompetitive threat. If the trend toward convergence continues, TDS i s at a competitive disadvantage to larger competitors, including the national wirelesscarriers and other potential large new entrants with much greater financial and other resources in adapting to such convergence. In addition, the IT servicesmarket is characterized by rapidly changing technology and services. Future technological changes or advancements may enable other technologies to equal orexceed TDS’ current levels of service and render its system infrastructure obsolete. For example, the timing , cost, and availability of CDMA enabled devicesand other CDMA ecosystem support needs, including voice roaming on other carrier networks, may inhibit TDS’ ability to maintain 3G wireless voice service untilit is fully replaced by VoLTE. TDS may not be able to respond to such changes and implement new technology on a timely or cost-effective basis, which couldreduce its revenues or increase its costs of doing business. If TDS cannot keep pace with these technological changes or other changes in the telecommunications or IT services industries over time, its financial condition, results of operations or ability to do business could be adversely affected.

14. Complexities associated with deploying new technologies present substantial risk and TDS’ investments in unproven technologies may notproduce the benefits that TDS expects.

TDS’ wireless business has completed the transition to 4G LTE and has implemented 4G LTE as well as VoLTE roaming agreements with national carriers. TDS’ wireless business began comm ercial deployment of VoLTE in 2017 and has begun testing 5G technology. Transition to new technologies involvessignificant time and cost. Furthermore, the wireless business experiences rapid technology changes and new services and products. If TDS fail s to effectivelydeploy new wireless technologies, services or products on a timely basis, this could have an adverse impact on TDS’ business, financial condition and results ofoperations.

20

Table of Contents

TDS’ Wireline business is deploying technologically advanced wireline and broadband services including advanced fiber optic access and bonded/vectoredVery-high-speed digital subscriber line 2 technologies (VDSL2). A significant amount of the product development and integration risks are borne by TDS. Further, the simultaneous rollout of these advanced services and technologies increases the execution risk. If TDS fails to effectively deploy new technologiesand products on a timely basis, this could have an adverse impact on TDS’ business, financial condition and results of operations.

Cable’s business is also subject to complexities associated with deploying new technologies, such as DOCSIS 3.1, and involves substantial risk, including rapidtechnology changes. If Cable’s business does not respond appropriately to technology changes, its competitive position may be adversely affected.

The HMS business is also continuously evaluating and deploying advances in technology relating to IT services. If HMS fails to effectively deploy newtechnologies and products on a timely basis, this could have an adverse impact on its business, financial condition and results of operations.

Furthermore, it is not certain that TDS’ investments in various new, unproven technologies and service and product offerings will be effective. The markets forsome of these services, products and solutions may still be emerging and the overall potential for these markets may be uncertain. If customer demand forthese new services, products and solutions does not develop as expected, TDS’ busin ess, financial condition or results of operations could be adverselyaffected.

15. TDS receives regulatory support and is subject to numerous surcharges and fees from federal, state and local governments, and the applicabilityand the amount of the support and fees are subject to great uncertainty, which could have an adverse effect on TDS’ business, financialcondition or results of operations.

Telecommunications companies may be designated by states, or in some cases by the FCC, as an ETC to receive universal service support payments if theyprovide specified services in “high cost” areas. U.S. Cellular has been designated as an ETC in certain states and received $ 92 million in high cost support forservice to high cost areas in 201 7 . TDS Telecom also received support under the Connect America Fund support program. In 201 7 , TDS Telecom received$ 82 million under all federal regulatory support programs.

In 20 11, the FCC released an order (USF Order ) to: reform its universal servic e and intercarrier compensation mechanisms; establish a new, broadband-focused support mechanism; and propose further rules to advance reform. For a discussion of the USF Order and risks to such regulatory support, see“Regulatory Matters – FCC Mobility F und Phase II Order” in Exhibit 13 to this Form 10-K, which is incorporated by reference herein. If the foregoing regulatorysupport is reduced from current levels, this could have an adverse effect on TDS’ business, financial condition or operating result s.

On March 30, 2016, the FCC released an order modifying the existing USF program under which TDS, through its wireline subsidiary, TDS Telecom, receivesannual support. The modification extends the program to rate-of-return incumbent local exchange car riers for the purpose of extending broadband services,including standalone broadband, in unserved and underserved rural areas. The FCC provided rate-of-return carriers with two possible paths to receive fundsfrom the program. The first path includes a voluntary model-based approach and includes support for a ten-year period in exchange for meeting defined build-out obligations, referred to as the Alternative Connect America Cost Model (A-CAM). The second path is based on existing rate-of-return mechani sms, but withsubstantial modifications. In January 2017, the FCC finalized its modification of the USF high cost support program. Under this program TDS is to receiveapproximately $75 million in annual support for ten years in exchange for meeting defi ned build-out obligations. Build-out obligations under this program willrequire capital expenditures over the ten-year period that may be significant. In the event additional high-cost support becomes available in 2018, TDS Telecomcould receive additio nal support revenue; however the additional revenues would also include increased speed requirements for certain build-out locations. There is no assurance that these build-outs will be fully funded by the support revenue received under the A-CAM program.

Telecommunications providers pay a variety of surcharges and fees on their gross revenues from interstate and intrastate services, including USF fees andcommon carrier regulatory fees.

The division of services between interstate services and intrastate services, including the divisions associated with Federal USF fees, is a matter of interpretationand may in the future be contested by the FCC or state authorities. The FCC also may change in the future the basis on which Federal USF fees are charged. T he Federal government and many states also apply transaction-based taxes to sales of telecommunications services and products and to purchases oftelecommunications services from various carriers. In addition, state regulators and local governments have i mposed and may continue to impose varioussurcharges, taxes and fees on telecommunications services. The applicability of these surcharges and fees to TDS’ services is uncertain in many cases andjurisdictions may contest whether TDS has assessed and remi tted those monies correctly. Periodically, state and federal regulators may increase or changethe surcharges and fees TDS currently pays. In some instances, TDS passes through these charges to its customers. However, Congress, the FCC, stateregulatory agencies or state legislatures may limit the ability to pass through transaction-based tax liabilities, regulatory surcharges and regulatory fees imposedon TDS to customers. TDS may or may not be able to recover some or all of those taxes from its custo mers and the amount of taxes may deter demand for itsservices or increase its cost to provide service which could have an adverse effect on its business, financial condition or operating results.

16. Performance under device purchase agreements could have a m aterial adverse impact on TDS' business, financial condition or results ofoperations.

TDS has entered into purchase commitments with certain vendors and may enter into similar purchase commitments with other vendors in the future. If TDS isunable to sel l all of the devices that it is required to purchase under such agreements, or if it is unable to sell them at the prices it projects, its business, financialcondition or results of operations could be adversely affected.

21

Table of Contents

17. Changes in TDS’ enterprise value, changes in the market supply or demand for wireless licenses, wireline or cable markets or IT serviceproviders, adverse developments in the businesses or the industries in which TDS is involved and/or other factors could require TDS torecognize impairme nts in the carrying value of its licenses, goodwill, franchise rights and/or physical assets or require re-evaluation of theindefinite-lived nature of such assets .

A large portion of TDS’ assets consists of indefinite-lived intangible assets in the form o f licenses, goodwill and franchise rights. TDS also has substantialinvestments in long-lived assets such as property, plant and equipment. TDS reviews its licenses, goodwill, franchise rights and other long-lived assets forimpairment annually or whenev er events or circumstances indicate that the carrying amount of such assets may not be fully recoverable. An impairment lossmay need to be recognized to the extent the carrying value of the assets exceeds the fair value of such assets. The amount of any such impairment loss couldbe significant and could have an adverse effect on TDS’ reported financial results for the period in which the loss is recognized. The estimation of fair valuesrequires assumptions by management about factors that are uncertai n. Different assumptions for these factors could create materially different results. During2017, TDS recognized impairment on its goodwill related to the HMS and U.S. Cellular reporting segments, and reduced the balance of its goodwill related tothose segments to zero.

18. Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or licenses and/or expansionof TDS’ businesses could have an adverse effect on TDS’ business, financial condition or re sults of operations.

As part of TDS’ operating strategy, TDS from time to time may be engaged in the acquisition, divestiture or exchange of companies, businesses, strategicproperties, wireless spectrum or other assets. TDS may change the markets in whic h it operates and the services that it provides through such acquisitions,divestitures and/or exchanges. In general, TDS may not disclose the negotiation of such transactions until a definitive agreement has been reached. Thesetransactions commonly inv olve a number of risks, including:

Identification of attractive companies, businesses, properties, spectrum or other assets for acquisition or exchange, and/or the selection of TDS’businesses or assets for divestiture or exchange;Competition for acquisit ion targets and the ability to acquire or exchange businesses at reasonable prices;Inability to make acquisitions that would achieve sufficient scale to be competitive with competitors with greater scale;Possible lack of buyers for businesses or assets t hat TDS desires to divest and the ability to divest or exchange such businesses or assets atreasonable prices;Ability to negotiate favorable terms and conditions for acquisitions, divestitures and exchanges;Significant expenditures associated with acqui sitions, divestitures and exchanges;Risks associated with integrating new businesses or markets, including risks relating to cybersecurity and privacy;Ability to enter markets in which TDS has limited or no direct prior experience and competitors have st ronger positions;Ability to integrate and manage TDS’ different business operations and services, including wireless services, traditional wireline services, cablebusinesses and hosted and managed services businesses;Uncertain revenues and expenses associated with acquisitions, with the result that TDS may not realize the growth in revenues, anticipated coststructure, profitability, or return on investment that it expects;Difficulty of integrating the technologies, services, products, operations an d personnel of the acquired businesses, or of separating such matters fordivested businesses or assets;Diversion of management’s attention;Disruption of ongoing business;Impact on TDS’ cash and available credit lines for use in financing future growth and working capital needs;Inability to retain key personnel;Inability to successfully incorporate acquired assets and rights into TDS’ service offerings;Inability to maintain uniform standards, controls, procedures and policies;Possible conditions to approval by the FCC, the Federal Trade Commission and/or the Department of Justice; andImpairment of relationships with employees, customers or vendors.

No assurance can be given that TDS will be successful with respect to its acquisition, divestiture or exchange strategies or initiatives. If TDS is not successfulwith respect to its acquisitions, divestitures or exchanges, its business, financial condition or results of operations could be adversely affected.

19. A failure by TDS to complete significant net work construction and systems implementation activities as part of its plans to improve the quality,coverage, capabilities and capacity of its network, support and other systems and infrastructure could have an adverse effect on its operations.

TDS’ busin ess plan includes significant construction activities and enhancements to its network, support and other systems and infrastructure. As TDS deploys,expands and enhances its wireless network, it may need to acquire additional spectrum. Also, as TDS conti nues to build out and enhance its network, TDSmust, among other things, continue to:

Lease, acquire or otherwise obtain rights to cell and switch sites, transport facilities, data centers relating to IT services or other facilities;Obtain zoning variance s or other local governmental or third-party approvals or permits for network construction;Complete and update the radio frequency design, including cell site design, frequency planning and network optimization, for each of TDS’ wirelessmarkets; andImpr ove, expand and maintain customer care, network management, billing and other financial and management systems.

22

Table of Contents

Any difficulties encountered in completing these activities, as well as problems in vendor equipment availability, technical resources, system p erformance orsystem adequacy, could delay expansion of operations and product capabilities in new or existing markets or result in increased costs. Failure to successfullybuild-out and enhance TDS’ network, support facilities and other systems and infra structure in a cost-effective manner, and in a manner that satisfies customerexpectations, could have an adverse effect on TDS’ business, business prospects, financial condition or results of operations.

20. Difficulties involving third parties with which TDS does business, including changes in TDS’ relationships with or financial or operationaldifficulties of key suppliers or independent agents and third party national retailers who market TDS’ services, could adversely affect TDS’business, financial condit ion or results of operations.

TDS has relationships with independent agents and third party national retailers who market TDS’ services. If such relationships are seriously harmed or if suchparties experience financial difficulties, including bankruptcy, TDS’ business, financial condition or results of operations could be adversely affected.

TDS depends upon certain vendors to provide it with equipment (including wireless devices), services or content to continue its network construction andupgrades an d to operate its business. TDS does not have operational or financial control over such key suppliers and has limited influence with respect to themanner in which these key suppliers conduct their businesses. If these key suppliers experience financial difficulties or file for bankruptcy or experience otheroperational difficulties, they may be unable to provide equipment, services or content to TDS on a timely basis, or at all, or they may otherwise fail to honor theirobligations to TDS. Furthermore, consolidation among key suppliers may result in less competition and higher prices or the discontinuation of support forequipment owned by TDS.

Regulations regarding the use of “conflict minerals” mined from the Democratic Republic of Congo and adjoining countries may affect some of TDS’ suppliers. These regulations may limit the availability of conflict free minerals and, as a result, TDS may not be able to obtain products in sufficient quantities or atcompetitive prices from its vendors who utilize suc h minerals in the manufacture of products. In such cases, TDS may be unable to maintain and upgrade itsnetwork or provide services and products to its customers in a competitive manner, or could suffer other disruptions to its business. In that event, T DS’business, financial condition or results of operations could be adversely affected.

In addition, operation of TDS’ supply chain and management of its inventory require accurate forecasting of customer growth and demand, which has becomeincreasingly challenging. If overall demand for wireless devices or the mix of demand for wireless devices is significantly different than TDS’ expectations, TDScould face inadequate or excess supplies of particular models of wireless devices. This could result in l ost sales opportunities or an excess supply of inventory. Either of these situations could adversely affect TDS’ revenues, costs of doing business, results of operations or financial condition.

Also, TDS has other arrangements with third parties, including arrangements pursuant to which TDS outsources certain support functions to third party vendors. Operational problems associated with such functions, including any failure by the vendor to provide the required level of service under the outsourci ngarrangements, including possible cyber-attacks or other breaches of network or information technology security or privacy, could have adverse effects on TDS’business, financial condition or results of operations.

21. TDS has significant investments in enti ties that it does not control. Losses in the value of such investments could have an adverse effect onTDS’ financial condition or results of operations.

TDS has significant investments in entities that it does not control, including equity investments an d interests in certain variable interest entities. TDS’ interestsin such entities do not provide TDS with control over the business strategy, financial goals, network build-out plans or other operational aspects of these entities. TDS cannot provide ass urance that these entities will operate in a manner that will increase or maintain the value of TDS’ investments, that TDS’ proportionateshare of income from these investments will continue at the current level in the future or that TDS will not incur los ses from the holding of such investments. Losses in the values of such investments or a reduction in income from these investments could adversely affect TDS’ financial condition or results ofoperations. In addition, certain investments have historicall y contributed significant cash flows to TDS and a reduction or suspension of such cash flows couldadversely affect TDS’ financial condition.

22. A failure by TDS to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, couldhave an adverse effect on TDS’ business, financial condition or results of operations.

TDS relies extensively on its telecommunication networks and information technology to operate and manage its businesses, process tran sactions andsummarize and report results. These networks and technology become obsolete over time and must be upgraded, replaced and/or otherwise enhanced overtime. Enhancements must be more flexible and dependable than ever before. All of this is cap ital intensive and challenging. A failure by TDS to maintainflexible and capable telecommunication networks or information technology could have an adverse effect on TDS’ business, financial condition or results ofoperations.

The increased provision of data services including IPTV has introduced significant new demands on TDS’ network and also has increased complexities relatedto network management. As it relates to Wireline’s networks, the transition to new IP-based networks from well-established time -division multiplexing networksrequires new support tools and technician skills. Further, this transition requires the use of more leased facilities and partnerships which require enhancednetwork monitoring and controls. The IP-based networks also gene rally require more electronics on customers’ premises which introduces more technical risksand makes diagnostics and repairs more difficult.

23

Table of Contents

Further, the increased provision of data services, especially given the introduction of unlimited plans, on TDS’ networks has created an increased level of riskrelated to quality of service. This is due to the fact that many customers increasingly rely on data communications to execute and validate transactions. As aresult, redundancy and geographical diversity o f TDS’ network facilities are critical to providing uninterrupted service. Also, the speed of repair andmaintenance procedures in the event of network interruptions is critical to maintaining customer satisfaction. TDS’ ability to maintain high-quality, uninterruptedservice to its customers is critical, particularly given the increasingly competitive environment and customers’ ability to choose other service providers.

In addition, TDS’ networks and information technology and the networks and informati on technology of vendors on which TDS relies are subject to damage orinterruption due to various events, including power outages, computer, network and telecommunications failures, computer viruses, security breaches, hackersand other cyber security risk s, catastrophic events, natural disasters, errors or unauthorized actions by employees and vendors, flawed conversion of systems,disruptive technologies and technology changes.

23. TDS has experienced and, in the future, expects to experience cyber-attacks or other breaches of network or information technology security ofvarying degrees on a regular basis, which could have an adverse effect on TDS' business, financial condition or results of operations.

TDS experiences cyber-attacks of varying degrees on a re gular basis. TDS maintains administrative, technical and physical controls, as well as otherpreventative actions, to reduce the risk of security breaches. Although to date TDS has not discovered a material security breach, these efforts may be insufficient to prevent a material security breach stemming from future cyber-attacks. If TDS’ or its vendors’ networks and information technology are not adequatelyadapted to changes in technology or are damaged or fail to function properly, and/or if TDS’ or it s vendors’ security is breached or otherwise compromised, TDScould suffer adverse consequences, including theft, destruction or other loss of critical and private data, including customer and/or employee data, interruptionsor delays in its operations, in accurate billings, inaccurate financial reporting, and significant costs to remedy the problems. If TDS’ or its vendors’ systemsbecome unavailable or suffer a security breach of customer or other data, TDS may be required to expend significant resources and take various actions toaddress the problems, including notification under data privacy laws and regulations, may be subject to fines, sanctions and litigation, and its reputation andoperating results could be adversely affected. Such events may also cause TDS to fail to satisfy service level commitments or trigger contractual obligations tocustomers of its IT services. Any material disruption in TDS’ networks or information technology, including security breaches, could have an adverse effect onTD S’ business, financial condition or results of operations.

24. The market price of TDS’ Common Shares is subject to fluctuations due to a variety of factors.

Factors that may affect the future market price of TDS’ Common Shares include:

General economic condit ions, including conditions in the credit and financial markets;Industry conditions;Fluctuations in TDS’ quarterly customer additions, churn rate, revenues, results of operations or cash flows;Variations between TDS’ actual financial and operating res ults and those expected by analysts and investors; andAnnouncements by TDS’ competitors.

Any of these or other factors could adversely affect the future market price of TDS’ Common Shares, or could cause the future market price of TDS’ CommonShares to fluctuate from time to time.

25. Changes in facts or circumstances, including new or additional information, could require TDS to record charges relating to adjustments ofamounts reflected in the financial statements, which could have an adverse effect on TD S’ business, financial condition or results of operations.

The preparation of financial statements requires TDS to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date ofthe financial statements and the rep orted amounts of revenues and expenses during the reporting period. TDS bases its estimates on historical experience andon various other assumptions and information that are believed to be reasonable under the circumstances, the results of which form the basis for makingjudgments about the carrying values of assets and liabilities. Actual results may differ from estimates under different assumptions or conditions. Changes infacts or circumstances, including new or additional information, could require TDS to record charges in excess of amounts accrued in the financial statements, ifany, which could have an adverse effect on TDS’ business, financial condition or results of operations.

26. Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things,impede TDS’ access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and loweroperating income and cash flows, which would have an adverse effect on TDS’ business, financial condition or results of operations.

Disruptions in the credit and financial markets, declines in consumer confidence, increases in unemployment, declines in economic growth and uncertainty aboutcor porate earnings could have a significant negative impact on the U.S. and global financial and credit markets and the overall economy. Such events couldhave an adverse impact on financial institutions resulting in limited access to capital and credit for many companies. Furthermore, economic uncertainties makeit very difficult to accurately forecast and plan future business activities. Changes in economic conditions, changes in financial markets, deterioration in thecapital markets or other factors cou ld have an adverse effect on TDS’ business, financial condition, revenues, results of operations and cash flows.

24

Table of Contents

27. Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on TDS’ business, financial condition or results of operations.

TDS is regularly involved in a number of legal and policy proceedings before the FCC and various state and federal courts. Such legal and policy proceedingscan be complex, costly, protracted and highly disruptive to business operations by diverting the attention and energies of management and other key personnel.

The assessment of legal and policy proceedings is a highly subjective process that requires judg ments about future events. Additionally, amounts ultimatelyreceived or paid upon settlement or resolution of litigation and other contingencies may differ materially from amounts accrued in the financial statements. Depending on a range of factors, thes e or similar proceedings could impose restraints on TDS’ current or future manner of doing business. Such potentialoutcomes could have an adverse effect on TDS’ financial condition, results of operations or ability to do business.

28. The possible developmen t of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissionsfrom wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various el ectronicmedical devices such as pacemakers, could have an adverse effect on TDS’ wireless business, financial condition or results of operations.

Media reports and certain professional studies have suggested that certain radio frequency emissions from wir eless devices may be linked to various healthproblems, including cancer or tumors, and may interfere with various electronic medical devices, including hearing aids and pacemakers. U.S. Cellular is a partyto and may in the future be a party to lawsuits against wireless carriers and other parties claiming damages for alleged health effects, including cancer or tumors,arising from wireless phones or radio frequency transmitters. Concerns over radio frequency emissions may discourage use of wireless devic es or expose TDSto potential litigation. In addition, the FCC or other regulatory authorities may adopt regulations in response to concerns about radio frequency emissions. Anyresulting decrease in demand for wireless services, costs of litigation and damage awards or regulation could have an adverse effect on TDS’ business, financialcondition or results of operations.

In addition, some studies have indicated that some aspects of using wireless devices while driving may impair drivers’ attention in certain circumstances, makingaccidents more likely. These concerns could lead to potential litigation relating to accidents, deaths or serious bodily injuries, any of which could have anadverse effect on TDS’ business, financial condition or results of operations.

Numerous state and local legislative bodies have enacted or proposed legislation restricting or prohibiting the use of wireless devices while driving motorvehicles. These enacted or proposed laws or other similar laws, if passed, could have t he effect of reducing customer usage and/or increasing costs, whichcould have an adverse effect on TDS’ business, financial condition, or results of operations.

29. Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent TDSfrom using necessary technology to provide products or services or subject TDS to expensive intellectual property litigation or monetarypenalties, which could have an adverse effect on TDS’ business, financial condition or results of operations.

TDS faces possible effects of industry litigation relating to patents, other intellectual property or otherwise, that may restrict TDS’ access to devices for sale tocustomers. If technology that TDS uses in products or services were determined by a court to infringe a patent or other intellectual property right held by anotherperson, TDS could be precluded from using that technology and could be required to pay significant monetary damages. TDS also may be required to paysignificant royalties to such person to continue to use such technology in the future. The successful enforcement of any intellectual property rights, or TDS’inability to negotiate a license for such rights on acceptable terms, could forc e TDS to cease using the relevant technology and offering services incorporatingthe technology. Any litigation to determine the validity of claims that TDS’ products or services infringe or may infringe intellectual property rights of another,regardless of their merit or resolution, could be costly and divert the effort and attention of TDS’ management and technical personnel. Regardless of the meritsof any specific claim, TDS cannot give assurance that it would prevail in litigation because of the com plex technical issues and inherent uncertainties inintellectual property litigation. Although TDS generally seeks to obtain indemnification agreements from vendors that provide it with technology, there can be noassurance that any claim of infringement will be covered by an indemnity or that TDS will be able to recover all or any of its losses and costs under any availableindemnity agreements. Any claims of infringement of intellectual property and proprietary rights of others could prevent TDS from us ing necessary technologyto provide its services or subject TDS to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on TDS’ business,financial condition or results of operations.

30. Certain matters, such as control by the TDS Voting Trust and provisions in the TDS Restated Certificate of Incorporation, may serve todiscourage or make more difficult a change in control of TDS.

The TDS Restated Certificate of Incorporation and the TDS bylaws contain provisions which may serve to discourage or make more difficult a change in controlof TDS without the support of the TDS Voting Trust and the TDS Board of Directors or without meeting various other conditions.

25

Table of Contents

The TDS Restated Certificate of Incorporation authorize s the issuance of different series of common stock, which have different voting rights. The TDS Series A Common Shares have the power to elect approximately 75% (less one) of the directors and have ten votes per share in matters other than the election ofdirectors. The TDS Common Shares (with one vote per share) vote as a separate group only with respect to the election of 25% (plus one) of the directors. Inaddition, the total percentage voting power in matters other than the election of directors of t he Series A Common Shares and Common Shares are fixed, at56.7% and 43.3%, respectively, subject to adjustment due to changes in the number of outstanding Series A Common Shares.

A substantial majority of the outstanding TDS Series A Common Shares are hel d in the TDS Voting Trust which expires on June 30, 2035. The TDS VotingTrust was created to facilitate the long-standing relationships among the trustees’ certificate holders. By virtue of the number of shares held by them, the votingtrustees have the power to elect eight directors based on the current TDS Board of Directors’ size of twelve directors, and control a majority of the voting powerof TDS with respect to matters other than the election of directors.

The existence of the TDS Voting Trust is likely to deter any potential unsolicited or hostile takeover attempts or other efforts to obtain control of TDS and maymake it more difficult for shareholders to sell shares of TDS at higher than market prices. The trustees of the TDS Voting Trust have advised TDS that theyintend to maintain the ability to keep or dispose of voting control of TDS.

The TDS Restated Certificate of Incorporation also authorizes the TDS Board of Directors to designate and issue TDS Undesignated Shares in one or moreclasses or series of preferred or common stock from time to time. Generally, no further action or authorization by the shareholders is necessary prior to thedesignation or issuance of the additional TDS Undesignated Shares authorized pursuant to the TDS Restate d Certificate of Incorporation unless applicable lawsor regulations would require such approval in a given instance. Such TDS Undesignated Shares could be issued in circumstances that would serve to preservecontrol of TDS’ then existing management.

In a ddition, the TDS Restated Certificate of Incorporation includes a provision which authorizes the TDS Board of Directors to consider various factors, includingeffects on customers, taxes, and the long-term and short-term interests of TDS, in the context of a proposal or offer to acquire or merge the corporation, or to sellits assets, and to reject such offer if the TDS Board of Directors determines that the proposal is not in the best interests of the corporation based on such factors.

The provisions of th e TDS Restated Certificate of Incorporation and the TDS bylaws and the existence of various classes of capital stock could preventshareholders from profiting from an increase in the market value of their shares as a result of a change in control of TDS by delaying or preventing such changein control.

31. Any of the foregoing events or other events could cause revenues, earnings, capital expenditures and/or any other financial or statisticalinformation to vary from TDS’ forward-looking estimates by a material amount.

From time to time, TDS may disclose forward-looking information, including estimates of future operating revenues; various measures of income before incometaxes; and/or capital expenditures. Any such forward-looking information includes consideration of known or anticipated c hanges to the extent disclosed, butdynamic market conditions and/or other unknown or unanticipated events, including but not limited to the risks discussed above, could cause such estimates todiffer materially from the actual amounts.

26

Table of Contents

Ite m 1B. Unresolve d Staff CommentsNone.

Item 2. Proper tiesTDS has properties located throughout the United States. As of December 31, 2017 , TDS’ Property, plant and equipment, net of accumulated depreciation,was held as follows:

U.S. Cellular’s mobile telephone switching offices, cell sites, cell siteequipment, call centers and retail stores are located primarily in U.S.Cellular’s operating markets and are either owned or leased by U.S. Cellular.

Wireline owns substantially all of its physical assets consisting of telephonedistribution networks, network electronic equipment and land and buildingslocated in its ILEC operating markets. TDS Telecom leases most of its officespace and switching facility buildings used in its CLEC operations.

Cable own s substantially all of its physical assets consisting of cabledistribution networks, headends, and equipment at or near customerpremises. Cable generally leases business offices and space on the towerson which equipment is located while headends are lo cated on owned orleased parcels of land.

HMS’ principal physical assets consist of data centers and related ITinfrastructure, and business offices which are either owned or leased.

Parent and Other fixed assets consist of assets , which are either owned o rleased, at the TDS corporate offices and Suttle-Straus.

As of December 31, 2017 , Property, plant and equipment, net of accumulated depreciation, totaled $ 2,320 million at U.S. Cellular , $ 710 million atWireline, $ 260 million at Cable, $ 111 million at HMS, and $ 23 million at Corporate and Suttle-Straus. See Note 9 – Property, Plant and Equipment in theNotes to Consolidated Financial Statements for additional information.

Item 3. Leg al ProceedingsTDS is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts. If TDS believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statementsfor the es timated loss. If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within that range isbetter than another, the low end of the range is accrued. The assessment of the expected outcomes of le gal proceedings is a highly subjective process thatrequires judgments about future events. The legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financialstatement disclosures. The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements. See Note 13 —Commitments and Contingencies in the Notes to Consolidated Financial Statements for further information.

Item 4. Mine Saf ety DisclosuresNot applicable.

27

Table of Contents

PA RT II

Item 5. Mar ket for Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity SecuritiesMarket, holder, dividend and performance graph information is incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report sections entitled“Shareholder Information” and “Consolidated Quarterly Information (Unaudited).”

TDS paid quarterly dividends per outstanding share of $ 0.155 in 2017 , $ 0.148 in 2016 and $ 0.141 in 2015 . TDS increased the dividend per share to $ 0.16in the first quarter of 201 8 . TDS has no current plans to change its policy of paying di vidends.

Information relating to Issuer Purchases of Equity Securities is set forth below.

On August 2, 2013, the Board of Directors of TDS authorized, and TDS announced by Form 8-K, a $250 million stock repurchase program for TDS CommonShares. Depending on market conditions, such shares may be repurchased in compliance with Rule 10b-18 of the Exchange Act, pursuant to Rule 10b5-1under the Exchange Act, or pursuant to accelerated share repurchase arrangements, prepaid share repurchases, private transacti ons or as otherwiseauthorized. This authorization does not have an expiration date. TDS did not determine to terminate the foregoing Common Share repurchase program, orcease making further purchases thereunder, during the fourth quarter of 2017 .

TDS determines whether to repurchase shares from time to time based on many considerations, including cash needed for other known or possiblerequirements, the stock price, market conditions, debt rating considerations, business forecasts, business plans, macroeconomic conditions, share issuancesunder compensation plans, provisions in governing and legal documents and other legal requirements, and other facts and circumstances. Subject to theseconsiderations, TDS may a pprove the repurchase of its shares from time to time when circumstances warrant.

The maximum dollar value of shares that may yet be purchased under this program was $ 199 million as of December 31, 2017 . There were no purchasesmade by or on behalf of TDS, and no open market purchases made by any “affiliated purchaser” (as defined by the SEC) of TDS, of TDS Common Sharesduring the quarter ended December 31, 2017 .

Item 6. Se lected Financial DataIncorporated by reference from Exhibit 13 to this Form 10-K, Annual Report section entitled “Selected Consolidated Financial Data,” except for Ratio ofearnings to fixed charges, which is incorporated herein by reference from Exhibit 12 to this Form 10-K.

Item 7. Manag ement’s Discussion and Analysis of Financial Condition and Results ofOperationsIncorporated by reference from Exhibit 13 to this Form 10-K, Annual Report section entitled “Management’s Discussion and Analysis of Financial Condition andResults of Operations.”

Item 7A. Qua ntitative and Qualitative Disclosures About Market RiskIncorporated by reference from Exhibit 13 to this Form 10-K, Annual Report section entitled “Market Risk.”

Item 8. Fin ancial Statements and Supplementary DataIncorporated by reference from Exhibit 13 to this Form 10-K, Annual Report sections entitled “Consolidated Statement of Operations,” “ Consolidated Statementof Comprehensive Income ,” “Consolidated Statement of Cash Flows,” “Consolidated Balance Sheet,” “Consolidated Statement of Changes in Equity,” “Notes toConsolidated Financial Statements,” “Management’s Report on Internal Control Over Financial Reporting,” “Report of Independent Registered Public AccountingFirm,” and “Consolidated Quarterly Information (Unaudited).”

Item 9. Ch anges in and Disagreements with Accountants on Accounting and FinancialDisclosureNone.

28

Table of Contents

Item 9A. Con trols and ProceduresEvaluation of Disclosure Controls and Procedures

TDS maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure thatinformation required to be disclosed in its reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the timeperiods specified in the SEC’s rules and forms, and that such inf ormation is accumulated and communicated to TDS’ management, including its principalexecutive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating thedisclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives.

As required by SEC Rule 13a-15(b), TDS carried ou t an evaluation, under the supervision and with the participation of management, including its principalexecutive officer and principal financial officer, of the effectiveness of the design and operation of TDS’ disclosure controls and procedures as of th e end of theperiod covered by this Annual Report. Based on this evaluation, the principal executive officer and principal financial officer have concluded that TDS’ disclosurecontrols and procedures were effective as of December 31, 2017 , at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act. TDS’ internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial stat ements for external purposes in accordance with accounting principles generally accepted in the UnitedStates of America (GAAP). TDS’ internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of r ecordsthat, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (ii) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements in a ccordance with GAAP, and that receipts and expenditures of the issuerare being made only in accordance with authorizations of management and, where required, the board of directors of the issuer; and (iii) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the issuer’s assets that could have a material effect on theinterim or annual consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.

Under the supervision and with the participation of TDS’ management, including its principal executive officer and principal financial officer, TDS conducted anevaluation of the effectiveness of its internal co ntrol over financial reporting as of December 31, 2017 , based on the criteria established in the 2013 version ofInternalControl—IntegratedFrameworkissued by the Committee of Sponsoring Organizations of the Tr eadway Commission (COSO). Management hasconcluded that TDS maintained effective internal control over financial reporting as of December 31, 2017 , based on criteria established in the 2013 version ofInternalControl—IntegratedFrameworkissued by the COSO.

The effectiveness of TDS’ internal control over financial reporting as of December 31, 2017 , has been audited by PricewaterhouseCoopers LLP, an independentregistere d public accounting firm, as stated in the firm’s report which is incorporated by reference into Item 8 of this Annual Report on Form 10-K from Exhibit 13filed herewith.

Changes in Internal Control over Financial Reporting

There were no changes in TDS’ internal control over financial reporting during the fourth quarter of 2017 that have materially affected, or are reasonably likely tomaterially affect, TDS’ internal control over financial reporting , except as follows: TDS implemented internal controls during the fourth quarter of 2017 to ensurethat, upon adoption of the new revenue recognition accounting standard, contracts will be properly evaluated and any impacts to the financial statements will berecognized in accordance with this new accounting standard effective January 1, 2018.

Item 9B. Oth er InformationThe following information is being provided to update prior disclosures made pursuant to the requirements of Form 8-K, Item 2.03 – Creation of a DirectFinancial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

Neither TDS nor U.S. Cellular borrowed or repaid any cash amounts under their revolving credit facilities in the fourth quarter of 2017 or through the filing date ofthis Form 10-K, and had no cash borrowings outstanding under their revolving credit facilities as of Decembe r 31, 2017 , or as of the filing date of this Form 10-K.

Further, U.S. Cellular did not borrow or repay any cash amounts under its receivables securitization facility in the fourth quarter of 2017 or through the filing dateof this Form 10-K, and had no cash borrowings outstanding under its receivables securitization facility as of December 31, 2017 , or as of the filing date of thisForm 10-K.

29

Table of Contents

PAR T III

Item 10 . Dire ctors, Executive Officers and Corporate GovernanceIncorporated by reference from Proxy Statement sections entitled “Election of Directors,” “Corporate Governance,” “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance.”

Item 11. E xecutive CompensationIncorporated by reference from Proxy Statement section entitled “Executive and Director Compensation.”

Item 12. Sec urity Ownership of Certain Beneficial Owners and Management and RelatedStockholder MattersIncorporated by reference from Proxy Statement sections entitled “Security Ownership of Certain Beneficial Owners and Management” and “SecuritiesAuthorized for Issuance under Equity Compensation Plans.”

Item 13. Ce rtain Relationships and Related Transactions, and Direc tor IndependenceIncorporated by reference from Proxy Statement sections entitled “Corporate Governance” and “Certain Relationships and Related Transactions.”

Item 14. Princ ipal Accountant Fees and ServicesIncorporated by reference from Proxy Statement section entitled “Fees Paid to Principal Accountants.”

30

Table of Contents

PAR T IV

Item 15. Exhib its and Financial Statement Schedules(a) The following documents are filed as part of this report: (1) Financial Statements Consolidated Statement of Operations Annual Report* Consolidated Statement of Comprehensive Income Annual Report* Consolidated Statement of Cash Flows Annual Report* Consolidated Balance Sheet Annual Report* Consolidated Statement of Changes in Equity Annual Report* Notes to Consolidated Financial Statements Annual Report* Management's Report on Internal Control Over Financial Reporting Annual Report* Report of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP Annual Report* Consolidated Quarterly Information (Unaudited) Annual Report* *Incorporated by reference from Exhibit 13. (2) Financial Statement Schedules Location Los Angeles SMSA Limited Partnership and Subsidiary Financial Statements S-1 Report of Independent Registered Public Accounting Firm — Ernst & Young LLP S-2 Consolidated Balance Sheets S-3 Consolidated Statements of Income and Comprehensive Income S-4 Consolidated Statements of Changes in Partners’ Capital S-5 Consolidated Statements of Cash Flows S-6 Notes to Consolidated Financial Statements S-7 All other schedules have been omitted because they are not applicable or not required or because the required information is shown in the

financial statements or notes thereto. (3) Exhibits The exhibits set forth below are filed as a part of this Report. Compensatory plans or arrangements are identified below with an asterisk.

31

Table of Contents

I ndex to E xhibitsExhibit Number Description of Documents

3.1 TDS’ Restated Certificate of Incorporation, dated January 24, 2012, is hereby incorporated by reference to Exhibit 3.1 to TDS’Registration Statement on Form 8 -A/A dated January 24, 2012.

3.2 TDS Restated Bylaws are hereby incorporated by reference to Exhibit 3.1 to TDS’ Current Report on Form 8-K dated August19, 2015.

4.1 TDS’ Restated Certificate of Incorporation is hereby incorporated as Exhibit 3.1.

4.2 TDS Restated Bylaws are hereby incorporated as Exhibit 3.2.

4.3(a) Indenture for Senior Debt Securities between TDS and The Bank of New York Mellon Trust Company, N.A., formerly known asThe Bank of New York Trust Company, N.A., as successor to BNY Midwest Trust Company (BNY) dated November 1, 2001 , ishereby in corporated by reference to Exhibit 4 to TDS’ Quarterly Report on Form 10-Q for the quarter ended September 30,2001.

4.3(b) Third Supplemental Indenture dated March 31, 2005 , by and between TDS and BNY, establishing TDS’ 6.625% Senior Notesdue 2045, is hereby incorporated by reference to Exhibit 4.1 to TDS’ Current Report on Form 8-K dated March 23, 2005.

4.3(c) Fourth Supplemental Indenture dated November 16, 2010 , by and between TDS and BNY, establishing TDS’ 6.875% SeniorNotes due 2059, is hereby incorporated by reference to Exhibit 4.1 to TDS’ Curre nt Report on Form 8-K dated November 16,2010.

4.3(d) Fifth Supplemental Indenture dated March 21, 2011 , by and between TDS and BNY, establishing TDS’ 7% Senior Notes due2060, is hereby incorporated by reference to Exhibit 4.1 to TDS’ Current Report on Form 8-K dated March 21, 2011.

4.3(e) Sixth Supplemental Indenture dated November 26, 2012 , by and between TDS and BNY, establishing TDS’ 5.875% Senior Notesdue 2061, is hereby incorporated by reference to Exhibit 4.1 to TDS’ Current Report on Form 8-K dated November 26, 2012.

4.4 Revolving Credit Agreement, among TDS, Wells Fargo National Association, as administrative agent, and the other lendersthereto, dated as of June 15, 2016, includ ing Schedules and Exhibits, including the form of the subsidiary Guaranty, is herebyincorporated by reference to Exhibit 4.1 to TDS’ Current Report on Form 8-K dated June 15, 2016.

4.5 Revolving Credit Agreement, among U.S. Cellular, Toronto Dominion (Texas) LLC, as administrative agent, and the other lendersthereto, dated as of June 15, 2016, including Schedules and Exhibits, including the form of the sub sidiary Guaranty andSubordination Agreement, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular's Form 8-K dated June 15, 2016.

4.6(a) I ndenture for Senior Debt Securities dated June 1, 2002 , between U.S. Cellular and BNY is hereby incorporated by reference toExhibit 4.1 to Form S-3 dated May 31, 2013 (File No. 333-188971).

4.6(b) Form of Third Supplemental Indenture dated as of December 3, 2003 , between U.S. Cellular and BNY, relating to$444,000,000 of U.S. Cellular’s 6.7% Senior Note s due 2033, is hereby incorporated by reference to Exhibit 4.1 to U.S.Cellular’s Current Report on Form 8-K dated December 3, 2003.

4.6(c) Form of Fifth Supplemental Indenture dated as of June 21, 2004 , between U.S. Cellular and BNY, relating to $100,000,000 ofU.S. Cellular’s 6.7% Senior Notes due 2033, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Current Reporton Form 8-K dated June 21, 2004.

4.6(d) Form of Sixth Supplemental Indenture dated as of May 9, 2011 , between U.S. Cellular and BNY, relating to $342,000,000 of U.S.Cellular’s 6.95% Senior Notes due 2060, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Current Report onForm 8-K dated May 9, 2011.

4.6(e) Form of Seventh Supplemental Indenture dated as of December 8, 2014 , between U.S. Cellular and BNY, relating to$275,000,000 of U.S. Cellular’s 7.25% Senior Notes due 2063, is hereby incorp orated by reference to Exhibit 2 to U.S. Cellular’sRegistration Statement on Form 8-A dated December 2, 2014.

4.6(f) Form of Eighth Supplemental Indenture dated as of November 23, 2015 , between U.S. Cellular and BNY, relating to$300,000,000 of U.S. Cellular’s 7.25% Senior Notes due 2064, is hereby incorporated by reference to Exhibit 2 to U.S. Cellular’sRegistration Statement on Form 8-A dated November 17 , 2015.

32

Table of Contents

4.7 Indenture for Subordinated Debt Securities between TDS and BNY is hereby incorporated by reference to Exhibit 4.1 to TDS’Current Report on Form 8-K dated September 16, 2013.

4.8 Indenture for Subordinated Debt Securities between U.S. Cellular and BNY is hereby incorporated by reference to Exhibit 4.1 toU.S . Cellular’s Current Report on Form 8-K dated September 16, 2013.

4.9 Amended and Restated Term Loan Credit Agreement, among U.S. Cellular and CoBank, ACB, as administrative agent, and theother lenders thereto, dated as of June 15, 2016, including Schedules and Exhibits, including the forms of the subsidiary Guarantyand Subordination Agreement, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellula r's Form 8-K dated June 15,2016.

4.10 Master Indenture for asset-backed notes by and among USCC Master Note Trust, USCC Services, LLC and U.S. Bank NationalAssociation, as Indenture Trustee, dated December 20, 2017, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’sForm 8-K dated December 20, 2017.

4.11 Supplemental Indenture for Series 2017-VFN Floating Rate Asset-Backed Notes by and among USCC Master Note Trust, USCCServices, LLC and U.S. Bank National Association, dated December 20, 2017, is hereby incorporated by reference to Exhibit 4.2to U.S. Cellular’s Form 8-K dated December 20, 2017.

9.1 Amendment and Restatement (dated April 22, 2005) of Voting Trust Agreement dated Jun e 30, 1989 , is hereby incorporatedby reference to the Exhibit filed on Amendment No. 3 to Schedule 13D dated May 2, 2005 , filed by the trustees of such votingtrust with respect to TDS Common Shares.

10.1(a)* TDS Amended and Restated 2004 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit 10.1 to TDS’ CurrentReport on Form 8-K dated April 11, 2 005.

10.1(b)* First Amendment to TDS Amended and Restated 2004 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit 10.3 to TDS’ Cur rent Report on Form 8-K dated December 10, 2007.

10.1(c)* Second Amendment to TDS Amended and Restated 2004 Long-Term Incentive Plan is hereby incorpor ated by reference toExhibit 10.4 to TDS’ Current Report on Form 8-K dated December 10, 2007.

10.1(d)* Third Amendment to TDS Amended and Restated 2004 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit10.1 to TDS’ Current Report on Form 8-K dated December 22, 2008.

10.2(a)* Telephone and Data Systems, Inc. 2011 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit B to TDS’ Noticeof Annual Meeting of Shareholders and Proxy Statement dated April 18, 2014.

10.2(b)* Amendment No. 1 to Telephone and Data Systems, Inc. 2011 Long-Term Incentive Plan is hereby incorporated by reference toExhibit A to TDS’ N otice of Annual Meeting of Shareholders and Proxy statement dated April 18, 2014.

10.3(a)* TDS Supplemental Executive Retirement Plan, as amended and r estated, effective January 1, 2009 , is hereby incorporated byreference to Exhibit 10.1 to TDS’ Current Report on Form 8-K dated August 27, 2008.

10.3(b)* Amendment Number One to the Telephone and Data Systems, Inc. Supplemental Executive Retirement Plan, is herebyincorporated by reference to Exhibit 10.2 to Telephone and Data Systems, Inc.’s Current Report on Form 8-K dated March 15,2012.

10.3(c)* Amendment Number Two to the Telephone and Data Systems, Inc. Supplemental Executive Retirement Plan, is herebyincorporated by reference to Exhibit 10.3 to Telephon e and Data Systems, Inc.’s Current Report on Form 8-K dated November 3,2014.

10.4* TDS’ Amended and Restated Compensation Plan for Non-Employee Directors, dated December 7, 2017.

10.5* TDS Bonus Deferral and Stock Unit Match Program and Election Form is hereby incorporated by reference to Exhibit 10.6 to TDS’Annual Report on Form 10-K for the year ended December 31, 2012.

10.6* U.S. Cellular 2005 Long-Term Incentive Plan, as amended, is hereby incorporated by reference to Exhibit C to U.S. Cellular’sNotice of Annual Meeting of Shareholders and Proxy Statement dated April 15, 2009.

10.7(a)* U.S. Cellular 2013 Lon g-Term Incentive Plan is hereby incorporated by reference to Exhibit B to U.S. Cellular’s Notice of AnnualMeeting of Shareholders and Proxy Statement dated April 12, 2016.

10.7(b)* Amendment No. 1 to U.S. Cellular 2013 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit A to U.S.Cellular's Notice of Annual Me eting of Shareholders and Proxy Statement dated April 12, 2016.

33

Table of Contents

10.8(a)* U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference to Exhibit 10.1 to U.S.Cellular’s Current Report on Form 8-K dated December 10, 2007.

10.8(b)* First Amendment to U.S. Cellul ar Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference toExhibit 10.6 to U.S. Cellular’s Current Report on Form 8-K dated December 9, 2008.

10.8(c)* Second Amendment to U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by referenceto Exhibit 10.12(c) to U.S. Cellular’s Annual Report on Form 10-K for the year ended December 3 1, 2012.

10.8(d)* Election Form for U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference toExhibit 10.12(d) to U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2012.

10.9* U.S. Cellular Form of Long-Term Incentive Plan Executive Deferred Compensation Agreement —Phantom Stock Account forofficers is hereby incorporated by reference to Exhibit 10.5 to U.S. Cellular’s Current Report on Form 8-K dated May 14, 2013.

10.10(a)* TDS 2007 Deferred Compensation Agreement between TDS and Kenneth R. Meyers dated December 26, 2006 , is herebyincorporated by reference to Exhibit 99.1 to TDS’ Current Report on Form 8-K dated January 1, 2007.

1 0.10(b)* Amendment to TDS 2007 Deferred Compensation Agreement between TDS and Kenneth R. Meyers is hereby incorporated byreference to Exhibit 10.4 to TDS Current Report on Form 8-K dated December 22, 2008.

10.11* Form of TDS Corporate Officer Long-Term Incentive Plan Stock Option Award Agreement for Officers, is hereby incorporated byreference to Exhibit 10.3 to TDS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.

10.12* Form of TDS Corporate Officer Long-Term Incentive Plan Restricted Stock Unit Award Agreement is hereby incorporated byreference to Exhibit 10.2 to TDS’ Current Report on Form 8-K dated May 1, 2015.

10.13* Form of 2016 TDS Performance Share Award Agreement, is hereby incorporated by reference to Exhibit 10.1 to TDS’ CurrentReport on Form 8-K dated June 16, 2016.

10.14* Form of 2017 TDS Performance Share Award Agreement, is hereby incorporated by reference to Exhibit 10. 2 to TDS' CurrentReport on Form 8-K dated May 24 , 201 7 .

10.15* TDS Incentive Plan is hereby incorporated by reference to Exhibit A to TDS’ Notice of Annual Meeting of Shareholders and ProxySt atement dated April 12, 2017.

10.16* TDS 201 7 Officer Bonus Program is hereby incorporated by reference to Exhibit 10.1 to TDS’ Current Report on Form 8-K datedMay 24 , 201 7 .

10.17* Amended and Restated Guidelines for the determination of Annual Bonus for President and Chief Executive Officer of TDS arehereby incorporated by reference to Exhibit 10.1 to TDS’ Current Report on Form 8-K dated November 18, 2009.

10.18* Guidelines for the determination of Annual Bonus for President and Chief Executive Officer of U.S. Cellular are herebyincorporated by reference to Exhibit 10.2 to U.S. Cellular’s Current Report on Form 8-K dated August 19, 2014.

10.19* Form of TDS Deferred Compensation Agreement is hereby incorporated by reference to Exhibit 10.1 to TDS’ Current Report onForm 8-K dated December 21, 2009.

10.20* Change of Election Form for TDS Deferred Compensation Agreement is hereby incorporated by reference to Exhibit 10 .2 to TDS’Current Report on Form 8-K dated December 21, 2009.

10.21* Pre 2005 Form of Deferred Compensation Agreement used by TDS Telecommunications LLC is hereby incorporated by referenceto Exhibit 10.28 to TDS’ Annual Report on Form 10-K for the annual period ended December 31, 2009.

10.22(a)* Post 2004 TDS Telecommunications LLC Executive Deferred Compensation Program, as amended and restated effectiveJanuary 1, 2008 , is hereby incorporated by reference to Exhibit 10.29 to TDS’ Annual Report on Form 10-K for the annual periodended December 31 , 2009.

34

Table of Contents

10.22(b)* First Amendment to TDS Telecommunications LLC Executive Deferred Compensation Program dated October 8, 2008 , is herebyincorporated b y reference to Exhibit 10.30 to TDS’ Annual Report on Form 10-K for the annual period ended December 31, 2009.

10.23* Current Initial Election Form and Post 2004 Payment Election Form for TDS Telecommunications LLC Executive DeferredCompensation Program is hereby incorporated by reference to Exhibit 10.31 to TDS’ Annual Report on Form 10-K for the annualperiod ended Dec ember 31, 2009.

10.24* Current Annual Election Form for TDS Telecommunications LLC Executive Deferred Compensation Program is herebyincorporated by re ference to Exhibit 10.32 to TDS’ Annual Report on Form 10-K for the annual period ended December 31, 2009.

10.25* Form of U.S. Cellular 2013 Long-Term Incentive Plan 2017 Performance Award Agreement for the President and Chief ExecutiveOfficer of U.S. Cellular, is hereby incorporated by reference to Exhibit 10. 1 to U.S. Cellular’s Current Report on Form 8-K datedApril 3 , 201 7 .

10.26* Form of U.S. Cellular Long-Term Incentive Plan Restricted Stock Unit Award Agreement for the President and Chief ExecutiveOfficer of U.S. Cellular, is hereby incorporated by reference to E xhibit 10. 2 to U.S. Cellular’s Current Report on Form 8-K datedApril 3 , 201 7 .

10.27* Letter Agreement dated July 25, 2013 , between U.S. Cellular and Kenneth R. Meyers is hereby incorporated by reference toExhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated July 25, 2013.

10.28** Master Service Agreement entered into by United States Cellular Corporation and Amdocs Software Systems Limited on August17, 2010 , to develop a Billing and Operational Support System (B/OSS) with a new point-of-sale system to consolidate billing onone platform, is hereby incorporated by reference to Exhibit 10.8 to U.S. Cellular’s Quarterly Report on Form 10-Q datedSeptember 30, 2010.

