Investor Presentation June 13, 2002
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Transcript of Investor Presentation June 13, 2002
Investor Presentation
June 13, 2002
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JOHN E. ROONEY
President &
Chief Executive Officer
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Safe HarborAll Information Set Forth In This Presentation, Except Historical AndFactual Information, Represents Forward-Looking Statements.This Includes All Statements About The Company’s Plans, Beliefs, Estimates And Expectations. These Statements Are Based On Current Estimates And Projections, Which Involve Certain Risks AndUncertainties That Could Cause Actual Results To Differ Materially From Those In The Forward-Looking Statements. Important Factors That May Affect Forward-Looking Statements Include, But Are Not Limited To: General Economic And Business Conditions, Both Nationally And In The Regions In Which The Company Operates; Technology Changes; Competition; Changes In Business Strategy OrDevelopment Plans; Acquisitions/Divestitures Of Properties And/Or Licenses; Changes In Governmental Regulations; Changes In The Value Of Investments; Availability of Future Financing;And Changes In Growth In Cellular Customers, Penetration Rates, Churn Rates And Roaming Rates. Investors Are Encouraged To Consider These And Other Risks And Uncertainties That Are Discussed In Documents Filed By The Company With Securities And Exchange Commission (“SEC”).
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USM Overview Eighth Largest Wireless Service Provider
Total Cellular Pops 27M
Serves 3.5M Customers - 13.2% Penetration
Pervasive Distribution... Nearly 1,800 Points Of Presence
Extensive Network Of Over 3,000 Cell Sites
#1 Market Share In All Of Its Largest Markets
Profitable And Financially Strong
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Strategy Regional Cluster Markets
Drive Profitable Growth With:— Outstanding Customer Service
— Broad Local Distribution
— Superior, High Quality Network
Maintain Strong Credit Profile With Positive Earnings
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Chicago Acquisition Currently Operates As PrimeCo
20 Megahertz PCS Spectrum Covering A Population Of 13 Million.
Assets Include Spectrum Plus:- A CDMA Based Network With 500 Cell Sites
- 350,000 Customers Generating $230 Million Of Annual Revenue
Purchase Price $610 Million
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Strategic Footprint
U.S. Cellular Properties Currently Majority Owned Or Managed
Chicago MTA Licensed Area Owned By PrimeCo
Incremental Licensed Service Areas Post Acquisition Of PrimeCo
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Chicago - Acquisition Strategy Complementary Footprint
Stronger Regional Competitor
Elimination Of Chicago Roaming Expenses
Economies Of Scale - Operating, Marketing & Technology
Similar CDMA Technology
Local Ownership And Control
Potential For Growth
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Proven Clustering Strategy
Regional Focus Works
Leverage Strong Position
Acquisitions And Swaps
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Strategic Footprint
U.S. Cellular MSAs And RSAs Currently Owned And Managed
PCS BTAs Owned Directly Or Through Joint Ventures (Incremental Territory Only)
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Strategy Regional Cluster Markets
Drive Profitable Growth With:— Outstanding Customer Service
— Broad Local Distribution
— Superior, High Quality Network
Maintain Strong Credit Profile With Positive Earnings
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Outstanding Customer Service
New Service-Focused Culture
Customer Service Delivered With Multiple Vehicles
Emphasis On Associate Satisfaction
Proactive Contact Of Customers To Analyze Rate Plans
Winner Of 2001 Wireless Review Industry Titan Award For Customer Service
Winner Of 24 Awards In 2001-2002 As Outstanding Wireless Service Provider In Local Markets
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1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
6 Largest Wireless Carriers
Average Independent CellularCarriers
U.S. Cellular
2001 Industry Leading Churn Rates
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Marketing Strategy
Over 1,800 Points Of Distribution Including:- Over 450 Company Stores & Kiosks- 1,300 Local Dealer Locations- A Direct Sales Force Focused On Business Accounts - Emerging New Channels (Internet & Telesales)
Local Distribution Aids In Delivery Of Customer Service.
Full Suite Of Product Offerings- National, Regional & Local Plans- Post & Prepay Offerings- SMS
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Superior, High Quality Network
Current Network Includes Over 3,000 Cell Sites
72% Of Customers On Digital Plans At 3/31/02.
Dropped Calls Fell From 1.5% To 1.3% Over Last 2 Years, Despite 55% CAGR In MOUs.
32% Of Population Served By CDMA Today; 68% By TDMA.
After Chicago Acquisition And Conversions 70% Of Population Will Have CDMA By 2nd Quarter 2003.
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Summary
Regional Strategy
Drive Profitable Growth By Focusing On Customer Satisfaction
Chicago Acquisition Is Consistent With Strategy
USM Has Management And Financial Strength To Succeed
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KENNETH R. MEYERS
Executive Vice President &
Chief Financial Officer
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Financial Highlights
Proven Ability To Execute Business Strategy
Highly Profitable Customer Base- High Lifetime Revenue- Low Cash Costs Per Subscriber
Strong Balance Sheet With Stable Cash Flows
Commitment To Investment Grade Credit Ratings
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Highly Profitable Customer Base
Life Time Cust. Revenue Churn RateU. S. Cellular $2,116 1.9%Alltel $2,005 2.3%AT&T $2,173 2.9%Cingular $1,848 2.9%Sprint $2,406 2.6%Verizon $1,930 2.5%Voicestream $1,117 4.4%
Based On 2001 Average of Quarterly Results As Reported By Various Analysts
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Cash Costs Per SubscriberU. S. Cellular $24Alltel 24AT&T 37Cingular 28Sprint 37Verizon 23Voicestream 40
Based On 2001 Average of Quarterly Results As Reported By Various Analysts
Highly Profitable Customer Base (cont’d)
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Operational Metrics2000 2001 % 1Q01 1Q02 %
Local ARPU $36.52 $35.68 -2% $34.39 $35.79 +4%
Total ARPU $49.21 $46.28 -6% $44.65 $44.14 -1%
Service Revenue $1,654M $1,826M +10% $424M $461M +9%
Monthly Churn 2.0% 1.9% 1.9% 21%
Ending Subs 3.061M 3.461M +13% 3.221M 3.504M +9%
Operating Cash Flow $558M $618M +11% $130M $152M +17%
Penetration 12.3% 13.5% +10% 12.5% 13.2% +5% (Cellular Markets Only)
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Chicago 20 MHz Acquisition
Purchase Price $610 Million Represents:- 2.7 Times 2000 Revenue- $47 Per Pop All In - $28 Per Pop Excluding Fixed Assets
Finance Primarily With Debt
Vodaphone Assets Have Been Monetized
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Recent Comparable Transactions Total Price PerDate Target Acquiror Pops (Mil) Sub Pop2/11/02 Georgia PCS U.S. Unwired 1.4 $2,471 $63.70
12/20/01 IWO U.S. Unwired 6.1 $4,437 $91.60
10/8/01 Telecorp AT&T Wireless 37.0 $5,919 $169.40
5/10/02 PrimeCo U.S. Cellular 13.1 $1,737 $46.41 Commun.
Source: Industry Analyst Reports
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Financial Strength Investment Grade Rating• Moody’s A3• S&P A-
Low Debt Levels
Additional Financial Assets• Tower Portfolio• Stock Investments Totaling $272 Million• Non Operating Cellular Investments
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Summary
Regional Strategy
Drive Profitable Growth By Focusing On Customer Satisfaction
Chicago Acquisition Is Consistent With Strategy
USM Has Management And Financial Strength To Succeed