FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 22, 1998
----------------
TELEPHONE AND DATA SYSTEMS, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 001-14157 36-2669023
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(State or other (Commission (IRS Employer
jurisdiction of incorporation) File Number) Identification No.)
30 North LaSalle Street, Chicago, Illinois 60602
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 630-1900
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
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On May 22, 1998, Telephone and Data Systems, Inc., a Delaware
corporation ("TDS") received an opinion letter from each of Credit Suisse First
Boston Corporation and Salomon Smith Barney with respect to the proposal by TDS
as set forth in the Proxy Statement/Prospectus dated March 24, 1998, as amended
April 20, 1998. Copies of such opinion letters are attached hereto as Exhibit
99.1 and 99.2, respectively.
In addition, on May 22, 1998, the Voting Trust Agreement dated June 30,
1989 was amended to be governed by the law of the State of Delaware. A copy of
such amendment is attached hereto as Exhibit 99.3.
Item 7. Financial Statements and Exhibits.
---------------------------------
Exhibits
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The exhibits accompanying this report are listed in the accompanying
Exhibit Index.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
TELEPHONE AND DATA SYSTEMS, INC.
(Registrant)
Date: June 5, 1998 By: /s/ GREGORY J. WILKINSON
------------------------------------
Gregory J. Wilkinson
Vice President and Controller
(principal accounting officer)
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
-------------- ----------------------
99.1 Opinion letter from Credit Suisse First Boston
Corporation
99.2 Opinion letter from Salomon Smith Barney
99.3 Amendment dated May 22, 1998 to Voting
Trust Agreement dated June 30, 1989
<PAGE>
EXHIBIT 99.1
OPINION OF CREDIT SUISSE FIRST BOSTON CORPORATION
May 22, 1998
Board of Directors
Telephone and Data Systems, Inc.
30 North LaSalle Street
Chicago, Illinois 60602
Dear Sirs:
We have reviewed a proposal (the "Proposal") by Telephone and Data Systems, Inc.
(the "Company") as set forth in the preliminary Proxy Statement/Prospectus dated
March 24, 1998, as amended April 20, 1998 (the "Proxy Statement/Prospectus"),
to: (i) create three new classes of common stock, which are intended to reflect
separately the performance of the Company's cellular telephone, landline
telephone and personal communications service businesses (the "Tracking
Stocks"), and (ii) change the state of incorporation of the Company from Iowa to
Delaware (the "Reincorporation"). The Proposal was approved by the stockholders
of the Company on April 27, 1998.
The Proposal, among other things, authorizes three new classes of common stock,
to be designated as United States Cellular Group Common Shares (the "Cellular
Group Common Shares"), TDS Telecommunications Group Common Shares (the "Telecom
Group Common Shares") and Aerial Communications Group Common Shares (the "Aerial
Group Common Shares"). The Cellular Group Common Shares, when issued, are
intended to reflect the separate performance of the United States Cellular Group
(the "Cellular Group"), which primarily includes the Company's interest in
United States Cellular Corporation, currently an approximately 81%-owned
subsidiary of the Company which operates and invests in cellular telephone
companies and properties ("U.S. Cellular"). The Telecom Group Common Shares,
when issued, are intended to reflect the separate performance of the TDS
Telecommunications Group (the "Telecom Group"), which primarily includes the
Company's interest in TDS Telecommunications Corporation, a wholly-owned
subsidiary of the Company which operates landline telephone companies ("TDS
Telecom"). The Aerial Group Common Shares, when issued, are intended to reflect
the separate performance of the Aerial Communications Group (the "Aerial Group"
and, together with the Cellular Group and the Telecom Group, the "Tracking
Group"), which primarily includes the Company's interest in Aerial
Communications, Inc., currently an approximately 82%-owned subsidiary of the
Company which is developing broadband personal communications services
("Aerial").
According to the Proposal, the Company intends to: (i) offer and sell Telecom
Group Common Shares in a public offering for cash, (the "Telecom Public
Offering"), and allocate the net proceeds thereof to the Telecom Group;
and (ii) distribute Cellular Group Common Shares, Telecom Group
<PAGE>
Board of Directors
Telephone and Data Systems, Inc.
