Greetings, and welcome to the TDS and U.S. Cellular Fourth Quarter Operating Results 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. It is now my pleasure to introduce your host, Ms. Jane McCahon, Senior Vice President, Corporate Relations of TDS. Thank you. Ms. McCahon, you may begin.

Thank you, Tim. Good morning, and thanks for joining us. I want to make you all aware of the presentation we have prepared to accompany our comments this morning, which you can find on the Investor Relations sections of the TDS and U.S. Cellular websites. With me today and offering prepared comments are from TDS, Doug Shuma, Senior Vice President, Finance and Chief Accounting Officer; from U.S. Cellular, Ken Meyers, President and Chief Executive Officer; and Steve Campbell, Executive Vice President and Chief Financial Officer. And from TDS Telecom, Vicki Villacrez, Vice President Finance and Chief Financial Officer. This call is being simultaneously webcast on the TDS and U.S. Cellular Investor Relations websites. Please see the websites for slides referred to on this call, including non-GAAP reconciliations. As a reminder, we provide guidance for both operating cash flow and adjusted EBITDA and for TDS Telecom, these are basically the same number. For the information set forth in the presentation and discussed during this call, contain statements about expected future events and financial results that are forward looking and subject to risks and uncertainties. Please review the safe-harbor paragraphs in our press releases and the extended version in our SEC filing. Shortly after we released our earnings and before the call, TDS and U.S. Cellular filed SEC forms 8-K, including today's press release and filed our SEC forms 10-K. Taking a quick look at the upcoming IR schedule, Slide 3. We will be presenting at the Deutsche Bank Conference on March 6 and the Raymond James Conference on March 7, and heading to New York and Boston with Gabelli on March 22 and 23. Please let us know if you would like information about any of these events. And please keep in mind that TDS has an open door policy so if you are in the Chicago area and would like to meet with members of management, the IR team will try to accommodate you, calendars permitting. As has been our tradition on our year-end call, we would like to take a moment to recap our major accomplishments for the year just completed as well as to set forth our strategic priorities for the coming year. So to begin, I would like to turn the call over to Doug Shuma to talk about TDS Corporate.

Thanks, Jane. Turning to Slide 4. We continue to execute on our strategic priorities and work to understand and capitalize on the many significant changes that occurred last year. During 2016, we saw benefits from prior year investments and work to manage our capital intensity as revenue growth because harder to achieve. The foundation of U.S. Cellular's value proposition is network quality. They continue to invest in spectrum capacity and new technology such as VoLTE, which will provide a great customer experience as well as opportunities for additional roaming revenue. And speaking of spectrum, I want to remind you about our inability to discuss the ongoing auction for 600 MHz spectrum, known as auction 1000. Although the clock phase has ended, the anti-collusion rule is still in effect and we are prohibited from speaking about it and will not entertain any questions relating to spectrum. At TDS Telecom, our fiber investments in wireline and network enhancements at cable, are now driving the growth we expect from our broadband strategy. As we think about capital allocation at the TDS level, not much has changed. We did not buy any cable assets for the past two years nor did we repurchase any meaningful amount of TDS shares. We did however, return value to our shareholders in the form of $65 million in dividends and this morning we announced a 5% dividend hike, our 43rd consecutive annual dividend increase. In 2016, U.S. Cellular repurchased $5 million of its shares. We continue to look for cable acquisitions that meet our criteria and plan to continue to target our 3:1 ratio of investing in the business versus returning value to shareholders for the foreseeable future. We are also assessing the opportunities and risks associated with the change in administration in Washington. As we will cover in greater detail, getting the A-CAM program for TDS Telecom across the finish line was a significant victory. One that provides commitment for ten years of support and helps us provide enhanced broadband services to some of our most remote customers. Recent comments by FCC Chair Pai seem to support the need for enhanced broadband in rural America and we will work diligently to pursue any opportunities. Of course, any initiatives to relieve regulatory burdens would be welcome by all of our businesses. We will also follow closely any tax reform efforts knowing full well that the devil will always be in the details. And now I will turn the call over to Ken Meyers. Ken?