10.29** Software License and Maintenance Agreement entered into by United States Cellular Corporation and Amdocs Software SystemsLimited on August 17, 2010 , to develop a Billing and Operational Su pport System (B/OSS) with a new point-of-sale system toconsolidate billing on one platform, is hereby incorporated by reference to Exhibit 10.9 to U.S. Cellular’s Quarterly Report on Form10-Q dated September 30, 2010.

10.30** Master Statement of Work, dated as of November 25, 2014, between U.S. Cellular and Amdocs Software Systems, Ltd., is herebyincorporated by reference from Exhibi t 10.26 to U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31,2014.

10.31 Series 2017-VFN Note Purchase Agreement by and among U SCC Receivables Funding LLC, as transferor, USCC Master NoteTrust, as issuer, USCC Services, LLC, as Servicer, U.S. Cellular as guarantor, and Royal Bank of Canada, as administrativeagent for owners of the notes, dated December 20, 2017, is hereby incorp orated by reference to Exhibit 10.1 to U.S. Cellular’sForm 8-K dated December 20, 2017.

10.32 Performance Guaranty and Parent Undertaking Agreement by U.S. Cellular in favor of the Guaranteed Parties defined therein,dated December 20, 2017, is hereby incorporated by reference to Exhibit 10.2 to U.S. Cellular’s Form 8-K dated December 20,2017.

10.33 Amended and Restated Trust Agreement between USCC Receivables Funding LLC, as transferor, and Wilmington Trust, NationalAssociation, as Trustee, is hereby incorporated by reference to Exhibit 10.3 to U.S. Cellular’s Form 8-K dated December 20, 2017.

11 Statement regarding computation of earnings per share (included in Note 5 — Earnings Per Share in the Notes to ConsolidatedFinancial Statements in Exhibit 13).

12 Statement regarding computation of ratio of earnings to fixed charges for the years ended December 31, 2017, 2016, 2015,2014, and 2013.

13 Incorporated portions of 201 7 Annual Report to Share holders.

21 Subsidiaries of TDS.

23.1 Consent of Independent Registered Public Accounting Firm—PricewaterhouseCoopers LLP.

23.2 Consent of Independent Registered Public Accounting Firm—Ernst & Young LLP.

31.1 Principal executive officer certification pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.

31.2 Principal financial officer certification pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.

35

Table of Contents

32.1 Principal executive officer certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.

32.2 Principal financial officer certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

* Indicates a management contract or compensatory plan or arrangement

** Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of anapplication for confidential treatment pursuant to the Securities Exchange Act of 1934, as amended. The application forconfidential treatment has been granted.

36

Table of Contents

Item 16. Form 10-K SummaryNone.

37

Table of Contents

LOS ANGELES SMSA LIMITED PARTNERSHIP AND SUBSIDIARY FINANCIAL STATEMENTS

TDS’ subsidiary, U.S. Cellular, owns a 5.5% limited partnership interest in the Los Angeles SMSA Limited Partnership and Subsidiary, and accounts for suchinterest by the equity method. The partnership’s consolidated financial statements were obtained by U.S. Cellular as a limited partner.

S- 1

Table of Contents

Report of Independent Registered Public Accounting Firm

The Partners of Los Angeles SMSA Limited Partnership

Opin ion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Los Angeles SMSA Limited Partnership and Subsidiary (the Partnership) as of December31, 2017 and 2016, the related consolidated statements of income and compr ehensive income, changes in partners’ capital and cash flows for each of the threeyears in the period ended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, theconsolidated fi nancial statements present fairly, in all material respects, the financial position of the Partnership at December 31, 2017 and 2016, and the resultsof its operations and its cash flows for each of the three years in the period ended December 31, 2017 in conformity with U.S. generally accepted accountingprinciples.

Basis for Opinion

These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the Partnership’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) andare required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.

We conducted our December 31, 2017 and 2016 audits in accordance with the standards of the PCAOB and in accordance with auditing standards generallyaccepted in the United States of America. We conducted our 2015 audit in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financialstatements, whether due to error or fraud, and perfor ming procedures that respond to those risks. Such procedures included examining, on a test basis,evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significantestimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonablebasis for our opinion.

/s/ Ernst & Young LLP Certified Public Accountants

We have served as the Partnership’s auditor since 2014.

Orlando, Florida

February 26, 2018

S- 2

Table of Contents

Los Angeles SMSA Partnership and Subsidiary Consolidated Balance Sheets - As of December 31, 2017 and 2016 (Dollars in Thousands) 2017 2016ASSETS CURRENT ASSETS: Due from affiliate $ 218,838     $ 281,846   Accounts receivable, net of allowances of $26,916 and $31,093 423,285       489,043   Unbilled revenue 21,901       23,190   Prepaid expenses 19,015       18,716   Total current assets 683,039       812,795          PROPERTY, PLANT AND EQUIPMENT - NET 1,936,038       1,862,892          WIRELESS LICENSES 2,075,448       2,075,448          OTHER ASSETS - NET 349,484       228,770          TOTAL ASSETS $ 5,044,009     $ 4,979,905          LIABILITIES AND PARTNERS' CAPITAL                CURRENT LIABILITIES:         Accounts payable and accrued liabilities $ 158,099     $ 202,284   Advance billings and other 174,965       160,434   Financing obligation 12,926       12,744   Deferred rent 8,360       8,382   Total current liabilities 354,350       383,844          LONG TERM LIABILITIES:         Financing obligation 111,318       112,552   Deferred rent 141,410       146,547   Other liabilities 7,841       158   Total long term liabilities 260,569       259,257           Total liabilities 614,919       643,101          PARTNERS' CAPITAL         General Partner's interest 1,771,636       1,734,722   Limited Partners' interest 2,657,454       2,602,082   Total partners' capital 4,429,090       4,336,804          TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 5,044,009     $ 4,979,905   See notes to consolidated financial statements.

S- 3

Table of Contents

Los Angeles SMSA Limited Partnership and Subsidiary Consolidated Statements of Income and Comprehensive Income - For the Years Ended December 31, 2017, 2016 and 2015 (Dollars in Thousands) 2017 2016 2015 OPERATING REVENUES: Service revenues $ 3,791,371   $ 3,996,989   $ 4,181,377   Equipment revenues 982,251   930,690   943,419   Other 246,322   256,917   221,918   Total operating revenues 5,019,944   5,184,596   5,346,714        OPERATING EXPENSES:       Cost of service (exclusive of depreciation and amortization) 1,107,614   1,070,302   968,132   Cost of equipment 1,174,858   1,193,924   1,267,801   Depreciation and amortization 355,696   356,848   360,463   Selling, general and administrative 1,168,978   1,278,205   1,397,856   Total operating expenses 3,807,146   3,899,279   3,994,252        OPERATING INCOME 1,212,798   1,285,317   1,352,462        OTHER INCOME (EXPENSE):       Interest income (expense), net 2,857   (6,552) (3,197) Other 1,631   –   –   Total other income (expense) 4,488   (6,552) (3,197)      NET INCOME AND COMPREHENSIVE INCOME $ 1,217,286   $ 1,278,765   $ 1,349,265        Allocation of Net Income:       General Partner $ 486,914   $ 511,507   $ 539,706   Limited Partners $ 730,372   $ 767,258   $ 809,559   See notes to consolidated financial statements.

S- 4

Table of Contents

Los Angeles SMSA Limited Partnership and Subsidiary Consolidated Statements of Changes in Partners' Capital - For the Years Ended December 31, 2017, 2016 and 2015 (Dollars in Thousands)

GeneralPartner Limited Partners

AirTouch

Cellular Inc. AirTouch

Cellular Inc. Cellco

Partnership

United StatesCellular

InvestmentCorporation ofLos Angeles

Total Partners'Capital

BALANCE - January 1, 2015 $   893,509     $   944,886     $   272,520     $   122,859     $   2,233,774                               Net Income   539,706       570,740       164,611       74,208       1,349,265                              BALANCE - December 31, 2015 $   1,433,215     $   1,515,626     $   437,131     $   197,067     $   3,583,039                               Distributions   (210,000)     (222,075)     (64,050)     (28,875)     (525,000)                             Net Income   511,507       540,917       156,009       70,332       1,278,765                              BALANCE - December 31, 2016 $   1,734,722     $   1,834,468     $   529,090     $   238,524     $   4,336,804                               Distributions   (450,000)     (475,875)     (137,250)     (61,875)     (1,125,000)                             Net Income   486,914       514,912       148,509       66,951       1,217,286                              BALANCE - December 31, 2017 $   1,771,636     $   1,873,505     $   540,349     $   243,600     $   4,429,090                              See notes to consolidated financial statements.

S- 5

Table of Contents

Los Angeles SMSA Limited Partnership and Subsidiary Consolidated Statements of Cash Flows - For the Years Ended December 31, 2017, 2016 and 2015 (Dollars in Thousands) 2017 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,217,286   $ 1,278,765   $ 1,349,265   Adjustments to reconcile net income to net cash provided by       operating activities:       Depreciation and amortization 355,696   356,848   360,463   Imputed interest on financing obligation 12,374   12,284   9,135   Provision for losses on accounts receivable 56,505   71,925   79,063   Gain on device installment plan receivables sold –   –   (7,632) Changes in certain assets and liabilities:       Account s receivable (36,907) (153,704) 42,964   Unbilled revenue 1,289   (307) 1,628   Pr epaid expenses (299) (6,931) 1,403   Other assets - net (137,062) 20,037   (151,954) Ac counts payable and accrued liabilities (54,321) 24,685   24,105   Advance billings and other 14,531   (6,099) (31,182) De ferred rent (5,159) (4,010) 88,115   Other liabilities 7,683   41   4,046   Net cash provided by operating activities 1,431,616   1,593,534   1,769,419        CASH FLOWS FROM INVESTING ACTIVITIES:       Capital expenditures (434,350) (449,005) (470,954) Fixed asset transfers out 15,648   23,453   25,371   Acquisition of wireless licenses –   (1,697) (1,994,208) Collections on deferred purchase price 46,161   1,783   –   Collection on beneficial interest - net 16,343   –   –   Change in due from affiliate 63,008   (281,846) (583,060) Net cash used in investing activities (293,190) (707,312) (3,022,851)      CASH FLOWS FROM FINANCING ACTIVITIES:       Change in due to affiliate –   (348,724) 1,137,057   Proceeds from financing obligation –   –   126,635   Repayments of financing obligation (13,426) (12,498) (10,260) Distributions (1,125,000) (525,000) –   Net cash used in financing activities (1,138,426) (886,222) 1,253,432        CHANGE IN CASH –   –   –        CASH - Beginning of year –   –   –        CASH - End of year $ –   $ –   $ –        CASH PAID FOR INTEREST $ –   $ 2,576   $ 24,269        NONCASH TRANSACTIONS FROM INVESTING ACTIVITIES:       Accruals for capital expenditures $ 25,757   $ 15,621   $ 28,829                               See notes to consolidated financial statements.                  

S- 6

Table of Contents

Los Angeles SMSA Limited Partnership and SubsidiaryNotes to Consolidated Financial Statements – For the Years E nded December 31, 2017 , 2016 and 2015(Dollars in Thousands)

1. ORGANIZATION AND MANAGEMENT

The Consolidated Financial Statements include the accounts of the Los Angeles SMSA Limited Partnership (“Los Angeles SMSA”) and Los Angeles EdgeLLC, a wholly owned subsidiary of Los Angeles SMSA (collectively, the “Partnership”). The principal activity of Los Angeles SMSA, formed in 1984, is toprovide cellular service in the Los Angeles metropolitan statistical area. Los Angeles Edge LLC was formed during 2015 and is a bankruptcy re mote specialpurpose entity (SPE) , created for the purpose of selling wireless device payment plan agreement receivables to third parties (see Note 3).

In accordance with the partnership agreement, AirTouch Cellular Inc., an indirect wholly owned subsidi ary of Cellco Partnership (“Cellco”), doing businessas Verizon Wireless, and general partner of the Partnership, is responsible for managing the operations of the Partnership (see Note 8).

The partners and their respective ownership percentages of the Par tnership as of December 31, 201 7, 2016, and 2015 are as follows:

General Partner: AirTouch Cellular Inc. 40.0% Limited Partners: AirTouch Cellular Inc. 42.3% Cellco Partnership 12.2% United States Cellular Investment Corporation of Los Angeles 5.5%

2.     SIGNIFICANT ACCOUNTING POLICIES Consolidation – The method of accounting applied to investments involves an evaluation of all significant terms of the investments that explicitly grant orsuggest evidence of control or influence over the operations of the investee. The consolidated financial statements include our subsidiary which is a variableinterest entity (VIE) where Los Ang eles SMSA is deemed to be the primary beneficiary. All significant intercompany accounts and transactions have beeneliminated (see Note 3).

Use of e stimates – The consolidated financial statements are prepared using U.S. generally accepted accounting prin ciples (GAAP), which requiresmanagement to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates.

Examples of significant estimates include: the allowance for doubtful accounts, the r ecoverability of property, plant and equipment, the recoverability ofwireless licenses and unbilled revenues, fair v alues of financial instruments, deferred purchase price, beneficial interest, accrued expenses andcontingencies.

Revenue r ecognition – The Partnership offers products and services to customers through bundled arrangements. These arrangements involve multipledeliverables which may include products, services, or a combination of products and services.

The Partnership earns revenue primarily by providing access to and usage of its network as well as the sale of equipment. In general, access revenue isbilled one month in advance and recognized when earned. Usage revenue is generally billed in arrears and recognized when servi ce is rendered.Equipment revenue associated with the sale of wireless devices and accessories is generally recognized when the products are delivered to and acceptedby the customer, as equipment sales is considered to be a separate earnings process from providing wireless services. For agreements involving the resaleof third-party services in which the Partnership is considered the primary obligor in the arrangements, the revenue is recorded gross at the time of sale.

Under the Verizon device payment pl an program, eligible wireless customers purchase wireless devices under a device payment plan agreement. ThePartnership may offer certain promotions that allow a customer to trade in his or her owned device in connection with the purchase of a new device. Underthese types of promotions, the customer receives a credit for the value of the trade-in device. In addition, the Partnership may provide the customer withadditional future credits that will be applied against the customer’s monthly bill as long as service is maintained. The Partnership recognizes a liability for thetrade-in device measured at fair value, which is approximated by considering several factors, including the weighted-average selling prices obtained inrecent resales of devices eligible for trade-in. Future credits are recognized when earned by the customer.

From time to time, the Partnership offers certain marketing promotions that allow our customers to upgrade to a new device after paying down a certainspecified portion of the ir re quired device payment plan agreement amount and trading in their device in good working order. When a customer enters into adevice payment plan agreement with the right to upgrade to a new device, the Partnership accounts for this trade-in right as a guarantee obligation. The fullamount of the trade-i n right’s fair value (not an allocated value) is recognized as a guarantee liability and the remaining allocable consideration is allocatedto the device. The value of the guarantee liability effectively results in a reduction to the revenue recognized for the sale of the device.

S- 7

Table of Contents

In multiple element arrangements that bundle devices and monthly wireless service, revenue is allocated to each unit of accounting using a relative sellingprice method. At the inception of the arrangement, the amount allocable to the delivered units of accounting is limited to the amount that is not contingentupon the delivery of the monthly wireless service (the noncontingent amount). The Partnership effectively recognizes revenue on the delivered device at thelesser of the a mount allocated based on the relative selling price of the device or the noncontingent amount owed when the device is sold.

Roaming revenue reflects service revenue earned by the Partnership when customers not associated with the Partnership operate in the service area of thePartnership and use the Partnership’s network. The roaming rates with third party carriers associated with those customers are based on agreements withsuch carriers. The roaming rates and methodology to determine roaming volumes charg ed by the Partnership to Cellco are established by Cellco on aperiodic basis and may not reflect current market rates (see Note 8).

Other revenues primarily consist of certain fees billed to customers for surcharges and elected services . The Partnership r eports taxes imposed bygovernmental authorities on revenue - producing transactions between the Partnership and its customers which is passed through to the customers on a netbasis. Other revenues also include switch revenue. This revenue represents revenu e earned by the Partnership for switch services provided to other Cellcoowned entities by the Partnership. The switch revenue rates charged by the Partnership to Cellco are established by Cellco on a periodic basis and may notreflect current market rates (see Note 8).

Operating e xpenses – Operating expenses include expenses incurred directly by the Partnership, as well as an allocation of selling, general andadministrative, and operating costs incurred by Cellco or its affiliates on behalf of the Partner ship. Employees of Cellco provide services on behalf of thePartnership. These employees are not employees of the Partnership, therefore operating expenses include direct and allocated charges of salary andemployee benefit costs for the services provided to the Partnership. Cellco believes such allocations, principally based on the Partnership’s totalsubscribers, are calculated in accordance with the Partnership agreement and are a reasonable method of allocating such costs (see Note 8). In 2016,allocati ons were principally based on the Partnership’s percentage of certain revenue streams, total subscribers and customer gross additions or minutes-of-use; in 2017, allocations were principally based on total subscribers. The impact of the change in allocatio n factors was insignificant.

Cost of roaming , included in cost of service, reflects costs incurred by the Partnership when customers associated with the Partnership operate in a servicearea not associated with the Partnership and use a network not associa ted with the Partnership. The roaming rates with third party carriers are based onagreements with such carriers. The roaming rates and methodology to determine roaming volumes charged to the Partnership by Cellco are established byCellco on a periodic ba sis and may not reflect current market rates (see Note 8).

Cost of equipment is recorded upon sale of the related equipment at Cellco’s cost basis. Inventory is wholly owned by Cellco until the moment of sale and isnot recorded in the consolidated financi al statements of the Partnership.

Maintenance and r epairs –The cost of maintenance and repairs, including the cost of replacing minor items not constituting substantial betterments, ischarged principally to Cost of service as these costs are incurred.

Ad vertising c osts –Costs for advertising products and services as well as other promotional and sponsorship costs are charged to Selling, general andadministrative expense in the periods in which they are incurred (See Note 8) .

Comprehensive i ncome –Comprehensive income is the same as net income as presented in the accompanying statements of income andcomprehensive income.

Income t axes –On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted. The TCJA significantly revised the U.S. federa l corporateincome tax by, among other things, lowering the corporate income tax rate to 21% and imposing limitations on the deduction of interest expense. ThePartnership is treated as a pass through entity for income tax purposes and, therefore, is not s ubject to federal, state or local income taxes. Accordingly, noprovision has been recorded for income taxes in the Partnership’s consolidated financial statements. The results of operations, including taxable income,gains, losses, deductions and credits, are allocated to and reflected on the income tax returns of the respective partners.

The Partnership files partnership income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions . The Partnership remain ssubject to examin ation by tax authorities for tax years as early as 2014. It is reasonably possible that various current tax examinations will conclude orrequire reevaluations of the Company’s tax positions during this period. An estimate of the range of the possible chan ge cannot be made until these taxmatters are further developed or resolved .

Due to/from affiliate – Due to/from affiliate principally represents the Partnership’s cash position with Cellco. Cellco manages, on behalf of the Partnership,all cash, investin g and financing activities , including all transactions associated with the sales of wireless device payment plan agreement receivables, ofthe Partnership. As such, the change in due to/from affiliate is reflected as an investing activity or a financing ac tivity in the statements of cash flowsdepending on whether it represents a net asset or net liability for the Partnership.

S- 8

Table of Contents

Additionally, cost of equipment, administrative and operating costs incurred by Cellco on behalf of the Partnership, as well as pr operty, plant and equipmentand wireless license transactions with affiliates, are charged to the Partnership through this account. Interest income on due from affiliate is based on theApplicable Federal Rate which was approximately 1.2 %, 0. 7 % and 0. 5 % fo r the years ended December 31, 201 7 , 201 6 and 201 5 , respectively.Interest expense on due to affiliate is calculated by applying Cellco’s average cost of borrowing from Verizon Communications Inc., which wasapproximately 4. 7 %, 4.8% and 4.8 % for the years ended December 31, 2017, 2016 and 2015 respectively , to the outstanding due to/from affiliatebalance. Included in Interest Income (expense) , net is interest income of $5,928 , $ 1,390 and $ 0 for the years ended December 31, 201 7 , 201 6, and 201 5 , respectively, related to due to/from affiliate. Interest expense of $ 0, $2,683 and $23,878 was incurred during the year s ended December 31, 2017,2016 and 2015 respectively , of which all was capitalized.

Allowance for doubtful a ccounts – Accounts rece ivable are recorded in the consolidated financial statements at cost , net of allowance for credit losses,with the exception of device payment plan agreement receivables which are initially recorded at fair value based on a number of factors including hist oricalwrite-off experience, credit quality of the customer base and other factors such as macroeconomic conditions. The Partnership maintains allowances foruncollectible accounts receivable, including device payment plan agreement receivables, for estima ted losses resulting from the failure or inability ofcustomers to make required payments. The allowance for uncollectible accounts receivable is based on Cellco’s assessment of the collectability of eachPartnership’s specific customer accounts and includ es consideration of the credit worthiness and financial condition of those customers. The Partnershiprecords an allowance to reduce the receivables to the amount that is reasonably believed to be collectible. The Partnership also records an allowance for allother receivables based on multiple factors including historical experience with bad debts, the general economic environment and the aging of suchreceivables. Similar to traditional service revenue accounting treatment, the Partnership records device payment plan agreement bad debt expense basedon an estimate of the percentage of equipment revenue that will not be collected. This estimate is based on a number of factors including historical write-offexperience, credit quality of the customer base and other factors such as macroeconomic conditions. Due to the device payment plan agreement beingincorporated in the standard Verizon Wireless bill, the collection and risk strategies continue to follow historical practices. The Partnership monitors the aging of accounts with device payment plan agreement receivables and writes off account balances if collection efforts are unsuccessful and future collection isunlikely.

Property, plant and equipment, and Depreciation –Property, plant and equipment is recor ded at cost. Property, plant and equipment are generallydepreciated on a straight-line basis.

Leasehold improvements are amortized over the shorter of the estimated life of the improvement or the remaining term of the related lease, calculated fromthe ti me the asset was placed in service.

When depreciable assets are retired or otherwise disposed of, the related cost and accumulated depreciation are deducted from the property, plant andequipment accounts and any gains or losses on disposition are recogniz ed in income. Transfers of property, plant and equipment between Cellco andaffiliates are recorded at net book value on the date of the transfer with an offsetting entry included in due to/from affiliate.

Interest associated with the construction of netwo rk-related assets is capitalized. Capitalized interest is reported as a reduction in interest expense anddepreciated as part of the cost of the network-related assets.

In connection with the ongoing review of estimated useful lives of property, plant and equipment during 2016, Cellco determined that the average usefullives of certain leasehold improvements would be increased from 5 to 7 years. This change was immaterial in 2016. Cellco determined that changes werealso necessary to the remaining estimated useful lives of certain assets as a result of technology upgrades, enhancements, and planned retirements. Whilethe timing and extent of current deployment plans are subject to ongoing analysis and modification, Cellco and the Partnership believe the curr entestimates of useful lives are reasonable.

Other assets – Other assets - net primarily include beneficial interest and long term device payment plan agreement receivables, net of allowances of $12,261 and $ 16,545 at December 31, 201 7 and 201 6 , respectiv ely (see Note 3) .

Impairment – All long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assetmay not be recoverable. If any indications were to become present, the Partnership w ould test for recoverability by comparing the carrying amount of theasset group to the net undiscounted cash flows expected to be generated from the asset group. If those net undiscounted cash flows do not exceed thecarrying amount, the next step would b e to determine the fair value of the asset and record an impairment, if any. The Partnership re - evaluates the usefullife determinations for these long-lived assets each year to determine whether events and circumstances warrant a revision to their remaini ng useful lives.

Wireless l icenses – W ireless licenses provide the Partnership with the exclusive right to utilize designated radio frequency spectrum to provide wirelesscommunications services. In addition, Cellco maintains wireless licenses that provide the Partnership with the exclusive right to utilize designated radiofrequenc y spectrum to provide wireless communications services (see Note 4) . While licenses are issued for only a fixed time, generally ten years, suchlicenses are subject to renewal by the Federal Communications Commission (FCC). License renewals, which are mana ged by Cellco, have historicallyoccurred routinely and at nominal cost. Moreover, Cellco determined that there are currently no legal, regulatory, contractual, competitive, economic or otherfactors that limit the useful life of the Partnership’s wireless licenses. As a result, wireless licenses are treated as an indefinite-lived intangible asset. Theuseful life determination for wireless licenses is re - evaluated each year to determine whether events and circumstances continue to support an indefiniteuse ful life. When evaluating for impairment, Cellco aggregates wireless licenses into one single unit of accounting, as they are utilized on an integratedbasis.

S- 9

Table of Contents

Cellco on behalf of the Partnership test s the wireless licenses balance for potential impairment annually or more frequently if impairment indicators arepresent. In 201 7, 2016, and 2015 , Cellco performed a qualitative impairment assessment to determine whether it is more likely than not that the fair valueof the Partnership’s wireless licenses was l ess than the carrying amount. As part of the assessment, several qualitative factors were considered includingmarket transactions, the business enterprise value of the Partnership , macroeconomic conditions (including changes in interest rates and discount rates),industry and market considerations (including industry revenue and EBITDA (Earnings before interest, taxes, depreciation and amortization) marginprojections), the projected financial performance, as well as other factors . In 2017 and 2016, Cellco also performed a qualitative impairment assessmentsimilar to that described for the Partnership for its aggregate wireless licenses. In 2015, Cellco performed a quantitative impairment assessment for itsaggregate wireless licenses which consisted of comparing the estimated fair value of its aggregate wireless licenses to the aggregated carrying amount asof the test date.

Interest expense incurred while qualifying activities are performed to ready wireless licenses for their intended use is capitalized as part of wireless licenses(see Note 4). The capitalization period ends when the development is discontinued or substantially complete and the license is ready for its intended use.

In addition, Cellco believes that under the Partnership agreement it has the right to allocate, based on a reasonable methodology, any impairment lossrecognized by Cellco for licenses included in Cellco’s national footprint. Cellco and the Partnership evaluated their wireless licenses for potential impairmentas of December 15, 2017, 2016 and 2015. These evaluations resulted in no impairment of wireless licenses.

Financial i nstruments – The Partnership’s trade receivables and payables are short-term in nature, and accordingly, their carrying value approximates fairvalue .

Fair value m easurements – Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that wouldbe received to sell an asset or paid to transfer a liability in an orderly transaction be tween market participants. The three-tier hierarchy for inputs used inmeasuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3 - No observable pricing inputs in the market

Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements.The assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets andliabilities being measured and their categorization within the fair value hierarchy. As of December 31, 2017 and 2016 the Partnership does not have anyassets or liabilities measured at fair value on a recurring basis.

Distributions – The Partnership i s required to make distributions to its partners based upon the Partnership’s operating results, due to/from affiliate status,and financing needs as determined by the General Partner at the date of the distribution.

Variable interest e ntities (VIEs) – VIE s are entities which lack sufficient equity to permit the entity to finance its activities without additional subordinatedfinancial support from other parties, have equity investors which do not have the ability to make significant decisions relating to t he entity’s operationsthrough voting rights, do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. Theassets and liabilities of the VIEs are consolidated when the Partnership is deemed to be the primary beneficiary. The primary beneficiary is the party whichhas the power to make the decisions that most significantly affect the economic performance of the VIE and the obligation to absorb losses or the right toreceive benefits tha t could potentially be significant to the VIE.

Recent accounting s tandards – In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain CashReceipts and Cash Payments . ” This standard update addresses eight specific cash flow issues with the objective of reducing the existing diversity inpractice for these issues. Among the updates, this standard update requires cash receipts from payments on a transferor’s beneficial in terests in securitizedtrade receivables to be classified as cash inflows from investing activities. This standard update is effective as of the first quarter of 2018; however, earlyadoption is permitted. We expect the amendment relating to beneficial int erests in securitization transactions will have an impact on our presentation ofcollections of the deferred purchase price from sales of wireless device payment plan agreement receivables in our consolidated statements of cash flows.Upon adoption of this standard update in the first quarter of 2018, we expect to retrospectively reclassify approximately $39,848 of collections of deferredpurchase price related to collections from customers from Cash flows from operating activities to Cash flows from invest ing activities in our consolidatedstatement of cash flows for the year ended December 31, 2017 and $81,670 for the year ended December 31, 2016.

S- 10

Table of Contents

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement o f Credit Losses on Financial Instruments.”This standard update requires that certain financial assets be measured at amortized cost net of an allowance for estimated credit losses such that the netreceivable represents the present value of expected cash collection. In addition, this standard update requires that certain financial assets be measured atamortized cost reflecting an allowance for estimated credit losses expected to occur over the life of the assets. The estimate of credit losses must be base don all relevant information including historical information, current conditions and reasonable and supportable forecasts that affect the collectability of theamounts. This standard update is effective as of the first quarter of 2020; however early adop tion is permitted. The Partnership is currently evaluating theimpact that this standard update will have on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This standard update intends to increas e transparency and improve comparabilityby requiring entities to recognize assets and liabilities on the balance sheet for all leases, with certain exceptions. In addition, through improved disclosurerequirements, the standard update will enable users of financial statements to further understand the amount, timing, and uncertainty of cash flows arisingfrom leases. This standard update is effective as of the first quarter of 2019; however early adoption is permitted. The Partnership’s current operating l easeportfolio is primarily comprised of spectrum, network, real estate, and equipment leases. Upon adoption of th is standard, the Partnership expects thebalance sheet to include a right of use asset and liability related to substantially all opera ting le ase arrangements. A t Cellco, a cross-functionalcoordinated implementation team has been established to implement the standard update related to leases. The Partnership is in the process ofdetermining the scope of arrangements that will be subject to this standard as well as assessing the impact to its systems, processes and internal controlsto meet the standard update’s reporting and disclosure requirements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from C ontracts with Customers (Topic 606) . ” Th is standard , along with related subsequentlyissued updates clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP. The standard provides a more robustframework for addressing revenue issues; improves comparabilit y of revenue recognition practices across entities, industries, jurisdictions, and capitalmarkets; and provides more useful information to users of financial statements through improved disclosure requirements. The standard update alsoamends current guid ance for the recognition of costs to obtain and fulfill contracts with customers such that incremental costs of obtaining and direct costsof fulfilling contracts with customers will be deferred and amortized consistent with the transfer of the related goo d or service. The two permitted transitionmethods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presentedand the cumulative effect of applying the standard would be re cognized at the earliest period shown, or the modified retrospective method, in which casethe standard is applied only to the most current period presented and the cumulative effect of applying the standard would be recognized at the date of initialappli cation. In August 2015, an accounting standard update was issued that delay ed the effective date of this standard until the first quarter of 2018, atwhich time the Partnership will adopt the standard using the modified retrospective approach to open contr acts. At Cellco, a cross-functional coordinatedteam has been established to implement this standard . Summarized below are the key impacts and areas requiring significant judgement arising from theinitial adoption of Topic 606.

The ultimate impact on reve nue resulting from the application of the new standard is subject to assessments that are dependent on many variables,including, but not limited to, the terms of the contractual arrangements and mix of business. T he Partnership expects the allocation of r evenue betweenequipment and service for wireless subsidy contracts will result in more revenue allocated to equipment and recognized upon delivery, and less servicerevenue recognized over the contract term than under current GAAP. Total revenue over the full contract term will be unchanged and there will be nochange to customer billing, the timing of cash flows or the presentation of cash flows.

Additionally, the new standard requires the deferral of incremental costs to obtain a customer contract, whic h are then amortized to expense, as part ofSelling, general and administrative expense, over the respective periods of expected benefit. As a result, a significant amount of our sales commissioncosts, which would have historically been expensed as incurred will be deferred and amortized. In addition, for certain contractual arrangements, the devicemay be sold by one Cellco entity but the service contract is the performance obligation of another Cellco entity. In contractual arrangements where anot herCellco entity sells the device on behalf of the Partnership, the Partnership will compensate the other Cellco entity for obtaining the service contract. Thisrepresents an incremental cost to obtain the service contract and will be deferred by the Part nership and recognized over the expected benefit period. ThePartnership will recognize service revenue for the wireless service that it provides to the customer. In contractual arrangements where the Partnership sellsthe device on behalf of another Cellc o entity, the equipment revenue associated with the transaction will be recognized by the Partnership, and thePartnership will also recognize commission revenue as compensation for obtaining the service contract on behalf of the other Cellco entity.

Base d on currently available information, we expect the cumulative effect of initially applying the new standard to result in an increase to the openingbalance of retained earnings ranging from approximately $125,000 to $175,000 .

Subsequent e vents – Events subsequent to December 31, 201 7 have been evaluated through February 2 6 , 201 8 , the date the consolidated financialstatements were issued.

S- 11

Table of Contents

3. WIRELESS DEVICE PAYMENT PLANS

Under the Verizon device payment program, eligible wireless customers purchase wireless devices under a device payment plan agreement. Customersthat activate service on devices purchased under the device payment program pay l ower service fee s as compared to those under fixed-term service plans, and their device payment plan charge is included o n their standard wireless monthly bill. As of January 2017, we no longer offer consumers new fixed-term service plans for phones, howev er we continue to service existing plans and provide these plans to business customers.

Wireless device payment plan agreement receivables – The following table displays device payment plan agreement receivables, net, that continue tobe recognized in the accompanying consolidated balance sheets:

2017 2016Device payment plan agreement receivables, gross $ 311,677   $ 272,174  Unamortized imputed interest (15,430) (11,544)

Device payment plan agreement receivables, net of unamortized imputed interest 296,247   260,630  Allowance for credit losses (33,897) (36,026)Device payment plan agreement receivables, net $ 262,350   $ 224,604      Classified on the consolidated balance sheets:    Accounts receivable, net $ 140,895   $ 120,747  Other assets, net $ 121,455   $ 103,857  Device payment plan agreement receivables, net $ 262,350   $ 224,604   

The Partnership may offer customers certain promotions that allow a customer to trade in his or her owned device in connection with the purchase of a newdevice. Under these types of promotions, the customer receive s a credit for the value of the trade-in device. In addition, the Partnership may provide thecustomer with additional future credits that will be applied against the customer’s monthly bill as long as service is maintained. The Partnership recognizes aliability for the trade-in device measured at fair value , which is determined by considering several factors, including the weighted-average selling pricesobtained in recent resale s of similar devices eligible for trade-in. Future credits are recognized when earned by the customer. Devi ce payment planagreement receivables, net does not reflect the trade-in device liability. At December 31, 2017 and 2016 , the amount of trade-in liability was insignificant.

From time to time, the Partnership offers certain marketing promotions that allow our customers to upgrade to a new device after paying down a certainspecified portion of the required device payment plan agreement amount as well as trading in their device in good working order. When a customer entersinto a device payment plan agreem ent with the right to upgrade to a new device, we account for this trade-in right as a guarantee obligation. At December31, 2017 and 2016, the amount of the guarantee obligation was insignificant. The amount of the guarantee obligation was included in Ad vance billings andother on the accompanying consolidated balance sheets.

At the time of sale, the Partnership imputes risk adjusted interest on the device payment plan agreement receivables. I mputed interest is recorded as areduction to the related acc ounts receivable. Interest income, which is included within Other revenues on the consolidated statements of income andcomprehensive income, is recognized over the financed device payment term.

When originating device payment plan agreements, the Partner ship uses internal and external data sources to create a credit risk score to measure thecredit quality of a customer and to determine eligibility for the device payment program. If a customer is either new to the Partnership or has less than 210days of customer tenure (a new customer), the credit decision process relies more heavily on external data sources. If the customer has 210 days or moreof customer tenure (an existing customer), the credit decision process relies on internal data sources. The Par tnership’s experience has been that thepayment attributes of longer tenured customers are highly predictive in estimating their ability to pay in the future. External data sources include obtaining acredit report from a national consumer credit reporting agency, if available. I nternal data and/or credit data obtained from the credit reporting agencies isused to create a custom credit risk score. The custom credit risk score is generated automatically (except with respect to a small number of applicationswhere the information needs manual intervention) from the applicant’s credit data using Verizon Wireless proprietary custom credit models, which areempirically derived and demonstrably and statistically sound. The credit risk score measures the likelihoo d that the potential customer will become severelydelinquent and be disconnected for non-payment. For a small portion of new customer applications, a traditional credit report is not available from one of thenational credit reporting agencies because the potential customer does not have sufficient credit history. In those instances, alternate credit data is used forthe risk assessment.

Based on the custom credit risk score, each customer is assigned to a credit class, each of which has a specified requir ed down payment percentage ,which ranges from zero to 100%, and specified credit limits. Device payment plan agreement receivables originated from customers assigned to creditclasses requiring no down payment represent the lowest risk. Device payment plan agreement receivables originated from customers assigned to creditclasses requiring a down payment represent a higher risk.

S- 12

Table of Contents

Subsequent to origination, the Partnership monitors delinquency and write-off experience as key credit quality indicators for its portfolio of device paymentplan agreements and fixed-term service plans. The extent of collection efforts with respect to a particular customer are based on the result s of proprietarycustom empirically derived internal behavioral scoring models that analyze the customer’s past performance to predict the likelihood of the customer fallingfurther delinquent. These customer scoring models assess a number of variables, in cluding origination characteristics, customer account history andpayment patterns. Based on the score derived from these models, accounts are grouped by risk category to determine the collection strategy to be appliedto such accounts. The Partnership con tinuously monitors collection performance results and the credit quality of device payment plan agreementreceivables based on a variety of metrics, including aging. The Partnership considers an account to be delinquent and in default status if there are u npaidcharges remaining on the account on the day after the bill’s due date.

As of December 31, 20 1 7 and 2016, t he balance and aging of the device payment plan agreement receivables o n a gross basis was as follows:

  2017   2016Unbilled $ 292,834     $ 264,724  Billed:    

Current 15,500     5,885  Past Due 3,343     1,565  

Device payment plan agreement receivables, gross $ 311,677     $ 272,174   

Activity in the allowance for credit losses for the device payment plan agreement receivables was as follows:

  2017 2016Balance at January 1 $ 36,026   $ 25,873    Bad debt expenses 42,873   48,965    Write-offs (40,181) (24,482)  Allowance related to receivables sold (3,800) (16,829)  Other (1,021) 2,499  Balance at December 31 $ 33,897   $ 36,026   

Sales of wireless device payment plan agreement receivables – Dur ing 2015 and 2016 Cellco established program s pursuant to a Receiva blesPurchase Agreement (RPA) to sell from time to time, on an uncommitted basis, eligible device payment plan receivables t o a group of primarily relationshipbanks (Purchasers) on both a revolving (Revolving Program) and non-revolving (Non-Revolving Program) basis . Additionally, d uri ng September of 2016,Cellco entered into a device payment plan agreement receivables financing facility (the “ABS Financing Facility”) with a number of financial institutions. Thereceivables sold under the RPA and the ABS Financing Facility were no longer considered assets of the Partnership. The proceeds received from thePurchasers wer e recorded within c ash flows provided by operating activities on the consolidated statements of cash flows.

ReceivablesPurchaseAgreement– Under the Non-Revolving Program, Los Angeles SMSA would transfer the eligible receivables to Los Angeles Edge(Sell er or SPE). The Seller would then sell the receivables to the Purchasers for upfront proceeds and additional consideration upon settlement of thereceivables (the deferred purchase price). Under the Revolving Program, Los Angeles SMSA transferred the eligi ble device payment plan agreementreceivables to the Seller. The Seller then sold the eligible receivables on a revolving basis, subject to a maximum funding limit, to the Purchasers. Sales ofeligible receivables by the Sellers, once initiated, generally occurred and were settled on a monthly basis. Customer payments made towards receivablessold under the Revolving Program were available to purchase additional eligible device payment plan agreement receivables originated during the revolvingperiod. Under the Programs, eligible device payment plan agreement receivables were transferred to the Purchasers for upfront cash proceeds andadditional consideration upon settlement of the receivables, referred to as the deferred purchase price. Throughout 2017, as permitted by the RPAagreements, Cellco exercised its clean up call options to trigger the repurchase of an immaterial amount of outstanding receivables in consideration for therights to collect any remaining deferred purchase price assets, ending the pro gram.

There were no sales of device payment plan agreement receivables under the Programs during 2017 . There were no reinvested collections in 2017.

During 2016, the Partnership sold $178,981 of receivables, net of allowances and imputed interest under the Revolving Program. The Partnership receivedproceeds from new transfers of $132,483 and proceeds from reinvested collections of $36,855, and recorded a deferred purchase price of $23,873.

During 2015, the Partnership sold $418,615 of receivables, net of a llowances and imputed interest, under the Non-Revolving Program. In connection withthis sale, proceeds from new transfers of $308,659 were received and a deferred purchase price of $117,587 was recorded. During 2015, the Partnershipalso sold $201,283 of receivables, net of allowances and imputed interest, under the Revolving Program. In connection with this sale, proceeds from newtransfers of $168,854 were received and a deferred purchase price of $32,429 was recorded.

S- 13

Table of Contents

During 2017, 2016, and 2015, the sales of receivables under the RPA did not have a material impact on the consolidated statements of income andcomprehensive income.

Deferredpurchaseprice– During 2017, 2016 and 2015, the Partnership collected $39,848, $81,670, and an insignificant amou nt, respectively, which wasreturned as deferred purchase price and recorded within Cash flows provided by operating activities on our consolidated statement of cash flows.Collections recorded within Cash flows from investing activities on our consolidate d statements of cash flows were $46,161 during 2017 and insignificantduring 2016 and 2015. At December 31, 2017 and 2016 , our deferred purchase price receivable was $0 and $95,827, respectively . The deferred purchaseprice was initially recorded at fair v alue, based on the remaining device payment amounts expected to be collected, adjusted, as applicable, for the timevalue of money and by the timing and estimated value of the device trade-in in connection with upgrades. The estimated value of the device t rade-inconsiders prices expected to be offered to us by independent third parties. This estimate contemplates changes in value after the launch of a device. Thefair value measurements were considered to be Level 3 measurements within the fair value hiera rchy. The collection of the deferred purchase price wascontingent on collections from customers.

Variableinterestentities(VIEs)– Under the RPA, the SPE’s sole business consists of the acquisition of the receivables from Los Angeles SMSA and theresal e of the receivables to the Purchasers. The assets of the SPE are not available to be used to satisfy obligations of any Partnership entities other thanthe SPE’s. It was determined that the SPE is a VIE as it lacks sufficient equity to finance its activit ies. Given that Los Angeles SMSA has the power to directthe activities of the SPE that most significantly impact the SPE’s economic performance, Los Angeles SMSA is deemed to be the primary beneficiary of theSPE. As a result, Los Angeles SMSA consolidate s the assets and liabilities of the SPE into the consolidated financial statements (see Note 2). As ofDecember 31, 2017 and 2016 the VIE held DPP assets of $0 and $95,827, respectively and held no liabilities.

ContinuingInvolvement– We no longer have continuing involvement in the RPA because the program ended in 2017. There was no loss related to theRPA. The Partnership’s maximum exposure to loss related to the sold receivables was limited to the amount of the outstanding deferred p urchase price,which was $0, $95,827 and $148,941 as of December 31, 2017, 2016, and 2015, respectively. The maximum exposure to loss represents an estimated lossthat would have been incurred under severe, hypothetical circumstances whereby the Partnershi p would not receive the total portion of the proceedswithheld by the Purchasers. As the Partnership believed the probability of these circumstances occurring was remote, the maximum exposure to loss wasnot an indication of the Partnership’s expected loss .

In addition, the Partnership had continuing involvement related to the sold receivables as the Partnership is responsible for absorbing additional creditlosses pursuant to the agreements. Credit losses on receivables sold were $5,277 during 2017 and $11 ,755 during 2016. The outstanding device payment plan agreement receivables derecognized from the Partnership’s consolidated balance sheets, but which Cellco continuesto service, was $ 0 and $ 259,856 at December 31, 2017 and 2016, respectively. ABSFinancingFacility– Under the terms of the ABS Financing Facility, the counterparties to the facility made advances under asset-backed loans backedby device payment plan agreement receivables for proceeds. There is a two year revolving period, which may be ex tended, during which Cellco maytransfer additional receivables to an ABS Entity. Subject to certain conditions, Cellco may also remove receivables from the ABS Entity. Cellco may prepaythe outstanding amounts of the loans without penalty, but in certain cases, with breakage costs. During 2017 and 2016 , the Partnership sold $ 706,729 and $389,800 , respectively, of device payment plan agreement receivables, net of allowances and imputed interest to affiliates of Cellco and receivedproceeds of $ 581,224 and $331,454 and recorded a beneficial interest of $ 125,505 and $58,346 respectively, which was recorded within Other assets -net on the consolidated balance sheets.

Variableinterestentities(VIEs)– Under the ABS Financing Facility, there is a Trust entity (the “Trust”) whose sole business consists of holding collectedreceivables which are sold by the Partnership to Cellco affiliates under the terms of the ABS Financing Facility. The activity of servicing the receivables anddistribution of the cash collec ted is the activity that has the most significant impact on the Trust. Cellco is the master and special servicer for thereceivables but does not have a direct variable interest in the Trust. The Partnership holds a beneficial interest in the Trust which represents the residualinterest in the Trust and as such are variable interests. Since Cellco maintains decision making rights as servicer and has an obligation to absorb losses, itis the primary beneficiary in the Trust.

Beneficialinterest– Under the ABS Financing Facility , the beneficial interest was initially recorded at fair value, based on the remaining device paymentamounts expected to be collected, adjusted, as applicabl e, for the time value of money and credit risk. The initial fair value measu rements are consideredto be Level 3 measurements within the fair value hierarchy. The collection of the beneficial interest is contingent on collections from customers. AtDecember 31, 2017 and 2016 , the Partnership’s beneficial interest was $ 174,077 and $56,359 respectively, which is included within Other Assets – net onthe consolidated balance sheets. During 2017 and 2016, the Partnership collected a net $16,343 and $0, respectively, which was recorded within Cashflows provided by investing activities on our consolidated statement of cash flows.

S- 14

Table of Contents

Continuinginvolvement–Cellco has continuing involvement with the sold receivables as it services the receivables pursuant to the ABS Financing Facilityon behalf of the Partnership. Cellco services their related receivables, including facilitating customer payment collection. While servicing the receivables, thesame policies and procedures are applied to the sold receivables that apply to owned receivables, and the Partnership continues to maintain normalrelationships with their customers. The credit quality of the customers the Partnership continues to service was consistent throughout the periods presented.The Partnership’s maximum exposure to loss related to the sold receivables was limited to the amo unt of the outstanding beneficial interest, which was $174,077 and $ 56,359 as of December 31, 2017 and 2016, respectively. The maximum exposure to loss represents an estimated loss that would have beenincurred under severe, hypothetical circumstances wher eby the Partnership would not receive the total portion of the proceeds withheld by the Trust. As thePartnership believes the probability of these circumstances occurring was remote, the maximum exposure to loss was not an indication of the Partnership’sexpected loss.

In addition, the Partnership has continuing involvement related to the sold receivables as the Partnership is responsible for absorbing additional creditlosses pursuant to the agreements. Credit losses on receivables sold were $11,176 durin g 2017 and insignificant during 2016.

The outstanding device payment plan agreement receivables derecognized from the Partnership’s consolidated balance sheets, but which Cellco continuesto service, was $ 629,686 and $350,134 at December 31, 2017 and 2016, respectively.

4. WIRELESS LICENSES

Changes in the carrying amount of wireless licenses are as follows : Balance at January 1, 2016 $ 2,073,751   Acquisitions –   Capitalized interest on wireless licenses 1,697  Balance at December 31, 2016 $ 2,075,448   Acquisitions –   Capitalized interest on wireless licenses –  Balance at December 31, 2017 $ 2,075,448  

The average remaining renewal period of the Partnership’s wireless license portfolio was 8.6 years as of December 31, 2017 .

Spectrum license transaction – On January 29, 2015, the FCC completed an auction of 65 MHz of spectrum, which it identified as the AWS-3 band.Cellco participated in that auction and was the high bidder on the licenses covering the Partnership service area. The licenses were deemed to be right touse assets and were allocated and recorded by the Partnership as wireless licenses. The cash payment made by the Partnership of $1,972,824 is classifiedwithin Acquisition of wireless licenses on the statement of cash flows for the year ended December 31, 2015 .

5. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consist of the following at December 31, 2017 and 2016 :

2017 2016Land $ 7,716   $ 7,716  Buildings and improvements (15-45 years) 1,031,746   940,411  Wireless plant and equipment (3-50 years) 4,383,737   4,165,458  Furniture, fixtures and equipment (3-10 years) 62,653   63,565  Leasehold improvements (5-7 years) 466,657   428,995       5,952,509   5,606,145      Less: accumulated depreciation (4,016,471) (3,743,253)    Property, plant and equipment, net $ 1,936,038   $ 1,862,892  

Capitalized interest cost of $0 and $772, and capitalized network engineering costs of $23,414 and $24,656, were recorded during the years endedDecember 31, 2017 and 2016, respectively. Construction in progress included in certain classifications shown above, principally consists of wireless plantand equipment, amounted to $122,335 and $12 7,758, as of December 31, 2017 and 2016, respectively. Depreciation expense of $355,692, $354,329, and$353,975 was incurred during the years ended December 31, 2017, 2016 and 2015 .

S- 15

Table of Con tents

6. TOWER MONETIZATION TRANSACTION

Prior to the acquisition of the Partnership interest by Cellco in 2000, Vodafone Group PLC (“Vodafone”), then parent company of AirTouch Cellular, enteredinto agreements to sublease all of its unused space on up to 430 of its communications towers (“Sublease Agreement”) to SpectraSite H oldings, Inc.(“SpectraSite”) in exchange for $155,000. At various closings in 2001 and 2000, SpectraSite leased 274 communications towers owned and operated by thePartnership for $98,465. At December 31, 201 7, 201 6 , and 2015 the Partnership has $ 14,053, $ 18,967 , and $23,932 respectively, recorded as deferredre nt . The Sublease Agreement requires monthly maintenance fees for the existing physical space used by the Partnership’s cellular equipment. ThePartnership paid $1,180 and $ 1,528 and $2,152 to Spectr aSite pursuant to the Sublease Agreement for the years ended December 31, 201 7, 201 6 , and2015, respectively, which is included in cost of service in the accompanying statements of income and comprehensive i ncome .

During March 2015, Verizon Communications , the parent company of Cellco, entered into an agreement with American Tower Corporation (ATC) givingATC exclusive rights to lease and operate approximately 11,300 wireless towers owned and operated by Cellco and its subsidiaries for an upfront paymento f $5.0 billion (not in thousands). Verizon Communications also sold 162 towers to ATC for an upfront payment of $0.1 billion (not in thousands). Under theterms of the lease agreements, ATC has exclusive rights to lease and operate the towers over an avera ge term of approximately 28 years. As the leasesexpire, ATC has fixed-price purchase options to acquire these towers based on their anticipated fair market values at the end of the lease terms. ThePartnership has subleased capacity on the towers from ATC for a minimum of 10 years at current market rates, with options to renew. The Partnershipparticipated in this arrangement and has leased 538 towers to ATC for an upfront payment of $221,653 and has sold 1 tower to ATC for an upfront paymentof $616. The upfront payment, including the towers sold was $222,269 and was accounted for as deferred rent and as a financing obligation. The $95,634accounted for as deferred rent was included in cash flows provided by operating activities and relates to the portion of the towers for which the right-of-usehas passed to ATC. The deferred rent is being recognized on a straight-line basis over the Partnership’s average lease term of 30 years. As of December31, 2015, a financing obligation in the amount of $126,635 was included in cash flows provided by financing activities, which relates to the portion of thetowers that continue to be occupied and used for the Partnership’s network operations. The Partnership makes a sublease payment to ATC for $1.9 permonth per site, with annual increases of 2 percent. During 2017, 2016, and 2015, the Partnership made $13,42 6 , $12,498, and $10,260, respectively, ofsublease payments to ATC, which are recorded as Repayments of financing obligation .

At December 31, 2017 , 2016, and 201 5 , the balance of deferred rent was $85,618 and $89,605 and $93,057, respectively. At December 31, 2017, 2016and 2015, the balance of the financing obligation was $124,24 4 and $125,296 and $125,510, respectively .

7. CURRENT LIABILITIES

Accounts payable and accrued liabilities consist of the following at December 31, 2017 and 2016 .