May 22, 1998
Page 2
Common Shares and Aerial Group Common Shares (the "Distributed Group Shares") in
the form of a stock dividend on a pro rata basis to holders of Series A Common
Shares and Common Shares of the Company (the "Distribution"; the Common Shares
of the Company and the Distributed Group Shares distributed to the holders of
Common Shares of the Company referred to together as the "Proposed Common
Equity"). You have informed us that it is currently anticipated that the
Distribution would take place in July 1998 or later, after the completion of the
Telecom Public Offering. The Distribution is intended to be tax-free to
shareholders (except with respect to any cash received in lieu of fractional
shares). The Telecom Public Offering, Distribution and Reincorporation are
herein collectively referred to as the Recapitalization (the
"Recapitalization"). The Company continues to contemplate the issuance of
Cellular Group Common Shares in exchange for all of the shares of common stock
of U.S. Cellular which are not owned by the Company pursuant to a merger between
a subsidiary of the Company and U.S. Cellular (the "U.S. Cellular Merger"), and
the issuance of Aerial Group Common Shares in exchange for all of the shares of
common stock of Aerial which are not owned by the Company pursuant to a merger
between a subsidiary of the Company and Aerial (the "Aerial Merger"), but the
Recapitalization is not conditioned on consummation of the U.S. Cellular
Merger or the Aerial Merger.
You have asked us to advise you with respect to the effect of the implementation
of the Recapitalization on (i) the market value of the Proposed Common Equity
and (ii) the ability of the Company to raise equity capital through an offering
or offerings of shares of common equity or securities convertible into common
equity ("Equity Market Access"), assuming that such proposed Recapitalization
was effective as of the date hereof. The terms of the Tracking Stocks are set
forth in the Proxy Statement/Prospectus, and all capitalized terms not
specifically defined herein shall have the meanings ascribed to them in the
Proxy Statement/Prospectus.
We have assumed with your consent that, immediately prior to the proposed
Recapitalization, the Company Common Shares, the Series A Common Shares and the
Preferred Shares (the "Initial Shares") will continue to be the only classes of
capital stock of the Company which are outstanding; that, other than in
connection with the proposed Recapitalization, there will be no material change
in the number of Initial Shares outstanding prior to the implementation of the
proposed Recapitalization; and that, immediately after the proposed
Recapitalization, the Company Common Shares, the Series A Common Shares, the
Preferred Shares and the Tracking Stocks will be the only classes of capital
stock then outstanding. We have further assumed that, prior to the proposed
Recapitalization, the Initial Shares which are currently listed will continue to
be listed on their respective exchanges or trading markets, and that, following
the proposed Recapitalization, the Tracking Stocks will be eligible for, and
listed on, the American Stock Exchange.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as the Proxy
Statement/Prospectus. We have also reviewed certain other information, including
financial forecasts, provided to us by the Company, and have met with the
Company's management to discuss the business and prospects of the
<PAGE>
Board of Directors
Telephone and Data Systems, Inc.
May 22, 1998
Page 3
Company and the Tracking Group and the potential impact of changes in the
competitive environment and in the Company's and the Tracking Group's business
plans and strategies on those forecasts, business and prospects.
We have also considered certain financial and stock market data of the Company,
and we have compared those data with similar data for other publicly held
companies which have multiple classes of stock outstanding which reflect the
performance of specific lines of business, and we have considered the financial
terms of the different classes of stock of such companies. We also considered
such other information, financial studies, analyses and investigations and
financial, economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information (including the
information contained in the Proxy Statement/Prospectus) and have relied on its
being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company and
the Tracking Group. In addition, we have not been requested to make, and have
not made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of the Company or the Tracking Group, nor have we been
furnished with any such evaluations or appraisals. We are not expressing any
opinion as to what the actual value of the Tracking Stocks will be when issued
to the Company's stockholders pursuant to the Recapitalization or the prices at
which such Tracking Stocks or the Common Stocks of U.S. Cellular or Aerial will
trade subsequent to the Recapitalization. In addition, we are not expressing any
opinion whatsoever as to the individual merits of the U.S. Cellular Merger, the
Aerial Merger, or the Telecom Public Offering, or any opinion whatsoever with
respect to the Reincorporation. Our opinion does not address the Company's
underlying business decision to effect the Recapitalization.
