TELEPHONE & DATA SYSTEMS INC /DE/
424B3, 1998-03-24
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
Previous: CHAPMAN HOLDINGS INC, 10KSB, 1998-03-24
Next: CYBERSHOP INTERNATIONAL INC, 424B1, 1998-03-24


<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.                Filed Pursuant to Rule 424(b)(3)
30 North LaSalle Street, 40th Floor                   Registration No. 333-42535
Chicago, Illinois 60602
312/630-1900
 
                                                                          [LOGO]
 
                                 March 24, 1998
 
Dear Fellow Shareholders:
 
    You are cordially invited to attend a Special Meeting of Shareholders of the
Company to be held on Monday, April 27, 1998, at 10:00 a.m. Chicago time, at
Harris Trust and Savings Bank, 111 West Monroe Street, 8th Floor, Chicago,
Illinois, in the Auditorium (the "Special Meeting"). The formal notice of the
meeting and a proxy statement/ prospectus are enclosed.
 
    At the Special Meeting, you are being asked to vote on a proposal that
would, among other things, create three new classes of common stock intended to
separately reflect the performance of the Company's cellular telephone, landline
telephone and personal communications service businesses ("Tracking Stocks"),
and change the state of incorporation of the Company from Iowa to Delaware (the
"Tracking Stock Proposal"). The Tracking Stock Proposal and the related
transactions discussed below are important to the Company's long-term
performance and to all shareholders of the Company.
 
    Some of the principal reasons for the Tracking Stock Proposal are:
 
    - to give greater market recognition to the value (individually and
      collectively) of the Company and of the Company's three principal business
      groups ("Tracking Groups"), thereby enhancing shareholder value over the
      long term, while at the same time enabling the Company's businesses to
      preserve the benefits of being part of a consolidated enterprise;
 
    - to provide the Company with greater flexibility in raising capital and
      making acquisitions, using equity securities specifically related to the
      Tracking Groups;
 
    - to enable the Company to more effectively tailor employee benefit plans to
      provide incentives to employees of the Tracking Groups; and
 
    - to provide shareholders with the opportunity to invest in separate
      securities that specifically reflect the underlying businesses, depending
      upon their investment objectives, as well as permit shareholders to
      continue to invest in all of the TDS businesses through the Common Shares
      and Series A Common Shares.
 
    Credit Suisse First Boston ("C.S. First Boston") and Salomon Brothers Inc
and Smith Barney Inc. (collectively doing business as "Salomon Smith Barney")
have acted as financial advisors to the Company in connection with the Tracking
Stock Proposal. The Company has received opinions from each of those firms with
respect to certain aspects of the Tracking Stock Proposal. As indicated in the
letters from such firms attached as Exhibits C-1 and C-2 to the accompanying
proxy statement/prospectus, such firms state that they are not expressing any
opinions as to other aspects of the Tracking Stock Proposal, including any
opinions as the value of the Tracking Stocks or the prices at which such
Tracking Stocks may trade. See the section entitled "Proposal 1--Tracking Stock
Proposal-- Opinions of Financial Advisors" in the accompanying proxy
statement/prospectus.
 
    The Board of Directors has studied the Tracking Stock Proposal, has
consulted with its financial and legal advisors, and has carefully weighed
potential advantages against potential disadvantages, and has concluded that the
positive aspects of the Tracking Stock Proposal outweigh potential adverse
aspects. THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE TRACKING STOCK
PROPOSAL, BELIEVES THAT THE ADOPTION OF THE TRACKING STOCK PROPOSAL IS IN THE
BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" THE TRACKING STOCK PROPOSAL.
 
    Under the Tracking Stock Proposal, you are being asked to approve an
Agreement and Plan of Merger (the "Merger Agreement") between the Company and
Telephone and Data Systems, Inc., a Delaware corporation and wholly-owned
subsidiary of the Company ("TDS Delaware"), pursuant to which the Company would
be merged (the "Merger") with and into TDS Delaware, with TDS Delaware
continuing as the surviving corporation. Immediately prior to the effective time
of the Merger, the Certificate of Incorporation of TDS Delaware would be amended
and restated to, among other things, authorize Preferred Shares, Series A Common
Shares and Common Shares and to establish the rights, limitations and
preferences of such shares. In the Merger, except to the extent that the holder
of any shares dissents from the Merger and seeks appraisal rights for such
shares, each issued Preferred Share of the Company would be converted into one
Preferred Share of TDS Delaware having substantially similar
<PAGE>
rights, limitations and preferences, except as described herein, and each issued
Common Share and Series A Common Share of the Company would be converted into
one Common Share and one Series A Common Share, respectively, of TDS Delaware,
having the rights, limitations and preferences described herein. YOU SHOULD
RETAIN ALL CERTIFICATES WHICH REPRESENT SHARES OF THE COMPANY SINCE SUCH
CERTIFICATES WILL CONTINUE TO REPRESENT SHARES OF THE SAME CLASS OR SERIES OF
TDS DELAWARE FOLLOWING THE MERGER.
 
    The Restated Certificate of Incorporation of TDS Delaware would also, among
other things, authorize three new classes of common stock, to be designated as
United States Cellular Group Common Shares (the "Cellular Group Shares"), TDS
Telecommunications Group Common Shares (the "Telecom Group Shares") and Aerial
Communications Group Common Shares (the "Aerial Group 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, currently an 81%-owned subsidiary of the Company
      operating and investing in cellular telephone companies and properties
      ("U.S. Cellular").
 
    - 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 wholly-owned subsidiary of the Company
      operating landline telephone companies ("TDS Telecom"), and includes the
      allocation of certain corporate debt.
 
    - 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.,
      currently an 83%-owned subsidiary of the Company providing broadband
      personal communications services ("Aerial").
 
    Subject to the approval of the Tracking Stock Proposal by shareholders and
the effectiveness of the Merger, the Company intends to:
 
    - offer and sell Telecom Group Shares in a public offering for cash, subject
      to prevailing market and other conditions (the "Telecom Public Offering"),
      and allocate the net proceeds thereof to the Telecom Group;
 
    - offer and issue Cellular Group Shares in exchange for all of the Common
      Shares of U.S. Cellular which are not owned by the Company, subject to
      approval by a special committee of the board of directors, the full board
      of directors and the shareholders of U.S. Cellular, pursuant to a merger
      between a subsidiary of the Company and U.S. Cellular (the "U.S. Cellular
      Merger");
 
    - offer and issue Aerial Group Shares in exchange for all of the Common
      Shares of Aerial which are not owned by the Company, subject to approval
      by a special committee of the board of directors, the full board of
      directors and the shareholders of Aerial, pursuant to a merger between a
      subsidiary of the Company and Aerial (the "Aerial Merger"); and
 
    - distribute one Cellular Group Share, two-thirds of a Telecom Group Share
      and two-thirds of an Aerial Group Share in the form of a stock dividend
      with respect to each outstanding Series A Common Share and Common Share of
      the Company (the "Distribution").
 
    It is currently expected that the Distribution would take place in July 1998
or later, after the completion of the Telecom Public Offering, the U.S. Cellular
Merger and the Aerial Merger. As soon as practicable after the Distribution, the
Transfer Agent for TDS Delaware will mail certificates representing whole shares
of Tracking Stock (and cash in lieu of fractional shares) to all shareholders.
The Merger and the Distribution are intended to be tax-free to non-dissenting
shareholders (except with respect to any cash received in lieu of fractional
shares).
 
    Upon the completion of the Telecom Public Offering, the U.S. Cellular
Merger, the Aerial Merger, and the Distribution, the outstanding shares of each
Tracking Stock would represent in the aggregate an approximately 80% interest in
the related Tracking Group. Approximately 20% of the common equity value of TDS
attributable to each Tracking Group would initially be retained (the "Retained
Interest") in a residual group (the "TDS Group"), along with all other interests
held by the Company. The value of the common equity of TDS in the TDS Group
would be represented by the outstanding Series A Common Shares and the Common
Shares of TDS Delaware.
 
                                      -ii-
<PAGE>
    The Company is filing an application to list each of the Cellular Group
Shares, the Telecom Group Shares and the Aerial Group Shares on the American
Stock Exchange ("AMEX"). The Common Shares of TDS Delaware would be substituted
for the existing Common Shares of the Company and would continue to be listed on
the AMEX under the symbol "TDS."
 
    If the Tracking Stock Proposal is implemented, holders of Preferred Shares
issued before October 31, 1981 and Common Shares would have the power to elect
one more director in addition to the directors which they currently elect.
 
    Immediately after the Distribution, a current holder of Common Shares and
Series A Common Shares would continue to receive an aggregate dividend which is
equal to the aggregate dividend which such shareholder currently receives from
the Company, assuming the shareholder retains the Telecom Group Shares received
in the Distribution. Approximately 25% of the current dividend would be paid
with respect to the Common Shares and Series A Common Shares, and approximately
75% of the current dividend would be paid with respect to the Telecom Group
Shares. The Board currently intends to retain future earnings, if any, for the
development of the businesses of the Cellular Group and Aerial Group,
respectively, and does not anticipate paying dividends on the Cellular Group
Shares or the Aerial Group Shares in the foreseeable future.
 
    An example which illustrates the effects of the Tracking Stock Proposal with
respect to a hypothetical holder of 100 Common Shares is attached to this
letter.
 
    At the Special Meeting, shareholders are also being asked to vote on related
proposals to amend or adjust certain existing employee stock plans and
agreements in connection therewith as a result of the Tracking Stock Proposal
and to approve a new plan which would permit stock awards to be made with
respect to shares of Tracking Stock.
 
    THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
TRACKING STOCK PROPOSAL AND THE RELATED PROPOSALS.
 
    YOUR PROXY IS VERY IMPORTANT. THE TRACKING STOCK PROPOSAL WILL NOT BE
APPROVED UNLESS IT RECEIVES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF
THE OUTSTANDING VOTING POWER OF EACH OF THE FOLLOWING VOTING GROUPS, EACH VOTING
SEPARATELY AS A CLASS: (I) COMMON SHARES, SERIES A COMMON SHARES AND PREFERRED
SHARES; (II) SERIES A COMMON SHARES; (III) COMMON SHARES; (IV) PREFERRED SHARES
ISSUED BEFORE OCTOBER 31, 1981; AND (V) PREFERRED SHARES ISSUED AFTER OCTOBER
31, 1981.
 
    If you have any questions prior to the Special Meeting, please call the
Company's Information Agent, McKenzie Partners, Inc., at 1-800-322-2885. We look
forward with pleasure to visiting with you at the Special Meeting.
 
                               Very truly yours,
 
          [SIGNATURE]                   [SIGNATURE]
 
LeRoy T. Carlson                        LeRoy T. Carlson, Jr.
Chairman                                President and Chief Executive Officer
 
                                     -iii-
<PAGE>
               ILLUSTRATION OF EFFECTS OF TRACKING STOCK PROPOSAL
 
    The following illustration assumes that you own 100 Common Shares of
Telephone and Data Systems, Inc., an Iowa corporation ("TDS Iowa").
 
    - If the Tracking Stock Proposal is approved, TDS Iowa will be merged with
      its wholly-owned subsidiary, Telephone and Data Systems, Inc., a Delaware
      corporation ("TDS Delaware").
 
    - Your 100 Common Shares of TDS Iowa would be automatically converted into
      100 Common Shares of TDS Delaware without any action on your part. The
      certificates which you hold for 100 Common Shares of TDS Iowa will, after
      such merger, represent 100 Common Shares of TDS Delaware and there will be
      no need for you to exchange stock certificates.
 
    - In addition, based on the expected distribution ratios, you would receive
      100 United States Cellular Group Common Shares ("Cellular Group Shares"),
      66 TDS Telecommunications Group Common Shares ("Telecom Group Shares"),
      plus cash in lieu of 2/3 of a share, and 66 Aerial Communications Group
      Common Shares ("Aerial Group Shares"), plus cash in lieu of 2/3 of a
      share.
 
    - 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, currently an 81%-owned subsidiary of the Company
      operating and investing in cellular telephone companies and properties
      ("U.S. Cellular").
 
    - 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 wholly-owned subsidiary of the Company
      operating landline telephone companies ("TDS Telecom"), and includes the
      allocation of certain corporate debt.
 
    - 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.,
      currently an 83%-owned subsidiary of the Company providing broadband
      personal communications services ("Aerial").
 
    - Your Common Shares would represent an equity interest in TDS Delaware
      attributable to a residual group (the "TDS Group"), which would have
      approximately a 20% Retained Interest in each of the Cellular Group, the
      Telecom Group and the Aerial Group upon the completion of all of the
      transactions contemplated by the Tracking Stock Proposal. The TDS Group
      would also include all of the Company's interest in businesses that are
      not attributed to a Tracking Group.
 
    - The Cellular Group Shares, the Telecom Group Shares, the Aerial Group
      Shares and the Common Shares of TDS Delaware would be traded on the AMEX.
 
    - The 100 Common Shares of TDS Delaware would have 100 votes in the election
      of 25% of the directors plus one additional director, and 100 votes on all
      other matters (other than the directors elected by holders of Series A
      Common Shares and Preferred Shares issued after October 31, 1981).
 
    - The 100 Cellular Group Shares, the 66 Telecom Group Shares and the 66
      Aerial Group Shares would initially have one vote per share. Thereafter,
      the voting power of such shares would be adjusted prior to the record date
      before each annual meeting of shareholders, based on relative market
      values at such time. Such shares would vote in the election of 25% of the
      directors plus one additional director together with the Common Shares.
      Such shares would generally not vote on other matters, except that each of
      the Cellular Group Shares, the Telecom Group Shares and the Aerial Group
      Shares would have a class vote in the event of an amendment to the TDS
      Delaware charter which was adverse to that class.
 
    - If you continue to retain the Common Shares and the Telecom Group Shares,
      you would receive an annual dividend of $0.11 per share with respect to
      each of the 100 Common Shares and $0.50 per share with respect to each of
      the 66 Telecom Group Shares, or an aggregate annual dividend of
      approximately $44, which is the amount of the annual dividend a holder of
      100 Common Shares currently receives.
 
                                      -iv-
<PAGE>
                           TELEPHONE AND DATA SYSTEMS, INC.
                      NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
                              TO BE HELD APRIL 27, 1998
 
      TO THE SHAREHOLDERS OF
 
                           TELEPHONE AND DATA SYSTEMS, INC
 
    A Special Meeting of Shareholders of Telephone and Data Systems, Inc., an
Iowa corporation (the "Company" or "TDS"), will be held at Harris Trust and
Savings Bank, 111 West Monroe Street, 8th Floor, Chicago, Illinois, in the
Auditorium, on Monday, April 27, 1998, at 10:00 a.m. Chicago time (the "Special
Meeting"), for the following purposes:
 
    1.  To consider and approve an Agreement and Plan of Merger between the
       Company and Telephone and Data Systems, Inc., a Delaware corporation and
       wholly-owned subsidiary of the Company, which would alter the capital
       structure of the Company and change the state of incorporation of the
       Company from Iowa to Delaware, as more fully described in the
       accompanying Proxy Statement/Prospectus.
 
    2.  To consider and approve certain amendments or adjustments to employee
       benefit plans as a result of Proposal 1, as more fully described in the
       accompanying Proxy Statement/Prospectus.
 
    3.  To consider and approve the Company's 1998 Long-Term Incentive Plan, as
       more fully described in the accompanying Proxy Statement/Prospectus.
 
    4.  To transact such other business as may properly come before the Special
       Meeting or any and all adjournments thereof.
 
    If Proposal 1 is not approved, Proposal 2 and Proposal 3 will not be
implemented even if they are approved. If Proposal 1 is approved, it will be
implemented even if Proposal 2 and Proposal 3 are not approved.
 
    This Notice of Special Meeting and Proxy Statement/Prospectus is first being
mailed to shareholders on or about March 24, 1998 to holders of record on March
16, 1998.
 
    The Board of Directors would like to have all shareholders represented at
the Special Meeting. If you do not expect to be present, please sign and mail
your proxy in the enclosed self-addressed envelope to Harris Trust and Savings
Bank, 311 West Monroe Street, Chicago, Illinois 60606. If you hold more than one
class of the Company's shares, you will receive a separate proxy for each
holding. To assure that all of your shares are represented, you must return a
proxy printed in black ink for Common Shares, including Common Shares owned
through the TDS dividend reinvestment plan and through the TDS Tax-Deferred
Savings Plan; a proxy printed in green ink for Series A Common Shares, including
Series A Common Shares owned through the dividend reinvestment plan; a proxy
printed in red ink for Preferred Shares issued before October 31, 1981; and a
proxy printed in blue ink for Preferred Shares issued after October 31, 1981.
Proxies given pursuant to this solicitation may be revoked at any time prior to
the closing of polls at the Special Meeting (by written notice to the Secretary
of the Company or attendance at the Special Meeting and notice to the Secretary
of such revocation). Once the polls are closed, however, proxies may not be
retroactively revoked.
 
                                          By order of the Board of Directors,
 
                                                   [SIGNATURE]
 
                                          Michael G. Hron
 
                                          Secretary
 
                 PLEASE HELP US AVOID THE EXPENSE OF FOLLOW-UP
                       PROXY MAILINGS TO SHAREHOLDERS BY
             SIGNING AND RETURNING THE ENCLOSED PROXY CARD PROMPTLY
<PAGE>
                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
PROXY STATEMENT/PROSPECTUS................................................     1
WHERE YOU CAN FIND MORE INFORMATION.......................................     2
QUESTIONS AND ANSWERS.....................................................     4
ILLUSTRATION OF CURRENT AND PROPOSED COMMON STOCK CAPITAL STRUCTURE.......     8
PROXY STATEMENT/PROSPECTUS SUMMARY........................................     9
  The Special Meeting.....................................................     9
  The Merger..............................................................    10
  The Transactions........................................................    10
  Certain Federal Income Tax Consequences.................................    10
  Reasons for Tracking Stock Proposal.....................................    11
  Risk Factors............................................................    12
  Summary Comparison of the Current Capital Structure with the Proposed
    Tracking Stock Proposal...............................................    13
  Significant Differences Between Iowa and Delaware Law...................    27
  Dissenters' Rights......................................................    30
  Summary Selected Consolidated and Group Financial Information...........    30
RISK FACTORS..............................................................    32
GENERAL...................................................................    41
DIVIDENDS AND PRICE RANGES OF COMMON SHARES...............................    43
DIVIDEND POLICY...........................................................    44
SELECTED FINANCIAL INFORMATION............................................    44
PROPOSAL 1--TRACKING STOCK PROPOSAL.......................................    50
  General.................................................................    50
  The Transactions........................................................    51
  Background and Reasons for the Tracking Stock Proposal and Related
    Transactions; Recommendation of the Board.............................    54
  Opinions of Financial Advisors..........................................    58
  Interests of Certain Persons............................................    61
  Changes to Board of Directors...........................................    62
  The Company.............................................................    62
  The Cellular Group......................................................    63
  The Telecom Group.......................................................    65
  The Aerial Group........................................................    68
 
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
  The TDS Group...........................................................    70
  Effect of Pre-Distribution Convertible Securities and Committed
    Acquisition Shares....................................................    72
  Description of Articles of Incorporation of TDS Iowa....................    73
  Description of Restated Certificate of Incorporation of TDS Delaware....    74
  Description of Terms of Tracking Stock..................................    84
  The Retained Interests..................................................    99
  Inter-Group Interests...................................................   102
  Management and Allocation Policies......................................   104
  Comparison of Shareholder's Rights Under Iowa and Delaware..............   107
  Dissenting Shareholders' Rights.........................................   114
  Certain Federal Income Tax Considerations...............................   115
  Securities Law Consequences of the Merger...............................   118
  Listing on the AMEX.....................................................   118
  Stock Transfer Agent and Registrar......................................   118
  Accounting Treatment....................................................   118
  Regulatory Approvals and Consents.......................................   118
  Dividend Reinvestment Plans.............................................   119
  Employee Benefit Plans..................................................   119
  Certain Definitions.....................................................   119
PROPOSAL 2--AMENDMENT AND ADJUSTMENT OF EMPLOYEE STOCK PLANS..............   127
PROPOSAL 3--APPROVAL OF 1998 LONG-TERM INCENTIVE PLAN.....................   128
BENEFICIAL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..........   132
SHAREHOLDER PROPOSALS.....................................................   135
SOLICITATION OF PROXIES...................................................   135
EXPENSES..................................................................   135
EXPERTS...................................................................   135
LEGAL MATTERS.............................................................   135
OTHER BUSINESS............................................................   135
INDEX TO EXHIBITS.........................................................   136
INDEX TO ANNEXES..........................................................   136
</TABLE>
<PAGE>
 
<TABLE>
<S>                                                   <C>
         TELEPHONE AND DATA SYSTEMS, INC.,                     TELEPHONE AND DATA SYSTEMS, INC.,
                An Iowa Corporation                                  A Delaware Corporation
                  PROXY STATEMENT                                          PROSPECTUS
</TABLE>
 
                           --------------------------
 
    This Proxy Statement and Prospectus (the "Proxy Statement/Prospectus") is
being furnished to the shareholders of Telephone and Data Systems, Inc., an Iowa
corporation (the "Company" or "TDS"), in connection with the solicitation of
proxies by the Board of Directors of TDS (the "Board"), for use at a Special
Meeting of Shareholders of TDS to be held at Harris Trust and Savings Bank, 111
West Monroe Street, 8th Floor, Chicago, Illinois, in the Auditorium, on April
27, 1998, at 10:00 a.m. Chicago time and at any and all adjournments or
postponements thereof (the "Special Meeting"). This Proxy Statement/Prospectus
is first being mailed to shareholders of the Company on or about March 24, 1998.
For definitions of certain defined terms used in this Proxy
Statement/Prospectus, see "Proposal 1--Tracking Stock Proposal--Certain
Definitions." An index of certain defined terms is attached as Exhibit G. This
Proxy Statement/Prospectus also constitutes the Prospectus of Telephone and Data
Systems, Inc., a Delaware corporation and wholly-owned subsidiary of the Company
("TDS Delaware"), filed as part of a Registration Statement on Form S-4 (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the shares of TDS Delaware preferred and common stock described
herein.
 
