Greetings and welcome to the TDS and U.S. Cellular Third Quarter Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. I would now like to turn the conference over to Jane McCahon. Thank you. Please go head.

Thank you, Brenda. Good morning and thank you for joining us. I want to make you all aware of the presentation that we've prepared to accompany our comments this morning, which you will find on the Investor Relations sections of the TDS and U.S. Cellular websites. With me today and offering prepared comments are from U.S. Cellular, Ken Meyers, President and Chief Executive Officer; Steve Campbell, Executive Vice President, Finance and CFO; and from TDS Telecom, Vicki Villacrez, Vice President Finance and CFO. This call is being simultaneously webcast on the TDS and U.S. Cellular Investor Relations websites. Please see those websites for slides referred to on this call, including other non-GAAP and operating cash flow, adjusted EBITDA reconciliations. The information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the Safe Harbor paragraph in our press releases and the extended versions in our SEC filings. Shortly after we released our earnings and before this call, TDS and U.S. Cellular filed SEC forms 8-K, including today's press releases, and their SEC forms 10-Q. We will be presenting at the Wells Fargo Conference in New York on November 10th and at the Citi Conference on January 6, in Las Vegas. Also please keep in mind has an open door policy, so that if you are in the Chicago and would like to meet with members of management, the IR team will try to accommodate you, calendars permitting. And now, I'd like to turn the call over to Ken Meyers.

Good morning and thanks for your time today. I'm glad to have this opportunity to talk about our progress this quarter. Highlights include the completion of our 4G LTE rollout project delivering reliable, high-speed and data services into our more remote rural areas. Continued customer and revenue growth and strong cost management combining to provide solid growth and operating cash flow on a business as usual basis. We also wound down our rewards program which brought back $58 million of previously deferred revenue. These results have us increasing operating cash flow guidance for the year as Steve will cover later. But it's important to note, that the guidance increase is driven by both, the operating results and the cessation of the rewards point program, not just the end of the rewards program. As I mentioned, we finished our rollout of 4G LTE. This program covered four years and included some groundbreaking work. Like the introduction of LTE and what we call Band 5 or on our 850 megahertz licenses. Today this network is now carrying 83% of our total data traffic. We just finished with this 4G LTE rollout. We are already working on our voice over LTE or voice over LTE or VoLTE trials. We're modifying networks in Northern Illinois and Southern Wisconsin to support VoLTE. The work on the network is close to completion and we expect to begin friendly user trials on this network, this quarter. As mentioned in my opening comments and as previously discussed. We terminated our rewards point program this quarter. This program was very innovative when rolled out five years ago. It served us and our customers well over the years. Now in a more price competitive environment, the value of the rewards program had diminished. So we terminate the program to allow…

Good morning, everyone. I'm going to begin with a few comments on our customer results for the quarter shown on Slide 6 of the presentation. As Ken said, during the third quarter we continued to grow our customer base. Postpaid gross additions for the third quarter 2015 were 200,000 compared to 251,000 a year ago, when we saw higher switching activity across the industry. Gross additions for the third quarter were actually very consistent with our results during the first half of the year, up 5% sequentially and at the same level as the first quarter. Postpaid net additions of 17,000 also were consistent with the levels achieved in the preceding two quarters and reflected the benefit of continuing low postpaid churn. This quarter, postpaid churn was 1.41% down from 1.59% last year. I'll say more about postpaid churn in a minute. In the prepaid category, we had 12,000 net additions versus 2,000 net losses last year. Gross additions were up about 11% and churn improved also. It was 5.2% this quarter versus 6.3% a year ago. The mix of our postpaid gross and net additions in the third quarter shown at the bottom of this slide. Similar to the past few quarters, the postpaid additions were primarily data centric devices like smartphones and connected devices especially tablets. Smartphones represented 60% of total gross additions. Connected devices represented 34% of gross additions and translated into 39,000 net additions. The next slide has a chart showing the trend in the postpaid churn rate over the past nine quarters. Churn peaked at 2.29% in the first quarter of 2014 and has continued on a steady downward trend since that time decreasing to 1.41% for the third quarter in 2015. As stated earlier, our gross additions consist primarily of data centric devices with…