Our analysis is necessarily based on financial, economic, market, and other
conditions as they exist and can be evaluated on the date of this letter and
assumes the Recapitalization was effective as of the date hereof, and we note
that such conditions may change prior to the expected date of consummation of
the Recapitalization. The Recapitalization may cause a change in perception by
some investors of the future plans of the Company or the holders of Series A
Common Shares. Consequently, our opinion assumes that the market has had a
reasonable opportunity to understand and evaluate the Recapitalization. In
addition, the Tracking Stocks which would be issued to the public shareholders
of the Company in the proposed Distribution might trade initially at market
prices below those at which they would trade on a fully distributed basis.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its consideration of the proposed
Recapitalization and is not to be quoted or referred to, in whole or in part, in
any registration statement, prospectus or in any other document used in
connection with the offering or sale of securities, nor shall this letter be
used for any other purposes, without our prior written consent; provided, that
this opinion may be included in its entirety, or appropriately described or
referred to, in any communication by the Company or the Board of Directors to
the stockholders of the Company or the Securities and Exchange Commission;
provided,
<PAGE>
Board of Directors
Telephone and Data Systems, Inc.
May 22, 1998
Page 4
that we have had the opportunity to review and comment on such communication
prior to the filing with the Securities and Exchange Commission and prior to its
dissemination to stockholders.
We have acted as financial advisor to the Company in connection with the
Recapitalization and will receive a fee for our services, a portion of which is
contingent upon the consummation of the Recapitalization.
In the ordinary course of our business, we and our affiliates may actively trade
the debt and equity securities of the Company, U.S. Cellular and Aerial for our
and such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
In the past, we have performed certain investment banking services for the
Company, U.S. Cellular and Aerial and their affiliates and have received
customary fees for such services.
Based upon and subject to the foregoing, it is our opinion that, assuming that
the proposed Recapitalization had been effective as of the date hereof, the
Recapitalization would not have a material adverse effect from a financial point
of view on (i) the aggregate market value on a fully distributed basis of the
Proposed Common Equity outstanding after such Recapitalization as compared with
the aggregate market value of the Company Common Shares outstanding immediately
prior to the announcement of such Recapitalization or (ii) the Company's Equity
Market Access after such Recapitalization as compared to the Company's Equity
Market Access prior to the announcement of such Recapitalization.
Sincerely,
CREDIT SUISSE FIRST BOSTON CORPORATION
<PAGE>
EXHIBIT 99.2
OPINION OF SALOMON SMITH BARNEY
May 22, 1998
Board of Directors
Telephone and Data Systems, Inc.
30 North LaSalle Street
Chicago, Illinois 60602
Dear Sirs:
We have reviewed a proposal (the "Proposal") by Telephone and Data Systems, Inc.
(the "Company") as set forth in the preliminary Proxy Statement/Prospectus dated
March 24, 1998, as amended April 20, 1998 (the "Proxy Statement/Prospectus"),
to: (i) create three new classes of common stock, which are intended to reflect
separately the performance of the Company's cellular telephone, landline
telephone and personal communications service businesses (the "Tracking
Stocks"), and (ii) change the state of incorporation of the Company from Iowa to
Delaware (the "Reincorporation"). The Proposal was approved by the stockholders
of the Company on April 27, 1998.
The Proposal, among other things, authorizes three new classes of common stock,
to be designated as United States Cellular Group Common Shares (the "Cellular
Group Common Shares"), TDS Telecommunications Group Common Shares (the "Telecom
Group Common Shares") and Aerial Communications Group Common Shares (the "Aerial
Group Common Shares"). The Cellular Group Common Shares, when issued, are
intended to reflect the separate performance of the United States Cellular Group
(the "Cellular Group"), which primarily includes the Company's interest in
United States Cellular Corporation, currently an approximately 81%-owned
subsidiary of the Company which operates and invests in cellular telephone
companies and properties ("U.S. Cellular"). The Telecom Group Common Shares,
when issued, are intended to reflect the separate performance of the TDS
Telecommunications Group (the "Telecom Group"), which primarily includes the
Company's interest in TDS Telecommunications Corporation, a wholly-owned
subsidiary of the Company which operates landline telephone companies ("TDS
Telecom"). The Aerial Group Common Shares, when issued, are intended to reflect
the separate performance of the Aerial Communications Group (the "Aerial Group"
and, together with the Cellular Group and the Telecom Group, the "Tracking
Group"), which primarily includes the Company's interest in Aerial
Communications, Inc., currently an approximately 82%-owned subsidiary of the
Company which is developing broadband personal communications services
("Aerial").
