<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 33-68456
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 15, 1998)
$200,000,000
Y
TELEPHONE AND DATA SYSTEMS, INC.
7% NOTES DUE AUGUST 1, 2006
------------------
The 7% Notes due August 1, 2006 (the "Notes") of Telephone and Data Systems,
Inc., a Delaware corporation ("TDS" or the "Company"), mature on August 1, 2006.
Interest on the Notes is payable semi-annually on August 1 and February 1 of
each year, commencing February 1, 1999. The Notes are redeemable in whole or in
part at any time at the option of the Company at a redemption price equal to the
greater of (i) 100% of the principal amount of such Notes, plus accrued but
unpaid interest thereon to the date of redemption and (ii) the sum of the
present values of the remaining scheduled payments of principal and interest
thereon discounted to the date of redemption on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate (as
defined herein) plus 25 basis points, plus accrued but unpaid interest thereon
to the date of redemption. If a redemption date does not fall on an interest
payment date, then, with respect to the interest payment immediately succeeding
the redemption date, only the unaccrued portion of such interest payment as of
the redemption date shall be included in any present value calculation pursuant
to clause (ii). The Notes will not be subject to any sinking fund. See "Certain
Terms of the Notes."
The Notes will be represented by a Global Note registered in the name of the
nominee of the Depository Trust Company, which will act as the Depositary (the
"Depositary"). Interests in the Global Note will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary and
its participants. Except as described herein, Notes in definitive form will not
be issued.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) COMPANY (1)(3)
<S> <C> <C> <C>
Per Note....................................................... 99.806% .625% 99.181%
Total.......................................................... $199,612,000 $1,250,000 $198,362,000
</TABLE>
(1) Plus accrued interest, if any, from July 30, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $240,000.
------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and
reject any orders in whole or in part. It is expected that delivery of the Notes
will be made through the book-entry facilities of the Depositary on or about
July 30, 1998.
------------------------
MERRILL LYNCH & CO. SALOMON SMITH BARNEY
---------------
The date of this Prospectus Supplement is July 27, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NOTES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR CAUTIONARY
STATEMENT
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN CONTAIN "FORWARD-LOOKING" STATEMENTS, AS
DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, THAT ARE BASED
ON CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS. STATEMENTS THAT ARE NOT
HISTORICAL FACTS, INCLUDING STATEMENTS ABOUT THE COMPANY'S BELIEFS AND
EXPECTATIONS, ARE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS CONTAIN POTENTIAL
RISKS AND UNCERTAINTIES AND, THEREFORE, ACTUAL RESULTS MAY DIFFER MATERIALLY.
THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
IMPORTANT FACTORS THAT MAY AFFECT THESE PROJECTIONS OR EXPECTATIONS INCLUDE,
BUT ARE NOT LIMITED TO: CHANGES IN THE OVERALL ECONOMY; CHANGES IN COMPETITION
IN MARKETS IN WHICH THE COMPANY OPERATES; ADVANCES IN TELECOMMUNICATIONS
TECHNOLOGY; CHANGES IN THE TELECOMMUNICATIONS REGULATORY ENVIRONMENT; PENDING
AND FUTURE LITIGATION; AVAILABILITY OF FUTURE FINANCING; START-UP OF PERSONAL
COMMUNICATIONS SERVICES OPERATIONS; AND UNANTICIPATED CHANGES IN GROWTH IN
CELLULAR CUSTOMERS, PENETRATION RATES, CHURN RATES AND THE MIX OF PRODUCTS AND
SERVICES OFFERED IN THE COMPANY'S MARKETS. READERS SHOULD EVALUATE ANY
STATEMENTS IN LIGHT OF THESE IMPORTANT FACTORS.
S-2
<PAGE>
THE COMPANY
The Company is a diversified telecommunications service company with
established cellular telephone and landline telephone operations and developing
personal communications services ("PCS") operations. At June 30, 1998, the
Company, through its subsidiaries, served approximately 2.7 million customer
units in 35 states, including 1,922,000 cellular telephones, 537,500 telephone
access lines, and 204,000 PCS telephones. For the twelve months ended June 30,
1998, cellular telephone operations provided 63% of the Company's consolidated
revenues, excluding paging operations; telephone operations provided 30% of such
revenues; and PCS operations provided 7% of such revenues. The Company's
business development strategy is to expand its existing operations through
internal growth and acquisitions and to explore and develop other
telecommunications businesses that management believes will utilize the
Company's expertise in customer-based telecommunications services.
The Company conducts substantially all of its cellular telephone operations
through its 81%-owned subsidiary United States Cellular Corporation ("U.S.
Cellular"). U.S. Cellular and its subsidiaries own, operate and invest in
cellular telephone systems throughout the United States. U.S. Cellular is the
eighth largest cellular telephone company in the United States, based on the
aggregate number of population equivalents ("POPs") it owns. Since beginning
operations in 1985, U.S. Cellular has expanded its cellular networks and
customer service operations to include 136 majority-owned and managed markets
("Consolidated Markets") serving 1,922,000 cellular telephones at June 30, 1998.
U.S. Cellular's 143 managed markets, which include the 136 Consolidated Markets,
are operated as eight market clusters. Each of these clusters has a total
population of more than one million, and four of the clusters each have a
population of more than two million.
The Company conducts its landline telephone operations through its wholly
owned subsidiary, TDS Telecommunications Corporation ("TDS Telecom"). TDS
Telecom provides modern, high-quality telephone communication service to rural
and suburban communities through its incumbent local exchange carriers
("ILECs"). TDS Telecom is the ninth largest non-Bell local exchange company in
the United States based on the number of access lines served. TDS Telecom's ILEC
markets are located in twenty-eight states throughout the United States. At June
30, 1998, approximately 57% of TDS Telecom's access lines were in Alabama,
Georgia, Indiana, Minnesota, Tennessee and Wisconsin.
The Company conducts substantially all of its PCS business through its
82%-owned subsidiary Aerial Communications, Inc. ("Aerial"). PCS is the term
used to describe the wireless telecommunications services that are offered by
those companies that acquired licenses for radio spectrum (frequency range
1850-1990 MHz) in auctions conducted by the Federal Communications Commission
and are the newest entrants in the wireless telecommunications market. Aerial,
together with its subsidiaries, is a provider of PCS in the United States, with
licenses to provide service in the Minneapolis, Tampa-St. Petersburg-Orlando,
Houston, Pittsburgh, Kansas City and Columbus Major Trading Areas (collectively,
the "PCS Markets"). The PCS Markets include approximately 27.6 million POPs.
Aerial has constructed networks for the PCS Markets using Global System for
Mobile Communication technology and each of the PCS Markets has been in service
for more than one year.
S-3
<PAGE>
SUMMARY OPERATING DATA (1)
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
MONTHS ENDED JUNE
30, AS OF OR FOR THE YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ACCESS LINES/CUSTOMERS (THOUSANDS)
U.S. Cellular........................................ 1,922 1,263 1,710 1,073 710 421 261
TDS Telecom.......................................... 538 500 516 485 426 393 356
Aerial............................................... 204 28 125 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total.............................................. 2,664 1,791 2,351 1,558 1,136 814 617
OPERATING REVENUES
U.S. Cellular........................................ $ 535 $ 402 $ 877 $ 680 $ 480 $ 328 $ 210
TDS Telecom.......................................... 241 213 444 396 355 306 268
Aerial............................................... 67 7 56 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total.............................................. $ 843 $ 622 $ 1,377 $ 1,076 $ 835 $ 634 $ 478
OPERATING CASH FLOW
U.S. Cellular........................................ $ 179 $ 127 $ 262 $ 196 $ 132 $ 83 $ 36
TDS Telecom.......................................... 97 99 197 191 176 160 139
Aerial............................................... (96) (46) (157) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total.............................................. $ 180 $ 180 $ 302 $ 387 $ 308 $ 243 $ 175
</TABLE>
- ------------------------
(1) Excludes American Paging, Inc.
RECENT DEVELOPMENTS
RECENT FINANCIAL RESULTS
The Company's operating revenues for the three- and six-month periods ended
June 30, 1998 increased 36% in each period to $451.9 million and $844.0 million,
respectively, compared to the same periods in 1997. The increases in 1998 were
attributable primarily to the growth in customer units. The Company's operating
cash flow for the three- and six-month periods ended June 30, 1998 was $104.2
million and $180.1 million, respectively, compared to $76.4 million and $180.8
million for the same periods in 1997. The increase in the three-month period was
attributable primarily to improvements at U.S. Cellular. Aerial's increased cash
outflow, due to the start-up of its markets in the second quarter of 1997,
offset U.S. Cellular's continued improvements for the six-month period of 1998.
The Company's operating income (loss) for the three- and six-month periods ended
June 30, 1998 was $4.7 million and ($22.6) million, respectively, compared to
$7.4 million and $49.3 million for the same periods in 1997. The decreases in
1998 were attributable primarily to start-up costs incurred by Aerial. The
Company's net income (loss) available to common for the three-and six-month
periods ended June 30, 1998 was ($14.1) million and $59.6 million, respectively,
compared to $6.4 million and $15.5 million for the same periods in 1997. After-
tax gains from asset sales contributed $5.1 million and $117.6 million for the
three- and six-month periods ended June 30, 1998, respectively, as compared to
$4.0 million for each of the same periods in 1997.
U.S. Cellular reported 33% increases in operating revenues for each of the
three- and six-month periods ended June 30, 1998 to $290.1 million and $535.3
million, respectively, as compared to the same periods in 1997. The revenue
increases were primarily related to increases in cellular customer units, which
grew by 52% during the twelve-month period ended June 30, 1998. U.S. Cellular's
operating cash flow increased 37% and 41% for the three- and six-month periods
ended June 30, 1998 to $100.6 million and $179.0 million, respectively, as
compared to the same periods in 1997. U.S. Cellular's operating income increased
19% and 27% for the three- and six-month periods ended June 30, 1998 to $50.1
million and $83.3 million, respectively, as compared to the same periods in
1997.
S-4
<PAGE>
TDS Telecom reported 17% and 13% increases in operating revenues for the
three- and six-month periods ended June 30, 1998 to $125.1 million and $241.3
million, respectively, as compared to the same periods in 1997. Access lines
grew by 8% in the twelve-month period ended June 30, 1998. TDS Telecom's
operating cash flow increased 3% for the three-month period ended June 30, 1998
and decreased 2% for the six-month period ended June 30, 1998 to $49.8 million
and $97.0 million, respectively, as compared to the same periods in 1997. TDS
Telecom's operating income decreased 8% and 17% for the three- and six-month
periods ended June 30, 1998 to $22.0 million and $42.3 million, respectively, as
compared to the same periods in 1997. The decreases in the three- and six-month
periods reflect losses incurred in start-up ventures, such as the Internet,
local area network wiring and competitive local exchange carrier operations, as
well as higher operating expenses and downward pressures on certain revenue
streams in the landline telephone business.
