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## Selected Consolidated Financial Data 

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## Telephone and Data Systems, Inc. 

## Management’s Discussion and Analysis of Results of Operation and Financial Condition 

Telephone and Data Systems, Inc. (“TDS” or the “Company”) is a diversified telecommunications company that provided high- quality telecommunications services to approximately 4.3 million wireless telephone and wireline telephone customer units in 34 states at December 31, 2001. TDS conducts substantially all of its wireless telephone operations through its 82.2%-owned subsidiary, United States Cellular Corporation (“U.S. Cellular”) and its wireline telephone operations through its wholly-owned subsidiary, TDS Telecommunications Corporation (“TDS Telecom”). 

The following discussion and analysis should be read in conjunction with TDS’s consolidated financial statements and the accompanying notes. 

## Results of Operations 

Operating Revenues increased 11% ($261.7 million) during 2001 and 10% ($204.5 million) during 2000 reflecting primarily the 14% and 17% growth in customer units in 2001 and 2000, respectively. U.S. Cellular revenues increased $178.2 million in 2001 and $140.2 million in 2000 on 13% and 18% increases in customer units, respectively. TDS Telecom revenues increased $83.5 million in 2001 and $64.3 million in 2000 as access lines increased by 19% and 12%, respectively. The increase in access lines is primarily related to the growth in the competitive local exchange operations and acquisitions. 

Operating Expenses rose 13% ($245.6 million) in 2001 and 9% ($154.8 million) in 2000. U.S. Cellular operating expenses increased $153.3 million during 2001 and $103.7 million during 2000 due primarily to the costs associated with providing service to an expanding customer base and additional depreciation and amortization expense. TDS Telecom operating expenses increased $92.3 million during 2001 and $51.1 million during 2000 due to the expansion of the competitive local exchange business and growth in local telephone operation. 

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Operating Income increased 4% ($16.1 million) in 2001 and 13% ($49.7 million) in 2000. U.S. Cellular’s operating income increased 9% ($24.9 million) in 2001 and 14% ($36.5 million) in 2000, reflecting the increase in customers and revenues. TDS Telecom’s operating income declined 7% ($8.8 million) in 2001 and increased 12% ($13.2 million) in 2000. The decrease in TDS Telecom’s operating income in 2001 reflects increased operating losses from the competitive local exchange business due to continued expansion of the business. 

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Investment and Other Income (Expense) primarily includes gains and (losses) on marketable securities and other investments, interest and dividend income and investment income. 

Gain (Loss) on marketable securities and other investments totaled $(548.3) million in 2001, $15.7 million in 2000 and $345.9 million in 1999. The Company held marketable securities of certain companies that were involved in merger transactions in 2001 and 1999 generating significant gains and losses. TDS recognized a gain or loss on the difference between the historical basis in its investments and the value of the shares and cash received from the mergers. In 2001, TDS realized a loss of $644.9 million as a result of the merger between VoiceStream Wireless Corporation (“VoiceStream”) and Deutsche Telekom AG. Partially offsetting the loss in 2001 was a gain of $96.1 million recorded as a result of the merger between 