According to the Proposal, the Company intends to: (i) offer and sell Telecom
Group Common Shares in a public offering for cash, (the "Telecom Public
Offering"), and allocate the net proceeds thereof to the Telecom Group; and (ii)
distribute Cellular Group Common Shares, Telecom Group Common Shares and Aerial
Group Common Shares (the "Distributed Group Shares") in the form of a stock
dividend on a pro rata basis to holders of Series A Common Shares and Common
Shares of
<PAGE>
Board of Directors
Telephone and Data Systems, Inc.
May 22, 1998
Page 2
the Company (the "Distribution"; the Common Shares of the Company and the
Distributed Group Shares distributed to the holders of Common Shares of the
Company referred to together as the "Proposed Common Equity"). You have informed
us that it is currently anticipated that the Distribution would take place in
July 1998 or later, after the completion of the Telecom Public Offering. The
Distribution is intended to be tax-free to shareholders (except with respect to
any cash received in lieu of fractional shares). The Telecom Public Offering,
Distribution and Reincorporation are herein collectively referred to as the
Recapitalization (the "Recapitalization"). The Company continues to contemplate
the issuance of Cellular Group Common Shares in exchange for all of the shares
of common stock of U.S. Cellular which are not owned by the Company pursuant to
a merger between a subsidiary of the Company and U.S. Cellular (the "U.S.
Cellular Merger"), and the issuance of Aerial Group Common Shares in exchange
for all of the shares of common stock of Aerial which are not owned by the
Company pursuant to a merger between a subsidiary of the Company and Aerial (the
"Aerial Merger"), but the Recapitalization is not conditioned on consummation of
the U.S. Cellular Merger or the Aerial Merger.
You have asked us to advise you with respect to the effect of the implementation
of the Recapitalization on (i) the market value of the Proposed Common Equity
and (ii) the ability of the Company to raise equity capital through an offering
or offerings of shares of common equity or securities convertible into common
equity ("Equity Market Access"), assuming that such proposed Recapitalization
was effective as of the date hereof. The terms of the Tracking Stocks are set
forth in the Proxy Statement/Prospectus, and all capitalized terms not
specifically defined herein shall have the meanings ascribed to them in the
Proxy Statement/Prospectus.
We have assumed with your consent that, immediately prior to the proposed
Recapitalization, the Company Common Shares, the Series A Common Shares and the
Preferred Shares (the "Initial Shares") will continue to be the only classes of
capital stock of the Company which are outstanding; that, other than in
connection with the proposed Recapitalization, there will be no material change
in the number of Initial Shares outstanding prior to the implementation of the
proposed Recapitalization; and that, immediately after the proposed
Recapitalization, the Company Common Shares, the Series A Common Shares, the
Preferred Shares and the Tracking Stocks will be the only classes of capital
stock then outstanding. We have further assumed that, prior to the proposed
Recapitalization, the Initial Shares which are currently listed will continue to
be listed on their respective exchanges or trading markets, and that, following
the proposed Recapitalization, the Tracking Stocks will be eligible for, and
listed on, the American Stock Exchange.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as the Proxy
Statement/Prospectus. We have also reviewed certain other information, including
financial forecasts, provided to us by the Company, and have met with the
Company's management to discuss the business and prospects of the Company and
the Tracking Group and the potential impact of changes in the competitive
environment and in the Company's and the Tracking Group's business plans and
strategies on those forecasts, business and prospects.
<PAGE>
Board of Directors
Telephone and Data Systems, Inc.