Aerial reported operating revenues of $36.7 million and $67.4 million for
the three- and six-month periods ended June 30, 1998, respectively, as compared
to $7.1 million in the three-month period ended June 30, 1997. Aerial began
operations in its markets in the second quarter of 1997. Aerial's operating cash
outflow was $46.2 million and $95.8 million for the three- and six-month period
ended June 30, 1998, respectively, as compared to $45.8 million in the
three-month period ended June 30, 1997. Aerial's operating loss increased to
$67.5 million and $136.8 million for the three- and six-month periods ended June
30, 1998, respectively, as compared to $51.6 million in the three-month period
ended June 30, 1997. The Company anticipates that development of high-quality
networks and the marketing of PCS services will continue to reduce the Company's
operating and net income from levels which would otherwise be achieved during
1998.
THE RECAPITALIZATION
On April 27, 1998, the shareholders of the Company approved a corporate
restructuring plan providing for, among other things, the creation of three new
classes of common stock (the "Tracking Stocks") which are intended to separately
reflect the performance of the Company's cellular telephone, landline telephone
and PCS businesses, and a change in the state of incorporation of the Company
from Iowa to Delaware. The reincorporation of the Company in Delaware was
effective May 22, 1998. For additional information with respect to the
Recapitalization of the Company, see "The Company" in the accompanying
Prospectus.
EQUITY INVESTMENT IN AERIAL
On June 1, 1998, Sonera Corporation (formerly Telecom Finland Ltd.)
("Sonera") and Aerial entered into a definitive purchase agreement which
provides, among other things, for Sonera to make a $200 million equity
investment in a wholly-owned subsidiary of Aerial which, after five years, will
become exchangeable into equity of Aerial or, in certain circumstances,
exchangeable for equity of the Company or cash. Sonera and Aerial have also
agreed to form a strategic partnership to work collectively in certain areas
such as new product development, and to jointly explore new business
opportunities in the United States PCS market.
RADIO PAGING OPERATIONS
On April 7, 1998, TDS announced that it had completed a transaction in which
it contributed substantially all of the assets and certain liabilities of its
subsidiary, American Paging, Inc. ("American Paging"), and TSR Paging Inc.
("TSR") contributed all of its assets and liabilities, to a limited liability
company, TSR Wireless Holdings, LLC ("TSR Holdings"), pursuant to a previously
announced asset contribution agreement. TDS has a 30% interest and TSR has a 70%
interest in TSR Holdings. TSR Holdings offers radio paging and related services
through its subsidiaries.
S-5
<PAGE>
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Notes to
repay certain notes payable. Thereafter, the Company may incur additional
short-term indebtedness, the proceeds of which would be used for general
corporate purposes, which may include working capital, capital expenditures,
repayment or repurchase of outstanding indebtedness and investments in
subsidiaries. Pending any such use, the net proceeds may be invested in
marketable securities and short-term investments. The indebtedness to be repaid
was incurred primarily for the purpose of funding capital expenditures and
working capital requirements of Aerial. At June 30, 1998, notes payable amounted
to approximately $512 million and bore interest at a weighted average rate of
5.94% per annum and had a weighted average original maturity of 29 days from the
date of incurrence of such indebtedness.
CONSOLIDATED CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at March 31, 1998 on an actual basis and on a pro forma basis after
giving effect to the sale of the Notes and the repayment of indebtedness with
the estimated net proceeds therefrom as described in "Use of Proceeds" in this
Prospectus Supplement. The table is unaudited and should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended December 31,
1997 and its Quarterly Report on Form 10-Q for the three-month period ended
March 31, 1998, each of which is incorporated by reference herein.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------
ACTUAL PRO FORMA
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt (includes notes payable and current portion of
long-term debt and preferred shares)............................ $ 466,706 $ 268,584
------------ ------------
------------ ------------
Long-term debt (excluding current maturities)..................... $ 1,292,311 $ 1,492,311
Minority Interest in Subsidiaries................................. 419,564 419,564
Company-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trusts Holding Solely Company Subordinated
Debentures...................................................... 300,000 300,000
Preferred Shares (excluding current maturities)................... 28,099 28,099
Stockholders' equity:
Common Shares, par value $.01 per share; authorized 100,000,000
shares; issued and outstanding 54,736,841(1).................. 547 547
Series A Common Shares, par value $.01 per share; authorized
25,000,000 shares; issued and outstanding 6,936,277(1)........ 69 69
Common Shares Issuable, 12,584 shares........................... 549 549
Capital in Excess of Par Value(1)............................... 1,747,236 1,747,236
Treasury Shares, at cost, 770,132 shares........................ (29,768) (29,768)
Retained Earnings............................................... 339,531 339,531
------------ ------------
Total stockholders' equity.................................... 2,058,164 2,058,164
------------ ------------
Total Capitalization.............................................. $ 4,098,138 $ 4,298,138
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(1) Reflects the reincorporation of the Company from Iowa to Delaware and the
conversion of the Common Shares and Series A Common Shares from $1 par value
into $.01 par value as if it had occurred on March 31, 1998. The
reincorporation was approved at the Special Meeting of Shareholders on April
27, 1998 and was effected on May 22, 1998.
S-6
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth consolidated financial information for the
Company for each of the fiscal years in the five-year period ended December 31,
1997 and for the three-month periods ended March 31, 1997 and 1998. The
information for each of the five years ended December 31, 1997 has been derived
from the audited Consolidated Financial Statements and other financial
information contained in the Company's Annual Report on Form 10-K for such
years. See "Where You Can Find More Information" in the accompanying Prospectus.
Information for the three-month periods ended March 31, 1997 and 1998 has been
derived from the unaudited financial statements of the Company that have been
prepared on the same basis as the audited financial statements of the Company,
and, in the opinion of management, contain all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the results
of operations for such period. Operating results for the three-month period
ended March 31, 1998 are not necessarily indicative of the results of operations
that may be expected for the year ending December 31, 1998. See "Recent
Developments."
<TABLE>
<CAPTION>
(UNAUDITED)
AS OF OR FOR THE
THREE MONTHS ENDED
MARCH 31, AS OF OR FOR THE YEARS ENDED DECEMBER 31,
---------------------- --------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenues(1)(2)............. $ 392,118 $ 290,155 $1,471,533 $1,179,857 $ 942,307 $ 726,036 $ 553,829
Operating Income (Loss).............. (27,249) 41,941 (3,702) 153,448 131,998 108,822 69,733
Other Income (Loss).................. 223,882 (4,672) 113,979 141,190 103,857 33,686 28,126
Interest Expense..................... 31,613 13,814 89,744 42,853 50,848 41,251 37,466
Income Taxes......................... 85,954 13,838 28,559 123,646 81,029 40,713 26,497
Net Income (Loss) Before Cumulative
Effect of Accounting Change........ 74,170 9,617 (9,549) 128,139 103,978 60,544 33,896
Cumulative Effect of Accounting
Change(3).......................... -- -- -- -- -- (723) --
Net Income (Loss).................... 74,170 9,617 (9,549) 128,139 103,978 59,821 33,896
Net Income (Loss) Available to
Common............................. $ 73,730 $ 9,136 $ (11,441) $ 126,182 $ 101,469 $ 57,362 $ 31,510
Weighted Average Common Shares
(000s)............................. 60,750 61,184 60,211 60,464 57,456 53,295 46,995
Earnings Per Common Share--Basic:
Before Cumulative Effect of
Accounting Change................ $ 1.21 $ 0.15 $ (0.19) $ 2.09 $ 1.77 $ 1.09 $ 0.67
Net Income (Loss).................. 1.21 0.15 (0.19) 2.09 1.77 1.08 0.67
Earnings per Common Share--Diluted:
Before Cumulative Effect of
Accounting Change................ 1.20 0.15 (0.19) 2.07 1.74 1.08 0.67
Net Income (Loss).................. 1.20 0.15 (0.19) 2.07 1.74 1.06 0.67
Dividends Per Common and Series A
Common Share....................... $ 0.11 $ 0.105 $ 0.42 $ 0.40 $ 0.38 $ 0.36 $ 0.34
OTHER DATA:
Ratio of Earnings to Fixed
Charges(4)......................... 4.99x 1.35x .72x 3.66x 3.20x 3.00x 2.15x
EBITDA(5)............................ $ 72,424 $ 103,664 $ 297,854 $ 384,523 $ 323,503 $ 260,333 $ 187,714
Capital Expenditures................. $ 125,314 $ 169,024 $ 786,317 $ 550,204 $ 359,996 $ 319,701 $ 200,984
BALANCE SHEET DATA:
Cash and Cash Equivalents and
Temporary Investments.............. $ 84,230 $ 85,840 $ 75,567 $ 119,297 $ 80,851 $ 44,566 $ 73,385
Property, Plant and Equipment
(Net).............................. 2,451,246 1,945,145 2,465,653 1,828,889 1,293,410 1,063,656 846,089
Total Assets......................... 5,201,108 4,315,866 4,971,601 4,200,969 3,469,082 2,790,127 2,259,182
Notes Payable........................ 450,615 299,468 527,587 160,537 184,320 98,608 6,309
Long-term Debt (including current
portion)........................... 1,307,385 1,021,001 1,279,034 1,018,851 894,584 562,165 537,566
Redeemable Preferred Shares
(including current portion)........ 1,192 1,578 1,479 1,858 15,093 25,001 27,367
Company-Obligated Mandatorily
Redeemable Preferred Securities of
Subsidiary Trusts Holding Solely
Company Subordinated Debentures.... 300,000 -- 150,000 -- -- -- --
Common Stockholders' Equity.......... $2,058,164 $2,003,629 $1,968,119 $2,032,941 $1,684,365 $1,473,038 $1,224,285
</TABLE>
- ------------------------------
(1) Effective January 1, 1997, U.S. Cellular changed its financial reporting
presentation for certain credits given to cellular customers on their
monthly bills. Amounts for the years 1993-1996 have been reclassified to
conform to the 1997 presentation.
S-7
<PAGE>
(2) Operating revenues for the three-months ended March 31, 1997 and 1998 do not
include American Paging revenues. On April 7, 1998, TDS announced that it
had transferred substantially all of the assets and certain, limited
liabilities of American Paging to TSR Wireless Holdings, LLC pursuant to an
asset contribution agreement.
(3) Effective January 1, 1994, TDS adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Post Employment Benefits." The
cumulative effect of the change on years prior to 1994 has been reflected in
1994 Net Income. Prior years' financial information has not been restated.
(4) For the computation of the ratio of earnings to fixed charges: (i) earnings
consist of net income from continuing operations plus income taxes from
continuing operations, fixed charges (less capitalized interest),
distributions from minority subsidiaries and minority share in income of
subsidiaries that have fixed charges, less equity in undistributed earnings
of unconsolidated investments and minority share of losses; and (ii) fixed
charges consist of interest expense, capitalized interest and estimated
interest portion of rentals.
(5) EBITDA represents Operating Income plus depreciation and amortization.
EBITDA is a measure commonly used by the financial community but is not
prepared in accordance with United States generally accepted accounting
principles and should not be considered as a measurement of net cash flows
from operating activities.