2017 2016 Accounts payable $ 144,549   $ 189,081  Accrued liabilities 13,550   13,203  Accounts payable and accrued liabilities $ 158,099   $ 202,284  

Advance billings and other consist of the following at December 31, 2017 and 2016 :

2017 2016 Advance billings $ 145,795   $ 139,714  Customer deposits 26,693   17,880  Guarantee liability, net 2,477   2,840  Advance billings and other $ 174,965   $ 160,434  

S- 16

Table of Contents

8. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

In addition to fixed asset purchases and right to use licenses substantially all of service revenues, equipment revenues, other revenues, cost of service, costof equipment, and selling, general and administrative expenses represent transac tions processed by affiliates (Cellco and its related parties) on behalf ofthe Partnership or represent transactions with affiliates. These transactions consist of (1) revenues and expenses that pertain to the Partnership which areprocessed by Cellco and directly attributed to or directly charged to the Partnership; (2) roaming revenue by customers of other Cellco affiliated marketswithin the Partnership market or Partnership customers’ cost when roaming in other Cellco affiliated markets; (3) certain re venues and expenses that areprocessed or incurred by Cellco which are allocated to the Partnership based on factors such as the Partnership’s percentage of revenue streams,customers, gross customer additions, or minutes of use in 2015 and 2016 and on tot al subscribers in 2017; (4) certain costs of operating switches whichare allocated to the Partnership; and (5) lease agreements with Cellco, whereas the Partnership has the right to use certain spectrum. These transactionsdo not necessarily represent arm ’s length transactions and may not represent all revenues and costs that would be present if the Partnership operated on astandalone basis. Cellco periodically reviews the methodology and allocation bases for allocating certain revenues, operating costs, selling, general andadministrative expenses to the Partnership. Resulting changes, if any, in the allocated amounts have historically not been significant , other than theroaming revenue and cost impacts discussed below .

Service revenues – Service revenue s include monthly customer billings processed by Cellco on behalf of the Partnership and roaming revenues relating tocustomers of other affiliated markets that are specifically identified to the Partnership. For the years ended December 31, 2017, 2016, an d 2015 roamingrevenues were $510,521, $486,262, and $438,105, respectively. During 2017, Cellco updated its roaming rates and methodology for determining roamingvolume s charged for postpaid, prepaid and reseller r evenue, resulting in a net de crease of $1 45,797 to roaming revenue as compared to prior periods.Service revenues also include long distance, data, and certain revenue reductions including revenue concessions that are processed by Cellco andallocated to the Partnership based on certain factors d eemed appropriate by Cellco .

Equipment revenues – Equipment revenues include equipment sales processed by Cellco and specifically identified to the Partnership, as well as certainhandset and accessory revenues, contra-revenues including equipment concessi ons, and coupon rebates that are processed by Cellco and allocated to thePartnership based on certain factors deemed appropriate by Cellco .

Other revenues – Other revenues include switch revenue and other fees and surcharges charged to the customer that a re specifically identified to thePartnership. For the years ended December 31, 2017, 2016, and 2015 switch revenues were $2,781, $8,570, and $9,234, respectively .

Cost of s ervice – Cost of service includes roaming costs relating to the Partnership’s custo mers roaming in other affiliated markets and switch costs thatare incurred by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco. For the years ended December 31, 2017,2016 and 2015, roaming costs were $637,264, $619,985, and $547,672, respectively. During 2017, Cellco updated its roaming rates and methodology fordetermining roaming volumes charged for postpaid, prepaid and rese ller cost, resulting in a net de crease of $182,169 to roaming cost as compared to prior periods. Cost of service also includes cost of telecom, long distance and application content that are incurred by Cellco and allocated to the Partnershipbased on certain factors deemed appropriate by Cellco. The Partnership has lease agreements for th e right to use additional spectrum owned by Cellco.See Note s 2 and 9 for further information regarding these arrangements .

Cost of equipment – Cost of equipment is recorded at Cellco’s cost basis (see Note 2). Cost of equipment also includes certain costs related to handsets,accessories and other costs incurred by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco .

Selling, general and administrative – Selling, general and administrative expenses include commissions, customer billing, office telecom, customer care,salaries, sales and marketing and advertising expenses that are specifically identified to the Partnership as well as incurred by Cellco and allocated to thePartnership based on certain factors deemed appropriate by Cellco. The Partnership was allocated $100,183, $113,3 00 and $117,409 in advertising costsfor the years ended December 31, 2017, 2016 and 2015, respectively .

Property, plant and equipment – Property, plant and equipment includes ass ets purchased by Cellco and directly charged to the Partnership as well asassets transferred between Cellco and the Partnership (see Note 2) .

Wireless licenses – Wireless licenses include the right to use assets that were allocated by Cellco and recorded by the Partnership in exchange for a$1,972,824 payment (see Note 4) .

S- 17

Table of Contents

9. COMMITMENTS

Cellco, on behalf of the Partnership, and the Partnership itself have entered into operating leases for facilities and equipment used in its operations. Leasecontracts include renewal options that include rent expense adjustments based on the Consumer Pri ce Index as well as annual and end-of-lease termadjustments. Rent expense is recorded on a straight-line basis. The noncancellable lease term used to calculate the amount of the straight-line rentexpense is generally determined to be the initial lease te rm, including any optional renewal terms that are reasonably assured of occurring. Leaseholdimprovements related to these operating leases are amortized over the shorter of their estimated useful lives or the noncancellable lease term. For theyears ended December 31 , 2017, 2016 and 2015 the Partnership incurred a total of $1 34,337 , $ 125,754, and $ 110,380, respectively, as rent expenserelated to these operating leases, which is included in Cost of service and Selling, general and administrative expenses i n the accompanying statements ofincome and comprehensive income depending on the nature of the facility. Aggregate future minimum rental commitmen t s under noncancellable operatingleases, excluding renewal options that are not reasonably assured of occurr ing and remaining tower maintenance fees of $ 7,862 ( s ee Note 6 ), for theyears shown are as follows :

Years Amount 2018 $ 105,123  2019 93,176  2020 70,037  2021 46,859  2022 32,029  2023 and thereafter 160,607    Total minimum payments $ 507,831  

The Partnership has also entered into certain agreements with Cellco, whereas the Partnership leases certain spectrum from Cellco that overlaps the LosAngeles metropolitan statistical area. Total rent expense under these spectrum leases amounted to $125,608 in 2017, $124,943 in 2016, and $124,722 in2015, which is included in Cost of service in the accompanying consolidated statements of income and comprehensive income .

Based on the terms of these leases as of December 31, 2017, future sp ectrum lease obligations are as follows :

Years Amount 2018 $ 126,288  2019 116,359  2020 106,439  2021 106,996  2022 107,562  2023 and thereafter 975,828    Total minimum payments $ 1,539,472  

The General Partner currently expects that any renewal option in the leases will be exercised .

S- 18

Table of Contents

10. CONTINGENCIES

Cellco and the Partnership are subject to lawsuits and other claims includ ing class actions, product liability, patent infringement, intellectual property,antitrust, partnership disputes, and claims involving relations with resellers and agents. Cellco is also currently defending lawsuits filed against it and otherparticipants in the wireless industry alleging various adverse effects as a result of wireless phone usage. Various consumer class action lawsuits allege thatCellco violated certain state consumer protection laws and other statutes and defrauded customers through mis leading billing practices or statements.These matters may involve indemnification obligations by third parties and/or affiliated parties covering all or part of any potential damage awards againstCellco and the Partnership and/or insurance coverage. All of the above matters are subject to many uncertainties, and the outcome s are not currentlypredictable .

The Partnership may be allocated a portion of the damages that may result upon adjudication of these matters if the claimants prevail in their actions. ThePartnership has no accrual for any pending matters. An estimate of the reasonably possible loss or range of loss with respect to these matters as ofDecember 31, 2017 cannot be made at this time due to various factors typical in contested proceedings, including (1) uncertain damage theorie s anddemands; (2) a less than complete factual record; (3) uncertainty concerning legal theories and their resolution by courts or regulators; and (4) theunpredictable nature of the opposing party and its demands. Cellco and the Partnership continuously monitors these proceedings as they develop and willadjust any accrual or disclosure as needed. It is not expected that the ultimate resolution of any pending regulatory or legal matter in future periods will havea material effect on the financial conditi on of the Partnership, but it could have a material effect on the results of operations for a given reporting period .

11. RECONCILIATION OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

Balance atBeginningof the Year

Additions

Charged toExpenses

Write-offs

Net ofRecoveries

Balance at

Endof the Year (a)

Accounts Receivable Allowances: 2017 $ 47,638   $ 56,505   $ (64,966) $ 39,177   2016 45,751   71,925   (70,038) 47,638   2015 24,136   79,063   (57,448) 45,751   a) Allowance for Uncollectible Accounts Receivable includes approximately $12,261, $16,545, and $8,661, at December 31, 2017, 2016, and 2015, respectively, related

to long-term device payment plan receivables.

                         ******

S- 19

Table of Contents

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

TELEPHONE AND DATA SYSTEMS, INC. By: /s/ LeRoy T. Carlson, Jr. LeRoy T. Carlson, Jr. President and Chief Executive Officer (principal executive officer) By: /s/ Douglas D. Shuma Douglas D. Shuma Senior Vice President - Finance and Chief Accounting Officer (principal financial officer and principal accounting officer) By: /s/ Anita J. Kroll Anita J. Kroll Vice President and Controller

Dated: February 26, 2018

Table of Contents

Power of Attorney Each person whose signature appears below constitutes and appoints LeRoy T. Carlson, Jr. as his or her true and lawful attorney-in-fact and agent, with fullpower of substitution and resubstitution for him or her and in his or her name, place, and stead, i n any and all capacities to sign any and all amendments to thisAnnual Report on Form 10-K under the Securities Exchange Act of 1934, as amended, and to file the same, with all exhibits thereto, and other documents inconnection therewith with the Securiti es and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do so and performeach and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do inperson, hereby ratifying and confirming all the said attorney-in fact and agent or any of them, or their or his substitute or substitutes, may lawfully do or cause tobe done by virtue hereof.

Pursuant to the requirements of the S ecurities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities and on the dates indicated.

Signature Title Date

/s/ LeRoy T. Carlson, Jr. Director February 26, 2018LeRoy T. Carlson, Jr.

/s/ Letitia G. Carlson, M.D. Director February 26, 2018

Letitia G. Carlson, M.D.

/s/ Prudence E. Carlson Director February 26, 2018Prudence E. Carlson

/s/ Walter C. D. Carlson Director February 26, 2018

Walter C. D. Carlson

/s/ Clarence A. Davis Director February 26, 2018Clarence A. Davis

/s/ Kim D. Dixon Director February 26, 2018

Kim D. Dixon

/s/ Kenneth R. Meyers Director February 26, 2018Kenneth R. Meyers

/s/ George W. Off Director February 26, 2018

George W. Off

/s/ Christopher D. O’Leary Director February 26, 2018Christopher D. O’Leary

/s/ Mitchell H. Saranow Director February 26, 2018

Mitchell H. Saranow

/s/ Gary L. Sugarman Director February 26, 2018Gary L. Sugarman

/s/ David A. Wittwer Director February 26, 2018

David A. Wittwer

Exhibit 10.4

TELEPHONE AND DATA SYSTEMS, INC. Amended and Restated Compensation Plan for Non-Employee Directors

Dated December 7, 2017

Recitals

The Board of Directors and shareholders of Telephone and Data Systems, Inc. (the “Company”) previously adopted a Restated Compensation Plan for Non-Employee Directors dated as of March 8, 2013 (the “2013 Restated Plan”). On December 7, 2017 , the Board o f Directors of the Company approved amendments to the 2013 Restated Plan (as amended, the “2017 Restated Plan”), toincrease the Stock Award (as defined below) from $80,000 to $100,000, effective as of March 1, 2017, and, subject to shareholder approval, t o increase thenumber of the Company’s Common Shares that may be issued under such plan. The purpose of the 2017 Restated Plan is to provide appropriate compensation to non-employee directors for their service to the Company and to ensure thatqualified persons serve as non-employee members of the Board of Directors. The 2017 Restated Plan was approved pursuant to the authority granted in Section 2.22 of Article II of the Company’s By-Laws, which provides that the Board ofDirectors shall have authority to establish reasonable compensation of directors, including reimbursement of expenses incurred in attending meetings of theBoard of Directors. The 2017 Restated Plan shall be submitted for approval by shareholders of the Company.

Effectiveness of 2017 Restated Plan

The increase in the Stock Award (as defined below) from $80,000 to $100,000 approved by the Board of Directors on December 7, 2017 is effective as of March1, 2017. The 2017 Restated Plan shall be submitted to the shareholders of the Comp any for approval at the 2018 Annual Meeting of shareholders and, ifapproved, the increase in the number of the Company’s Common Shares that may be issued under such plan shall become effective as of the date of suchapproval. Board Service

Each direct or of the Company who is not an employee of the Company, TDS Telecommunications Corporation, United States Cellular Corporation or any othersubsidiary of the Company (“non-employee director”) will receive: 1. An annual director’s retainer fee, paid in cash (“Cash Retainer”), (i) in the case of the Chairperson of the Board of Directors, of $ 100,000 , and (ii) in the

case of non-employee directors other than the Chairperson of the Board of Directors, of $ 80,000 .

2. An annual award of $ 100 ,000 paid in the form of the Company’s Common Shares (“Stock Award”), which shall be distributed in March on or prior to March15 of each year, for services performed during the 12 month period that commences on March 1 of the immediately preceding calendar year and ends onthe l ast day of February of the calendar year of payment. The number of shares shall be determined on the basis of the closing price of the Company’sCommon Shares, as reported in the New York Stock Exchange Composite Transaction section of the Wall Street Jou rnal, for the first trading day in themonth of March of the calendar year of payment.

3. A director’s meeting fee of $ 1,750 for each meeting attended and reimbursement of reasonable expenses incurred in connection with attendance atmeetings of the Board of Directors, paid in cash.

Audit Committee Service

Each non-employee director who serves on the Audit Committee, other than the Chairperson, will receive an annual committee retainer fee of $11,000, acommittee meeting fee of $1,750 for each meeting att ended and reimbursement of reasonable expenses incurred in connection with attendance at meetings ofthe Audit Committee. The Audit Committee Chairperson will receive an annual committee retainer fee of $22,000, a committee meeting fee of $1,750 for eachmeeting attended and reimbursement of reasonable expenses incurred in connection with attendance at such meetings. Compensation Committee Service

Each non-employee director who serves on the Compensation Committee, other than the Chairperson, will receive an annual committee retainer fee of $7,000,a committee meeting fee of $1,750 for each meeting attended and reimbursement of reasonable expenses incurred in connection with attendance at meetings ofthe Compensation Committee. The Compensation Com mittee Chairperson will receive an annual committee retainer fee of $14,000, a committee meeting feeof $1,750 for each meeting attended and reimbursement of reasonable expenses incurred in connection with attendance at such meetings.

Corporate Governance and Nominating Committee Service

Each non-employee director who serves on the Corporate Governance and Nominating Committee, other than the Chairperson, will receive an annualcommittee retainer fee of $5,000, a committee meeting fee of $1,750 for each m eeting attended and reimbursement of reasonable expenses incurred inconnection with attendance at meetings of the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating CommitteeChairperson will receive an annual committe e retainer fee of $10,000, a committee meeting fee of $1,750 for each meeting attended and reimbursement ofreasonable expenses incurred in connection with attendance at such meetings. Other Meetings or Activities of Non-Employee Directors

The Board of D irectors may also authorize the payment of fees and reimbursement of reasonable expenses incurred in connection with other meetings (such asmeetings of the independent directors) or activities of the non-employee directors. Miscellaneous

Under the 2017 Restated Plan, annual retainers will be paid in cash on a quarterly basis, as of the last day of each calendar quarter, and will compensate thenon-employee director for services performed during such calendar quarter. Fees for meetings of the board, all committee meetings and other meetings and activities will be paid in cash on a quarterly basis, as of the last day of eachcalendar quarter, and will compensate the non-employee director for meetings and activities attended during such calendar quarter. N on-employee directors shall timely submit for reimbursement their reasonable expenses incurred in connection with meeting attendance or other activities, andthe Company shall reimburse such expenses within two weeks after submission.The directors of the Company shall have the authority without further shareholder approval to further amend this 2017 Restated Plan from time to time, includingamendments to increase the amount of the compensation payable in Common Shares from time to time, provided that the total number of Common Sharesissued under the 2016 Restated Plan shall not exceed the number previously approved by shareholders of the Company. Shareholders of the Company previously approved the issuance of Common Shares under the 2013 Restated Plan, 8 5,393 of which remain unissued as of theabove date. Subject to approval by shareholders of the Company, the total number of Common Shares that may be issued under the 2017 Restated Plan shall be increasedby 200,000 Common Shares. Subject to sharehold er approval and effectiveness of the 2017 Restated Plan, pursuant to Section 303A.08 of the New York Stock Exchange Listed CompanyManual, the authorization to issue Common Shares under the 2017 Restated Plan shall expire ten years after the date of such s hareholder approval, unlessreapproved by shareholders. If for any reason shares cannot be issued pursuant to the requirements of the New York Stock Exchange or otherwise, the value ofsuch shares that cannot be issued shall be paid in the form of cash. 

Exhibit 12 

TELEPHONE AND DATA SYSTEMS, INC.RATIO OF EARNINGS TO FIXED CHARGES

For the Year Ended December 31, 2017 2016 2015 2014 2013(Dollars in millions) EARNINGS:        Income (loss) before income taxes 1 $ (122) $ 92   $ 435   $ (152) $ 293  Add (deduct):         Equity in earnings of unconsolidated entities (137) (140) (140) (132) (133) Distributions from unconsolidated entities 136   93   60   112   128   Amortization of capitalized interest 8   8   8   7   5  

Income attributable to noncontrolling interests in subsidiaries that do not have fixed charges (1) (1) (6) (1) (6)

(116) 52   357   (166) 287  Add fixed charges:           Consolidated interest expense 2 170   170   142   111   99  

Interest portion (1/3) of consolidated rent expense 64   63   60   62   67  

$ 118   $ 285   $ 559   $ 7   $ 453  FIXED CHARGES:           Consolidated interest expense 2 $ 170   $ 170   $ 142   $ 111   $ 99   Capitalized interest 2   3   6   10   22  

Interest portion (1/3) of consolidated rent expense 64   63   60   62   67  

$ 236   $ 236   $ 208   $ 183   $ 188            RATIO OF EARNINGS TO FIXED CHARGES 3 *   1.21   2.69   *   2.41  

1 Includes non-cash charges related to losses on impairment of $262 million in 2017 and $88 million in 2014. Includes gain on sale of business and other exit costs, net of $1 million, $1 million, $136 million, $16 million and $301 m illion in 2017, 2016, 2015, 2014 and 2013,

respectively. Includes gain on license sales and exchanges, net of $22 million, $20 million, $147 million, $113 million and $256 million in 2017, 2016, 2015, 2014 and 2013,

respectively. Includes gain on investments of $15 million in 2013.2 Interest expense on income tax contingencies is not included in fixed charges.3 Ratio of earnings to fixed charges and preferred dividends was also 1.21, 2.69 and 2.41 for the years ended December 31, 2016, 2015 and 2013, respectively.* Earnings in 2017 and 2014 were inadequate to cover fixed charges by $118 million, and $176 million, respectively, and fixed charges and preferred dividends by $118

million and $176 million, respectively.                                 

Exhibit 13

Telephone and Data Systems, Inc.

Financial Reports Contents Page No.

Management’s Discussion and Analysis of Financial Condition and Results of Operations 1

Executive Overview 1Terms used by TDS 3Results of Operations – TDS Consolidated 5U.S. Cellular Operations 9TDS Telecom Operations 17

Wireline Operations 21Cable Operations 24HMS Operations 26

Liquidity and Capital Resources 28Contractual and Other Obligations 34Consolidated Cash Flow Analysis 35Consolidated Balance Sheet Analysis 36Applications of Critical Accounting Policies and Estimates 37Other Items 41Regulatory Matters 42Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement 43Market Risk 45Supplemental Informatio n Relating to Non-GAAP Financial Measures 47

Financial Statements 53Consolidated Statement of Operations 53Consolidated Statement of Comprehensive Income 54Consolidated Statement of Cash Flows 55Consolidated Balance Sheet – Assets 56Consolidated Balance Sheet – Liabilities and Equity 57Consolidated Statement of Changes in Equity 58Notes to Consolidated Financial Statements 61

Reports of Management 101Report of Independent Registered Public Accounting Firm 103Selected Consolidated Financial Data 105Consolidated Quarterly Information (Unaudited) 106Shareholder Information 107

Table of Contents

Telep hone and Data Systems, Inc.Management’s Discussion and Analysis of Financial Condition

and Results of Operations

Exe cutive OverviewThe following Managem ent’s Discussion and Analysis ( MD&A) should be read in conjunction with Telephone and Data Systems, Inc.’s (TDS) auditedconsolidated financial s tatements and notes for the year ended December 31, 2017 , and with the description of TDS’ business included herein. Certainnumbers included herein are rounded to millions for ease of presentation; however, calculated amounts and pe rcentages are determined using the unroundednumbers .

This report contains statements that are not based on historical facts, including the words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,”“projects” and similar expressions . Th ese statements constitute and represent “forward looking statements” as this term is defined in the Private SecuritiesLitigation Reform Act of 1995. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results,events or developments to be significantly different from any future results, events or developments expressed or implied by s uch forward looking statements. See Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionar y Statement for additional information.

TDS uses certain “non-GAAP financial measures” and each such measure is identified in the MD&A. A discussion of the reason TDS determines these metricsto be useful and a reconciliation of these measures to their mo st directly comparable measures determined in accordance with accounting principles generally accepted in the United States of America (GAAP) are included in the Supplemental Information Relating to Non-GAAP Financial Measures section within the MD&A of th is Form 10-K Report.

General

TDS is a diversified telecommunications company that provides high-qualitycommunications services to approximately 6 million connections nationwide. TDS provides wireless services through its 83% -owned subsidiary, UnitedStates Cellular Corporation (U.S. Cellular ) . TDS also provides wireline,cable and hosted and managed services ( HMS ) , through its wholly-ownedsubsidiary, TDS Telecommunications LLC ( TDS Telecom ) . TDS’segments operate almost en tirely in the United States. See Note 18 —Business Segment Information in the Notes to Consolidated FinancialStatements for additional information about TDS’ segments.

TDS has re-evaluated internal reporting roles with regard to its HMSbusiness unit and, as a result, will be changing its reportable segments. Effective January 1, 2018, HMS will be considered a non-reportablesegment and will no longer be reported under TDS Telecom. See Note 21— Subsequent Events in the Notes to Consolidated Financial Statements foradditional information.

TDS Mission and Strategy

TDS’ mission is to provide outstanding communications services to its customers and meet the needs of its shareholders, its people, and its communities. Inpursuing this mission, TDS seeks to grow its businesses, create opportunities for its associates an d employees, and build value over the long-term for itsshareholders. Across all of its businesses, TDS is focused on providing exceptional customer experiences through best-in-class services and products andsuperior customer service.

TDS’ long-term str ategy calls for the majority of its capital to be reinvested in its operating businesses to strengthen their competitive positions and financialperformance, while also returning value to TDS shareholders through the payment of a regular quarterly cash div idend and share repurchases.

Throughout 2017 , TDS focused on investing in the networks that are the backbone of its commitment to provide outstanding communications services to itscustomers. TDS believes these investments will strengthen its competitive position and improve operating performance. Looking ahead to 2018 , TDS willcontinue to execute on its strategies to build strong, competitive businesses providing high- quality, data-focused services and products .

1

Table of Contents

Invest in the business to improve returns and pursue initiatives that align with long-term strategies

Consistent with its strategy, TDS made significant investments in 20 17 to improve the performance of its networks. U.S. Cellular added capacity to its 4G LTEnetwork responding to customers’ growing use of data. U.S. Cellular enhanced its service and product offerings by commercially deploying VoLTE technologyfor the first time in one key market and will continue to build out VoLTE services over the next few years. The next commercial launch is expected to occur inseveral additional operating markets in early 2018. VoLTE technology allows customers to utilize a 4G LTE network for both voice and data services, and offersenhanced services such as high definition voice, video calling and simultaneous voice and data sessions. In addition, the deployment of VoLTE technologyexpands U.S. Cellular’s ability to offer roam ing services to other carriers . U.S. Cellular continued to enhance its spectrum position and monetize non-strategicassets by entering into multiple spectrum exchange and purchase agreements with third parties and participating in Auction 1002.

TDS Telecom’s Wireline segment began work on bringing higher broadband speeds to its most rural customers as part of the Connect America Fund. Beginningin 2017, TDS Telecom receives over $75 million per year for 10 years (with incremental funding for tra nsition in the early years for certain states) for operatingand maintaining its network along with the obligation to provide broadband service at various speeds to about 160,000 locations . In 2017, TDS Telecom’sCable segment expanded its footprint by ac quiring several small cable companies that complement its market portfolio, services and products .

Return value to shareholders

Since August of 2013, TDS has invested $ 611 million, primarily through acquisition of cable compani es and returned $ 333 million to shareholders throughpayment of $ 282 million in regular quarterly cash dividends and $ 51 million of stock repurchases. During 2017 , TDS paid $ 69 million in regular quarterly cashdividends. TDS increased the dividend per share paid to its investors by 5 % in 2017 which marks the 43 rd c onsecutive year of dividend increases and inFebruary 2018, TDS increased its dividend per share from $ 0.155 to $ 0.16 . There were no TDS or U.S. Cellular share repurchases in 2017. As ofDecember 31, 2017 , $ 199 million was available for share repurchase under the announced TDS stock repurchase program. There is no assurance that TDSwill continue to increase the dividend rate or pay dividends and no assurance that TDS or U.S. Cellular will make any significant amount of share repurchases inthe future.

Significant Financial and Operating Matters

The following is a summary of certain selected information contained in the comprehensive MD&A that follows. The overview does not contain all of theinformation that may be important. You should carefully read the entire MD&A and not rely solely on the highlights.

Net inc ome available to TDS common shareholders was $ 153 million in 2017, compared to $ 43 million in 2016. Diluted earnings per share was $ 1.37compared to $ 0.39 in 2017 and 2016, respectively.

In 2017, TDS recognized a loss on impairment of goodwill totaling $262 million ($ 188 million, net of tax and noncontrolling interests impacts) bringing theamount of reco rded goodwill for the U.S. Cellular and HMS reporting units to zero.

Due to the enactment on December 22, 2017, of H.R.1, originally known as the Tax Cuts and Jobs Act of 2017, which reduced the U.S. fed eral statutorycorporate income tax rate from 35% to 21%, TDS recognized a deferred tax benefit of $ 327 million ($282 million, net of noncontrolling interests impacts)due to the revaluation of its deferred tax assets and liabilities at the new corporate rate. Refer to Note 4 — Income Taxes in the Notes to Cons olidatedFinancial Statements for further information.

2

Table of Contents

Terms U sed by TDSThe following is a list of definitions of certain industry terms that are used throughout this document :

4G LTE – fourth generation Long-Term Evolution which is a wireless broadband t echnology.5G – fifth generation wireless broadband technology.Account – represents an individual or business financially responsible for one or multiple associated connections. A n account may include a variety oftypes of connections such as handsets an d connected devices.Alternative Connect America Cost Model (A - CAM ) – a USF support mechanism for rate-of-return carriers, which provides revenue supportannually for ten years beginning in 2017. This support comes with an obligation to build defined broa dband speeds to a certain number of locations .Auction 97 – a Federal Communications Commission (FCC) auction of AWS-3 spectrum licenses that ended in January 2015.Auctions 1000, 1001, and 1002 – Auction 1000 is an FCC auction of 600 MHz spectrum licens es that started in 2016 and concluded in 2017involving: (1) a “reverse auction” in which broadcast television licensees submitted bids to voluntarily relinquish spectrum usage rights in exchange forpayments (referred to as Auction 1001); (2) a “repacking ” of the broadcast television bands in order to free up certain broadcast spectrum for otheruses; and (3) a “forward auction” of licenses for spectrum cleared through this process to be used for wireless communications (referred to as Auction1002).Broa dband Connections – refers to the number of Wireline customers provided high-capacity data circuits via various technologies, including DSLand dedicated internet circuit technologies or the Cable billable number of lines into a building for high-speed dat a services.Churn Rate – represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churnrate for each respective period.Connected Devices – non-handset devices that connect directly to the U.S. Cellular network. Connected devices include products such as tablets,modems, and hotspots .EBITDA – refers to earnings before interest, taxes, depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted EBITDAthroughou t this document.DOCSIS – Data Over Cable Service Interface Specification is an international telecommunications standard that permits the addition of high-bandwidthdata transfer to an existing cable TV (CATV) system . DOCSIS 3.1 is a system specification that increases data transmission rates.Eligible Telecommunications Carrier (ETC) – designation by states for providing specified services in “high cost” areas which enables participation inuniversal service support mechanisms.Free Cash Flow – non-GAAP metric defined as Cash flows from operating activities less Cash paid for additions to property, plant, and equipment.Gross Additions – represents the total number of new connections added during the period, without regard to connections that were termina tedduring that period.IPTV Connections – represents the number of Wireline customers provided video services using IP networking technology.Machine- to-Machin e or M2M – technology that involves the transmission of data between networked devices, as well as the performance of actionsby devices without human intervention. U.S. Cellular sells and supports M2M solutions to customers, provides connectivity for M2M solutions via theU.S. Cellular network, and has agreements with device manufacturers and soft ware developers which offer M2M solutions.ManagedIP Connections – refers to the number of telephone handsets, data lines and IP trunks providing communications using IP networkingtechnology.Net Additions – represents the total number of new connections added during the period, net of connections that were terminated during that period.OIBDA – refers to operating income before depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted OIBDA throughoutthis document.Postpaid A verage Billings per Account (Postpaid ABPA) – non-GAAP metric which is calculated by dividing total postpaid service revenues plusequipment installment plan billings by the average number of postpaid accounts and by the number of months in the period.Pos tpaid Average Billings per User (Postpaid ABPU) – non-GAAP metric which is calculated by dividing total postpaid service revenues plusequipment installment plan billings by the average number of postpaid connections and by the number of months in the peri od.Postpaid Average Revenue per Account (Postpaid ARPA) – metric which is calculated by dividing total postpaid service revenues by the averagenumber of postpaid accounts and by the number of months in the period.Postpaid Average Revenue per User (Postp aid ARPU) – metric which is calculated by dividing total postpaid service revenues by the averagenumber of postpaid connections and by the number of months in the period.Retail Connections – the sum of U.S. Cellular postpaid connections and U.S. Cellular prepaid connections.Tax Act – refers to comprehensive federal tax legislation enacted on December 22, 2017 , which made broad and compl ex changes to the U.S. taxcode. Now titled H.R.1, the Tax Act was originally identified as the Tax Cuts and Jobs Act o f 2017.Universal Service Fund (USF) – a system of telecommunications collected fees and support payments managed by the FCC intended to promoteuniversal access to telecommunications services in the United States.U.S. Cellular Connections - individual li ne s of service associated with each device activated by a customer . This includes smartphones, featurephones, tablets, modems, hotspots and machine-to-machine devices.Video Connections – generally, a home or business receiving video programming counts as one video connection. In counting bulk residential orcommercial connections, such as an apartment building or a hotel, connections are counted based on the number of units/rooms within the buildingreceiving service.Voice Connections – refers to the individual circuits connecting a customer to Wireline’s central office facilities or the Cable billable number of linesinto a building for voice services.

3

Table of Contents

VoLTE – Voice over Long-Term Evo lution is a technology specification that defines the standards and procedures for delivering voice communicationsand related services over 4G LTE networks.Wireline Residential Revenue per Connection – is calculated by dividing total Wireline residential revenue by the average number of Wirelineresidential connections and by the number of months in the period.

4

Table of Contents

Res ults of Operations — TDS Consolidated

Year Ended December 31, 2017 2016 2015 2017 vs. 2016 2016 vs.

2015(Dollars in millions)Operating revenues U.S. Cellular $ 3,890   $ 3,990   $ 4,031   (3)% (1)% TDS Telecom 1,140   1,151   1,158   (1)% (1)% All other 1 14   14   21   1% (35)% Total operating revenues 5,044   5,155   5,210   (2)% (1)%Operating expenses       U.S. Cellular 4,194   3,942   3,684   6% 7% TDS Telecom 1,077   1,084   1,079   (1)% 1% All other 1, 2, 3 (122) 18   16   >(100)% 9% Total operating expenses 5,149   5,044   4,779   2% 6%Operating income (loss)       U.S. Cellular (304) 48   347   >(100)% (86)% TDS Telecom 63   67   79   (7)% (15)% All other 1, 2, 3 136   (4) 5   >100% >(100)% Operating income (loss) (105) 111   431   >(100)% (74)%Investment and other income (expense)       Equity in earnings of unconsolidated entities 137   140   140   (2)% - Interest and dividend income 15   11   5   42% >100% Interest expense (170) (170) (142) - (20)% Other, net 1   –   1   >100% (98)% Total investment and other income (expense) (17) (19) 4   12% >(100)%       Income (loss) before income taxes (122) 92   435   >(100)% (79)% Income tax expense (benefit) (279) 40   172   >(100)% (77)%       Net income 157   52   263   >100% (80)%

Less: Net income attributable to noncontrolling interests, net oftax 4   9   44   (55)% (79)%

Net income attributable to TDS shareholders $ 153   $ 43   $ 219   >100% (80)%       Adjusted OIBDA (Non-GAAP) 4 $ 999   $ 967   $ 1,014   3% (5)%Adjusted EBITDA (Non-GAAP) 4 $ 1,152   $ 1,118   $ 1,160   3% (4)%Capital expenditures $ 694   $ 630   $ 759   10% (17)%

  1 Consists of corporate and other operations and intercompany eliminations.2 In 2015, TDS recognized an incremental gain compared to U.S. Cellular of $12 million on the Tower Sale as a result of lower asset basis in the assets disposed.

See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to these transactions.3 During the third quarter of 2017, U.S. Cellular recorded a goodwill impairment of $370 million while TDS recorded a goodwill impairment of the U.S. Cellular reporting

unit of $227 million. Prior to 2009, TDS accounted for U.S. Cellular's share repurchases as step acquisitions, allocating a portion of the share repurchase value toTDS' Goodwill. Further, goodwill of the U.S. Cellular reporting unit was impaired at the TDS level in 2003 but not at U.S. Cellular. Consequently, U.S. Cellular'sgoodwill on a stand-alone basis and any resulting impairments of goodwill does not equal the TDS consolidated goodwill related to U.S. Cellular. For furtherinformation on the goodwill impairment see Note 7 — Intangible Assets in the Notes to Consolidated Financial Statements for additional information.

4 Represents a non-GAAP financial measure. Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation ofthis measure.

5

Table of Contents

2017 - 2016 Commentary

TDS’ 2% decrease in operating revenues is due primarily to decreases inU.S. Cellular retail service, inbound roaming, and equipment sales revenuesprimarily driven by industry-wide competition.

2016 - 2015 Commentary

TDS’ 1% decrease in operating revenues is due primarily to decreasedPostpaid ARPU, the impact of $58 million in revenue recognized by U.S.Cellular from expired rewards points in 2015 and a decrease in inboundroaming revenue driven by lower roaming rates. This was partially offset byincreased Equipment sales revenues at U.S. Cellular due primarily to anincreasing number of customers choosing equipment installment plans.

2017 - 2016 Commentary

TDS’ 2% increase in operating expenses was primarily driven by a loss onimpairment of goodwill of $262 million recognized in the third quarter of2017. See Note 7 — Intangible Assets in the Notes to ConsolidatedFinancial Statements for additional information. This loss was partially offsetby decreases in system operations and selling, general and administrativeexpenses due to cost savings initiatives at TDS Telecom and U.S. Cellular.

2016 - 2015 Commentary

TDS’ 6% increase in o perating expenses was driven by decreased gains ondivestiture and exchange transactions. Such gains were $21 million in 2016compared to $283 million in 2015. See Note 6 — Acquisitions, D ivestituresand Exchanges in the Notes to Consolidated Financial Statements foradditional information related to these gains.

Refer to individual segment discussions in this MD&A for additional details on operating revenues and expenses at the segment level.

Equity in earnings of unconsolidated entities

Equity in earnings of unconsolidated entities represents TDS’ share of net income from entities in which it has a noncontrolling interest and that are accountedfor by the equity method. TDS’ investme nt in the Los Ang eles SMSA Limited Partnership (LA Partnership ) contributed $ 66 million, $ 71 million and $ 74million to Equity in earnings of unconsolidated entities in 2017 , 2016 and 2015 , respectively.

Interest expense

Interest expense increased in 2016 as a result of U.S. Cellular ’ s issuance of $ 3 00 million of 7.25% Senior Notes due 2064 in November 2015 and borrowingof $225 million on its senior term loan facil ity that was drawn in July 2015. See Note 11 — Debt in the Note s to Consolidated Financial Statements for furtherinformation on TDS’ long-term debt.

6

Table of Contents

Income tax expense (benefit)

TDS’ effective tax rate on Income (loss) before income taxes for 2017 was not meaningful as discussed below. The rates for 2016 and 2015 were 43.2% and39.6% , respectively. In December 2017 , the Tax Act was signed into law. TDS adjusts for the effects of changes in tax laws and rates in the period ofenactment. The major provisions of the Tax Act impacting TDS are the reduction of the U.S. fed eral corporate tax rate from 35 % to 21% and the bonusdepreciation deduction allowing for full expensing of qualified property additions. Income tax expense decreased in 2017 due primarily to a reduction in the Netdeferred income tax liability of $ 327 m illion as a result of the impact of the rate decrease on TDS’ federal taxable temporary differences.

The disclosed amounts within include provisional estimates, pursuant to SEC Staff Accounting Bulletin No. 118, for current and deferred taxes related to taxdepreciation of fixed assets. For property acquired and placed in service after September 27, 2017, the Tax Act provides for fu ll expensing if such property wasnot subject to a written binding agreement in existence as of September 27, 2017. As of December 31, 2017 , TDS has not completed a full analysis of allcontracts and agreements related to fixed assets placed in service dur ing 2017, but was able to record a reasonable estimate of the effects of these changesbased on capital expenditures made during 2017. TDS expects any final adjustments to the provisional amounts to be recorded by the third quarter of 2018,which could be material to TDS’ financial statements. The accounting for all other applicable provisions of the Tax Act was performed based on TDS’ currentinterpretation of the provisions of the law as enacted as of December 31, 2017.

The overall effective tax rate for 2017 is not meaningful due to the effect of the Tax Act combined with the impaired goodwill of the U.S. Cellular and HMSreporting units, since portions of the goodwill balance are not amortizable for income tax p urposes. The effective income tax rates for 2016 and 2015 areconsistent with a normalized tax rate inclusive of federal and state tax during the periods . Discrete items in these years did not have a significant impact on theeffective tax rate. For 2018 and future years, TDS expects its effective tax rate will decrease consistent with the statutory federal rate reduction provided in theTax Act. However, the effective r ate in future years also may be impacted by discrete items and permanent tax adjustments. After considering the bonusdepreciation provision of the Tax Act, TDS does not expect to incur a significant current federal income tax liability in 2018 . See Note 4 — Income Taxes in theNotes to Consolidated Financial Statements for additional information.

Net income attributable to noncontrolling interests, net of tax

Net income attributable to noncontrolling interests, net of tax includes the noncontrolling public shareholders’ share of U.S. Cellular’s net income, thenoncontrolling shareholders’ or partners’ share of certain U.S. Cell ular subsidiaries’ net income and other TDS noncontrolling i nterests.

Year Ended December 31, 2017 2016 2015(Dollars in millions) Net income attributable to noncontrolling interests, net of tax U.S. Cellular noncontrolling public shareholders’ $ 2   $ 8   $ 38   Noncontrolling shareholders’ or partners’ 2   1   6   $ 4   $ 9   $ 44  

7

Table of Contents

2017 - 2016 Commentary

Net income increased from 2016 to 2017 due primarily to thereduction of income tax expense as result of the Tax Act partiallyoffset by a loss on impairment of goodwill at the U.S. Cellular andHMS reporting units. Income tax expense and th e loss onimpairment of goodwill are added back into Adjusted EBITDA. Theincrease in Adjusted EBITDA was due primarily to a combination ofimproved operating results at TDS Telecom driven by the Wirelineand Cable segments and cost savings initiatives at U.S. Cellular.

2016 - 2015 Commentary

Net income (loss) and Adjusted EBITDA decreased due to lowerrevenues, partially offset by increased Interest and dividendincome relat ed to imputed interest income recognized onequipment installment plans. Net income (loss) also decreaseddue to lower gains from sales and exchanges of businesses andlicenses and increased Interest expense in 2016. Such gains andInterest expense are n ot included as a component of AdjustedEBITDA and, as a result, Adjusted EBITDA did not decrease asmuch as Net income (l oss) .

*Representsanon-GAAPfinancialmeasure.RefertoSupplementalInformationRelatingtoNon-GAAPFinancialMeasureswithinthisMD&Aforareconciliationofthismeasure.

8

Table of Contents

U.S. CE LLULAR OPERATIONS

Business OverviewU.S. Cellular owns, operates, and invests in wireless markets throughout the United States. U.S. Cellular is an 83% -owned subsidiary of TDS. U.S. Cellular’sstrategy is to attract and retain wireless customers through a value proposition compri sed of a high-quality network, outstanding customer service, andcompetitive devices, plans, and pricing, all provided with a local focus.

 OPERATIONS

 Serves customers with approximately 5.1 million connections including 4.5 million postpaid, 0.5 million prepaid and 0.1 million reseller and otherconnections

Operates in 22 states

Employs approximately 5,900 assoc iates

6,460 cell sites including 4,080 owned towers in service

9

Table of Contents

Trends and Developments

U.S. Cellular’s mission is to provide exceptional wireless communication services which enhance consumers’ lives, increase the competitiveness of localbusinesses, and improve the efficiency of government operations in the mi d-sized and rural markets serve d.

Network and Technology :

U.S. Cellular continues to devote efforts to enhance its network capabilities. In 2017, U.S. Cellular commercially deployed VoLTE technology for thefirst time in one key market and will continue to build out VoLTE services over the next few years. The next commercial launch is expected to occur i nseveral additional operating markets starting in early 2018. VoLTE technology allows customers to utilize a 4G LTE network for both voice and dataservices, and enables enhanced services such as high definition voice, video calling and simultaneous voic e and data session s. In addition, thedeployment of VoLTE technology expands U.S. Cellular’s ability to offer roaming services to other carriers.

U.S. Cellular is committed to continuous innovation to provide customers in the markets it serves with the latest technology that can enhance their l ivesor businesses. U.S. Cellular successfully tested 5G technology for the first time in 2016 in both indoor and outdoor environments and perform edadditional tests in 2017. U.S. Cellular remain s committed to on going tests geared towards understanding the propagation characteristics of the newtechnology and contributing to the development of 5G standards. When deployed commercially, 5G technology is expected to help address customers’growing demand for data se rvices as well as create opportunities for new services requiring high speed and reliability as well as low latency.

Asset Management:

U.S. Cellular continues to enhance its spectrum position and monetize non-strategic assets by participating in auctions a nd entering into agreementswith third parties. In 2017, the FCC announced by way of public notice that U.S. Cellular was the winning bidder for 188 licenses for an aggregatepurchase price of $329 million in the Auction 1002. In addition, U.S. Cellular closed on certain license exchange agreement s and received $15 millionof cash and recognized gains of $22 million. See Note 6 — Acquisitions, Divestitures and Exchanges in the No tes to Consolidated FinancialStatements for additional information related to these transactions.

Services and Products :

U.S. Cellular’s customers are able to choose from a variety of national plans with voice, messaging and data usage options and pricing that aredesigned to fit different customer needs, usage patterns and budgets. In early 2017, U.S. Cellular introduced new Total Plans to postpaid customersthat include unlimited offerings and no hidden fees such as overage charges and activation fees. U.S. Cellular offers a wide range of accessories, including wireless basics such as cases, screen protectors , chargers, and memory cards as well as anassortment of consumer electronics such as headphones, smart speakers, wearables and home auto mation products (e.g. cameras, sensors, andthermostats) . During the fourth quarter of 2017, U.S. Cellular began to offer accessories for purchase on installment plans. These plans allow new andexisting postpaid customers to purchase certain accessories payable over a specified time period.

10

Table of Contents

Operational Overview

As of December 31, 2017 2016 2015Retail Connections – End of Period

Postpaid 4,518,000 4,482,000 4,409,000 Prepaid 519,000 484,000 387,000 Total 5,037,000 4,966,000 4,796,000

Year Ended December 31, 2017 2016 2015Postpaid Activity:

Gross Additions 688,000 773,000 831,000 Net Additions 36,000 73,000 111,000 Churn 1.21% 1.31% 1.39%

2017 - 2016 Commentary

Postpaid net additions decreased in 2017 mainly due to lower connected devices net additions which reflected both lower tablet gross additions and an increasein tablet churn . The decline in tablet gross additions reflects industry-wide trends including (i) reduced consumer demand for network-connected tablets, and(ii) carriers including U.S. Cellular have curtailed promo tions of heavily discounted tablets designed to stimulate demand due to poor economics. The decreasein connected devices net additions was partially offset by an improvement in handsets net additions driven by both higher gross additions and a decrease i nchurn.

2016 - 2015 Commentary

Postpaid net additions decreased in 2016 mainly due to lower handsets gross additions, partially offset by an improvement in postpaid churn.

11

Table of Contents

Postpaid Revenue

Year Ended December 31, 2017 2016 2015Average Revenue Per User (ARPU) 1 $ 44.38   $ 46.96   $ 54.50  Average Billings Per User (ABPU) 1,2 $ 55.60   $ 56.12   $ 59.74    Average Revenue Per Account (ARPA) 1 $ 118.96   $ 124.09   $ 136.90  Average Billings Per Account (ABPA) 1,2 $ 149.02   $ 148.29   $ 150.07     

1 The discontinuation of the loyalty rewards points program had the effect of increasing Postpaid ARPU/ABPU and Postpaid ARPA/ABPA by $1.12 and $2.82,respectively, in 2015.

2 Postpaid ABPU and Postpaid ABPA are non-GAAP financial measures. Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this

MD&A for a reconciliation of these measures. 2017 - 2016 Commentary

Postpaid ARPU and Postpaid ARPA decreased in 2017 due primarily to industry-wide price competition resulting in overall price reductions on plan offerings. Equipment installment plans increase equipment sales reve nue as customers pay for their wireless devices in inst allments at a total device pric e that isgenerally higher than the device price offered to customers in conjunction with alternative plans that are subject to a service contract. Equipment installmentplans also have the impact of reducing service revenues as certain plan offerings provide for reduced monthly access charges. In order to show the trends intotal service and equipment revenues received, U.S. Cellular has presented Postpaid ABPU and Postpa id ABPA, which are calculated as Postpaid ARPU andPostpaid ARPA plus aver age monthly equipment installment plan billings per connection and account, respectively. Equipment installment plan billings increased in 2017 due to increased penetration of equipment installment plans. Postpaid ABPU decreased in 2017 as theincre ase in equipment installment plan billings was more than offset by the decline in Postpaid ARPU discussed above. Postpaid ABPA, however, increasedslightly in 2017 as the increa se in equipment installment plan billings more than offset the decline in Postpaid ARPA discussed above. 2016 - 2015 Commentary

Postpaid ARPU and Postpaid ARPA decreased in 2016 due primarily to industry-w ide price competition, discounts on shared data plans provided to customerson equipment installment plans and those providing their own device at the time of activation or renewal , and the $58 million impact of the discontinuation of theloyalty rewards p oints program in 2015. These fact ors were partially offset by the impact of increased adoption of smartphones and the related increase in service revenues from data usage. Equipment installment plan billings increased in 2016 due to increased adoption of equipment installment plans by postpaid customers. Postpaid ABPU andABPA decreased in 2016 as the incre ase in equipment installment plan billings was more than offset by the decline in Postpaid ARPU and ARPA discussedabove.

12

Table of Contents

Financial Ov erview — U.S. CellularComponents of Operating Income (Loss)

Year Ended December 31, 2017 2016 2015 2017 vs. 2016 2016 vs. 2015

(Dollars in millions)

Retail service $ 2,589   $ 2,700  

$ 2,994  

(4)%

(10)%

Inbo und roaming 129  

152  

192  

(15)%

(21)%

Othe r 260  

229  

198  

13%

16%

Service revenues 2,978  

3,081  

3,384  

(3)%

(9)%

Equi pment sales 912  

909  

647  

-

41%

Total operating revenues 3,890  

3,990  

4,031  

(3)%

(1)%

 

 

 

Syst em operations (excluding Depreciation,       amortization and accretion reported below) 732   760   775   (4)% (2)%

Cost of equipment sold 1,071  

1,081  

1,053  

(1)%

3%

Selling, general and administrative 1,412   1,480   1,494   (4)% (1)%

Depreciation, amortization and accretion 615  

618  

607  

-

2%

Loss on impairment of goodwill 370   –   –   N/M N/M

(Gain) loss on asset disposals, net 17   22  

16  

(22)%

36%

(Gai n) loss on sale of business and other exit costs, net (1) –   (114) >(100)% 100%

(Gai n) loss on license sales and exchanges, net (22) (19)

(147)

(17)%

87%

Total operating expenses 4,194  

3,942  

3,684  

6%

7%

Operating income (loss) $ (304) $ 48  

$ 347  

>(100)%

(86)%

      Net income $ 15   $ 49   $ 247   (70)% (80)%

Adjusted OIBDA (Non-GAAP) 1 $ 675   $ 669   $ 709   1% (6)%

Adjusted EBITDA (Non-GAAP) 1 $ 820   $ 816   $ 852   1% (4)%Capital expenditures $ 469   $ 446   $ 533   5% (16)%       N /M - Percentage change not meaningful      

1 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

13

Table of Contents

S ervice revenues consist of:

Retail Service – C harges for access, airtime, roaming, recovery of regulatory costs and value added services, including data services and productsInbound Roaming – Charges to other wireless carriers whose customers use U.S. Cellular’s wireless systems when roamingOther Se rvice – Primarily amounts received from the Federal USF, imputed interest recognized on equipment installment plan contracts and towerrental revenues

Equipment revenues consist of:

Sales of wireless devices and related accessories to new and existing cu stomers, agent s, and third-party distributors

Key components of changes in the statement of operations line items were as follows:

2017-2016 Commentary

Total operating revenues

Service revenues decreased as a result of (i) a decrease in retail service revenues driven by industry-wide price competition resulting in overall price reductionson plan offerings; and (ii) a decrease in inbound roaming revenue mainly due to lower roamin g rates. Such reductions were partially offset by an increase inimputed interest income due to an increase in the total number of active equipment installment plans. U.S. Cellular offers certain promotions that provide the customer with future credits f or a fixed period of time as long as service is maintained. Such credits areapplied against the customer’s monthly bill and recognized as a reduction to Retail service revenues when earned by the customer. Federal USF revenue remained flat year over ye ar at $92 million. See the Regulatory Matters section in this MD&A for a description of the FCC Mobility FundPhase II Order (MF2 Order) and its expected impacts on U.S. Cellular’s current Federal USF support.

Equipment sales revenues increased by a modest amount year over year reflecting an increase in average revenue per device sold, a mix shift to higher endsmartphone devices and , to a lesser extent , an increase in accessories revenues. Such increases were almost entirely offset by a decrease i n the number ofdevices sold, a reduction in guarantee liability amortization for equipment installment contracts as a result of changes in plan offerings, and lower deviceactivation fees.

14

Table of Contents

System operations expenses

System operations expenses decreased i n 2017 as a result of (i) a decrease in customer usage expenses driven mainly by decreased circuit costs; and (ii) adecrease in roaming expenses driven primarily by lower roaming rates, partially offset by increased data roaming usage . Cost of equipment sold

Cost of equipment sold decreased mainly due to a reduction in the number of devices sold partially offset by a mix shift from feature phones and connecteddevices to higher cost smartphones. Loss on equipment, defined as Equipment sales revenues less Cost of equipment sold, was $1 59 million and $ 172million for 201 7 and 201 6 , respectively. Selling, general and administrative expenses

Selling expenses decreased by $26 million due to lower advertising expenses, including a decrease in sponsorship expenses related to the termination of anaming rights agreement in 2016. Such reductions were partially offset by an increase in commissions expenses. General and administrative expenses decrease d by $42 million mainly due to lower expenses for bad debts and phone programs, along with reductions innumerous other general and administrative expense categories. Loss on impairment of goodwill

In 2017, U.S. Cellular recorded a $370 million loss on impairment related to goodwill. See Note 7 — Intangible Assets in the Notes to Consolidated FinancialStatements for additional information.