May 22, 1998
Page 3
We have also considered certain financial and stock market data of the Company,
and we have compared those data with similar data for other publicly held
companies which have multiple classes of stock outstanding which reflect the
performance of specific lines of business, and we have considered the financial
terms of the different classes of stock of such companies. We also considered
such other information, financial studies, analyses and investigations and
financial, economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information (including the
information contained in the Proxy Statement/Prospectus) and have relied on its
being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company and
the Tracking Group. In addition, we have not been requested to make, and have
not made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of the Company or the Tracking Group, nor have we been
furnished with any such evaluations or appraisals. We are not expressing any
opinion as to what the actual value of the Tracking Stocks will be when issued
to the Company's stockholders pursuant to the Recapitalization or the prices at
which such Tracking Stocks or the Common Stocks of U.S. Cellular or Aerial will
trade subsequent to the Recapitalization. In addition, we are not expressing any
opinion whatsoever as to the individual merits of the U.S. Cellular Merger, the
Aerial Merger, or the Telecom Public Offering, or any opinion whatsoever with
respect to the Reincorporation. Our opinion does not address the Company's
underlying business decision to effect the Recapitalization.
Our analysis is necessarily based on financial, economic, market, and other
conditions as they exist and can be evaluated on the date of this letter and
assumes the Recapitalization was effective as of the date hereof, and we note
that such conditions may change prior to the expected date of consummation of
the Recapitalization. The Recapitalization may cause a change in perception by
some investors of the future plans of the Company or the holders of Series A
Common Shares. Consequently, our opinion assumes that the market has had a
reasonable opportunity to understand and evaluate the Recapitalization. In
addition, the Tracking Stocks which would be issued to the public shareholders
of the Company in the proposed Distribution might trade initially at market
prices below those at which they would trade on a fully distributed basis.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its consideration of the proposed
Recapitalization and is not to be quoted or referred to, in whole or in part, in
any registration statement, prospectus or in any other document used in
connection with the offering or sale of securities, nor shall this letter be
used for any other purposes, without our prior written consent; provided, that
this opinion may be included in its entirety, or appropriately described or
referred to, in any communication by the Company or the Board of Directors to
the stockholders of the Company or the Securities and Exchange Commission;
provided, that we have had the opportunity to review and comment on such
communication prior to the filing with the Securities and Exchange Commission
and prior to its dissemination to stockholders.
<PAGE>
Board of Directors
Telephone and Data Systems, Inc.
May 22, 1998
Page 4
We have acted as financial advisor to the Company in connection with the
Recapitalization and will receive a fee for our services, a portion of which is
contingent upon the consummation of the Recapitalization.
In the ordinary course of our business, we and our affiliates may actively trade
the debt and equity securities of the Company, U.S. Cellular and Aerial for our
and such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
In the past, we have performed certain investment banking services for the
Company, U.S. Cellular and Aerial and their affiliates and have received
customary fees for such services.
Based upon and subject to the foregoing, it is our opinion that, assuming that
the proposed Recapitalization had been effective as of the date hereof, the
Recapitalization would not have a material adverse effect from a financial point
of view on (i) the aggregate market value on a fully distributed basis of the
Proposed Common Equity outstanding after such Recapitalization as compared with
the aggregate market value of the Company Common Shares outstanding immediately
prior to the announcement of such Recapitalization or (ii) the Company's Equity
Market Access after such Recapitalization as compared to the Company's Equity
Market Access prior to the announcement of such Recapitalization.
Sincerely,
SALOMON SMITH BARNEY
<PAGE>
EXHIBIT 99.3
Voting Trust Agreement dated as of June 30, 1989
Change of Controlling Law
Pursuant to Section 8.11 of the Voting Trust Agreement dated of as of
June 30, 1989 ("Agreement"), the undersigned trustees do hereby agree that,
effective as of May 22, 1998, the date upon which Telephone and Data Systems,
Inc. became incorporated under the laws of the State of Delaware, all questions
concerning the validity and administration of the Agreement and the trust
created thereunder shall be determined under the law of the State of Delaware
instead of the State of Iowa. A copy of this document is being sent to all
Certificate Holders under the Agreement as required by Section 8.11.
Dated: May 22, 1998 /s/ Walter C.D. Carlson
--------------------------------------
Walter C.D. Carlson
Dated: May 22, 1998 /s/ Letitia G.C. Carlson
--------------------------------------
Letitia G.C. Carlson
Dated: May 22, 1998 /s/ LeRoy T. Carlson, Jr.
--------------------------------------
LeRoy T. Carlson, Jr.
Dated: --------------------------------------
------------- Melanie J. Heald
Dated: May 22, 1998 /s/ Donald C. Nebergall
--------------------------------------
Donald C. Nebergall
<PAGE>