Thanks, Steve and good morning, everyone. TDS Telecom had a solid quarter. As we execute on our strategic priorities. We continue to see cable as a natural extension of our wireline business, a common strategy for these businesses is to own the best price to the market and use that advantage to grow high margin broadband services, bundled with video and voice products. To achieve this objective, we're continuing the integration of our cable and wireline businesses in order to take advantage of product operational and infrastructure synergies. To execute on our broadband strategy and our wireline business. We continue to invest in fiber and have focused on providing high speed data services and related products. Which has led to strong growth in IPTV connection. TDS TV has been launched in 22 markets, enabling 150,000 service address or roughly 21% of our total footprint. We expect to launch an additional six markets over the remainder of 2015 and are very pleased with the success of our IPTV deployments. We will continue to make fiber investments to achieve our goals of enabling approximately 25% of our ILEC service addresses into 2016. As a result of continually reviewing all of our operations, we agreed to sell three small ILEC territories in Oklahoma and Arkansas and we expect that transaction to close in the fourth quarter. Our cause and demographic metrics in these markets did not support the capital investment required to be the most competitive data service provider in these markets going forward. In our cable business, our investment thesis is around monetizing the growing demand for high quality broadband services. To execute on this strategy, we've made investments to increase capacity on the broadband network and we've rolled out new products to improve the customer experience. Last quarter, we rebranded our…

Thanks, Vicki and Brenda, we're ready for questions.

[Operator Instructions] and our first question comes from the line of Richard Prentiss with Raymond James. Please go ahead with your question.

I want to ask a couple of questions around subscribers and then, one on margins. On the subscriber side, on the EIP. You mentioned I think, 70 - I'm trying to think what you said, sorry. EIP was 44% of sales, does that mean your base is up about 23% on EIP? Just trying to figure, where we are in the base.

That's a good number.

Okay and in the guidance, you mentioned that one of the reasons for revenue changing was now, EIP assumption would be at a lower take rate. What are you assuming EIP take rates are going to be now?

So Rick, as you said we had the 44% in the third quarter and as we look out to the fourth quarter in this year. We think the rate will probably notch up to about 50% for the fourth quarter.

So we had actually expected to see, a little higher rate than we've been running. In part of the rate variance so to speak has been a slow deliberate rollout of EIP, to our Asian channel. And part of it is just been a customer base that still likes the subsidized model. And so we haven't seen, as fast migration to EIP as maybe others. And our view is, we're going to make sure, we got the right products for the right customers and then, those that want subsidized plans, as long as we make the economics work, we will offer those as well EIP.

Okay, so fourth quarter maybe more like 50% whereas before you were thinking, it might have gone even higher.

Yes.

Okay and speaking of subsidy. What are you seeing as far as loss on equipment on a subsidy model these days given the competition and handset pricing?

First of all, what we're seeing is a, bifurcation by mix I guess I'd say, higher end phones are all migrating to the EIP and part of that's just our, our management in the pricing. So if I think about LOE on a subsidized phone, I don't have the exact number in front of me, but I'm guessing it's like 200.

Yes, roughly speaking, it's up 215 on a subsidized phone.

Okay, cool and then final question on subscriber side is, upgrades. What do you see in the quarter, we heard some of the other U.S. carriers upgrades came in a little later than some people might have been expecting?

Yes, so and that would be true for us as well. Our upgrade rate for the quarter was about 6.5% and it was about 8% in the comparable period a year ago.

For us, the upgrade rate had been, I - should been running 10% not too long ago and part of that was the whole migration from a strategy that did not involve contracts to bring in the customer base back under contract. So now before a year ago, we were running about 10% it's about probably third quarter of last year, started marching itself down and now I'd say, we're more in line with the kind of industry average, we've been running hot [ph] before.

Sure and what are the major trends in the industry. You guys talked to it was churn. Slide 7, you saw your quarterly seasonal churn numbers. Do you expect that churn can continue down on a year-over-year basis and what's driving that?