(Gain) loss on asset disposals, net

Loss on asset disposals, net decreased primarily as a result of fewer dispo sals of certain network assets.

(Gain) loss on license sales and exchanges , net

The net gains in 2017 and 2016 were due to license exchange transactions with third parties . See Note 6 — Acquisitions, Divestitures and Exchanges in theNotes to Consolidated Financial Statements for additional information .

2016-2015 Commentary

Total operating revenues

Service revenues decreased as a result of (i) a decrease in r etail service revenues and resulting ARPU and ARPA primarily driven by industry-wide pricecompetition and discounts on shared data plans provided to customers on equipment installment plans and those providing their own device at the time ofactivation or renewal; (ii) the $58 million of revenue recognized in 2015 from unredeemed rewards points upon termination of U.S. Cellular’s rewards program;and (iii) a decrease in inbound roaming revenue driven by lower roaming rates . Such reductions were partially offset by an increase in average connectionsbase and increased adoption of smartphones as well as an increase in imputed interest income recognized on equipment installment plans.

Federal USF revenue remained flat year over year at $92 million.

Equipment sales revenues increased year over year due primarily to an increase in average revenue per device sold driven by the increase in sales underequipment installment plans, an overall increase in the number of devices sold, and a shift to smartphon es. Equipment installment plan sales contributed $710million and $351 million in 2016 and 2015, respectively. Equipment installment plan connections represented 44% and 27% of total postpaid connections as ofDecember 31, 2016 and 2015 , respectively.

Co st of equipment sold

Cost of equipment sold increased primarily as the result of a shift to smartphone sales and an overall increase in the number of devices sold, partially offset by adecrease in the average cost per device sold driven by lower cost smar tphones and connected devices. Cost of equipment sold in 2016 included $758 millionrelated to equipment installment plan sales compared to $449 million in 2015. Loss on equipment was $ 172 million and $ 406 million for 2016 and 2015,respectively.

15

Table of Contents

(Gain) loss on asset disposals, net

Loss on asset disposals, net increased primarily as a result of more disposals of certain network assets.

(Gain) loss on sale of business and other exit costs, net

The net gain in 2015 was due primarily to a $108 million gain r ecognized on the sale of towers and certain related contracts, assets and liabilities. See Note 6— Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Stateme nts for additional information.

(Gain) loss on license sales and exchanges , net

The net gains in 2016 and 2015 were due to license exchange transactions with third parties . See Note 6 — Acq uisitions, Divestitures and Exchanges in theNotes to Consolidated Financial Statements for additional information .

16

Table of Contents

TDS TEL ECOM OPERATIONS

Business OverviewThrough December 31, 2017, TDS Telecom operate d in three segments: Wireline, Cable and HMS. The overall strategy for the W ireline and C ablebusinesses is to offer the best broadband connection in the market in order to capitalize on data growth and customers’ needs for higher broad band speeds andleverage that growth by bundling services with video and voice. In addition, HMS provides a wide range of Informati on Technology (IT ) services includingcolocation, cloud and hosting solutions, managed services , application management , and sales of IT-hardware and related maintenance and professionalservices .

OPERATIONS

TDS Telecom operates in 34 states and through its Wireline and Cable operations provides broadband, video and voice services to approximately1.2 million connections.

Employs approximately 3,300 employees

Wireline o perates incumbent local exchange carriers (ILEC ) and competitive local exchange carrier s (CLEC ) in 27 s tates .

Cable operates primarily in Colorado, New Mexico, Texas, Utah and Oregon.

HMS operates a total of eight data centers. It owns two data centers in Iowa, one each in Minnesota, Wisconsin , Colorado and Oregon and itleases two data centers in Arizona .

17

Table of Contents

Trends and Developments

Acquisition / Divestiture :  I n 201 7 and 201 6 , TDS Telecom acquired certain cable companies to further grow its markets. These acquisitions collectively represented lessthan 1% of TDS Telecom’s 2017 Total operating revenues. TDS Telecom will continue to pursue cable acquisitions that meet its criteria of havingfavorable compet itive environments, attractive market demographics and the ability to grow broadband penetration.

In 2017, TDS Telecom acquired the fiber assets of Sun Prairie Utilities which supports its fiber deployment strategy for grow th both inside and outsidethe cu rrent footprint of the Wireline business in 2018 .

Technology & Support Systems: 

TDS Telecom’s Wireline segment continues to upgrade and expand its network to respond to the needs of its customers for greater bandwidth andadvanced technologies. At December 31, 2017, fiber has been deployed to approximately 24% of ILEC service address es. Fiber technology allowsbroadband speeds of up to 1 Gigabit per second (Gbps). In non-fiber markets, TDS Telecom has deployed copper bonding technology to increase dataspeeds up to 50 Megabits per second (Mbps) to reach approximately 26% of ILEC ser vice addresses. TDS Telecom continues to utilize federal andstate funding mechanisms in order to extend broadband service to unserved and underserved markets.

TDS Telecom’s Cable segment continues to make capaci ty investments in line with its strategy to increase broadband p enetration in its markets. DOCSIS 3.0 technology is deployed to nearly all of Cable’s service addresses which allows it to offer enhanced transmission speeds and in 2017 TDSTelecom began enabling a next generation DOCSIS 3.1 broadband network . TDS Telecom’s Cable segment is offering 6 00 Mbps service in its largestmarkets.

The HMS segment continues to invest in data center facilities based on customer demand.

Services and Products : 

TDS Telecom ’s Wireline segment strives to be the preferred broadband provider in its ILEC markets. As such, TDS Telecom continues to invest in itsnetwork to offer higher speed data service. As of December 31, 201 7 , TDS Telecom was able to provide broadband service to 96% of its ILECphysical access lines. At December 31, 201 7 , 68% of the service addresses in its ILEC markets had 10 Mbps or faster service available and 45% ofthe service addresses in its ILEC markets had 25 Mbps or faster service available.

TDS Telecom’s Wireline segment offers IPTV, brand ed as TDS TV, in order to leverage its high-speed network. TDS TV provides customers withconnected-home DVRs, video-on-demand (VOD) and TV Everywhere. TDS Telecom offers TDS TV in 29 markets, enabling 210 ,000 or roughl y 2 8 %of its service addresses. Where TDS TV is not available, TDS Telecom partners with a satellite TV provider to allow for triple or double play bundling. TDS Telecom plans additional fiber expansion in 2018.

TDS Telecom continues to focus its commerc ial sales on managedIP. TDS managedIP is available in w ireline markets that cover 83% of allcommercial customers at December 31, 201 7, and is also available in certain c able markets .

TDS Telecom ’s Cable segment seeks to expand broadband services and leve rage that growth by bundling with video and voice services. In additionto providing enhanced broadband speeds through DOCSIS 3.0 technology, TDS Telecom also provides customers with the most up-to-date TVtechnology through a w hole h ome entertainment s ol ution branded as CatchTV.

HMS continues to enhance its suite of hybrid-IT solutions including managed services on public clouds, hosted private clouds (its enterprise-classReliaCloud platform) and customer-owned private clouds in addition to colocation s ervices.

Other Developments

TDS has re-evaluated internal reporting roles with regard to its HMS business unit and, as a result, will be changing its reportable segments. Effective January1, 2018, HMS will be considered a non-reportable segment and will no longer be reported under TDS Telecom. This change will enable TDS Telecom tocontinue to successfully execute on the Wireline and Cable segments’ shared strategy to be the preferred service provider in its markets. Additionally, HMS willbe able to le verage TDS’ corporate IT resources, to improve operations and customer service, and better position itself for growth.

18

Table of Contents

Financial Overview — TDS TelecomComponents of Operating Income

Year Ended December 31, 2017 2016 2015 2017 vs. 2016 2016 vs. 2015(Dollars in millions) Operating revenues Wireline $ 714   $ 698   $ 701   2% - Cable 206   185   175   11% 6% HMS 225   273   287   (18)% (5)% Intra-company elimination (5) (5) (5) (9)% (1)% TDS Telecom operating revenues 1,140   1,151   1,158   (1)% (1)%       Operating expenses       Wireline 603   618   612   (2)% 1% Cable 198   183   169   8% 9% HMS 282   288   302   (2)% (5)% Intra-company elimination (5) (5) (5) (9)% (1)% TDS Telecom operating expenses 1,077   1,084   1,079   (1)% 1%       TDS Telecom operating income $ 63   $ 67   $ 79   (7)% (15)%       Net income $ 88   $ 42   $ 46   >100% (9)%Adjusted OIBDA (Non-GAAP) 1 $ 323   $ 295   $ 304   9% (3)%Adjusted EBITDA (Non-GAAP) 1 $ 329   $ 298   $ 306   10% (3)%Capital expenditures $ 215   $ 173   $ 219   25% (21)%  

Numbers may not foot due to rounding.  

1 Refer to supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

2017 - 2016 Commentary

Operating revenues de creased in 2017 due primarily to a decrease inHMS E quipment and product sales revenues . Increases in Wirelinesupport revenue provided through the A-CAM program and frombroadband and IPTV we re partially offset by decreases in C ommercialrevenues. Cable revenues increased due to broadband connection growthand price increases for video and broadband services.

2016 - 2015 Commentary

Operating revenues decreased in 2016 due to a decrease in HMSequipment and product sales revenues and a decrease in WirelineCommercial and Wholesale revenues. The decreases were partially offsetby increases in Wireline revenues f rom broadband and IPTV and revenuesfrom Cable operations.

19

Table of Contents

Total operating expenses

Operating expenses de creased in 2017 due primarily to a de creas e in HMS E quipment cost of goods sold on reduced equipment revenues as well as lowerWireline employee costs and depreciation expense . Partially offsetting the expense decline was a $35 million L oss on impairment of goodwill related to theHMS segment during the third quarter of 2017 and the growth in Cable opera tions .

Operating expenses increased in 2016 due to higher video programming costs and employee expenses. HMS equipment cost of goods sold decreased onreduced equipment revenues.

20

Table of Contents

WIR ELINE OPERATIONS

Business OverviewTDS Telecom’s W ireline business provides broadband, video and voice services. These services are provided to residential, commercial, and wholesalecustomers in a mix of rural, small town and suburban markets, with the largest concentration of its customers in the Uppe r Midwest and the Southeast. TDSTelecom’s strategy is to offer its residential customers broadband, video, and voice services throu gh value-added bundling. In its commercial business, TDSTelecom’s focus is on small - to medium - sized business es and its sales efforts emphasize advanced IP-based voi ce and data services.

Operational OverviewILEC Residential Broadband

C onnections by SpeedsWireline Residential Revenue per

Connection

Residential broadband customers are increasingly choosing higher speeds inILEC markets with 5 7 % choosing speeds of 10 Mbps or greater and 2 5 %choosing speeds of 50 Mbps or greater , driving increases in ARPU .

Wireline residential revenue per connection increased in 2017 dueprimarily to higher broadband speeds, IPTV connection growth, and priceincreases .

Residential Connections Commercial Connections

Total residential connections de creased by 3% as declines in voiceand broadband connections outpaced the growth in IPTVconnections.

Total commercial connections decreased by 6 % due primarily to a 9%decrease in voice connections, mostly in CLEC markets.

21

Table of Contents

Financial Overview — WirelineComponents of Operating Income

Year Ended December 31, 2017 2016 2015 2017 vs. 2016 2016 vs. 2015(Dollars in millions) Residential $ 319   $ 309   $ 297   3% 4%Commercial 199   212   221   (6)% (4)%Wholesale 195   175   181   12% (4)% Service revenues 713   696   699   2% -Equipment and product sales 1   2   2   (33)% (9)% Total operating revenues 714   698   701   2% -       Cost of services (excluding Depreciation,       amortization and accretion reported below) 258   258   255   - 1%Cost of equipment and products 2   2   2   (16)% 1%Selling, general and administrative 191   197   194   (3)% 2%Depreciation, amortization and accretion 151   159   166   (5)% (4)%(Gain) loss on asset disposals, net 1   2   5   (35)% (62)%(Gain) loss on sale of business and other       exit costs, net –   –   (10) N/M >100%(Gain) loss on license sales and exchanges, net –   (1) –   N/M N/M Total operating expenses 603   618   612   (2)% 1%       Operating income $ 111   $ 80   $ 89   40% (10)%       Income before income taxes $ 117   $ 83   $ 92   41% (9)%Adjusted OIBDA (Non-GAAP) 1 $ 263   $ 240   $ 250   10% (4)%Adjusted EBITDA (Non-GAAP) 1 $ 269   $ 242   $ 252   11% (4)%Capital expenditures $ 146   $ 108   $ 140   35% (23)% Numbers may not foot due to rounding. N/M - Percentage change not meaningful

1 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

Residential revenues consist of:

Broadband services, including fiber-based and other digital , premium and enhanced data servicesIPTV and satellite videoVoice services

Commercial revenues consist of:

TDS managedIP voice and data servicesHigh-speed and dedicated business internet servicesVoice services

Wholesale revenues consist of:

Network access services to interexchange carriers for the originationand termination of interstate and intrastate long distance phone callson TDS Telecom’s network and special access services to car riersand othersFederal and State USF support

22

Table of Contents

Key components of changes in the statement of operations items were as follows:

201 7 -201 6 Commentary

Total operating revenues

Residential revenues increased in 201 7, due primarily to growth in broadband revenues. Sales of higher tiered services and price increases for broadbandincreased revenues $9 million. IPTV average connections grew 13% increasing revenues $5 million, while average voice connections declined by 4%decreasing revenues by $6 million.

Commercial revenues decreased in 201 7, due to declining connections mostly in CLEC markets.

Wholesale revenues in creased in 201 7, due primarily to increased support received from the A-CAM program.

In January 2017, the FCC finalized its modification of the USF high cost support program. Under this program, known as A-CAM, TDS is to receiveapproximately $75 million in annual support which replaces approximately $50 million in annual USF support rece ived in 2016. In addition, TDS is to receiveadditional transition support payments in certain states. In 2017, TDS Telecom received $82 million in support payments. The A-CAM support comes with anobligation to build defined broadband speeds to reach a pproximately 160,000 locations.

Cost of services

Cost of services decreased in 201 7, due to reduced costs of provisioning circuits, purchasing unbundled network elements and providing long-distance services, offset by increased charges related to growth in IPTV.

Selling, general and administrative

Selling, general and administrative decreased in 201 7, due to decreases in employee related expense and in contributions to the Federal Universal ServiceFund .

Depreciation, amortization and accretion

Depreciat ion, amortization and accretion decreased in 2017 as certain assets became fully depreciated.

201 6 -201 5 Commentary

Total operating revenues

Residential revenues increased in 201 6 as growth in data and IPTV connections more than offset the decline in legacy voice connections . IPTV averageconnections grew 44% increasing revenues $ 13 million, while average voice connections declined by 3% decreasing revenues by $ 3 million. In addition,revenues increased due to 4% growt h in average revenue per residential connection driven by price increases for broadband and video services, growth incustomers opting for faster broadband speeds and growth in customers selecting higher - tier IPTV packages .

Commercial revenues decreased i n 201 6 due to d eclining legacy voice and data connections offset by increases from 3 % growth in average managedIPconnections .

Wholesale revenues decreased in 201 6 due primarily to the effect of divestitures and a 14% reduction in intra-state minutes-of-u se and lower special accessrevenues .

Cost of services

Cost of services in creased in 201 6 due to increased charges related to growth in IPTV and increased employee expenses , offset by reduced costs ofprovisioning circuits, purchasing unbundled network el ements and providing long-distance services.

Selling, general and administrative expenses

Selling, general and administrative expenses increased in 2016 due primarily to an increase in employee-related expenses .

Depreciation, amortization and accretion

Depreciation, amortization and accretion decreased in 2016 due primarily to an adjustment recorded in the second quarter of 2016 for excess depreciationattributable to prior periods.

23

Table of Contents

 CA BLE OPERATIONS

Business OverviewTDS Telecom’s cable strategy is to expand its broadband services and leverage that growth by bundling with video and voice services. TDS Telecom seeks tobe the leading provider of broadband services in its targeted markets by leveraging its core competencies in network management and customer focus.

Operational Overview

Cable Connections

Cable connections grew 8% in 2017 , including12,800 connections from acquisitions. Broadbandconnections grew 15%, including 7,40 0connections from acquisitions.

24

Table of Contents

Financial Overview — CableComponents of Operating Income

Year Ended December 31, 2017 2016 2015 2017 vs. 2016 2016 vs. 2015(Dollars in millions) Residential $ 169   $ 147   $ 138   15% 6%Commercial 37   38   36   (4)% 6%

Total operating revenues 206   185   175   11% 6%       Cost of services (excluding Depreciation, amortization       and accretion reported below) 98   94   79   4% 19%Selling, general and administrative 54   51   54   6% (6)%Depreciation, amortization and accretion 44   37   35   21% 4%(Gain) loss on asset disposals, net 2   2   1   (7)% >100%

Total operating expenses 198   183   169   8% 9%      

Operating income $ 8   $ 2   $ 6   >100% (71)%       Income before income taxes $ 8   $ 2   $ 7   >100% (66)%

Adjusted OIBDA (Non-GAAP) 1 $ 54   $ 41   $ 42   33% (4)%

Adjusted EBITDA (Non-GAAP) 1 $ 54   $ 41   $ 42   33% (3)%Capital expenditures $ 55   $ 54   $ 52   2% 5% Numbers may not foot due to rounding.

1 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

Residential and Commercial revenues consist of:

B roadband services , including high-speed internet, security andsupport servicesVideo services including premium programming in HD, multi-roomand TV Everywhere offeringsVoice services 

Key components of changes in the statement of operations items were as follows:

2017 - 2016 Commentary

R evenues increased in 2017, due primarily to growth in broadband connections and price increases. A change in classification of certain bulk broadb and andvideo connections increased residential revenues and reduced commercial revenues by $ 6 million in 2017. Cost of services increased in 2017, due primarily toincreases in programming fees. Selling, general and administrative expenses increased in 2017 due to increased IT-related expenses and acquisition expense.

2016 - 2015 Commentary

Residential revenues increased in 2016 due primarily to an 8 % increase in average residential connections partially offset by the impact of promotional pricing. Commercial revenues increased in 2016 due primarily to increases in advertising revenues and high-speed data customers. Cost of services increased in 201 6due primarily to increase s in employee expenses and programming content costs. Selling, general and administrative expenses decreased in 2016 due tolower employee and customer service costs .

25

Table of Contents

HMS OP ERATIONS

Business OverviewUnder the OneNeck IT Solutions brand, HMS offer s a full-s uite of IT solutions ranging from equipment resale to full management and hosting of a customer’s ITinfrastructure and applications. The goal of HMS operations is to create, deliver, and support a platform of IT products and services tailored fo r mid- marketbusiness customers.

Financial Overview — HMSComponents of Operating Loss

Year Ended December 31, 2017 2016 2015 2017 vs. 2016 2016 vs. 2015(Dollars in millions)       Service revenues $ 111   $ 119   $ 117   (6)% 1%Equipment and product sales 114   155   170   (26)% (9)% Total operating revenues 225   273   287   (18)% (5)%       Cost of services (excluding Depreciation,       amortization and accretion reported below) 83   82   85   1% (4)%Cost of equipment and products 95   128   143   (26)% (10)%Selling, general and administrative 42   48   47   (13)% 3%Depreciation, amortization and accretion 28   29   27   (4)% 6%Loss on impairment of goodwill 35   –   –   N/M N/M Total operating expenses 282   288   302   (2)% (5)%       Operating loss $ (57) $ (14) $ (15) >(100)% 7%       Loss before income taxes $ (60) $ (18) $ (18) >(100)% (2)%Adjusted OIBDA (Non-GAAP) 1 $ 6   $ 14   $ 12   (61)% 24%Adjusted EBITDA (Non-GAAP) 1 $ 6   $ 15   $ 12   (59)% 26%Capital expenditures $ 14   $ 11   $ 27   36% (61)% Numbers may not foot due to rounding. N/M - Not meaningful

1 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

26

Table of Contents

Service revenues consist of:

Cloud and hosting solutionsManaged servicesEnterprise Resource Planning ( ERP) application managementProfessional servicesCo-location servicesIT hardware maintenance services

Equipment revenues consist of:

IT hardware sales

Key components of changes in the statement of operations items were as follows:

2017 - 2016 Commentary

Declines in hardware maintenance and installation services resulted in a decrease in Service revenues in 2017. Equipment and prod uct sales revenues fromsales of IT infrastructure hardware solutions decreased in 2017, due primarily to lower spending by existing customers. There was a corresponding decrease inCost of equipment and products. Cost of services increased in 2017, due to increased employee expenses and software maintenance and support costs. Selling, general and administrative expenses decreased due primarily to lower commissions associated with decreased sales.

Loss on i mpairment of goodwill

During the third quarter of 2017, HMS recorded a $35 million loss on impairmen t related to goodwill. See Note 7 — Intangible Assets in the Notes toConsolidated Financial Statements for additional information.

2016 - 2015 Commentary

Service revenues increased in 2016 due primarily to higher maintenance sales offset by lower professional services and installation revenue. Equipment andproduct sales revenues from sales of IT infrastructure hardware solutions decreased in 2016. There was a corresponding decrease in Cost of equipment andproducts. Cost of services decreased in 2016 due primarily to reduced employee expenses offset by higher maintenance and support costs. Selling, generaland administrative expenses increased in 2016 due primarily to higher employee costs.

27

Table of Contents

Liquid it y and Capital ResourcesSources of Liquidity

TDS and its subsidiaries operate capital-intensive businesses. Historically, TDS has used internally-generated funds and also has obtained substantial fundsfrom external sources for general corporate purposes. In the past, TDS’ existing cash and investment balances, funds available under its revolving creditfacilities, funds from other financing sources, including a term loan and other long-term debt, and cash flows from operating, certain investing and financingactivities, including sales of assets or businesses, provided sufficient liquidity and financial flexibility for TDS to meet its normal day-to-day operating need s anddebt service requirements, to finance the build-out and enhancement of markets and to fund acquisitions. There is no assurance that this will be the case in thefuture. See Market Risk for additional information regarding maturities of long-term de bt.

Although TDS currently has a significant cash balance, TDS has i ncurred negative free cash flow at times in the past and this will occur in the future if operatingresults do not improve or capital expenditures are not reduced. However, TDS believes that existing cash and investment balances, funds available under itsrevolving credit facilities, receivables securitization facility and expected cash flows from operating and investing activities provide liquidity for TDS to meet itsnormal day-to-day o perating needs and debt service requirements for the coming year.

TDS may require substantial additional capital for, among other uses, funding day-to-day operating needs including working capital, acquisitions of providers ofcable, wireless or wireline telecommun ications services , IT services or other businesses, spectrum license or system acquisitions, system development andnetwork capacity expansion, debt service requirements, the repurchase of shares, the payment of dividends, or making additional i nvestments. It may benecessary from time to time to increase the size of the existing revolving credit facilities, to put in place new credit facilities, or to obtain other forms of financingin order to fund potential expenditures. TDS’ liquidity would be adversely affected if, among other things, TDS is unable to obtain short or long-term financing onacceptable terms, TDS makes significant spectrum license purchases, TDS makes significant business acquisitions, the LA Partnership discontinues or reduc esdistributions compared to historical levels, or Federal USF and/or other regulatory support payments decline. In addition, although sales of assets or businessesby TDS have been an important source of liquidity in prior periods, TDS does not expect a similar level of such sales in the future .

TDS’ credit rating currently is sub-investment grade. There can be no assurance that sufficient funds will continue to be available to TDS or its subsidiaries onterms or at prices acceptable to TDS. Insuffici ent cash flows from operating activities, changes in its credit ratings, defaults of the terms of debt or creditagreements, uncertainty of access to capital, deterioration in the capital markets, reduced regulatory capital at banks which in turn limits th eir ability to borrowand lend, other changes in the performance of TDS or in market conditions or other factors could limit or restrict the availability of financing on terms and pricesacceptable to TDS, which could require TDS to reduce its acquisition, capital expenditure and business development programs, reduce the acquisition ofspectrum licenses, and/or reduce or cease share repurchases and/or the payment of dividends. TDS cannot provide assurance that circumstances that couldhave a material adver se effect on its liquidity or capital resources will not occur. Any of the foregoing would have an adverse impact on TDS’ businesses,financial condition or results of operations.

Cash and Cash Equivalents

Cash and cash equivalents include cash and money market investments. The primary objective of TDS’ Cash and cash equivalents investment activities is topreserve principal. Cash held by U.S. Cellular is for its operational needs and acquisition, capital expenditure and business development progra ms. TDS doesnot have direct access to U.S. Cellular cash unless U.S. Cellular pays a dividend on its common stock. U.S. Cellular has no current intention to pay a dividendto its shareholders.

At December 31, 201 7 , TDS’ consolidated C ash and cash equivalentstotaled $ 619 million compared to $ 900 million and $ 985 million atDecember 31, 2016 and December 31, 2015 , respectively . The majority of TDS’ Cash and cash equivalents was held in bank depositaccounts and in money market funds that purchase only debt issued by theU.S. Treasury or U.S. government agencies across a range of eligiblemoney market investments that may include, but are not limited to,government agency repurchase agreements, government agency debt, U.S. Treasury repurchase agreements, U.S. Treasury debt, and other securitiescollateralized by U.S. government obligations. TDS monitors the financialviability of the money market funds and direct investments in which itinvests and believes that the credit risk associated with these investmentsis low.

28

Table of Contents

Short-term investments

At December 31 , 2017, TDS held $100 million of Short-term investments which consisted of U.S. Treasury Bills with original maturities of six months. For theseinvestments, TDS’ objective is to earn a higher rate of return on funds that are not anticipated to be require d to meet liquidity needs in the immediate futurewhile maintaining low investment risk.

Financing

Revolving Credit Facilities

TDS and U.S. Cellular have unsecured revolving credit facilities available for general corporate purposes including acquisition s, spectrum purchases and capitalexpenditures, with a maximum borrowing capacity of $400 million and $300 million, respectively . Amounts under the revolving credit facilities may beborrowed, repaid and reborrowed from time to time until maturity in June 2021 . As of December 31, 2017 , there were no outstanding borrowings under therevolving credit facilities, except for letters of credit, and TDS and U.S. Cellular’s unused capacity under their revolving credit fa cilities was $ 399 million and $298 million, respectively. The continued availability of the revolving credit facilities requires TDS and U.S. Cellular to comply with certain negative andaffirmative co venants , maintain certain financial ratios and provide representations on certain matters at the time of each borrowing. TDS and U.S. Cellularbelieve they were in compliance as of December 31, 2017 , with all of t he covenants and requirements set forth in their revolving credit facilities. See FinancialCovenants below.

See Note 11 — Debt in the Notes to Consolidated Financial Statements for addi tional information regarding the revolving credit facilities.

Term Loan

In January 2015, U.S. Cellular entered into an unsecured senior term loan credit facility. In July 2015, U.S. Cellular borrowed the full amount of $225 millionavailable under this fa cility in two separate draws. This term loan credit facility was amended and restated in June 2016. Principal reductions are due andpayable in quarterly installments of $3 million beginning in March 2016 through December 2021, and the remaining unpaid b alance will be due and payable inJanuary 2022. This facility was entered into for general corporate purposes, including working capital, spectrum purchases and capital expenditures.

The continued availability of the term loan facility requires U.S. Ce llular to comply with certain negative and affirmative covenants, maintain certain financialratios and make representations regarding certain matters at the time of each borrowing, that are substantially the same as those in the U.S. Cellular revolving credit facility described above. TDS believes that U.S. Cellular was in compliance at December 31, 2017 , with all of the covenants and requirements set forth inthe term loan facility. See Financial Covenants below .

See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information regarding the term loan.

Receivables Securitization Facility

In December 2017, U.S. Cellular, through its subsidiaries, entered into a $200 million credit facility to permit securitized borrowings using its equipmentinstallment receivables for general corporate purposes. U.S. Cellular entered into a performance guaranty whereby U.S. Cel lular guarantees the performanceof certain wholly-owned subsidiaries of U.S. Cellular under the facility. Amounts under the receivables securitization facility may be borrowed, repaid andreborrowed from time to time until maturity in December 2019, whic h may be extended from time to time as specified therein. As of December 31, 2017, therewere no outstanding borrowings under the receivables securitization facility, and the entire unused capacity of $200 million was available, subject to sufficientcoll ateral to satisfy the asset borrowing base provisions of the facility. The continued availability of the receivables securitization facility requires U.S. Cellular tocomply with certain negative and affirmative covenants, maintain certain financial ratio s and provide representations on certain matters at the time of eachborrowing. TDS believes that U.S. Cellular was in compliance as of December 31, 2017, with all of the covenants and requirements set forth in its receivablessecuritization facility. Se e Financial Covenants below.

See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information regarding the receivables securitization facility.

Financial Covenants

As noted above, t he TDS and U.S. Cellular revolving credit facilities , the U.S. Cellular senior term loan facility and the U.S. Cellular receivables securitizationfacility require TDS or U.S. Cellular, as applicable, to comply with certain affi rmative and negative covenants, which include certain financial covenants. Inparticular, under these agreements, TDS and U.S. Cellular are required to maintain the Consolidated Interest Coverage Ratio at a level not lower than 3.00 to1.00 as of the end of any fiscal quarter. TDS and U.S. Cellular also are required to maintain the Consolidated Leverage Ra tio at a level not to exceed 3.2 5 to1.00 as of the end of any fiscal quarter through June 30, 2019. From July 1, 2019, and thereafter, the Consolidate d Leverage Ratio is not to exceed 3.00 to1.00 as of the end of any fiscal quarter. TDS and U.S. Cellular believe they were in compliance at December 31, 2017 , with all such financial covenants.

29

Table of Contents

Other Long-Term Financing

TDS and U.S. Cellular each have an effective shelf registration statement on Form S-3 to issue senior or subordinated debt securities. The proceeds from anysuch issuances may be used for general corporate purposes including : the possible reduct ion of other short-term or long-term debt, spectrum purchases, andcapital expenditures ; in connection with acquisition, construction and development programs; for working capital; to provide additional investments insubsidiaries; or the repurchase of sha res. The TDS shelf registration permits TDS to issue at any time and from time to time senior or subordinated debtsecurities in one or more offerin gs in an indeterminate amount. The U.S. Cellular shelf registration statement permits U.S. Cellular to iss ue at any time andfrom time to time senior or subordinated debt securities in one or more offerings , up to the amount registered, which is currently $500 million . The ability ofTDS or U.S. Cellular to complete an offering pursuant to such shelf registra tion statements is subject to market conditions and other factors at the time.

TDS believes that it and /or its subsidiaries were in compli ance as of December 31, 2017 , with all covenants and other requirements set forth in the TDS andU.S. Cellular long-term debt indentures. The TDS and U.S. Cellular long-term debt indentures do not include any financial covenants. TDS and U.S. Cellularhave not failed to make nor do they expect to fail to make any scheduled payment of principal or interest under such indentures.

The total long-term debt principal payments due for the next five years are $ 229 million, which represent 9% of the total gross long-term debt obliga tion atDecember 31, 2017 . Refer to Market Risk — Long-Term Debt for additional information regarding required principal payments and the weighted averageinterest rates related to TDS’ Long-term debt.

TDS and U.S . Cellular, at their discretion, may from time to time seek to retire or purchase their outstanding debt through cash purchases and/or exchanges forother securities, in open market purchases, privately negotiated transactions, tender offers, exchange offe rs or otherwise. Such repurchases or exchanges, ifany, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information on long-term financing .

Credit Ratings

In certain circumstances, TDS’ and U.S. Cellular’s interest cost on their various facilities may be subject to increase if their current credit ratings from nationallyrecognized credit rating agencies are lowered, and may be subject to decrease if the ratings are raised. The facilities do not cease to be available nor do thematurity dates accelerate solely as a result of a downgrade in TDS’ or U.S. Cellular’s credit rating. However, downgrades in TDS’ or U.S. Cellular’s credit ratingcould adversely affect their ability to renew the facilities or obtain access to other credit facilities in the future .

TDS and U.S. Cellular are rate d at sub-investment grade . TDS and U.S. Cellular’s credit ratings as of December 31, 2017 , and the dates such ratings wereissued/re-affirmed were as follows:

Rating Agency Rating OutlookMoody's (TDS) (updated August 2017) Ba2 stable outlookMoody's (U.S. Cellular) (updated August 2017) Ba1 stable outlookStandard & Poor's (re-affirmed October 2017) BB stable outlookFitch Ratings (re-affirmed August 2016) BB+ stable outlook

Capital Requirements

The discussion below is intended to highlight some of the significant cash outlays expected during 2018 and beyond and to highlight the spending incurred inprior years for these items. This d iscussion does not include cash required to fund normal operations, and is not a comprehensive list of capital requirements. Significant cash requirements that are not routine or in the normal course of business could arise from time to time.

Capital Expenditures

TDS makes substantial investments to acquire , construct and upgrade telecommunications networks and facilities to remain competitive and as a basis forcreating long-term value for shareholders. In recent years, rapid changes in technology an d new opportunities (such as 4G LTE and VoLTE technology in theWireless business and fiber in the Wireline business) have required substantial investments in potentially revenue-enhancing and cost-reducing upgrades toTDS’ networks to remain competitive .

30

Table of Contents

Capital expenditures (i.e., additions to property, plant and equipment and system development expenditures), which include the effects of accruals andcapitalized interest, in 2017 , 2016 and 2015 were as follows:

U.S. Cellular’s capital expenditures in 2017 were $ 469 millioncompared to $ 446 million in 2016 and $ 533 million in 2015 . In 2017 ,these capital expenditures were used to (i) enhance U.S. Cel lular’snetwork capabilities through the deployment of VoLTE technology; (ii)improve network support and billing related systems and platforms; and(iii) construct new cell sites.

C apital expenditures for 2018 are expected to be between $500 millionand $550 million. These expenditures are expected to be used for thefollowing purposes:

Enhance network coverage by continuing to deploy VoLTEtechnology in certain markets and providing additional capacityto accommo date increased network usage, principally datausage, by current customers; andInvest in and replace end of life platforms.

TDS Telecom’s capital expenditures for Wireline, Cable and HMS in2017 were $ 215 million compared to $ 173 million in 2016 and $ 219million in 2015 . In 2017 these capital expendit ures were used primarilyto upgrade broadband capacity and speeds and to support success-based growth.

C apital expenditures for Wireline and Cable in 2018 are expected to beapproximately $ 270 million . These expenditures are expected to beused for the following purposes:

Maintain and enhance existing infrastructure including build-outrequirements to meet state broadband and A-CAM programs ;Upgrade broadband capacity and speeds;Suppor t s uccess-based spend ing to sustain IPTV,Broadband and Cable growth ;Build Cloud TV platform; andExpand fiber deployment

TDS plans to finance its capital expenditure s program for 2018 using primarily C ash flows from operating activities , existing cash balances and, if required, itsreceivables securitization and/or revolving credit facilities.

31

Table of Contents

Acquisitions, Divestitures and Exchanges

TDS may be engaged from time to time in negotiations (subject to all applicab le regulations) relating to the acquisition, divestiture or exchange of companies,properties, wireless spectrum and other possible businesses. In general, TDS may not disclose such transactions until there is a definitive agreement.

In July 2016, the FCC announced U.S. Cellular as a qualified bidder in the FCC’s forward auction of 600 MHz spectrum licenses, referred to as Auction 1002. InApril 2017, the FCC announced by way of public notice that U.S. Cellular was the winning bidder for 188 licenses for an aggregate purchase price of $ 329million. Prior to commencement of the forward auction, U.S. Cellular made an upfront payment to the FCC of $ 143 million in June 2016. U.S . Cellular paid theremaining $ 186 million to the FCC and was granted the licenses during the second quarter of 2017. In the table below, the $143 million deposit is included withthe 2016 Cash payments for acquisitions.

TDS assesses its business interests on an ongoing basis with a goalof improving the competitiveness of its operations and maxi mizing itslong-term return on capital . As part of this strategy, TDS reviewsattractive opportunities to acquire additional wireles s operatingmarkets and wireless spectrum , including pursuant to FCC auctions; and telecommunications, cable, HMS or other possible businesses.

TDS also may seek to divest outright or include in exchanges forother interests those interests that are not strategic to its long-termsuccess .

In February 2016, U.S. Cellular entered into an agreement with a third part y to exchange certain 700 MHz licenses for certain AWS and PCS licenses and $ 28million of cash . This license e xchange was accomplished in two closings. The first closing occurred in the second quarter of 2016, at which time U.S. Cellularreceived $ 13 million of cash and recorded a gain of $ 9 million. The seco nd closing occurred in the first quarter of 2017, at which time U.S. Cellular received $15 million of cash and recorded a gain of $ 17 million.

See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to significanttransactions.

Variable Interest Entities

TDS consolidates certain “variable interest entities” as defined under GAAP. See Note 14 — Variable Interest Entities in the Notes to Consolidated FinancialStatements for additional information related to these variable interest entities. TDS may elect to make additional capital contributions and/or ad vances to thesevariable interest entities in future periods in order to fund their operations.

32

Table of Contents

Common Share Repurchase Programs

TDS and U.S. Cellular have repurchased and expect to continue to repurchase their common shares, in each case subject to any a vailable repurchaseprogram. Share repurchases made under these programs were as follows:

Number of Average Cost Dollar AmountYear Ended December 31, Shares Per Share (in millions)2017      

U.S. Cellular Common Shares –   $ –   $ –  TDS Common Shares –   –   –  

     2016      

U.S. Cellular Common Shares 154,449   $ 34.55   $ 5  TDS Common Shares 111,700   22.56   3  

     2015      

U.S. Cellular Common Shares 177,508   $ 34.86   $ 6  TDS Common Shares –   –   –  

Depending on their future financial performance, construction, development and acquisition programs, and available sources of financing, TDS and U.S. Cellularmay not have sufficient liquidity or capital resources to make significant share repurchases. Th erefore, there is no assurance that TDS or U.S. Cellular willmake any significant share repurchases in the future.

For additional information related to the current TDS and U.S. Cellular repurchase authorizations , see Note 16 — Common Shareholders’ Equity in the Notes toCo nsolidated Financial Statements.

Off-Balance Sheet Arrangements

TDS had no transactions, agreements or other contractual arrangements with unconsolidated entities involving “off-balance sheet arrangements,” as defined bySEC rules, that had or are reasonably likely to have a material current or future effect on its financial condition, results of operations, liquidity, capitalexpenditures or capital resources.

Div idends

TDS paid quarterly dividends per outstanding share of $ 0.155 in 2017 , $ 0.148 in 2016 and $ 0.141 in 2015 . TDS increased the dividend per share to $ 0.16 inthe first quarter of 2018 . See Note 16 — Common Shareholders’ Equity in the Notes to Consolidated Financial Statements for additional information. TDS hasno current plans to change its policy of paying dividends.

33

Table of Contents

Contract ual and Other Obligatio nsAt December 31, 2017 , the resources required for contractual obligations were as follows:

Payments Due by Period

Total Less Than 1

Year 1 - 3 Years 3 - 5 Years More Than 5

Years(Dollars in millions) Long-term debt obligations 1 $ 2,526   $ 20   $ 39   $ 170   $ 2,297  Interest payments on long-term debt obligations 5,851   167   335   325   5,024  Operating leases 2 1,438   160   285   227   766  Capital leases 7   1   2   1   3  Purchase obligations 3 2,110   1,258   750   67   35   $ 11,932   $ 1,606   $ 1,411   $ 790   $ 8,125  

1 Includes current and long-term portions of debt obligations. The total long-term debt obligation differs from Total long-term debt, net due to capital leases, debtissuance costs, unamortized discounts related to U.S. Cellular’s 6.7% Senior Notes, and unamortized discounts related to the Installment payment agreement. SeeNote 11 — Debt in the Notes to Consolidated Financial Statements for additional information.

2 Includes future lease costs related to telecommunications plant facilities, office space, retail sites, cell sites, data centers and equipment. See Note 13 —

Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information. 3 Includes obligations payable under non-cancellable contracts, commitments for device purchases, network facilities and transport services, agreements for software

licensing, long-term marketing programs, as well as certain agreements, to purchase goods or services, calculated based on termination fees that can be paid to exitthe contract.

The table above excludes potential liabilities related to “unrecognized tax benefits” as defined by GAAP because TDS is unable to predict the outcome or periodof settlement of such liabilities. Such unrecognized tax benefits were $ 46 million at December 31, 2017 . See Note 4 — Income Taxes in the Notes toConsolidated Financial Statements for additional information on unrecognized tax benefits.

See Note 13 — Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information.

34

Table of Contents

Consoli dated Cash Flow AnalysisTDS operates a capital- and marketing-intensive business. TDS makes substantial investments to acquire wireless licenses and properties and to construct andupgrade communications networks and facilities as a basis for creating long-term value for shareholders. In recent years, rapid changes in technology and newopportunities have required substantial investments in potentially revenue ‑ enhanci ng and cost-reducing upgrades to TDS’ networks. TDS utilizes cash onhand, cash from operating activities, cash proceeds from divestitures and disposition s of investments, short-term credit facilities and long-term debt financing tofund its acquisitions (including spectrum licenses), construction costs, operating expenses and s hare repurchases. Ca sh flows may fluctuate from quarter toquarter and year to year due to seasonality, the timing of acquisitions and divestitures , capital expenditures and other factors. The following discussionsummarize s TDS’ cash flow activities in 2017 , 2016 and 2015 .

2017 Commentary

TDS’ Cash, cash equivalents and restricted cash decreased $ 282 million in 2017. Net cash provided by operating activities was $ 776 million in 2017 dueprimarily to net income of $ 157 million plus non-cash items of $ 742 million (including a $ 262 million loss on impairment of goodwill and a $ 369 milliondecrease in the deferred income tax liability) and distributions received from unconsolidated entities of $ 136 million (including $ 62 million from the LAPartnership). This was partially offset by changes in working capital items which decreased net cash by $ 259 million. The decrease resulting from changes inworking capital items was due primarily to a $ 261 million incr ease in equipment installment plan receivables, which are expected to continue to increase andfurther require the use of working capital in the near term. TDS paid income taxes, net of refunds received, of $ 56 million in 2017. After considering the bonusdepreciation provision of the Tax Act, TDS does not expect to incur a significant current federal income tax liability in 2018.

Cash flows used for investing activities were $ 981 million. Cash paid i n 2017 for additions to property, plant and equipment totaled $ 685 million. Cash paidfor acquisitions and licenses was $ 218 million which included the remaining $ 186 million due to the FCC for licenses U.S. Cellular won in Auction 1002. Cashpaid for investments was $ 100 million which included the purchase of short-term Treasury bills. This was partially offset by Cash received from divesti turesand exchanges of $ 21 million. See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Stateme nts for additionalinformation related to these transactions.

Cash flows used for financing activities were $ 77 million, reflecting ordinary activity such as the payment of dividends and the scheduled repayments of debt.

2016 Commentary

TDS’ Cash, cash equivalents and restricted cash decreased $ 85 million in 2016. Net cash provided by operating activities was $ 782 million in 2016 due primarily to net income of $ 52 million plus non-cash items of $882 million and distributions received from unconsolidated entities of $ 93 million, including $29million in distributions from the LA Partn ership. This was partially offset by changes in working capital items which decreased cash by $245 million. Thedecrease in working capital items was due to a $ 246 million increase in equipment installment plan receivables.

T he net cash provided by operating activities was offset by cash flows used for investing activities of $ 808 million. Cash paid in 2016 for additions to property,plant and equipment totaled $ 636 millio n. In June 2016, U.S. Cellular made a deposit of $ 143 million to the FCC for its participation in Auction 1002. Cashpaid for acquisitions and licenses in 2016 was $ 53 million partially offset by Cash received from divestitures and exchanges of $ 21 million. See Note 6 —Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information relate d to these transactions.

Cash flows used for financing activities were $ 59 million in 2016, reflecting ordinary activity such as the payment of dividends and the scheduled repayments ofdebt.

2015 Commentary

Cash flows from operating activities were $ 790 million in 2015 . An increase in cash flows from operating activities was due primarily to improved net incomeand wor king capital factors. In 2015, increased receivables related to equipment installment plans decreased cash flows from operating activities.

In December 2015, as part of the Protecting Americans from Tax Hikes Act of 2015, bonus depreciation was enacted w hich allowed TDS to acceleratedeductions for depreciation, resulting in an overpayment of estimated tax amounts paid during 2015. Primarily as a result of this overpayment, TDS recorded $70 million of Income taxes receivable at December 31, 201 5 . TDS pa id income taxes, net of refunds, of $ 57 million in 201 5 .

Cash flows used for investing activities were $ 743 million in 2015 . Cash paid for additions to prop erty, plant and equipment totaled $ 801 million in 2015 .

During 2015, a $ 278 million payment was made by Advantage Spectrum , L.P. to the FCC for licenses for which it was the provisional winning bidder. SeeNote 6 — Acquisitions, Divestitures and Exchanges and Note 14 — Variable Interest Entities in the Notes to Consolidated Financial Statements foradditional information.

Cash flows from financing activities were $ 461 million in 2015 . In July 2015, U.S. Cellular borrowed $225 million on its Term Loan. In November 2015,U.S. Cellular issued $300 million of 7.25% Senior Notes due 2064.

35

Table of Contents

Con solidated Balance Sheet AnalysisThe following discussion addresses certain captions in the consolidated balance sheet and changes therein. This discussion is intended to highlight thesignificant changes and is not intended to fully reconcile the changes. Changes in financial condition during 2017 are as follows:

Cash and cash equivalents

See the Consolidated Cash Flow analysis above for a discussion of cash and cash equivalents.

Short-term investments

Short-term investments increa sed $ 100 million due to the purchase of short-term investments, which consisted of U.S. Treasury Bills with original maturities ofsix months.

Licenses

Licenses increased $ 337 million due primarily to an aggregate winning bid of $329 million in FCC Auction 1002. These licenses were granted by the FCC in thesecond quarter of 2017. See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for more information aboutthis transaction.

Goodwill

Goodwill decreased $ 257 million due primarily to the impairment loss recorded in the third quarter of 2017. See Note 7 — Intangible Assets in the Notes toConsolidated Financial Statements for additional information.

Deferred income tax liability, net

In December 2017, the Tax Act was signed into law . The major provisions of the Tax Act impacting TDS are the reduction of the U.S. federal corporate tax ratefrom 35% to 21% and the enactment of the bonus depreciation allowing for full expensing of qualified property. Deferred income tax liability, net , decreased $370 million due primarily to the impact of the rate decrease on TDS’ federal taxable temporary differences as well as the impairment of tax-amortizable goodwill.

36

Table of Contents

Applic ation of Critical Accounting Policies a nd EstimatesTDS prepares i ts consolidated financial statements in accordance with GAAP. TDS’ significant accounting policies are discussed in detail in Note 1 —Summary of Significant Ac counting Policies and Recent Accounting Pronouncements in the Notes to Consolidated Financial Statements.

Management believes the application of the following critical accounting policies and the estimates required by such application reflect its most s ignificantjudgments and estimates used in the preparation of TDS’ consolidated financial statements. Management has discussed the development and selection of eachof the following accounting policies and related estimates and disclosures with the Audit Committee of TDS’ Board of Directors.

Intangible Asset Impairment

Licenses, Goodwill and Franchise rights represent a significant component of TDS’ consolidated assets. These assets are considered to be indefinite - livedassets and , therefore , are not amortized but rather are tested annually for impairment. TDS performs annual impairment testing of Licenses , Goodwill andFranchise rights as of November 1 of each year or more frequently if triggering events are pres ent . Significant negative events , such as changes in any of theassumptions described below as well as decreases in forecasted cash flows, could result in an impairment in future periods. Licenses and Franchise rights aretested for impairment at the level of reporting referred to as a unit of accounting. Goodwill is tested for impairment at the level of reporting referred to as areporting unit.

TDS early adopted Accounting Standards Update 2017-04, Intangibles–GoodwillandOther:SimplifyingtheTestforGoodwillImpairment(ASU 201 7-04) , inthe third quarter of 2017 and applied the guidance to interim and annual goodwill impairment tests completed in 2017. ASU 2017-04 eliminated Step 2 of thegoodwill impairment test. See Note 7 — Intangible Assets in the Notes to Consolidated Financial Statements for informat ion related to Licenses , Goodwill andFranchise rights activity in 2017 and 20 16 .

Wireless Licenses – U.S. Cellular

U.S. Cellular performs its annual impairment assessment of Licenses as of November 1 of each year or more frequently if there are events or circumstances thatcause U.S. Cellular to believe the carrying value of Lic enses exceeds their fair value on a more likely than not basis. For purposes of its 2017 and 2016impairment testing of Licenses, U.S. Cellular separated its FCC licenses into eight units of accounting. The eight units of accounting consisted of one unit ofaccounting for developed operating market licenses (built licenses) and seven geographic non-operating market licenses (unbuilt licenses). U.S. Cellularperformed a quantitative impairment assessment in 2017 , and a qualitative impairment assessment in 2016 , to determine whether it was more likely than notthat the fair value of the built and unbuilt licenses exceed ed their carrying value .

In 2017 , a market approach was used to value the spectrum license portfolio. The licenses were segregated by type and by similar geographical area. Themarket approach develops an indication of fair value by calculating estimated m arket values using observable license purchase and auction transactions as abasis for such values for each pool of licenses. The sum of the fair values of the discrete pools represents the estimated fair value of U.S. Cellular’s licenses. Based on the a ssessment, the fair values of the license units of accounting exceeded their respective carrying values by amounts ranging from 16% to greaterthan 100%. Therefore, no impairment of licenses existed.

In 2016 , U.S. Cellular consid ered several qualitative factors, including analysts’ estimates of license values, which contemplated recent spectrum auctionresults, recent U.S. Cellular and other market participant transactions and other industry and market factors. Based on this asse ssment, U.S. Cellularconcluded that it was more likely than not that the fair value of the licenses in each unit of accounting exceeded the respective carrying values. Therefore, noimpairment of licenses existed and no Step 1 quantitative impairment eva luation was completed.

Goodwill – U.S. Cellular

U.S. Cellular ha d recorded Goodwill as a result of the acquisition of wireless companies. For purposes of the 2017 and 2016 Goodwill impairment tests, U.S .Cellular had one repor ting unit.

During the third quarter of 2017, management identified a triggering event and performed an interim impairment assessment. A discounted cash flow approachwas used to value the reporting unit, using value drivers and ris ks specific to U.S. Cellular and the industry and current economic factors. The cash flowestimates incorporated certain assumptions that market participants may use in their estimates of fair value and may not be indicative of U.S. Cellular specificassu mptions. However, the discount rate used in the analysis considers any additional risk a market participant might place on integrating the U.S. Cellularreporting unit into its operations. The most significant assumptions made in this process were the re venue growth rate (shown as a compound annual growthrate in the table below), the terminal revenue growth rate, and the discount rate .

Key Assumptions Revenue growth rate 0.8%Terminal revenue growth rate 2.0%Discount rate 9.5% 

37

Table of Contents

The results of the interim goodwill impairment test indicated that the carrying value of the U.S. Cellular reporting unit exceeded its fair value. Therefore, TDSrecognized a loss on impairment of goodwill of $227 million to reduce the carrying value of goodwill for the U. S. Cellular reporting unit to zero . Prior to 2009,TDS accounted for U.S. Cellular’s share repurchases as step acquisitions, allocating a portion of the share repurchase value to TDS’ Goodwill. This resulted ina difference between U.S. Cellular’s Goodwi ll on a stand-alone basis and the TDS consolidated Goodwill related to U.S. Cellular. TDS recorded subsequentactivities relating to Goodwill, including impairments and divestiture activities, for both entities based on their respective balances .

In conne ction with the interim goodwill impairment test in the third quarter of 2017, conditions existed that indicated U.S. Cellular’s long-lived asset group mightnot be recoverable. As a result, the company also performed a long-lived asset recoverability asse ssment related to the U.S. Cellular asset group in the thirdquarter of 2017 , and determined that no impairment of the long-lived asset group existed as of the interim assessment date.

Goodwill – T DS Telecom

TDS Telecom has record ed Goodwill as a result of the acquisition of wireline, cable and HMS businesses. For purposes of the 2017 and 2016 Goodwillimpairment tests, TDS Telecom had three reporting units: Wireline, Cable and H MS.