S-8
<PAGE>
CERTAIN TERMS OF THE NOTES
The Notes will be issued under an Indenture dated as of February 1, 1991
between Telephone and Data Systems, Inc., an Iowa corporation ("TDS Iowa"), and
Harris Trust and Savings Bank, as trustee (the "Trustee"), as amended by the
First Supplemental Indenture among TDS Iowa, the Company and the Trustee (the
"Indenture"). The Indenture is described in the accompanying Prospectus and the
Notes constitute Debt Securities described in the accompanying Prospectus. The
following description of the particular terms of the Notes offered hereby
supplements the description of the general terms and provisions set forth in the
Prospectus, to which description reference is hereby made. References to "the
Company" in this section, unless the context indicates otherwise, are to TDS and
not its subsidiaries or any other entities in which it holds an interest.
GENERAL
The Notes will mature on August 1, 2006, and will be limited to $200,000,000
aggregate principal amount. Each Note will bear interest at the rate per annum
stated on the cover page hereof from July 30, 1998 or from the most recent
interest payment date to which interest has been paid, payable semi-annually on
August 1 and February 1 of each year (each such date being referred to herein as
an "Interest Payment Date"), commencing February 1, 1999, to the person in whose
name a Note is registered at the close of business on July 15 or January 15, as
the case may be, preceding such Interest Payment Dates. Interest on the Notes
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
The Notes will be unsecured and will rank PARI PASSU with all other
unsecured and unsubordinated indebtedness of the Company. However, because the
Company is a holding company which conducts substantially all of its operations
through subsidiaries, the right of the Company, and hence the right of creditors
of the Company (including the holders of the Notes), to participate in any
distribution of the assets of any subsidiary upon its liquidation or
reorganization or otherwise is necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent that claims of the Company
itself as a creditor of the subsidiary may be recognized.
The Indenture provision described under "Description of Debt
Securities--Defeasance and Discharge" in the accompanying Prospectus will be
applicable to the Notes. The Indenture does not contain any covenants or other
provisions applicable to the Notes which might afford beneficial owners of Notes
protection in the event of a highly leveraged transaction, change in credit
rating of the Notes or other similar occurrence.
The Notes will not be entitled to any sinking fund and are not convertible
into other securities.
OPTIONAL REDEMPTION
The Notes are redeemable in whole or in part at any time at the option of
the Company, at a redemption price equal to the greater of (i) 100% of the
principal amount of such Notes, plus accrued but unpaid interest thereon to the
date of redemption and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the
redemption date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate plus 25 basis points, plus accrued
but unpaid interest thereon to the date of redemption. If a redemption date does
not fall on an interest payment date, then, with respect to the interest payment
immediately succeeding the redemption date, only the unaccrued portion of such
interest payment as of the redemption date shall be included in any present
value calculation pursuant to clause (ii).
"TREASURY RATE" means, with respect to any redemption date, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
S-9
<PAGE>
"COMPARABLE TREASURY ISSUE" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "INDEPENDENT INVESTMENT BANKER" means one of the
Reference Treasury Dealers appointed by the Trustee after consultation with the
Company.
"COMPARABLE TREASURY PRICE" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (a) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(b) if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations. "REFERENCE TREASURY DEALER
QUOTATIONS" means, with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption
date.
"REFERENCE TREASURY DEALER" means each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Salomon Brothers Inc, their respective successors and any
other primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer") selected by the Company pursuant to Section 2.3 of the
Indenture in addition to, or in substitution for, any of such firms; provided,
however, that if any of the foregoing shall cease to be a Primary Treasury
Dealer, the Company shall substitute therefor another Primary Treasury Dealer.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after
the redemption date interest will cease to accrue on the Notes or portions
thereof called for redemption and the Notes or portions thereof called for
redemption will cease to be outstanding and will only represent the right to
receive the redemption price plus accrued interest to the date of redemption
with respect to such Notes. A holder of Notes whose Notes are redeemed would
have to reinvest the redemption price received upon redemption of such holder's
Notes in securities paying interest at a rate at least equal to the Treasury
Rate plus 25 basis points and having a term to maturity equal to the remaining
term to maturity of the Notes in order to receive the same investment return
that such holder anticipated receiving on such holder's investment in Notes.
Various factors could influence the Company's decision to redeem the Notes or
portions thereof, including market interest rates at the time of the decision
and the Company's financing needs and flexibility.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest will be made by the
Company in immediately available funds. The Notes will trade in the Depositary's
Same-Day Funds Settlement System until maturity, and secondary market trading
activity in the Notes will therefore be required by the Depositary to settle in
immediately available funds.
S-10
<PAGE>
GLOBAL NOTES
The Company has established a depositary arrangement with The Depository
Trust Company (the "Depositary") with respect to the Notes the terms of which
are summarized below:
Upon issuance, all Notes will be represented by one or more global notes
(the "Global Notes"). The Global Notes representing the Notes will be deposited
with, or on behalf of, the Depositary and will be registered in the name of the
Depositary or a nominee of the Depositary. No Global Note may be transferred
except as a whole by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or such nominee to a successor
of the Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a Global
Note, the Depositary or its nominee, as the case may be, will be the sole holder
of the Notes represented thereby for all purposes under the Indenture. Except as
otherwise provided in this section, the Beneficial Owners (as defined below) of
the Global Notes representing the Notes will not be entitled to receive physical
delivery of certificated Notes and will not be considered the holders thereof
for any purpose under the Indenture, and no Global Notes shall be exchangeable
or transferable. Accordingly, each Beneficial Owner must rely on the procedures
of the Depositary and, if such Beneficial Owner is not a Participant (as defined
below), on the procedures of the Participant through which such Beneficial Owner
owns its interest in order to exercise any rights of a holder under such Global
Notes or the Indenture. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
certificated form. Such limits and such laws may impair the ability to transfer
beneficial interests in the Global Notes representing the Notes.
The Global Notes representing the Notes will be exchangeable for
certificated Notes of like tenor and terms and of differing authorized
denominations aggregating a like principal amount, only if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the Global Notes, (ii) the Depositary ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (iii) the Company in its sole discretion determines that the Global Notes
shall be exchangeable for certificated Notes or (iv) there shall have occurred
and be continuing an Event of Default under the Indenture with respect to the
Notes. Upon any such exchange, the certificated Notes shall be registered in the
names of the Beneficial Owners of the Global Notes representing the Notes, which
names shall be provided by the Depositary's relevant Participants (as identified
by the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Notes. The
Notes will be issued as fully registered securities registered in the name
of Cede & Co. (the Depositary's partnership nominee). Fully registered
Global Notes will be issued for the Notes, in the aggregate principal amount
of such issue, and will be deposited with the Depositary.
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
a "clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act. The Depositary holds securities that its participants
("Participants") deposit with the Depositary.
The Depositary also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes to
Participants' accounts, thereby eliminating the need for physical movement
of securities certificates. Direct Participants of the Depositary ("Direct
Participants") include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain
other organizations. The Depositary is owned by a number of its Direct
Participants and by the New York Stock
S-11
<PAGE>
Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the Depositary's system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with
a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to the Depositary and its Participants
are on file with the Securities and Exchange Commission (the "Commission").
Purchases of Notes under the Depositary's system must be made by or
through Direct Participants, which will receive a credit for such Notes on
the Depositary's records. The ownership interest of each actual purchaser of
each Note represented by a Global Note ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from the Depositary of their purchase,
but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of
their holdings, from the Direct or Indirect Participants through which such
Beneficial Owners entered into the transaction. Transfers of ownership
interests in the Global Notes representing the Notes are to be accomplished
by entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners of the Global Notes representing the Notes will
not receive certificated Notes representing their ownership interests
therein, except in the event that use of the book-entry system for such
Notes is discontinued.
To facilitate subsequent transfers, all Global Notes representing the
Notes which are deposited with, or on behalf of, the Depositary are
registered in the name of the Depositary's nominee, Cede & Co. The deposit
of Global Notes with, or on behalf of, the Depositary and their registration
in the name of Cede & Co. effect no change in beneficial ownership. The
Depositary has no knowledge of the actual Beneficial Owners of the Global
Notes representing the Notes; the Depositary's records reflect only the
identity of the Direct Participants to whose accounts such Notes are
credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and by
Direct and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Global Notes representing the Notes. Under its usual procedure, the
Depositary mails an Omnibus Proxy to the Company as soon as possible after
the applicable record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts
the Notes are credited on the applicable record date (identified in a
listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments on Global
Notes representing the Notes will be made to the Depositary. The
Depositary's practice is to credit Direct Participants' accounts on the
applicable payment date in accordance with their respective holdings shown
on the Depositary's records unless the Depositary has reason to believe that
it will not receive payment on such date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name", and will be the
responsibility of such Participant and not of the Depositary, the Trustee or
the Company, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal, premium, if any, and/or
interest, if any, to the Depositary is the responsibility of the Company or
the Trustee. Disbursements of such payments to the Beneficial Owners shall
be the responsibility of Direct and Indirect Participants.
S-12
<PAGE>
The Depositary may discontinue providing its services as securities
depository with respect to the Notes at any time by giving reasonable notice
to the Company or the Trustee. Under such circumstances, in the event that a
successor securities depositary is not obtained, certificated Notes are
required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depositary). In
that event, certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but the Company assumes no responsibility for the accuracy thereof.
A further description of the Depositary's procedures with respect to the
Global Notes representing the Notes is set forth in the accompanying Prospectus
under "Description of Debt Securities--Registered Global Securities."
S-13
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among the Company and each of Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc (collectively, the
"Underwriters"), the Company has agreed to sell to each of the Underwriters and
each of the Underwriters severally has agreed to purchase from the Company the
aggregate principal amount of the Notes set forth opposite its name below. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the Notes if any are purchased.
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT
- ------------------------------------------------------------------------------------------------ ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................................................... $ 125,000,000
Salomon Brothers Inc............................................................................ 75,000,000
----------------
Total................................................................................. $ 200,000,000
----------------
----------------
</TABLE>
The Underwriters have advised the Company that they propose to offer the
Notes to the public at the public offering price set forth on the cover page of
this Prospectus Supplement and to certain dealers at such price less a
concession not in excess of .375% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of .25% of the principal amount of the Notes to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
There is no public trading market for the Notes and the Company does not
intend to apply for listing of the Notes on any national securities exchange or
for quotation of the Notes on any automated dealer quotation system. The Company
has been advised by the Underwriters that they presently intend to make a market
in the Notes after the consummation of the offering contemplated hereby,
although they are under no obligation to do so and may discontinue any
market-making activities at any time without any notice. No assurance can be
given as to the liquidity of the trading market for the Notes or that an active
public trading market for the Notes will develop. If an active public trading
market for the Notes does not develop, the market price and liquidity of the
Notes may be adversely affected. If the Notes are traded, they may trade at a
discount from their initial offering price, depending on prevailing interest
rates, the market for similar securities, the performance of the Company and
certain other factors.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments that the Underwriters may be required to make in
respect thereof.