So I'm looking across the table to Jay Ellison, who's Executive Vice President, Operations and used that word expect and I like to use that word a lot, when I talk to him about churn. I think there is a lot of things that are driving it. One is, we believe satisfaction. It's also, you get more and more lines and devices on an account and it's more and more difficult to move all of those. So I think it's both satisfaction as well as, is difficult to your barriers almost.

I think just quickly additionally, with the completion of the LTE rollout this year, as well as to Ken's point in the broad based portfolio including the tablet selection. I think I expect to see us continue to have good churn results.

Thank you, Jay.

You're welcome. Ken.

Great, thanks guys.

Thank you. And our next question comes from the line of Simon Flannery with Morgan Stanley. Please go ahead with your questions.

So, on the auction for 600. You talked about the funding requirements about that. Can you just talk about how you think that spectrum. It obviously won't be available for few years, but you've got a lot of rural territory presumably, that could help with some coverage. But you also have a quite a lot of low band already capacity needs given some of your territory may not be as great. Given the density, so how do you weigh all of those things. And then, can you talk a little bit about return of capital. It's a little while, since you've done an M&A deal. We didn't see any buybacks this quarter. I understand as auction is coming up. But how are you thinking about other uses of cash beyond the auction in terms of acquisition for buybacks? Thanks.

Okay, so let me start with the auction question. You listed many different factors, and I'll go into the great big black box to see what comes out. But as we think about it, we want low band spectrum everywhere and with our 850 and the 700 A Block licenses that we have, we have a real nice kind of coverage over most of our markets. So there's a few, that we don't have any 800 or 700 and also those would be, the first targets for the 600 auctions. So that we can ensure that we've got the coverage everywhere. After, we've got the coverage spectrum, then we start thinking about capacity and to-date we've got AWS and PCS and other higher band frequencies that we use to augment that, but engineers are also working on carrier aggregation and some of the recent work shows that, what we were concerned about in the past, which was called low, low aggregation after the aggregating multiple lower bands of frequency together is looking more promising. And so, some of the 600 actually could be capacity additions for us. So all that says is, we've got the 600 coming up. We're preparing both from a liquidity financing standpoint as well as from an engineering and analytical standpoint to be ready for that auction, once it gets there. In terms of M&A or use of cash, I'm going to throw the question over to Doug Shuma is in the room, from TDS.

Hi, Simon. How are you? Yes, as far as M&A, we're absolutely still interested in acquiring additional cable companies to help improve our returns. Obviously, we haven't done any of that this year. We were committed still to this 75-25 invest in the business return to shareholder strategy. We've said consistently, that we would do that pretty modestly, moderately. We're doing that, many point in time. We maybe in or out of the markets for bunch of different reasons.

Okay, great. Thanks for the color.

Thank you. And our next question that comes from the line of Sergey Dluzhevskiy with Gabelli & Co. Please go ahead with your questions.

Couple questions. First one for, Ken. Just following up on the question about the auction. One of your competitors, I guess was concerned that 600 and 700 megahertz spectrum bands don't play well together, due to interference. I was just wondering maybe a bigger question is, there are other interference concerns related to that band. So maybe if you could talk, a little bit. How you look at some of those interference issues, how big of an issue you think that is and what are some of things that could be done to alleviate some of those concerns?

Sergey, you're asking me to talk about engineering and technical solutions. Is probably not the best idea. But Mike, here is our CTO is in the room and I'll let him talk about. But the big thing is, that we think that there is a lot of work going on, that is going to make that low, low work in certain applications. Mike?

Good morning, Sergey. Certain low, low combinations we believe are easier to carrier aggregate than others and it has to do with filtering limitations. And I would say that, carrier aggregating 600 and 700 is probably one of the more challenging low, lows to be addressed. But there is a lot of work going to improve filtering improves antenna bandwidth to make all low, low combinations possible. But definitely 600, 700 is one of the more challenging low, combinations.

And we're seeing progress, I think even on the standards front to include that in the standard. So we're optimistic.