    This Proxy Statement/Prospectus relates to the approval by shareholders of
the Company of a proposal that would, among other things, create three new
classes of common stock which are intended to separately reflect the performance
of the Company's cellular telephone, landline telephone and personal
communications services businesses, and change the state of incorporation of the
Company from Iowa to Delaware (the "Tracking Stock Proposal"). Under the
Tracking Stock Proposal, shareholders of the Company are being asked to approve
an Agreement and Plan of Merger dated as of March 6, 1998 (the "Merger
Agreement"), among TDS and TDS Delaware, which provides for the merger (the
"Merger") of TDS with and into TDS Delaware, with TDS Delaware surviving the
Merger. A conformed copy of the Merger Agreement is attached hereto as EXHIBIT
A. Immediately prior to the effective time of the Merger, the Certificate of
Incorporation of TDS Delaware would be amended and restated to, among other
things, authorize 475,000,000 shares of capital stock and to establish the
rights, limitations and preferences of such shares (the "Restated Certificate").
A copy of the Restated Certificate is attached hereto as EXHIBIT B. Subject to
the terms and conditions of the Merger Agreement, each share of TDS capital
stock outstanding immediately prior to the effective time of the Merger will be
converted into shares of TDS Delaware stock of the same class and series. The
Preferred Shares will be converted into an equivalent number of TDS Delaware
Preferred Shares of the same series and each Common Share and Series A Common
Share will be converted into one Common Share and one Series A Common Share,
respectively, of TDS Delaware. The consummation of the Merger is subject, among
other things, to: (i) the approval and adoption of the Merger Agreement by the
shareholders of the Company entitled to vote thereon; and (ii) the receipt of
certain regulatory approvals. See EXHIBIT A.
 
    After the Merger, the Voting Trust which controls TDS (the "TDS Voting
Trust") will continue to control the election of a majority of the Board of
Directors and a majority of the voting power of TDS Delaware. However, if the
Tracking Stock Proposal is approved, the number of directors that the TDS Voting
Trust will elect will decrease by one director, and the number of directors that
will be elected by the voting group which includes the holders of Preferred
Shares issued before October 31, 1981 and Common Shares of the Company will
increase by one director.
 
    There has been no prior market for the Cellular Group Shares, the Telecom
Group Shares or the Aerial Group Shares. The Company is filing an application to
list each of the Cellular Group Shares, the Telecom Group Shares and the Aerial
Group Shares on the American Stock Exchange ("AMEX"). The Common Shares of TDS
Delaware would be substituted for the existing Common Shares of the Company and
would continue to be listed on the AMEX under the symbol "TDS."
                           --------------------------
 
  SEE "RISK FACTORS" BEGINNING ON PAGE 32 FOR CERTAIN INFORMATION THAT SHOULD
      BE CONSIDERED IN CONNECTION WITH THE TRANSACTIONS DESCRIBED HEREIN.
                             ---------------------
 
    THE APPROVAL OF THE TRACKING STOCK PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE OUTSTANDING VOTING POWER OF EACH OF THE
FOLLOWING VOTING GROUPS, EACH VOTING SEPARATELY AS A CLASS: (I) COMMON SHARES,
SERIES A COMMON SHARES AND PREFERRED SHARES; (II) SERIES A COMMON SHARES; (III)
COMMON SHARES; (IV) PREFERRED SHARES ISSUED BEFORE OCTOBER 31, 1981; AND (V)
PREFERRED SHARES ISSUED AFTER OCTOBER 31, 1981. ALTHOUGH THE TDS VOTING TRUST
HAS THE VOTING POWER TO CAUSE THE AFFIRMATIVE VOTE OF EACH OF (I) AND (II) ABOVE
TO BE ASSURED, THE TDS VOTING TRUST HOLDS NO COMMON SHARES OR PREFERRED SHARES.
ACCORDINGLY, SUCH PROPOSAL WILL NOT BE APPROVED UNLESS IT IS ALSO APPROVED BY
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF EACH OF THE VOTING GROUPS
IDENTIFIED IN (III), (IV) AND (V) ABOVE. ALTHOUGH THE TDS VOTING TRUST HAS THE
VOTING POWER TO APPROVE THE TWO ADDITIONAL PROPOSALS RELATED TO THE TRACKING
STOCK PROPOSAL, SUCH PROPOSALS WILL NOT BE IMPLEMENTED IF THE TRACKING STOCK
PROPOSAL IS NOT APPROVED.
 
IT IS IMPORTANT TO NOTE THAT HOLDERS OF CELLULAR GROUP SHARES, TELECOM GROUP
SHARES AND AERIAL GROUP SHARES WHEN ISSUED WILL, TOGETHER WITH THE HOLDERS OF
COMMON SHARES AND SERIES A COMMON SHARES, BE COMMON SHAREHOLDERS OF THE COMPANY
AND WILL BE SUBJECT TO RISKS ASSOCIATED WITH AN INVESTMENT IN THE COMPANY AND
ALL OF ITS BUSINESSES, ASSETS AND LIABILITIES. THE COMPANY CAN PROVIDE NO
ASSURANCE AS TO THE DEGREE TO WHICH THE MARKET PRICE OF ANY CLASS OF STOCK WILL
REFLECT THE SEPARATE PERFORMANCE OF THE RELATED GROUP OR AS TO THE IMPACT OF THE
TRACKING STOCK PROPOSAL ON THE MARKET PRICE OF THE COMMON SHARES. IN ADDITION,
IMPLEMENTATION OF THE TRACKING STOCK PROPOSAL WILL MAKE THE CAPITAL STRUCTURE OF
THE COMPANY MORE COMPLEX AND MAY GIVE RISE TO OCCASIONS WHEN THE INTERESTS OF
THE HOLDERS OF THE SEPARATE CLASSES OF COMMON STOCK MAY DIVERGE OR APPEAR TO
DIVERGE.
 
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 PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
                           --------------------------
 
         THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS MARCH 24, 1998
<PAGE>
                      WHERE YOU CAN FIND MORE INFORMATION
 
    The Company files reports, proxy statements and other information with the
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 and at the
following Regional Offices of the SEC: Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies may be obtained by mail at prescribed rates from
the Public Reference Section of the SEC at its principal office at 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. Copies of such materials may also
be inspected at the offices of the American Stock Exchange, 86 Trinity Place,
New York, New York 10006.
 
    TDS Delaware filed a Registration Statement on Form S-4 related to the
transactions described in this Proxy Statement/Prospectus. This Proxy
Statement/Prospectus is a part of that Registration Statement and constitutes a
prospectus of TDS Delaware in addition to being a proxy statement of the Company
for the Special Meeting. As allowed by SEC rules, this Proxy
Statement/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 the Company to "incorporate by reference" information into
this Proxy Statement/Prospectus, which means that the Company 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 Proxy Statement/Prospectus, except for any information
superseded by information in this Proxy Statement/Prospectus. This Proxy
Statement/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 businesses and finances.
 
    1.  TDS's Annual Report on Form 10-K for the year ended December 31, 1996;
 
    2.  TDS's Quarterly Reports on Form 10-Q for the quarters ended March 31,
       June 30 and September 30, 1997; and
 
    3.  TDS's Current Reports on Form 8-K reporting events on November 18,
       December 1, December 18 and December 23, 1997 and on January 28 and
       February 10, 1998.
 
    This Proxy Statement/Prospectus also incorporates by reference additional
documents that may be filed by the Company with the SEC between the date of this
Proxy Statement/Prospectus and the date of the Special Meeting.
 
    YOU MAY OBTAIN COPIES OF SUCH DOCUMENTS WHICH ARE INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT/ 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 PRIOR TO THE SPECIAL MEETING, ANY REQUEST THEREFOR SHOULD BE MADE
NOT LATER THAN APRIL 20, 1998.
 
    YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/ PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAT THE
DATE OF SUCH PROXY STATEMENT/PROSPECTUS, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO SHAREHOLDERS NOR THE ISSUANCE OF ANY SECURITIES
HEREUNDER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
 
                                      -2-
<PAGE>
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR CAUTIONARY
STATEMENT
 
    THIS PROXY STATEMENT/PROSPECTUS CONTAINS "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 PCS
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. SEE "RISK FACTORS." READERS SHOULD EVALUATE ANY
STATEMENTS IN LIGHT OF THESE IMPORTANT FACTORS.
 
QUESTIONS
 
    Questions concerning the Tracking Stock Proposal to be acted upon at the
Special Meeting should be directed to the Company's Information Agent, MacKenzie
Partners, Inc., at the telephone number and address indicated below. Additional
copies of this Proxy Statement/Prospectus or the Proxy Card may be obtained from
the Information Agent or the Company's Investor Relations Department at its
principal office.
 
                                     [LOGO]
 
                                156 FIFTH AVENUE
                            NEW YORK, NEW YORK 10010
                         (212) 929-5500 (CALL COLLECT)
                                       OR
                         CALL TOLL-FREE (800) 322-2885
                              FAX: (212) 929-0308
 
                                      -3-
<PAGE>
                             QUESTIONS AND ANSWERS
          RELATING TO TRACKING STOCK PROPOSAL AND RELATED TRANSACTIONS
 
Q:  WHY AM I RECEIVING THIS PROXY STATEMENT/PROSPECTUS?
 
A:  The Board of Directors of Telephone and Data Systems, Inc., an Iowa
    corporation (the "Company" or "TDS") is distributing this Proxy
    Statement/Prospectus to shareholders of the Company in connection with a
    proposal that would, among other things, create three new classes of common
    stock intended to separately reflect the performance of the Company's
    cellular telephone, landline telephone and personal communications service
    businesses ("Tracking Stocks"), and change the state of incorporation of the
    Company from Iowa to Delaware (the "Tracking Stock Proposal").
 
    The Board of Directors is seeking your proxy to vote in favor of the
    Tracking Stock Proposal at a special meeting of shareholders. At the special
    meeting, you are also being asked to vote on two related proposals to amend
    or adjust certain existing employee stock plans and agreements in connection
    therewith as a result of the Tracking Stock Proposal and to approve a new
    plan which would permit stock awards to be made with respect to shares of
    Tracking Stock.
 
Q:  WHEN AND WHERE WILL THE SPECIAL MEETING BE HELD?
 
A:  The special meeting will be held on Monday, April 27, 1998, at 10:00 a.m.
    Chicago time, at Harris Trust and Savings Bank, 111 West Monroe Street, 8th
    Floor, Chicago, Illinois, in the Auditorium.
 
Q:  WHAT DO I NEED TO DO NOW?
 
A:  Just mail in your signed proxy card in the enclosed return envelope as soon
    as possible, so that your shares may be represented at the special meeting.
 
Q:  WHAT DOES THE BOARD OF DIRECTORS RECOMMEND?
 
A:  The Board of Directors has unanimously approved each proposal, believes that
    the adoption of each proposal is in the best interests of the Company and
    its shareholders and unanimously recommends that you vote "FOR" the Tracking
    Stock Proposal and the related proposals.
 
Q:  WHAT VOTE IS REQUIRED TO APPROVE THE TRACKING STOCK PROPOSAL AND THE RELATED
  PROPOSALS?
 
A:  The approval of the Tracking Stock Proposal requires the affirmative vote of
    the holders of a majority of the outstanding voting power of each of the
    following voting groups, each voting separately as a class:
 
    (i)  Common Shares, Series A Common Shares and Preferred Shares;
 
    (ii) Series A Common Shares;
 
    (iii) Common Shares;
 
    (iv) Preferred Shares issued before October 31, 1981; and
 
    (v) Preferred Shares issued after October 31, 1981.
 
    Although the Voting Trust which controls TDS has the voting power to cause
    the affirmative vote of each of (i) and (ii) above to be assured, the TDS
    Voting Trust holds no Common Shares or Preferred Shares. Accordingly, the
    Tracking Stock Proposal will not be approved unless it is also approved by
    the affirmative vote of the holders of a majority of each of the voting
    groups identified in (iii), (iv) and (v) above. Although the TDS Voting
    Trust has the voting power to approve the two related proposals, such
    proposals will not be implemented if the Tracking Stock Proposal is not
    approved.
 
                                      -4-
<PAGE>
Q:  WILL THE TRACKING STOCK PROPOSAL RESULT IN A CHANGE IN CONTROL OF TDS?
 
A:  There will be no change in control of TDS if the Tracking Stock Proposal is
    approved. The TDS Voting Trust currently controls, and after the proposed
    transactions will continue to control, the election of a majority of the
    directors of TDS and all other matters submitted to a vote of shareholders
    of TDS, except for matters that require a class vote.
 
Q:  WHAT WILL HAPPEN IF THE TRACKING STOCK PROPOSAL IS APPROVED?
 
A:  If the Tracking Stock Proposal is approved, TDS will be reincorporated as a
    Delaware corporation through a merger (the "Merger") of the Company into a
    wholly-owned Delaware subsidiary ("TDS Delaware"). The Merger is being
    effected simply for the purpose of changing the state of incorporation of
    TDS from Iowa to Delaware and will not result in any change in the name,
    management, businesses, operations, strategies, assets or liabilities of
    TDS.
 
Q:  WHAT IS THE PURPOSE OF REINCORPORATING INTO DELAWARE?
 
A:  It will allow the Company to benefit from Delaware's well-developed
    corporate laws, which are periodically updated and revised to meet changing
    business needs. Delaware courts have developed considerable expertise in
    dealing with corporate issues and a substantial body of case law has been
    established construing Delaware law and establishing public policies with
    respect to Delaware corporations. As a consequence, a greater measure of
    predictability is possible in Delaware with respect to corporate legal
    affairs than is available in other states. In addition, the Company believes
    that Delaware law will offer clearer guidance with respect to legal issues
    that may arise as a result of the existence of separate classes of Tracking
    Stock.
 
Q:  SHOULD I SEND IN MY STOCK CERTIFICATES?
 
A:  No. It will not be necessary for shareholders to exchange their existing
    stock certificates representing shares of TDS Iowa for stock certificates
    representing shares of TDS Delaware. Shareholders should retain all
    certificates which represent shares of the Company since such certificates
    will continue to represent shares of the same class or series of TDS
    Delaware following the Merger.
 
Q:  WHAT IS A TRACKING STOCK?
 
A:  Tracking stock represents shares of common stock of a parent corporation, in
    this case TDS, which are intended to "track" the performance of a group of
    assets or a subsidiary. The Restated Certificate of Incorporation of TDS
    Delaware would, among other things, authorize three new classes of tracking
    stock, to be designated as United States Cellular Group Common Shares (the
    "Cellular Group Shares"), TDS Telecommunications Group Common Shares (the
    "Telecom Group Shares") and Aerial Communications Group Common Shares (the
    "Aerial Group 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, currently an 81%-owned subsidiary of the Company
      operating and investing in cellular telephone companies and properties
      ("U.S. Cellular").
 
    - 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 wholly-owned subsidiary of the Company
      operating landline telephone companies ("TDS Telecom"), and includes the
      allocation of certain corporate debt.
 
    - 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.,
      currently an 83%-owned subsidiary of the Company providing broadband
      personal communications services ("Aerial").
 
Q:  WHAT ARE THE COMPANY'S PLANS AFTER THE MERGER?
 
A:  If the Tracking Stock Proposal is approved and the Merger takes place, the
    Company intends to:
 
                                      -5-
<PAGE>
    - offer and sell Telecom Group Shares in a public offering for cash, subject
      to prevailing market and other conditions (the "Telecom Public Offering"),
      and allocate the net proceeds thereof to the Telecom Group;
 
    - offer and issue Cellular Group Shares in exchange for all of the Common
      Shares of U.S. Cellular which are not owned by the Company, subject to
      approval by a special committee of the board of directors, the full board
      of directors and the shareholders of U.S. Cellular, pursuant to a merger
      between a subsidiary of the Company and U.S. Cellular (the "U.S. Cellular
      Merger");
 
    - offer and issue Aerial Group Shares in exchange for all of the Common
      Shares of Aerial which are not owned by the Company, subject to approval
      by a special committee of the board of directors, the full board of
      directors and the shareholders of Aerial, pursuant to a merger between a
      subsidiary of the Company and Aerial (the "Aerial Merger"); and
 
    - distribute one Cellular Group Share, two-thirds of a Telecom Group Share
      and two-thirds of an Aerial Group Share in the form of a stock dividend
      with respect to each outstanding Series A Common Share and Common Share of
      the Company (the "Distribution").
 
Q:  WHEN WILL ALL OF THIS TAKE PLACE?
 
A:  If the Tracking Stock Proposal is approved, the Merger to reincorporate TDS
    into Iowa is expected to take place shortly after the special meeting. The
    Telecom Public Offering is expected to occur shortly after that, subject to
    favorable market conditions. The Company hopes that the U.S. Cellular Merger
    and the Aerial Merger can be completed by June 1998, but the timing of these
    transactions depends on negotiations with independent special committees of
    U.S. Cellular and Aerial. If all of these events occur as planned, the
    Distribution would take place in July or as soon as practicable thereafter,
    following the completion of the Telecom Public Offering, the U.S. Cellular
    Merger and the Aerial Merger. However, the Board of Directors could choose
    to make the Distribution or any part thereof at any time, or not to make the
    Distribution, depending on the circumstances at the time.
 