Until the distribution of the Notes is completed, rules of the Securities
and Exchange Commission may limit the ability of the Underwriters and certain
selling group members to bid for and purchase the Notes. As an exception to
these rules, the Underwriters are permitted to engage in certain transactions
that stabilize the price of the Notes. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Notes.
If the Underwriters create a short position in the Notes in connection with
the offering, i.e., if they sell more Notes than are set forth on the cover page
of this Prospectus Supplement, the Underwriters may reduce that short position
by purchasing Notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor any of the Underwriters makes any representation that the
S-14
<PAGE>
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
From time to time the Underwriters and certain of their affiliates have
engaged, and may in the future engage, in transactions with, and perform
services for, the Company and its affiliates in the ordinary course of business.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by Sidley & Austin, Chicago, Illinois, and certain legal matters will be passed
upon for the Underwriters by Mayer, Brown & Platt, Chicago, Illinois. The
Company is controlled by a voting trust. Walter C.D. Carlson, a trustee and
beneficiary of the voting trust and a director of the Company and certain
subsidiaries of the Company, Michael G. Hron, the Secretary of the Company and
certain subsidiaries of the Company, William S. DeCarlo, the Assistant Secretary
of the Company and certain subsidiaries of the Company, Stephen P. Fitzell, the
Secretary of certain subsidiaries of the Company and Sherry S. Treston, the
Assistant Secretary of certain subsidiaries of the Company, are partners of
Sidley & Austin. Mayer, Brown & Platt from time to time acts as counsel in
certain matters for the Company. Debora de Hoyos, wife of Walter C.D. Carlson,
is a partner of Mayer, Brown & Platt.
S-15
<PAGE>
PROSPECTUS
[LOGO]
TELEPHONE AND DATA SYSTEMS, INC.
DEBT SECURITIES
----------------
Telephone and Data Systems, Inc., a Delaware corporation ("TDS," "TDS
Delaware" or the "Company"), may use this Prospectus from time to time to offer
debentures, notes and/or other unsecured evidences of indebtedness (the "Debt
Securities") of the Company. The aggregate initial offering price may not exceed
U.S. $300,000,000 (or its equivalent in any other currency or units based on or
relating to foreign currencies). The Debt Securities may be offered by us in one
or more series in amounts, at prices and on terms to be determined at the time
of sale.
We have included the specific terms of any Debt Securities offered by the
Company (the "Offered Securities") in an accompanying Prospectus Supplement.
Such terms include the specific designation, aggregate principal amount,
denomination (which may be in United States dollars, in any other currency or in
units based on or relating to foreign currencies), maturity, rate (which may be
fixed or variable) and time of payment of interest, if any, any subordination of
the Offered Securities to other indebtedness of the Company, any terms for
redemption at the option of TDS or the holder, any terms for sinking fund
payments, any listing on a securities exchange, the initial public offering
price and any other terms in connection with the offering and sale of the
Offered Securities.
We may issue the Debt Securities in registered form, in bearer form with
coupons attached or both. In addition, we may issue all or a portion of the Debt
Securities of any series in permanent registered global form which will be
exchangeable only under certain conditions for definitive Debt Securities.
We may sell Debt Securities to or through underwriters or dealers, and also
may sell Debt Securities to other purchasers directly or through agents. The
accompanying Prospectus Supplement sets forth the names of any underwriters,
dealers or agents involved in the sale of the Offered Securities, the principal
amounts, if any, to be purchased by underwriters and the compensation of such
underwriters, dealers or agents.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR HAS PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is July 15, 1998.
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD CAREFULLY
READ THIS ENTIRE DOCUMENT AND THE DOCUMENTS INCORPORATED BY REFERENCE IN THIS
DOCUMENT. SEE "WHERE YOU CAN FIND MORE INFORMATION."
THE COMPANY
TDS is a diversified telecommunications service company with established
cellular telephone and landline telephone operations and developing personal
communications services ("PCS") operations. The Company's business development
strategy is to expand its existing operations through internal growth and
acquisitions and to explore and develop other telecommunications businesses that
management believes will utilize the Company's expertise in customer-based
telecommunications services.
THE SECURITIES WE MAY OFFER
We may from time to time offer debentures, notes and/or other unsecured
evidences of indebtedness ("Debt Securities").
MAXIMUM AMOUNT
The aggregate initial offering price may not exceed U.S. $300,000,000.
PLAN OF DISTRIBUTION
We may sell the Debt Securities to or through underwriters or dealers, or to
other purchasers directly or through agents.
FORM OF DEBT SECURITIES
We may issue the Debt Securities in registered form, bearer form and/or in
registered global form.
TERMS OF DEBT SECURITIES
The specific designation, aggregate principal amount, maturity, rate and
time of payment of interest, initial offering price and other terms of the Debt
Securities will be set forth in a Prospectus Supplement.
INDENTURE
The Debt Securities will be issued in most cases under an Indenture dated
February 1, 1991 between the Company's predecessor and Harris Trust and Savings
Bank, as Trustee, as amended by the First Supplemental Indenture among the
Company's predecessor, the Company and the Trustee. Any subordinated Debt
Securities would be issued under a separate indenture which would be filed with
the SEC and described in a Prospectus Supplement.
USE OF PROCEEDS
Unless otherwise indicated in a Prospectus Supplement, we intend to use the
net proceeds from the sale of the Debt Securities offered by this Prospectus
principally in connection with TDS's acquisition, construction and development
programs, including reduction of short-term debt incurred in connection
therewith, and we may also use such proceeds for working capital, to reduce
existing long-term debt, to provide additional investments in TDS's
subsidiaries, and for other corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for the last five years and the
latest interim period will be set forth in a Prospectus Supplement.
WHERE YOU CAN FIND MORE INFORMATION
This Prospectus "incorporates by reference" certain information about the
Company from the Company's filings with the SEC. See "Where You Can Find More
Information" about how to obtain copies of such filings.
ADDRESS AND TELEPHONE
The address of TDS is 30 North LaSalle Street, Chicago, Illinois 60603; and
its telephone number is (312) 630-1900.
2
<PAGE>
THE COMPANY
TDS is a diversified telecommunications service company with established
cellular telephone and landline telephone operations and developing PCS
operations. The Company's business development strategy is to expand its
existing operations through internal growth and acquisitions and to explore and
develop other telecommunications businesses that management believes will
utilize the Company's expertise in customer-based telecommunications services.
The Company's Restated Certificate of Incorporation establishes three
tracking groups (the "Tracking Groups"), each of which would be represented by a
different class of common stock ("Tracking Stock"), and one residual group (the
"TDS Group"), which is represented by the Series A Common Shares and Common
Shares of the Company.
The United States Cellular Group Common Shares (the "Cellular Group
Shares"), when issued, are intended to reflect the separate performance of the
United States Cellular Group (the "Cellular Group"), which consists of the
Company's interest in United States Cellular Corporation, a subsidiary of the
Company operating and investing in cellular telephone companies and properties
("U.S. Cellular").
The TDS Telecommunications Group Common Shares (the "Telecom Group Shares"),
when issued, are intended to reflect the separate performance of the TDS
Telecommunications Group (the "Telecom Group"), which consists of the Company's
interest in TDS Telecommunications Corporation, a subsidiary of the Company
operating landline telephone companies ("TDS Telecom"), and includes the
attribution of certain corporate debt.
The Aerial Communications Group Common Shares (the "Aerial Group Shares"),
when issued, are intended to reflect the separate performance of the Aerial
Communications Group (the "Aerial Group"), which consists of the Company's
interest in Aerial Communications, Inc., a subsidiary of the Company providing
broadband personal communications services ("Aerial").
Pursuant to an Agreement and Plan of Merger (the "Merger Agreement"), dated
as of March 6, 1998, between Telephone and Data Systems, Inc., an Iowa
corporation ("TDS Iowa"), and the Company, which had been a wholly-owned
subsidiary of TDS Iowa, TDS Iowa merged with and into the Company, with the
Company as the surviving corporation (the "Reincorporation Merger"). In the
Reincorporation Merger, each Common Share, $1.00 par value, of TDS Iowa issued
immediately prior to the Reincorporation Merger was automatically converted into
one issued and fully paid and nonassessable Common Share, $.01 par value, of the
Company ("Common Shares"), each Series A Common Share, $1.00 par value, of TDS
Iowa issued immediately prior to the Reincorporation Merger was automatically
converted into one issued and fully paid and nonassessable Series A Common
Share, $.01 par value, of Company ("Series A Common Shares"), and each Preferred
Share, without par value, of TDS Iowa issued immediately prior to the
Reincorporation Merger was automatically converted into one issued and fully
paid and nonassessable Preferred Share, $.01 par value, of the Company with the
same rights, preferences and limitations as set forth in the original
certificate of designation for the series related to such Preferred Share.
The Company intends to distribute (the "Distribution") one Cellular Group
Share, two-thirds of a Telecom Group Share and two-thirds of an Aerial Group
Share with respect to each outstanding Series A Common Share and Common Share.
There can be no assurance that the Distribution will be completed or that it
will be completed as currently contemplated.
Upon the completion of the Distribution as contemplated, the Series A Common
Shares and the Common Shares of the Company would represent a common equity
interest in the TDS Group, which would have a Retained Interest of approximately
20-25% of the common shareholders' equity value of the Company attributable to
each of the Cellular Group, the Telecom Group and the Aerial Group. Accordingly,
the Series A Common Shares and Common Shares of TDS Delaware are intended to
reflect the combined performance of the all of the Tracking Groups of TDS. In
addition, the Series A Common Shares and Common Shares are intended to reflect
the performance of all other interests held by the TDS
3
<PAGE>
Group and the effects of certain corporate operations performed by the TDS
Group. The TDS Group would also include such other assets and liabilities of the
Company as the Board may in the future determine to attribute to the TDS Group
and such other businesses, assets and liabilities as the Company or any of its
subsidiaries may in the future acquire for the TDS Group, as determined by the
Board. Until such time as there are any issued and outstanding Cellular Group
Shares, Telecom Group Shares and Aerial Group Shares, all of the Company's
equity interest in the Cellular Group, the Telecom Group and the Aerial Group,
respectively, will be deemed to be held by the TDS Group.
The Company is attempting to reach an agreement with a special committee of
U.S. Cellular relating to the acquisition by TDS of the outstanding shares of
U.S. Cellular which TDS does not own in exchange for Cellular Group Shares, and
to reach an agreement with a special committee of Aerial relating to the
acquisition by TDS of the outstanding shares of Aerial which TDS does not own in
exchange for Aerial Group Shares. There can be no assurance that TDS will be
able to reach agreements relating to such transactions. If TDS is unable to
reach such agreements or otherwise acquire the publicly-held shares of U.S.
Cellular or Aerial, such shares would continue to remain outstanding.
The Reincorporation Merger, the Distribution and related transactions are
described in the Proxy Statement of TDS Iowa and Prospectus of Company, dated
March 24, 1998, as supplemented, which is incorporated by reference herein.