Okay. One question on the cable side for Vicki. So obviously, we've seen additional cable deals I guess last quarterly call. So and I also, I mean given the recent market volatility, could you talk a little bit, if you're seeing an impact on deal environment in cable space and your potential pipeline. Have you seen prices come down some of the assets that you're looking given market volatility?

Sure. I think the activity is seen in the cable acquisition space says a couple of things. I think it says, one obviously how competitive the space is and then, two more importantly. I think, how attractive the space is and as you know our, strategy is around growing that broadband opportunity and so as we're looking at and I think, we've been clear about that. As we're looking for cable acquisitions, we continue to be disciplined buyers and we'll only do the deal, if we can make it work. But overall, we really like the business and the opportunity from the broadband growth perspective.

All right and last question, I guess. Going back to Ken. If you could talk little bit about your machine-to-machine opportunities that you see in your markets, is probably a small component of your business now, but where do you see it going over the next two years? What are some of the biggest opportunities for you?

Gosh, I don't know that I can do justice to that question. Right now, our focus is more in the connected device space. Especially bringing, efficiencies to operations in some of our local government operations. We're seeing strong receptivity to solutions, that help whether, be the county [ph] government or the city government here. Operate their, their fleets operate provide information to their citizens in a more efficient basis. We're that evolved long-term to really, I'm still - we're more real. I think about our customers in that area. They're more followers and they're going to be leaders. Right now, it's all about connected devices.

Okay, thank you.

Our next question comes from the line of Phil Cusick with JP Morgan. Please go ahead with your questions.

I think I remember you telling us, that you're more conservative on EIP modelling in terms of residuals and things like that, than your peers. Do you have any idea, what the EBITDA impact might be, if you took a pure level assumption?

I don't know that I'm more conservative than my peers. I think that we're appropriately conservative. And when we, record an EIP transaction we're looking at a residual value of 20% at the end of affectively year one, the way that works under our original offerings. What that means in terms of margins or whatever. I think about it, that you really don't know until after you play through your first cycle of EIP's. In our case, the first upgrade eligible ones were, about four months ago and we're seeing a much lower and slower upgrades, those than we thought. But Phil I don't know, that I can convert to, this what somewhat else say, this is what I said and kind of work it out to a bottom line. I think we're and sure we get enough history with these. We don't want to be in a position, where we've got a great big surprise on a balance sheet someplace. I'm not suggesting anybody else has one, I'm just maybe saying that, our team here Steve and Doug have been working to make sure that we don't wind up with one.

Good and then gross adds on the phone side continue to be fairly slow, even with the pick-up and ensuring that, AT&T and T-Mobile. How are you working to drive the sort of customer knowledge of the business and increase gross add share?

Now you're getting to the tough question. What we're doing is, a lot. One of the big opportunities for us was just awareness. Still customers outside our base of the availability of the Apple product. Jay? You want to talk about it, what we're doing there?

So we're using all of the standard vehicles obviously. We have tremendous amount of win back, direct mail campaign, to Ken's point relative to making the, continue to make the awareness grow relative to our iPhones. We got our second tranche of Apple related TV that just hit the air very recently and we're extremely as it is Apple, very excited about the calibre and the quality of the thought, that we're putting out there. We've got ongoing [indiscernible] of our tablets sales, which really have just been about a year in the market for us in an aggressive way. As I mentioned TV, print, radio all those standard methodologies have really been our focus this year and we will continue with the strong portfolio in that effort going into Q4.

The other thing, Mike. [Indiscernible] is that, what our study showed, is that most customers or prospective customers will shop online before they ever hit a store and they'll still buy in the store, if they shop online and so part of our whole pricing strategy is making sure, that we stay in the consideration set. That's why, we're just under Verizon and AT&T and networks that are similar in quality to ours. So when the customers looking at it online that they see that value difference and keep us in the consideration side.