Good morning. Let me start this morning by talking about 2016. What a year. Steve will cover the financial results for the quarter and the year in some detail but I am going to start with some summary comments. First, I want everyone to know that I am very proud of the way this organization -- what this organization accomplished in the face of extremely aggressive and one might even say uneconomic competition. The spirit of the customer focus exhibited by all of our associates is extraordinary and I want to thank them for their efforts. Looking back at the guidance we issued a year ago, we met all of our targets. Though we must admit, we got there a bit different than I thought a year ago. Revenue, while within our expected ranges was at the lower end as competitive pricing and promotion activity impacted both average revenue per unit and customer growth. Given that environment, we focused on protecting our customer base, reducing cost and closely managing our investments. As a result, we lowered both postpaid and prepaid churn in 2016 and delivered a small increase in operating cash flow and adjusted EBITDA when you put things on an apples to apples basis. I am going to let Steve explain that later. Turning to Slide 7. Some of the key factors behind last year's results and the key accomplishments include, first, with switching activity and gross additions down for the industry, promotions became increasingly richer as the year wore on. While we continue to win back customers at a healthy rate, we chose to manage our promotional spend at a reasonable level, offering uneconomic promotions is not part of our strategy. An important priority for 2016 was to increase customer engagement. This is a priority across all areas…

Thank you, Ken, and good morning, everyone. I am going to begin with a few additional comments on connection activity which is shown on Slide 12 of our presentation today. We had 2000 retail net additions for the fourth quarter of 2016, down from 75,000 net additions a year ago. In the prepaid segment, net adds for the quarter were 4000 compared to 7000 a year ago. We achieved a nice increase of about 20% in prepaid gross additions with only a very small amount of migration from our postpaid base but that impact was offset by modestly higher churn. In the postpaid segment, we had a net loss of 2000 connections. This was largely the result of lower gross additions which decreased 22% year-over-year to 187,000 due to a combination of factors, including lower switching activity, and extremely aggressive promotional activity by other carriers. Postpaid churn was at 1.41% this quarter compared to 1.31% a year ago. I will provide a breakdown of churn for handsets versus connected devices in a subsequent Slide, but let me mention here that for the year, postpaid churn improved from 1.39% to 1.31%. As shown at the bottom of the Slide, there was a net loss of 25,000 postpaid handsets in the fourth quarter. That compares to the net loss of 2000 handsets in the prior year. However, we continue to have upgrades from feature phones and including those upgrades, total Smartphone connections increased by 31,000 during the fourth quarter. We provide a little more information about smartphones on the next Slide. Smartphones represented 93% of total handsets sold this quarter and Smartphone penetration increased 79% of our basic postpaid handset connections, up from 74% a year ago. As I said, we saw that some Smartphone additions this quarter were migrations from feature…

Thank you, Steve, and good morning, everyone. I am excited to share our 2016 accomplishments with you and then I will outline our strategic priority for 2017. As you know, the common strategy for our wireline and cable businesses is to offer the best broadband connection in the market and use that advantage to grow high margin broadband services bundled with both video and voice products. This strategy allows us to leverage our expertise and infrastructure across both segments. On Slide 22 in our wireline business, we have continued our focus on driving fiber to the home connections to provide the most competitive broadband service and related products, which has led to growth in both broadband and IPTV connection. Our wireline's full year 2016 residential revenues increased 4%. By the end of 2016, we had deployed fiber to the home to 22% of ILEC service addresses. Fiber technology allows us to provide Internet speeds of up to 1 gigabit per second. To further strengthen our broadband offerings, we have deployed copper bonding technology to an additional 20% of our ILEC service addresses to drive higher speeds in or middle tier ILEC market. Our IPTV product called TDSTV is an important offering that leverages our high speed network, improves ARPU, and reduced churn through attractive bundling. We now have launched TDSTV in 28 markets, enabling 190,000 service addresses, which is roughly 26% of our total footprint. We have been focusing on bundling IPTV and high speed broadband to drive higher penetration in these markets. One positive side effect of the increased triple play bundle is that it has moderated the losses of legacy voice lines. The year-over-year decrease in ILEC residential voice connections was only 2%. One of our big successes in 2016 comes in the area of universal service funding.…

Thanks, Vicki. And Tim, we are ready for questions.

[Operator Instructions] Our first question comes from the line of Ric Prentiss of Raymond James. Please proceed with your question.