HMS

During the third quarter of 2017, management identified a triggering event for the HMS reporting unit and performed an interim Goodwill impairment assessment. TDS used the discounted cash flow approach and guideline public company method to valu e the HMS reporting unit. The discounted cash flow approachuses value drivers and considers risks specific to the industry as well as current economic factors. The most significant assumptions made in this process werethe revenue growth rate (shown as a compound annual growth rate in the table below), the terminal revenue growth rate and the discount rate. The guidelinepublic company method develops an indication of fair value by calculating average market pricing multiples for selected publicly-trade d companies. Thedeveloped multiples was applied to applicable financial measures of the HMS reporting unit to determine fair value. The discounted cash flow approach andguideline public company method were weighted to arrive at the total fair value use d for impairment testing. The w eighting of methods was consistentlyapplied in both 2017 and 2016 .

Key Assumptions Revenue growth rate 3.8%Terminal revenue growth rate 2.5%Discount rate 10.5%

The results of the interim goodwill impairment test indicated that the carrying value of the HMS reporting unit exceeded its fair value. Therefore, TDSrecognized a loss on impairment of goodwill of $35 million to reduce the carrying value of goodwill for the HMS reporting unit to zero.

WirelineandCable

Based on the results of the TDS Telecom annual Goodwill impairment assessment performed as of November 1, 2017 , the fair values of the Wireline and Cablereporting units exceed ed their carrying values. Therefore, no impairment of Goodwill existed for these reporting units.

The discounted cash flow approach and guideline public company method w ere used to value the Wireline and Cable reporting units. The discounted cash flowapproach uses value drivers and considers risks specific to the industry as well as current economic factors. The most significant assumptions made in thisprocess were the revenue growth rate (shown as a compound annual growth rate in the table below), t he terminal revenue growth rate and the discount rate. The guideline public company method develops an indication of fair value by calculating average market pricing multiples for selected publicly-tradedcompanies. The developed multiples were applied t o applicable financial measures of the respective reporting unit to determine fair value . The discountedcash flow approach and guideline public company method were weighted to arrive at the total fair value used for impairment testing . The w eighting of methodswas consistently applied in both 2017 and 2016 .

38

Table of Contents

For purposes of the discounted cash flow approach, the following table represents key assumptions used in estimating the fair value of the Wireline and Cablereporting units as of November 1, 2017 . There are uncertainties associa ted with these key assumptions and potential events and/or circumstances that couldhave a negative effect on the key assumptions described below.

Key Assumptions Wireline CableRevenue growth rate 1 (1.7)% 7.1%Terminal revenue growth rate 1 0.0% 2.0%Discount rate 2 5.5% 9.0%

1 There are risks that could negatively impact the projected revenue growth rates, including but not limited to the success of new and existing products/services,competition, and operational difficulties. TDS Telecom’s reporting units use internally generated forecasts. These internally generated forecasts consider suchthings as observed demand, market factors and competitive knowledge.

2 The weighted average cost of capital is derived based on a set of guideline public companies and is an indicator of the cost of capital for a market participant in TDS

Telecom's industries. The weighted average cost of capital may increase if borrowing co sts rise, market participants weight more of their capital structure towardsequity vs. debt, long-term risk free interest rates increase modestly, or other elements affecting the estimated cost of equity or debt increase. To the extent that theweighted average cost of capital of market participants increases or Wireline or Cable's risk in relation to its peers increases, this would decrease the estimated fairvalue of the reporting units.

Provided all other assumptions r emained the same, the Wireline and Cable discount rates would have to increase to 7.4 % and 9.7 %, respectively, to yieldestimated fair values equal to their respective carrying values at November 1, 2017 . Further, provided all other assumptions remained the same, the Wirelineand Cable terminal revenue growth rate assumptio ns would need to decrease to negative 3.0 % and positive 0.9 % , r espectively, to yield an estimate of fairvalue equal to the carrying value of the respective reporting units at November 1, 2017 .

The Goodwill balances of the reporting units tested for impairment as of November 1, 2017 , and the percentage by which the estimated fair value of thecorresponding reporting units exceeded their carrying values, as a percentage of carrying value, was as follows :

Reporting unit Goodwill balance Excess of estimated Fair

Value over Carrying Value(Dollars in millions) Wireline $ 409   26.1%Cable $ 100   8.7%

Franchise R ights – TDS Telecom

TDS Telecom has recorded Franchise rights as a result of acquisitions of cable businesses. For purposes of its impairment testing of Franchise rights, TDSTelecom had one unit of accounting: Cable.

TDS Telecom applied the build-out (or Greenfield) metho d to estimate the fair value of Franchise rights in 2017 and 2016 . Based on the results of thisassessment, the estimated fair value of the Franchise rights exceeded their carrying value.

The following table represents key assumptions used in estimating the fair value of the Franchise rights using the build-out method as of November 1, 2017 . There are uncertainties associated with these key assumptions and potenti al events and/or circumstances that could have a negative effect on the keyassumptions are described below.

Key Assumptions Build-out period 1 2 yearsDiscount rate 2 7.0%Terminal revenue growth rate 3 2.0%

1 The build-out period represents the estimated time to perform a hypothetical build of the network. Changes in the estimated build-out period can occur as a result ofchanges in resources and technology. Such changes could negatively or positively impact the results.

2 The discount rate used in the valuation of Franchise rights is less than the discount rate used in the valuation of the Cable reporting unit for purposes of Goodwill

impairment testing. The discount rate used for Franchise rights includes a reduced company-specific ri sk premium as it is assumed a market participant starting acable network build would construct and operate its network in an optimal manner and would not be constrained by the current network and operations associatedwith a mature cable company. The dis count rate is estimated based on the overall risk-free interest rate adjusted for industry participant information, such as atypical capital structure (i.e., debt-equity ratio), the after-tax cost of debt, and the cost of equity. The cost of equity takes into consideration the average risk of marketparticipants. The weighted average cost of capital may increase if borrowing costs rise, market participants weight more of their capital structure towards equity vs.debt, long-term interest rates increase m odestly, or other elements affecting the estimated cost of equity increase.

3 There are risks that could negatively impact the projected revenue growth rates, including but not limited to the success of new and existing products/services,

competition, network buildout costs and operational difficulties. TDS Telecom’s reporting units use internally generated forecasts. These internally generatedforecasts consider such things as observed demand, market factors and competitive knowledge.

As of November 1, 2017 , the fair value of the franchise rights exceeded their carrying value by 33.9 %. Provided all other assumptions remained the same, thediscount rate would have to inc rease to 7.5 % to yield an estimated fair value of the Franchise rights that equals the carrying value at November 1, 2017 . Further, provided all other assumptions remained the same, the terminal revenue growth rate assumption would need to decrease to 1.2 % to yield an estimateof fair value equal to the carrying value of the Franchi se rights at November 1, 2017 .

39

Table of Contents

Income Taxes

The amounts of income tax assets and liabilities, the related income tax provision and the amount of unrecognized tax benefits are critical accounting estimatesbecause such amounts are significant to TDS’ financial condition and results of operations.

The preparation of the consolidated financial statements requires TDS to calculate a provision for income taxes. This process involves estimating the actualcurrent income tax liability to gether with assessing temporary differences resulting from the different treatment of items for tax purposes. These temporarydifferences result in deferred income tax assets and liabilities, which are included in TDS’ Consolidated Balance Sheet. TDS mus t then assess the likelihoodthat deferred income tax assets will be realized based on future taxable income and, to the extent management believes that realization is not likely, establish avaluation allowance. Management’s judgment is required in deter mining the provision for income taxes, deferred income tax assets and liabilities and anyvaluation allowance that is established for deferred income tax assets.

TDS recognizes the tax benefit from an uncertain tax position only if it is more likely than n ot that the tax position will be sustained on examinati on by the taxingauthorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based onmanagement’s judgment as to the possible outcome that has a greater than 50% cumulative likelihood of being realized upon ultimate resolution.

See Note 4 — Income Taxes in the Notes to Consolidated Financial Stat ements for details regarding TDS’ income tax provision, deferred income taxes andliabilities, valuation allowances and unrecognized tax benefits, including information regarding estimates that impact income taxes.

Equipment Installment Plans

TDS sells dev ices and certain accessories to customers under installment contracts over a specified time period and, under certain of these plans, offers thecustomer a trade-in right. Customers on an installment contract who elect to trade-in the device will receive a credit in the amount of the outstanding balance ofthe installment contract, provided the customer trades-in an eligible used device in good working condition and purchases a new device from TDS. Equipmentrevenue under these contracts is recognized at the time the device is delivered to the end-user customer for the selling price of the device, net of any deferredimputed interest and the value of the trade-in right, if applicable. See Note 3 — Equipment Installment Plans in the Notes to Consolidated Financial Statementsfor additional information.

Trade-InRight

TDS values the trade-in right as a guarantee liability. This liability is initially measured a t fair value and is determined based on assumptions including theprobability and timing of the customer upgrading to a new device and the fair value of the device being traded-in at the time of trade-in. TDS reevaluates itsestimate of the guarantee lia bility quarterly. A significant change in any of the aforementioned assumptions used to compute the guarantee liability wouldimpact the amount of revenue recognized under these plans and the timing thereof. In 2017 and 2016 , TDS assumed the earliest contractual time of trade-in,or the minimum amount of payments as specified in the device installment contract, for all customers on installment contracts with trade-in rights.

When a customer exerc ises the trade-in option, both the outstanding receivable and guarantee liability balances related to the respective devices are reduced tozero, and the value of the used device that is received in the transaction is recognized as inventory. If the custo mer does not exercise the trade-in option at thetime of eligibility, TDS begins amortizing the liability and records this amortization as additional equipment revenue.

Interest

TDS equipment installment plans do not provide for explicit interest charges. Because equipment installment plans have a duration of greater than twelvemonths, TDS imputes interest using a market rate and recognizes such interest income over the duration of the plan as Services revenues. Changes in theimputed interest rate would impact the amount of revenue recognized under these plans.

Allowancefordoubtfulaccounts

TDS maintains an allowance for doubtful accounts for estimated losses that result from the failure of its customers to make payments due under the equipmentinstallment plans. The allowance is estimated based on historical experience, account aging and other factors that could affect collectability. When it isprobable that an account balance will not be collected, the account balance is charged against the allowance for doubtful accounts. To the extent that actualloss experience differs significantly from historical trends, the required allowance amounts could differ from the original estimates.

40

Table of Contents

Oth er ItemsInflation

Management believes that inflation affects TDS’ business to no greater or lesser extent than the general economy.

Seasonality

TDS’ profitability historically has been lower in the fourth quarter as a result of U.S. Cellular’s significant marketing and promotional activity during the holidayseason.

Recently Issued Accounting Pronouncements

See Note 1 — Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the Notes to Consolidated Financial Statements forinformation on recent ly issued accounting pronouncements.

Cer tain Relationships a nd Related Transactions

See Note 20 – Certain Relation ships and Related Transactions in the Notes to Consolidated Financial Statements.

41

Table of Contents

Regul atory MattersFCC Auction 1002

U.S. Cellular was a bidder in the FCC’s forward auction of 600 MHz spectrum licenses, referred to as Auction 1002, which concluded in March 2017. In April2017, the FCC announced by way of public notice that U.S. Cellular was the winning bidder for 188 licenses for an aggregate purchase price of $329 million. Prior to commencement of the forward auction, U.S. Cellular made an upfront payment to the FCC of $143 m illion in June 2016. U.S. Cellular paid theremaining $186 million to the FCC and was granted the licenses during the second quarter of 2017 .

FCC Mobility Fund Phase II Order

In October 2011, the FCC adopted its USF/Intercarrier Compensation Transformation Order (USF Order). Pursuant to this order, U.S. Cellular’s then currentFederal USF support was to be phased down at the rate of 20% per year beginning July 1, 2012. The USF Order contemplated the establishment of a newmobile USF program and provided for a pause in the phase down if that program was not timely implemented by July 2014. The Phase II Connect AmericaMobility Fund (MF2) was not operational as of July 2014 and, therefore, as provided by the USF Order, the phase down was suspe nded at 60% of the baselineamount until such time as the FCC had taken steps to establish the MF2. In February 2017, the FCC adopted the MF2 Order addressing the framework for MF2and the resumption of the phase down. The MF2 Order establishes a support fund of $453 million annually for ten years to be distributed through a market-based, multi-round reverse auction. For areas that receive support under MF2, legacy support to MF2 Auction winners will terminate and be replaced with MF2support effective t he first day of the month following release of the public notice closing the auction. Legacy support in areas where the legacy supportrecipient is not an MF2 winner will be subject to phase down over two years unless there is no winner in a particular c ensus block, in which case it will becontinued for one legacy support recipient only. The MF2 Order further states that the phase down of legacy support for areas that were not eligible for supportunder MF2 will commence on the first day of the month f ollowing the completion of the auction and will conclude two years later .

In August 2017, the FCC adopted the MF2 Challenge Process Order, which laid out procedures for establishing areas that would be eligible for support underthe MF2 program. This wi ll include a collection process to be followed by a challenge window, a challenge response window, and finally adjudication of anycoverage disputes. In September 2017, the FCC issued a public notice initiating the collection of 4G LTE coverage data. Res ponses submitting the collecteddata were due on January 4, 2018.

In October 2017, the FCC issued a public notice proposing and seeking comment on detailed challenge procedures and a schedule for the challenge process. Under this proposal, the challenge window would begin no earlier than four weeks after the January 4 collection date and would last 150 days. No earlier thanfive business days after the close of the challenge window, the FCC would open a thirty-day challenge response window. Following t he challenge responsewindow, the FCC would adjudicate any disputes. This entire process must be completed before an auction can be commenced.

U.S. Cellular cannot predict at this time when the MF2 auction will occur, when the phase down period for its existing legacy support from the Federal USF willcommence, or whether the MF2 auction will provide opportunities to U.S. Cellular to offset any loss in existing support. However, the FCC indicated that itcurrently plans to hold the MF2 auction in 2018. U.S. Cellular currently expects that its legacy support will continue at the 2017 level through 2018.

FCC Rulemaking – Restoring Internet Freedom

In December 2017, the FCC approved rules reversing or revising decisions made in the FCC’s 2015 Open Intern et and Title II Order (Restoring InternetFreedom) . The 2017 action reversed the FCC’s 2015 decision to reclassify Broadband Internet Access Services as telecommunications services subject toregulation under Title II of the Telecommunications Act. The 2 017 action also reversed the FCC’s 2015 restrictions on blocking, throttling and paid prioritization,and modified transparency rules relating to such practices. Parties are pursuing legal proceedings challenging the 2017 actions. TDS cannot predict theoutcome of these proceedings or the impact on its business.

Action is being pursued in a number of states, including certain states in which TDS operates, to adopt state laws that would be intended to reinstate aspects ofthe foregoing net neutrality reg ulations that were reversed or revised by the FCC in 2017. To the extent such laws are enacted, it is expected that legalproceedings will be pursued challenging such laws. TDS cannot predict the outcome of these proceedings or the impact on its business .

Other Regulatory Matters

In March 2017, both the U.S. Senate and U.S. House of Representatives approved a joint resolution under the Congressional Review Act to repeal regulationsapproved by the FCC in October 2016 governing consumer privacy by broadband Internet service providers. The President approved the resolution in April2017. The repeal removed the pending FCC rules, wh ich would have gone into effect in 2017 and reinstated the prior set of rules that apply totelecommunication services . The privacy broadband rules would h ave prohibited broadband internet service providers from sharing certain sensitive customerinformation unless customers opted in and expressly agreed to share such information. TDS will continue to protect customer information in accordance withSection 222 of the Telecommunications Act and applicable regulations and also its publicly available Privacy Statement until such time as it becomes subject toother privacy requirements.

42

Table of Contents

Private Sec urities Litigation Reform Act of 1995Safe Harbor Cautionary Statement

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Annual Report contain statements thatare not based on historical facts, including the words “believes,” “anticipates,” “estimates,” “expe cts,” “plans,” “intends,” “ projects ” and similar expressions . These statements constitute and represent “forward ‑ looking statements” as this term is defined in the Private Securities Litigation Reform Act of 1995. Suchforward ‑ looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to besignificantly different from any future results, events or developments expressed or implied by such forward ‑ looking statements. Each of t he following riskscould have a material adverse effect on TDS’ business, financial condition or results of operations. However, such factors are not necessarily all of the importantfactors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statementscontained in this document. Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements. Such risk s, uncertainties and other factors include, but are not limited to, the following risks. See “Risk Factors” in TDS’ Annual Report on Form 10-K for theyear ended December 31, 2017 , for a further discussion of thes e risks. TDS undertakes no obligation to update publicly any forward-looking statementswhether as a result of new information, future events or otherwise. Readers should evaluate any statements in light of these important factors.

IntensecompetitioninthemarketsinwhichTDSoperatescouldadverselyaffectTDS’revenuesorincreaseitscoststocompete.

AfailurebyTDStosuccessfullyexecuteitsbusinessstrategy(includingplannedacquisitions,spectrumacquisitions,divestituresandexchanges)orallocateresourcesorcapitalcouldhaveanadverseeffectonTDS’business,financialconditionorresultsofoperations.

UncertaintyinTDS’futurecashflowandliquidityorintheabilitytoaccesscapital,deteriorationinthecapitalmarkets,otherchangesinTDS’performanceormarketconditions,changesinTDS’creditratingsorotherfactorscouldlimitorrestricttheavailabilityoffinancingontermsandpricesacceptabletoTDS,whichcouldrequireTDStoreduceitsconstruction,developmentoracquisitionprograms,reducetheacquisitionofspectrumlicenses,and/orreduceorceasesharerepurchasesand/orthepaymentofdividends.

TDShasasignificantamountofindebtednesswhichcouldadverselyaffectitsfinancialperformanceandinturnadverselyaffectitsabilitytomakepaymentsonitsindebtedness,complywithtermsofdebtcovenantsandincuradditionaldebt.

ChangesinroamingpracticesorotherfactorscouldcauseTDS’roamingrevenuestodeclinefromcurrentlevels,roamingexpensestoincreasefromcurrentlevelsand/orimpactTDS’abilitytoserviceitscustomersingeographicareaswhereTDSdoesnothaveitsownnetwork,whichcouldhaveanadverseeffectonTDS’business,financialconditionorresultsofoperations.

AfailurebyTDStoobtainaccesstoadequateradiospectrumtomeetcurrentoranticipatedfutureneedsand/ortoaccuratelypredictfutureneedsforradiospectrumcouldhaveanadverseeffectonTDS’business,financialconditionorresultsofoperations.

TotheextentconductedbytheFCC,TDSmayparticipateinFCCauctionsforadditionalspectrumorforfundingincertainUniversalServiceprogramsinthefuturedirectlyorindirectlyand,duringcertainperiods,willbesubjecttotheFCC’santi-collusionrules,whichcouldhaveanadverseeffectonTDS.

FailurebyTDStotimelyorfullycomplywithanyexistingapplicablelegislativeand/orregulatoryrequirementsorchangestheretocouldadverselyaffectTDS’business,financialconditionorresultsofoperations.

Aninabilitytoattractpeopleofoutstandingpotential,todeveloptheirpotentialthrougheducationandassignments,andtoretainthembykeepingthemengaged,challengedandproperlyrewardedcouldhaveanadverseeffectonTDS'business,financialconditionorresultsofoperations.

TDS’assetsandrevenueareconcentratedprimarilyintheU.S.telecommunicationsindustry.Consequently,itsoperatingresultsmayfluctuatebasedonfactorsrelatedprimarilytoconditionsinthisindustry.

TDS’smallerscalerelativetolargercompetitorsthatmayhavegreaterfinancialandotherresourcesthanTDScouldcauseTDStobeunabletocompetesuccessfully,whichcouldadverselyaffectitsbusiness,financialconditionorresultsofoperations.

Changesinvariousbusinessfactors,includingchangesindemand,customerpreferencesandperceptions,pricecompetition,churnfromcustomerswitchingactivityandotherfactors,couldhaveanadverseeffectonTDS’business,financialconditionorresultsofoperations.

AdvancesorchangesintechnologycouldrendercertaintechnologiesusedbyTDSobsolete,couldputTDSatacompetitivedisadvantage,couldreduceTDS’revenuesorcouldincreaseitscostsofdoingbusiness.

43

Table of Contents

ComplexitiesassociatedwithdeployingnewtechnologiespresentsubstantialriskandTDS’investmentsinunproventechnologiesmaynotproducethebenefitsthatTDSexpects.

TDSreceivesregulatorysupportandissubjecttonumeroussurchargesandfeesfromfederal,stateandlocalgovernments,andtheapplicabilityandtheamountofthesupportandfeesaresubjecttogreatuncertainty,whichcouldhaveanadverseeffectonTDS’business,financialconditionorresultsofoperations.

PerformanceunderdevicepurchaseagreementscouldhaveamaterialadverseimpactonTDS'business,financialconditionorresultsofoperations.

ChangesinTDS’enterprisevalue,changesinthemarketsupplyordemandforwirelesslicenses,wirelineorcablemarketsorITserviceproviders,adversedevelopmentsinthebusinessesortheindustriesinwhichTDSisinvolvedand/orotherfactorscouldrequireTDStorecognizeimpairmentsinthecarryingvalueofitslicenses,goodwill,franchiserightsand/orphysicalassetsorrequirere-evaluationoftheindefinite-livednatureofsuchassets.

Costs,integrationproblemsorotherfactorsassociatedwithacquisitions,divestituresorexchangesofpropertiesorlicensesand/orexpansionofTDS’businessescouldhaveanadverseeffectonTDS’business,financialconditionorresultsofoperations.

AfailurebyTDStocompletesignificantnetworkconstructionandsystemsimplementationactivitiesaspartofitsplanstoimprovethequality,coverage,capabilitiesandcapacityofitsnetwork,supportandothersystemsandinfrastructurecouldhaveanadverseeffectonitsoperations.

DifficultiesinvolvingthirdpartieswithwhichTDSdoesbusiness,includingchangesinTDS’relationshipswithorfinancialoroperationaldifficultiesofkeysuppliersorindependentagentsandthirdpartynationalretailerswhomarketTDS’services,couldadverselyaffectTDS’business,financialconditionorresultsofoperations.

TDShassignificantinvestmentsinentitiesthatitdoesnotcontrol.LossesinthevalueofsuchinvestmentscouldhaveanadverseeffectonTDS’financialconditionorresultsofoperations.

AfailurebyTDStomaintainflexibleandcapabletelecommunicationnetworksorinformationtechnology,oramaterialdisruptionthereof,couldhaveanadverseeffectonTDS’business,financialconditionorresultsofoperations.

TDShasexperiencedand,inthefuture,expectstoexperiencecyber-attacksorotherbreachesofnetworkorinformationtechnologysecurityofvaryingdegreesonaregularbasis,whichcouldhaveanadverseeffectonTDS'business,financialconditionorresultsofoperations.

ThemarketpriceofTDS’CommonSharesissubjecttofluctuationsduetoavarietyoffactors.

Changesinfactsorcircumstances,includingneworadditionalinformation,couldrequireTDStorecordchargesrelatingtoadjustmentsofamountsreflectedinthefinancialstatements,whichcouldhaveanadverseeffectonTDS’business,financialconditionorresultsofoperations.

Disruptionincreditorotherfinancialmarkets,adeteriorationofU.S.orglobaleconomicconditionsorothereventscould,amongotherthings,impedeTDS’accesstoorincreasethecostoffinancingitsoperatingandinvestmentactivitiesand/orresultinreducedrevenuesandloweroperatingincomeandcashflows,whichwouldhaveanadverseeffectonTDS’business,financialconditionorresultsofoperations.

Settlements,judgments,restraintsonitscurrentorfuturemannerofdoingbusinessand/orlegalcostsresultingfrompendingandfuturelitigationcouldhaveanadverseeffectonTDS’business,financialconditionorresultsofoperations.

Thepossibledevelopmentofadverseprecedentinlitigationorconclusionsinprofessionalstudiestotheeffectthatradiofrequencyemissionsfromwirelessdevicesand/orcellsitescauseharmfulhealthconsequences,includingcancerortumors,ormayinterferewithvariouselectronicmedicaldevicessuchaspacemakers,couldhaveanadverseeffectonTDS’wirelessbusiness,financialconditionorresultsofoperations.

Claimsofinfringementofintellectualpropertyandproprietaryrightsofothers,primarilyinvolvingpatentinfringementclaims,couldpreventTDSfromusingnecessarytechnologytoprovideproductsorservicesorsubjectTDStoexpensiveintellectualpropertylitigationormonetarypenalties,whichcouldhaveanadverseeffectonTDS’business,financialconditionorresultsofoperations.

Certainmatters,suchascontrolbytheTDSVotingTrustandprovisionsintheTDSRestatedCertificateofIncorporation,mayservetodiscourageormakemoredifficultachangeincontrolofTDS.

Anyoftheforegoingeventsorothereventscouldcauserevenues,earnings,capitalexpendituresand/oranyotherfinancialorstatisticalinformationtovaryfromTDS’forward-lookingestimatesbyamaterialamount.

44

Table of Contents

Mar ket RiskLong-Term Debt

As of December 31, 2017 , the majority of TDS’ long-term debt was in the form of fixed-rate notes with remaining maturities ranging up to 47 years . Fluctuations in market interest rates can lead to significant fluctuations in the fair value of these fixed-rate notes.

The following chart presents the scheduled principal payments on long-term debt by maturity dates at December 31, 2017 :

45

Table of Contents

The following table presents the scheduled princ ipal payments on long-term debt, capital lease obligations, and other installment arrangements, and the relatedweighted average interest rates by maturity dates at December 31, 2017 :

Principal Payments Due by Period

Long-Term Debt

Obligations 1

Weighted-Avg. InterestRates on Long-Term Debt

Obligations 2

(Dollars in millions) 2018 $ 21   2.8%2019 21   2.8%2020 21   2.7%2021 13   4.2%2022 158   4.3%After 5 years 2,298   6.9%Total $ 2,532   6.6%

1 The total long-term debt obligation differs from Long-term debt in the Consolidated Balance Sheet due to unamortized debt issuance costs on all non-revolving debtinstruments, unamortized discounts related to U.S. Cellular's 6.7% Senior Notes, and unamortized discounts related to the Installment payment agreement.See Note11 — Debt in the Notes to Consolidated Financial Statements for additional information.

2 Represents the weighted average interest rates at December 31, 2017, for debt maturing in the respective periods.

Fair Value of Long-Term Debt

At December 31, 2017 and 2016 , the estimated fair value of long-term debt obligations, excluding capital lease obligations , other installment arrangements, thecurrent portion of such long-term debt and debt financing costs , was $ 2,499 million and $ 2,480 million , respectively. See Note 2 — Fair Value Measurementsin the Notes to Consolidated Financial Statements for additional information .

Other Market Risk Sensitive Instruments

The substantial majority of TDS’ other market risk sensitive instruments (as defined in item 305 of SEC Regulation S-K) are short-term, incl uding Cash and cashequivalents. Accordingly, TDS believes that a significant change in interest rates would not have a material effect on such other market risk sensitiveinstruments.

46

Table of Contents

Supple mental Information Relating to Non-GAAP Financial MeasuresTDS sometimes use s information derived from consolidated financial information but not presented in its financial statements prepared in accordance with U.S .GAAP to evaluate the performance of its business. Certain of these measures are considered “non-GAAP financial measures” under U.S. Secu rities andExchange Commission Rules. Specifically, TDS ha s referred to the following mea sures in this Form 10-K Report:

EBITDAAdjusted EBITDAAdjusted OIBDAFree cash flowPostpaid ABPUPostpaid ABPAGoodwill impairment, net of tax and noncontrolling in terests and Tax Act, net of noncontrolling interests

Following are explanations of each of these measures:

EBITDA, Adjusted EBITDA and Adjusted OIBDA

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation below. EBITDA, AdjustedEBITDA and Adjusted OIBDA are not measures of financial performance under GAAP and should not be considered as alternatives to Net income or Cash flowsfrom operating activities, as indicators of cash flows or as measures of liquidity. TDS does not intend to imply that any such items set forth in the reconciliationbelow are non-recurring, infrequent or unusual; such items may occur in the future.

Adjusted EBITDA is a segment measure reported to the chief operati ng decision maker for purposes of making decisions about allocating resources to thesegments and assessing their performance. See Note 18 — Business Segment Information in the Notes to Consolidated Financial Statements for additionalinformation.

Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability and , therefore , reconciliations to applicable GAAP incomemeasures are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS’ operating results beforesignificant recurring non-cash charges, gains and losses, and other ite ms as presented below as they provide additional relevant and useful information toinvestors and other users of TDS’ financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistentwith manage ment’s evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization andaccretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of u nconsolidated entities and Interest anddividend income in order to more effectively show the performance of operating activities excluding investment activities. The following table reconciles EBITDA,Adjusted EBITDA and Adjusted OIBDA to the correspondi ng GAAP measure, Net income or Income (loss) before income taxes. Income tax expense is notprovided at the individual segment level for Wireline, Cable and HMS. TDS calculates income tax expense for TDS Telecom in total.

47

Table of Contents

TDS - CONSOLIDATED 2017 2016 2015(Dollars in millions) Net income (GAAP) $ 157   $ 52   $ 263  Add back or deduct:       Income tax expense (benefit) (279) 40   172   Interest expense 170   170   142   Depreciation, amortization and accretion 844   850   844  EBITDA (Non-GAAP) 892   1,112     1,421  Add back or deduct:       Loss on impairment of goodwill 262   –   –   (Gain) loss on sale of business and other exit costs, net (1) (1) (136) (Gain) loss on license sales and exchanges, net (22) (20) (147) (Gain) loss on asset disposals, net 21   27   22  Adjusted EBITDA (Non-GAAP) 1,152   1,118   1,160  Deduct:       Equity in earnings of unconsolidated entities 137   140   140   Interest and dividend income 15   11   5   Other, net 1   –   1  Adjusted OIBDA (Non-GAAP) 999   967   1,014  Deduct:       Depreciation, amortization and accretion 844   850   844   Loss on impairment of goodwill 262   –   –   (Gain) loss on sale of business and other exit costs, net (1) (1) (136) (Gain) loss on license sales and exchanges, net (22) (20) (147) (Gain) loss on asset disposals, net 21   27   22  Operating income (loss) (GAAP) $ (105) $ 111   $ 431  

U.S. CELLULAR 2017 2016 2015(Dollars in millions) Net income (GAAP) $ 15   $ 49   $ 247  Add back or deduct:       Income tax expense (benefit) (287) 33   157   Interest expense 113   113   86   Depreciation, amortization and accretion 615   618   607  EBITDA (Non-GAAP) 456   813     1,097  Add back or deduct:       Loss on impairment of goodwill 370   –   –   (Gain) loss on sale of business and other exit costs, net (1) –   (114) (Gain) loss on license sales and exchanges, net (22) (19) (147) (Gain) loss on asset disposals, net 17   22   16  Adjusted EBITDA (Non-GAAP) 820   816   852  Deduct:       Equity in earnings of unconsolidated entities 137   140   140   Interest and dividend income 8   6   2   Other, net –   1   1  Adjusted OIBDA (Non-GAAP) 675   669   709  Deduct:       Depreciation, amortization and accretion 615   618   607   Loss on impairment of goodwill 370   –   –   (Gain) loss on sale of business and other exit costs, net (1) –   (114) (Gain) loss on license sales and exchanges, net (22) (19) (147) (Gain) loss on asset disposals, net 17   22   16  Operating income (loss) (GAAP) $ (304) $ 48   $ 347  

48

Table of Contents

TDS TELECOM 2017 2016 2015(Dollars in millions) Net income (GAAP) $ 88   $ 42   $ 46  Add back or deduct:       Income tax expense (benefit) (24) 25   35   Interest expense 4   3   1   Depreciation, amortization and accretion 222   224   228  EBITDA (Non-GAAP) 291   294     310  Add back or deduct:       Loss on impairment of goodwill 35   –   –   (Gain) loss on sale of business and other exit costs, net –   –   (10) (Gain) loss on license sales and exchanges, net –   (1) –   (Gain) loss on asset disposals, net 4   4   6  Adjusted EBITDA (Non-GAAP) 329   298   306  Deduct:       Interest and dividend income 5   3   2  Adjusted OIBDA (Non-GAAP) 323   295   304  Deduct:       Depreciation, amortization and accretion 222   224   228   Loss on impairment of goodwill 35   –   –   (Gain) loss on sale of business and other exit costs, net –   –   (10) (Gain) loss on license sales and exchanges, net –   (1) –   (Gain) loss on asset disposals, net 4   4   6  Operating income (GAAP) $ 63   $ 67   $ 79        Numbers may not foot due to rounding.

WIRELINE 2017 2016 2015(Dollars in millions) Income before income taxes (GAAP) $ 117   $ 83   $ 92  Add back or deduct:       Interest expense –   (1) (1) Depreciation, amortization and accretion 151   159   166  EBITDA (Non-GAAP) 267   241     257  Add back or deduct:       (Gain) loss on sale of business and other exit costs, net –   –   (10) (Gain) loss on license sales and exchanges, net –   (1) –   (Gain) loss on asset disposals, net 1   2   5  Adjusted EBITDA (Non-GAAP) 269   242   252  Deduct:       Interest and dividend income 5   3   2  Adjusted OIBDA (Non-GAAP) 263   240   250  Deduct:       Depreciation, amortization and accretion 151   159   166   (Gain) loss on sale of business and other exit costs, net –   –   (10) (Gain) loss on license sales and exchanges, net –   (1) –   (Gain) loss on asset disposals, net 1   2   5  Operating income (GAAP) $ 111   $ 80   $ 89        Numbers may not foot due to rounding.    

49

Table of Contents

CABLE 2017 2016 2015(Dollars in millions) Income before income taxes (GAAP) $ 8   $ 2   $ 7  Add back:       Depreciation, amortization and accretion 44   37   35  EBITDA (Non-GAAP) 52   38     42  Add back or deduct:       (Gain) loss on asset disposals, net 2   2   1  Adjusted EBITDA (Non-GAAP) 54   41   42  Deduct:       Interest and dividend income –   –   –  Adjusted OIBDA (Non-GAAP) 54   41   42  Deduct:       Depreciation, amortization and accretion 44   37   35   (Gain) loss on asset disposals, net 2   2   1  Operating income (GAAP) $ 8   $ 2   $ 6        Numbers may not foot due to rounding.

HMS 2017 2016 2015(Dollars in millions) Loss before income taxes (GAAP) $ (60) $ (18) $ (18)Add back:       Interest expense 4   4   2   Depreciation, amortization and accretion 28   29   27  EBITDA (Non-GAAP) (29) 14     11  Add back or deduct:       Loss on impairment of goodwill 35   –   –  Adjusted EBITDA (Non-GAAP) 6   15   12  Deduct:       Interest and dividend income –   –   –  Adjusted OIBDA (Non-GAAP) 6   14   12  Deduct:       Depreciation, amortization and accretion 28   29   27   Loss on impairment of goodwill 35   –   –  Operating loss (GAAP) $ (57) $ (14) $ (15) Numbers may not foot due to rounding.

Free Cash Flow

The followi ng table presents Free cash flow . Management uses Free cash flow as a liquidity measure and it is defined as Cash flows from operating activitiesless Cash paid for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure which TDS believes may be usef ul to investorsand other users of its financial information in evaluating liquidity, specifically, the amount of net cash generated by busine ss operations after deducting Cashpaid for additions to property, plant and equipment.

2017 2016 2015(Dollars in millions) Cash flows from operating activities (GAAP) $ 776   $ 782   $ 790  Less: Cash paid for additions to property, plant and equipment 685   636   801   Free cash flow (Non-GAAP) $ 91   $ 146   $ (11)

50

Table of Contents

Postpaid ABPU and Postpaid ABPA

U.S. Cellular presents Postpaid ABPU and Postpaid ABPA to reflect the revenue shift from Service revenues to Equipment and product sales resulting from theincreased adoption of equipment installment plans. Postpaid ABPU and Postpaid ABPA, as previously d efined, are non-GAAP financial measures which U.S.Cellular believes are useful to investors and other users of its financial information in showing trends in both service and equipment and product sales revenuesreceived from customers.

2017 2016

2015

(Dollars and connection counts in millions) Calculation of Postpaid ARPU      Postpaid service revenues $ 2,389   $ 2,517   $ 2,831  Average number of postpaid connections 4.49   4.47   4.33  Number of months in period 12   12   12   Postpaid ARPU (GAAP metric) $ 44.38   $ 46.96   $ 54.50   Calculation of Postpaid ABPU Postpaid service revenues $ 2,389   $ 2,517   $ 2,831  Equipment installment plan billings 604   491   272   Total billings to postpaid connections $ 2,993   $ 3,008   $ 3,103  Average number of postpaid connections 4.49   4.47   4.33  Number of months in period 12   12   12   Postpaid ABPU (Non-GAAP metric) $ 55.60   $ 56.12   $ 59.74   Calculation of Postpaid ARPA Postpaid service revenues $ 2,389   $ 2,517   $ 2,831  Average number of postpaid accounts 1.67   1.69   1.72  Number of months in period 12   12   12   Postpaid ARPA (GAAP metric) $ 118.96   $ 124.09   $ 136.90   Calculation of Postpaid ABPA Postpaid service revenues $ 2,389   $ 2,517   $ 2,831  Equipment installment plan billings 604   491   272   Total billings to postpaid accounts $ 2,993   $ 3,008   $ 3,103  Average number of postpaid accounts 1.67   1.69   1.72  Number of months in period 12   12   12   Postpaid ABPA (Non-GAAP metric) $ 149.02   $ 148.29   $ 150.07  

51

Table of Contents

Goodwill impairment, net of tax and noncontrolling interests and Tax Act, net of noncontrolling interests

The following non-GAAP financial measures isolate the total effects on net income of th e current period loss on impairment of goodwill including tax, enactmentof the Tax Act and other related tax effects and noncontrolling interests impacts. The loss on impairment of goodwill, which occurred in the third quarter of 2017,and the deferred t ax benefit are being excluded in this presentation, as they cause current operations of TDS not to be comparable with prior periods. TDSbelieves these measures may be useful to investors and other users of its financial information to assist in comparing the current period financial results withperiods that were not impacted by such items.

2017 2016 2015(Dollars in millions)      Goodwill impairment:       Loss on impairment of goodwill $ 262   $ –   $ –   Tax benefit on impairment of goodwill 1 (22) –   –   Net income (loss) attributable to noncontrolling interests, net of tax 2 (52) –   –  Goodwill impairment, net of tax and noncontrolling interests (Non-GAAP) 188   –   –        Tax Act:       Effect of the Tax Act (327) –   –   Noncontrolling interests impact 2 45   –   –  Ta x Act, net of noncontrolling interests (Non-GAAP) $ (282) $ –   $ –        

1 Tax benefit represents the amount associated with the tax-amortizable portion of the loss on goodwill impairment.      

2 Noncontrolling interests, net of tax, includes noncontrolling public shareholders' share in U.S. Cellular for similar adjustments recorded on U.S. Cellular's consolidatedfinancial statements.

52

Table of Contents

Financial StatementsTelepho ne and Data Systems, Inc.

Consolidated Statement of Operations Year Ended December 31, 2017 2016 2015(Dollars and shares in millions, except per share amounts) Operating revenues Service $ 3,979   $ 4,050   $ 4,356   Equipment and product sales 1,065   1,105   854   Total operating revenues 5,044   5,155   5,210        Operating expenses       Cost of services (excluding Depreciation, amortization       and accretion reported below) 1,164   1,189   1,191   Cost of equipment and products 1,195   1,240   1,224   Selling, general and administrative 1,686   1,759   1,781   Depreciation, amortization and accretion 844   850   844   Loss on impairment of goodwill 262   –   –   (Gain) loss on asset disposals, net 21   27   22   (Gain) loss on sale of business and other exit costs, net (1) (1) (136) (Gain) loss on license sales and exchanges, net (22) (20) (147) Total operating expenses 5,149   5,044   4,779        Operating income (loss) (105) 111   431        Investment and other income (expense)       Equity in earnings of unconsolidated entities 137   140   140   Interest and dividend income 15   11   5   Interest expense (170) (170) (142) Other, net 1   –   1   Total investment and other income (expense) (17) (19) 4        Income (loss) before income taxes (122) 92   435   Income tax expense (benefit) (279) 40   172  Net income 157   52   263   Less: Net income attributable to noncontrolling interests, net of tax 4   9   44  Net income attributable to TDS shareholders 153   43   219   TDS Preferred dividend requirement –   –   –  Net income available to TDS common shareholders $ 153   $ 43   $ 219        Basic weighted average shares outstanding 111   110   109  Basic earnings per share available to TDS commonshareholders $ 1.39   $ 0.39   $ 2.02   Diluted weighted average shares outstanding 112   111   110  Diluted earnings per share available to TDS commonshareholders $ 1.37   $ 0.39   $ 1.98   Dividends per share to TDS shareholders $ 0.62   $ 0.59   $ 0.56  

The accompanying notes are an integral part of these consolidated financial statements.

53

Table of Contents

Telep hone and Data Systems, Inc.

Consolidated Statement of Comprehensive Income Year Ended December 31, 2017 2016 2015(Dollars in millions) Net income $ 157   $ 52   $ 263  Net change in accumulated other comprehensive income       Change in net unrealized gain on equity investments –   1   –   Change related to retirement plan       Amounts included in net periodic benefit cost for the period       Net actuarial gains 2   2   1   Prior service cost (3) –   (7) Amortization of prior service cost (2) (2) (3) (3) –   (9) Change in deferred income taxes 1   –   3   Change related to retirement plan, net of tax (2) –   (6) Net change in accumulated other comprehensive income (2) 1   (6)Comprehensive income 155   53   257   Less: Net income attributable to noncontrolling interests, net of tax 4   9   44  Comprehensive income attributable to TDS shareholders $ 151   $ 44   $ 213  

The accompanying notes are an integral part of these consolidated financial statements.

54

Table of Contents

Tele phone and Data Systems, Inc.Consolidated Statement of Cash Flows

Year Ended December 31, 2017 2016 2015(Dollars in millions) Cash flows from operating activities Net income $ 157   $ 52   $ 263   Add (deduct) adjustments to reconcile net income to net       cash flows from operating activities       Depreciation, amortization and accretion 844   850   844   Bad debts expense 95   102   112   Stock-based compensation expense 46   42   40   Deferred income taxes, net (369) 22   71   Equity in earnings of unconsolidated entities (137) (140) (140) Distributions from unconsolidated entities 136   93   60   Loss on impairment of goodwill 262   –   –   (Gain) loss on asset disposals, net 21   27   22   (Gain) loss on sale of business and other exit costs, net (1) (1) (136) (Gain) loss on license sales and exchanges, net (22) (20) (147) Noncash interest 3   3   3   Other operating activities –   (3) (1) Changes in assets and liabilities from operations       Accounts receivable (61) (23) (120) Equipment installment plans receivable (261) (246) (134) Inventory 6   4   115   Accounts payable (7) 36   7   Customer deposits and deferred revenues (4) (52) (36) Accrued taxes 37   60   38   Accrued interest –   (1) 4   Other assets and liabilities 31   (23) (75) Net cash provided by operating activities 776   782   790        Cash flows from investing activities       Cash paid for additions to property, plant and equipment (685) (636) (801) Cash paid for acquisitions and licenses (218) (53) (287) Cash paid for investments (100) –   –   Cash received from divestitures and exchanges 21   21   343   Federal Communications Commission deposit –   (143) –   Other investing activities 1   3   2   Net cash used in investing activities (981) (808) (743)      Cash flows from financing activities       Issuance of long-term debt –   2   525   Repayment of long-term debt (17) (12) (1) TDS Common Shares reissued for benefit plans, net of tax payments 4   9   13   U.S. Cellular Common Shares reissued for benefit plans, net of tax payments 1   6   2   Repurchase of TDS Common Shares –   (3) –   Repurchase of U.S. Cellular Common Shares –   (5) (6) Repurchase of TDS Preferred Shares (1) –   –   Dividends paid to TDS shareholders (69) (65) (61) Payment of debt issuance costs (2) (4) (13) Distributions to noncontrolling interests (4) (1) (6) Payments to acquire additional interest in subsidiaries –   –   (4) Other financing activities 11   14   12   Net cash provided by (used in) financing activities (77) (59) 461        Net increase (decrease) in cash, cash equivalents and restricted cash (282) (85) 508        Cash, cash equivalents and restricted cash       Beginning of period 904   989   481   End of period $ 622   $ 904   $ 989  

The accompanying notes are an integral part of these consolidated financial statements.

55

Table of Contents

Telep hone and Data Systems, Inc.Consolidated Balance Sheet — Assets

December 31, 2017 2016

(Dollars in millions) Current assets Cash and cash equivalents $ 619   $ 900   Short-term investments 100   –   Accounts receivable     Customers and agents, less allowances of $61 and $55, respectively 861   753   Other, less allowances of $2 and $2, respectively 100   98   Inventory, net 145   151   Prepaid expenses 112   115   Income taxes receivable 2   10   Other current assets 27   32   Total current assets 1,966   2,059      Assets held for sale 10   8      Licenses 2,232   1,895  Goodwill 509   766  Franchise rights 255   244  Other intangible assets, net of accumulated amortization of $142 and $153, respectively 24   33  Investments in unconsolidated entities 453   451  Other investments –   1      Property, plant and equipment     In service and under construction 11,742   11,679   Less: Accumulated depreciation and amortization 8,318   8,124   Property, plant and equipment, net 3,424   3,555      Other assets and deferred charges 422   434      Total assets 1 $ 9,295   $ 9,446  

The accompanying notes are an integral part of these consolidated financial statements.

56

Table of Contents

Telepho ne and Data Systems, Inc.Consolidated Balance Sheet — Liabilities and Equity

December 31, 2017 2016

(Dollars and shares in millions, except per share amounts) Current liabilities Current portion of long-term debt $ 20   $ 12   Accounts payable 368   365   Customer deposits and deferred revenues 223   229   Accrued interest 11   11   Accrued taxes 64   44   Accrued compensation 126   127   Other current liabilities 106   99   Total current liabilities 918   887      Deferred liabilities and credits     Deferred income tax liability, net 552   922   Other deferred liabilities and credits 495   453      Long-term debt, net 2,437   2,433      Commitments and contingencies        Noncontrolling interests with redemption features 1   1      Equity     TDS shareholders’ equity     Series A Common and Common Shares     Authorized 290 shares (25 Series A Common and 265 Common Shares)     Issued 133 shares (7 Series A Common and 126 Common Shares    

Outstanding 111 shares (7 Series A Common and 104 Common Shares) and 110 shares (7 Series ACommon and 103 Common Shares), respectively    

Par Value ($.01 per share) 1   1   Capital in excess of par value 2,413   2,386   Treasury shares, at cost, 22 and 23 Common Shares, respectively (669) (698) Accumulated other comprehensive income (loss) (1) 1   Retained earnings 2,525   2,454   Total TDS shareholders’ equity 4,269   4,144       Preferred shares –   1   Noncontrolling interests 623   605       Total equity 4,892   4,750      Total liabilities and equity 1 $ 9,295   $ 9,446  

The accompanying notes are an integral part of these consolidated financial statements.

1 The consolidated total assets as of December 31, 2017 and 2016, include assets held by consolidated variable interest entities (VIEs) of $765million and $804 million, respectively, which are not available to be used to settle the obligations of TDS. The consolidated total liabilities as ofDecember 31, 2017 and 2016, include certain liabilities of consolidated VIEs of $21 million and $17 million, respectively, for which the creditors ofthe VIEs have no recou rse to the general credit of TDS. See Note 14 — Variable Interest Entities for additional information.

       

57

Table of Contents

Teleph one and Data Systems, Inc.Consolidated Statement of Changes in Equity

TDS Shareholders

Series ACommon

andCommonshares

Capital inexcess ofpar value

Treasuryshares

Accumulatedother

comprehensiveincome

Retainedearnings

Total TDSshareholders'

equity Preferred

shares Noncontrolling

interests Total

equity(Dollars in millions) December 31, 2016 $ 1   $ 2,386   $ (698) $ 1   $ 2,454   $ 4,144   $ 1   $ 605   $ 4,750  Net incomeattributable to TDSshareholders –   –   –   –   153   153   –   –   153  Net incomeattributable to noncontrollinginterests                   classified as equity –   –   –   –   –   –   –   4   4  Othercomprehensive loss –   –   –   (2) –   (2) –   –   (2)TDS Common andSeries A Common sharedividends –   –   –   –   (69) (69) –   –   (69)Redemption ofPreferred                   shares –   –   –   –   –   –   (1) –   (1)Dividendreinvestment plan –   –   13   –   (1) 12   –   –   12  Incentive andcompensation plans –   –   16   –   (12) 4   –   –   4  Adjust investment in subsidiaries forrepurchases,                   issuances andother                   compensationplans –   13   –   –   –   13   –   18   31  Stock-basedcompensation awards –   14   –   –   –   14   –   –   14  Distributions to noncontrollinginterests –   –   –   –   –   –   –   (4) (4)December 31, 2017 $ 1   $ 2,413   $ (669) $ (1) $ 2,525   $ 4,269   $ –   $ 623   $ 4,892   The accompanying notes are an integral part of these consolidated financial statements.

58

Table of Contents

Telephone and Data Systems, Inc.Consolidated Statement of Changes in Equity

TDS Shareholders

Series ACommon

andCommonshares

Capital inexcess ofpar value

Treasuryshares

Accumulatedother

comprehensiveincome

Retainedearnings

Total TDSshareholders'

equity Preferred

shares Noncontrolling

interests Total

equity(Dollars in millions) December 31, 2015 $ 1   $ 2,365   $ (727) $ –   $ 2,487   $ 4,126   $ 1   $ 577   $ 4,704  Net incomeattributable

–   –   –   –   43   43   –   –   43   to TDSshareholdersNet incomeattributable

–   –   –   –   –   –   –   9   9  

to noncontrollinginterests classified as equityOthercomprehensiveincome –   –   –   1   –   1   –   –   1  TDS Common andSeries A

–   –   –   –   (65) (65) –   –   (65) Common SharedividendsRepurchase ofCommon Shares –   –   (3) –   –   (3) –   –   (3)Dividendreinvestment plan –   2   7   –   –   9   –   –   9  Incentive andcompensation

–   (5) 25   –   (11) 9   –   –   9   plansAdjust investment in

–   7   –   –   –   7   –   20   27  

subsidiaries forrepurchases, issuances andother compensationplansStock-basedcompensation

–   16   –   –   –   16   –   –   16   awardsTax windfall(shortfall)

–   1   –   –   –   1   –   –   1   from stock awardsDistributions to

–   –   –   –   –   –   –   (1) (1) noncontrollinginterestsDecember 31, 2016 $ 1   $ 2,386   $ (698) $ 1   $ 2,454   $ 4,144   $ 1   $ 605   $ 4,750   The accompanying notes are an integral part of these consolidated financial statements.

59

Table of Contents

Telephone and Data Systems, Inc.Consolidated Statement of Changes in Equity

TDS Shareholders

Series ACommon

andCommonshares

Capital inexcess ofpar value

Treasuryshares

Accumulatedother

comprehensiveincome (loss)

Retainedearnings

Total TDSshareholders'

equity Preferred

shares Noncontrolling

interests Total

equity(Dollars in millions) December 31, 2014 $ 1   $ 2,337   $ (748) $ 6   $ 2,330   $ 3,926   $ 1   $ 528   $ 4,455  Net incomeattributable to TDSshareholders –   –   –   –   219   219   –   –   219  Net incomeattributable to noncontrollinginterests classified as equity –   –   –   –   –   –   –   38   38  Othercomprehensive loss –   –   –   (6) –   (6) –   –   (6)TDS Common andSeries A Common Share dividends –   –   –   –   (61) (61) –   –   (61)Dividendreinvestment plan –   3   9   –   –   12   –   –   12  Incentive andcompensation plans –   2   12   –   (1) 13   –   –   13  Adjust investment in subsidiaries for repurchases, issuances andother compensationplans –   7   –   –   –   7   –   12   19  Stock-basedcompensation awards –   16   –   –   –   16   –   –   16  Distributions to noncontrollinginteres ts –   –   –   –   –   –   –   (1) (1)December 31, 2015 $ 1   $ 2,365   $ (727) $ –   $ 2,487   $ 4,126   $ 1   $ 577   $ 4,704   The accompanying notes are an integral part of these consolidated financial statements.