The Company is the successor to TDS Iowa. As noted above, in 1998, TDS Iowa
merged with and into the Company, with the Company surviving the merger. The
Company's corporate headquarters are located at 30 N. LaSalle, Suite 4000,
Chicago, Illinois 60602, and its telephone number is (312) 630-1900. Except
where the context otherwise indicates, the terms "Company" and "TDS" include
Telephone and Data Systems, Inc., a Delaware corporation, and its subsidiaries.
USE OF PROCEEDS
Unless otherwise indicated in the Prospectus Supplement, the net proceeds to
be received by TDS from the sale of Debt Securities offered by this Prospectus
will be used by TDS principally in connection with its acquisition, construction
and development programs, including reduction of short-term debt incurred in
connection therewith, and may also be used for working capital, to reduce
existing long-term debt, to provide additional investments in TDS's
subsidiaries, and for other corporate purposes or otherwise as described in the
Prospectus Supplement. Until the proceeds are used for these purposes, TDS may
deposit them in interest-bearing accounts or invest them in short-term
investment securities.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued in most cases under an Indenture dated
February 1, 1991 between TDS Iowa and Harris Trust and Savings Bank, as Trustee
(the "Trustee"), as amended by the First Supplemental Indenture among TDS Iowa,
TDS Delaware and the Trustee (the "Indenture"), the form of which is
incorporated by reference as an exhibit to the Registration Statement of which
this Prospectus is a part. Any subordinated Debt Securities would be issued
under a separate indenture which would be filed as an exhibit to the
Registration Statement by post-effective amendment and would be described in a
Prospectus Supplement. The following statements with respect to the Indenture
and the Securities (as hereinafter defined) are brief summaries of certain
provisions of the Indenture and do not purport to be complete; such statements
are subject to the detailed referenced provisions of the Indenture, including
the definition of capitalized terms used under this caption. Wherever particular
sections or defined terms of the Indenture are referred to, such sections or
defined terms are incorporated herein by reference as part of the statement
made, and the statement is qualified in its entirety by such reference. The term
"Securities", as used under this caption, refers to all securities issued under
the Indenture, including the Debt Securities.
4
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for the last five years and the
latest interim period is set forth in the accompanying Prospectus Supplement
under the heading "Selected Consolidated Financial Information."
GENERAL
The Indenture does not limit the aggregate principal amount of Securities
(which may include debentures, notes and other unsecured evidences of
indebtedness) which may be issued thereunder, and Securities may be issued
thereunder from time to time in one or more series and may be denominated and
payable in foreign currencies or units based on or relating to foreign
currencies, including European Currency Units. Special United States federal
income tax considerations applicable to any Securities so denominated will be
described in the Prospectus Supplement relating thereto. Unless otherwise
indicated in the applicable Prospectus Supplement, the Indenture also permits
TDS to increase the principal amount of any series of Securities previously
issued and to issue such increased principal amount (Section 2.3).
The Prospectus Supplement will set forth the following terms relating to the
Offered Securities: (1) the specific designation of the Offered Securities; (2)
any limit on the aggregate principal amount of the Offered Securities; (3) the
date or dates, if any, on which the Offered Securities will mature; (4) the rate
or rates per annum (which may be fixed or variable) at which the Offered
Securities will bear interest, if any, the date or dates on which any such
interest will be payable and the Record Dates for any interest payable on the
Offered Securities which are Registered Securities; (5) any subordination of the
Offered Securities to other indebtedness of the Company; (6) any mandatory or
optional redemption or sinking fund provisions, including the period or periods
within which, the price or prices at which and the terms and conditions upon
which the Offered Securities may be redeemed or purchased at the option of TDS
or otherwise; (7) whether the Offered Securities will be issuable in registered
form or bearer form or both, and, if issuable in bearer form, the restrictions
as to the offer, sale and delivery of the Offered Securities in bearer form and
as to exchanges between registered and bearer form; (8) whether the Offered
Securities will be issuable in the form of one or more temporary or permanent
Global Securities and, if so, the identity of the Depository for such Global
Securities; (9) the denominations of $1,000 and any multiple thereof, and the
denominations in which any of the Offered Securities which are in bearer form
will be issuable, if other than the denominations of $1,000 and $5,000; (10)
each office or agency where the principal of and any premium and interest on the
Offered Securities will be payable, and each office or agency where the Offered
Securities may be presented for registration of transfer or exchange; (11) if
other than United States dollars, the foreign currency or the units based on or
relating to foreign currencies in which the Offered Securities are denominated
and/or in which the payment of the principal of and any premium and interest on
the Offered Securities will or may be payable; (12) any applicable United States
federal income tax consequences; and (13) any other terms of the Offered
Securities (which terms shall not adversely affect the interests of any Holders
of Securities then Outstanding), including additions to or deletions from the
covenants and events of default with respect to the Offered Securities.
Securities may be issued under the Indenture bearing no interest or interest
at a rate below the prevailing market rate at the time of issuance, to be
offered and sold at a discount below their stated principal amount. United
States federal income tax consequences and other special considerations
applicable to any such discounted Securities or to other Securities offered and
sold at par which are treated as having been issued at a discount for United
States federal income tax purposes will be described in the Prospectus
Supplement relating thereto.
The Securities and any coupons appertaining thereto will be unsecured and
will rank PARI PASSU with all other unsecured and unsubordinated indebtedness of
TDS. However, since TDS is a holding company, the right of TDS, and hence the
right of the creditors of TDS (including the Holders of Securities), to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or
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otherwise is necessarily subject to the prior claims of creditors of such
subsidiary, except to the extent that claims of TDS as a creditor of such
subsidiary may be recognized. There is no restriction in the Indenture against
subsidiaries of TDS incurring secured or unsecured indebtedness or issuing
secured or unsecured securities. The ability of TDS to make payments of
principal and interest on the Debt Securities will be dependent upon the payment
to it by its subsidiaries of dividends, loans or advances. As more fully set
forth in the notes to the Company's financial statements, such payments by TDS's
regulated telephone company subsidiaries are subject to legal and contractual
restrictions, primarily contained in the mortgages granted by certain such
subsidiaries to the Rural Electrification Administration.
The Indenture does not contain covenants or other provisions designed to
afford Holders of Securities protection in the event of a highly leveraged
transaction, change in credit rating or other similar occurrence.
EXCHANGE AND TRANSFER
Securities may be presented for exchange and registered Securities may be
presented for registration of transfer at the offices and subject to the
restrictions set forth therein and in the applicable Prospectus Supplement
without service charge, but upon payment of any taxes or other governmental
charges due in connection therewith, subject to any applicable limitations
contained in the Indenture. TDS has appointed the Trustee as Security Registrar.
Securities in bearer form and the coupons appertaining thereto, if any, will be
transferable by delivery (Sections 2.8 and 3.2).
PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of the principal of and the premium and interest, if any, on all Securities
(other than a Registered Global Security) in registered form will be made at the
office or agency of the Trustee in the Borough of Manhattan, The City of New
York, except that, at the option of TDS, payment of any interest may be made (i)
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register or (ii) by wire transfer to an account
maintained by the Person entitled thereto as specified in the Security Register
(Sections 3.1 and 3.2). Unless otherwise indicated in the applicable Prospectus
Supplement, payment of any interest due on Securities in registered form will be
made to the Persons in whose name such Registered Securities are registered at
the close of business on the Record Date for such interest payments (Section
2.7).
REGISTERED GLOBAL SECURITIES
The registered Securities of a particular series may be issued in the form
of one or more Registered Global Securities which will be deposited with a
Depository, or its nominee, each of which will be identified in the Prospectus
Supplement relating to such series. Unless and until exchanged, in whole or in
part, for Securities in definitive registered form, a Registered Global Security
may not be transferred except as a whole by the Depository for such Registered
Global Security to a nominee of such Depository, by a nominee of such Depository
to such Depository or another nominee of such Depository or by such Depository
or any such nominee to a successor of such Depository or a nominee of such
successor (Section 2.8).
The specific terms of the depository arrangement with respect to any portion
of a particular series of Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such series.
TDS anticipates that the following provisions will apply to all depository
arrangements.
Upon the issuance of a Registered Global Security, the Depository therefor
or its nominee will credit, on its book entry and registration system, the
respective principal amounts of the Securities represented by such Registered
Global Security to the accounts of such persons having accounts with such
Depository
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("participants") as shall be designated by the underwriters or agents
participating in the distribution of such Securities or by TDS if such
Securities are offered and sold directly by TDS. Ownership of beneficial
interests in a Registered Global Security will be limited to participants or
persons that may hold beneficial interests through participants. Ownership of
beneficial interests in a Registered Global Security will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
the Depository therefor or its nominee (with respect to beneficial interests of
participants) or by participants or persons that hold through participants (with
respect to interests of persons other than participants). The laws of some
states require certain purchasers of securities to take physical delivery
thereof in definitive form. Such depository arrangements and such laws may
impair the ability to transfer beneficial interests in a Registered Global
Security.
So long as the Depository for a Registered Global Security or its nominee is
the registered owner thereof, such Depository or such nominee, as the case may
be, will be considered the sole owner or Holder of the Securities represented by
such Registered Global Security for all purposes under the Indenture. Except as
provided below, owners of beneficial interests in a Registered Global Security
will not be entitled to have Securities of the series represented by such
Registered Global Security registered in their names, will not receive or be
entitled to receive physical delivery of Securities of such series in definitive
form and will not be considered the owners or Holders thereof under the
Indenture.
Principal, premium, if any, and interest payments on a Registered Global
Security registered in the name of a Depository or its nominee will be made to
such Depository or nominee, as the case may be, as the registered owner of such
Registered Global Security. None of TDS, the Trustee or any paying agent for
Securities of the series represented by such Registered Global Security will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial interests in such Registered Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial interests.
TDS expects that the Depository for a Registered Global Security or its
nominee, upon receipt of any payment of principal, premium or interest, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amounts of such
Registered Global Security as shown on the records of such Depository or its
nominee. TDS also expects that payments by participants to owners of beneficial
interests in such Registered Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name,"
and will be the responsibility of such participants.
If the Depository for a Registered Global Security representing Securities
of a particular series is at any time unwilling or unable to continue as
Depository and a successor Depository is not appointed by TDS within 90 days,
TDS will issue Securities of such series in definitive form in exchange for such
Registered Global Security. In addition, TDS may at any time and in its sole
discretion determine not to have the Securities of a particular series
represented by one or more Registered Global Securities and, in such event, will
issue Securities of such series in definitive form in exchange for all of the
Registered Global Securities representing Securities of such series.
CERTAIN COVENANTS OF TDS
Under the Indenture, TDS has agreed that it will not engage in certain
transactions, as described below.