Q:  WHAT DO I NEED TO DO TO RECEIVE MY CERTIFICATES FOR THE TRACKING STOCKS?
 
A:  You do not need to do anything to receive your certificates for the Tracking
    Stocks. If all of the transactions take place as planned, certificates
    representing whole shares of Tracking Stock (and cash in lieu of fractional
    shares) will be mailed to all shareholders in July 1998 or later.
 
Q:  WHAT ARE THE TAX CONSEQUENCES TO ME?
 
A:  The Merger and the Distribution are intended to be tax-free to
    non-dissenting shareholders (except with respect to any cash received in
    lieu of fractional shares).
 
Q:  WHAT WILL MY SHARES REPRESENT AFTER THESE TRANSACTIONS?
 
A:  Upon the completion of the Telecom Public Offering, the U.S. Cellular
    Merger, the Aerial Merger, and the Distribution, the outstanding shares of
    Tracking Stock would represent in the aggregate an approximately 80%
    interest in the related Tracking Group. Approximately 20% of the common
    equity value of TDS attributable to each Tracking Group would initially be
    retained (the "Retained Interest") in a residual group (the "TDS Group"),
    along with all other interests held by the Company. The value of the common
    equity of TDS in the TDS Group would be represented by the outstanding
    Series A Common Shares and Common Shares of TDS Delaware.
 
Q:  WHAT WILL MY COMMON SHARES REPRESENT IF EVERYTHING TAKES PLACE AS PLANNED?
 
A:  The Common Shares and the Series A Common Shares would represent an equity
    interest in the TDS Group. Upon the completion of all the transactions as
    planned, the TDS Group would have an approximately 20% Retained Interest in
    each of the Tracking Groups. The TDS Group would also include all of the
    Company's interest in businesses that are not attributed to a Tracking
    Group. The TDS Group would provide management, accounting, financial, cash
    management and other services to the Tracking Groups. The TDS Group would
    also be credited with the benefit of any tax losses which any Tracking Group
    cannot utilize on a stand-alone basis, but which can be utilized to reduce
    the consolidated tax liability of TDS.
 
                                      -6-
<PAGE>
Q:  WILL THE COMMON SHARES AND THE TRACKING STOCK BE LISTED ON THE AMERICAN
  STOCK EXCHANGE?
 
A:  The Common Shares of TDS Delaware will be substituted for the existing
    Common Shares of the Company and will continue to be listed on the American
    Stock Exchange under the symbol "TDS." The Company is filing an application
    to list each of the Cellular Group Shares, the Telecom Group Shares and the
    Aerial Group Shares on the American Stock Exchange.
 
Q:  WHAT VOTING RIGHTS WILL I HAVE?
 
A:  Immediately after the Distribution, the holders of Preferred Shares issued
    before October 31, 1981 and Common Shares would have the same voting power
    which they currently have and would also become entitled to elect one more
    director in addition to the directors which they currently elect. In the
    election of directors, the holders of the Tracking Stocks would vote
    together with the holders of Preferred Shares issued before October 31, 1981
    and Common Shares (the "Public Holders") in the election of 25% of the
    directors (rounded up) plus one additional director (or four directors based
    on a Board of twelve directors). The Preferred Shares issued before October
    31, 1981 and Common Shares would have one vote per share in the election of
    such directors and with respect to all other matters, other than the
    election of directors elected by the Series A Holders discussed below. The
    Tracking Stocks would have no votes except in the election of such directors
    and as otherwise required by law. In the election of such directors, each
    class of Tracking Stock would initially have one vote per share. Thereafter,
    the number of votes of each class of Tracking Stock would vary based on the
    aggregate market value of such class held by Public Holders as compared to
    the aggregate market value of all shares of stock held by the Public
    Holders, calculated over a twenty-trading day period ending ten days prior
    to the record date for each annual meeting of shareholders. It is
    anticipated that the Cellular Group Shares would have more than one vote per
    share and that the Telecom Group Shares and Aerial Group Shares would have
    approximately one vote per share based on anticipated market values,
    although this may change over time.
 
    Under the Tracking Stock Proposal, holders of Preferred Shares issued after
    October 31, 1981 and Series A Common Shares (the "Series A Holders") would
    vote in the election of one less director than at present. Based on twelve
    directors, the Series A Holders would vote in the election of eight
    directors, as compared to nine directors currently. The Preferred Shares
    issued after October 31, 1981 would continue to have one vote and Series A
    Common Shares would continue to have ten votes per share in the election of
    such directors, as well as with respect to all other matters (other than the
    election of the directors elected by the Public Holders described in the
    preceding paragraph).
 
Q:  WHAT HAPPENS TO MY FUTURE DIVIDENDS?
 
A:  Immediately after the Distribution, a current holder of Common Shares and
    Series A Common Shares would continue to receive an aggregate dividend which
    is equal to the aggregate dividend which such shareholder currently receives
    from the Company, assuming the shareholder retains the Telecom Group Shares
    received in the Distribution. Following the Distribution, the Board
    currently intends to establish an annual dividend on the Common Shares and
    Series A Common Shares in an amount equal to $0.11 per share and an annual
    dividend on the Telecom Group Shares in an amount equal to $0.50 per share.
    Based on the expected distribution ratio of two-thirds of a Telecom Group
    Share for each existing Common Share and Series A Common Share, the dividend
    rate on the Telecom Group Shares would equate to a per share annual dividend
    of $0.33 per existing Common Share and Series A Common Share. The total of
    this rate and the rate of $0.11 per Common and Series A Common Share is
    equal to $0.44 per share per annum, which is the same as the current annual
    dividend rate on the existing Common Shares and Series A Common Shares.
 
    The Board currently intends to retain future earnings, if any, for the
    development of the businesses of the Cellular Group and Aerial Group and
    does not anticipate paying dividends on the Cellular Group Shares or the
    Aerial Group Shares in the foreseeable future.
 
    Future dividends on all shares of common stock will be payable only if
    declared by the Board out of the lesser of (i) all funds of the Company
    legally available therefor and (ii) the available dividend amount with
    respect to the relevant Group, as described in the proxy
    statement/prospectus.
 
Q:  WHAT DO I DO IF I HAVE ADDITIONAL QUESTIONS?
 
A:  If you have any questions prior to the special meeting, please call the
    Company's Information Agent, McKenzie Partners, Inc., at 1-800-322-2885.
 
                                      -7-
<PAGE>
             CURRENT COMMON STOCK CAPITAL STRUCTURE OF THE COMPANY
 
                                  [GRAPHIC]
 
             PROPOSED COMMON STOCK CAPITAL STRUCTURE OF THE COMPANY
 
                               [GRAPHIC]
 
                                      -8-
<PAGE>
                       PROXY STATEMENT/PROSPECTUS SUMMARY
 
    THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE
TRACKING STOCK PROPOSAL FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL
TERMS OF THE TRACKING STOCK PROPOSAL, YOU SHOULD READ CAREFULLY THIS ENTIRE
DOCUMENT AND THE DOCUMENTS WHICH ARE INCORPORATED BY REFERENCE IN THIS DOCUMENT.
SEE "WHERE YOU CAN FIND MORE INFORMATION." FOR DEFINITIONS OF CERTAIN DEFINED
TERMS USED IN THIS SUMMARY, SEE "PROPOSAL 1--TRACKING STOCK PROPOSAL--CERTAIN
DEFINITIONS" AND EXHIBIT G--INDEX OF CERTAIN DEFINED TERMS.
 
                              THE SPECIAL MEETING
 
<TABLE>
<S>                                                  <C>
Date, Time and Place of Meeting....................  A Special Meeting of Shareholders will be held
                                                     on Monday, April 27, 1998 at 10:00 a.m., Chicago
                                                     time, at Harris Trust and Savings Bank, 111 West
                                                     Monroe Street, 8th Floor, Chicago, Illinois, in
                                                     the Auditorium.
Proposals to be Considered at the Special            The following proposals will be considered at
  Meeting..........................................  the Special Meeting:
</TABLE>
 
    PROPOSAL 1--A proposal to create three new classes of common stock which
    are intended to separately reflect the performance of the Company's
    cellular telephone, landline telephone and personal communications
    businesses, and to change the state of incorporation of the Company from
    Iowa to Delaware (the "Tracking Stock Proposal").
 
    PROPOSAL 2--A proposal to approve certain amendments and adjustments to
    certain employee stock plans to reflect the effects of Proposal 1.
 
    PROPOSAL 3--A proposal to approve the Company's 1998 Long-Term Incentive
    Plan to permit the award of options and stock awards with respect to
    shares of Tracking Stock as well as Common Shares.
 
<TABLE>
<S>                                                  <C>
Vote Required......................................  The following votes are required with respect to
                                                     each of the Proposals:
</TABLE>
 
    PROPOSAL 1--The approval of the Tracking Stock Proposal requires the
    affirmative vote of the holders of a majority of the outstanding voting
    power of each of the following voting groups, each voting separately as
    a class: (i) Common Shares, Series A Common Shares and Preferred Shares;
    (ii) Series A Common Shares; (iii) Common Shares; (iv) Preferred Shares
    issued before October 31, 1981; and (v) Preferred Shares issued after
    October 31, 1981.
 
    Although the TDS Voting Trust has the voting power to cause the
    affirmative vote of each of (i) and (ii) above to be assured, the TDS
    Voting Trust holds no Common Shares or Preferred Shares. Accordingly,
    such proposal will not be approved unless it is also approved by the
    affirmative vote of the holders of a majority of each of the voting
    groups identified in (iii), (iv) and (v) above.
 
    PROPOSAL 2--This proposal requires the affirmative vote of the holders
    of a majority of the voting power of the Company. Since the TDS Voting
    Trust holds a majority of the voting power of the Company, the approval
    of this proposal is assured. However, this proposal will not be
    implemented if the Tracking Stock Proposal is not approved.
 
    PROPOSAL 3--This proposal requires the affirmative vote of the holders
    of a majority of the voting power of the Company. Since the TDS Voting
    Trust holds a majority of the voting power of the Company, the approval
    of this proposal is assured. However, this proposal will not be
    implemented if the Tracking Stock Proposal is not approved.
 
    THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED EACH PROPOSAL, BELIEVES THAT
THE ADOPTION OF EACH PROPOSAL IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT ALL SHAREHOLDERS VOTE "FOR" THE
TRACKING STOCK PROPOSAL AND THE RELATED PROPOSALS.
 
                                      -9-
<PAGE>
                                   THE MERGER
 
    If the Tracking Stock Proposal is approved, the Company will be merged with
and into TDS Delaware, with TDS Delaware as the surviving company. In the
Merger, the Preferred Shares will be converted into an equivalent number of TDS
Delaware Preferred Shares of the same series, and each Common Share and Series A
Common Share will be converted into one Common Share and one Series A Common
Share, respectively, of TDS Delaware. It will not be necessary for you to
exchange your stock certificates since such certificates will continue to
represent TDS Delaware shares of the same class or series.
 
                                THE TRANSACTIONS
 
    Subject to the approval of the Tracking Stock Proposal and the effectiveness
of the Merger, the Board intends to take the following action:
 
<TABLE>
<S>                                 <C>
Telecom Public Offering...........  Offer and sell between 10,000,000 and 17,000,000 Telecom Group
                                    Shares in a public offering for cash, subject to prevailing
                                    market and other conditions, and to allocate the net proceeds
                                    thereof to the Telecom Group.
 
U.S. Cellular Merger..............  Offer and issue 1.14613 Cellular Group Shares in exchange for
                                    each Common Share of U.S. Cellular which is not owned by the
                                    Company (based on shares outstanding as of November 30, 1997),
                                    pursuant to a merger between a subsidiary of the Company and U.S.
                                    Cellular. This transaction is further subject to negotiation of
                                    the other terms of a merger agreement, approval by a special
                                    committee of the board of directors, the full board of directors
                                    and the shareholders of U.S. Cellular and certain other
                                    conditions.
 
Aerial Merger.....................  Offer and issue .91485 Aerial Group Shares in exchange for each
                                    Common Share of Aerial which is not owned by the Company (based
                                    on shares outstanding as of November 30, 1997), pursuant to a
                                    merger between a subsidiary of the Company and Aerial. This
                                    transaction is subject to negotiation of the other terms of a
                                    merger agreement, approval by a special committee of the board of
                                    directors, the full board of directors and the shareholders of
                                    Aerial and certain other conditions.
 
Distribution......................  Distribute Cellular Group Shares, Telecom Group Shares and Aerial
                                    Group Shares in the form of a stock dividend on a pro rata basis
                                    to holders of Series A Common Shares and Common Shares. It is
                                    currently contemplated that the Distribution would take place
                                    after the completion of the Telecom Public Offering, the U.S.
                                    Cellular Merger and the Aerial Merger. However, the Board
                                    reserves the right not to effect all or any part of the
                                    Distribution, or to effect all or any part of the Distribution,
                                    regardless of whether or not the Telecom Public Offering, the
                                    U.S. Cellular Merger or the Aerial Merger have been completed.
                                    The intended distribution ratio is one Cellular Group Share,
                                    two-thirds of a Telecom Group Share and two-thirds of an Aerial
                                    Group Share for each of the outstanding Common Shares and Series
                                    A Common Shares.
</TABLE>
 
                    CERTAIN FEDERAL INCOME TAX CONSEQUENCES
 
    The Company has been advised by counsel that no gain or loss will be
recognized by the non-dissenting shareholders of the Company in connection with
the Merger or the Distribution (except with respect to any cash received in lieu
of fractional shares in the Distribution); however, there are no court decisions
bearing directly on the Tracking Stock Proposal and the Internal Revenue Service
has announced that it will not issue advance rulings on the federal income tax
consequences of transactions similar to the Tracking Stock Proposal. See
"Proposal 1-- Tracking Stock Proposal--Certain Federal Income Tax
Considerations."
 
                                      -10-
<PAGE>
                      REASONS FOR TRACKING STOCK PROPOSAL
 
    The Board believes that the division of the Company's interests in its
principal businesses into the Tracking Groups would enable the Company to
benefit in a variety of ways, some of which are described below.
 
        GREATER MARKET RECOGNITION.  The Tracking Stock Proposal is intended to
    result in greater market
 
    recognition of the value (individually and collectively) of the Company and
    the Company's three principal business groups, thereby enhancing shareholder
    value over the long term. Additionally, a public market for each of TDS's
    three principal business groups should make it easier for the capital
    markets to understand and value the Company's businesses and assets.
 
        INCREASED LIQUIDITY FOR U.S. CELLULAR AND AERIAL.  The Board believes
    that the Distribution would serve to increase the liquidity of the
    publicly-traded equity related to U.S. Cellular and Aerial. The Financial
    Advisors have advised the Company that this increased liquidity may increase
    the valuation of the Cellular Group Shares and Aerial Group Shares as
    compared to the recent public market values of the Common Shares of U.S.
    Cellular and Aerial.
 
        FINANCING FLEXIBILITY.  The Tracking Stock Proposal should provide the
    Company with greater flexibility in raising capital and making acquisitions,
    with equity securities specifically related to the Tracking Groups. The
    Tracking Stocks may also be used, rather than Common Shares, for TDS's
    employee stock purchase plans, stock option plans and other employee benefit
    plans.
 
        SHAREHOLDER FLEXIBILITY.  The issuance and sale of the Tracking Stocks
    would also provide shareholders with the opportunity to continue to invest
    in all of the TDS businesses through the TDS Group or any one or more of the
    Tracking Groups individually, depending upon their investment objectives.
 
        CONSOLIDATED ENTERPRISE.  The Tracking Stock Proposal will retain for
    the Company the advantages of doing business as a single company, including
    synergies that may result from the eventual convergence of the
    telecommunications and wireless industries and strategic, financial,
    operational benefits, economies of scale and debt capacity that would not be
    available if the Groups were separate legal entities. It would also permit
    the Company to retain the advantages of tax consolidation.
 
        TAX FACTORS.  Implementation of the Tracking Stock Proposal should not
    be taxable to the Company or non-dissenting shareholders (except for cash in
    lieu of fractional shares).
 
        FUTURE ALTERNATIVES.  The Tracking Stock Proposal will not preclude
    other alternatives to increase
 
    shareholder value.
 
        EMPLOYEE COMPENSATION.  The ability to issue shares of one or more of
    the Tracking Stocks would increase TDS's flexibility to tailor stock
    incentives to employees by creating stocks that are tied directly to the
    stock price performance of the Group in which they are employed.
 
        ACCEPTANCE OF TRACKING STOCK CAPITAL STRUCTURES.  The use of tracking
    stocks by other companies, including several large, well-known companies,
    has increased in the last several years and tracking stocks are now
    generally well-followed by financial analysts and accepted by investors.
 
        BENEFITS OF DELAWARE REINCORPORATION.  Delaware is generally recognized
    as having a modern, flexible and nationally recognized corporate statute and
    a well-developed body of case law that provides predictability and certainty
    in business planning. Cases involving corporate law issues are decided in a
    separate Court of Chancery in Delaware, where judges have substantial
    experience and precedent in making their decisions. Due to the importance of
    corporate law in Delaware, the Delaware legislature puts a high priority on
    corporate law matters and is at the forefront of keeping the Delaware
    corporate statute current in the face of changing business practices and
    legal developments. Due to such factors, reincorporating in Delaware may
    reduce the impediments and increase the opportunities for structuring
    securities and financial transactions, which would facilitate acquisitions,
    raising capital and other financing transactions. In addition, the Company
    believes that Delaware will offer clearer guidance with respect to legal
    issues that may arise as a result of the existence of separate classes of
    Tracking Stock.
 
    For additional Reasons for the Tracking Stock Proposal, see "Proposal
1--Tracking Stock Proposal-- Reasons."
 
                                      -11-
<PAGE>
                                  RISK FACTORS
 
    When evaluating the Tracking Stock Proposal, shareholders should be aware of
certain risk factors relating thereto. Such risk factors include the following:
 
        LIMITATIONS AND QUALIFICATIONS IN FINANCIAL ADVISOR OPINIONS.  The
    Company has received opinions from the Financial Advisors with respect to
    certain aspects of the transactions described in the Proxy Statement/
    Prospectus. Such opinions do not address all aspects of such transactions
    and are subject to material qualifications, limitations, assumptions and
    other factors. Shareholders should carefully consider and evaluate the
    opinions of the Financial Advisors in view of these assumptions,
    limitations, qualifications and other factors. See "Proposal 1-- Tracking
    Stock Proposal--Opinions of Financial Advisors." See also Exhibits C-1 and
    C-2 for copies of the full text of such opinions.
 
        ABILITY OF BOARD TO UNILATERALLY CONVERT TRACKING STOCK.  The Company
    could, at any time, in the sole discretion of its Board, without further
    shareholder approval, determine to convert each outstanding share of a class
    of Tracking Stock for shares of another class of Tracking Stock or Special
    Common Shares at a predetermined premium to relative market values. The
    determination by the Board to redeem shares of a class of Tracking Stock for
    shares of another class of Tracking Stock or Special Common Shares could be
    made at a time when any class of the Company's stock may be considered to be
    overvalued or undervalued, or at a time when there is no public market for
    any class of stock. In addition, any such redemption would preclude holders
    of the redeemed Tracking Stock from retaining their investment in a security
    that is intended to reflect separately the performance of the related
    Tracking Group. See "Proposal 1--Tracking Stock Proposal-- Description of
    Terms of Tracking Stock--Conversion at Option of Company."
 