I think the challenge for a lot of investors and thinking about the stock, I think is that. While churn has come down that's awesome. EBITDA is better that's awesome. The question is just the relevance of the company and with, we could argue whether it's sort of two or three competitors in your market. It's pretty clearly not four. But as Sprint slowly rolls out there 800 megahertz and T-Mobile, I would think eventually buy spectrum across your markets, it might be a few years before they can deploy it. I would think that the competitive levels goes up. Is this, do you see sort of three or four years from now, that you can be more advantage competitively today than you're today?

Well that's the whole, strategy. That's the whole set of challenges in front of us. Right as you said churn is down, there was something that was up. We've addressed it. You said the financials are better than they were, we've addressed that. Our local positioning, our continued investment in network quality are local and convenient distribution and the increased focus on small and medium-sized businesses are all the next steps that were taking around continuing to grow the business. So and as you said, what you've done there is always something else that needs to be done, that's where our focus is now.

Got it, thanks guys.

Our next question comes from the line of Michael Rollins with Citi. Please proceed with your questions.

Two if I could. First, could you update us on your AWS-3 spectrum and what you're expected. Timing is to get that spectrum from the FCC and I will follow-up with the second one, if I could please?

Sure. If you're talking about our investment in advantage wireless, that's the. It's their spectrum, they're the owner of that. They were in the auction and we know that they've got, they're working with the FCC around getting the license grant, but I don't know what the timing is of that and until such time, I hear from them. I'm here just on hold.

Has there been any issues identified as to, what - why the duration that is been?

No, that I'm aware of.

And then secondly, if you can talk a little bit more broadly about allocation of capital. So from a TDS and the U.S. Cellular level, how are the companies looking at monetizing more of the wireless asset? Whether it's the spectrum, you have other assets like towers, the minority investments in wireless properties. How are you looking at all of this as possible funding whether it's for cable interest that you described earlier in the call or whether it - to create some opportunities or return more capital to shareholders. Is there an update on thinking on this allocation of capital?

Let me try it from the Cellular standpoint and kind of pick them one at a time. So let's start with the minority investments. When we talk about those, you're talking about investments primarily, biggest one is LA. It is a very nice annuity that is paid for many, many years. They just bought a big license out there. So for the first time and as many years as I can remember. The cash flow has been redirected for this one year, but we fully expect to see the same level of cash coming out of that, in the future we have and that's been running $60 million. Zero tax basis asset that, you can run your numbers and put a value on that. And until such time there is another way to get similar value out of that to monetize that at some much lower potential return, this doesn't make sense. Towers, told you. We just finished the LTE rollout but we're about to start down the VoLTE trial and what we're seeing in VoLTE more cell site, modifications that are needed. And to be able to do those and at least half of our cell sites without incurring substantial lease renegotiation fees as well as give us some leverage in those. Of those remain a strategic asset and I don't see that changing right now. I think Steve pointed out, as we think about the auction coming up between cash balances, what do you say $300 million of VIP related receivables, unused lines of credit? I think we're pretty well there. In terms of other uses at TDS. I'm going to point on that one to the people on the other side of the table.

Mike, it's Doug. As far as TDS. We don't look to any assets at U.S. Cellular could or potentially seller financed as a source of cash for TDS to invest in cable. Cable acquisitions we look through the same places that are cash available on our balance sheet, potentially accessing the debt markets, if we have to we think they're available to us. But we would not be selling assets at U.S. Cellular to fund cable acquisitions.

And just finally, as you were in the board meetings for both U.S. and TDS at time. How do you measure the success? Is there a one metric that you look at for U.S. Cellular when you measure the success of your strategy? Is it revenue performance, is a metric of return on capital? Is there one thing that you guys look out and say, this is key thing you guys deliver on to demonstrate long-term success with your strategy?

There are many factors that, the board's look at to evaluate the performance of this business and the management team here. One that we've talked about in the past, that we continue to focus on, but it's not the only one. But a very, very critical one for the board is returning capital and making sure that we're on a path to change that result.

Thanks very much, Ken.

Thank you and this concludes today's question-and-answer session. We would like to turn the floor back to management for closing remarks.

We'd like to thank you all for joining us today and please let us know any follow-up questions. Have a great weekend.

Ladies and gentlemen. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.