60

Table of Contents

Telep hone and Data Systems, Inc.Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies and Recent AccountingPronouncementsNature of Operations

Telephone and Data Systems, Inc. (TDS) is a diversified telecommunications company providing high-quality communications services to customers withapproximately 5.1 million wireless connections and 1.2 million wireline and cable connections at December 31, 2017 . TDS conducts all of its wirelessoperations through i ts 83% -owned subsidiary, United States Cellular Corporation (U.S. Cellular). TDS provides wireline services, cable services and hostedand managed services through its wholly-owned subsidiary, TDS Telecommunications LLC (TDS Teleco m).

TDS has the following reportable segments: U.S. Cellular, Wireline, Cable, and Hosted and Managed Services (HMS) operations. TDS’ non-reportable otherbusiness activities are presented as “Corporate, Eliminations and Other”. This includes the opera tions of TDS’ wholly-owned subsidiary Suttle-Straus, Inc.(Suttle-Straus). Suttle-Straus’ financial results were not significant to TDS’ operations. All of TDS’ segments operate only in the United States, except for HMS,which includes an insignificant f oreign operation. See Note 18 — Business Segment Information for summary financial information on each business segment.

Principles of Consolidation

The accounting policies of TDS conform to accounting principles generally accepted in the United States of America (GAAP) as set forth in the FinancialAccounting Standards Board (FASB) Accounting Standards Codification (ASC). Unless otherwise specified, references to accounting provisions and GAAP inthese notes refer to the requirements of the FASB ASC. The consolidated financial statements include the accounts of TDS and subsidiaries in which it has acontrolling financial interest, including U.S. Cell ular and TDS Telecom. In addition, the consolidated financial statements include certain entities in which TDShas a variable interest that requires consolidation under GAAP. See Note 14 — Variable Interest Entities for additional information relating to TDS’ VIEs. Allmaterial intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requi res management to make estimates and assumptions that affect (a) thereported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (b) the reported amountsof revenues and expense s during the reported period. Actual results could differ from those estimates. Significant estimates are involved in accounting forgoodwill and indefinite-lived intangible assets, income taxes and equipment installment plans.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less. Cash and cash equivalents subject tocontractual restrictions are classified as restricted cash. On December 31, 2017, TDS early adopted the provisions of Accounting Standards Update 2016-18,StatementofCashFlows:RestrictedCash(ASU 2016-18) on a retrospective basis which requires that restricted cash be presented with cash and cashequivalents in the statement of cash flows. The following table provides a reconciliation of Cash and cash equivalents and restricted cash reported in theConsolidated Balance Sheet to the total of the amounts in the Consolidated Statement of Cash Flows.

December 31, 2017 2016 2015(Dollars in millions) Cash and cash equivalents $ 619   $ 900   $ 985  Restricted cash included in:       Other current assets 3   3   3   Other assets and deferred charges –   1   1  Cash, cash equivalents and restricted cash in the statement of cash flows $ 622   $ 904   $ 989  

61

Table of Contents

Accounts Receivable and Allowance for Doubtful Accounts

U.S. Cellular’s accounts receivable consist primarily of amounts owed by customers for wireless services and equipment sales, including sales of certain devicesunder equipment installment plans, by agents for sales of equipment to them and by other wirele ss carriers whose customers have used U.S. Cellular’s wirelesssystems.

TDS Telecom’s accounts receivable primarily consist of amounts owed by customers for services and products provided, by state and federal funds includingAlternative Connect America C ost Model (A-CAM), and by interexchange carriers for long-distance traffic, which TDS Telecom carries on its network.

The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related to existing billed and unbilled a ccounts receivable. Theallowance is estimated based on historical experience, account aging and other factors that could affect collectability. Accounts receivable balances arereviewed on either an aggregate or individual basis for collectability depen ding on the type of receivable. When it is probable that an account balance will notbe collected, the account balance is charged against the allowance for doubtful accounts. TDS does not have any off-balance sheet credit exposure related toits customer s.

Inventory

Inventory consists primarily of wireless devices stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. Netrealizable value is determined by reference to the stand-alone selling price.

Licenses

Licenses consist of direct and incremental costs incurred in acquiring Federal Communications Commission (FCC) licenses to provide wireless service.

TDS has determined that wireless licenses are indefinite-lived intangible assets and, therefore, not subject to amortization based on the following factors:

Radio spectrum is not a depleting asset.The ability to use radio spectrum is not limited to any one technology.TDS and its consolidated subsidiaries are licensed to use radio spectrum through the FCC licensing process, which enables licensees to utilizespecified portions of the spectrum for the provision of wireless service.TDS and its consolidated subsidiaries are required to renew their FCC licenses every ten years or, in some cases, every fifteen years. To date, all ofTDS’ license renewal applications have been granted by the FCC. Generally, license renewal applications filed by licensees otherwise in compliancewith FCC regulations are routinely granted. If, however, a license renewal application is challenged either by a competing applicant for the license or bya petition to deny the renewal application, the license will be renewed if the licensee can demonstrate its entitlement to a “renewal expectancy.” Licensees are entitled to su ch an expectancy if they can demonstrate to the FCC that they have provided “substantial service” during their license termand have “substantially complied” with FCC rules and policies. TDS believes that it is probable that its future license renewal app lications will begranted.

U.S. Cellular performs its annual impairment assessment of Licenses as of November 1 of each year or more frequently if there are events or circumstances thatcause U.S. Cellular to believe the carrying value of Licenses exceeds their fair value on a more likely than not basis. For purposes of its 2017 and 2016impairment testing of Licenses, U.S. Cellular separat ed its FCC licenses into eight units of accounting. The eight units of accounting consisted of one unit ofaccounting for developed operating market licenses (built licenses) and seven geographic non-operating market licenses (unbuilt licenses).

U.S. Ce llular performed a quantitative impairment assessment in 2017 and a qualitative impairment assessment in 2016 to determine whether it was more likely than not that the fair value of the built and unbuilt licenses exceed their carrying value. Based on the impairment assessments performed, U.S. Cellular didnot have an impairment of its Licenses in 2017 or 2016 . See Note 7 — Intangible Assets for additional details related to Licenses.

Goodwill

TDS early adopted Accounting Standards Update 2017-04, Intangibles–GoodwillandOther:SimplifyingtheTestforGoodwillImpairment(ASU 2017-04) , inthe third quarter of 2017 and applied the guidance to interim and annual goodwill impairment tests completed in 2017. ASU 2017-04 eliminated Step 2 of thegoodw ill impairment test. Goodwill impairment loss will be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value. Theloss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

TDS has Goodwill as a result of its acquisition of wireline and cable companies and, as previously reported, had Goodwill as a result of its acquisitions ofwireless and HMS companies. Under previous business combination guidance in effect prior to 2009, step acquisitions related to U.S. Cellular’s repurchase ofits common shares also contributed to TDS’ goodwill balance. Such Goodwill represents the excess of the total purchase price over the fair value of net assetsacquired in these transactions. TDS performs its annual impairment assessment of Goodwill as of November 1 of each year or more frequently if there areevents or circumstances that cause TDS to believe the carrying value of individual reporting units exceeds their respective fair values on a more likely than notbasis.

See Note 7 — Intangible Assets for additional details related to Goodwill.

62

Table of Contents

U.S. Cellular

For purposes of conducting its impairment tests, U.S. Cel lular identified one reporting unit. During the third quarter of 2017, management identified a triggeringevent and performed an interim impairment assessment. A discounted cash flow approach was used to value the reporting unit for purposes of the Goodw illimpairment review. As a result of the interim impairment assessment, TDS recorded a loss on impairment of $227 million. U.S. Cellular did not have animpairment of its Goodwill in 2016 .

TDS Telecom

For purp oses of conducting its Goodwill impairment tests for 2017 and 2016 , TDS Telecom identified three reporting units: Wireline, Cable and HMS. Duringthe third quarter of 2017, management identified a triggering event for the HMS reporting unit and performed an interim impairment assessment. As a result ofthe interim impairment assessment, TDS recorded a loss on impairment of $35 million. HMS did not have an impairment of its Goodwill in 2016.

The discounted cash flow approach and guideline public company method were used to value the HMS reporting unit for the interim impairment assessment aswell as the Wireline and Cable reporting units for the annual impairment tests.

Based on the annual impairment assessments performed as of November 1, 2017 , Wireline and Cable did not have an impairment of their Goodwill in 2017 or2016 .

Franchise Rights

TDS Telecom has Franchise rights as a result of acquisitions of cable businesses. Franchise rights are intangible assets that provide their holder with the rightto operate a b usiness in a certain geographical location as sanctioned by the franchiser, usually a government agency. Cable Franchise rights are generallygranted for ten year periods and may be renewed for additional terms upon approval by the granting authority. TD S anticipates that future renewals of itsFranchise rights will be granted. At December 31, 2017 , TDS has determined that Franchise rights are indefinite-lived intangible assets and, therefore, notsubject to amor tization because TDS expects both the renewal by the granting authorities and the cash flows generated from the Franchise rights to continueindefinitely. TDS periodically evaluates the remaining useful life of these intangible assets to determine whether events and circumstances continue to supportan indefinite useful life.

TDS Telecom performs its annual impairment assessment of Franchise rights as of November 1 of each year or more frequently if there are events orcircumstances that cause TDS Telecom to believe the carrying value of Franchise rights exceeds their fair value on a more likely than not basis. TDS Telecomtests Franchise rights for impairment at a unit of accounting level for which one unit of accounting was identified and estimates the f air value of Franchise rightsfor purposes of impairment testing using the build-out (or Greenfield) method. Based on the impairment assessments performed, TDS Telecom did not have animpairment of Franchise rights in 2017 or 2016 . See Note 7 — Intangible Assets for additional details related to Franchise rights.

Investments in Unconsolidated Entities

Fo r its equity method investments for which financial information is readily available, TDS records its equity in the earnings of the entity in the current period. For its equity method investments for which financial information is not readily available, T DS records its equity in the earnings of the entity on a one quarter lagbasis.

Property, Plant and Equipment

Property, plant and equipment is stated at the original cost of construction or purchase including capitalized costs of certain taxes, payroll-re lated expenses,interest and estimated costs to remove the assets.

Expenditures that enhance the productive capacity of assets in service or extend their useful lives are capitalized and depreciated. Expenditures formaintenance and repairs of assets in s ervice are charged to Cost of services or Selling, general and administrative expense, as applicable. Retirements anddisposals of assets are recorded by removing the original cost of the asset (along with the related accumulated depreciation) from plant in service and chargingit, together with net removal costs (removal costs less an applicable accrued asset retirement obligation and salvage value realized), to (Gain) loss on assetdisposals, net. Certain Wireline segment assets use the group depreciati on method. Accordingly, when a group method asset is retired in the ordinary courseof business, the original cost of the asset and accumulated depreciation in the same amount are removed, with no gain or loss recognized on the disposition.

TDS capitalize s certain costs of developing new information systems. Software licenses are accounted for as the acquisition of an intangible asset and theincurrence of a liability to the extent that the license fees are not fully paid at acquisition.

63

Table of Contents

Depreciation and Amortization

Depreciation is provided using the straight-line method over the estimated useful life of the related asset, except for certain Wireline segment assets, which usethe group depreciation method. The group depreciation method develops a dep reciation rate based on the average useful life of a specific group of assets,rather than each asset individually. TDS depreciates leasehold improvement assets associated with leased properties over periods ranging from one to thirtyyears; such periods approximate the shorter of the assets’ economic lives or the specific lease terms.

Useful lives of specific assets are reviewed throughout the year to determine if changes in technology or other business changes would warrant accelerating thedepreciation of those specific assets. There were no material changes to useful lives of proper ty, plant and equipment in 2017 , 2016 or 2015 . See Note 9 —Property, Plant and Equipment for additional details related to useful lives.

Impairment of Long-Lived Assets

TDS reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired.

U.S. Cellular has one asset group for purposes of assessing property, plant and equipment for impairment based on the fact that the individual operatingmarkets are reliant on centrally operated data centers, mobile telephone switching offices and a network ope rations center. U.S. Cellular operates a singleintegrated national wireless network. The cash flows generated by this single interdependent network represent the lowest level for which identifiable cash flowsare largely independent of the cash flows of other groups of assets and liabilities.

TDS Telecom has three asset groups of Wireline, Cable and HMS for purposes of assessing property, plant and equipment for impairment based on theirintegrated network, assets and operations. The cash flows generate d by each of these groups is the lowest level for which identifiable cash flows are largelyindependent of the cash flows of other groups of assets and liabilities.

In connection with the interim goodwill impairment test in the third quarter of 2017, condi tions existed that indicated U.S. Cellular’s long-lived asset group mightnot be recoverable. As a result, the company performed a long-lived asset recoverability assessment related to the U.S. Cellular asset group and determinedthat no impairment of the long-lived asset group existed.

Agent Liabilities

U.S. Cellular has relationships with agents, which are independent businesses that obtain customers for U.S. Cellular. At December 31, 2017 and 2016 , U.S.Cellular had accrued $ 61 million and $ 57 million, respectively, for amounts due to agents. These amounts are included in Other current liabilities in t heConsolidated Balance Sheet.

Debt Issuance Costs

Debt issuance costs include underwriters’ and legal fees and other charges related to issuing various borrowing instruments and other long-term agreements,and are amortized over the respective term of eac h instrument. TDS presents certain debt issuance costs in the balance sheet as an offset to the related debtobligation. Debt issuance costs related to TDS and U.S. Cellular’s revolving credit facilities and U.S. Cellular’s receivables securitization fac ility are recorded inOther assets and deferred charges in the Consolidated Balance Sheet.

Asset Retirement Obligations

TDS accounts for asset retirement obligations by recording the fair value of a liability for legal obligations associated with an asset retirement in the period inwhich the obligations are incurred. At the time the liability is incurred, TDS records a liability equal to the net present value of the estimated cost of the assetretirement obligation and increases the carrying amount of th e related long-lived asset by an equal amount. Until the obligation is fulfilled, TDS updates itsestimates relating to cash flows required and timing of settlement. TDS records the present value of the changes in the future value as an increase or decre aseto the liability and the related carrying amount of the long-lived asset. The liability is accreted to future value over a period ending with the estimated settlementdate of the respective asset retirement obligation. The carrying amount of the long -lived asset is depreciated over the useful life of the related asset. Uponsettlement of the obligation, any difference between the cost to retire the asset and the recorded liability is recognized in the Consolidated Statement ofOperations.

Treasury S hares

Common Shares repurchased by TDS are recorded at cost as treasury shares and result in a reduction of equity. When treasury shares are reissued, TDSdetermines the cost using the first-in, first-out cost method. The difference between the cost of t he treasury shares and reissuance price is included in Capital inexcess of par value or Retained earnings.

64

Table of Contents

Revenue Recognition

Revenues related to services are recognized as services are rendered. Revenues billed in advance or in arrears of the servic es being provided are estimatedand deferred or accrued, as appropriate. Revenues from sales of equipment, products and accessories are recognized when TDS no longer has anyrequirements to perform, when title has passed and when the products are accepted by the customer.

Multiple Deliverable Arrangements

U.S. Cellular and TDS Telecom sell multiple element service and equipment offerings. In these instances, revenues are allocated using the relative selling pricemethod. Under this method, arrangement c onsideration is allocated to each element on the basis of its relative selling price. Revenue recognized for thedelivered items is limited to the amount due from the customer that is not contingent upon the delivery of additional products or services.

Lo yalty Reward Program

In March 2015, U.S. Cellular announced that it would discontinue its loyalty reward program effective September 1, 2015. All unredeemed reward points expiredat that time and the deferred revenue balance of $58 million related to such expired points was recognized as service revenues.

U.S. Cellular followed the deferred revenue method of accounting for its loyalty reward program. Under this method, revenue allocated to loyalty reward pointswas deferred. The amount allocated to the l oyalty points was based on the estimated retail price of the services and products for which points were redeemabledivided by the number of loyalty points required to receive such services and products. This was calculated on a weighted average basis and required U.S.Cellular to estimate the percentage of loyalty points that would be redeemed for each product or service.

Revenue was recognized at the time of customer redemption or when such points were depleted via an account maintenance charge. U.S. Cellular employedthe proportional model to recognize revenues associated with breakage. Under the proportional model, U.S. Cellular allocated a portion of the estimated futurebreakage to each redemption and recorded revenue proportionally.

Equipment Installment Plans

U.S. Cellular equipment revenue under equipment installment plan contracts is recognized at the time the device is delivered to the end-user customer for theselling price of the device, net of any deferred imputed interest or trade-in ri ght, if applicable. Imputed interest is reflected as a reduction to the receivablebalance and recognized over the duration of the plan as Service revenues.

Incentives

Discounts and incentives that are deemed cash are recognized as a reduction of Operat ing revenues concurrently with the associated revenue.

U.S. Cellular issues rebates to its agents and end customers. These incentives are recognized as a reduction to revenue at the time the wireless device sale tothe customer occurs. The total potential rebates and incentives are reduced by U.S. Cellular’s estimate of rebates that will not be redeemed by customersbased on historical experience of such redemptions.

From time to time, U.S. Cellular may offer certain promotions to incentivize cust omers to switch to, or to purchase additional services from, U.S. Cellular. Underthese types of promotions, an eligible customer may receive an incentive in the form of a discount off additional services purchased shown as a rebate or creditto the custo mer’s monthly bill. U.S. Cellular accounts for the future discounts at the time of the initial transaction by allocating and deferring a portion ofequipment revenue based on the relative proportion of the future discounts in comparison to the aggregate i nitial purchase plus the minimum future purchasesrequired to receive the discounts. The deferred revenue will be recognized as service revenue in future periods.

Activation Fees

TDS charges its end customers activation fees in connection with the sale of certain services and equipment. Activation fees charged by TDS Telecom inconjunction with a service offering are deferred and recognized over the average customer’s service period. Device activation fees charged at both agentlocations and U.S. Cellu lar company-owned retail stores in connection with equipment installment plan device transactions are deferred and recognized over aperiod that corresponds with the equipment upgrade eligibility date based on the contract terms. Device activation fees ch arged at U.S. Cellular agent locationsin connection with subsidized device sales are deferred and recognized over a period that corresponds with the length of the customer’s service contract. Device activation fees charged at U.S. Cellular company-owned retail stores in connection with subsidized device sales are recognized at the time the device isdelivered to the customer.

65

Table of Contents

Amounts Collected from Customers and Remitted to Governmental Authorities

TDS records amounts collected from customers and remitted to governmental authorities on a net basis within a tax liability account if the tax is assessed uponthe customer and TDS merely acts as an agent in collecting the tax on behalf of the imposing governmental authority. If the tax is assessed upon TDS, th enamounts collected from customers as recovery of the tax are recorded in Service revenues and amounts remitted to governmental authorities are recorded inSelling, general and administrative expenses in the Consolidated Statement of Operations. The amou nts recorded gross in revenues that are billed tocustomers and remitted to governmental authorities totaled $ 80 million, $ 85 million and $ 95 million for 2017 , 2016 and 2015 , respectively.

Wholesale Revenues

TDS Telecom earns wholesale revenues in its Wireline segment from state and federal support fun d payments including A-CAM and by payments made bylong-distance carriers to local service providers for originating and terminating calls on local telephone networks.

Eligible Telecommunications Carrier (ETC) Revenues

Telecommunications companies may be d esignated by states, or in some cases by the FCC, as an ETC to receive support payments from the UniversalService Fund if they provide specified services in “high cost” areas. ETC revenues recognized in the reporting period represent the amounts which U. S. Cellular is entitled to receive for such period, as determined and approved in connection with U.S. Cellular’s designation as an ETC in various states.

Advertising Costs

TDS expenses advertising costs as incurred. Advertising costs totaled $ 228 million, $ 263 million and $ 268 million in 2017 , 2016 and 2015 , respectively.

Income Taxes

TDS files a consolidated federal income tax return. Deferred taxes are computed using the liability method, whereby deferred tax assets are recognized forfuture deductible temporary differences and op erating loss carryforwards, and deferred tax liabilities are recognized for future taxable temporary differences. Both deferred tax assets and liabilities are measured using the tax rates anticipated to be in effect when the temporary differences reverse. Temporarydifferences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for theeffects of changes in tax laws and rates on the date of enactment. Deferred t ax assets are reduced by a valuation allowance when it is more likely than not thatsome portion or all of the deferred tax assets will not be realized. TDS evaluates income tax uncertainties, assesses the probability of the ultimate settlementwith the a pplicable taxing authority and records an amount based on that assessment. Deferred taxes are reported as a net non-current asset or liability byjurisdiction. Any corresponding valuation allowance to reduce the amount of deferred tax assets is also reco rded as non-current.

Stock-Based Compensation and Other Plans

TDS has established long-term incentive plans, dividend reinvestment plans, and a non-employee director compensation plan. The dividend reinvestment planof TDS is not considered a compensatory plan and, therefore, recognition of compensation costs for grants made under this plan is not required. All other plansare considered compensatory plans; therefore, recognition of compensation costs for grants made under these plans is required.

TDS rec ognizes stock compensation expense based upon the fair value of the specific awards granted using established valuation methodologies. The amountof stock compensation cost recognized on either a straight-line basis or graded attribution method is based o n the portion of the award that is expected to vestover the requisite service period, which generally represents the vesting period. Stock-based compensation cost recognized has been reduced for estimatedforfeitures. Forfeitures are estimated at the ti me of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. SeeNote 17 — Stock-Based Compensation for additional information.

66

Table of Contents

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update 2014-09, RevenuefromContractswithCustomers(ASU 2014-09) and has since amended thestandard with Accounting Standards Update 2015-14, RevenuefromContractswithCustomers:DeferraloftheEffectiveDate, Accounting Standards Update2016-08, RevenuefromContractswithCustomers:PrincipalversusAgentConsiderations(ReportingRevenueGrossversusNet), Accounting StandardsUpdate 2016-10, RevenuefromContractswithCustomers:IdentifyingPerformanceObligationsandLicensing, Accounting Standards Update 2016-12,RevenuefromContractswithCustomers:Narrow-ScopeImprovementsandPracticalExpedients,and Accounting Standards Update 2016-20, TechnicalCorrectionsandImprovementstoTopic606,RevenuefromContractswithCustomers. These standards replace existing revenue recognition rules with asingle comprehensive model to use in accounting for revenue arising from contracts with customers. TDS will adopt ASU 2014-09, as amended, on January 1,2018, under the modified retrospective transition method whereby a cumulative effect adjustment to retained earnings will be recognized upon adoption and theguidance is applied prospectively. TDS has implemented new sy stems, processes and controls to adopt ASU 2014-09, as amended. ASU 2014-09, asamended, impacts TDS’ revenue recognition related to the allocation of contract revenues between various services and equipment, and the timing of whenthose revenues are reco gnized. In addition, ASU 2014-09, as amended, requires deferral of incremental contract acquisition and fulfillment costs andsubsequent expense recognition over the contract period or expected customer life. Upon adoption, the cumulative effect adjustme nt will include theestablishment of contract asset and contract liability accounts with a corresponding adjustment to retained earnings to reflect the reallocation of revenuesbetween service and equipment performance obligations for which control is tran sferred to customers in different periods. Reallocation impacts generally arisewhen bundle discounts are provided in a contract arrangement that includes equipment and service performance obligations. In these cases, the revenue will bereallocated acco rding to the relative stand-alone selling prices of the performance obligations included in the bundle and this may be different than how therevenue is billed to the customer and recognized under current guidance. In addition, contract cost assets will b e established to reflect costs that will bedeferred as incremental contract acquisition and fulfillment costs. Incremental contract acquisition costs generally relate to commissions paid to salesassociates while fulfillment costs are generally related t o service installation costs on the wireline and cable businesses. The cumulative effect of adoption ofthe new standard will be to increase Retained earnings as of January 1, 2018, by approximately $ 175 million. Based on curre ntly available information, TDSestimates that the new standard will not have a significant impact on operating income in 2018.

In January 2016, the FASB issued Accounting Standards Update 2016-01, FinancialInstruments–Overall:RecognitionandMeasurementofFinancialAssetsandFinancialLiabilities(ASU 2016-01). This ASU introduces changes to current accounting for equity investments and financial liabilities under the fair valueoption and the presentation and disclosure requirements for financial i nstruments. TDS is required to adopt ASU 2016-01 on January 1, 2018, using themodified retrospective approach. The adoption of ASU 2016-01 is not expected to have a significant impact on TDS’ financial position or results of operations.

In February 2016 , the FASB issued Accounting Standards Update 2016-02, Leases(ASU 2016-02). ASU 2016-02 requires lessees to record a right-of-useasset and lease liability for almost all leases. This ASU does not substantially impact the lessor accounting model. Howev er, some changes to the lessoraccounting guidance were made to align with lessee accounting changes within Accounting Standards Codification (ASC) 842, Leasesand certain key aspectsof ASC 606, RevenuefromContractswithCustomers.Early adoption is pe rmitted; however, TDS plans to adopt ASU 2016-02 on a modified retrospectivebasis when required on January 1, 2019. In January 2018, the FASB issued Accounting Standards Update 2018-01, Leases(ASU 2018-01), which permits anentity to elect an optional t ransition practical expedient to not evaluate land easements that exist or expired before the entities adoption of ASU 2016-02. TDSplans to adopt ASU 2018-01 in conjunction with its adoption of ASU 2016-02. TDS is evaluating the full effect that adoptio n of ASU 2016-02 and ASU 2018-01will have on its financial condition, results of operations and disclosures. Upon adoption, TDS expects a substantial increase to assets and liabilities on itsbalance sheet and is in the process of implementing a new leas e management and accounting system to assist in the application of the new standard.

In March 2016, the FASB issued Accounting Standards Update 2016-04, Liabilities–ExtinguishmentsofLiabilities:RecognitionofBreakagefromCertainPrepaidStored-ValueProducts(ASU 2016-04). ASU 2016-04 requires companies that sell prepaid stored-value products redeemable for goods, services orcash at third-party merchants to recognize breakage (i.e., the value that is ultimately not redeemed by the consumer) in a wa y that is consistent with how it willbe recognized under the new revenue recognition standard. TDS is required to adopt ASU 2016-04 on January 1, 2018, retrospectively. The adoption of ASU2016-04 is not expected to have a significant impact on TDS’ fin ancial position or results of operations.

In June 2016, the FASB issued Accounting Standards Update 2016-13, FinancialInstruments–CreditLosses:MeasurementofCreditLossesonFinancialInstruments(ASU 2016-13). ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses. It also requiresadditional disclosure relating to the credit quality of trade and other receivables, including information relating to management’s estimate of credit allowances. TDS is required to adopt ASU 2016-13 on January 1, 2020, using the modified retrospective approach. Early adoption is permitted as of January 1, 2019. TDSis evaluating the effects that adoption of ASU 2016-13 will have on its financial position, results of operations and disclosures .

In October 2016, the FASB issued Accounting Standards Update 2016-16, IncomeTaxes:Intra-EntityTransfersofAssetsOtherThanInventory(ASU 2016-16). ASU 2016-16 impacts the accounting for the income tax consequences of int ra-entity transfers of assets other than inventory when the transfer occurs betweenentities in different tax jurisdictions. TDS is required to adopt ASU 2016-16 on January 1, 2018, using the modified retrospective approach. The adoption ofASU 2016-16 i s not expected to have a significant impact on TDS’ financial position or results of operations.

67

Table of Contents

In February 2017, the FASB issued Accounting Standards Update 2017-05, OtherIncome–GainsandLossesfromtheDerecognitionofNonfinancialAssets:ClarifyingtheScopeofAssetDerecognitionGuidanceandAccountingforPartialSalesofNonfinancialAssets(ASU 2017-05). ASU 2017-05 clarifies howentities account for the derecognition of a nonfinancial asset and adds guidance for partial sales of nonfinanci al assets. TDS is required to adopt ASU 2017-05on January 1, 2018, either retrospectively or using the modified retrospective approach. The adoption of ASU 2017-05 is not expected to have a significantimpact on TDS’ financial position or results of ope rations.

In March 2017, the FASB issued Accounting Standards Update 2017-07, Compensation–RetirementBenefits:ImprovingthePresentationofNetPeriodicPensionCostandNetPeriodicPostretirementBenefitCost(ASU 2017-07). ASU 2017-07 requires that an employer report the service cost component in thesame line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of netperiodic benefit cost must be presented separ ately from the service cost component and outside of Operating income in the Consolidated Statement ofOperations. The guidance also specifies that only the service cost component of net benefit cost is eligible for capitalization. TDS is required to ado pt ASU2017-07, retrospectively on January 1, 2018. The adoption of ASU 2017-07 is not expected to have a significant impact on TDS’ results of operations.

In May 2017, the FASB issued Accounting Standards Update 2017-09, Compensation–StockCompensation(ASU 2017-09). ASU 2017-09 clarifies whenchanges to the terms or conditions of share-based payment awards must be accounted for as modifications. TDS is required to adopt ASU 2017-09prospectively on January 1, 2018. The adoption of ASU 2017-09 is not expected to have a significant impact on TDS’ financial position or results of operations.

In July 2017, the FASB issued Accounting Standards Update 2017-11, EarningsPerShare,DistinguishingLiabilitiesfromEquity,DerivativesandHedging:I.AccountingforCertainFinancialInstrumentswithDownRoundFeatures,II. ReplacementoftheIndefiniteDeferralforMandatorilyRedeemableFinancialInstrumentsofCertainNonpublicEntitiesandCertainMandatorilyRedeemableNoncontrollingInterestswithaScopeException(ASU 2017-11). Theamendments in Part I of ASU 2017-11 that relate to liability or equity classification of financial instruments (or embedded features) affect all entities that issuefinancial instruments (for example, warrants or convertible instruments) that include down round features. The amendments in Part II ASU 2017-11 do not havean accounting effect since the amendments only replace the indefinite deferral of certain guidance with a scope exception. TDS is required to adopt ASU 2017-11 on January 1, 2019, either retrospectively or using the modified retrospective approach. Early adoption is permitted. The adoption of ASU 2017-11 is notexpected to have a significant impact on TDS’ financial position or results of operations.

In August 2017, the FASB issued Accounting Standards Update 2017-12, DerivativesandHedging:TargetedImprovementstoAccountingforHedgingActivities(ASU 2017-12). ASU 2017-12 amends hedge accounting recognition and presentation requirements to improve transparency and understandability ofinformation disclosed in the financials as well as simplifies the application of hedge accounting guidance. TDS is required to adopt ASU 2017-12 on January 1,2019, using the modified retrospective approach. Early adoption is permitted. The adoption of ASU 2017-12 is not expected to have a significant impact onTDS’ financial position or results of operations.

In February 2018, the FASB issued Accounting Standards Update 2018-02, Income Statement – Reporting Comprehensive Income: Reclassification of CertainTax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). The provisions in ASU 2018-02 allow for a reclassification from accumulated othercomprehensive income to retained earnings to elimina te the stranded tax effects resulting from the change in federal corporate income tax rate in the Tax Act. TDS is required to adopt ASU 2018-02 on January 1, 2019. Early adoption is permitted, including adoption in any interim period for which financial statementshave not yet been issued. TDS adopted ASU 2018-02 on December 31, 2017, and elected to reclassify the income tax effects of the Tax Act to retainedearnings. The adoption of ASU 2018-02 did not have a significant impact on TDS’ financial posi tion or results of operations.

68

Table of Contents

Note 2 Fair Value MeasurementsAs of December 31, 2017 and 2016 , TDS did not have any material financial or nonfinancial assets or liabilities that were required to be recorded at fair value inits Consolidated Balance Sheet in accordance with GAAP.

The provisions of GAAP establish a fair value hierarchy that contains three levels for inputs used in fair value measurements. Level 1 inputs include quotedmarket prices for identical assets or liabilities in active markets. Level 2 inputs include quoted market prices for similar assets and liabilities in active markets orquoted market prices for iden tical assets and liabilities in inactive markets. Level 3 inputs are unobservable. A financial instrument’s level within the fair valuehierarchy is based on the lowest level of any input that is significant to the fair value measurement. A financial in strument’s level within the fair value hierarchyis not representative of its expected performance or its overall risk profile and, therefore, Level 3 assets are not necessarily higher risk than Level 2 assets orLevel 1 assets.

TDS has applied the provis ions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayedbelow.

Level withinthe Fair Value

Hierarchy

December 31, 2017 December 31, 2016

Book Value Fair Value Book Value Fair Value(Dollars in millions) Cash and cash equivalents 1 $ 619   $ 619   $ 900   $ 900  Short-term investments 1 100   100   –   –  Long-term debt         Retail 2 1,753   1,783   1,753   1,741   Institutional 2 534   522   533   532   Other 2 194   194   208   207  

The fair value of Cash and cash equivalents and Short-term investments approximate their book values due to the short-term nature of these financialinstruments . Long-term debt excludes capital lease obligations , other installment arrangements, the curre nt portion of Long-term debt and debt financing costs. The fair value of “Retail” Long-term debt was estimated using market prices for TDS’ 7.0% Senior Notes, 6.875% Senior Notes, 6.625% Senior Notes and5.875% Senior Notes, and U.S. Cellular’s 6.95% Seni or Notes, 7.25% 2063 Senior Notes and 7.25% 2064 Senior Notes. TDS’ “Institutional” debt consists ofU.S. Cellular’s 6.7% Senior Notes which are traded over the counter. TDS’ “Other” debt consists of a senior term loan credit facility and other borrowing s withfinancial institutions. TDS estimated the fair value of its Institutional and Other debt through a discounted cash flow analysis using the interest rates or estimatedyield to maturity for each borrowing, which ranged from 4 .74% to 7.13% and 0.00% to 6.93% at December 31, 2017 and 2016 , respectively.

69

Table of Contents

Note 3 Equipment Installment PlansTDS sells devices to customers under equipment installment contracts over a specified time period. For certain equipment installment plans, after a specifiedperiod of time or amount of payments, the customer may have the right to upgrade to a new device and have the remaining unpaid equipment installmentcontract balance waived, subject to certain conditions, including trading in the original device in good working condition and signing a new equipment installmentcontract. TDS values this trade-in right as a guarantee liability. The guarantee liability is initially measured at fair value and is determined based onassumptions including the probability and timing of the customer upgrad ing to a new device and the fair value of the device being traded-in at the time of trade-in. When a customer exercises the trade-in option, both the outstanding receivable and guarantee liability balances related to the respective device are reducedto z ero, and the value of the used device that is received in the transaction is recognized as inventory. If the customer does not exercise the trade-in option atthe time of eligibility, TDS begins amortizing the liability and records this amortization as ad ditional equipment revenue. As of December 31, 2017 and 2016 ,the guarantee liability related to these plans was $ 15 million and $ 33 million, respectively, and is reflected in Customer deposits and deferred revenues in theConsolidated Balance Sheet.

TDS equipment installment plans do not provide for explicit interest charges. Because equipment instal lment plans have a duration of greater than twelvemonths, TDS imputes interest. TDS records imputed interest as a reduction to the related accounts receivable and recognizes it over the term of the installmentagreement as a component of Service revenues . Equipment installment plan receivables had a weighted average effective imputed interest rate of 12.5% and11.2% as of December 31, 2017 and 2016 , respectively.

The following table summarizes equipment installment plan receivables as of December 31, 2017 and 2016 .

December 31, 2017 2016(Dollars in millions) Equipment installment plan receivables, gross $ 873   $ 628  Deferred interest (80) (53)

Equipment installment plan receivables, net of deferred interest 793   575  Allowance for credit losses (65) (50)

Equipment installment plan receivables, net $ 728   $ 525      Net balance presented in the Consolidated Balance Sheet as:    Accounts receivable — Customers and agents (Current portion) $ 428   $ 345  Other assets and deferred charges (Non-current portion) 300   180  

Equipment installment plan receivables, net $ 728   $ 525   TDS uses various inputs, including internal data, information from the credit bureaus and other sources, to evaluate the credit profiles of its customers. Fromthis evaluation, a credit class is assigned to the customer that determines the number of eligible lines, the amount of credit available, and the down paymentrequirement, if any. Customers assigned to credit classes requiring no down payment represent a lower risk category , whereas those assigned to creditclasses requiring a down payment represent a higher risk category. The balance and aging of the equipment installment plan receivables on a gross basis bycredit category were as follows:

December 31, 2017 December 3 1, 2016 Lower Risk Higher Risk Total Lower Risk Higher Risk Total(Dollars in millions) Unbilled $ 807   $ 20   $ 827   $ 553   $ 38   $ 591  Billed — current 31   1   32   23   2   25  Billed — past due 12   2   14   10   2   12  

Equipment installment planreceivables, gross $ 850   $ 23   $ 873   $ 586   $ 42   $ 628  

70

Table of Contents

The activity in the allowance for credit losses balance for the equipment installment plan receivables was as follows:

2017 2016(Dollars in millions) Allowance for credit losses, beginning of year $ 50   $ 26  Bad debts expense 62   63  Write-offs, net of recoveries (47) (39)Allowance for credit losses, end of year $ 65   $ 50  

TDS recorded out-of-period adjustments in 2016 due to errors related to equipment installment plan transactions occurring in 2015 (2016 EIP adjustments). The2016 EIP adjustments had the impact of increasing Equipment and product sales revenues by $ 2 million, decreasing bad debts expense, which is a componentof Selling, general and administrative expense, by $ 2 million and increasing Income before income taxes by $ 4 million in 2016. Additionally, TDS recorded out-of-period adjustments in 2015 du e to errors related to equipment installment plan transactions (2015 EIP adjustments) that were attributable to 2014. The 2015EIP adjustments had the impact of reducing Equipment and product sales revenues and Income before income taxes by $ 6 million in 2015. TDS hasdetermined that these adjustments were not material to any of the periods impacted.

Note 4 Income TaxesTDS’ current income taxes balances at December 31, 2017 and 2016 , were as follows:

December 31, 2017 2016(Dollars in millions) Federal income taxes receivable (payable) $ (17) $ 7  Net state income taxes receivable 2   3  

Income tax expense (benefit) is summarized as follows:

Year Ended December 31, 2017 2016 2015(Dollars in millions) Current Federal $ 77   $ 17   $ 93   State 13   1   8  Deferred       Federal (366) 20   61   State (3) 2   10   Total income tax expense (benefit) $ (279) $ 40   $ 172  

In December 2017 , the Tax Act was signed into law. TDS adjusts for the effects of changes in tax laws and rates in the period of enactment. The majorprovisions of the Tax Act impacting TDS are the reduction of the U.S. fed eral corporate tax rate from 35% to 21% and the bonus depreciation deductionallowing for full expensing of qualified property additions.

The disclosed amounts within include provisional estimates, pursuant to SEC Staff Accounting Bulletin No. 118, for current and deferred taxes related to taxdepreciation of fixed assets. For property acquired and placed in service after September 27, 2017, the Tax Act provides for full expensing if such property wasnot subject to a written binding agreeme nt in existence as of September 27, 2017. As of December 31, 2017, TDS has not completed a full analysis of allcontracts and agreements related to fixed assets placed in service during 2017, but was able to record a reasonable estimate of the effects of t hese changesbased on capital expenditures made during 2017. TDS expects any final adjustments to the provisional amounts to be recorded by the third quarter of 2018,which could be material to TDS’ financial statements. The accounting for all other applicable provisions of the Tax Act was performed ba sed on TDS’ currentinterpretation of the provisions of the law as enacted as of December 31, 2017.

71

Tab le of Contents

A reconciliation of TDS’ income tax expense computed at the statutory rate to the reported income tax expense, and the statutory federal income tax expenserate to TDS’ effective income tax expense rate is as follows:

Year Ended December 31, 2017 2016 2015 Amount Rate Amount Rate Amount Rate(Dollars in millions) Statutory federal income tax expense and rate $ (43) 35.0   % $ 32   35.0   % $ 152   35.0   %State income taxes, net of federal benefit 1 6   (5.2) 2   2.5   11   2.5   Effect of noncontrolling interests (2) 1.7   (1) (0.8) 3   0.6   Federal income tax rate change 2 (314) 257.5   –   –   –   –   Change in federal valuation allowance 3 (5) 4.3   2   2.6   2   0.5   Goodwill impairment 4 71   (58.2) –   –   –   –   Nondeductible compensation 10   (8.1) 3   2.7   1   0.2   Other differences, net (2) 2.1   2   1.2   3   0.8   Total income tax expense (benefit) and rate $ (279) 229.1   % $ 40   43.2   % $ 172   39.6   %

1 State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to the valuation allowance. 2 Federal income tax rate change due to the Tax Act reducing the federal income tax rate from 35% to 21% and a corresponding reduction to the deferred tax liability.

The amount is slightly different from the total impact of the federal tax rate change becau se the rate change impacts the amount of State income taxes, net of federalbenefit as well as the Change in federal valuation allowance.

3 Change in federal valuation allowance relates primarily to losses incurred by certain entities where realization of deferred tax assets is not "more likely than not." The2017 amount also reflects the revaluation of the federal valuation allowance due to the reduction in federal income tax rate.

4 Goodwill impairment reflects an adjustment to increase income tax expense by $71 million related to a portion of the impaired goodwill that is not amortizable forincome tax purposes. See Note 7 — Intangible Assets for additional information related to the goodwill impairment.

Significant components of TDS’ deferred income tax assets and liabilities at December 31, 2017 and 2016 , were as follows:

December 31, 2017 2016(Dollars in millions) Deferred tax assets Net operating loss (NOL) carryforwards $ 167   $ 145   Stock-based compensation 42   62   Compensation and benefits - other 9   35   Deferred rent 21   23   Other 70   73  Total deferred tax assets 309   338   Less valuation allowance (147) (122)Net deferred tax assets 162   216  Deferred tax liabilities     Property, plant and equipment 368   639   Licenses/intangibles 221   325   Partnership investments 123   173   Total deferred tax liabilities 712   1,137  Net deferred income tax liability $ 550   $ 921      Presented in the Consolidated Balance Sheet as:    Deferred income tax liability, net $ 552   $ 922  Other assets and deferred charges (2) (1) Net deferred income tax liability $ 550   $ 921  

At December 31, 2017 , TDS and certain subsidiaries had $ 2,823 million of state NOL carryforwards (generating a $ 153 million deferred tax asset) availableto offset future taxable income. The state NOL carryforwards expire between 2018 and 2037 . Certain subsidiaries had federal NOL carryforwards (generatinga $ 14 million deferred tax asset) available to offset their future taxable income. The federal NOL carryforwards expire between 2018 and 2037 . A valuationallowance was established for certain state NOL carryforwards and federal NOL carryforwards since it is more likely than not that a portion of such carryforwardswill expire before they can be utilized.

72

Tab le of Contents

A summary of TDS' deferred tax asset valuation allowance is as follows:

2017 2016 2015(Dollars in millions) Balance at beginning of year $ 122   $ 113   $ 114   Charged (credited) to income tax expense 25   9   (1)Balance at end of year $ 147   $ 122   $ 113  

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

2017 2016 2015(Dollars in millions) Unrecognized tax benefits balance at beginning of year $ 42   $ 39   $ 38   Additions for tax positions of current year 6   11   7   Additions for tax positions of prior years 1   3   2   Reductions for tax positions of prior years (1) (1) (2) Reductions for settlements of tax positions –   –   (1) Reductions for lapses in statutes of limitations (2) (10) (5)Unrecognized tax benefits balance at end of year $ 46   $ 42   $ 39  

Unrecognized tax benefits are included in Accrued taxes and Other deferred liabilities and credits in the Consolidated Balance Sheet. If these benefits wererecognized, they would have reduced income tax expense in 2017 , 2016 and 2015 by $ 37 million , $ 28 million and $ 26 million , respectively, net of the federalbenefit from state income taxes.

TDS recognizes accrued interest and penalties related to unrecognized tax benefits in Income tax expense (benefit) . The amounts charged to income taxexpense related to inter est and penalties resulted in an expense of $ 3 million in 2017 , a benefit of $ 1 million in 2016 and an expense of $ 1 million in 2015 . Net accrued liabilities for interest and penalties were $ 19 million and $ 15 million at December 31, 2017 and 2016 , respectively, and are included in Otherdeferred liabilities and credits in the Consolidated Balance Sheet.

TDS and its subsidiaries file federal and state income tax returns. With only limited exceptions, TDS is no longer subject to federal and state income tax auditsfor the years prior to 2013 .

73

Table of Contents

Note 5 Earnings Per ShareBasic earnings per share available to TDS common shareholders is computed by dividing Net income available to TDS common shareholders by the weightedaverage number of common shares outstanding during the period. Dilute d earnings per share available to TDS common shareholders is computed by dividingNet income available to TDS common shareholders by the weighted average number of common shares outstanding during the period adjusted to include theeffects of potentially d ilutive securities. Potentially dilutive securities primarily include incremental shares issuable upon the exercise of outstanding stockoptions and the vesting of performance and restricted stock units.

The amounts used in computing earnings per common s hare and the effects of potentially dilutive securities on the weighted average number of commonshares were as follows:

Year Ended December 31, 2017 2016 2015(Dollars and shares in millions, except earnings per share) Basic earnings per share available to TDS common

shareholders: Net income available to TDS common shareholders used in basic earnings per share $ 153  

$ 43  

$ 219  

Adjustments to compute diluted earnings:       Noncontrolling interest adjustment –   –   (1)Net income available to TDS common shareholders

$ 153  

$ 43  

$ 218  used in diluted earnings per share      Weighted average number of shares used in basic      

earnings per share:       Common Shares 104   103   102   Series A Common Shares 7   7   7   Total 111   110   109        Effects of dilutive securities 1   1   1  Weighted average number of shares used in diluted

earnings per share 112   111   110        Basic earnings per share available to TDS common      

shareholders $ 1.39   $ 0.39   $ 2.02        Diluted earnings per share available to TDS common      

shareholders $ 1.37   $ 0.39   $ 1.98   Certain Common Shares issuable upon the exercise of stock options, vesting of performance and restricted stock units or conversion of preferred shares werenot included in average diluted shares outsta nding for the calculation of Diluted earnings per share available to TDS common shareholders because theireffects were antidilutive. The number of such Common Shares excluded was 4 million shares, 4 million shares and 5 million shares for 2017 , 2016 , and 2015 ,respectively.

74

Table of Contents

Note 6 Acquisitions, Divestitures and ExchangesCable Acquisitions

In 2017, TDS acquired substantially all of the assets of several small tuck-in cable companies for $ 29 million in cash. The allocations of the purchase price forthese acquisitions were as follows:

Allocation of Purchase Price

Purchase

Price 1 Goodwill 2 Franchise

Rights

Intangible AssetsSubject to

Amortization 3 Net Tangible

Assets/(Liabilities)(Dollars in millions) TDS Telecom cable business $ 29   $ 5   $ 11   $ 1   $ 12    

1 Cash amounts paid for acquisitions may differ from the purchase price due to cash acquired in the transactions and the timing of cash payments related to therespective transactions.

2 The ent ire amount of Goodwill acquired in 2017 was amortizable for income tax purposes.

3 In 2017 , at the date of acquisition, the weighted average amortization period for Intangible Assets Subject to Amortization acquired was 3.6 years for TDS Telecom's

cable business.

Other Acquisitions, Divestitures and Exchanges

In July 2016, the FCC announced U.S. Cellular as a qualified bidder in the FCC’s forward auction of 600 MHz spectrum licenses, referred to as Auction 1002. Prior to commencement of the forward auction, U.S. Cellular made an upfront payment to the FCC of $ 143 m illion in June 2016 to establish its initial biddingeligibility. In April 2017, the FCC announced by way of public notice that U.S. Cellular was the winning bidder for 188 licenses for an aggregate purchase priceof $ 329 million. U.S. Cellular paid the remaining $ 186 million to the FCC and was granted the licenses during the second quarter of 2017.

In March 2016, U.S. Cellular entered into an agreement with a thir d party to transfer FCC licenses in non-operating markets and receive FCC licenses inoperating markets. The agreement provided for the transfer of certain AWS and PCS spectrum licenses to U.S. Cellular in exchange for U.S. Cellulartransferring certain P CS spectrum licenses with a carrying value of $ 8 million and $ 1 million of cash to the third party. This transaction closed in the fourthquarter of 2016, at which time U.S. Cellular recorded a gain of $ 3 million.

In February 2016, U.S. Cellular entered into an agreement with a third party to exchange certain 700 MHz licenses for certain AWS and PCS licenses and $ 28million of c ash. This license exchange was accomplished in two closings. The first closing occurred in the second quarter of 2016, at which time U.S. Cellularreceived $ 13 million of cash and recorded a gain of $ 9 million. The second closing occurred in the first quarter of 2017 at which time U.S. Cellular received $15million of cash and recorded a gain of $ 17 million.

In February 2016, U.S. Cellular entered into an additional agreemen t with a third party that provided for the transfer of certain AWS spectrum licenses and $ 2million in cash to U.S. Cellular, in exchange for U.S. Cellular transferring certain AWS, PCS and 700 MHz licenses with a carrying value of $ 7 million to the thirdparty. This transaction closed in the third quarter of 2016, at which time U.S. Cellular recorded a gain of $ 7 million.

In 2015 and 2016, U.S. Cellular entered into multiple agreements to purchase spectrum licenses located in U.S. Cellular’s existing operating markets. Theaggregate purchase price for these spectrum licenses is $ 57 million, of which $ 53 mill ion closed in 2016 and $3 million closed in 2017. The remainingagreement is expected to close in early 2018.

In 2015, TDS sold certain Wireline markets for $ 26 million, including working capital adjustments, and recognized aggr egated gains of $ 10 million.

In March 2015, U.S. Cellular exchanged certain of its unbuilt PCS licenses for certain other PCS licenses located in U.S. Cellular’s existing operating marketsand $ 117 million of cash. As of the transaction date, the licenses received in the transaction had an estimated fair value, per a market approach, of $ 43million. A gain of $ 125 million was recorded in (Gain) loss on license sales and exchanges, net in the Consolidated Statement of Operations in the first quarterof 2015.

U.S. Cellular participated in Auction 97 indirectly through its limited partnership interest in Advantage Spectrum. Advantage Spe ctrum was the provisionalwinning bidder for 124 licenses for an aggregate winning bid of $ 338 million, after its designated entity discount of 25 %. Advantage Spectrum’s bid amount,less the upfront payment of $ 60 million paid in 2014, was paid to the FCC in March 2015. These licenses were granted by the FCC in July 2016. See Note 14— Variable Interest Entities for additional information.

75

Table of Contents

In December 2014, U.S. Cellular entered into an agreement with a third party to sell 595 towers and certain related contracts, assets, and liabilities for $159million. This agreement and related transactions were accomplished in two closings. The first closing occurred in December 2014 and included the sale of 236towers, without tenants, for $10 million. On this same date, U.S. Cellular received $8 million in earnest money . At the time of the first closing, a $ 5 million gainwas recorded. The second closing for the remaining 359 towers, primarily with tenants, took place in January 2015, at which time U.S. Cellular received $142million in additional cash proceeds and TDS recorded a gain of $1 20 million in (Gain) loss on sale of business and other exit costs, net.

In September 2014, U.S. Cellular entered into an agreement with a third party to exchange certain PCS and AWS licenses for certain other PCS and AWSlicenses and $28 million of cash. This lic ense exchange was accomplished in two closings. The first closing occurred in December 2014 at which time U.S.Cellular transferred licenses to the counterparty with a net book value of $11 million, received licenses with an estimated fair value, per a ma rket approach, of$52 million, recorded a $22 million gain and recorded an $18 million deferred credit in Other current liabilities. The license that was transferred to thecounterparty in the second closing had a net book value of $22 million. The secon d closing occurred in July 2015. At the time of the second closing, U.S.Cellular received $28 million in cash and recognized the deferred credit from the first closing resulting in a total gain of $24 million recorded on this part of thelicense exchange .

Note 7 Intangible AssetsActivity related to TDS’ Licenses, Goodwill and Franchise rights is presented below. See Note 6 — Acquisitions, Divestitures and Exchanges for informationregarding transactions which affected these intangible assets during the periods. Prior to 2009, TDS accounted for U.S. Cellular’s share repurchases as stepacquisitions, allocating a portion of the share repurchase value to TDS’ Licenses and Goodwill. Further, a goodwill impairment loss on the U.S. Cellularreporting unit was recognized in 2003 at TDS but not at U.S. Cellular. Consequently, U.S. Cellular’s Licenses and Goodwill on a stand-alone basis do not equalthe TDS consolidated Licenses and Goodwill related to U.S. Cellular.