        CONTROL BY TDS VOTING TRUST.  The Tracking Stock Proposal will not alter
    the TDS Voting Trust's present control of TDS. As of November 30, 1997, the
    TDS Voting Trust held 6,334,473 Series A Common Shares, representing over
    50% of the voting power of TDS with respect to matters other than the
    election of directors. Based on such shares, the TDS Voting Trust would
    receive 6,334,473 Cellular Group Shares, 4,222,982 Telecom Group Shares and
    4,222,982 Aerial Group Shares in connection with the Distribution. Under the
    current terms of the TDS Voting Trust, such shares of Tracking Stock will be
    distributed by the trustees to the beneficiaries. Following the
    Distribution, and after the distribution of such shares by the TDS Voting
    Trust to the beneficiaries thereof, the TDS Voting Trust will continue to
    hold such 6,334,473 Series A Common Shares, representing over 50% of the
    aggregate voting power of the Company with respect to all matters other than
    the election of directors, and will continue to be able to elect a majority
    of the directors.
 
        ANTITAKEOVER CONSIDERATIONS.  The control by the TDS Voting Trust is
    likely to deter any potential unsolicited or hostile takeover attempts or
    other efforts to obtain control of TDS and may make it more difficult for
    shareholders to sell shares of TDS at higher than market prices.
    Implementation of the Tracking Stock Proposal will allow TDS to issue
    Cellular Group Shares, Telecom Group Shares and Aerial Group Shares, as well
    as Special Common Shares, which would not vote except in the election of
    certain directors and as required by law. This may preserve the ability of
    the TDS Voting Trust to continue to exercise control over a majority of
    TDS's voting power and is likely to limit or deter a merger proposal or
    tender offer that is not acceptable to the TDS Voting Trust. The Restated
    Certificate and the Company's Bylaws also contain provisions which may serve
    to discourage or make more difficult a change in control of the Company
    without the support of the Board or without meeting various other
    conditions.
 
    In addition to the foregoing, other risk factors include: (i) the risks
associated with an investment in a single company and all of the Company's
businesses, assets and liabilities; (ii) the potential diverging interests of
the classes of common stock; (iii) the lack of legal precedent with respect to
the fiduciary duties of the board of directors of a company with a capital
structure which includes tracking stocks, (iv) limited separate shareholder
rights with respect to the classes of common stock; (v) the ability of the Board
to change certain management and accounting policies without shareholder
approval; (vi) the ability of the Board to transfer funds between the Groups;
(vii) the Company's ability to issue authorized but unissued shares of stock
without shareholder approval; and (viii) the potential effects of a possible
Disposition of assets attributed to a Group; and (x) the lack of assurances as
to the market price of the classes of stock following the Merger. See "Risk
Factors."
 
                                      -12-
<PAGE>
 SUMMARY COMPARISON OF THE CURRENT CAPITAL STRUCTURE WITH THE PROPOSED TRACKING
                                 STOCK PROPOSAL
 
    THE FOLLOWING SUMMARIZES THE TRACKING STOCK PROPOSAL AS COMPARED TO THE
CURRENT CAPITAL STRUCTURE OF THE COMPANY.
 
COMMON EQUITY INTERESTS IN BUSINESSES:
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Common Shares and Series A      Currently, the Common Shares and the Series A  The Common Shares and Series A Common Shares,
Common Shares (and Special      Common Shares represent 100% of the common     together with any issued Special Common
Common Shares, if authorized    equity of the Company                          Shares, would represent interests in the
and issued)                                                                    Company's common equity in the TDS Group. The
                                                                               TDS Group would consist of all businesses and
                                                                               assets of the Company other than the Cellular
                                                                               Group, the Telecom Group and the Aerial
                                                                               Group. In addition, upon completion of all of
                                                                               the Transactions as contemplated, the TDS
                                                                               Group would have approximately a 20% Retained
                                                                               Interest in each of the Cellular Group, the
                                                                               Telecom Group and the Aerial Group.
 
Cellular Group Shares           N/A                                            The Cellular Group Shares, when issued, are
                                                                               intended to reflect the separate performance
                                                                               of the Cellular Group, which consists of the
                                                                               Company's interest in U.S. Cellular,
                                                                               currently an 81%-owned subsidiary of the
                                                                               Company which operates and invests in
                                                                               cellular telephone companies and properties.
                                                                               Upon the completion of the U.S. Cellular
                                                                               Merger, U.S. Cellular would become a
                                                                               wholly-owned subsidiary of the Company.
 
Telecom Group Shares            N/A                                            The Telecom Group Shares, when issued, are
                                                                               intended to reflect the separate performance
                                                                               of the Telecom Group, which consists of the
                                                                               Company's interest in TDS Telecom, a
                                                                               wholly-owned subsidiary of the Company which
                                                                               operates landline telephone companies. The
                                                                               Telecom Group also includes the allocation of
                                                                               certain TDS debt.
 
Aerial Group Shares             N/A                                            The Aerial Group Shares, when issued, are
                                                                               intended to reflect the separate performance
                                                                               of the Aerial Group, which consists of the
                                                                               Company's interest in Aerial Communications,
                                                                               Inc., currently an 83%-owned subsidiary of
                                                                               the Company which is developing broadband
                                                                               personal communications services. Upon the
                                                                               completion of the Aerial Merger, Aerial would
                                                                               become a wholly-owned subsidiary of the
                                                                               Company.
</TABLE>
 
                                      -13-
<PAGE>
AUTHORIZED SHARES:
 
<TABLE>
<CAPTION>
                                                                                   CURRENT CAPITAL          TRACKING STOCK
                                                                                      STRUCTURE                PROPOSAL
                                                                               -----------------------  ----------------------
<S>                                                                            <C>                      <C>
Preferred Shares                                                                         5,000,000                326,664(1)
Undesignated Shares                                                                      --                     4,673,336(1)
                                                                                      ------------           ------------
    SUBTOTAL                                                                             5,000,000              5,000,000
                                                                                      ------------           ------------
Common Shares                                                                          100,000,000            100,000,000
Series A Common Shares                                                                  25,000,000             25,000,000
Special Common Shares                                                                    --                    20,000,000
Cellular Group Shares                                                                    --                   140,000,000
Telecom Group Shares                                                                     --                    90,000,000
Aerial Group Shares                                                                      --                    95,000,000
                                                                                      ------------           ------------
  SUBTOTAL                                                                             125,000,000            470,000,000
                                                                                      ------------           ------------
  TOTAL AUTHORIZED SHARES                                                              130,000,000            475,000,000
                                                                                      ------------           ------------
                                                                                      ------------           ------------
</TABLE>
 
- ------------
 
(1) Based on shares issued and issuable at November 30, 1997; the actual numbers
    will be based on the number of outstanding Preferred Shares prior to the
    Merger. In the Merger, the issued Preferred Shares of TDS Iowa will be
    converted into Preferred Shares of TDS Delaware with substantially the same
    rights, limitations and preferences, except as described herein. The
    authorized but unissued Preferred Shares of TDS Iowa will be reclassified as
    Undesignated Shares of TDS Delaware. As so reclassified, the Undesignated
    Shares will authorize the Board to designate one or more series of common as
    well as preferred stock. Such reclassification will permit the Board to
    designate and issue new series of Tracking Stock, as well as preferred
    stock. See "Proposal 1-- Tracking Stock Proposal--Description of Restated
    Certificate of Incorporation of TDS Delaware."
 
PRO FORMA SHARES (based on shares outstanding as of November 30, 1997, assuming
shareholder approval of the Tracking Stock Proposal and assuming the Merger, the
Distribution and the other Transactions):
 
<TABLE>
<CAPTION>
                                                                         CURRENT CAPITAL          TRACKING STOCK
                                                                            STRUCTURE                PROPOSAL           PERCENT
                                                                     -----------------------  ----------------------  -----------
<S>                                                                  <C>                      <C>                     <C>
Preferred Shares
  Issued                                                                         296,664               296,664
  Issuable                                                                        30,000                30,000
                                                                             -----------           -----------
      Total                                                                      326,664               326,664
                                                                             -----------           -----------
                                                                             -----------           -----------
Common Shares                                                                 53,878,129(2)         53,878,129
Series A Common Shares                                                         6,933,233             6,933,233
                                                                             -----------           -----------
Total Common and Series A Common Shares                                       60,811,362            60,811,362
                                                                             -----------           -----------
                                                                             -----------           -----------
Cellular Group Shares(3)
  Outstanding (75%)                                                            --                   60,811,362              60.8%
  Retained Interest (25%)                                                      --                   20,270,454              20.3%
                                                                                                   -----------             -----
      Subtotal                                                                 --                   81,081,816              81.1%
  U.S. Cellular Merger(4)                                                      --                   18,897,187              18.9%
                                                                                                   -----------             -----
      Total                                                                    --                   99,979,003             100.0%
                                                                                                   -----------             -----
                                                                                                   -----------             -----
Telecom Group Shares(5)
  Outstanding (75%)                                                            --                   40,540,908              60.0%
  Retained Interest (25%)                                                      --                   13,513,636              20.0%
                                                                                                   -----------             -----
      Subtotal                                                                 --                   54,054,544              80.0%
  Telecom Public Offering (6)                                                  --                   13,500,000              20.0%
                                                                                                   -----------             -----
      Total                                                                    --                   67,554,544             100.0%
                                                                                                   -----------             -----
                                                                                                   -----------             -----
Aerial Group Shares (7)
  Outstanding (75%)                                                            --                   40,540,908              61.9%
  Retained Interest (25%)                                                      --                   13,513,636              20.6%
                                                                                                   -----------             -----
      Subtotal                                                                 --                   54,054,544              82.5%
  Aerial Merger (8)                                                            --                   11,453,996              17.5%
                                                                                                   -----------             -----
      Total                                                                    --                   65,508,540             100.0%
                                                                                                   -----------             -----
                                                                                                   -----------             -----
</TABLE>
 
- ------------
 
(2) Includes 484,012 Common Shares held by a subsidiary of TDS.
 
(3) The distribution ratio for the Cellular Group Shares is expected to be one
    Cellular Group Share for each outstanding Common Share and Series A Common
    Share.
 
                                      -14-
<PAGE>
(4) This amount is the product of the number of U.S. Cellular Common Shares
    outstanding on November 30, 1997 which are not held by TDS (16,487,822) and
    the exchange ratio offered by TDS (1.14613). The exchange ratio is equal to
    the quotient obtained by dividing the total number of Cellular Group Shares
    which would be deemed to be outstanding or held by the TDS Group pursuant to
    the Retained Interest immediately after the completion of the Merger and the
    Transactions as contemplated (99,979,003) by the total number of outstanding
    shares of U.S. Cellular as of November 30, 1997 (87,231,658).
 
(5) The distribution ratio for the Telecom Shares is expected to be two-thirds
    of a Telecom Group Share for each outstanding Common Share and Series A
    Common Share.
 
(6) The Company intends to offer between 10,000,000 and 17,000,000 Telecom Group
    Shares. For purposes of this Proxy Statement/ Prospectus, the midpoint of
    this amount is assumed for all purposes.
 
(7) The distribution ratio for the Aerial Group Shares is proposed to be
    two-thirds of an Aerial Group Share for each outstanding Common Share and
    Series A Common Share.
 
(8) This amount is the product of the number of Aerial Common Shares outstanding
    on November 30, 1997 which are not held by TDS (12,520,081) and the exchange
    ratio offered by TDS (.91485). The exchange ratio is equal to the quotient
    obtained by dividing the total number of Aerial Group Shares which would be
    deemed to be outstanding or held by the TDS Group pursuant to the Retained
    Interest immediately after the completion of the Merger and the Transactions
    as contemplated (65,508,540) by the total number of outstanding shares of
    Aerial as of November 30, 1997 (71,606,081).
 
    Since the Telecom Public Offering, the U.S. Cellular Merger and the Aerial
Merger are expected to precede the Distribution, after such other Transactions
but before the Distribution, the initial Retained Interest of the TDS Group in
each Tracking Group would be approximately 80% for the Telecom Group, 81% for
the Cellular Group and 83% for the Aerial Group. Of the total equity of each
Tracking Group, not including shares issuable pursuant to Convertible
Securities, approximately 15-25% of the Telecom Group would be represented by
the Telecom Group Shares issued in the Telecom Public Offering, 19% of the
Cellular Group would be represented by the Cellular Group Shares issued in the
U.S. Cellular Merger, and 17% of the Aerial Group would be represented by the
Aerial Group Shares issued in the Aerial Merger.
 
VOTING FOR DIRECTORS:
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Preferred Shares issued before  The holders of the Preferred Shares issued     The holders of the Preferred Shares issued
October 31, 1981 and Common     before October 31, 1981 and Common Shares      before October 31, 1981 and Common Shares
Shares                          vote as a group in the election of 25% of the  would vote as a group together with the
                                directors (I.E., three directors based on a    holders of shares of Tracking Stock and any
                                Board of twelve directors). In such vote,      issued Special Common Shares in the election
                                each Preferred Share issued before October     of 25% of the directors plus one additional
                                31, 1981 and Common Share is entitled to one   director (I.E., four directors based on a
                                vote in the election of directors.             Board of twelve directors). In such vote,
                                                                               each Preferred Share issued before October
                                                                               31, 1981 and Common Share will continue to be
                                                                               entitled to one vote in the election of
                                                                               directors.
 
Preferred Shares issued after   The holders of the Preferred Shares issued     The holders of Preferred Shares issued after
October 31, 1981 and Series A   after October 31, 1981 and Series A Common     October 31, 1981 and Series A Common Shares
Common Shares                   Shares vote as a group in the election of 75%  would vote as a group in the election 75% of
                                of the directors (I.E., nine directors based   the directors less one director (I.E., eight
                                on a Board of twelve directors). In such       directors based on a Board of twelve
                                vote, each Series A Common Share is entitled   directors). In such vote, each Series A
                                to ten votes and each Preferred Share issued   Common Share will continue to be entitled to
                                after October 31, 1981 is entitled to one      ten votes and each Preferred Share issued
                                vote.                                          after October 31, 1981 will continue to be
                                                                               entitled to one vote.
</TABLE>
 
                                      -15-
<PAGE>
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Tracking Stock (and Special                          N/A                       The holders of Tracking Stock (and any issued
Common Shares, if issued)                                                      Special Common Shares) would vote as a group
                                                                               together with the holders of Preferred Shares
                                                                               issued before October 31, 1981 and Common
                                                                               Shares (the "Public Holders") in the election
                                                                               of 25% of the directors plus one additional
                                                                               director (I.E., four directors based on a
                                                                               Board of twelve directors). In such vote,
                                                                               holders of any issued Special Common Shares
                                                                               would have one vote per share. Holders of
                                                                               Tracking Stock would initially have one vote
                                                                               per share. Thereafter, the number of votes
                                                                               which shares of each class of Tracking Stock
                                                                               would have in such vote would vary based on
                                                                               the average Market Capitalization of such
                                                                               class compared to the average Market
                                                                               Capitalization of all shares held by the
                                                                               Public Holders, calculated over the
                                                                               twenty-Trading Day period ending ten Trading
                                                                               Days prior to the record date for each annual
                                                                               meeting of shareholders. It is anticipated
                                                                               that the Cellular Group Shares would have
                                                                               more than one vote per share, and that the
                                                                               Telecom Group Shares and Aerial Group Shares
                                                                               would have approximately one vote per share
                                                                               based on anticipated market values, although
                                                                               this may change over time.
</TABLE>
 
VOTING ON MATTERS OTHER THAN THE ELECTION OF DIRECTORS:
 
<TABLE>
<S>                             <C>                                            <C>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
Preferred Shares                As set forth in the designation.               All issued Preferred Shares would have one
                                                                               vote per share.
 
Common Shares                   The Common Shares have one vote per share.     The Common Shares would continue to have one
                                                                               vote per share.
 
Series A Common Shares          The Series A Common Shares have ten votes per  The Series A Common Shares would continue to
                                share.                                         have ten votes per share.
 
Tracking Stock (and Special     N/A                                            The shares of Tracking Stock (and Special
Common Shares, if issued)                                                      Common Shares, if issued), would have no
                                                                               vote, except in the election of certain
                                                                               directors as discussed above and as required
                                                                               by law.
</TABLE>
 
                                      -16-
<PAGE>
PRO FORMA VOTING POWER ON MATTERS OTHER THAN THE ELECTION OF DIRECTORS (based on
shares outstanding as of November 30, 1997, assuming the Distribution):
 
<TABLE>
<CAPTION>
                                                                                   CURRENT CAPITAL
                                                                                      STRUCTURE         TRACKING STOCK PROPOSAL
                                                                               -----------------------  -----------------------
<S>                                                                            <C>                      <C>
Preferred Shares                                                                            0.2%                     0.2%
Common Shares                                                                              43.6%                    43.6%
Series A Common Shares                                                                     56.2%(6)                 56.2%(6)
Tracking Stock (and Special                                                              N/A                         -0-
 Common Shares, if issued)
</TABLE>
 
- ------------
 
(6) The TDS Voting Trust holds over 90% of the Series A Common Shares,
    representing over 50% of the voting power of TDS on matters other than the
    election of directors. The TDS Voting Trust would continue to control over
    50% of the voting power of TDS with respect to matters other than the
    election of directors if the Tracking Stock Proposal, the Merger and all of
    the Transactions are implemented.
 
DIVIDENDS:
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Preferred Shares                Preferred Shares have a senior preference to   Issued Preferred Shares would continue to
                                all common stock. Dividends on Preferred       have a senior preference to all common stock.
                                Shares are payable out of all assets of the    Dividends on Preferred Shares are payable out
                                Company legally available for the payment of   of all assets of the Company legally
                                dividends.                                     available for the payment of dividends.
                                                                               However, dividends paid on the issued
                                                                               Preferred Shares will be notionally allocated
                                                                               to the TDS Group.
 
Common Shares and Series A      Common Shares are entitled to per share        Common Shares would be entitled to the same
Common Shares (and Special      dividends which are the same as or greater     per share dividends as any issued Special
Common Shares, if authorized    than the per share dividends on the Series A   Common Shares and to per share dividends
and issued)                     Common Shares. Subject to the Preferred Share  which are the same as or greater than the per
                                dividend preference, dividends on Common       share dividends on the Series A Common
                                Shares and Series A Common Shares are payable  Shares. Subject to the Preferred Share
                                out of all assets of the Company legally       dividend preference, dividends on Common
                                available for the payment of dividends.        Shares, Special Common Shares and Series A
                                                                               Common Shares are payable out of the lesser
                                                                               of (i) the assets of the Company legally
                                                                               available for the payment of dividends and
                                                                               (ii) the TDS Group's Available Dividend
                                                                               Amount.
 
Tracking Stock                  N/A                                            Subject to the Preferred Share dividend
                                                                               preference, dividends on issued shares of a
                                                                               class of Tracking Stock would be payable only
                                                                               out of the lesser of (i) the assets of the
                                                                               Company legally available for the payment of
                                                                               dividends and (ii) such Tracking Group's
                                                                               Available Dividend Amount. The Available
                                                                               Dividend Amount for a Tracking Group is
                                                                               intended to be similar to an amount equal to
                                                                               the product of the Outstanding Interest
                                                                               Fraction and the amount of assets that would
                                                                               be available for the payment of dividends
                                                                               under Delaware law if such Tracking Group
                                                                               were a separate subsidiary.
</TABLE>
 
                                      -17-
<PAGE>
DIVIDEND POLICY ON COMMON STOCK:
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Common Shares and Series A      The Board of Directors currently pays an       The Board initially intends to establish a
Common Shares (and Special      annual dividend of $0.44 per Common Share and  policy of declaring an annual dividend of
Common Shares, if authorized    Series A Common Share.                         approximately $0.11 per Common Share and
and issued)                                                                    Series A Common Share. Special Common Shares,
                                                                               if issued, would be entitled to the same per
                                                                               share dividend as the Common Shares.(7)
 
Cellular Group Shares           N/A                                            The Board currently does not intend to pay
                                                                               dividends on the Cellular Group Shares.
 