LIMITATION ON SECURED DEBT. TDS will not create or incur any Secured Debt
without in either case effectively providing that Debt Securities (together
with, if TDS shall so determine, any other Debt of or guaranteed by TDS ranking
equally with the Debt Securities) shall be secured equally and ratably with (or,
at the option of TDS, prior to) such Secured Debt, with certain stated
exceptions. These exceptions permit (a) Secured Debt (i) in respect of Liens on
property existing at the time such property is acquired by TDS,
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(ii) in respect of Liens created upon or within 270 days following the
acquisition or construction of property (including any improvements to existing
property) to secure the payment of all or part of the purchase price thereof, or
(iii) incurred by TDS prior to, at the time of or within 270 days following the
acquisition of property which is subject to a related Lien, which Secured Debt
is incurred for the purpose of financing all or part of the purchase price
thereof, provided that no such Lien applies to any property theretofore owned by
TDS (including property transferred by TDS to any subsidiary of TDS in
contemplation of or in connection with the creation of such Lien) or to any
property of TDS other than the property so acquired (other than, in the case of
construction or improvement, any theretofore unimproved real property or portion
thereof on which the property so constructed, or the improvement, is located);
(b) Secured Debt in respect of Liens on property of a Person (i) existing at the
time such Person is merged into or consolidated with TDS or at the time of a
sale, lease or other disposition of the properties of a Person as an entirety or
substantially as an entirety to TDS, (ii) resulting from such merger,
consolidation, sale, lease or disposition by virtue of any Lien on property
granted by TDS prior to such merger, consolidation, sale, lease or disposition
(and not in contemplation thereof or in connection therewith) which applies to
after-acquired property of TDS or (iii) resulting from such merger,
consolidation, sale, lease or disposition pursuant to a Lien or contractual
provision granted or entered into by such Person prior to such merger,
consolidation, sale, lease or disposition (and not at the request of TDS);
PROVIDED, HOWEVER, that any such Lien referred to in clause (i) shall not apply
to any property of TDS other than the property subject thereto at the time such
Person or properties were acquired and any such Lien referred to in clause (ii)
or (iii) shall not apply to any property of TDS other than the property so
acquired; (c) Liens existing at the date of the Indenture; (d) Liens in favor of
a government or governmental entity to secure partial progress, advance or other
payments, or other obligations, or to secure any Debt incurred for the purpose
of financing all or any part of the cost of acquiring, constructing or improving
the property subject thereto (including, without limitation, Liens incurred in
connection with industrial revenue, pollution control, private activity bond or
similar financing); (e) Liens arising by reason of deposits with, or the giving
of any form of security to, any governmental agency or any body created or
approved by law or governmental regulation, which Lien is required by law or
governmental regulation as a condition to the transaction of any business or the
exercise of any privilege, franchise, license or permit; (f) Liens for taxes,
assessments or governmental charges or levies not yet delinquent or governmental
charges or levies already delinquent, the validity of which charge or levy is
being contested in good faith and for which any reserves required in accordance
with generally accepted accounting principles have been established; (g) Liens
(including judgment liens) arising in connection with legal proceedings so long
as such proceedings are being contested in good faith and, in the case of
judgment liens, execution thereon is stayed and for which any reserves required
in accordance with generally accepted accounting principles have been
established; and (h) Secured Debt secured by any extension, renewal or
replacement (or successive extensions, renewals or replacements) of any Liens
referred to in the foregoing clauses (a) to (g), inclusive (provided that the
principal amount of Secured Debt secured thereby does not exceed the principal
amount of such Debt immediately prior to such extension, renewal or replacement,
and that any Lien created in connection therewith is limited to all or part of
the property (plus improvements to such property) which secured the Secured Debt
so extended, renewed or replaced).
The foregoing restrictions do not apply if, immediately after the incurrence
of such Secured Debt (giving effect to the application of the proceeds
therefrom), the aggregate principal amount of Secured Debt (other than Secured
Debt described in clauses (a) to (h), inclusive, of the immediately preceding
paragraph), plus the aggregate amount of Capitalized Rent in respect of Sale and
Leaseback Transactions (other than Sale and Leaseback Transactions the proceeds
of which are or will be applied as described in clauses (a) to (e) inclusive,
under "Limitation on Sale and Leaseback Transactions" below), would not exceed
10% of Consolidated Capitalization (Sections 1.1 and 3.6).
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. TDS will not enter into any
Sale and Leaseback Transaction unless immediately after the completion of such
Sale and Leaseback Transaction (giving effect to the application of the proceeds
therefrom), the aggregate amount of Capitalized Rent in respect of Sale
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and Leaseback Transactions (other than Sale and Leaseback Transactions described
in clauses (a) to (e), inclusive, of the immediately succeeding paragraph), plus
the aggregate principal amount of Secured Debt (other than Secured Debt
described in clauses (a) to (h), inclusive, under "Limitation on Secured Debt"
above), would not exceed 10% of Consolidated Capitalization.
The foregoing restrictions do not apply to, and there shall be excluded in
computing the aggregate amount of Capitalized Rent for the purpose of such
restrictions, the following Sale and Leaseback Transactions: (a) any Sale and
Leaseback Transaction entered into to finance the payment of all or any part of
the purchase price of property acquired or constructed by TDS (including any
improvements to existing property) or entered into prior to, at the time of or
within 270 days after the acquisition or construction of such property, which
Sale and Leaseback Transaction is entered into for the purpose of financing all
or part of the purchase or construction price thereof; PROVIDED, HOWEVER, that
in the case of any such acquisition, such Sale and Leaseback Transaction shall
not involve any property transferred by TDS to a subsidiary thereof in
contemplation of or in connection with such Sale and Leaseback Transaction or
involve any property of TDS other than the property so acquired (other than, in
the case of construction or improvement, any theretofore unimproved real
property or portion thereof on which the property so constructed, or the
improvement, is located); (b) any Sale and Leaseback Transaction involving
property of a Person existing at the time such Person is merged into or
consolidated with TDS or at the time of a sale, lease or other disposition of
the properties of a Person as an entirety or substantially as an entirety to
TDS; (c) any Sale and Leaseback Transaction in which the lessor is a government
or governmental entity and which Sale and Leaseback Transaction is entered into
to secure partial progress, advance or other payments, or other obligations,
pursuant to any contract or statute or to secure any Debt incurred for the
purpose of financing all or any part of the cost of constructing or improving
the property subject to such Sale and Leaseback Transaction (including, without
limitation, Sale and Leaseback Transactions incurred in connection with
pollution control, industrial revenue, private activity bond or similar
financing); (d) any Sale and Leaseback Transaction involving the extension,
renewal or replacement (or successive extensions, renewals or replacements) in
whole or in part of a lease pursuant to a Sale and Leaseback Transaction
referred to in the foregoing clauses (a) to (c), inclusive; PROVIDED, HOWEVER,
that such lease extension, renewal or replacement shall be limited to all or any
part of the same property leased under the lease so extended, renewed or
replaced (plus improvements to such property); and (e) any Sale and Leaseback
Transaction the net proceeds of which are at least equal to the fair value (as
determined by the Board of Directors of TDS) of the property leased pursuant to
such Sale and Leaseback Transaction, so long as within 270 days of the effective
date of such Sale and Leaseback Transaction, TDS applies (or irrevocably commits
to an escrow account for the purpose or purposes hereinafter mentioned) an
amount equal to the net proceeds of such Sale and Leaseback Transaction to
either (x) the purchase of other property having a fair value at least equal to
the fair value of the property leased in such Sale and Leaseback Transaction and
having a similar utility and function, or (y) the retirement or repayment (other
than any mandatory retirement or repayment at maturity) of (i) Securities, (ii)
other Funded Debt of TDS which ranks prior to or on a parity with the Securities
or (iii) indebtedness of any subsidiary of TDS maturing by its terms more than
one year from its date of issuance (notwithstanding that any portion of such
indebtedness is included in current liabilities) or preferred stock of any
subsidiary of TDS (other than any such indebtedness owed to or preferred stock
owned by TDS or any subsidiary of TDS); PROVIDED, HOWEVER, that in lieu of
applying an amount equivalent to all or any part of such net proceeds to such
retirement or repayment (or committing such an amount to an escrow account for
such purpose), TDS may deliver to the Trustee Outstanding Securities and thereby
reduce the amount to be applied pursuant to (y) of this clause (e) by an amount
equivalent to the aggregate principal amount of the Securities so delivered.
CERTAIN DEFINITIONS
"CAPITAL STOCK" means and includes any and all shares, interests,
participations or other equivalents (however designated) of ownership in a
corporation or other Person.
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"CAPITALIZATION" means with respect to a Person the total of (a) Funded
Debt, (b) the par value or, in the case of Capital Stock with no par value, a
value stated on the books, of all outstanding shares of Capital Stock, (c) the
paid-in surplus and retained earnings (or minus the net surplus deficit, as the
case may be), (d) deferred taxes and deferred investment tax credits, (e)
Capitalized Rent, and (f) minority interests in subsidiaries of such Person.
"CAPITALIZED RENT" means the present value (discounted semi-annually at a
discount rate equal to the weighted average rate of interest borne by the Debt
Securities then Outstanding) of the total net amount of rent payable for the
remaining term of any lease of property by TDS (including any period for which
such lease has been extended); PROVIDED, HOWEVER, that no such rental obligation
shall be deemed to be Capitalized Rent unless the lease resulted from a Sale and
Leaseback Transaction. The total net amount of rent payable under any lease for
any period shall be the total amount of the rent payable by the lessee with
respect to such period but shall not include amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water rates,
sewer rates and similar charges.
"CONSOLIDATED CAPITALIZATION" means the Capitalization of TDS and its
Subsidiaries determined on a consolidated basis at the end of TDS's then most
recently reported fiscal year or quarter, as the case may be, including minority
interests in Subsidiaries.
"DEBT" means with respect to a Person all obligations of such Person for
borrowed money and all such obligations of any other Person for borrowed money
guaranteed by such Person.
"FUNDED DEBT" means any Debt maturing by its terms more than one year from
its date of issuance (notwithstanding that any portion of such Debt is included
in current liabilities).
"LIEN" means any mortgage, pledge, security interest, lien, charge or other
encumbrance.
"OUTSTANDING" means, subject to certain exceptions, all Debt Securities
issued under the Indenture, except those theretofore canceled by the Trustee or
delivered to it for cancellation, defeased in accordance with the Indenture,
paid in full, or in respect of which substitute Debt Securities have been
authenticated and delivered by the Trustee.
"PERSON" means any individual, corporation, partnership, joint venture,
joint-stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"PROPERTY" means any directly-held interest of a Person in any kind of
property or asset, whether real, personal or mixed and whether tangible or
intangible, and includes Capital Stock of a subsidiary or other Person.
"SALE AND LEASEBACK TRANSACTION" means any arrangement with any Person other
than a Tax Consolidated Subsidiary providing for the leasing (as lessee) by TDS
of any property (except for temporary leases for a term, including any renewal
thereof, of not more than three years (provided that any such temporary lease
may be for a term of up to five years if (a) the Board of Directors of TDS
reasonably finds such term to be in the best interest of TDS and (b) the primary
purpose of the transaction of which such lease is a part is not to provide funds
to or financing for TDS)), which property has been or is to be sold or
transferred by TDS (i) to any subsidiary of TDS in contemplation of or in
connection with such arrangement or (ii) to such other Person.
"SECURED DEBT" means Debt of TDS secured by any Lien on property (including
Capital Stock or indebtedness of subsidiaries of TDS) owned by TDS.