Licenses U.S. Cellular Wireline Cable Total(Dollars in millions) Balance at December 31, 2015 $ 1,838   $ 3   $ 3   $ 1,844   Acquisitions 53   –   –   53   Transferred to Assets held for sale (8) –   –   (8) Divestitures –   (1) –   (1) Exchanges - Licenses received 25   –   –   25   Exchanges - Licenses surrendered (18) –   –   (18)Balance at December 31, 2016 1,890   2   3   1,895   Acquisitions 331   –   –   331   Transferred to Assets held for sale (10) –   –   (10) Exchanges - Licenses received 25   –   –   25   Exchanges - Licenses surrendered (9) –   –   (9)Balance at December 31, 2017 $ 2,227   $ 2   $ 3   $ 2,232  

Goodwill U.S. Cellular Wireline Cable HMS Total(Dollars in millions) Bala nce at December 31, 2015 $ 227   $ 409   $ 95   $ 35   $ 766   Other –   –   –   –   –  Balance at December 31, 2016 227   409   95   35   766   Acquisitions –   –   5   –   5   Loss on impairment (227) –   –   (35) (262)Balance at December 31, 2017 $ –   $ 409   $ 100   $ –   $ 509  

Accumulate d impairment losses in prior periods were $ 334 million for U.S. Cellular, $ 29 million for Wireline, $ 84 million for HMS, and $ 4 million for Corporateand Other.

76

Table of Contents

Goodwill Interim Impairment Assessment

U.S.Cellular

U.S. Cellular operates in an intensely competitive wireless industry environment and has experienced declining service revenues in recent periods. Based onrecent 201 7 developments, including wireless expansion plans announced by other companies and the results of the FCC’s forward auction of 600 MHzspectrum licenses and other FCC actions, U.S. Cellular anticipates increased competition for customers in its primary op erating markets from new and existingmarket participants over the long term. In addition, the widening adoption of unlimited data plans and other data pricing constructs across the industry, includingU.S. Cellular’s introduction of unlimited plans earli er in 2017, may limit the industry’s ability to monetize future growth in data usage. These factors whenassessed and considered as part of U.S. Cellular’s annual planning process conducted in the third quarter of each year caused management to revise its long-range financial forecast in the third quarter of 2017. Based on the factors noted above, management identified a triggering event and performed a quantitativegoodwill impairment test on an interim basis.

TDS used a one-step quantitative approach that compared the fair value of the U.S. Cellular reporting unit to its carrying value. A discounted cash flowapproach was used to value the reporting unit, using value drivers and risks specific to U.S. Cellular and the industry and current economic fac tors. The cashflow estimates incorporated certain assumptions that market participants would use in their estimates of fair value and may not be indicative of U.S. Cellularspecific assumptions. However, the discount rate used in the analysis considers any additional risk a market participant might place on integrating the U.S.Cellular reporting unit into its operations.

The results of the interim goodwill impairment test indicated that the carrying value of the U.S. Cellular reporting unit exceeded i ts fair value. Therefore, TDSrecognized a loss on impairment of goodwill of $227 million to reduce the carrying value of goodwill for the U.S. Cellular reporting unit to zero in the third quarterof 2017.

HMS

HMS has continued to experience slower than e xpected service revenue growth in 2017 due primarily to the competitive nature of the hosted and managedservices industry, and the portfolio of services offered by HMS compared to the industry overall. Further, revenue mix has been trending towards a hig herproportion of lower margin revenue streams. These factors when assessed and considered as part of its annual planning process caused HMS management torevise its long-range forecast in the third quarter of 2017. Based on the factors noted above, mana gement identified a triggering event and performed aquantitative goodwill impairment test on an interim basis. No other triggering events for indefinite-lived intangible assets or long-lived assets were identified.

TDS used a one-step quantitative approach that compared the fair value of the HMS reporting unit to its carrying value. TDS used the discounted cash flowapproach and guideline public company method to value the HMS reporting unit. The discounted cash flow approach uses value drivers an d considers risksspecific to the industry as well as current economic factors. The guideline public company method develops an indication of fair value by calculating averagemarket pricing multiples for selected publicly-traded companies. The developed multiples were applied to applicable financial measures of the HMS reportingunit to determine fair value. The discounted cash flow approach and guideline public company method were weighted to arrive at the total fair value used forimpairment testing. The weighting of methods was consistently applied in both 2017 and 2016.

The results of the interim goodwill impairment test indicated that the carrying value of the HMS reporting unit exceeded its fair value. Therefore, TDS recognizeda loss on impairme nt of goodwill of $35 million to reduce the carrying value of goodwill for the HMS reporting unit to zero in the third quarter of 2017.

Franchise Rights

Franchise rights were $ 255 million and $ 244 million as of December 31, 2017 and 2016 , respectively. The increase in Franchise rights was due primarily tothe acquistion of several small cable companies during 2017. See Note 6 — Acquisitions, Divestitures and Exchanges for further information.

77

Table of Contents

Note 8 Inv estments in Unconsolidated EntitiesInvestments in unconsolidated entities consist of amounts invested in wireless and wireline entities in which TDS holds a noncontrolling interest. Theseinvestments are accounted for using either the equity or cost m ethod as shown in the following table:

December 31, 2017 2016(Dollars in millions) Equity method investments:

Capital contributions, loans, advances and adjustments $ 116   $ 118  Cumulative share of income 1,753   1,613  Cumulative share of distributions (1,434) (1,298)

Total equity method investments 435   433  Cost method investments 18   18  Total investments in unconsolidated entities $ 453   $ 451  

The following tables, which are based on information provided in part by third parties, summarize the combined assets, liabilities and equity, and results ofoperations of TDS’ equity method investments:

December 31, 2017 2016(Dollars in millions) Assets  

Current $ 705   $ 776  Due from affiliates 323   386  Property and other 4,852   4,666  

Total assets $ 5,880   $ 5,828      

Liabilities and Equity    Current liabilities $ 436   $ 468  Deferred credits 181   189  Long-term liabilities 208   197  Long-term capital lease obligations 1   6  Partners’ capital and shareholders’ equity 5,054   4,968  

Total liabilities and equity $ 5,880   $ 5,828   Year Ended December 31, 2017 2016 2015(Dollars in millions) Results of Operations

Revenues $ 6,585   $ 6,769   $ 6,979  Operating expenses 4,985   5,068   5,245  Operating income 1,600   1,701   1,734  Other income (expense), net (3) (13) (9)Net income $ 1,597   $ 1,688   $ 1,725  

78

Table of Contents

Note 9 Property, Plant and EquipmentTDS’ Property, plant and equipment in service and under construction, and related accumulated depreciation and amortization, as of December 31, 2017 a nd2016 , were as follows:

Useful Lives December 31, (Years) 2017 2016(Dollars in millions) Land N/A $ 55   $ 54  Buildings 5-40 519   511  Leasehold and land improvements 1-30 1,214   1,188  Cable and wire 15-35 1,802   1,740  Network and switching equipment 3-13 2,361   2,348  Cell site equipment 7-25 3,411   3,383  Office furniture and equipment 3-10 480   508  Other operating assets and equipment 3-12 194   187  System development 1-7 1,387   1,523  Work in process N/A 319   237  

Total property, plant and equipment, gross 11,742   11,679  Accumulated depreciation and amortization (8,318) (8,124)

Total property, plant and equipment, net $ 3,424   $ 3,555   Depreciation and amortization expense totaled $ 817 million, $ 820 million and $ 811 million in 2017 , 2016 and 2015 , respectively. In 2017 , 2016 and 2015 ,(Gain) loss on asset disposals, net included charges of $ 21 million, $ 27 million and $ 22 million, respectively, related to disposals of assets, trade-ins o f olderassets for replacement assets and other retirements of assets from service in the normal course of business.

During 2016, TDS recorded an out-of-period adjustment attributable to 2014 and 2015 related to the over-depreciation of certain assets in the Wireline segment. TDS has determined that this adjustment was not material to the prior annual periods and also was not material to 2016 results. As a result of this out-of-periodadjustment, Depreciation, amortization and accretion expense decreased by $4 million in 2016. This adjustment was made in the second quarter of 2016.

Note 10 Asset Retirement ObligationsU.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, swi tching office sites, retail store sites and office locations in itsoperating markets. Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-leaseconditions.

TDS Telecom owns poles, cable and wire and certain buildings and also leases data center and office space and property used for housing central officeswitching equipment and fiber cable. These assets and leases often have removal or remediation requirements associated wit h them. For example, TDSTelecom’s poles, cable and wire are often located on property that is not owned by TDS Telecom and may be subject to the provisions of easements, permits, orleasing arrangements. Pursuant to the terms of the permits, easements, or leasing arrangements, TDS Telecom is often required to remove these assets andreturn the property to its original condition at some defined date in the future.

Asset retirement obligations are included in Other deferred liabilities and credits in the Con solidated Balance Sheet.

In 2017 and 2016 , U.S. Cellular and TDS Telecom performed a review of the assumptions and estimated costs related to asset ret irement obligations. Theresults of the reviews (identified as Revisions in estimated cash outflows) and other changes in asset retirement obligations during 2017 and 2016 , were asfollows:

2017 2016

(Dollars in millions) Balance at beginning of year $ 266   $ 243   Additional liabilities accrued 1   1   Revisions in estimated cash outflows (1) 7   Acquisition of assets 1   –   Disposition of assets (1) (1) Accretion expense 17   16  Balance at end of year $ 283   $ 266      

79

Table of Contents

Note 11 DebtRevolving Credit Facilities

At December 31, 2017 , TDS and U.S. Cellular had revolving credit facilities available for general corporate purposes, including acquisitions, spectrumpurchases and capital expenditures. Amounts under the revolving credit facilities may be borrowed, repaid and reborrowed fro m time to time until maturity inJune 2021. As of December 31, 2017 , there were no outstanding borrowings under the revolving credit facilities, except for letters of credit. Interest expenserepresen ting commitment fees on the unused portion of the revolving lines of credit was $ 2 million in each of 2017 , 2016 and 2015 . The commitment fees arebased on the unsecured senior debt ratings assigned to TDS and U.S. Cellular by certain ratings agencies.

The following table summarizes the revolving credit facilities as of December 31, 2017 :

TDS U.S. Cellular (Dollars in millions) Maximum borrowing capacity $ 400   $ 300   Letters of credit outstanding $ 1   $ 2   Amount borrowed $ –   $ –   Amount available for use $ 399   $ 298  

Borrowings under the revolving credit facilities bear interest either at a LIBOR rate plus 1.75% or at an alternative Base Rate as defined in the revolving creditagreement plus 0.75%, at TDS’ or U.S. Cellular’s option. TDS and U.S. Cellular may select a borrowing period of either one, two, three or six months (or otherperiod of twelve months or less if requested by TDS or U.S. Cellular and approved by the lenders). TDS’ and U.S. Cellular’s credit spread and commitment feeson their revolving credit faci lities may be subject to increase if their current credit ratings from nationally recognized credit rating agencies are lowered, and maybe subject to decrease if the ratings are raised.

In connection with U.S. Cellular’s revolving credit facility, TDS a nd U.S. Cellular entered into a subordination agreement dated June 15, 2016, together with theadministrative agent for the lenders under U.S. Cellular’s revolving credit agreement. Pursuant to this subordination agreement, (a) any consolidated funded indebtedness from U.S. Cellular to TDS will be unsecured and (b) any (i) consolidated funded indebtedness from U.S. Cellular to TDS (other than “refinancingindebtedness” as defined in the subordination agreement) in excess of $105 million and (ii) refinancin g indebtedness in excess of $250 million will besubordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under U.S. Cellular’s revolving credit agreement. As ofDec ember 31, 2017 , U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the revolvingcredit agreement pursuant to the subordination agreement.

The continued availability of the revolving cr edit facilities requires TDS and U.S. Cellular to comply with certain negative and affirmative covenants, maintaincertain financial ratios and make representations regarding certain matters at the time of each borrowing. TDS and U.S. Cellular believe the y were incompliance as of December 31, 2017 , with all covenants and other requirements set forth in the revolving credit facilities.

The revolving credit agreements include the following financial covenants:

Conso lidated Interest Coverage Ratio may not be less than 3.00 to 1.00 as of the end of any fiscal quarter.

Consolidated Leverage Ratio may not be greater than the ratios indicated as of the end of any fiscal quarter for each period specified below:

Period Ratios From the agreement date of June 15, 2016 through June 30, 2019 3.25 to 1.00 From July 1, 2019 and thereafter 3.00 to 1.00

Certain TDS and U.S. Cellular wholly-owned subsidiaries have jointly and severally unconditionally guaranteed the payment and performance of the obligationsof TDS and U.S. Cellular under the revolving credit agreements pursuant to a guaranty dated June 15 , 2016. Other subsidiaries that meet certain criteria will berequired to provide a similar guaranty in the future. TDS and U.S. Cellular believe that they were in compliance with all of the financial and other covenants andrequirements set forth in the ir revolving credit facilities as of December 31, 2017 .

80

Table of Contents

Term Loan

In July 2015, U.S. Cellular borrowed $225 million on a senior term loan credit facility in two separate draws. This facility was entered into in Ja nuary 2015 andamended and restated in June 2016. The interest rate on outstanding borrowings is reset at three and six month intervals at a rate of LIBOR plus 250 basispoints. This credit facility provides for the draws to be continued on a long-term b asis under terms that are readily determinable. U.S. Cellular has the abilityand intent to carry the debt for the duration of the agreement. Principal reductions are due and payable in quarterly installments of $3 million beginning in March2016 through December 2021, and the remaining unpaid balance will be due and payable in January 2022. The senior term loan credit facility contains financialcovenants and subsidiary guarantees that are consistent with the revolving credit agreements described above. This facility was entered into for generalcorporate purposes, including working capital, spectrum purchases and capital expenditures. U.S. Cellular believes that it was in compliance with all of thefinancial and other covenants and requirements set fo rth in its term loan credit facility as of December 31, 2017 .

In connection with U.S. Cellular’s term loan credit facility, TDS and U.S. Cellular entered into a subordination agreement in June 2016 together with th eadministrative agent for the lenders under U.S. Cellular’s term loan credit agreement, which is substantially the same as the subordination agreement for U.S.Cellular as described above under the “Revolving Credit Facilities.” As of December 31, 2017 , U.S. Cellular had no outstanding consolidated fundedindebtedness or refinancing indebtedness that was subordinated to the term loan facility pursuant to this subordination agreement.

Receivables Securitization Fac ility

In December 2017, U.S. Cellular, through its subsidiaries, entered into a $200 million credit facility to permit securitized borrowings using its equipmentinstallment receivables for general corporate purposes, including acquisitions, spectrum purch ases and capital expenditures. In connection with the receivablessecuritization facility, U.S. Cellular formed a wholly-owned subsidiary, USCC Master Note Trust (Trust), which qualifies as a bankruptcy remote entity. Under theterms of the facility, U.S . Cellular, through its subsidiaries, transfers eligible equipment installment receivables to the Trust. The Trust then utilizes thetransferred assets as collateral for notes payables issued to third party financial institutions. Since U.S. Cellular ret ains effective control of the transferredassets in the Trust, any activity associated with this receivables securitization facility will be treated as a secured borrowing. Therefore, TDS will continue toreport equipment installment receivables and any r elated balances on the Consolidated Balance Sheet. Cash received from borrowings under the receivablessecuritization facility will be reported as Debt. Refer to Note 14 — Variable Interes t Entities for additional information.

U.S. Cellular entered into a performance guaranty whereby U.S. Cellular guarantees the performance of certain wholly-owned subsidiaries of U.S. Cellular underthe receivables securitization facility. Amounts under the receivables securitization facility may be borrowed, repaid and re borrowed from time to time untilmaturity in December 2019, which may be extended from time to time as specified therein. As of December 31, 2017 , there were no outstanding borrowingsunder the receivables securitization facility, and the entire unused capacity of $200 million was available, subject to sufficient collateral to satisfy the assetborrowing base provisions of the facility. As of D ecember 31, 2017, the Trust held less than $1 million of assets available to be pledged as collateral for thereceivables securitization facility .

The continued availability of the receivables securitization facility requires U.S. Cellular to comply with c ertain negative and affirmative covenants, maintaincertain financial ratios and provide representations on certain matters at the time of each borrowing. The covenants include the same financial covenants forU.S. Cellular as described above under the “R evolving Credit Faci lity .” TDS believes that U.S. Cellular was in compliance as of December 31, 2017 , with allof the financial covenants and requirements set forth in its receivables secur itization facility.

81

Table of Contents

Other Long-Term Debt

Long-term debt as of December 31, 2017 and 2016 , was as follows:

December 31, 2017 December 31, 2016

Issuance

dateMaturity

date

Calldate (anytime onor after)

PrincipalAmount

LessUnamortized

discountand debtissuance

costs

Total

PrincipalAmount

LessUnamortized

discountand debtissuance

costs Total(Dollars in millions) TDS: Unsecured Senior Notes

6.625%

March2005

March2045

March2010 $ 116   $ 3   $ 113   $ 116   $ 3   $ 113  

6.875%

Nov2010

Nov2059

Nov2015 225   7   218   225   7   218  

7.000%

March2011

March2060

March2016 300   9   291   300   10   290  

5.875%

Dec2012

Dec2061

Dec2017 195   7   188   195   7   188  

Purchasecontract

Oct2001

Oct2021 –   –   –   1   –   1  

Total Parent $ 836   $ 26   $ 810   $ 837   $ 27   $ 810  Subsidiaries:     U.S. Cellular     Unsecured Senior Notes    

6.700%

Dec 2003and

June 2004Dec2033

Dec 2003and

June 2004 $ 544   $ 15   $ 529   $ 544   $ 15   $ 529  

6.950%

May2011

May2060

May2016 342   11   331   342   11   331  

7.250%

Dec2014

Dec2063

Dec2019 275   10   265   275   10   265  

7.250%

Nov2015

Dec2064

Dec2020 300   10   290   300   10   290  

TermLoan

Jul2015

Jan2022 203   2   201   214   2   212  

Capital lease obligations 4   –   4   2   –   2   Installment payment agreement 21   1   20   –   –   –   TDS Telecom             Rural Utilities Service (RUS) and other notes –   –   –   1   –   1   Capital lease obligations 1   –   1   1   –   1   Installment payment agreement 2   –   2   –   –   –   Other            

Long-term notes Through

2021 4   –   4   4   –   4   Total Subsidiaries 1,696   49   1,647   1,683   48   1,635  Total long-term debt $ 2,532   $ 75   $ 2,457   $ 2,520   $ 75   $ 2,445   Long-term debt, current     $ 20       $ 12   Long-term debt, noncurrent   $ 2,437       $ 2,433  

TDS may redeem its callable notes and U.S. Cellular may redeem its 6.95% Senior Notes, 7.25% 2063 Senior Notes and 7.25% 2064 Senio r Notes, in whole orin part at any time after the respective call date, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest. U.S.Cellular may redeem the 6.7% Senior Notes, in whole or in part, at any tim e prior to maturity at a redemption price equal to the greater of (a) 100% of theprincipal amount of such notes, plus accrued and unpaid interest, or (b) the sum of the present values of the remaining scheduled payments of principal andinterest thereon d iscounted to the redemption date on a semi-annual basis at the Treasury Rate plus 30 basis points.

Interest on the Senior Notes outstanding at December 31, 2017 , is payable quarterly, with the exception of U.S. Cel lular's 6.7% Senior Notes for which interestis payable semi-annually.

82

Table of Contents

The annual requirements for principal payments on long-term debt are approximately $ 21 million for each of the years 20 18 through 2020, and $ 13 million and$ 158 million for the years 2021 and 2022 , respectively.

The covenants associated with TDS and its subsidiaries’ long-term debt obligations, among other things, restrict TDS’ ability, subject to certain exclusions, toincur additional liens, enter into sale and leaseback transactions, and sell, consolidate or me rge assets.

TDS’ and U.S. Cellular’s long-term debt notes do not contain any provisions resulting in acceleration of the maturities of outstanding debt in the event of achange in TDS’ or U.S. Cellular’s credit rating. However, a downgrade in TDS’ or U.S. Cellular’s credit rating could adversely affect its ability to obtain long-termdebt financing in the future.

Note 12 Employee Benefit PlansDefined Contribution Plans

TDS sponsors a qualified noncontributory defined contribution pension plan. The plan provides benefits for certain employees of TDS Corporate, TDS Telecomand U.S. Cellular. Under this plan, pension costs are calculated separately for each participant and are funded annually. Total pension cos ts were $ 16million, $ 17 million and $ 16 million in 2017 , 2016 and 2015 , respectively. In addition, TDS sponsors a defined contribution retirement savings plan ( 401(k) )plan. Total costs incurred from TDS’ contributions to the 401(k) plan were $ 27 million in 2017 and 2016 , and $ 26 million in 2015 .

TDS also sponsors an unfunded nonqualified deferred supplemental executive retir ement plan for certain employees to offset the reduction of benefits causedby the limitation on annual employee compensation under the tax laws.

Other Post-Retirement Benefits

TDS sponsors a defined benefit post-retirement plan that provides medical benef its to retirees and that covers certain employees of TDS Corporate and TDS Telecom , which is not significant to TDS’ financial position or operating results . The plan is contributory, with retiree contributions adjusted annually. TDSrecognizes the funde d status of the plan as a component of Other assets and deferred charges in the Consolidated Balance Sheet as of December 31, 2017and 2016 . Changes in the funded status are included in Accumulated other comprehensive income (loss) in the Consolidated Balance Sheet before affectingsuch amounts for income taxes to the extent that such changes are not recognized in earnings as a component of net periodic benefit cost.

The post-retirement benefit fund invests mainly in mutual funds that hold U.S. equities, international equities, and debt securities. The post-retirement benefitfund does not hold any debt or equity securities issued by TDS, U.S. Cellular or any related parties . The fair value of the plan assets of the post-retirementbenefit fund was $ 59 million and $ 52 million as of December 31, 201 7 and 2016 , respectively. The total plan benefit obligations were $ 45 million and $ 39million as of December 31, 2017 and 2016 , respectively. Therefore, the total funded status was an asset of $ 14 million and $ 13 million as of December 31,2017 and 2016 , respectively.

TDS is not required to set aside current funds for its future retiree health insurance benefits. The decision to contribute to the plan assets is based upon severalfactors, i ncluding the funded status of the plan, market conditions, alternative investment opportunities, tax benefits and other circumstances. In accordancewith applicable income tax regulations, annual contributions to fund the costs of future retiree medical b enefits may not exceed certain thresholds. TDS has notdetermined whether it will make a contribution to the plan in 2018 .

Note 13 Commitments and ContingenciesPurchase Obligations

TDS has obligations payable under non-cancellable contracts, commitments for device purchases, network facilities and transport services, agreements forsoftware licensing, long-term marketi ng programs, as well as certain agreements to purchase goods or services. Where applicable, TDS calculates itsobligation based on termination fees that can be paid to exit the contract. Future minimum payments required under these commitments are as fol lows:

Purchase Obligations(Dollars in millions) 2018 $ 1,258  2019 671  2020 79  2021 45  2022 22  Thereafter 35  Total $ 2,110  

83

Table of Contents

Leases

TDS and its subsidiaries have leases for certain plant facilities, office space, retail store sites, cell sites, data centers and data-processing equipment which areaccounted for as operating leases. Certain leases have renewal options and/or fixed rental increases. Renewal options that are reasonably assured of exerciseare included in determining the lease term. Any rent abatements or lease incentives, in addition to fixed rental increases, are included in the calculation of rentexpense and calculated on a straight-line basis over the defined lease term. For 2 017 , 2016 and 2015 , rent expense for noncancellable long-term leases was$ 183 million, $ 177 million and $ 168 million, respectively; and rent expense under cancellable short-term leases was $ 12 million, $ 12 million and $ 11million, respectively.

TDS and its subsidiaries are also the lessors for tower and colocation space and certain plant facilities which are accounted for as operating leases. The leasedassets are included in Property, plant and equipme nt on the Consolidated Balance Sheet.

As of December 31, 2017 , future minimum rental payments required under operating leases and rental receipts expected under operating leases that havenoncancellable lease terms in excess of one year were as follows:

Operating Leases

Operating Leases

Future Minimum Future MinimumRental Payments Rental Receipts

(Dollars in millions) 2018 $ 160   $ 80  2019 149   62  2020 136   35  2021 121   22  2022 106   9  Thereafter 766   6  Total $ 1 ,438   $ 216  

Indemnifications

TDS enters into agreements in the normal course of business that provide for indemnification of counterparties. The terms of the indemnifications vary byagreement. The events or circumstances that would require TDS to perform under t hese indemnities are transaction specific; however, these agreements mayrequire TDS to indemnify the counterparty for costs and losses incurred from litigation or claims arising from the underlying transaction. TDS is unable toestimate the maximum poten tial liability for these types of indemnifications as the amounts are dependent on the outcome of future events, the nature andlikelihood of which cannot be determined at this time. Historically, TDS has not made any significant indemnification payments under such agreements.

Legal Proceedings

TDS is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts. If TDS believes that a loss arising from such legal p roceedings is probable and can be reasonably estimated, an amount is accrued in the financial statementsfor the estimated loss. If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within tha t range isbetter than another, the low end of the range is accrued. The assessment of the expected outcomes of legal proceedings is a highly subjective process thatrequires judgments about future events. The legal proceedings are reviewed at least quar terly to determine the adequacy of accruals and related financialstatement disclosures. The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements.

TDS has accrued $1 million and less than $1 milli on with respect to legal proceedings and unasserted claims as of December 31, 2017 and 2016 , respectively. TDS has not accrued any amount for legal proce edings if it cannot estimate the amount of the possible loss or range of loss. TDS is unable to estimate anycontingent loss in excess of the amounts accrued.

84

Table of Contents

Note 14 Variable Interest EntitiesConsolidated VIEs

TDS consolidates variable interest entities (VIEs) in which it has a controlling financial interest as defined by GAAP and is therefore deemed the primarybeneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impacteconomic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE. TDS r eviews these criteriainitially at the time it enters into agreements and subsequently when events warranting reconsideration occur. These VIEs have risks similar to those describedin the “Risk Factors” in TDS’ Form 10-K for the year ended December 31, 2017 .

During 2017, U.S. Cellular formed USCC EIP LLC (Seller/Sub-Servicer), USCC Receivables Funding LLC (Transferor) and the Trust , special purpose entities(SPEs), to facilitate a securitized borrowing using its equipment installment plan receivables. Under a Receivables Sale Agreement, U.S. Cellular wholly-owned,majority-owned and unconsolidated entities, collectively referred to as “affiliated entities”, transfer device equipment installment contracts to USCC EIP LLC. The Seller/Sub-Servicer will aggregate device equipment installment plan contracts, perform servicing, collection and all other administrative activities related toaccounting for equipment installment plan contracts. The Seller/Sub-Servicer wil l sell the eligible equipment installment plan receivables to the Transferor, abankruptcy remote entity, which will subsequently sell the receivables to the Trust. The Trust, which is bankruptcy remote and isolated from the creditors of U.S.Cellular, wi ll be responsible for issuing asset-backed variable funding notes (Notes), which are collateralized by the equipment installment plan receivablesowned by the Trust. Given that U.S. Cellular has the power to direct the activities of these SPEs, and that t hese SPEs lack sufficient equity to finance theiractivities, U.S. Cellular is deemed to have a controlling financial interest in the SPEs and, therefore, consolidates them. All transactions with third parties (e.g.issuance of the asset-backed variable f unding notes) will be accounted for as a secured borrowing due to the pledging of equipment installment contracts ascollateral, significant continuing involvement in the transferred assets , subordinated interests of the cash flows, and continued evidence of control of thereceivables. Refer to Note 11 — Debt, Receivable s Securitization Facility for additional details regarding the securitization facility for which these entities wereestablished.

The following VIEs were formed to participate in FCC a uctions of wireless spectrum and to fund, establish, and provide wireless service with respect to any FCClicenses won in the auctions:

Advantage Spectrum, L.P. (Advantage Spectrum) and Sunshine Spectrum, Inc. (Sunshine Spectrum), the general partner of Ad vantage Spectrum (formergeneral partner was Frequency Advantage, L.P. (Frequency Advantage));Aquinas Wireless, L.P. (Aquinas Wireless); andKing Street Wireless, L.P. (King Street Wireless) and King Street Wireless, Inc., the general partner of King Str eet Wireless.

These particular VIEs are collectively referred to as designated entities. The power to direct the activities that most significantly impact the economicperformance of these VIEs is shared. Specifically, the general partner of these VIEs has the exclusive right to manage, operate and control the limitedpartnerships and make all decisions to carry on the business of the partnerships. The general partner of each partnership needs the consent of the limitedpartner, an indirect TDS subsidia ry, to sell or lease certain licenses, to make certain large expenditures, admit other partners or liquidate the limitedpartnerships. Although the power to direct the activities of these VIEs is shared, TDS has the most significant level of exposure to t he variability associated withthe economic performance of the VIEs, indicating that TDS is the primary beneficiary of the VIEs. Therefore, in accordance with GAAP, these VIEs areconsolidated.

In January 2017, Sunshine Spectrum and the other owner of Fre quency Advantage (the previous general partner of Advantage Spectrum) completed a series oftransactions whereby Frequency Advantage was dissolved and Sunshine Spectrum became the new general partner of Advantage Spectrum. Consistent withits previous tre atment of Frequency Advantage and in accordance with GAAP, TDS consolidates Sunshine Spectrum in its financial statements.

In March 2015, King Street Wireless made a $ 60 million distribution to its owners. Of this distribution, $ 6 million was provided to King Street Wireless, Inc. and$ 54 million was provided to U.S. Cellular.

FCC Auction 97 ended in January 2015. TDS participated in Auction 97 indirectly through its interest in Advantage Spectrum. An indirect subsidiary of U.S.Cellular is a limited partner in Advantage Spectrum. Advantage Spectrum applied as a “designated entity,” and received bid credits with respect to spectrumpurchased in Auction 97. Advantage Spectrum was the winning bidder for 124 licenses for an aggregate bid of $ 338 million, after its designated entity discountof 25% . This amount is classified as Licenses in TDS’ Consolidated Balance Sheet at December 31, 2017 an d 2016 . Advantage Spectrum’s bid amount, lessthe initial deposit of $ 60 million paid in 2014, plus certain other charges totaling $ 2 million, was paid to the FCC in March 2015. These licenses were grantedby the FCC in July 2016.

TDS also consolidates other VIEs that are limited partnerships that provide wireless service. A limited partnership is a variable interest entity unless t he limitedpartners hold substantive participating rights or kick-out rights over the general partner. For certain limited partnerships, U.S. Cellular is the general partner andmanages the operations. In these partnerships, the limited partners do not h ave substantive kick-out or participating rights and, further, such limited partners donot have the authority to remove the general partner. Therefore, these limited partnerships are also recognized as VIEs and are consolidated under the variableinteres t model.

85

Table of Contents

The following table presents the classification and balances of the consolidated VIEs’ assets and liabilities in TDS’ Consolidated Balance Sheet.

December 31, 2017 2016(Dollars in millions) Assets Cash and cash equivalents $ 3   $ 2   Accounts receivable 473   39   Other current assets 7   6   Licenses 648   649   Property, plant and equipment, net 89   93   Other assets and deferred charges 304   15   Total assets $ 1,524   $ 804      Liabilities     Current liabilities $ 36   $ 18   Deferred liabilities and credits 12   12   Total liabilities $ 48   $ 30  

Unconsolidated VIEs

TDS manages the operations of and holds a variable interest in certain other limited partnerships, but is not the primary beneficiary of these entities and,therefore, does not consolidate them under the variable interest model.

TDS’ total investment in these unconsolidated entities was $ 4 million and $ 6 million at December 31, 2017 and 2016 , respectively, and is included inInvestments in unconsolidated entities in TDS’ Consolidated Balance Sheet. The maximum exposure from unconsolidated VIEs is limited to the investment heldby TDS in those entities.

Other Related Matters

TDS made contrib utions, loans and/or advances to its VIEs totaling $ 821 million, of which $ 790 million is related to USCC EIP LLC as discussed above, $ 98million and $ 281 million, during 2017 , 2016 and 2015 , respectively. TDS may agree to make additional capital contributions and/or advances to these or otherVIEs and/or to their general partners to provide additional funding for operations or the development of licenses granted in various auctions. TDS may financesuch amounts with a combination of cash on hand, borrowings under its revolving credit agreement and/or other long-term debt. There is no assurance thatTDS will be able to obtain additional financing on commercially reasonable terms or at all to provide such financial support.

The limited partnership agreements of Advantage Spectrum, Aquinas Wireless and King St reet Wireless also provide the general partner with a put optionwhereby the general partner may require the limited partner, a subsidiary of U.S. Cellular, to purchase its interest in the limited partnership. The generalpartner’s put options related to its interests in King Street Wireless and Aquinas Wireless will become exercisable in 2019 and 2020, respectively. The generalpartner’s put options related to its interest in Advantage Spectrum will become exercisable in 2021 and 2022. The put option pri ce is determined pursuant to aformula that takes into consideration fixed interest rates and the market value of U.S. Cellular’s Common Shares. Upon exercise of the put option, the generalpartner is required to repay borrowings due to U.S. Cellular. If the general partner does not elect to exercise its put option, the general partner may trigger anappraisal process in which the limited partner (a subsidiary of U.S. Cellular) may have the right, but not the obligation, to purchase the general partner’s interestin the limited partnership at a price and on other terms and conditions specified in the limited partnership agreement. In accordance with requirements underGAAP, TDS is required to calculate a theoretical redemption value for all of the put opt ions assuming they are exercisable at the end of each reporting period,even though such exercise is not contractually permitted. Pursuant to GAAP, this theoretical redemption value, net of amounts payable to U.S. Cellular forloans and accrued interest t hereon made by U.S. Cellular to the general partners (net put value), was $ 1 million at December 31, 2017 and 2016 . The net put value is recorded as Noncontrolling interests with redemption features in TDS’ Consolidated Balance Sheet. Also in accordance with GAAP, changes inthe redemption value of the put options, net of interest accrued on the loans, are recorded as a comp onent of Net income attributable to noncontrolling interests,net of tax, in TDS’ Consolidated Statement of Operations.

During 2015, TDS recorded out-of-period adjustments attributable to the third quarter of 2013 through the second quarter of 2015 related to an agreement withKing Street Wireless. TDS determined that these adjustments were not material to the quarterly periods or the annual results for 2015. These out-of-periodadjustments h ad the impact of reducing Net income by $ 3 million and Net income attributable to TDS shareholders by $ 3 million in 2015.

86

Table of Contents

Note 15 Noncontroll ing InterestsThe following schedule discloses the effects of Net income attributable to TDS shareholders and changes in TDS’ ownership interest in U.S. Cellular on TDS’equity for 2017 , 2016 and 2015 :

Year Ended December 31, 2017 2016 2015

(Dollars in millions)      Net income attributable to TDS shareholders $ 153   $ 43   $ 219  

Transfer (to) from the noncontrolling interests      Change in TDS’ Capital in excess of par value from

(12)

(16)

(15) U.S. Cellular's issuance of U.S. Cellular sharesChange in TDS’ Capital in excess of par value from

–  

1  

1   U.S. Cellular’s repurchase of U.S. Cellular sharesNet transfers (to) from noncontrolling interests (12) (15) (14)

Change from net income attributable to TDS shareholders and$ 141   $ 28   $ 205   transfers (to) from noncontrolling interests

Mandatorily Redeemable Noncontrolling Interests in Finite-Lived Subsidiaries

TDS’ consolidated financial statements include certain noncontrolling interests that meet the GAA P definition of mandatorily redeemable financial instruments.These mandatorily redeemable noncontrolling interests represent interests held by third parties in consolidated partnerships, where the terms of the underlyingpartnership agreement provide for a defined termination date at which time the assets of the subsidiary are to be sold, the liabilities are to be extinguished andthe remaining net proceeds are to be distributed to the noncontrolling interest holders and TDS in accordance with the respecti ve partnership agreements. Thetermination dates of these mandatorily redeemable noncontrolling interests range from 2085 to 2 092 .

The estimated aggregate amount that would be due and payable to settle all of these noncontrolling interests, assuming an orderly liquidation of the finite-livedconsolidated partnerships on December 31, 2017 , net of estimated liquidation costs, is $ 16 million. This amount excludes redemption amounts recorded inNoncontrolling interests with redemption features in the Consolidated Balance Sheet. The estimate of settlement value was based on certain factors andassumptions which are subjective in nature. Changes in those factors and assumptions could result in a materially larger or smaller settlement amount. TDScurrently has no plans or intentions relating to the liquidation of any of th e related partnerships prior to their scheduled termination dates. The correspondingcarrying value of the mandatorily redeemable noncontrolling interests in finite-lived consolidated partnerships at December 31, 2017 , was $ 5 million, and isincluded in Noncontrolling interests in the Consolidated Balance Sheet. The excess of the aggregate settlement value over the aggregate carrying value ofthese mandatorily redeemable noncontrolling in terests is due primarily to the unrecognized appreciation of the noncontrolling interest holders’ share of theunderlying net assets in the consolidated partnerships. Neither the noncontrolling interest holders’ share, nor TDS’ share, of the appreciation o f the underlyingnet assets of these subsidiaries is reflected in the consolidated financial statements.

87

Table of Contents

Note 16 Common Shareholders’ EquityCommon Stock

As of December 31, 2017 , Series A Common Shares were convertible, on a share for share basis, into Common Shares and 7,257,584 Common Shares werereserved for possible issuance upon conversion of Series A Common Shares.

The following table summa rizes the number of Common and Series A Common Shares issued and repurchased.

CommonShares

Series ACommonShares

CommonTreasuryShares

(Shares in millions) Balance at December 31, 2014 126   7   25   Dividend reinvestment, incentive and compensation plans –   –   (1)Balance at December 31, 2015 126   7   24   Dividend reinvestment, incentive and compensation plans –   –   (1)Balance at December 31, 2016 126   7   23   Dividend reinvestment, incentive and compensation plans –   –   (1)Balance at December 31, 2017 126   7   22  

On August 2, 2013, the Board of Directors of TDS authorized a $ 250 million stock repurchase program for the purchase of TDS Common Shares from time totime pursuant to open market purchases, block transactions, private purchases or otherwise, depending on market conditions. This authorization does not havean expiration date.

In November 2009, the Board of Directors of U.S. Cellul ar authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009and continuing each year thereafter, on a cumulative basis. In December 2016, the U.S. Cellular Board amended this authorization to provide that , beginningon January 1, 2017, the authorized repurchase amount with respect to a particular year will be any amount from zero to 1,300,000, as determined by the PricingCommittee, and that if the Pricing Committee did not specify an amount for any year, such amount would be zero for such year. The Pricing Committee did notspecify any amount as of January 1, 201 8 . The Pricing Committee also was authorized to decrease the cumulative amount of the authorization at any time,but has not taken any action to do so at th is time. As a result, there was no change to the cumulative amount of the share repurchase authorization as ofJanuary 1, 201 8 . As of December 31, 2017 , the total cumulati ve amount of Common Shares authorized to be purchased is 5,900,849 . The authorizationprovides that share repurchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on marketprices and other conditions. This authorization does not have an expiration date.

Tax-Deferred Savings Plan

At December 31, 2017 , TDS has reserved 90,341 Common Shares for issuanc e under the TDS Tax-Deferred Savings Plan, a qualified profit ‑ sharing planpursuant to Sections 401(a) and 401(k) of the Internal Revenue Code. Participating employees have the option of investing their contributions and TDS’contributions in a TDS Common Share fund, a U.S. Cellular Common Share fund or certain unaffiliated funds.

88

Table of Contents

Note 17 Stock-Based CompensationTDS Consolidated

The following table summarizes stock-based compensation expense recognized durin g 2017 , 2016 and 2015 :

Year Ended December 31, 2017 2016 2015(Dollars in millions) Stock option awards $ 10   $ 16   $ 18  Restricted stock unit awards 29   24   20  Performance share awards 5   –   –  Deferred compensation bonus and matching stock unit awards 1   1   1  Awards under Non-Employee Director compensation plan 1   1   1  Total stock-based compensation, before income taxes 46   42   40  Income tax benefit (17) (16) (15)Total stock-based compensation expense, net of income taxes $ 29   $ 26   $ 25  

At December 31, 2017 , unrecognized compensation cos t for all stock ‑ based compensation awards was $ 50 million and is expected to be recognized over aweighted average period of 1.8 years.

The following table provides a summary of the classification of stock-based compensation expense included in the Consolidated Statement of Operations for theyears ended:

December 31, 2017 2016 2015(Dollars in millions) Selling, general and administrative expense $ 42   $ 39   $ 37  Cost of services and products 4   3   3  Total stock-based compensation $ 46   $ 42   $ 40  

TDS’ tax benefits realized from the exercise of stock options and other awards totaled $ 9 million in 2017 . TDS (E xcluding U.S. Cellular)

The information in this section relates to stock ‑ based compensation plans using the equity instruments of TDS. Participants in these plans are employees ofTDS Corporate and TDS Telecom and Non-employee Directors of TDS. Informati on related to plans using the equity instruments of U.S. Cellular are shownin the U.S. Cellular section following the TDS section.

Under the TDS Long-Term Incentive Plans, TDS may grant fixed and performance based incentive and non-qualified stock options , restricted stock, restrictedstock units, and deferred compensation stock unit awards to key employees.

TDS had reserved 15,702,000 Common Shares at December 31, 2017 , for equity awards granted and to be granted under the TDS Long-Term Incentive Plansin effect. At December 31, 2017 , the only types of awards outstanding are fixed non-qualified stock option awards, r estricted stock unit awards, performanceshare awards and deferred compensation stock unit awards.

TDS has also established a Non-Employee Directors’ compensation plan under which it has reserved 85,000 TDS Common Shares at December 31, 2017 , forissuance as compensation to members of the Board of Directors who are not employees of TDS.

TDS uses treasury stock to satisfy requirements for shares issued pursuant to its various stock-base d compensation plans.

Long-TermIncentivePlan–StockOptions

Stock options granted to key employees are exercisable over a specified period not in excess of ten years. Stock options generally vest over periods up to threeyears from the date of grant. Stock options outstanding at December 31, 2017 , expire between 2018 and 2027. However, vested stock options typically expire30 days after the effective date of an employee’s termination of employment for reasons other than retirement. Employees who leave at the age of retirementhave 90 days (or one year if they satisfy certain requirements) within which to exercise their vested stock options. The exercise price of options equals themarket value of TDS common stock on the date of grant.

89

Table of Contents

TDS estimated the fair value of stock options granted in 2017 , 2016 and 2015 using the Black-Scholes valuation model and the assumptions shown in the tablebelow:

2017 2016 2015Expected life 6.4 years 6.2 years 6.1 yearsExpected annual volatility rate 30.4%   30.3%   30.8%  Dividend yield 2.2%   2.0%   1.9%  Risk-free interest rate 2.0%   1.3%   1.8%  Estimated annual forfeiture rate 2.5%   2.7%   3.2%  

Pre-vesting forfeitures and expected life are estimated based on historical experience related to similar awards, giving considerations to the contractual terms ofthe stock-based awards, vesting schedules and expectations of future employee behavior. TDS believes that its historical experience provides the bestestimates of future pre-vesting forfeitures and future expected life. The expected volatility a ssumption is based on historical volatility of TDS’ common stockover a period commensurate with the expected life. The dividend yield assumption is equal to the dividends declared in the most recent year as a percentage ofthe share price on the date of grant. The risk-free interest rate assumption is determined using the U.S. Treasury Yield Curve Rate with a term length thatapproximates the expected life of the stock options.

A summary of TDS stock options (total and portion exercisable) and changes du ring 2017 is presented in the tables and narrative below.

Weighted Average Weighted Aggregate Remaining Average Intrinsic Contractual Number of Exercise Value LifeCommon Share Options Options Prices (in millions) (in years)Outstanding at December 31, 2016 8,677,000   $ 29.98     (6,167,000 exercisable)   30.59     Granted 701,000   27.79     Exercised (278,000) 25.05     Forfeited (426,000) 28.79     Expired (813,000) 54.39      Outstanding at December 31, 2017 7,861,000   $ 27.49   $ 13   4.6  (5,927,000 exercisable)   $ 27.04   $ 13   3.3  

The weighted average grant date fair value per share of the TDS stock options granted in 2017 , 2016 and 2015 was $ 7.06 , $ 7.24 and $ 7.66 , respectively. The aggregate intrinsic value of TDS stock options exercised in 2017 , 2016 and 2015 was $ 1 million, $ 4 million and $ 4 million, respectively. The aggregateintrinsic value at December 31, 2017 , presented in the table above represents the total pre-tax intrinsic value (the difference between TDS’ closing stock pricesand the exercise price, multiplied by the number of in-the-money options) that would have been received by option holders had all options been exercised onDecember 31, 2017 .

Long-TermIncentivePlans–RestrictedStockUnits

TDS also grants restricted stock unit awards to key employees. Each outstanding restricted stock unit is c onvertible into one Common Share Award. Therestricted stock unit awards currently outstanding were granted in 2015 , 2016 and 2017 and will vest in 2018, 2019 and 2020, respectively.

TDS estimates the fair value of restricted stock units by reducing the grant-date price of TDS’ shares by the present value of the dividends expected to be paidon the underlying shares during the requi site service period, discounted at the appropriate risk-free interest rate, since employees are not entitled to dividendsdeclared on the underlying shares while the restricted stock is unvested. The fair value is then recognized as compensation cost on a straight-line basis over therequisite service periods of the awards, which is generally the vesting period.

90

Table of Contents

A summary of TDS nonvested restricted stock units and changes during 2017 is presented in the table below:

Common Restricted Stock Units

Number

Weighted AverageGrant DateFair Value

Nonvested at December 31, 2016 1,130,000   $ 26.97   Granted 494,000   $ 25.97   Vested (322,000) $ 25.27   Forfeited (127,000) $ 27.09  Nonvested at December 31, 2017 1,175,000   $ 27.01  

No restricted stock units vested during 2015. The total fair values as of the respective vesting dates of restricted stock units vested during 2017 and 2016 were$ 9 million and $ 10 million, respectively. The weighted average grant date fair value per share of the restricted stock units granted in 2017 , 2016 and 2015 was$ 25.97 , $ 27.87 and $ 27.57 , respectively.

Long-TermIncentivePlans–PerformanceShareAwards(PerformanceShares)

Beginning in 2016, TDS granted performance shares, sp ecifically performance stock units, to certain TDS executive officers. Each recipient may be entitled toshares of TDS common stock equal to 0% to 200% of a communicated target award depending on the achievement of predetermined performance-based andmark et-based operating targets over a three year period. Performance-based operating targets include Total Revenue and Return on Capital. Market-basedoperating targets are measured against TDS’ total shareholder return relative to a defined peer group. Per formance shares accumulate dividend equivalents,which are forfeitable if the performance metrics are not achieved.

TDS estimates fair value of performance-based operating targets using TDS’ closing stock price on the date of grant. An estimate of the number of performanceshares expected to vest based upon achieving the performance-based operating targets is made and the fair value is expensed on a straight-line basis over therequisite service period. Each reporting period these estimates are reviewed and stock compensation expense is adjusted accordingly to reflect the newestimates of total awards expected to vest. If any part of the performance shares does not vest as a result of the established performance-based operatingtargets not being achieved, the related stock compensation expense is reversed.

TDS estimates the market-based operating target’s fair value using an internally developed valuation model. This estimated fair value approximated TDS’closing stock price at the date of grant for market-based share awards granted in 2017 and 2016. This market-based operating target value determined at thedate of grant is expensed on a straight-line basis over the requisite service period and the stock compensation expense is not adjusted during the performanceperiod for the subsequent changes in the value of the market-based share awards and will not be reversed even if the market-based operating target is notachieved.

A summary of TDS nonvested performance shares and changes during 2017 is presented in the table below:

Common Performance Shares

Number

Weighted Ave rageGrant DateFair Value

Nonvested at December 31, 2016 97,000   $ 29.45   Granted 115,000   $ 27.79   Accumulated dividend equivalents 4,000   $ 28.68  Nonvested at December 31, 2017 216,000   $ 28.56  

No performance shares vested during 2017 or 2016 . The weighted average grant date fair value per share of the performance shares granted in 2017 and2016 was $ 27.79 and $ 29.45 , respectively. Long-TermIncentivePlans–DeferredCompensationStockUnits

Certain TDS employees may elect to defer receipt of all or a portion of their annual bonuses and to receive a company matching contribution on the amountdeferred. All bonus compensation that is deferred by employees electing to participate is immediately vested and is deemed to be invested in T DS CommonShare units. The amount of TDS’ matching contribution depends on the portion of the annual bonus that is deferred. Participants receive a 25% stock unitmatch for amounts deferred up to 50% of their total annual bonus and a 33% match for amount s that exceed 50% of their total annual bonus; such matchingcontributions also are deemed to be invested in TDS Common Share units and vest over three years.

The total fair values of deferred compensation stock units that vested during 2017 , 2016 and 2015 were less than $1 million. The weighted average grant datefair value per share of the defe rred compensation stock units granted in 2017 , 2016 and 2015 was $ 27.13 , $ 27.94 and $ 25.36 , respectively. As ofDecember 31, 2017 , there were 112,000 vested but unissued deferred compensation stock units valued at $ 3 million.

91

Table of Contents

CompensationofNon-EmployeeDirectors

TDS issued 27,000 , 27,000 and 28,000 Common Shares under its Non-Employee Director plan in 2017 , 2016 and 2015 , respectively.

DividendReinvestmentPlans

TDS had reserved 1,405,000 Common Sh ares at December 31, 2017 , for issuance under Automatic Dividend Reinvestment and Stock Purchase Plans and247,000 Series A Common Shares for issuance under the Series A Common Share Auto matic Dividend Reinvestment Plan. These plans enabled holders ofTDS’ Common Shares to reinvest cash dividends in Common Shares and holders of Series A Common Shares to reinvest cash dividends in Series ACommon Shares. The purchase price of the shares i s 95% of the market value, based on the average of the daily high and low sales prices for TDS’ CommonShares on the New York Stock Exchange for the ten trading days preceding the date on which the purchase is made. These plans are considered non-compensa tory plans; therefore, no compensation expense is recognized for stock issued under these plans.

U.S. Cellular

The information in this section relates to stock ‑ based compensation plans using the equity instruments of U.S. Cellular. Participants in these p lans areemployees of U.S. Cellular and Non-employee Directors of U.S. Cellular. Information related to plans using the equity instruments of TDS are shown in theprevious section.

U.S. Cellular has established the following stock ‑ based compensation plans : Long-Term Incentive Plans and a Non-Employee Director compensation plan.

Under the U.S. Cellular Long-Term Incentive Plans, U.S. Cellular may grant fixed and performance based incentive and non-qualified stock options, restrictedstock, restricted stock units, and deferred compensation stock unit awards to key employees. At December 31, 2017 , the only types of awards outstanding arefixed non-qualified stock option awards, restricted stock unit awards, performanc e share awards and deferred compensation stock unit awards.

Under the Non-Employee Director compensation plan, U.S. Cellular may grant Common Shares to members of the Board of Directors who are not employees ofU.S. Cellular or TDS.

At December 31, 2017 , U.S. Cellular had reserved 14,449,000 Common Shares for equity awards granted and to be granted under the Long-Term IncentivePlans and 154,000 Common Shares fo r issuance under the Non-Employee Director compensation plan.

U.S. Cellular uses treasury stock to satisfy requirements for Common Shares issued pursuant to its various stock-based compensation plans.

Long-TermIncentivePlans–StockOptions

Stock option s granted to key employees are exercisable over a specified period not in excess of ten years. Stock options generally vest over a period of threeyears from the date of grant. Stock options outstanding at December 31, 2017 , expire between 2018 and 2026. However, vested stock options typically expire30 days after the effective date of an employee’s termination of employment for reasons other than retirement. Employees who leave at the age of retirementhave 90 days (or one year if they satisfy certain requirements) within which to exercise their vested stock options. The exercise price of options equals themarket value of U.S. Cellular Common Shares on the date of grant.

U.S. Cellular did not grant stock optio n awards in 2017. U.S. Cellular estimated the fair value of stock options granted during 2016 and 2015 using the Black-Scholes valuation model and the assumptions shown in the table below.

2016 2015Expected life 4.7 years 4.6 yearsExpected annual volatility rate 30.5% 30.1%Dividend yield 0% 0%Risk-free interest rate 1.2% 1.2%Estimated annual forfeiture rate 9.4% 9.7%

Pre-vesting forfeitures and expected life are estimated based on historical experience related to similar awards, giving consideration to the contractual terms ofthe stock-based awards, vesting schedules and expectations of future employee behavior. U.S. Cellular believes that its historical experience provides the bestestimates of future pre-vesting forfeitures and future expected life. The expected volatility assumption is based on the historical volatility of U.S. Cellular’scommon stock over a perio d commensurate with the expected life. The dividend yield assumption is zero because U.S. Cellular has never paid a dividend,except a special cash dividend in June 2013, and has expressed its intention to retain all future earnings in the business. The risk-free interest rate assumptionis determined using the U.S. Treasury Yield Curve Rate with a term length that approximates the expected life of the stock options.