Telecom Group Shares            N/A                                            The Board of Directors initially intends to
                                                                               establish a policy of declaring an annual
                                                                               dividend of approximately $0.50 per Telecom
                                                                               Group Share.(7)
 
Aerial Group Shares             N/A                                            The Board currently does not intend to pay
                                                                               dividends on the Aerial Group Shares.
</TABLE>
 
- ---------
 
(7) After giving effect to the proposed two-thirds of one share distribution
    ratio for the Telecom Group Shares, the dividend of $0.50 per Telecom Group
    Share is equivalent to approximately $0.33 per existing Common Share or
    Series A Common Share (the "Telecom Equivalent Dividend Rate"). In addition,
    the Board intends to establish an annual dividend rate on the Common Shares
    and Series A Common Shares of $0.11 per share. The sum of this amount plus
    the Telecom Equivalent Dividend Rate is $0.44 per share per annum, which is
    the same as the current annual dividend on the existing Common Shares and
    Series A Common Shares. The intent is that, immediately after the
    Distribution, a current shareholder of the Company would continue to receive
    an aggregate dividend which is at least equal to the aggregate dividend such
    shareholder currently receives from the Company.
 
                                      -18-
<PAGE>
SHARE DIVIDENDS ON COMMON STOCK:
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Common Shares and Series A      May be distributed only as follows: (i)        May be distributed only as follows: (i)
Common Shares (and Special      Common Shares may be distributed to holders    Common Shares may be distributed on an equal
Common Shares, if authorized    of Common Shares and proportionately to        per share basis to holders of Common Shares
and issued)                     holders of Series A Common Shares; (ii)        and holders of Series A Common Shares, and
                                Series A Common Shares may be distributed to   Special Common Shares may be distributed on
                                holders of Common Shares and proportionately   an equal per share basis to holders of
                                to holders of Series A Common Shares; and      Special Common Shares; (ii) Series A Common
                                (iii) Common Shares may be distributed to      Shares may be distributed on an equal per
                                holders of Common Shares and Series A Common   share basis to holders of Common Shares and
                                Shares may be distributed proportionately to   holders of Series A Common Shares, and
                                holders of Series A Common Shares.             Special Common Shares may be distributed on
                                                                               an equal per share basis to holders of
                                                                               Special Common Shares; (iii) Common Shares
                                                                               may be distributed on an equal per share
                                                                               basis to holders of Common Shares, Series A
                                                                               Common Shares may be distributed on an equal
                                                                               per share basis to holders of Series A Common
                                                                               Shares and Special Common Shares may be
                                                                               distributed on an equal per share basis to
                                                                               holders of Special Common Shares; (iv)
                                                                               Special Common Shares may be distributed on
                                                                               an equal per share basis to the holders of
                                                                               Common Shares, Series A Common Shares and any
                                                                               issued Special Common Shares, and (v) shares
                                                                               of any class of Tracking Stock may be
                                                                               distributed on an equal per share basis to
                                                                               the holders of Common Shares, Series A Common
                                                                               Shares and Special Common Shares up to the
                                                                               amount of the Retained Interest in such
                                                                               shares of Tracking Stock. In addition, shares
                                                                               of a new class or series of stock which
                                                                               represents a subdivision or new business of
                                                                               the TDS Group, or any assets attributed by
                                                                               the Board to the TDS Group, could be
                                                                               distributed to the holders of Series A Common
                                                                               Shares, Common Shares and any issued Special
                                                                               Common Shares on an equal per share basis.
</TABLE>
 
                                      -19-
<PAGE>
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Tracking Stock                                       N/A                       Holders of shares of a class of Tracking
                                                                               Stock may receive shares of that same
                                                                               Tracking Stock, as well as shares of any
                                                                               other Tracking Stock up to the amount of the
                                                                               Inter-Group Interest in such other Tracking
                                                                               Stock. Holders of Tracking Stock may not
                                                                               receive any TDS Group Shares since a Tracking
                                                                               Group may not have an Inter-Group Interest in
                                                                               the TDS Group. In addition, shares of a new
                                                                               class or series of stock which represents a
                                                                               subdivision or new business of a Tracking
                                                                               Group, or any assets attributed by the Board
                                                                               to such Tracking Group, could be distributed
                                                                               to the holders of shares related to such
                                                                               Tracking Group on an equal per share basis.
</TABLE>
 
DISTRIBUTION OF A TDS GROUP SUBSIDIARY:
 
<TABLE>
<S>                             <C>                                            <C>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
Preferred Shares                As specified in the designation.               As specified in the designation.
 
Common Shares and Series A      To the extent practicable, holders of Common   To the extent practicable, holders of Common
Common Shares (and Special      Shares would receive subsidiary shares         Shares would receive subsidiary shares
Common Shares, if authorized    corresponding to Common Shares, and holders    corresponding to Common Shares, holders of
and issued)                     of Series A Common Shares would receive        Series A Common Shares would receive
                                subsidiary shares corresponding to Series A    subsidiary shares corresponding to Series A
                                Common Shares.                                 Common Shares and any issued Special Common
                                                                               Shares would receive subsidiary shares
                                                                               corresponding to Special Common Shares.
 
Tracking Stock                                       N/A                       Holders of Tracking Stock are not entitled to
                                                                               participate in the distribution of a
                                                                               subsidiary which is included in the TDS
                                                                               Group.
</TABLE>
 
DISTRIBUTION OF A SUBSIDIARY OF A TRACKING GROUP (other than a Qualifying
Subsidiary):
 
<TABLE>
<S>                             <C>                                            <C>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
Preferred Shares                N/A                                            N/A
</TABLE>
 
                                      -20-
<PAGE>
 
<TABLE>
<S>                             <C>                                            <C>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
Common Shares and Series A      N/A                                            With respect to the distribution of a
Common Shares (and Special                                                     subsidiary that is attributed to a Tracking
Common Shares, if authorized                                                   Group, other than a Qualifying Subsidiary
and issued)                                                                    that holds all of the assets and liabilities
                                                                               of such Tracking Group, holders of Common
                                                                               Shares and Series A Common Shares, as well as
                                                                               any issued Special Common Shares, may, in the
                                                                               sole discretion of the Board, receive
                                                                               subsidiary shares up to the amount of the
                                                                               Retained Interest by the TDS Group in such
                                                                               Tracking Group. In such event, to the extent
                                                                               practicable, holders of Common Shares would
                                                                               receive subsidiary shares corresponding to
                                                                               the Common Shares, holders of Series A Common
                                                                               Shares would receive subsidiary shares
                                                                               corresponding to Series A Common Shares and
                                                                               holders of Special Common Shares, if any,
                                                                               would receive subsidiary shares corresponding
                                                                               to Special Common Shares. The Series A Common
                                                                               Shares, Common Shares and any issued Special
                                                                               Common Shares would be entitled to receive
                                                                               the same number of subsidiary shares per
                                                                               share which are distributed in respect of the
                                                                               Retained Interest in such Tracking Group.
 
Tracking Stock                  N/A                                            With respect to the distribution of a
                                                                               subsidiary that is attributed to a Tracking
                                                                               Group, other than a Qualifying Subsidiary
                                                                               that holds all of the assets and liabilities
                                                                               of such Tracking Group, to the extent
                                                                               practicable, the holders of Tracking Stock of
                                                                               such Tracking Group would generally receive
                                                                               subsidiary shares corresponding to Special
                                                                               Common Shares. Holders of shares of Tracking
                                                                               Stock of any other Group may, at the sole
                                                                               discretion of the Board, receive subsidiary
                                                                               shares corresponding to Special Common
                                                                               Shares, up to the amount of any Inter-Group
                                                                               Interest of such Group in the Tracking Group
                                                                               making the distribution of subsidiary shares.
</TABLE>
 
                                      -21-
<PAGE>
LIQUIDATION OF THE COMPANY:
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Preferred Shares                In the event of a liquidation of the Company,  In the event of a liquidation of the Company,
                                the Preferred Shares have a senior claim as    the issued Preferred Shares will continue to
                                to liquidation value plus accumulated          have a senior claim as to liquidation value
                                dividends.                                     plus accumulated dividends.
 
Common Shares and Series A      In the event of a liquidation of the Company,  In the event of a liquidation of the Company,
Common Shares (and Special      the Common Shares and Series A Common Shares   the Common Shares and Series A Common Shares,
Common Shares, if authorized    would share pari passu any assets remaining    and any issued Special Common Shares, would
and issued)                     for distribution to holders of common stock.   share any assets remaining for distribution
                                                                               to holders of common stock based upon
                                                                               Liquidation Units, with Common Shares, Series
                                                                               A Common Shares and any issued Special Common
                                                                               Shares each having one Liquidation Unit per
                                                                               share.
 
Tracking Stock                                       N/A                       In the event of a liquidation of the Company,
                                                                               the issued shares of each class of Tracking
                                                                               Stock would share any assets remaining for
                                                                               distribution to holders of common stock based
                                                                               upon Liquidation Units, with each Cellular
                                                                               Group Share having 2.5 Liquidation Units,
                                                                               each Telecom Group Share having 0.9
                                                                               Liquidation Units and each Aerial Group Share
                                                                               having 1.1 Liquidation Units.
</TABLE>
 
DISPOSITION OF SUBSTANTIALLY ALL ASSETS OF A TRACKING GROUP:
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Preferred Shares                N/A                                            N/A
 
Common Shares and Series A      N/A                                            In the event of a disposition of any assets
Common Shares (and Special                                                     of a Tracking Group, the holders of Common
Common Shares, if authorized                                                   Shares, Special Common Shares and Series A
and issued)                                                                    Common Shares would indirectly share pari
                                                                               passu any proceeds allocable to the Retained
                                                                               Interest of the TDS Group in such Tracking
                                                                               Group.
</TABLE>
 
                                      -22-
<PAGE>
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Tracking Stock                  N/A                                            In the event of a Disposition of all or
                                                                               substantially all of the properties and
                                                                               assets attributed to a Tracking Group (I.E.,
                                                                               80% or more on a current market value basis),
                                                                               other than in a transaction in which the
                                                                               Company receives primarily equity securities
                                                                               of an entity engaged or proposing to engage
                                                                               primarily in a business similar or
                                                                               complementary to the business of the Affected
                                                                               Tracking Group and certain other
                                                                               circumstances, the Company must either: (i)
                                                                               distribute to the holders of the affected
                                                                               Tracking Stock--by special dividend or by
                                                                               redemption of shares of outstanding Affected
                                                                               Tracking Stock--an amount in cash, securities
                                                                               or other property or any combination thereof
                                                                               equal to the proportionate interest of the
                                                                               outstanding Affected Tracking Stock in the
                                                                               Fair Value of the Net Proceeds of the
                                                                               Disposition; or (ii) convert each outstanding
                                                                               share of the Affected Tracking Stock into a
                                                                               number (or fraction) of Special Common Shares
                                                                               or shares of any other class or classes of
                                                                               Tracking Stock (or any combination thereof on
                                                                               a pro rata basis) equal to 110% (the
                                                                               "Disposition Conversion Percentage") of the
                                                                               average daily ratio (calculated to the
                                                                               nearest five decimal places) of the Market
                                                                               Value of (A) one share of Affected Tracking
                                                                               Stock to (B) the Market Value of one Special
                                                                               Common Share or such other share of Tracking
                                                                               Stock (or any combination thereof on a pro
                                                                               rata basis) during a forty-Trading Day period
                                                                               beginning on the 11th Trading Day after
                                                                               consummation of the transaction.
</TABLE>
 
                                      -23-
<PAGE>
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
                                                                               The Company may, at any time prior to the
                                                                               first anniversary of a dividend on, or
                                                                               partial redemption of, a class of Tracking
                                                                               Stock following a Disposition of all or
                                                                               substantially all of the properties and
                                                                               assets attributed to such Tracking Stock,
                                                                               convert each outstanding share of such
                                                                               Tracking Stock into a number (or fraction) of
                                                                               Special Common Shares or shares of another
                                                                               class or classes of Tracking Stock, equal to
                                                                               the product of the Disposition Conversion
                                                                               Percentage and the average daily ratio of the
                                                                               Market Value of one share of the affected
                                                                               Tracking Stock to the Market Value of one
                                                                               Special Common Share or one share of such
                                                                               other Tracking Stock (or a combination
                                                                               thereof on a pro rata basis), calculated over
                                                                               the twenty-Trading Day period ending five
                                                                               Trading Days prior to the date of notice of
                                                                               such conversion.
 
                                                                               If there is no public market for the Special
                                                                               Common Shares at the time of such conversion,
                                                                               the Market Value per share will be deemed to
                                                                               be the same as the Common Shares.
</TABLE>
 
REDEMPTION AT THE OPTION OF THE COMPANY(8):
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Preferred Shares                Certain Preferred Shares are redeemable by     Issued Preferred Shares which are redeemable
                                their terms.                                   by their terms will continue to be
                                                                               redeemable.
 
Common Shares                   Not redeemable.                                Not generally redeemable.
 
Series A Common Shares          Not redeemable.                                Not redeemable.
 
Special Common Shares           N/A                                            Not generally redeemable.
 
Tracking Stock                  N/A                                            The Company may redeem any class of Tracking
                                                                               Stock of a Tracking Group for a number of
                                                                               shares of one or more Qualifying Subsidiaries
                                                                               (that hold all of the assets and liabilities
                                                                               attributed to such Tracking Group) equal to
                                                                               the product of the Adjusted Outstanding
                                                                               Interest Fraction of such Tracking Group and
                                                                               the total number of shares of each of such
                                                                               Qualifying Subsidiaries held by the Company.
</TABLE>
 
- ------------
 
(8) In addition to the redemption provisions described above, the Restated
    Certificate of TDS Delaware will permit shares of capital stock, other than
    the Series A Common Shares, to be redeemed by the Company, generally at fair
    market value, to the extent necessary to prevent the loss or secure the
    reinstatement of, or prevent the denial of applications for the renewal of,
    any license or franchise from any governmental agency.
 
                                      -24-
<PAGE>
CONVERSION AT THE OPTION OF THE COMPANY:
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Preferred Shares                Not convertible at the option of the Company.  Not convertible at the option of the Company.
 
Common Shares                   Not convertible at the option of the Company.  Not convertible at the option of the Company.
 
Series A Common Shares          Not convertible at the option of the Company.  Not convertible at the option of the Company.
 
Special Common Shares                                N/A                       Not convertible at the option of the Company.
 
Tracking Stock                                       N/A                       The Company may, at any time, convert each
                                                                               share of Tracking Stock of any class into a
                                                                               number of Special Common Shares or shares of
                                                                               another class or classes of Tracking Stock or
                                                                               any combination thereof, equal to the
                                                                               Optional Conversion Percentage of the average
                                                                               daily ratio of the Market Value of one share
                                                                               of such Tracking Stock to be converted to the
                                                                               Market Value of one Special Common Share or
                                                                               share of such other class of Tracking Stock
                                                                               (or a combination thereof on a pro rata
                                                                               basis), calculated over the twenty-Trading
                                                                               Day period ending five Trading Days prior to
                                                                               the date of notice of such conversion.
 
                                                                               The initial Optional Conversion Percentage
                                                                               will be 115% and will remain fixed for a
                                                                               period of five years, and then will decline
                                                                               annually at a rate of 1% per year until the
                                                                               Optional Conversion Percentage is 110% on the
                                                                               ninth anniversary of the initial issuance
                                                                               date of the applicable Tracking Stock.
 
                                                                               If there is no public market for the Special
                                                                               Common Shares, the Market Value per share
                                                                               will be deemed to be the same as the Common
                                                                               Shares.
</TABLE>
 
CONVERSION AT THE OPTION OF THE HOLDER:
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Preferred Shares                Certain series of Preferred Shares are         The series that are currently convertible
                                convertible into Common Shares.                into Common Shares would continue to be
                                                                               convertible into Common Shares.
 
                                                                               In the event of the Distribution, such
                                                                               Preferred Shares would be convertible into
                                                                               Common Shares and a number of Cellular Group
                                                                               Shares, Telecom Group Shares and Aerial Group
                                                                               Shares as if such Preferred Shares had been
                                                                               converted immediately prior to the
                                                                               Distribution.
 
Common Shares                   N/A                                            Not convertible.
</TABLE>
 
                                      -25-
<PAGE>
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Series A Common Shares          Convertible on a share-for-share basis into    Convertible on a share-for-share basis into
                                Common Shares.                                 Common Shares or Special Common Shares.
 
Special Common Shares           N/A                                            Not convertible.
 
Tracking Stock                  N/A                                            Not convertible.
</TABLE>
 
PREEMPTIVE RIGHTS:
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Preferred Shares                None                                           None
 
Common Shares                   None                                           None
 
Series A Common Shares          Series A Common shareholders have a            Series A Common shareholders would continue
                                preemptive right to purchase additional        to have a preemptive right to purchase
                                Series A Common Shares for cash.               additional Series A Common Shares for cash.
 
Special Common Shares           N/A                                            None
 
Tracking Stock                  N/A                                            None
</TABLE>
 
PAR VALUE:
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Preferred Shares                                No par value                                       $0.01
 
Undesignated Shares                                  N/A                                           $0.01
 
Common Shares                                       $1.00                                          $0.01
 
Series A Common Shares                              $1.00                                          $0.01
 
Special Common Shares                                N/A                                           $0.01
 
Telecom Group Shares                                 N/A                                           $0.01
 
Cellular Group Shares                                N/A                                           $0.01
 
Aerial Group Shares                                  N/A                                           $0.01
</TABLE>
 
AMERICAN STOCK EXCHANGE ("AMEX") LISTING:
 
<TABLE>
<CAPTION>
                                          CURRENT CAPITAL STRUCTURE                       TRACKING STOCK PROPOSAL
                                ---------------------------------------------  ---------------------------------------------
<S>                             <C>                                            <C>
Preferred Shares                                 Not Listed                                     Not Listed
 
Common Shares                   Listed on the AMEX under the symbol "TDS".     Would continue to be listed on the AMEX under
                                                                               the symbol "TDS".
 
Series A Common Shares          Not listed, but convertible into Common        Not listed, but convertible into Common
                                Shares, which are listed.                      Shares, which are listed.
 
Tracking Stock                                       N/A                       Application is being filed to list all shares
                                                                               of Tracking Stock on the AMEX.
</TABLE>
 
                                      -26-
<PAGE>
             SIGNIFICANT DIFFERENCES BETWEEN IOWA AND DELAWARE LAW
 
    THE FOLLOWING SUMMARIZES THE RIGHTS OF SHAREHOLDERS UNDER DELAWARE LAW AS
COMPARED TO THE RIGHTS OF SHAREHOLDERS UNDER IOWA LAW:
 
<TABLE>
<CAPTION>
       PROVISION                     IOWA ARTICLES                 RESTATED DELAWARE CERTIFICATE
- ------------------------  ------------------------------------  ------------------------------------
<S>                       <C>                                   <C>
Increase in Authorized    An increase or decrease in the        As permitted by Delaware law, the
Shares                    number of authorized shares of any    Restated Certificate provides that
                          class requires approval by the        an increase or decrease in the
                          holders of a majority of the          number of authorized shares of any
                          outstanding shares of such class and  class may be approved by the holders
                          any other class which is prior,       of a majority of the voting power of
                          superior or substantially equal to    the outstanding shares of the
                          such class, each voting as a          Company entitled to vote in matters
                          separate group (even if such shares   other than the election of
                          are nonvoting), and by the holders    directors, voting as a single group.
                          of the voting power of all shares of
                          capital stock.
 