"SUBSIDIARY" means a Person which is consolidated with TDS in accordance
with generally accepted accounting principles.
"TAX CONSOLIDATED SUBSIDIARY" means a Subsidiary of TDS with which, at the
time a Sale and Leaseback Transaction is entered into by TDS, TDS would be
entitled to file a consolidated federal income tax return.
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EVENTS OF DEFAULT
The occurrence of any of the following events with respect to the Securities
of any series will constitute an "Event of Default" with respect to the
Securities of such series: (a) default for 30 days in the payment of any
interest on any of the Securities of such series; (b) default in the payment of
any of the principal of or the premium, if any, on any of the Securities of such
series, whether at maturity, upon redemption, by declaration or otherwise; (c)
default in the deposit of any sinking fund payment in respect of any Securities
of such series; (d) default for 90 days by TDS in the observance or performance
of any other covenant or agreement contained in the Indenture relating to the
Securities of such series after written notice thereof as provided in the
Indenture; (e) (i) an event of default occurs under any instrument under which
there is outstanding, or by which there may be secured or evidenced, any
indebtedness of TDS for money borrowed (other than non-recourse indebtedness)
which results in acceleration of, or non-payment at maturity (after giving
effect to any applicable grace period) of such indebtedness in an aggregate
amount exceeding the greater of $15,000,000 or 2% of Consolidated
Capitalization, in which case TDS shall immediately give notice to the Trustee
of such acceleration or non-payment, and (ii) there shall have been a failure to
cure such default or to discharge such indebtedness within ten days after notice
thereof to TDS by the Trustee or to TDS and the Trustee by the Holders of at
least 25% in aggregate principal amount of the Securities then Outstanding;
PROVIDED, that no such Event of Default described in this clause (e) shall exist
as long as TDS is contesting any such default or acceleration in good faith and
by appropriate proceedings; or (f) certain events of bankruptcy, insolvency or
reorganization relating to TDS (Section 5.1). Different Events of Default may be
prescribed for the benefit of the Holders of a particular series of Securities
and will be described in the Prospectus Supplement or Pricing Supplement
relating thereto.
If an Event of Default due to a default in the payment of the principal of
or the premium or interest, if any, on, or in the deposit of any sinking fund
payment with respect to, any series of Securities shall have occurred and be
continuing, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Securities of such series then Outstanding may declare
the principal of all Securities of such series and the interest, if any, accrued
thereon to be due and payable immediately. If an Event of Default due to a
default in the observance or performance of any other covenant or agreement of
TDS contained in the Indenture and applicable to the Securities of one or more
(but less than all) series then Outstanding shall have occurred and be
continuing, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Securities of the affected series then Outstanding
(voting as one class) may declare the principal of all Securities of each such
affected series and the interest, if any, accrued thereon to be due and payable
immediately. If an Event of Default due to a default in the observance or
performance of any other covenant or agreement of TDS contained in the Indenture
applicable to all Securities then Outstanding or due to the acceleration or
non-payment at maturity of certain indebtedness of TDS shall have occurred and
be continuing, either the Trustee or the Holders of not less than 25% in
aggregate principal amount of all Securities then Outstanding (voting as one
class) may declare the principal of all Securities and the interest, if any,
accrued thereon to be due and payable immediately. If an Event of Default due to
certain acts of bankruptcy, insolvency or reorganization of TDS shall have
occurred and be continuing, the principal and interest on all the Securities
then Outstanding shall thereby become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Security holders.
Upon certain conditions, any such declarations may be rescinded and annulled if
all Events of Default, other than the nonpayment of accelerated principal, with
respect to the Securities of all such affected series then Outstanding shall
have been cured or waived as provided in the Indenture by the Holders of a
majority in aggregate principal amount of the Securities of the affected series
then Outstanding (voting as one class, except in the case of Events of Default
described in clauses (a), (b) and (c) of the preceding paragraph, as to which
each series so affected will vote as a separate class). See "Modification of the
Indenture" below. Reference is made to the Prospectus Supplement relating to any
series of Original Issue Discount Securities for the particular provisions
relating to the acceleration of a
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portion of the principal amount thereof upon the occurrence and continuance of
an Event of Default with respect thereto (Section 5.1).
The Indenture provides that, subject to the duty of the Trustee to act with
the requisite standard of care, in case a default with respect to a series of
Securities shall have occurred and be continuing, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of the Holders of the Securities, unless such
Holders shall have offered to the Trustee reasonable indemnity (Sections 5.6 and
6.2). Subject to such provisions for indemnity and certain other limitations
contained in the Indenture, the Holders of a majority in the aggregate principal
amount of the Securities of each affected series then Outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, with respect to the Securities of such affected series (Section
5.9).
The Indenture provides that no Holder of Securities may institute any action
against TDS under the Indenture (except actions for payment of overdue
principal, premium or interest) unless such Holder previously shall have given
to the Trustee written notice of default and continuance thereof and unless the
Holders of not less than 25% in aggregate principal amount of the Securities of
the affected series then Outstanding (voting as one class) shall have requested
the Trustee to institute such action and shall have offered the Trustee
reasonable indemnity, the Trustee shall not have instituted such action within
60 days of such request and the Trustee shall not have received direction
inconsistent with such request by the Holders of a majority in aggregate
principal amount of the Securities of the affected series then Outstanding
(voting as one class) (Sections 5.6 and 5.9).
The Indenture requires TDS to furnish to the Trustee annually a statement as
to the performance of TDS's covenants under the Indenture (Section 3.5). The
Indenture provides that the Trustee may withhold notice to the Holders of the
Securities of any series of any default affecting such series (except defaults
as to payment of principal, premium or interest on the Securities of such series
or as to sinking fund payments) if it considers such withholding to be in the
interests of the Holders of the Securities of such series (Section 5.11).
CONSOLIDATION, MERGER OR SALE OF ASSETS
TDS may consolidate with or merge into, or sell, lease or convey its
property as an entirety or substantially as an entirety to, any other entity if
(a) such entity assumes the obligations of TDS under the Securities and the
Indenture; (b)(i) such entity is organized and existing under the laws of the
United States or any state thereof or the District of Columbia; or (ii) such
entity is organized and existing under the laws of Canada, Japan, Australia, New
Zealand, any nation in Western Europe, or any political subdivision of any
thereof and such entity undertakes to pay to the Holders of Securities any
additional amounts as may be necessary in order that every net payment of
principal of and interest, if any, on the Securities, after withholding for or
on account of any present or future tax, assessment or governmental charge
imposed upon such Holder (except for a tax, assessment or charge imposed solely
as a result of a connection between the recipient and the jurisdiction imposing
such tax, assessment or charge) by reason of or as a result of such payment
being made by an entity which is not an entity existing under the laws of the
United States or any state thereof or the District of Columbia, will not be less
than the amount provided for in the Securities to be then due and payable; (c)
upon request by the Trustee, TDS delivers to the Trustee certain certificates
and opinions specified in the Indenture; (d) immediately after giving effect to
such transaction (and treating any Secured Debt or Sale and Leaseback
Transaction which becomes an obligation of the resulting, surviving or
transferee Person as a result of such transaction as having been incurred or
entered into by such Person at the time of such transaction), no Event of
Default (or event which, after notice or lapse of time or both, would be an
Event of Default) shall exist and (e) upon such consolidation, merger, sale,
lease or conveyance any property owned by TDS immediately prior thereto would
become subject to any Lien (unless such Lien would be permitted by the
provisions described above under "Limitation on Secured Debt"), the Securities
must be secured (together with, if TDS shall so
12
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determine, any other Debt ranking equally with or prior to the Securities
incurred, assumed or guaranteed by TDS, whether then or thereafter existing) by
a direct Lien on such property prior to all Liens other than any theretofore
existing thereon (Sections 9.1 and 9.2). The covenant phrase "substantially as
an entirety" is not defined in the Indenture, and the Company is unaware of an
established meaning or quantification of the phrase under Illinois law, which is
the law governing construction of the Indenture. A Holder may bear the burden of
establishing the meaning of the phrase "substantially as an entirety."
MODIFICATION OF THE INDENTURE
The Indenture permits TDS and the Trustee to enter into supplemental
indentures without the consent of the Holders of the Securities to: (a) subject
to compliance with TDS's covenants described above under "Certain Covenants of
TDS-Limitation on Secured Debt", secure the Securities of one or more series,
(b) add guarantees with respect to the Securities of one or more series, (c)
evidence the assumption by a successor Person of the obligations of TDS under
the Indenture and the Securities then Outstanding, (d) add covenants for the
protection of the Holders of the Securities, (e) cure any ambiguity or correct
any inconsistency in the Indenture, (f) establish the form and terms of the
Securities of any series, (g) evidence the acceptance of appointment by a
successor Trustee, (h) subject to compliance with certain requirements of the
Indenture, provide for uncertificated Securities in addition to or in place of
certificated Securities and (i) comply with any requirements of the Securities
and Exchange Commission in connection with qualifying the Indenture under the
Trust Indenture Act of 1939, as amended (Section 8.1).
The Indenture also permits TDS and the Trustee, with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Securities of all series then Outstanding and affected (voting as one class), to
add any provisions to, or change in any manner or eliminate any of the
provisions of, the Indenture or modify in any manner the rights of the Holders
of the Securities of each such affected series; PROVIDED, HOWEVER, that TDS and
the Trustee may not, without the consent of the Holder of each Security then
Outstanding and affected thereby: (a) extend the time of payment of the
principal (or any installment) of any Security, or reduce the principal amount
thereof, or reduce the rate, alter the method of computation of the rate or
extend the time of payment of interest thereon, or reduce any amount payable on
the redemption thereof, or change the currency in which the principal thereof or
the interest thereon is payable, or reduce the amount payable on any Original
Issue Discount Security upon acceleration or provable in bankruptcy, or alter
certain provisions of the Indenture relating to Securities not denominated in
United States dollars, or impair the right to institute suit for the enforcement
of any payment on any Security when due; or (b) reduce the percentage in
principal amount of the Securities of the affected series, the consent of whose
Holders is required for any such modification or for any waiver provided for in
the Indenture (Section 8.2).
Prior to the acceleration of the maturity of any Securities, the Holders of
a majority in aggregate principal amount of the Securities of all series at the
time Outstanding with respect to which a default or an Event of Default shall
have occurred and be continuing (voting as one class) may on behalf of the
Holders of all such affected Securities waive any past default or Event of
Default and its consequences, except a default or an Event of Default in respect
of a covenant or provision of the Indenture or of any Security which cannot be
modified or amended without the consent of the Holder of each Security affected.