A couple of questions on the '17 guidance at the U.S. Cellular side. Steve, I think you said that depending on kind of where as we're at and competition would take you to the lower or higher end. Looking at the actual results in '16, is that kind of the baseline for the midpoint as far as your gross adds and net adds? Just trying to get a factoring in of what you think the range is of subscriber growth. And then also on the competition side, what your underlying assumptions are, kind of what ARPUs might look like?

So going into the year, I don’t know that customer growth is expected to be much different than this year. Whether it be the gross or net levels, right -- it's Ken. The second part of the question was...?

So on the competitive environment, as you look at the guidance you've given, what are the thoughts about what's baked into that as far as costs, like subscriber acquisition costs from promos, or further ARPU pressure. Just trying to think how to moderate that thought of what would cause competition to be seen as more moderating versus more intense?

Well, I don’t know if I can answer that -- if I quite get it, let me try it this way. I think competition is at that point where the big guys are stepping in now and saying let's get some discipline here. So I am hoping to see some rebound in pricing by the end of the year. A rebound is not baked into these numbers but I think as fast as things are moving in this industry right now, it's an area that we just need to watch.

Okay. And then when we look at the margins then, and obviously you're moving imputed interest stuff to the revenue items, but the operating cash flow margins are still in the mid-teens. As you think going forward, what would your target be as far as where margins could get back to and what timeframe would be involved in getting there?

Until we get stability in pricing I can't even guess at that number.

Okay. And final question for me is then, are you seeing any overbuilding of your markets in from T-Mobile or Sprint and can you update us as far as what market shares Sprint and T-Mobile have averaged across your footprint?

Yes. Sure. We have not seen significant overbuilding from either of those. In fact, we talked about, the question has come out in the past about overbuilding with T-Mobile. And they have been using the 700 MHz A license in most of our markets. Not all, but most of our markets that’s the license that we have. In fact, we have 4G roaming agreements with both of those carriers to help make sure that their customers get serviced wherever it is that they travel. So we aren't seeing a lot. I mean we are seeing a little bit from the metro side in terms of prepaid, but in terms of the postpaid business, not a lot right now.

And as far as market shares, is there kind of a ballpark market share those guys have in your territory?

The last numbers I saw are T-Mobile was still single digit and Sprint not significantly changed from the last time we look at it either. Not big moves.

Okay. So the competition is really maybe driven by Sprint and T-Mobile affecting the bigger two carriers, and then you competing directly up against the bigger two? Is that kind of what we should...?

That is still the main formula. We both loose most of our -- most of the highest number of ports we lose go to Verizon and the highest number that we get back from Verizon, with AT&T being number two. Those are our top two competitors. It's when they have to respond to things that are being done in the larger markets that we feel it, since everything is done on a national basis, we feel it in our markets.

Okay. And one final one on the guidance. What percent of your base is now on EIP? That helps us understand when services shifting to equipment revenue might stabilize. Where are you at as far as, I know you've been doing like 80% or so on the sales, but where are you on the base?

Yes. In terms of the penetration of the base, we are right around the 40% mark at this time.

But we could see still a continuation of pressure there throughout '17 but maybe more stabilization in '18. As far as...

We definitely see a small increase, I think, in percent on EIP. Remember that we announced that the retails sales will be primarily EIP going forward. So the percent of sales will grow and we expect to see that penetration in the base grow with it over the next year plus.

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

So on the unlimited plan that you rolled out today, can you just talk about how the roaming will work? Is there going to be limitations on out of market roaming? Is that potentially going to squeeze your margins if you have people who are using a lot more data? They're watching TV when they're in New York or something like that? And how do we think about optimization, are there people on bigger bucket plans who may be paying more that might have an opportunity to trade down to this, so there might be some dilution from that?

Just try a couple of things there, Simon. One, there is in fact a limit on the roaming side. But what we have seen over the last year is, as customers get faster speeds as they roam now in 4G, that outbound roaming has grown faster over the last year but only getting back to kind of more historical levels somewhere in the 5% to 6% of total usage. So I haven't seen that shift dramatically in terms of, they still travel the same amount of time. And therefore still use the same percentage of their total usage, on-network or off network. Secondly, as Steve talked about, with the 4G roaming agreements that we have put in place, we have seen substantial reductions in the cost per unit megabyte, gigabyte whatever, which will mitigate some of the risk around that margin compression.