The fair value of options is recognized as compensation cost using an accelerated attribution method over the requisite service periods of the awards, which isgenerally the vesting period.

92

Table of Contents

A summary of U.S. Cellular stock options outstanding (total and portion exercisable) and changes during 2017 is presented in the table below:

Weighted Average Weighted Aggregate Remaining Average Intrinsic Contractual Number of Exercise Value LifeCommon Share Options Options Price (in millions) (in years)Outstanding at December 31, 2016 3,973,000   $ 41.92     (1,937,000 exercisable)   42.54     Exercised (162,000) 36.21     Forfeited (74,000) 41.62     Expired (242,000) 57.67      Outstanding at December 31, 2017 3,495,000   $ 41.10   $ 3   6.0  (2,475,000 exercisable)   $ 40.79   $ 2   5.4  

The weighted average grant date fair value per share of the U.S. Cellular stock options granted in 2016 and 2015 was $ 12.77 and $ 9.94 , respectively. Theaggregate intrinsic value of U.S. Cellular stock options exercised in 2017 , 2016 and 2015 was $ 1 million, $ 4 million and $ 2 million, respectively. Theaggregate intrinsic value at December 31, 2017 , presented in the table above represents the total pre-tax intrinsic value (the difference between U.S. Cellular’sclosing stock price and the exercise price multiplied by the number of in-the-money options) that would have been received by option holders had all optionsbeen exercised on December 31, 2017 .

Long-TermIncentivePlans–RestrictedStockUnits

Restricted stock unit awards granted to key employees generally vest after three years. U.S. Cellular estimates the fair value of restricted stock units based onthe closing market price of U.S. Cellular shares o n the date of grant. The fair value is then recognized as compensation cost on a straight-line basis over therequisite service periods of the awards, which is generally the vesting period.

A summary of U.S. Cellular nonvested restricted stock units at December 31, 2017 , and changes during the year then ended is presented in the table below:

Common Restricted Stock Units Number

Weighted AverageGrant DateFair Value

Nonvested at December 31, 2016 1,310,000   $ 40.74   Granted 557,000   38.04   Vested (294,000) 41.24   Forfeited (90,000) 40.07  Nonvested at December 31, 2017 1,483,000   $ 39.67  

The total fair value of restricted stock units that vested during 2017 , 2016 and 2015 was $ 11 million, $ 15 million and $ 13 million, respectively. The weightedaverage grant date fair value per share of the restricted stock units granted in 2017 , 2016 and 2015 was $ 38.04 , $ 43.32 and $ 37.24 , respectively.

Long-TermIncentivePlans–PerformanceShareAwards(PerformanceShares)

Beginning in 2017, U.S. Cellular granted performance shares, specifically performance stock units, to key employees. The performance shares vest after threeyears. Each recipient may be entitled to shares of U.S. Cellular common stock equal to 50% to 200 % of a communicated target award depending on theachievement of predetermined performance-based operating targets over the performance period, which is a one year period beginning on January 1 in the yearof grant to December 31 in the year of grant. The remaining time through the end of the vesting period is considered the “time-based period”. Performance-based operating targets include Simple Free Cash Flow, Consolidated Total Revenue and Postpaid Handset Voluntary Defections. Subject to vesting durin gthe time-based period, the performance share award agreement provides that in no event shall the award be less than 50% of the target opportunity as of thegrant date.

U.S. Cellular estimates the fair value of performance shares using U.S. Cellular’s cl osing stock price on the date of grant. An estimate of the number ofperformance shares expected to vest based upon achieving the performance-based operating targets is made and the aggregate fair value is expensed on astraight-line basis over the requis ite service period. Each reporting period, during the performance period, the estimate of the number of performance sharesexpected to vest is reviewed and stock compensation expense is adjusted as appropriate to reflect the revised estimate of the aggreg ate fair value of theperformance shares expected to vest.

93

Table of Contents

A summary of U.S. Cellular’s nonvested performance shares and changes during 2017 is presented in the table below:

Common Performance Shares

Number

Weighted AverageGrant DateFair Value

Nonvested at December 31, 2016 –   $ –   Granted 352,000   $ 36.92   Forfeited (10,000) $ 36.92  Nonvested at December 31, 2017 342,000   $ 36.92  

Long-TermIncentivePlans–DeferredCompensationStockUnits

Certain U.S. Cellular employees may elect to defer receipt of all or a portion of their annual bonuses and to receive a company matching contribution on theamount deferred. All bonus compensation that is deferred by employees electing to par ticipate is immediately vested and is deemed to be invested in U.S.Cellular Common Share stock units. The amount of U.S. Cellular’s matching contribution depends on the portion of the annual bonus that is deferred. Participants receive a 25% match for a mounts deferred up to 50% of their total annual bonus and a 33% match for amounts that exceed 50% of their totalannual bonus; such matching contributions also are deemed to be invested in U.S. Cellular Common Share stock units and vest over three years.

T he total fair value of deferred compensation stock units that vested during 2017 , 2016 and 2015 was less than $ 1 million. The weighted average grant datefair value per share of the deferred compensation stock units granted in 2017 , 2016 and 2015 was $ 36.02 , $ 41.31 and $ 35.96 , respectively. As ofDecember 31, 2017 , there were 21,000 vested but unissued deferred compensation stock units valued at $ 1 million.

CompensationofNon-EmployeeDirectors

U.S. Cellular issued 15,000 , 13,000 and 15,000 Common Shares in 2017 , 2016 and 2015 , respectively, under its Non-Employee Director compensation plan.

94

Table of Contents

Note 18 Business Segment InformationU.S. Cellular and TDS Telecom are billed for all services they receive from TDS, consisting primarily of informa tion processing, accounting and finance, andgeneral management services. Such billings are based on expenses specifically identified to U.S. Cellular and TDS Telecom and on allocations of commonexpenses. Management believes the method used to allocate common expenses is reasonable and that all expenses and costs applicable to U.S. Cellular andTDS Telecom are reflected in the accompanying business segment information on a basis that is representative of what they would have been if U.S. Cellularand TDS Telecom operated on a stand-alone basis.

Financial data for TDS’ reportable segments for 2017 , 2016 and 2015 , is as follows. Se e Note 1 — Summary of Significant Accounting Policies and RecentAccounting Pronouncements for additional information.

95

Table of Contents

TDS Telecom

Year E nded or as of December 31,2017

U.S.Cellular Wireline Cable HMS

TDSTelecom

Eliminations

TDSTelecom

Total

Corporate,Eliminations

and Other Total(Dollars in millions) Operating revenues Service $ 2,978   $ 713   $ 206   $ 111   $ (5) $ 1,024   $ (23) $ 3,979   Equipment and product sales 912   1   –   114   –   116   37   1,065   Total operating revenues 3,890   714   206   225   (5) 1,140   14   5,044  Cost of services (excludingDepreciation, amortization                 and accretion expense reportedbelow) 732   258   98   83   (5) 434   (2) 1,164  Cost of equipment and products 1,071   2   –   95   –   97   27   1,195  Selling, general and administrative 1,412   191   54   42   –   286   (12) 1,686  Depreciation, amortization andaccretion 615   151   44   2 8   –   222   7   844  Loss on impairment of goodwill 1 370   –   –   35   –   35   (143) 262  (Gain) loss on asset disposals, net 17   1   2   –   –   4   –   21  (Gain) loss on sale of business andother exit costs, net (1) –   –   –   –   –   –   (1)(Gain) loss on license sales andexchanges, net (22) –   –   –   –   –   –   (22)

Operating income (loss) (304) 111   8   (57) –   63   136   (105)Equity in earnings of unconsolidatedentities 137   –   –   –   –   –   –   137  Interest and dividend income 8   5   –   –   –   5   2   15  Interest expense (113) –   –   (4) –   (4) (53) (170)Other, net –   –   –   –   –   –   1   1  Income (loss) before income taxes (272) 117   8   (60) –   65   85   (122)Income tax expense (benefit)² (287)         (24) 32   (279)Net income 15           88   54   157  Add back:                Depreciation, amortization andaccretion 615   151   44   28   –   222   7   844  Loss on impairment of goodwill 1 370   –   –   35   –   35   (143) 262  (Gain) loss on asset disposals, net 17   1   2   –   –   4   –   21  (Gain) loss on sale of business andother exit costs, net (1) –   –   –   –   –   –   (1)(Gain) loss on license sales andexchanges, net (22) –   –   –   –   –   –   (22)

Interest expense 113   –   –   4   –   4   53   170  Income tax expense (benefit)² (287)         (24) 32   (279)Adjusted EBITDA 3 $ 820   $ 269   $ 54   $ 6   $ –   $ 329   $ 3   $ 1,152                  Investments in unconsolidated entities $ 415   $ 4   $ –   $ –   $ –   $ 4   $ 34   $ 453  Total assets $ 6,841   $ 1,237   $ 644   $ 196   $ –   $ 2,077   $ 377   $ 9,295  Capital expenditures $ 469   $ 146   $ 55   $ 14   $ –   $ 215   $ 10   $ 694  

96

Table of Contents

TDS Telecom

Year E nded or as of December 31,2016

U.S.Cellular Wireline Cable HMS

TDSTelecom

Eliminations

TDSTelecom

Total

Corporate,Eliminations

and Other Total(Dollars in millions) Operating revenues Service $ 3,081   $ 696   $ 185   $ 119   $ (5) $ 995   $ (26) $ 4,050   Equipment and product sales 909   2   –   155   –   157   39   1,105   Total operating revenues 3,990   698   185   273   (5) 1,151   14   5,155  Cost of services (excludingDepreciation, amortization                 and accretion expense reportedbelow) 760   258   94   82   (4) 430   (1) 1,189  Cost of equipment and products 1,081   2   –   128   –   131   28   1,240  Selling, general and administrative 1,480   197   51   48   –   295   (16) 1,759  Depreciation, amortization andaccretion 618   159   37   29   –   224   8   850  (Gain) loss on asset disposals, net 22   2   2   –   –   4   1   27  (Gain) loss on sale of business andother exit costs, net –   –   –   –   –   –   (1) (1)(Gain) loss on license sales andexchanges, net (19) (1) –   –   –   (1) –   (20)

Operating income (loss) 48   80   2   (14) –   67   (4) 111  Equity in earnings of unconsolidatedentities 140   –   –   –   –   –   –   140  Interest and dividend income 6   3   –   –   –   3   2   11  Interest expense (113) 1   –   (4) –   (3) (54) (170)Other, net 1   –   –   –   –   –   (1) –  Income (loss) before income taxes 82   83   2   (18) –   67   (57) 92  Income tax expense (benefit)² 33           25   (18) 40  Net income (loss) 49           42   (39) 52  Add back:                Depreciation, amortization andaccretion 618   159   37   29   –   224   8   850  (Gain) loss on asset disposals, net 22   2   2   –   –   4   1   27  (Gain) loss on sale of business andother exit costs, net –   –   –   –   –   –   (1) (1)(Gain) loss on license sales andexchanges, net (19) (1) –   –   –   (1) –   (20)

Interest expense 113   (1) –   4   –   3   54   170  Income tax expense (benefit)² 33           25   (18) 40  Adjusted EBITDA 3 $ 816   $ 242   $ 41   $ 15   $ –   $ 298   $ 4   $ 1,118                  Investments in unconsolidated entities $ 413   $ 4   $ –   $ –   $ –   $ 4   $ 34   $ 451  Total assets $ 7,110   $ 1,231   $ 599   $ 264   $ –   $ 2,094   $ 242   $ 9,446  Capital expenditures $ 446   $ 108   $ 54   $ 11   $ –   $ 173   $ 11   $ 630  

97

Table of Contents

TDS Telecom

Year E nded or as of December 31,2015

U.S.Cellular Wireline Cable HMS

TDSTelecom

Eliminations

TDSTelecom

Total

Corporate,Eliminations

and Other Total(Dollars in millions) Operating revenues   Service $ 3,384   $ 699   $ 175   $ 117   $ (5) $ 986   $ (14) $ 4,356   Equipment and product sales 647   2   –   170   –   172   35   854   Total operating revenues 4,031   701   175   287   (5) 1,158   21   5,210  Cost of services (excludingDepreciation, amortization                 and accretion reported below) 775   255   79   85   (4) 414   2   1,191  Cost of equipment and products 1,053   2   –   143   –   145   26   1,224  Selling, general and administrative 1,494   194   54   47   –   294   (7) 1,781  Depreciation, amortization andaccretion 607   166   35   27   –   228   9   844  (Gain) loss on asset disposals, net 16   5   1   –   –   6   –   22  (Gain) loss on sale of business andother exit costs, net (114) ( 10) –   –   –   (10) (12) (136)(Gain) loss on license sales andexchanges, net (147) –   –   –   –   –   –   (147)

Operating income (loss) 347   89   6   (15) –   79   5   431  Equity in earnings of unconsolidatedentities 140   –   –   –   –   –   –   140  Interest and dividend income 2   2   –   –   –   2   1   5  Interest expense (86) 1   –   (2) –   (1) (55) (142)Other, net 1   –   –   –   –   –   –   1  Income (loss) before income taxes 404   92   7   (18) –   81   (50) 435  Income tax expense (benefit)² 157           35   (20) 172  Net income (loss) 247           46   (30) 263  Add back:                Depreciation, amortization andaccretion 607   166   35   27   –   228   9   844  (Gain) loss on asset disposals, net 16   5   1   –   –   6   –   22  (Gain) loss on sale of business andother exit costs, net (114) ( 10) –   –   –   (10) (12) (136)(Gain) loss on license sales andexchanges, net (147) –   –   –   –   –   –   (147)

Interest expense 86   (1) –   2   –   1   55   142  Income tax expense (benefit)² 157           35   (20) 172  Adjusted EBITDA 3 $ 852   $ 252   $ 42   $ 12   $ –   $ 306   $ 2   $ 1,160                  Investments in unconsolidated entities $ 363   $ 4   $ –   $ –   $ –   $ 4   $ 35   $ 402  Total assets $ 7,060   $ 1,312   $ 578   $ 286   $ –   $ 2,176   $ 186   $ 9,422  Capital expenditures $ 533   $ 140   $ 52   $ 27   $ –   $ 219   $ 7   $ 759   Numbers may not foot due to rounding.

1 During the twelve months ended December 31, 2017, U.S. Cellular recorded a goodwill impairment of $370 million while TDS r ecorded a goodwill impairment of the U.S. Cellular reporting unit of $227million. Prior to 2009, TDS accounted for U.S. Cellular's share repurchases as step acquisitions, allocating a portion of the share repurchase value to TDS' Goodwill. Further, good will of the U.S. Cellularreporting unit was impaired at the TDS level in 2003 but not at U.S. Cellular. Consequently, U.S. Cellular's goodwill on a stand-alone basis and any resulting impairments of goodwill does not equal theTDS consolidated goodwill r elated to U.S. Cellular. For further information on the goodwill impairment see Note 7 — Intangible Assets in the Notes to Consolidated Financial Statements.

2 Income tax expense (benefit) is not provided at the individual segment level for Wireline, Cable and HMS. TDS calculates income tax expense for “TDS Telecom Total”. 3 Adjusted earnings before interest, taxes, depreciation, amortization and accretion (Adjusted EBITDA) is a segment measure repo rted to the chief operating decision maker for purposes of making

decisions about allocating resources to the segments and assessing their performance. Adjusted EBITDA is defined as net income, adjusted for the items set forth in the reconciliation above. TDSbelieves Adjusted EBITDA is a useful measure of TDS’ operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additionalrelevant and useful information to investors and oth er users of TDS' financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent withmanagement's evaluation of business performance.

98

Table of Contents

Note 19 Supplemental Cash Flow DisclosuresFollowing are supplemental cash flow disclosures regarding interest paid and income taxes paid.

Year Ended December 31, 2017 2016 2015(Dollars in millions) Interest paid $ 167   $ 168   $ 135  Income taxes paid, net of refunds received 56   (39) 57  

Following are supplemental cash flow disclosures regarding transactions related to stock-based compensation awards. In certain situations, TDS and U.S.Cellular withhold shares that are issuable upon the exercise of stock options or the vesting of restricted shares to cover, and with a value equivalent to, the exercise price and/or the amount of taxes required to be withheld from the stock award holder at the time of the exercise or vesting. TDS and U.S. Cellular thenpay the amount of the required tax withholdings to the taxing authorities in cash.

TDS: Year Ended December 31, 2017 2016 2015(Dollars in millions) Common Shares withheld 120,560   126,747   3,163        Aggregate value of Common Shares withheld $ 3   $ 4   $ –        Cash receipts upon exercise of stock options 7   13   13  Cash disbursements for payment of taxes (3) (4) –  Net cash receipts from exercise of stock       options and vesting of other stock awards $ 4   $ 9   $ 13  

U.S. Cellular: Year Ended December 31, 2017 2016 2015

(Dollars in millions)   Common Shares withheld 144,755   308,010   228,011        Aggregate value of Common Shares withheld $ 6   $ 13   $ 8        Cash receipts upon exercise of stock options 5   12   7  Cash disbursements for payment of taxes (4) (6) (5)Net cash receipts from exercise of stock options       and vesting of other stock awards $ 1   $ 6   $ 2  

Under the American Recovery and Reinvestment Act of 2009 (the Recovery Act), TDS Telecom was awarded and received $ 94 million in federal grants andprovided $ 32 million of its own funds to complete 44 projects to provide broadband access in unserved areas. TDS Telecom received the remaining $ 15 millionin grants in 2015. These funds reduced the carrying amo unt of the assets to which they relate. TDS Telecom has received all funding due under this program.

99

Table of Contents

Note 20 Certain Relationships and Related TransactionsThe following persons are partners of Sidley Austin LLP, the principal law firm of TDS and its subsidiaries: Walter C.D. Carlson, a trustee and beneficiary of avoting trust that controls TDS, the non-executive Chairman of the Board and member of the Board of Directors of TDS and a director of U.S. Cellular, asubsidiary of TDS; William S. DeCarlo, the General Counsel of TDS and an Assistant Secretary of TDS and certain subsidiaries of TDS; and Stephen P. Fitzell,the General Counsel of U.S. Cellular and TD S Telecommunications LLC and an Assistant Secretary of certain subsidiaries of TDS. Walter C.D. Carlsondoes not provide legal services to TDS or its subsidiaries. TDS, U.S. Cellular and their subsidiaries incurred legal costs from Sidley Austin LLP of $ 11 million, $ 9 million and $ 12 million in 2017 , 2016 and 2015 , respectively .

The Audit Committee of the Board of Directors of TDS is responsible for the review and evaluation of all related-party transactions as such term is defined by therules of the New York Stock Exchange.

Note 21 Subsequent EventsTDS has re - evaluated internal reporting roles with regard to its HMS business unit and, as a result, will be changing its reportable segments. Effective January1, 2018, HMS will be considered a non-reportable segment and will no lo nger be reported under TDS Telecom. This change will enable TDS Telecom tocontinue to successfully execute on the Wireline and Cable segments’ shared strategy to be the preferred service provider in its markets. Additionally, HMS willbe able to leverag e TDS’ corporate IT resources, to improve operations and customer service, and better position itself for growth .

100

Table of Contents

Rep orts of ManagementManagement’s Responsibility for Financial Statements

Management of Telephone and Data Systems, Inc. has the responsibi lity for preparing the accompanying consolidated financial statements and for theirintegrity and objectivity. The statements were prepared in accordance with accounting principles generally accepted in the United States of America and, inmanagement’s op inion, were fairly presented. The financial statements included amounts that were based on management’s best estimates and judgments. Management also prepared the other information in the annual report and is responsible for its accuracy and consistency with the financial statements.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited these consolidated financial statements in accordance with thestandards of the Public Company Accounting Oversight Board (United State s) and has expressed herein its unqualified opinion on these financial statements.

/s/ LeRoy T. Carlson, Jr.   /s/ Douglas D. ShumaLeRoy T. Carlson, Jr. Douglas D. ShumaPresident and Senior Vice President - Finance andChief Executive Officer Chief Accounting Officer(principal executive officer) (principal financial officer and principal accounting officer)     /s/ Anita J. Kroll    Anita J. Kroll    Vice President and Controller    

101

Table of Contents

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act. TDS’ internal control over financial reporting is a p rocess designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the UnitedStates of America ( GAAP). TDS’ internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the is suer; (ii) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuerare being made only in accordance with authorization s of management and, where required, the Board of Directors of the issuer; and (iii) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the issuer’s assets that could have a material ef fect on theinterim or annual consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future period s are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.

Under the supervision and with the participation of TDS’ management, includin g its principal executive o fficer and principal f inancial o fficer, TDS conducted anevaluation of the effectiveness of its internal control over financial reporting as of December 31, 2017 , based on the criteria es tablished in the 2013 version ofInternalControl—IntegratedFrameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management hasconcluded that TDS maintained effective internal control over financial reporting as of December 31, 2017 , based on criteria established in the 2013 version ofInternalControl—IntegratedFrameworkissued by the COSO.

The effectiveness of TDS’ internal control over financial reporting as of December 31, 2017 , has been audited by PricewaterhouseCoopers LLP, an independentregistered public accounting firm, a s stated in the firm’s report included herein.

/s/ LeRoy T. Carlson, Jr.   /s/ Douglas D. ShumaLeRoy T. Carlson, Jr. Douglas D. ShumaPresident and Senior Vice President - Finance andChief Executive Officer Chief Accounting Officer(principal executive officer) (principal financial officer and principal accounting officer)     /s/ Anita J. Kroll    Anita J. Kroll    Vice President and Controller    

102

Table of Contents

Rep ort of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Telephone and Data Systems, Inc.: Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Telephone and Data Systems, Inc. and its subsidiaries (“the Company”) as of December 31,2017 and 2016, and the related consolidated statement of operati ons, comprehensive income , changes in equity, and cash flows for each of the three years inthe period ended December 31, 2017 , including the related notes (collectively referred to as the “ consolidated financial statements”). We also have audited theCompany’s internal control over financial reporting as of December 31, 2017 , based on criteria established in InternalControl–IntegratedFramework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred t o above present fairly, in all materialrespects, the financial position of the Company as of December 31, 2017 and 2016 , and the results of their operations and their cash flows for each of the threeyears in the period ended December 31, 2017 in conformi ty with accounting principles generally accepted in the United States of America. Also in our opinion,the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria establi shed inInternalControl-IntegratedFramework(2013) issued by the COSO .

We did not audit the financial statements of Los Angeles SMSA Limited Partnership, a 5.5% equity investment of the Company, which is reflected in theconsolidated financial statem ents of the Company as an equity method investment of $244,400,000 and $240,1 00,000 as of December 31, 201 7 and 201 6 ,respectively, and income from equ ity investments of $66,200,000, $71 , 4 00,000 and $7 4 , 0 00,000 for each of the three years in th e period ended December31, 2017 . The financial statements of Los Angeles SMSA Limited Partnership were audited by other auditors whose report thereon has been furnished to us,and our opinion on the financial statements expressed herein, insofar as it relates to the amounts included for Los Angeles SMSA Limited Partnership, is basedsolely on the report of the other auditors.

Basis for Opinions The Company's management is responsible for these consolidated financial statements , for maintaining effective internal control over financial reporting , andfor its assessment of the effectiveness of internal control over financial reporting, included in Management ’s Report on Internal Control over Financial Reportingappearing under Item 9A . Our responsibility is to exp ress opinions on the Company’s consolidated financial statements and on the Company's internal controlover financial reporting based on our audits . We are a public accounting firm registered with the Public Company Accounting Oversight Board (United Stat es)(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB . Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement , whether due to error or fraud, an d whether effective internalcontrol over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated fin ancialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,evidence regarding the amounts and disclosures in the consolidated financial statements . Our aud its also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement s . Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our aud its also included performing suchother procedures as we considered necessary in the circumstances. We believe that our audits and the report of other auditors provide a reasonable basis forour opinions .

103

Table of Contents

Definition and Limitations of Internal Control ove r Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control overfinancial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflectthe transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and th at receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluati on ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP Chicago, Illinois February 26, 2018 We have served as the Company’s auditor since 2002.

104

Table of Contents

Telep hone and Data Systems, Inc.Selected Consolidated Financial Data

Year Ended or at December 31, 2017 2016 2015 2014 2013(Dollars and shares in millions, except per share amounts) Statement of Operations data Operati ng revenues $ 5,044   $ 5,155   $ 5,210   $ 5,018   $ 4,901  Loss on impairment of goodwill 262   –   –   88   –  (Gain) loss on sale of business and other           exit costs, net (1) (1) (136) (16) (301)(Gain) loss on license sales and           exchanges, net (22) (20) (147) (113) (255)Operating income (loss) (105) 111   431   (181) 235  Gain on investments –   –   –   –   15  Income tax expense (benefit) (279) 40   172   (5) 126  Net income (loss) 157   52   263   (147) 167  Net income (loss) attributable to noncontrolling           interests, net of tax 4   9   44   (11) 25  Net income (loss) attributable to TDS           shareholders 153   43   219   (136) 142  Net income (loss) available to common           shareholders $ 153   $ 43   $ 218   $ (136) $ 142  Basic weighted average shares           outstanding 111   110   109   108   108  Basic earnings (loss) per share attributable       to TDS shareholders $ 1.39   $ 0.39   $ 2.02   $ (1.26) $ 1.31  Diluted weighted average shares       outstanding 112   111   110   108   109  Diluted earnings (loss) per share       attributable to TDS shareholders $ 1.37   $ 0.39   $ 1.98   $ (1.26) $ 1.29  Dividends per Common, Special Common           and Series A Common Share $ 0.62   $ 0.59   $ 0.56   $ 0.54   $ 0.51     Balance Sheet data   Total assets $ 9,295   $ 9,446   $ 9,422   $ 8,854   $ 8,861  Net long-term debt, excluding current portion 2,437   2,433   2,440   1,941   1,677  Total TDS shareholders’ equity $ 4,269   $ 4,144   $ 4,126   $ 3,926   $ 4,118    

105

Table of Contents

 Telephone and Data Systems, Inc.

Consolidated Quarterly Information (Unaudited) Quarter Ended2017 March 31 June 30 September 30 December 31(Dollars in millions, except per share amounts) Operating revenues $ 1,238   $ 1,247   $ 1,251   $ 1,308  Loss on impairment of goodwill 1 –   –   262   –  (Gain) loss on asset disposals, net 4   6   6   5  (Gain) loss on sale of business and other exit costs, net 2 –   –   (1) –  (Gain) l oss on license sales and exchanges, net 2 (17) (2) –   (3)Operating income (loss) 82   28   (232) 17  Income t ax expense (benefit) 3 34   10   (5) (319)Net inco me (loss) 43   12   (231) 334  Net income (loss) attributable to TDS shareholders $ 37   $ 10   $ (181) $ 287  Basic we ighted average shares outstanding 110   111   111   111  Basic earnings (loss) per share attributable         to TD S shareholders $ 0.34   $ 0.09   $ (1.64) $ 2.59  Diluted weighted average shares outstanding 112   112   111   112  Diluted earnings (loss) per share attributable         to TDS shareholders $ 0.33   $ 0.09   $ (1.64) $ 2.54  Stock pr ice TDS Common Shares 4 High $ 32.98   $ 29.31   $ 29.87   $ 29.31   Lo w 24.84   25.57   26.33   24.57   Cl ose 26.51   27.75   27.89   27.80  Dividend s paid $ 0.155   $ 0.155   $ 0.155   $ 0.155   Quarter Ended2016 March 31 June 30 September 30 December 31(Dollars in millions, except per share amounts) Operating revenues $ 1,254   $ 1,295   $ 1,314   $ 1,293  (Gain) loss on asset disposals, net 6   6   8   7  (Gain) loss on sale of business and other exit costs, net 2 –   –   –   –  (Gain) loss on license sales and exchanges, net 2 –   (9) (7) (3)Operatin g income (loss) 26   53   33   (1)Net income (loss) 10   32   16   (5)Net income (loss) attributable to TDS shareholders $ 8   $ 28   $ 13   $ (5)Basic weighted average shares outstanding 109   109   110   110  Basic ea rnings (loss) per share attributable         to TDS shareholders $ 0.07   $ 0.25   $ 0.12   $ (0.05)Diluted weighted average shares outstanding 110   111   111   110  Diluted earnings (loss) per share attributable         to TDS shareholders $ 0.07   $ 0.25   $ 0.11   $ (0.05)Stock price TDS Common Shares 4 High $ 30.29   $ 30.70   $ 32.00   $ 30.17   Low 20.83   25.54   26.46   24.12   Close 30.09   29.66   27.18   28.87  Dividends paid $ 0.148   $ 0.148   $ 0.148   $ 0.148  

Due to rounding, the sum of quarterly results may not equal the total for the year.  

1 See Note 7 — Intangible Assets for additional information on Loss on impairment of goodwill.2 See Note 6 — Acquisitions, Divestitures and Exchanges for additional information on (Gain) loss on sale of business and other exit costs, net and (Gain) loss on

license sales and exchanges, net.3 In December 2017, the Tax Act was enacted. The Tax Act reduced the federal income tax rate from 35% to 21%. See Note 4 — Income Taxes for additional

information.4 The high, low and closing sales prices as reported by the New York Stock Exchange (NYSE).

106

Table of Contents

Telep hone and Dat a Systems, Inc.Shareholder Information

Stock and Dividend Information

TDS' Common Shares are listed on the New York Stock Exchange under the symbol “TDS.” As of January 31, 2018 , the last trading day of the month, TDSCommon Shares were held by approximately 1,2 73 record owners , and the Series A Common Shares were held by approximately 69 r ecord owners.

TDS has paid cash dividends on its common stock since 1974, and paid dividends of $ 0.62 per Common and Series A Common Share during 2017 . During2016 , TDS paid dividends of $ 0.59 per Common and Series A Common Share.

The Common Shares of United States Cellular Corporation, an 83% -owned subsidiary of TDS, are listed on the NYSE under the symbol “USM.”

See “Consolidated Quarterly Information (Unaudited)” for information on the high and low trading prices of the TDS Common Shares for 2017 and 2016 .

Stock Performance Graph

The following chart provides a comparison of TDS’ cumulative total return to shareholders (stock price appreciation plus dividends) during the previous five yearsto the returns of the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones U.S. Telecommunications Index. As of December 31, 2017 , theDow Jones U.S. Telecommunicati ons Index was composed of the following companies: AT&T Inc., CenturyLink Inc., Frontier Communications Corp., SBACommunications Corp., Sprint Corp., T-Mobile US Inc., Telephone and Data Systems, Inc. (TDS) and Verizon Communications Inc.

Note: Cumulat ive total return assumes reinvestment of dividends

2012 2013 2014 2015 2016 2017Telephone and Data Systems Common Shares(NYSE: TDS) $ 100   $ 118.95   $ 118.97   $ 124.54   $ 141.90   $ 139.94  S&P 500 Index 100   132.39   150.51   152.59   170.84   208.14  Dow Jones U.S. Telecommunications Index 100   114.13   116.85   120.96   149.94   149.53  

Assumes $100.00 invested at the close of trading on the last trading day preceding the first day of 2012 , in TDS Common Shares, S&P 500 Index and the DowJones U.S. Telecommuni cations Index.

Dividend Reinvestment Plan

TDS’ dividend reinvestment plans provide its common shareholders with a convenient and economical way to participate in the future growth of TDS. Holders ofrecord of ten (10) or more Common Shares may purchase Common Shares with thei r reinvested dividends at a five percen t discount from market price. Common S hares may also be purchased, at market price, on a monthly basis throug h optional cash payments by participants in this plan . The initial ten (10)shares cannot be purchased dir ectly from TDS. An authorization card and prospectus will be mailed automatically by the transfer agent to all registered recordholders with ten (10) or more shares. Once enrolled in the plan, there are no brokerage commissions or service charges for pu rchases made under the plan.

107

Table of Contents

Investor relations

TDS’ annual report, SEC filings and news releases are available to investors, securities analysts and other members of the investment community. Thesereports are provided, without charge, upon request to ou r Corporate Office. Investors may also access these and other reports through the Investor Relationsportion of the TDS website ( www.tdsinc.com).

Questions regarding lost, stolen or destroyed certificates, consolidation of accounts, transferring of share s and name or address changes should be directed to:

Julie Mathews, IRC, Director — Investor Relations Telephone and Data Systems, Inc. 30 North LaSalle Street, Suite 4000 Chicago, IL 60602 312.592.5341 312.630.9299 (fax) julie.mathews@tdsinc.com General inquiries by investors, securities analysts and other members of the investment community should be directed to:

Jane W. McCahon, Senior Vice President — Corporate Relations and Corporate Secretary Telephone and Data Systems, Inc. 30 North LaSalle Street, Suite 4000 Chicago, IL 60602 312.592.5379 312.630.9299 (fax) jane.mccahon@tdsinc.com Directors and executive officersSee “Election of Directors” and “Executive Officers” sections of the Proxy Statement issued in 2 018 for the 2018 Annual Meeting.

Principal counselSidley Austin LLP, Chicago, Illinois

Transfer agent Computershare Trust Company, N.A. 462 South 4th Street, Suite 1600 Louisvil le, KY 40202 312.360.5326 Independent registered public accounting firmPricewaterhouseCoopers LLP

Visit TDS' web site at www.tdsinc.com

 

108

Exhibit 21TELEPHONE AND DATA SYSTEMS, INC.

SUBSIDIARY COMPANIESDecember 31, 2017

SUBSIDIARY COMPANIES STATE OF

ORGANIZATION U.S. CELLULAR UNITED STATES CELLULAR CORPORATION DELAWARE BANGOR CELLULAR TELEPHONE, L.P. DELAWARE BARAT WIRELESS, INC. DELAWARE BARAT WIRELESS, L.P. DELAWARE CALIFORNIA RURAL SERVICE AREA #1, INC. CALIFORNIA CARROLL PCS, INC. DELAWARE CARROLL WIRELESS, L.P. DELAWARE CEDAR RAPIDS CELLULAR TELEPHONE, L.P. DELAWARE CELLVEST, INC. DELAWARE CENTRAL CELLULAR TELEPHONES, LTD. ILLINOIS CHAMPLAIN CELLULAR, INC. NEW YORK COMMUNITY CELLULAR TELEPHONE COMPANY TEXAS CROWN POINT CELLULAR, INC. NEW YORK DUBUQUE CELLULAR TELEPHONE, L.P. DELAWARE EASTERN NORTH CAROLINA CELLULAR JOINT VENTURE DELAWARE HARDY CELLULAR TELEPHONE COMPANY DELAWARE INDIANA RSA # 5, INC. INDIANA INDIANA RSA NO. 4 LIMITED PARTNERSHIP INDIANA INDIANA RSA NO. 5 LIMITED PARTNERSHIP INDIANA IOWA RSA # 3, INC. DELAWARE IOWA RSA # 9, INC. DELAWARE IOWA RSA # 12, INC. DELAWARE JACKSONVILLE CELLULAR PARTNERSHIP NORTH CAROLINA JACKSONVILLE CELLULAR TELEPHONE COMPANY NORTH CAROLINA KANSAS #15 LIMITED PARTNERSHIP DELAWARE KENOSHA CELLULAR TELEPHONE, L.P. DELAWARE LAB465, LLC ILLINOIS MADISON CELLULAR TELEPHONE COMPANY WISCONSIN MAINE RSA # 1, INC. MAINE MAINE RSA # 4, INC. MAINE MCDANIEL CELLULAR TELEPHONE COMPANY DELAWARE MINNESOTA INVCO OF RSA # 7, INC. DELAWARE NEWPORT CELLULAR, INC. NEW YORK NH #1 RURAL CELLULAR, INC. NEW HAMPSHIRE OREGON RSA #2, INC. OREGON PCS WISCONSIN, LLC WISCONSIN RACINE CELLULAR TELEPHONE COMPANY WISCONSIN TENNESSEE NO. 3, LIMITED PARTNERSHIP TENNESSEE TEXAHOMA CELLULAR LIMITED PARTNERSHIP TEXAS TEXAS INVCO OF RSA # 6, INC. DELAWARE TOWNSHIP CELLULAR TELEPHONE, INC. DELAWARE UNITED STATES CELLULAR INVESTMENT CO. OF OKLAHOMA CITY, INC. OKLAHOMA UNITED STATES CELLULAR INVESTMENT COMPANY, LLC DELAWARE UNITED STATES CELLULAR INVESTMENT CORPORATION OF LOS ANGELES INDIANA UNITED STATES CELLULAR OPERATING COMPANY LLC DELAWARE UNITED STATES CELLULAR OPERATING COMPANY OF BANGOR MAINE UNITED STATES CELLULAR OPERATING COMPANY OF CEDAR RAPIDS DELAWARE

UNITED STATES CELLULAR OPERATING COMPANY OF CHICAGO, LLC DELAWARE UNITED STATES CELLULAR OPERATING COMPANY OF DUBUQUE IOWA UNITED STATES CELLULAR OPERATING COMPANY OF KNOXVILLE TENNESSEE UNITED STATES CELLULAR OPERATING COMPANY OF MEDFORD OREGON UNITED STATES CELLULAR OPERATING COMPANY OF YAKIMA WASHINGTON UNITED STATES CELLULAR TELEPHONE COMPANY (GREATER KNOXVILLE), L.P. TENNESSEE USCC DISTRIBUTION CO., LLC DELAWARE USCC EIP LLC DELAWARE USCC FINANCIAL L.L.C. ILLINOIS USCC FIRST RESPONDER, INC. DELAWARE USCC MASTER NOTE TRUST DELAWARE USCC PURCHASE, LLC DELAWARE USCC RECEIVABLES FUNDING LLC DELAWARE USCC SERVICES, LLC DELAWARE USCC WIRELESS INVESTMENT, INC. DELAWARE USCCI CORPORATION DELAWARE USCIC OF FRESNO CALIFORNIA USCOC NEBRASKA/KANSAS, INC. DELAWARE USCOC NEBRASKA/KANSAS, LLC DELAWARE USCOC OF CENTRAL ILLINOIS, LLC ILLINOIS USCOC OF CHICAGO REAL ESTATE HOLDINGS, LLC DELAWARE USCOC OF CUMBERLAND, LLC DELAWARE USCOC OF GREATER IOWA, LLC DELAWARE USCOC OF GREATER MISSOURI, LLC DELAWARE USCOC OF GREATER NORTH CAROLINA, LLC DELAWARE USCOC OF GREATER OKLAHOMA, LLC OKLAHOMA USCOC OF JACK/WIL, INC. DELAWARE USCOC OF JACKSONVILLE, LLC DELAWARE USCOC OF LACROSSE, LLC WISCONSIN USCOC OF OREGON RSA # 5, INC. DELAWARE USCOC OF PENNSYLVANIA RSA NO. 10-B2, INC. DELAWARE USCOC OF RICHLAND, INC. WASHINGTON USCOC OF ROCHESTER, INC. DELAWARE USCOC OF SOUTH CAROLINA RSA # 4, INC. SOUTH CAROLINA USCOC OF TEXAHOMA, INC. TEXAS USCOC OF VIRGINIA RSA # 3, INC. VIRGINIA USCOC OF WASHINGTON-4, INC. DELAWARE USCOC OF WILMINGTON, LLC DELAWARE VERMONT RSA NO. 2-B2, INC. DELAWARE WASHINGTON RSA # 5, INC. WASHINGTON WESTELCOM CELLULAR, INC. NEW YORK WESTERN SUB-RSA LIMITED PARTNERSHIP DELAWARE WILMINGTON CELLULAR PARTNERSHIP NORTH CAROLINA WILMINGTON CELLULAR TELEPHONE COMPANY NORTH CAROLINA YAKIMA MSA LIMITED PARTNERSHIP DELAWARE TDS TELECOMMUNICATIONS TDS TELECOMMUNICATIONS LLC DELAWARE INCUMBENT LOCAL EXCHANGE COMPANIES AMELIA TELEPHONE CORPORATION VIRGINIA ARCADIA TELEPHONE COMPANY OHIO ARIZONA TELEPHONE COMPANY ARIZONA ARVIG TELEPHONE COMPANY MINNESOTA ASOTIN TELEPHONE COMPANY WASHINGTON BADGER TELECOM, LLC DELAWARE

BLACK EARTH TELEPHONE COMPANY, LLC DELAWARE BLUE RIDGE TELEPHONE COMPANY GEORGIA BONDUEL TELEPHONE COMPANY, LLC DELAWARE BRIDGE WATER TELEPHONE COMPANY MINNESOTA BURLINGTON, BRIGHTON & WHEATLAND TELEPHONE COMPANY, LLC DELAWARE BUTLER TELEPHONE COMPANY, INC. ALABAMA CALHOUN CITY TELEPHONE COMPANY, INC. MISSISSIPPI CAMDEN TELEPHONE AND TELEGRAPH COMPANY, INC. GEORGIA CAMDEN TELEPHONE COMPANY, INC. INDIANA CENTRAL STATE TELEPHONE COMPANY, LLC DELAWARE CHATHAM TELEPHONE COMPANY MICHIGAN COBBOSSEECONTEE TELEPHONE COMPANY MAINE COMMUNICATION CORPORATION OF MICHIGAN MICHIGAN COMMUNICATIONS CORPORATION OF INDIANA INDIANA COMMUNICATIONS CORPORATION OF SOUTHERN INDIANA INDIANA CONCORD TELEPHONE EXCHANGE, INC. TENNESSEE CONTINENTAL TELEPHONE COMPANY OHIO DELTA COUNTY TELE-COMM, INC. COLORADO DEPOSIT TELEPHONE COMPANY, INC. NEW YORK DICKEYVILLE TELEPHONE, LLC DELAWARE EASTCOAST TELECOM OF WISCONSIN, LLC DELAWARE EDWARDS TELEPHONE COMPANY, INC. NEW YORK GRANTLAND TELECOM, LLC DELAWARE HAMPDEN TELEPHONE COMPANY MAINE HAPPY VALLEY TELEPHONE COMPANY CALIFORNIA HARTLAND & ST. ALBANS TELEPHONE COMPANY MAINE HOLLIS TELEPHONE COMPANY, INC. NEW HAMPSHIRE HOME TELEPHONE COMPANY, INC. INDIANA HORNITOS TELEPHONE CO. CALIFORNIA HUMPHREYS COUNTY TELEPHONE COMPANY TENNESSEE ISLAND TELEPHONE COMPANY MICHIGAN KEARSARGE TELEPHONE COMPANY NEW HAMPSHIRE LESLIE COUNTY TELEPHONE COMPANY KENTUCKY LEWIS RIVER TELEPHONE COMPANY, INC. WASHINGTON LEWISPORT TELEPHONE COMPANY KENTUCKY LITTLE MIAMI COMMUNICATIONS CORPORATION OHIO LUDLOW TELEPHONE COMPANY VERMONT MAHANOY & MAHANTANGO TELEPHONE COMPANY PENNSYLVANIA MCCLELLANVILLE TELEPHONE COMPANY, INC. SOUTH CAROLINA MCDANIEL TELEPHONE COMPANY WASHINGTON MERRIMACK COUNTY TELEPHONE COMPANY NEW HAMPSHIRE MID-AMERICA TELEPHONE, LLC OKLAHOMA MID-PLAINS TELEPHONE, LLC DELAWARE MID-STATE TELEPHONE COMPANY MINNESOTA MIDWAY TELEPHONE COMPANY, LLC DELAWARE MOSINEE TELEPHONE COMPANY, LLC DELAWARE MT. VERNON TELEPHONE COMPANY, LLC DELAWARE MYRTLE TELEPHONE COMPANY, INC. MISSISSIPPI NELSON-BALL GROUND TELEPHONE COMPANY GEORGIA NEW CASTLE TELEPHONE COMPANY VIRGINIA NORTHFIELD TELEPHONE COMPANY VERMONT NORWAY TELEPHONE COMPANY, INC. SOUTH CAROLINA OAKMAN TELEPHONE COMPANY, INC. ALABAMA OAKWOOD TELEPHONE COMPANY OHIO OKLAHOMA COMMUNICATION SYSTEMS, LLC OKLAHOMA

ORISKANY FALLS TELEPHONE CORPORATION NEW YORK PEOPLES TELEPHONE COMPANY, INC. ALABAMA PERKINSVILLE TELEPHONE COMPANY, INC. VERMONT PORT BYRON TELEPHONE COMPANY NEW YORK POTLATCH TELEPHONE COMPANY IDAHO QUINCY TELEPHONE COMPANY FLORIDA RIVERSIDE TELECOM, LLC DELAWARE S & W TELEPHONE COMPANY, INC. INDIANA SALEM TELEPHONE COMPANY KENTUCKY SCANDINAVIA TELEPHONE COMPANY, LLC DELAWARE SHIAWASSEE TELEPHONE COMPANY MICHIGAN SOMERSET TELEPHONE COMPANY MAINE SOUTHEAST MISSISSIPPI TELEPHONE COMPANY, INC. MISSISSIPPI SOUTHEAST TELEPHONE CO. OF WISCONSIN, LLC DELAWARE SOUTHWESTERN TELEPHONE COMPANY ARIZONA ST. STEPHEN TELEPHONE COMPANY SOUTH CAROLINA STOCKBRIDGE & SHERWOOD TELEPHONE COMPANY, LLC. DELAWARE STRASBURG TELEPHONE COMPANY COLORADO SUGAR VALLEY TELEPHONE COMPANY PENNSYLVANIA TELLICO TELEPHONE COMPANY, INC. TENNESSEE TENNESSEE TELEPHONE COMPANY TENNESSEE TENNEY TELEPHONE COMPANY, LLC DELAWARE THE FARMERS TELEPHONE COMPANY, LLC DELAWARE THE HOME TELEPHONE COMPANY OF PITTSBORO, INC. INDIANA THE ISLAND TELEPHONE COMPANY MAINE THE MERCHANTS AND FARMERS TELEPHONE COMPANY INDIANA THE STATE LONG DISTANCE TELEPHONE COMPANY, LLC DELAWARE THE VANLUE TELEPHONE COMPANY OHIO THE WEST PENOBSCOT TELEPHONE & TELEGRAPH COMPANY MAINE TIPTON TELEPHONE COMPANY, INC. INDIANA TOWNSHIP TELEPHONE COMPANY, INC. NEW YORK TRI-COUNTY TELEPHONE COMPANY, INC. INDIANA UNION TELEPHONE COMPANY NEW HAMPSHIRE UTELCO, LLC DELAWARE VERNON TELEPHONE COMPANY, INC. NEW YORK VIRGINIA TELEPHONE COMPANY VIRGINIA WARREN TELEPHONE COMPANY MAINE WAUNAKEE TELEPHONE COMPANY, LLC DELAWARE WEST POINT TELEPHONE COMPANY, INCORPORATED INDIANA WILLISTON TELEPHONE COMPANY SOUTH CAROLINA WILTON TELEPHONE COMPANY, INC. NEW HAMPSHIRE WINSTED TELEPHONE COMPANY MINNESOTA WINTERHAVEN TELEPHONE COMPANY CALIFORNIA WOLVERINE TELEPHONE COMPANY MICHIGAN OTHER COMPANIES TDS LONG DISTANCE CORPORATION DELAWARE TDS METROCOM, LLC DELAWARE TDS TELECOM SERVICE LLC IOWA TRI-COUNTY COMMUNICATIONS CORPORATION INDIANA TDS GROUP AFFILIATE FUND DELAWARE AIRADIGM COMMUNICATIONS, INC. WISCONSIN COMMVEST, INC. DELAWARE

INTERLINX COMMUNICATION, LLC DELAWARE M.C.T. COMMUNICATIONS, INC. NEW HAMPSHIRE NATIONAL TELEPHONE & TELEGRAPH COMPANY DELAWARE ONENECK DATA CENTER HOLDINGS LLC DELAWARE ONENECK IT SERVICES CORPORATION DELAWARE ONENECK IT SOLUTIONS LLC DELAWARE ONENECK UK LIMITED UNITED KINGDOM SUTTLE-STRAUS, INC. WISCONSIN TDS BROADBAND LLC DELAWARE TDS BROADBAND SERVICE LLC DELAWARE TDS BROADCASTING LLC DELAWARE TONAQUINT NETWORKS, LLC DELAWARE       

Exhibit 23.1 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos.333-188965, 333-211486, 333-219698, 333-219697 and333-190907), Form S-4 (No.33-64293) and Form S-8 (Nos.333-58127, 333-105676, 333-179702, 333-179703, 333-185143, 333-190330 and 333-197793) ofTelephone and Data Systems, Inc. of our report dated February 2 6 , 2018, relating to the financial statements and the effectiveness of internal control overfinancial reporting, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLPChicago, IllinoisFebruary 26, 2018

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the following Registration Statements of Telephone and Data Systems, Inc.:

(1) Registration Statement (Form S-3 No. 333-188965 ) (2) Registration Statement (Form S-3 No. 333-190907) (3) Registration Statement (Form S-3 No. 333-211486) (4) Registration Statement (Form S-4 No. 33-64293) (5) Registration Statement (Form S-8 No. 333-58127) (6) Registration Statement (Form S-8 No. 333-105676) (7) Registration Statement (Form S-8 No. 333-179702) (8) Registration Statement (Form S-8 No. 333-179703) (9) Registration Statement (Form S-8 No. 333-185143) (10) Registration Statement (Form S-8 No. 333-190330) (11) Registration Statement (Form S-8 No. 333-197793) (12) Registration Statement (Form S-3 No. 333-219697); and (13) Registration Statement (Form S-3 No. 333-219698);

of our report dated February 26, 2018, with respect to the consolidated financial statements of Los Angeles SMSA Limited Partnership and Subsidiary includedin this Annual Report (Form 10-K) of Telephone and Data Systems, Inc. for the year ended December 31, 2017. /s/ Ernst & Young LLP Certified Public Accountants Orlando, Florid a February 26, 2018

Exhibit 31.1

Certification of principal executive officer I, LeRoy T. Carlson, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Telephone and Data Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledg e, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this repo rt;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have:

A. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information rel ating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;

B. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with gene rally accepted accounting principles;

C. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the pe riod covered by this report based on such evaluation; and

D. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal qua rter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on ou r most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

A. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and

B. any fraud, whether or not mater ial, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.

Date: February 26, 2018

/s/ LeRoy T. Carlson, Jr.

LeRoy T. Carlson, Jr.President and Chief Executive Officer(principal executive officer)

  

Exhibit 31.2

Certification of principal financial officer I, Douglas D. Shuma , certify that:

1. I have reviewed this annual report on Form 10-K of Telephone and Data Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the fin ancial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The re gistrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchang e Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:

A. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to th e registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;

B. designed such internal control over financial reporting, or caused such inter nal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accep ted accounting principles;

C. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covere d by this report based on such evaluation; and

D. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most rece nt evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

A. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and

B. any fraud, whether or not material, that in volves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.

Date: February 26, 2018

/s/ Douglas D. Shuma

Douglas D. ShumaSenior Vice President - Finance and Chief Accounting Officer(principal financial officerand principal accounting officer)

  

Exhibit 32.1

Certification Pursuant to Section 1350 of Chapter 63of Title 18 of the United States Code

I, LeRoy T. Carlson, Jr., the principal executive officer of Telephone and Data Systems, Inc., certify that ( i ) the annual report on Form 10-K for the yearended December 31, 2017 , fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the informationcontained in the Form 10-K fairly presents, in all ma terial respects, the financial condition and results of operations of Telephone and Data Systems, Inc.

/s/ LeRoy T. Carlson, Jr. LeRoy T. Carlson, Jr.

February 26, 2018 A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Telephone and Data Systems, Inc.and will be retained by Telephone and Data Systems, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

Exhibit 32.2

Certification Pursuant to Section 1350 of Chapter 63of Title 18 of the United States Code

I, Douglas D. Shuma , the principal financial officer of Telephone and Data Systems, Inc., certify that ( i ) the annual report on Form 10-K for the yearended December 31, 2017 , fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the informationcontained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Telephone and Data Systems, Inc.

/s/ Douglas D. Shuma Douglas D. Shuma

February 26, 2018 A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Telephone and Data Systems, Inc.and will be retained by Telephone and Data Systems, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.