DEFEASANCE AND DISCHARGE
The Indenture provides that, at the option of TDS, (a) TDS will be
discharged from any and all obligations in respect of the Securities of a
particular series then Outstanding (except for certain obligations to register
the transfer of or exchange the Securities of such series, to replace stolen,
lost or mutilated Securities of such series, to maintain paying agencies, in the
event that the Trustee is not the Security Registrar, to furnish the Trustee
with the names and addresses of the Holders of Registered Securities of each
series, to cause any successor Person substituted for TDS in accordance with the
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<PAGE>
Indenture to assume TDS's obligations thereunder and with respect to the
Securities, to comply with certain covenants described under "Consolidation,
Merger or Sale of Assets" and to maintain the trust described below), or (b) TDS
need not comply with certain covenants of the Indenture (including certain of
those described under "Certain Covenants of TDS" and "Consolidation, Merger or
Sale of Assets"), in each case if TDS irrevocably deposits in trust with the
Trustee money, and/or securities of the government which issued the currency in
which the Securities of such series are payable or securities backed by the full
faith and credit of such government which, through the payment of the principal
thereof and the interest thereon in accordance with their terms, will provide
money in an amount sufficient to pay all the principal of (and premium, if any)
and interest on the Securities of such series on the stated maturity of such
Securities in accordance with the terms thereof. To exercise such option, TDS is
required, among other things, to deliver to the Trustee an opinion of
independent counsel of nationally recognized standing in matters of federal
income tax law to the effect that the exercise of such option would not cause
the Holders of the Securities of such series to recognize income, gain or loss
for United States federal income tax purposes as a result of such defeasance,
and such Holders will be subject to United States federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance had not occurred, and, in the case of a discharge as described
in clause (a) of the preceding sentence, such opinion states that either (A)
there has been a change in the applicable federal income tax law to the
foregoing effect or (B) TDS has received a private letter ruling from the
Internal Revenue Service or there has been published a revenue ruling to the
foregoing effect (Section 10.1).
In the event TDS exercises its option to effect a covenant defeasance with
respect to the Securities of any series as described in the preceding paragraph
and the Securities of such series are thereafter declared due and payable
because of the occurrence of any Event of Default other than an Event of Default
caused by failing to comply with the covenants which are defeased, and the
amount of money and securities on deposit with the Trustee would be insufficient
to pay amounts due on the Securities of such series at the time of their
accelerated maturity, TDS would remain liable for such amounts.
If the Trustee or paying agent is unable to apply any money or Government
Obligation in accordance with the foregoing provisions by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
TDS's obligations under the Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to such provisions until
such time as the Trustee or paying agent is permitted to apply all such money or
Government Obligations in accordance therewith; PROVIDED, HOWEVER, that, if TDS
has made any payment of interest on or principal of any Securities because of
the reinstatement of its obligations, TDS shall be entitled, at its election,
(a) to receive from the Trustee or paying agent, as applicable, that portion of
such money or Government Obligations equal to the amount of such payment or (b)
to be subrogated to the rights of the Holders of such Securities to receive such
payment from the money or Government Obligations held by the Trustee or paying
agent.
GOVERNING LAW
The Indenture and the Debt Securities issued thereunder will be governed by
the laws of the State of Illinois.
CONCERNING THE TRUSTEE
Harris Trust and Savings Bank, the Trustee under the Indenture, is one of a
number of banks with which TDS and its subsidiaries maintain ordinary banking
relationships. Harris Trust and Savings Bank also serves as transfer agent for
the Common Shares, Series A Common Shares and Preferred Shares of TDS. Harris
Trust and Savings Bank is also Trustee with respect to Medium-Term Notes, Series
A, B and C of TDS.
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<PAGE>
PLAN OF DISTRIBUTION
TDS may sell Debt Securities being offered hereby: (i) directly to
purchasers, (ii) through agents, (iii) through underwriters and (iv) through
dealers.
Offers to purchase Debt Securities may be solicited by agents designated by
TDS from time to time. Any such agent, who may be deemed to be an underwriter as
that term is defined in the Securities Act, involved in the offer or sale of the
Debt Securities in respect of which this Prospectus is delivered will be named,
and any commissions payable by TDS to such agent will be set forth, in the
Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement,
any such agent will be acting on a best efforts basis for the period of its
appointment.
If underwriters are utilized in the sale, TDS will execute an underwriting
agreement with such underwriters at the time of sale to them and the names of
the underwriters and the terms of the transaction will be set forth in the
Prospectus Supplement, which will be used by the underwriters to make resales of
the Debt Securities in respect of which this Prospectus is delivered to the
public. Any underwriters will acquire Debt Securities for their own account and
may resell such Debt Securities from time to time in one or more transactions,
including negotiated transactions, at fixed public offering prices or at varying
prices determined at the time of sale. Debt Securities may be offered to the
public either through underwriting syndicates represented by managing
underwriters, or directly by the managing underwriters. Only underwriters named
in the Prospectus Supplement are deemed to be underwriters in connection with
the Debt Securities offered thereby. If any underwriters are utilized in the
sale of the Debt Securities, the underwriting agreement will provide that the
obligations of the underwriters are subject to certain conditions precedent and
that the underwriters with respect to a sale of Debt Securities will be
obligated to purchase all such Debt Securities, if any are purchased.
If a dealer is utilized in the sale of the Debt Securities in respect of
which this Prospectus is delivered, TDS will sell such Debt Securities to the
dealer, as principal. The dealer may then resell such Debt Securities to the
public at varying prices to be determined by such dealer at the time of resale.
Agents, underwriters and dealers may be entitled under agreements entered
into with TDS to indemnification by TDS against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the agents, underwriters or dealers may be required to make in
respect thereof. Agents, underwriters and dealers may be customers of, engage in
transactions with, or perform services for TDS in the ordinary course of
business.
Offers to purchase Debt Securities may be solicited directly by TDS and
sales thereof may be made by TDS directly to institutional investors or others.
The terms of any such sales will be described in the Prospectus Supplement
relating thereto.
If so indicated in the Prospectus Supplement, TDS will authorize agents and
underwriters to solicit offers by certain institutions to purchase Debt
Securities from TDS at the public offering price set forth in the Prospectus
Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for
payment and delivery on the date stated in the Prospectus Supplement. Each
Contract will be for an amount not less than, and unless TDS otherwise agrees
the aggregate principal amount of Debt Securities sold pursuant to Contracts
shall be not less nor more than, the respective amounts stated in the Prospectus
Supplement. Institutions with whom Contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other
institutions, but shall in all cases be subject to the approval of TDS.
Contracts will not be subject to any conditions except that the purchase by an
institution of the Debt Securities covered by its Contract shall not at the time
of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject. A commission indicated in the
Prospectus Supplement will be paid to underwriters and agents soliciting
purchases of Debt Securities pursuant to Contracts accepted by TDS.
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<PAGE>
The place and time of delivery for the Debt Securities in respect of which
this Prospectus is delivered are set forth in the accompanying Prospectus
Supplement.
LEGAL MATTERS
Certain legal matters relating to the securities offered hereby will be
passed upon for TDS by Sidley & Austin, Chicago, Illinois. The Company is
controlled by a voting trust. Walter C.D. Carlson, a trustee and beneficiary of
the voting trust and a director of the Company and certain subsidiaries of the
Company, Michael G. Hron, the Secretary of the Company and certain subsidiaries
of the Company, William S. DeCarlo, the Assistant Secretary of the Company and
certain subsidiaries of the Company, Stephen P. Fitzell, the Secretary of
certain subsidiaries of the Company, and Sherry S. Treston, the Assistant
Secretary of certain subsidiaries of the Company, are partners of Sidley &
Austin.
EXPERTS
The audited consolidated financial statements and schedules of TDS
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
incorporated by reference herein. The financial statements and schedules
referred to above have been incorporated by reference in reliance upon the
authority of such firms as experts in accounting and auditing in giving said
reports.
WHERE YOU CAN FIND MORE INFORMATION
The Company files reports, proxy statements and other information with the
Securities and Exchange Commission ("SEC"). You may inspect and copy such
reports, proxy statements and other information at the public reference
facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information. Such materials also may be accessed electronically by means
of the SEC's web site at http://www.sec.gov.
The Company filed a Registration Statement related to the offering described
in this Prospectus. As allowed by SEC rules, this Prospectus does not contain
all of the information which you can find in the Registration Statement. You are
referred to the Registration Statement and the Exhibits thereto for further
information. This document is qualified in its entirely by such other
information.
The SEC allows us to "incorporate by reference" information into this
Prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this Prospectus, except for
any information superseded by information in this Prospectus. This Prospectus
incorporates by reference the documents set forth below that have been
previously filed with the SEC. These documents contain important information
about the Company's business and finances.
1. TDS's Annual Report on Form 10-K for the year ended December 31, 1997;
2. TDS's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998;
3. The Company's Current Reports on Form 8-K, dated January 28, February
10, March 24, April 17, April 21, April 27, May 22, June 1 and June 12,
1998;
4. The Company's Prospectus dated March 24, 1998, which is part of its
Registration Statement on Form S-4 (Registration No. 333-42535); and
5. The Company's Report on Form 8-A/A dated July 10, 1998, which includes a
description of the Company's capital stock.
This Prospectus also incorporates by reference additional documents that may
be filed by the Company with the SEC between the date of this Prospectus and the
date our offering is completed.
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<PAGE>
YOU MAY OBTAIN COPIES OF SUCH DOCUMENTS WHICH ARE INCORPORATED BY REFERENCE
IN THIS PROSPECTUS (OTHER THAN EXHIBITS THERETO WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE HEREIN), WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST
TO INVESTOR RELATIONS, TELEPHONE AND DATA SYSTEMS, INC., 30 N. LASALLE STREET,
CHICAGO, IL 60603, (312) 630-1900. IN ORDER TO ENSURE DELIVERY OF DOCUMENTS, ANY
REQUEST THEREFOR SHOULD BE MADE NOT LATER THAN FIVE BUSINESS DAYS PRIOR TO
MAKING AN INVESTMENT DECISION.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROSPECTUS. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE PROSPECTUS IS ACCURATE
AS OF ANY DATE OTHER THAT THE DATE OF SUCH PROSPECTUS, AND NEITHER THE MAILING
OF THE PROSPECTUS TO SHAREHOLDERS NOR THE ISSUANCE OF ANY SECURITIES HEREUNDER
SHALL CREATE ANY IMPLICATION TO THE CONTRARY. THIS PROSPECTUS DOES NOT OFFER TO
BUY OR SELL ANY SECURITIES IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO.
17
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company............................................................... S-3
Summary Operating Data.................................................... S-4
Recent Developments....................................................... S-4
Use of Proceeds........................................................... S-6
Consolidated Capitalization............................................... S-6
Selected Consolidated Financial Information............................... S-7
Certain Terms of the Notes................................................ S-9
Underwriting.............................................................. S-14
Legal Matters............................................................. S-15
PROSPECTUS
Summary................................................................... 2
The Company............................................................... 3
Use of Proceeds........................................................... 4
Description of Debt Securities............................................ 4
Plan of Distribution...................................................... 15
Legal Matters............................................................. 16
Experts................................................................... 16
Where You Can Find More Information....................................... 16
</TABLE>
$200,000,000
Y
TELEPHONE AND
DATA SYSTEMS, INC.
7% NOTES
DUE AUGUST 1, 2006
------------------------
PROSPECTUS SUPPLEMENT
------------------------
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
JULY 27, 1998
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