Redemption of Shares to   Iowa has no statute permitting the    As permitted by Delaware law, the
Protect Licenses          redemption of shares to protect       Restated Certificate provides that
                          licenses.                             the Company may redeem certain
                                                                shares of capital stock, generally
                                                                at fair market value, to the extent
                                                                necessary to prevent the loss or
                                                                secure the reinstatement of, or to
                                                                prevent the denial of applications
                                                                for or the renewal of any license or
                                                                franchise from any governmental
                                                                agency.
 
Voting Trust              Under current Iowa law, a voting      Delaware has no limitation on the
                          trust cannot be established with a    term of a voting trust.
                          term of more than ten years after
                          its effective date, unless extended.
 
Election of Directors     The election of a director requires   The election of a director requires
                          the affirmative vote of a majority    the affirmative vote of a plurality
                          of the votes cast by shares entitled  of the voting power of shares
                          to vote with respect to such          present in person or represented by
                          director.                             proxy at the meeting and entitled to
                                                                vote with respect to such director.
 
Removal of Directors      Shareholders may remove one or more   Unless the certificate of
                          directors, with or without cause,     incorporation provides otherwise,
                          unless the articles of incorporation  the shareholders may remove
                          provide that directors may be         directors of a corporation with a
                          removed only for cause. The Articles  classified board only for cause. The
                          do not provide that directors may be  Restated Certificate provides that
                          removed only for cause.               directors may be removed with or
                                                                without cause by a majority vote of
                                                                the shares entitled to vote in the
                                                                election of such directors.
</TABLE>
 
                                      -27-
<PAGE>
 
<TABLE>
<CAPTION>
       PROVISION                     IOWA ARTICLES                 RESTATED DELAWARE CERTIFICATE
- ------------------------  ------------------------------------  ------------------------------------
<S>                       <C>                                   <C>
Meetings of Shareholders  Special meetings of shareholders may  Special meetings of shareholders may
                          be called by the board of directors,  be called by the board of directors
                          a person or persons so authorized by  or such other person as may be
                          the articles of incorporation or      authorized by the certificate of
                          bylaws, or by holders of at least     incorporation or the bylaws. The
                          fifty percent of the votes entitled   Delaware Bylaws will authorize the
                          to be cast on any issue proposed to   Chairman, President or holders of at
                          be considered at the special          least fifty percent of the votes
                          meeting. The TDS Iowa Bylaws provide  entitled to be cast at a special
                          that the principal executive officer  meeting to call a special meeting.
                          is authorized to call special         The Delaware By-Laws will also
                          meetings of shareholders.             provide that the right of any group
                                                                of shareholders to call a meeting
                                                                may not be amended or eliminated
                                                                without approval by a majority of
                                                                the voting power held by the
                                                                shareholders in such voting group.
 
Shareholder Action by     Unless otherwise provided in the      Unless otherwise provided in the
Written Consent           articles of incorporation,            certificate of incorporation,
                          shareholder action may be taken       shareholder action may be taken
                          without a meeting or vote if a        without a meeting or vote if a
                          written consent is signed by the      written consent is signed by the
                          holders of outstanding shares having  holders of outstanding shares having
                          90% of the votes entitled to be cast  a majority of votes entitled to be
                          at a meeting. The Articles do not     cast at a meeting. The Restated
                          provide otherwise.                    Certificate provides that
                                                                shareholder action may be taken
                                                                without a meeting or vote if a
                                                                written consent is signed by the
                                                                holders of outstanding shares having
                                                                at least 90% of the votes entitled
                                                                to be cast at a meeting.
 
Amendments to Charter     An amendment to the articles of       An amendment to the certificate of
                          incorporation must be approved by a   incorporation generally requires
                          majority of the votes entitled to be  approval by holders of a majority of
                          cast by any voting group with         the voting power of all outstanding
                          respect to which the amendment would  shares. Holders of shares of a class
                          create dissenters' rights and a       are entitled to vote as a class of
                          majority of the votes cast by every   capital stock on a proposed
                          other voting group entitled to vote   amendment if the amendment would
                          on the amendment. In general,         increase or decrease the par value
                          holders of shares of a class of       or alter the powers, preferences or
                          capital stock are entitled to vote    special rights of the shares of such
                          as a separate group if the amendment  class so as to affect them
                          has any effect on such class, even    adversely.
                          if the articles provide that such
                          shares are nonvoting.
 
Share Exchanges, Mergers  A share exchange or merger must be    A merger or consolidation must be
and Consolidations        approved by holders of a majority of  approved by the holders of a
                          the voting power of all shares of     majority of the voting power of the
                          capital stock entitled to vote with   outstanding shares entitled to vote
                          respect to such matter and, in        with respect to such matter. A
                          general, by a majority of the shares  merger or consolidation does not
                          of each class of capital stock which  require a separate class vote by any
                          is affected in some manner by the     class of capital stock. Delaware law
                          share exchange or merger. Iowa law    does not provide for mandatory share
                          does not provide for consolidations.  exchanges.
</TABLE>
 
                                      -28-
<PAGE>
 
<TABLE>
<CAPTION>
       PROVISION                     IOWA ARTICLES                 RESTATED DELAWARE CERTIFICATE
- ------------------------  ------------------------------------  ------------------------------------
<S>                       <C>                                   <C>
Appraisal Rights          Shareholders are entitled to dissent  Shareholders are entitled to dissent
                          from and obtain the fair value of     and obtain the fair value of their
                          their shares in the event of certain  shares in connection with mergers or
                          amendments to the articles of         consolidations, provided that
                          incorporation which materially and    appraisal rights do not apply (i) to
                          adversely affect rights in respect    shareholders of a surviving
                          of a dissenter's shares, and sales    corporation if shareholder approval
                          of all or substantially all of a      is not required or (ii) as to any
                          corporation's assets, share           class of stock which is either
                          exchanges and mergers which require   listed on a national securities
                          a shareholder vote.                   exchange or the Nasdaq national
                                                                market, or held of record by more
                                                                than 2,000 holders, unless
                                                                shareholders are required to accept
                                                                for their shares anything other than
                                                                shares in the surviving corporation,
                                                                shares in any other corporation that
                                                                is similarly listed or held, and/or
                                                                cash in lieu of fractional shares.
 
Anti-Takeover Law         A corporation is prohibited from      A corporation is prohibited from
                          engaging in a business combination    engaging in a business combination
                          with an interested shareholder for a  with an interested shareholder for a
                          period of three years following the   period of three years following the
                          time such person became interested    time such person became interested
                          unless approved by the board of       unless approved by the board of
                          directors before the shareholder      directors before the shareholder
                          became an interested shareholder,     became an interested shareholder,
                          approved by the board of directors    approved by the board of directors
                          and the holders of 66 2/3% of the     and the holders of 66 2/3% of the
                          outstanding voting stock not owned    outstanding voting stock not owned
                          by the interested shareholder after   by the interested shareholder
                          the shareholder became an interested  (except by written consent) after
                          shareholder or the interested         the shareholder became an interested
                          shareholder owned at least 85% of     shareholder or the interested
                          the voting stock outstanding upon     shareholder owned at least 85% of
                          consummation of the interested        the voting stock outstanding upon
                          shareholder transaction. TDS is       consummation of the interested
                          currently subject to this provision.  shareholder transaction. As
                                                                permitted by Delaware law, the
                                                                Restated Certificate provides that
                                                                TDS elects not to be governed by
                                                                this provision.
 
Dividends and Stock       No distribution can be made if,       Dividends may be paid out of any
Repurchases               after giving it effect, the           surplus and, if none, any net
                          corporation would not be able to pay  profits for the fiscal year in which
                          its debts as they become due in the   the dividend was declared or the
                          usual course of business or the       preceding fiscal year. A corporation
                          corporation's total assets would be   may purchase or redeem shares only
                          less than the sum of its total        when its capital is not impaired and
                          liabilities plus the amount that      such purchase or redemption would
                          would be needed to satisfy the        not cause any impairment of the
                          superior preferential rights of       capital.
                          shareholders upon dissolution.
 
Transactions Involving    A conflict of interest transaction    A conflict of interest transaction
Officers and Directors    can be authorized, approved or        can be authorized, approved or
                          ratified by a committee of two or     ratified by a committee of one or
                          more disinterested directors or by a  more disinterested directors or by a
                          majority of the shares entitled to    majority of the shares entitled to
                          vote (excluding shares owned by or    vote (including shares owned by or
                          under the control of any interested   under the control of any interested
                          director).                            director).
</TABLE>
 
                                      -29-
<PAGE>
                               DISSENTERS' RIGHTS
 
    Shareholders of the Company whose shares are not voted in favor of the
Tracking Stock Proposal and who otherwise duly take all action required by Iowa
law will have statutory dissenters' rights under Iowa law. See "Proposal
1--Tracking Stock Proposal--Rights of Dissenting Shareholders." If, in the
judgment of the Board, an excessive number of shareholders assert dissenters'
rights, it is contemplated that the Board may abandon the Tracking Stock
Proposal, even if it is approved by shareholders.
 
         SUMMARY SELECTED CONSOLIDATED AND GROUP FINANCIAL INFORMATION
 
    We are providing the following financial information to aid you in your
analysis of the financial aspects of the Tracking Stock Proposal. We derived
this information from audited financial statements for 1993 through 1997. The
information is only a summary and you should read it in conjunction with the
financial statements (and related notes) contained in Annexes I through V of
this Proxy Statement/Prospectus. See also "Where You Can Find More Information"
for information about other financial information incorporated by reference
herein.
 
                 SUMMARY TDS CONSOLIDATED FINANCIAL INFORMATION
 
<TABLE>
<CAPTION>
                                                                              YEAR ENDED OR AT DECEMBER 31,
                                                                ----------------------------------------------------------
                                                                   1997        1996        1995        1994        1993
                                                                ----------  ----------  ----------  ----------  ----------
                                                                     (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                             <C>         <C>         <C>         <C>         <C>
Operating Revenues............................................  $1,471,533  $1,179,857  $  942,307  $  726,036  $  553,829
Net Income (Loss) Available to Common.........................     (11,441)    126,182     101,469      57,362      31,510
Earnings Per Common Share - Basic.............................        (.19)       2.09        1.77        1.08        0.67
Earnings per Common Share - Diluted...........................        (.19)       2.07        1.74        1.06         .67
Dividends Per Common Share and Series A Common Share..........         .42         .40         .38         .36         .34
Total Assets..................................................   4,971,601   4,200,969   3,469,082   2,790,127   2,259,182
Notes Payable.................................................     527,587     160,537     184,320      98,608       6,309
Long-term Debt (including current portion)....................   1,279,034   1,018,851     894,584     562,165     537,566
Redeemable Preferred Shares (including current portion).......       1,479       1,858      15,093      25,001      27,367
Common Stockholders' Equity...................................  $1,968,119  $2,032,941  $1,684,365  $1,473,038  $1,224,285
</TABLE>
 
                   SUMMARY FINANCIAL INFORMATION OF TDS GROUP
 
<TABLE>
<CAPTION>
                                                                                YEAR ENDED OR AT DECEMBER 31,
                                                                  ---------------------------------------------------------
                                                                     1997        1996        1995        1994       1993
                                                                  ----------  ----------  ----------  ----------  ---------
                                                                                   (DOLLARS IN THOUSANDS)
<S>                                                               <C>         <C>         <C>         <C>         <C>
Net Income......................................................  $   52,968  $   47,540  $   22,691  $   26,052  $  30,972
Net Income Available to Common and Series A Common Shares.......      51,076      45,583      20,182      23,594     28,586
Total Assets....................................................   1,519,829   1,079,975   1,006,728   1,038,484    802,280
Notes Payable - Affiliates......................................     165,686     201,641     186,786     128,530    123,511
Notes Payable - Other...........................................     530,175     159,162     182,625      97,724      6,059
TDS Group Equity................................................  $  602,471  $  642,005  $  509,421  $  683,783  $ 613,607
</TABLE>
 
                                      -30-
<PAGE>
                SUMMARY FINANCIAL INFORMATION OF CELLULAR GROUP
 
<TABLE>
<CAPTION>
                                                                              YEAR ENDED OR AT DECEMBER 31,
                                                                ----------------------------------------------------------
                                                                   1997        1996        1995        1994        1993
                                                                ----------  ----------  ----------  ----------  ----------
                                                                                  (DOLLARS IN THOUSANDS)
<S>                                                             <C>         <C>         <C>         <C>         <C>
Operating Revenues............................................  $  876,965  $  680,068  $  480,316  $  327,630  $  210,344
Net Income (Loss).............................................     111,539     129,929      99,742      16,393     (25,441)
Total Assets..................................................   2,508,916   2,085,899   1,880,144   1,534,787   1,245,396
Long-term Debt (including current portion)....................     515,330     353,761     355,748     302,218     204,455
Cellular Group Equity.........................................  $1,629,320  $1,476,202  $1,329,454  $1,093,967  $  940,128
</TABLE>
 
                 SUMMARY FINANCIAL INFORMATION OF TELECOM GROUP
 
<TABLE>
<CAPTION>
                                                                                YEAR ENDED OR AT DECEMBER 31,
                                                                  ---------------------------------------------------------
                                                                     1997        1996        1995        1994       1993
                                                                  ----------  ----------  ----------  ----------  ---------
                                                                                   (DOLLARS IN THOUSANDS)
<S>                                                               <C>         <C>         <C>         <C>         <C>
Operating Revenues..............................................  $  444,203  $  395,602  $  354,841  $  306,341  $ 268,122
Net Income......................................................      30,388      35,694      34,155      32,654     25,134
Total Assets....................................................   1,406,048   1,352,929   1,228,232   1,138,242    959,582
Notes Payable...................................................      28,181      25,039      15,784      15,059     12,080
Long-term Debt (including current portion)......................     563,374     560,844     536,379     492,946    470,257
Long-term Debt-affiliated.......................................     255,302     239,538     233,176     224,742    228,540
Telecom Group Equity............................................  $  383,759  $  343,816  $  265,387  $  228,800  $ 107,298
</TABLE>
 
                 SUMMARY FINANCIAL INFORMATION OF AERIAL GROUP
 
<TABLE>
<CAPTION>
                                                                               YEAR ENDED OR AT DECEMBER 31,
                                                                 ----------------------------------------------------------
                                                                    1997         1996        1995        1994       1993
                                                                 -----------  ----------  ----------  ----------  ---------
                                                                                   (DOLLARS IN THOUSANDS)
<S>                                                              <C>          <C>         <C>         <C>         <C>
Operating Revenues.............................................  $    55,952  $       --  $       --  $       --  $      --
Net (Loss).....................................................     (247,057)    (37,921)     (6,468)     (1,283)       (67)
Total Assets...................................................      960,648     672,827     360,444      21,320        512
Long-term Debt (Revolving Credit Agreement--TDS)...............      448,234          --      60,238      22,659        650
Long-term Debt.................................................      196,439     103,743          --          --         --
Aerial Group Equity (Deficit)..................................  $   192,427  $  437,785  $  281,282  $   (1,444) $    (161)
</TABLE>
 
                                      -31-
<PAGE>
                                  RISK FACTORS
 
    You should consider the following factors, in addition to the other
information contained elsewhere in this Proxy Statement/Prospectus and the
Exhibits and Appendices hereto, in connection with the Tracking Stock Proposal.
For definitions of certain defined terms, see "Proposal 1--Tracking Stock
Proposal--Certain Definitions" and Exhibit G--Index of Certain Defined Terms.
 
SHAREHOLDERS OF ONE COMPANY; FINANCIAL EFFECTS OF ONE GROUP COULD ADVERSELY
  AFFECT THE OTHER GROUPS
 
    Notwithstanding the attribution of assets and liabilities (including
contingent liabilities) and shareholders' equity among the Groups for the
purpose of preparing their respective financial statements, the change in the
capital structure of the Company contemplated by the Tracking Stock Proposal
will not affect legal title to such assets or responsibility for such
liabilities of the Company or any of its subsidiaries, except that TDS Delaware
will succeed to all of the franchises, rights, assets and liabilities of TDS
Iowa. Financial impacts arising from the TDS Group, the Cellular Group, the
Telecom Group or the Aerial Group that affect the consolidated results of
operations or financial position of the Company could affect the results of
operations or financial position of the other Groups. Moreover, any net losses
of the TDS Group, the Cellular Group, the Telecom Group or the Aerial Group, and
any distributions on, or repurchases of, any shares of capital stock will reduce
the funds of the Company legally available for the payment of dividends on all
classes and series of common stock of the Company.
 
    Accordingly, the TDS Group, Cellular Group, Telecom Group and Aerial Group
financial information should be read in conjunction with the Company's
consolidated financial information. The Company will continue to prepare
consolidated financial statements and also provide such consolidated financial
statements to the holders of each of the Tracking Stocks. If the Tracking Stock
Proposal is approved, the Company will provide to shareholders of each of the
TDS Group, Cellular Group, Telecom Group and Aerial Group separate financial
statements, financial reviews, descriptions of businesses and other relevant
information for the respective Group, together with the Company's consolidated
financial statements. Upon request, the Company will provide to any shareholder
of a Group a copy of the separate combined financial statements related to any
of the other Groups.
 
LIMITED SEPARATE SHAREHOLDER RIGHTS
 
    Under the Tracking Stock Proposal, holders of Cellular Group Shares, Telecom
Group Shares or Aerial Group Shares would not have any legal rights specifically
related to the assets attributed to the Cellular Group, Telecom Group or Aerial
Group, respectively, and the holders of Common Shares and Series A Common Shares
would not have any legal rights specifically related to the TDS Group, except as
described herein. Holders of Tracking Stock will be common shareholders of the
Company, and will continue to be subject to all the risks associated with an
investment in the Company and all of its businesses and liabilities. The Company
and its subsidiaries will continue to be responsible for each of their
respective liabilities.
 
CHANGES IN VOTING FOR DIRECTORS
 
    At present, the holders of Series A Common Shares and Preferred Shares
issued after October 31, 1981 which have voting rights, voting as a group, elect
all of the directors (nine out of twelve directors) who are not elected by the
holders of Common Shares and Preferred Shares issued prior to October 31, 1981
(three out of twelve directors). After the Merger, holders of Preferred Shares
issued before October 31, 1981 and Common Shares will vote as a group with the
holders of any issued Cellular Group Shares, Telecom Group Shares and Aerial
Group Shares, as well as any issued Special Common Shares, in the election of
25% of the directors (rounded up) plus one additional director (or four of the
twelve present directors). As a result, holders of Preferred Shares issued after
October 31, 1981 and Series A Common Shares as such will be entitled to vote in
the election of one less director (I.E., eight of the twelve present directors).
See "Proposal 1--Tracking Stock Proposal--Description of Restated Certificate of
Incorporation of TDS Delaware--Voting Rights."
 
LIMITED VOTING RIGHTS; VARIABLE VOTING RIGHTS
 
    Under the Tracking Stock Proposal, holders of Cellular Group Shares, Telecom
Group Shares and Aerial Group Shares will not have any right to vote on matters
other than the election of certain directors, except as otherwise required by
law. Accordingly, actions submitted to a vote of shareholders other than the
election of directors will generally be voted on only by holders of Common
Shares, Series A Common Shares and series of Preferred Shares which have voting
rights. Under the Restated Certificate, only the affirmative vote of the holders
of a majority of the
 
                                      -32-
<PAGE>
outstanding voting power of the Common Shares, Series A Common Shares and such
voting Preferred Shares, voting as a group, will be required to amend the
Restated Certificate, approve any merger or consolidation of TDS with or into
any other corporation, approve the dissolution of TDS or approve any other
matter required to be voted on by shareholders, except as required under the
DGCL. Under the DGCL, the holders of the outstanding shares of a class are
entitled to vote as a class upon a proposed amendment, whether or not entitled
to vote thereon by the Restated Certificate, if the amendment would increase or
decrease the par value of the shares of such class or alter or change the
powers, preferences or special rights of the shares of such class so as to
affect them adversely. As permitted by the DGCL, the Restated Certificate will
permit the number of authorized shares of any class of capital stock to be
increased or decreased (but not below the number of shares then outstanding in
such class, respectively) by the affirmative vote of a majority of the voting
power of the shares of capital stock entitled to vote with respect to such
matter, voting together as one group.
 
