U.S. Cellular®

While the number of people who do not yet have a wireless phone continues to decline, more are using multiple wireless devices: for business and personal use, and for primarily data use, such as laptops and netbooks. U.S. Cellular is implementing strategies designed to drive deeper and longer customer engagement, generate greater revenue from existing customers, and attract customers seeking a high-quality wireless experience. In particular, U.S. Cellular is building on its very strong network quality and superior customer service to deliver high-quality wireless voice and data experiences. U.S. Cellular also continuously updates its strong portfolio of voice- and data-enabled handsets, including smart phones and premium touch screen phones.

In 2008, the company enabled many more of its customers to realize the full potential of these devices by expanding its 3G / EVDO network to more key markets, and by emphasizing Mobile Internet, Mobile E-mail and other high-demand offerings in its easyedgeSM line of applications.

These complementary initiatives, along with increased use of text and picture messaging, drove significant increases in data revenues and ARPU, which in turn increased service revenues for the year. Although U.S. Cellular added fewer retail postpay customers than expected in the first three quarters of 2008, additions increased in the fourth quarter, and U.S. Cellular ended the year with 6.2 million total customers. Ninety-five percent of the company’s retail customers are in the target postpay segment.

Connecting Customers with U.S. Cellular

In June of 2008, U.S. Cellular rolled out a marketing and brand positioning initiative to define its unique qualities and benefits for customers, and thereby forge stronger customer relationships. In its retail and sales environments, marketing materials, and advertising, U.S. Cellular encourages existing and potential customers to “Believe in Something Better™”—to believe in a unique wireless company that shares their values and understands their needs.

U.S. Cellular is backing up its market positioning with services and features that demonstrate its commitment to providing a superior wireless experience, such as free incoming calls, free storage of customer contacts (My Contacts Backup), early equipment upgrades with no fees, and free plan changes.

Delivering a Superior Mobile Data Experience

U.S. Cellular customers can choose from a strong lineup of devices, including BlackBerry® smart phones, and premium touch screen phones from HTC, Samsung, and LG. Smart phone-related ARPU for many customers is nearly twice as high as standard retail postpay ARPU. Thus, the revenue growth potential is considerable, despite a higher upfront smart phone equipment subsidy. As U.S. Cellular continues to bring more high-demand, data-intensive devices to market, and makes 3G speeds available to much more of its network, the company expects ongoing revenue growth in this area.

Investing for the Future

U.S. Cellular took important steps in 2008 to ensure that its network supports developing customer needs for technology. The company expanded its 3G network to approximately 23 percent of its cell sites, and intends to bring 3G speeds to at least 60 percent of its cell sites by the end of 2009. The company also added many new cell sites in 2008—financing the expansion in part with Universal Service Fund disbursements.

These investments enabled U.S. Cellular to maintain its award-winning network quality. J.D. Power and Associates has ranked U.S. Cellular “Highest Call Quality Performance Among Wireless Cell Phone Users in the North Central Region” for seven consecutive reporting periods.

U.S. Cellular, indirectly through its limited partnership interest in King Street Wireless, made strategic investments in spectrum in 2008 through participation in a major Federal Communications Commission (FCC) auction. The company also made several direct spectrum acquisitions. The spectrum covers areas that complement U.S. Cellular’s strategic footprint and could help to support an eventual transition to 4G / Long-Term Evolution network technology.

At year end, U.S. Cellular was well-positioned for strong future growth, with a total operating market population of 46 million in 26 states.