Okay. And has there been any marked impact from the Verizon Unlimited move last week? I know it's early days but do you view that as a, obviously you've matched it, but do you view that as a major change in market dynamics from what you've seen so far?

Too soon to really see much impact at all. The organization moved unbelievably fast to get that into the marketplace so there wouldn’t be an impact to our customers. Going back to that first point around protecting our customer base. Now in terms of -- so I think it's a shift. I think it's a message, it's a signal. You want to do this, we are going to do it too. And by the way we are do it too on a high quality networks and everything else. Long-term, I don’t think it's sustainable by anybody. I do not -- business had to keep investing in capacity which is why I think we have been at the door a couple of times in the past and eventually have pulled away. And I think that’s what I am expecting to see here too.

Okay. And any change to your long term view about being a regional provider? Obviously, you sort of gave some guidance here about subscriber trends continuing, but you're one of the few remaining regional providers here. How do you think about long term? Should you be open to consolidation approaches if they came?

Yes. We have said for many, many, many years, we have got long term shareholders that are very interested in being long-term players in this industry. They have got their SEC form, whatever they are -- Doug what is it -- that’s on file. Unless they change their view and there is no indication that they are, we will continue to do exactly what we are doing today.

And, Tim, we have time for one more question, please.

And our final question will come from the line of Sergey Dluzhevskiy of Gabelli & Company. Please proceed with your question.

Just I guess a two part question on the wireless side. So on margins, and I understand that given the uncertainty on pricing, you are reluctant to provide longer term guidance. But from your perspective, from cost management perspective, could you provide more examples or greater clarity on what cost markets are you going to be taking in 2017, maybe 2018? And the second part of my question is on towers. Obviously you have a large own tower portfolio, you are probably the fourth largest tower company, or tower portfolio in the country. What are your thoughts on realizing greater value from this portfolio, either organically or from potential of selling this portfolio or spinning it off to shareholders?

Thanks, Sergey. So in terms of cost across the broad, I will say the network guys actually have done a really good job this year in terms of managing some of the backhaul investments and I expect that we are going to see more change in that areas, especially as more and more of our traffic moves off of CDMA. At the same time, we have, when I look at it, on 84% of all the cash we -- of all our cash expenditures, are outside the company, meaning not personnel. Not salary and wages. So we are working with all of our vendors in terms of how do we sharpen our advertising spend and how do we negotiate different discounts out of our handset and on the reverse logistics side. We have been making changes to like commission side, within our own distribution and continue to optimize that. So it’s across the board. It's not any one area. I can look at customer service last year and say millions came out of that area last year. As we put different technology in, as well as we give customers choices in terms of how to interact with us. None of those initiatives are going to stop. As we look at towers, on one hand I think year-over-year revenues is up 8% and understand that the towers still are a major, major underpinning to our network quality. And how we get to migrate from LTE to VoLTE on a cost effective way. In certain cases, in order to mitigate the change in coverage that one gets going through the CDMA voice to voice over LTE, we have had to go and install equipment on the top of towers. That means that top of the towers isn't an area that we are willing to rent out to somebody. So as we try to maximize revenue there, it's maximize it within the constraint that its primary, first, purpose of those towers is to ensure the flexibility we need to maintain network quality. It's not about trying to get the most money out of those towers and then getting in the way of our network strategy. So in effect there is a constraint in terms of that. Within that constraint we continue, 8% year-over-year, we are going to continue to monetize again more next year but within the confines of not getting in the way of our network strategy.

Do you see any benefits to structuring your tower company maybe as a standalone, maybe even fully owned subsidiary underneath U.S. Cellular but more of a separate company within your structure?

Not if it changes that constraint, right. If I were to put that -- if I gave one person the charge to optimize that and the optimization of those tower rent, which is what -- and revenue stream of $60 million. So let's say that person grew that by 20% next year, up dramatically from the 8%. That’s $12 million, okay. It would cost a lot more then that $12 million on the network side to deliver the quality we need if the towers take priority, tower rent takes priority over network. So network is job one and it's optimized tower rental economics within the constraint of network quality being job one.

There are no further questions over the audio portion of the conference. I would now like to turn the conference back over to management for closing remarks.

We would like to thank you all for joining us and we are around for questions for the rest of the day. Have a great one.

This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful rest of your day.