    When a vote is taken on any matter as to which all stock is voting together
as one group, any one or more classes entitled to more than the number of votes
required to approve such matter will be in a position to control the outcome of
the vote on such matter. Certain matters on which holders of common stock would
vote together as a single class could involve a divergence or the appearance of
a divergence of the interests between the holders of classes of common stock.
 
    The Restated Certificate does not require that a merger or consolidation of
the Company requiring the approval of the Company's shareholders be approved by
a separate class vote of holders of any class of capital stock. As a result, the
TDS Voting Trust, as the holder of Series A Common Shares representing a
majority of the voting power of the Company, could approve a merger of the
Company without a class vote by any class of capital stock.
 
    The relative voting power of shares of Tracking Stock in the election of
directors elected by the Public Holders would fluctuate from time to time, with
each share of a class of Tracking Stock having a variable number of votes, based
upon the ratio, over a specified period, of the average Market Capitalization of
such class of Tracking Stock to the average Market Capitalization of all classes
of stock voting in the election of directors elected by the Public Holders. This
formula is intended to equate the proportionate voting rights of each class of
stock to their respective Market Capitalizations at the time of each annual
meeting of shareholders. The Market Capitalization of the classes of stock could
be influenced by many factors, including the results of operations of the
Company and each of the Groups, the regulatory environment, trading volume,
share issuances and repurchases and general economic and market conditions. Such
changes in the aggregate votes or relative voting power of the Tracking Stock
could result from the market's reaction to a decision by the Company's
management or Board that is perceived to disparately affect one class of common
stock in comparison to another. See "Proposal 1--Tracking Stock
Proposal--Description of Terms of Tracking Stock--Voting Rights."
 
POTENTIAL DIVERGENCE OF INTERESTS; NO SPECIFIC PROCEDURES FOR RESOLUTION
 
    Occasions may arise when the interests of the holders of one Tracking Stock
and the holders of the other Tracking Stocks or Common Shares and Series A
Common Shares, or some combination thereof, may diverge or appear to diverge.
Examples include, among others, determinations by the Board to (i) redeem the
shares of a class of Tracking Stock, (ii) approve the disposition of all or
substantially all of the properties and assets of one of the Tracking Groups,
(iii) allocate consideration to be received by holders of common stock in
connection with a merger or consolidation involving the Company among holders of
different classes of common stock, (iv) allocate resources and financial support
to or pursue business opportunities or operational strategies through one Group
instead of one or more of the other Groups, (v) if and to the extent there is
either a Retained Interest or an Inter-Group Interest, allocate the proceeds of
future issuances of the Tracking Stock as a reduction (a) in a Retained Interest
or Inter-Group Interest (as the case may be) in the issuing Tracking Group or
(b) to the equity of the issuing Tracking Group, (vi) pay or omit dividends on
any class of common stock or (vii) approve transactions involving the transfer
of funds or assets from one Group to one or more of the other Groups or make
other operational or financial decisions with respect to one Group that could be
considered to be detrimental to one or more of the other Groups.
 
    As described under "Management and Allocation Policies," procedures have
been adopted for consideration of matters involving a divergence of interests
among the holders of the Company's common stock; however, these policies could
be modified or rescinded by the Board, in its sole discretion, without the
approval of shareholders, although there is no present intention to do so. The
Board could also adopt additional policies. The Board intends to exercise its
judgment from time to time, depending on the circumstances, as to how best to
obtain information regarding the divergence (or potential divergence) of
interests, under what circumstances to seek the assistance of outside advisors,
whether a committee of the Board should be appointed to address the matter and
how to assess which available alternative is in the best interests of the
Company and all of its shareholders. The Board believes the
 
                                      -33-
<PAGE>
advantages of retaining flexibility in determining how best to fulfill its
responsibilities in such circumstances as they may arise outweigh any perceived
advantages from attempting to adopt specific procedures in advance to cover all
conceivable circumstances.
 
    Disproportionate ownership interests of members of the Board in one or more
classes of common stock of the Company or disparate values of the classes of
common stock of the Company held by directors could create or appear to create
potential conflicts of interest when directors are faced with decisions that
could have different implications for different classes. Nevertheless, the
Company believes that a director would be able to discharge his or her fiduciary
duties even if his or her interests in shares of the classes of common stock
were disproportionate and/or had disparate values.
 
    The Company's counsel has advised the Company that there is no definitive
precedent directly concerning the manner in which Delaware law would be applied
to a board of directors' duties in the context of a capital structure which
includes tracking stock with divergent interests. The Company has been advised
by counsel that, in general, under existing Delaware case law, disinterested
directors would be deemed to have satisfied their duty of care to the Company
and its shareholders if they act in good faith with the care an ordinarily
prudent person in a like position would exercise under similar circumstances,
and in a manner such directors reasonably believe to be in the best interests of
the Company. Based on the advice of counsel, the Company believes that, under
Delaware law, a good faith determination by a disinterested and adequately
informed Board, or a committee thereof, which discharges such duty, and which
the directors honestly believe is in the best interests of the Company and its
shareholders, would be a defense to any challenge by or on behalf of the holders
of any class of common stock to any determination by the Board that could have a
disparate effect on any class of common stock.
 
NO ASSURANCE OF PAYMENT OF DIVIDENDS
 
    Dividends on each of the classes of common stock would be payable out of the
lesser of assets of the Company legally available therefor and the Available
Dividend Amount for that Group. Subject to the foregoing provisions, and
notwithstanding the Available Dividend Amount for any Group, the respective
amounts of prior dividends paid on, or liquidation rights of, any shares of
common stock, or any other factor, dividends may be declared and paid on the
Common Shares, the Series A Common Shares, any Special Common Shares that may be
issued in the future, the Telecom Group Shares, the Cellular Group Shares and/or
the Aerial Group Shares in equal or unequal amounts (with the exception that
dividends paid on Common Shares and any Special Common Shares that may be issued
in the future must always be the same per share and equal to or greater than the
per share dividend on the Series A Common Shares). Any decision to pay dividends
will depend on the financial condition, results of operations and business
requirements of the Company as a whole. In making a determination as to the
allocation of any dividends among the classes or series of common stock, the
Board expects to follow a policy under which it will consider, among other
factors, the relative financial condition, results of operations and business
requirements of the respective Groups. See "Dividend Policy."
 
    If any of the TDS Group, the Telecom Group, the Cellular Group or the Aerial
Group incurs a net loss, the assets legally available for payment of dividends
on all classes of common stock would be reduced. In addition, payment of
dividends or distributions on any class of common stock will decrease the amount
of funds available under the limitations described above for the payment of
dividends on all classes of common stock.
 
ALLOCATION OF PROCEEDS OF MERGERS OR CONSOLIDATIONS
 
    The Restated Certificate does not contain any provisions governing how
consideration to be received by the Company's shareholders in connection with a
merger or consolidation involving the Company (in which the common stock is to
be converted into other securities, cash or other property) is to be allocated
among holders of the various classes or series of common stock, except that, in
general, holders of Common Shares and Special Common Shares are entitled to
receive the same consideration per share in any merger or consolidation of TDS.
In any such merger or consolidation, the allocation of consideration would be
determined by the Board and would be subject to approval by a majority of the
voting power of all shares of capital stock of the Company, voting together as
one group. At the present time, the TDS Voting Trust controls a majority of the
voting power of all shares of capital stock. See "--Control by Voting Trust."
 
OPTIONAL CONVERSION OF TRACKING STOCK
 
    The Company could, at any time, in the sole discretion of its Board,
determine to convert each outstanding share of a class of Tracking Stock for
shares of another class or classes of Tracking Stock or Special Common
 
                                      -34-
<PAGE>
Shares at a predetermined premium. The determination by the Board to redeem
shares of a class of Tracking Stock for shares of another class or classes of
Tracking Stock or Special Common Shares or a combination thereof could be made
at a time when any class of the Company's stock may be considered to be
overvalued or undervalued, or at a time when there is no public market for any
class of stock. In addition, any such redemption would preclude holders of the
redeemed Tracking Stock from retaining their investment in a security that is
intended to reflect separately the performance of the related Tracking Group.
See "Proposal 1--Tracking Stock Proposal--Description of Terms of Tracking
Stock--Conversion at Option of Company."
 
DISPOSITION OF TRACKING GROUP ASSETS
 
    As long as the assets of a Group continue to represent less than
substantially all of the properties and assets of the Company, the Board may
approve sales and other dispositions of any amount of the properties and assets
of such Group without shareholder approval, because under the DGCL and the
Restated Certificate shareholder approval is required only for a sale or other
disposition of all or substantially all of the properties and assets of the
Company as a whole. In the event of a Disposition of substantially all of the
properties or assets attributed to a Tracking Group, except under certain
circumstances, the Company must distribute the Fair Value of the Net Proceeds
from the Disposition or exchange each share of that Tracking Stock for shares of
another class or classes of Tracking Stock or Special Common Shares or a
combination thereof at a predetermined premium, at the option of the Board.
 
    The determination by the Board to exchange shares of Tracking Stock for
shares of another class or classes of Tracking Stock and/or Special Common
Shares could be made at a time when any class of the Company's stock may be
considered to be overvalued or undervalued, or at a time when there is no public
market for any class of stock. Any consideration which holders of Tracking Stock
may receive in connection with the Disposition of all or substantially all of
the properties or assets attributed to a Tracking Group may not correspond to
what such holders would receive if they held equity interests directly in the
Tracking Group. In addition, any such exchange would preclude holders of the
redeemed Tracking Stock from retaining their investment in a security that is
intended to reflect separately the performance of that Tracking Group.
 
    The term "Fair Value of the Net Proceeds" means the fair value of the gross
proceeds of a Disposition after payment of or provision for certain specified
costs, including taxes related to the Disposition or such dividend or
redemption, transaction costs and liabilities and other obligations (contingent
or otherwise), including obligations in respect of Preferred Shares and
Convertible Securities (without duplication) attributed to the Tracking Group
involved in the Disposition. See "--Certain Definitions." If such Tracking Group
were a separate independent company and its shares were acquired by another
person, certain of those costs, including corporate and shareholder level taxes,
might not be payable in connection with such an acquisition. As a result, the
consideration that would be received by shareholders of such a separate
independent company in connection with such a stock acquisition might be greater
than the Fair Value of the Net Proceeds that would be received by holders of
Tracking Stock if all or substantially all of the properties and assets of the
related Tracking Group were sold. In addition, no assurance can be given that
the Fair Value of the Net Proceeds per share of Tracking Stock to be received in
connection with a Disposition of all or substantially all of the properties and
assets of a Tracking Group will be equal to or more than the Market Value per
share of such Tracking Stock prior to or after announcement of such Disposition.
See "Proposal 1--Tracking Stock Proposal--Description of Terms of Tracking
Stock--Disposition of Assets of Tracking Group."
 
ALLOCATION OF PROCEEDS UPON SUBSEQUENT ISSUANCES OF TRACKING STOCK
 
    If and to the extent that, at the time of any issuance of shares of Tracking
Stock, (i) the TDS Group has a Retained Interest in a Tracking Group or (ii)
another Tracking Group has an Inter-Group Interest in a Tracking Group, the
Board would determine the allocation of the proceeds of such issuance among the
TDS Group, the other Tracking Group which holds the Inter-Group Interest and the
shareholders' equity of the Tracking Group, the shares of which are being
issued. Any such allocation of net proceeds to the TDS Group would reduce the
Retained Interest and any allocation to a Tracking Group holding an Inter-Group
Interest would reduce the Inter-Group Interest. See "Proposal 1--Tracking Stock
Proposal--Description of Terms of Tracking Stock."
 
PUBLIC POLICY DETERMINATIONS
 
    Because of the nature of the Company's businesses, the Groups may have
diverging interests as to the position the Company should take with respect to
various regulatory issues. For example, Federal Communications Commission
regulations which may advance the interests of the Telecom Group may not advance
the interests of
 
                                      -35-
<PAGE>
the Cellular Group or Aerial Group. In addition, increasing overlap between the
businesses of the two Groups resulting from regulatory changes and technological
advancements may increase such conflicts. The Board will cause policies and
procedures to be implemented to resolve any such conflicts. In the event any
such conflict cannot be resolved or otherwise requires resolution by the Board,
the Board would resolve such conflict in accordance with its good faith business
judgment of the best interests of the Company and all of its shareholders.
 
MANAGEMENT AND ALLOCATION POLICIES
 
    The Board has adopted certain management and allocation policies described
herein with respect to cash management, corporate expenses and inter-Group
transactions, any and all of which could be modified or rescinded by the Board,
in its sole discretion, without the approval of shareholders, although there is
no present intention to do so. The Board could also adopt additional policies
depending upon the circumstances. The Board could decide to modify or rescind
such policies, or to adopt additional policies, and any such decision could have
disparate effects upon holders of shares of any class or series of common stock.
The Board could also allocate resources and financial support to or pursue
business opportunities or operational strategies through one Group instead of
the other Groups. The decision to allocate resources and financial support to
one Group may adversely affect the ability of the other Groups to obtain funds
sufficient to implement their business strategies. In making such determination,
the Board may also consider regulatory requirements, including those imposed by
the public utility commissions of various states and the Federal Communications
Commission. See "Proposal 1--Tracking Stock Proposal--Management and Allocation
Policies."
 
TERMINATION OF EXISTING INTERCOMPANY AGREEMENTS
 
    Subject to the consummation of the U.S. Cellular Merger and the Aerial
Merger, or other transactions pursuant to which U.S. Cellular or Aerial become
wholly-owned subsidiaries of the Company, the Company intends to terminate
certain intercompany agreements between the Company and U.S. Cellular and
Aerial, respectively. Thereafter, all of the relationships between the Company
and such subsidiaries would be determined solely under the management and
allocation policies described herein, similarly to TDS Telecom, which is
currently a wholly-owned subsidiary of TDS. Many of such policies would continue
the arrangements which presently exist between the Company and U.S. Cellular or
Aerial pursuant to the intercompany agreements, but the Company would have no
contractual obligation to continue such policies after the intercompany
agreements have been terminated. See "Proposal 1--Tracking Stock
Proposal--Management and Allocation Policies."
 
TRANSFER OF FUNDS AMONG GROUPS; EQUITY CONTRIBUTIONS
 
    If the Tracking Stock Proposal is approved by shareholders, all debt
incurred or preferred stock issued by the Company and its subsidiaries following
the issuance by the Company of the Tracking Stock would be (unless the Board
otherwise provides) specifically attributed to and reflected in the combined
financial statements of the Tracking Group that includes the entity which
incurred the debt or issued the preferred stock or, in case of debt or preferred
stock that is not specifically attributed to one of the Tracking Groups, the TDS
Group. The Board could, however, determine from time to time that debt incurred
or preferred stock issued by entities included in a Group should be specifically
attributed to and reflected in the combined financial statements of one of the
other Groups to the extent that the debt is incurred or the preferred stock is
issued for the benefit of such other Group.
 
    To the extent cash needs of one Group exceed cash provided by such Group,
one of the other Groups may transfer funds to such other Group. The Company has
provided and will continue to provide centralized cash management functions
under which cash receipts of certain entities included in the Groups are
remitted to the TDS Group and certain cash disbursements of the other Groups
will be funded by the TDS Group on a daily basis. Such transfers of funds
between the Groups will be reflected as borrowings or, if determined by the
Board, in the case of a transfer from the TDS Group or one of the other Groups,
as the case may be, to another Group, reflected as the creation of a Retained
Interest or Inter-Group Interest, as the case may be, in the recipient Group, or
as an increase or decrease in any such existing interest.
 
    There are no specific criteria for determining when a transfer will be
reflected as a borrowing or as the creation of, or an increase or reduction in,
a Retained Interest or an Inter-Group Interest. The Board expects to make such
determinations, either in specific instances or by setting generally applicable
policies from time to time, after consideration of such factors as it deems
relevant, including, without limitation, the needs of the Company, the financing
needs and objectives of the Groups, the investment objectives of the Groups, the
availability, cost and time associated with alternative financing sources,
prevailing interest rates and general economic conditions.
 
                                      -36-
<PAGE>
    Generally, it is expected that the entities included in each of the Groups
will seek their own long-term debt financing. However, the Board may permit a
Group with excess funds to lend such funds to another Group which requires
funds. Loans from one Group to another Group would bear interest at such rates
and have such repayment schedules and other terms as are established from time
to time by, or pursuant to procedures established by, the Board. The Board
expects to make such determinations, either in specific instances or by setting
generally applicable policies from time to time, after consideration of such
factors as it deems relevant, including, without limitation, the needs of the
Company, the use of proceeds by and creditworthiness of the recipient Group, the
capital expenditure plans and investment opportunities available to each Group
and the availability, cost and time associated with alternative financing
sources.
 
    Although the creation of or any increase in a Retained Interest or an
Inter-Group Interest resulting from an equity contribution by the TDS Group or
another Group to a particular Tracking Group (or any decrease in such Retained
Interest or Inter-Group Interest) would be determined by reference to the Market
Value of the applicable Tracking Stock as of the date of such event, an increase
(or decrease) could occur at a time when such Tracking Group's shares could be
considered undervalued or overvalued.
 
ABSENCE OF APPROVAL RIGHTS WITH RESPECT TO FUTURE ISSUANCES OF AUTHORIZED SHARES
 
    The authorized but unissued shares of capital stock of the Company will be
available for issuance from time to time at the sole discretion of the Board for
any proper corporate purpose. Such issuances could include Common Shares, Series
A Common Shares, Cellular Group Shares, Telecom Group Shares, Aerial Group
Shares, Special Common Shares, or a combination thereof, as well as the issuance
of such shares upon the conversion or exercise of securities of the Company that
are convertible into or exercisable or exchangeable for such shares. In
addition, the Board will be able to designate and issue series of common or
preferred stock from the authorized but unissued Undesignated Shares. The
approval of the shareholders of the Company will not be sought by the Company
for the issuance of authorized but unissued shares of any class of capital stock
(or the reissuance of previously issued shares that have been reacquired by the
Company) or securities of the Company that are convertible into or exercisable
or exchangeable for such shares, unless deemed advisable by the Board or
required by applicable law, regulation or AMEX requirements. The Company has no
current plans to issue any shares of Tracking Stock except in connection with
the Transactions and as otherwise described herein. The Company has no current
plans to issue any Special Common Shares or to designate any series of
Undesignated Shares.
 
    In addition, as permitted by Delaware law, the Restated Certificate will
permit the number of authorized shares of any class of capital stock to be
increased or decreased (but not below the number of shares then outstanding in
such class, respectively) by the affirmative vote of the holders of a majority
of the voting power of the shares of capital stock of the Company entitled to
vote with respect to such matter. No similar authority exists under Iowa law.
The TDS Voting Trust (as defined below) presently holds a majority of the voting
power of the Company. This provision could allow TDS Delaware to authorize and
issue shares of capital stock under circumstances which could preserve the
ability of the TDS Voting Trust to continue to exercise control over a majority
of the voting power of TDS Delaware and, therefore, could deprive shareholders
of TDS of an opportunity to sell their shares at a premium over market prices or
make it more difficult to replace the current Board and management of TDS
Delaware. The Company has no current intention to take any action to authorize
any additional shares of capital stock, other than as described herein. See
"Proposal 1--Tracking Stock Proposal--Description of Restated Certificate of
Incorporation of TDS Delaware."
 
CONTROL BY VOTING TRUST
 
    A substantial majority of the outstanding Series A Common Shares are held in
a voting trust which expires on June 30, 2009 (herein referred to as the "TDS
Voting Trust"). See "Security Ownership of Management." The TDS Voting Trust was
created to facilitate the long-standing relationships among the trustees'
certificate holders. By virtue of the number of shares held by them, the voting
trustees have the power to elect approximately 75% of the directors, or nine
directors based on the current size of the Board, and control a majority of the
voting power of the Company with respect to matters other than the election of
directors. The Tracking Stock Proposal will not alter the TDS Voting Trust's
present control of TDS. However, assuming adoption of the Tracking Stock
Proposal, after the Merger the voting trustees would have the power to elect
eight, rather than nine, directors, based on the current size of the Board.
 
    As of November 30, 1997, the TDS Voting Trust had voting or dispositive
power over an aggregate of 6,334,473 Series A Common Shares, representing
approximately 51.8% of the voting power of TDS with respect to matters other
than the election of directors. Based on such shares, the TDS Voting Trust would
receive 6,334,473 Delaware
 
                                      -37-
<PAGE>
Series A Common Shares in the Merger and an aggregate of 6,334,473 Cellular
Group Shares, 4,222,982 Telecom Group Shares and 4,222,982 Aerial Group Shares
in connection with the Distribution. Under the current terms of the TDS Voting
Trust, such shares of Tracking Stock will be distributed by the trustees to the
beneficiaries. Following the Distribution, and after the distribution of all of
the Cellular Group Shares, Telecom Group Shares and Aerial Group Shares received
by the TDS Voting Trust to the beneficiaries thereof, the TDS Voting Trust would
continue to have at least 51.8% of the aggregate voting power of the Company
with respect to all matters other than the election of directors and will be
able to elect eight of the twelve directors, assuming no other changes.
 
ANTI-TAKEOVER CONSIDERATIONS
 
    The existence of the TDS Voting Trust is likely to deter any potential
unsolicited or hostile takeover attempts or other efforts to obtain control of
TDS and may make it more difficult for shareholders to sell shares of TDS at
higher than market prices. Regardless of whether the Tracking Stock Proposal is
implemented, the trustees of the TDS Voting Trust have advised the Company that
they intend to maintain the ability to keep or dispose of voting control of TDS.
Implementation of the Tracking Stock Proposal will allow TDS to issue Cellular
Group Shares, Telecom Group Shares and Aerial Group Shares, as well as Special
Common Shares, which would not vote except in the election of certain directors
and as required by law. This may preserve the ability of the TDS Voting Trust to
continue to exercise control over a majority of TDS's voting power. Assuming TDS
were to continue to issue additional common stock, implementation of the
Tracking Stock Proposal and the Distribution is likely to limit or deter a
merger proposal or tender offer that is not acceptable to the TDS Voting Trust.
Consequently, the Tracking Stock Proposal and the Distribution might deprive
shareholders of TDS of an opportunity to sell their shares at a premium over
prevailing market prices and make it more difficult to replace the current Board
and management of TDS.
 
    The Restated Certificate and the Company's Bylaws also contain provisions
which may serve to discourage or make more difficult a change in control of the
Company without the support of the Board or without meeting various other
conditions. In particular, the Restated Certificate includes a provision,
similar to a provision currently included in the Articles, which authorizes the
Board to consider various factors, including effects on customers, taxes, and
the long-term and short-term interests of the Company, in the context of a
proposal or offer to acquire or merge the corporation, or to sell its assets,
and to reject such offer if the Board determines that the proposal is not in the
best interests of the corporation based on such factors. In addition, the
existence of the Tracking Stocks could present complexities and could in certain
circumstances pose obstacles, financial and otherwise, to an acquiring person.
The provisions of the Restated Certificate and the Bylaws of TDS Delaware and
the existence of the Tracking Stocks could, under certain circumstances, prevent
shareholders from profiting from an increase in the market value of their shares
as a result of a change in control of the Company by delaying or preventing such
change in control.
 
    Like the Articles, the Restated Certificate divides the Board into three
classes, with staggered terms of office. Each year, one class is elected for a
three-year term. This may have the effect of limiting or deterring a proxy
contest for the removal of incumbent directors.
 
    TDS is not aware of any current intention of the TDS Voting Trust to dispose
of any significant amount of Series A Common Shares of TDS or of any existing or
planned effort on the part of any party to accumulate material amounts of Common
Shares or Series A Common Shares, or to acquire control of TDS by means of a
merger, tender offer, solicitation in opposition to management or otherwise, or
to change TDS's management.
 
NO ASSURANCES AS TO MARKET PRICE
 
    Because there has been no prior market for the Cellular Group Shares, the
Telecom Group Shares or the Aerial Group Shares, there can be no assurance as to
the market price of such shares following issuance thereof. There can be no
assurance that the combined market values of the Common Shares, Cellular Group
Shares, Telecom Group Shares and Aerial Group Shares held by a shareholder
immediately following the Distribution of the Tracking Stocks will equal or
exceed the market value of the Common Shares held by such shareholder prior to
the Company's announcement of the Tracking Stock Proposal, and the combined
market value could be less than such market value of the Common Shares. Until an
orderly market develops for the Tracking Stocks, their respective trading prices
may fluctuate significantly. If an active trading market does develop in any of
such shares, there can be no assurance that it will be maintained. The prices at
which the shares of Tracking Stock will trade will be determined in the trading
markets and may be influenced by many factors, including the consolidated
results of the Company, as well as the respective performance of the TDS Group,
Cellular Group, Telecom Group and Aerial Group, investors' expectations for the
Company and each Group, trading volume and general economic and market
conditions. There is no assurance that investors will assign value to each of
the Tracking Stocks based on the reported financial results and fundamental
operating prospects of the related Group. Financial effects of the
 
                                      -38-
<PAGE>
Groups that affect the Company's consolidated results of operations or financial
condition could affect the market prices of the Common Shares, Cellular Group
Shares, Telecom Group Shares and Aerial Group Shares. In addition, the Company
cannot predict the impact on the market values of each of the Tracking Stocks of
certain terms of the securities, such as the ability of the Company to convert
or redeem shares of the Tracking Stocks, the discretion of the Board to make
various determinations or the impact on the market value of each of the Tracking
Stocks of its voting power.
 
LIMITATIONS AND QUALIFICATIONS IN FINANCIAL ADVISOR OPINIONS
 
    The Company has received an opinion from each of the Financial Advisors
which states that, assuming the proposed Telecom Public Offering, U.S. Cellular
Merger, Aerial Merger, Distribution and Merger (collectively the
"Recapitalization") had been effective as of the date of such opinion, the
Recapitalization would not have a material adverse effect from a financial point
of view on (i) the aggregate market value on a fully-distributed basis of the
Common Shares and shares of Tracking Stock to be distributed in the Distribution
with respect thereto (the "Proposed Common Equity") outstanding after such
Recapitalization as compared with the aggregate market value of the Common
Shares outstanding immediately prior to the announcement of such
Recapitalization or (ii) the Company's ability to raise equity capital through
offerings of shares of common equity or securities convertible into common
equity ("Equity Market Access") after such Recapitalization as compared to the
Company's Equity Market Access prior to the announcement of such
Recapitalization. Such opinions are limited to such aspects of the
Recapitalization and do not address other aspects of the Recapitalization and
are subject to material qualifications and limitations.
 
    In particular, the Financial Advisors did not express any opinion as to what
the actual value of the Tracking Stocks will be when issued to the Company's
shareholders pursuant to the Recapitalization or the prices at which such
Tracking Stocks will trade subsequent to the Recapitalization. In addition, the
Financial Advisors did not express any opinion whatsoever as to the individual
merits of the U.S. Cellular Merger, the Aerial Merger, or the Telecom Public
Offering, or any opinion whatsoever with respect to the Reincorporation. The
opinions of the Financial Advisors do not address the Company's underlying
business decision to effect the Recapitalization and do not constitute a
recommendation to any shareholder of the Company as to how such shareholder
should vote with respect to the Recapitalization.
 
    The opinions also state that the Recapitalization may cause a change in
perception by some investors of the future plans of the Company or the holders
of Series A Common Shares. Consequently, the opinions assume that the market has
had a reasonable opportunity to understand and evaluate the Recapitalization. In
addition, the opinions state that the Tracking Stocks which would be issued to
the public shareholders of the Company in the proposed Distribution might trade
initially at market prices below those at which they would trade on a fully
distributed basis.
 
    The opinions of the Financial Advisors also depend on the accuracy of
certain assumptions and other factors considered by the Financial Advisors, as
described in their opinions. Shareholders should carefully consider and evaluate
the opinions of the Financial Advisors in view of such qualifications,
limitations, assumptions and other factors. See "Proposal 1 -- Tracking Stock
Proposal --Opinions of Financial Advisors." See also Exhibits C-1 and C-2 for
copies of the full text of such opinions.
 
NO ASSURANCE OF COMPLETION OF TRANSACTIONS
 
    This Proxy Statement/Prospectus describes the U.S. Cellular Merger, the
Aerial Merger, the Telecom Public Offering and the Distribution as currently
contemplated by the Board. Such Transactions are subject to various conditions
and uncertainties and there can be no assurance that all or any of such
Transactions will be completed or, if any are completed, that they will be
completed on the terms described in the Proxy Statement/Prospectus.
 
TAX CONSIDERATIONS
 
    Subsequent to the Distribution, the Company might engage in one or more
transactions involving shares of Tracking Stock (see "Proposal 1--Tracking Stock
Proposal--Description of Terms of Tracking Stock"). Such a transaction might be
tax-free, partially tax-free or fully taxable to the shareholder of Tracking
Stock involved in such transaction.
 
                                      -39-
<PAGE>
LITIGATION
 
    On December 29, 1997, Airmont Plaza Associates, which claims to be a holder
of U.S. Cellular Common Shares, filed a putative class action complaint on
behalf of common stockholders of U.S. Cellular in the Court of Chancery of the
State of Delaware in New Castle County. The complaint names as defendants TDS,
U.S. Cellular, and the directors of U.S. Cellular. The complaint alleges a
breach of fiduciary duties by the defendants and seeks to have the U.S. Cellular
Merger enjoined or, if it is consummated, to have it rescinded and to recover
unspecified damages, fees and expenses. The defendants have been served with the
complaint in this case but have not yet responded to the complaint. The time for
the defendants to respond has been extended. The timing for a response will be
determined based on discussions between counsel for plaintiffs and defendants,
but a response is not expected to take place for at least one or more months. On
January 30, 1998, a virtually identical complaint was also filed by John G.
Guillemont, Trustee of the John G. Guillemont Living Trust, who subsequently
withdrew as plaintiff and was substituted with Marcus Galt. None of the
defendants have been served with this complaint. It is expected that these cases
will be consolidated.
 
    On January 5, 1998, Richard Greenfield, who claims to be a holder of Aerial
Common Shares, filed a putative class action complaint on behalf of common
stockholders of Aerial in the Court of Chancery of the State of Delaware in New
Castle County. The complaint names as defendants TDS, Aerial and the directors
of TDS and Aerial. The complaint alleges a breach of fiduciary duties by the
defendants and seeks to have the Aerial Merger enjoined or, if it is
consummated, to have it rescinded and to recover unspecified damages, fees and
expenses. The defendants have been served with the complaint in this case but
have not yet responded to the complaint. The time for the defendants to respond
has been extended. The timing for a response will be determined based on
discussions between counsel for plaintiffs and defendants, but a response is not
expected to take place for at least one or more months. On February 6, 1998, a
virtually identical complaint was also filed by Jess Colvin. None of the
defendants have been served with this complaint. It is expected that these cases
will be consolidated.
 
    The Company intends to vigorously defend against these lawsuits. However,
there can be no assurance that such lawsuits will not have a material adverse
effect on the Company or the transactions contemplated by the Proxy
Statement/Prospectus.
 
                                      -40-
<PAGE>
                                    GENERAL
 
DATE, TIME AND PLACE OF SPECIAL MEETING
 
    The Special Meeting of Shareholders of the Company will be held at Harris
Trust and Savings Bank, 111 West Monroe Street, 8th Floor, Chicago, Illinois, in
the Auditorium, on Monday, April 27, 1998, at 10:00 a.m. Chicago time (the
"Special Meeting"), for the following purposes: (1) to consider and approve the
Tracking Stock Proposal; (2) to consider and approve certain amendments or
adjustments to employee benefit plans as a result of the Tracking Stock
Proposal; (3) to consider and approve the 1998 Long-Term Incentive Plan of the
Company; and (4) to transact such other business as may properly come before the
Special Meeting or any and all adjournments thereof.
 
    If Proposal 1 is not approved, Proposal 2 and Proposal 3 will not be
implemented even if they are approved. If Proposal 1 is approved, it will be
implemented even if Proposal 2 and Proposal 3 are not approved.
 
    The Board of Directors has fixed the close of business on March 16, 1998 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the Special Meeting or any adjournment thereof.
 
    If you do not expect to be present, please sign and mail your proxy in the
enclosed self-addressed envelope to Harris Trust and Savings Bank, 311 West
Monroe Street, Chicago, Illinois 60606. If you hold more than one class of the
Company's shares, you will receive a separate proxy for each holding. To assure
that all of your shares are represented, you must return a proxy printed in
black ink for Common Shares, including Common Shares owned through the TDS
dividend reinvestment plan and through the TDS Tax-Deferred Savings Plan; a
proxy printed in green ink for Series A Common Shares, including Series A Common
Shares owned through the dividend reinvestment plan; a proxy printed in red ink
for Preferred Shares issued before October 31, 1981; and a proxy printed in blue
ink for Preferred Shares issued after October 31, 1981. Proxies given pursuant
to this solicitation may be revoked at any time prior to the closing of polls at
the Special Meeting (by written notice to the Secretary of the Company or
attendance at the Special Meeting of Shareholders and notice to the Secretary of
such revocation). Once the polls are closed, however, proxies may not be
retroactively revoked.
 
VOTING INFORMATION
 
    To be approved, the Tracking Stock Proposal must receive the affirmative
vote of the holders of a majority of the votes entitled to be cast by holders of
Common Shares, Series A Common Shares and Preferred Shares, voting together as
one group, and the affirmative vote of the holders of a majority of the votes
entitled to be cast by the holders of Common Shares, Series A Common Shares,
Preferred Shares issued before October 31, 1981 and Preferred Shares issued
after October 31, 1981, each voting separately as a group. Abstentions from
voting on such proposal and non-votes will not represent affirmative votes and
will, therefore, effectively constitute votes against the matter for purposes of
such vote. A majority of the votes entitled to be cast on the proposal by each
voting group constitutes a quorum of that voting group for action on that
proposal.
 
    The proposal to approve amendments and adjustments to employee stock plans
and agreements related to the Tracking Stock Proposal will be approved if votes
favoring the proposal cast by holders of Common Shares, Series A Common Shares
and Preferred Shares, voting together as one group, exceed the votes cast within
such group opposing such proposal, assuming that a quorum exists. A majority of
the votes entitled to be cast on the proposal constitutes a quorum of that
voting group for action on that proposal. Votes to abstain from voting on such
proposal and non-votes will not represent votes cast in favor of or opposing
such matter and will not affect the determination of whether such proposal is
approved for purposes of such vote.
 
    The proposal to approve the 1998 Long-Term Incentive Plan of the Company
will be approved if votes favoring the proposal cast by holders of Common
Shares, Series A Common Shares and Preferred Shares, voting together as one
group, exceed the votes cast within such group opposing such proposal, assuming
that a quorum exists. A majority of the votes entitled to be cast on the
proposal constitutes a quorum of that voting group for action on that proposal.
Votes to abstain from voting on such proposal and non-votes will not represent
votes cast in favor of or opposing such matter and will not affect the
determination of whether such proposal is approved for purposes of such vote.
 
    On December 31, 1997, the Company had outstanding and entitled to vote
53,648,683 Common Shares, par value $1.00 per share (excluding 794,575 treasury
shares and 484,012 shares held by a subsidiary of the Company); 6,936,277 Series
A Common Shares, par value $1.00 per share; and 324,667 Preferred Shares,
without par value, of which 8,899 Preferred Shares were issued before October
31, 1981 (Series A, B, D, G, H and N), and 315,768 Preferred Shares were issued
after October 31, 1981 (Series O, S, U, BB, DD, EE, GG, HH, II, JJ, KK, LL, QQ,
RR, SS and TT). Each of the outstanding Common Shares and Preferred Shares is
entitled to one vote on all
 
                                      -41-
<PAGE>
matters to come before the Special Meeting and each of the outstanding Series A
Common Shares is entitled to ten votes on all matters to come before the Special
Meeting.
 
    The trustees of the TDS Voting Trust intend to vote in favor of all of the
proposals, subject to approval by a vote of 75% in interest of the beneficiaries
of record of the Tracking Stock Proposal. It is anticipated that the
beneficiaries will approve the Tracking Stock Proposal by the requisite vote.
 
    A complete list of shareholders entitled to vote at the Special Meeting,
arranged in alphabetical order and by voting group, showing the address of and
number of shares held by each shareholder, will be kept open at the offices of
the Company, 30 North LaSalle Street, 40th Floor, Chicago, Illinois 60602, for
examination by any shareholder, beginning at least two business days after this
notice of meeting and continuing through the Special Meeting.
 
    ALL SHAREHOLDERS ARE URGED TO SIGN, DATE AND MAIL THEIR PROXY CARDS
PROMPTLY. IF NO DIRECTION IS MADE, ALL PROXIES WILL BE VOTED FOR EACH OF THE
PROPOSALS.
 
                                      -42-
<PAGE>
                  DIVIDENDS AND PRICE RANGES OF COMMON SHARES
 
    The following table sets forth the high and low sales prices of the Common
Shares on the AMEX as reported by the Dow Jones News Service, and the dividends
paid per Common Share during the periods indicated:
 
<TABLE>
<CAPTION>
                                                                                                    SALES PRICES
                                                                                                --------------------   DIVIDENDS
                                                                                                  HIGH        LOW        PAID
                                                                                                ---------  ---------  -----------
<S>                                                                                             <C>        <C>        <C>
1995
  First Quarter...............................................................................  $   46.38  $   36.13   $    .095
  Second Quarter..............................................................................      39.38      36.00        .095
  Third Quarter...............................................................................      42.88      36.38        .095
  Fourth Quarter..............................................................................      43.25      35.63        .095
1996
  First Quarter...............................................................................  $   48.75  $   39.00   $     .10
  Second Quarter..............................................................................      48.88      43.38         .10
  Third Quarter...............................................................................      45.63      37.75         .10
  Fourth Quarter..............................................................................      40.50      34.75         .10
1997
  First Quarter...............................................................................  $   42.00  $   34.50   $    .105
  Second Quarter..............................................................................      40.50      36.25        .105
  Third Quarter...............................................................................      46.44      36.56        .105
  Fourth Quarter..............................................................................      48.50      42.00        .105
1998
  First Quarter (through March 13, 1998)......................................................  $   48.56  $   43.38   $    .110
</TABLE>
 
    On December 17, 1997, the trading day prior to the Company's announcement of
the Tracking Stock Proposal, the closing sale price of the Common Shares was
$45.56 per share, and on March 13, 1998, the closing price of the Common Shares
was $48.56 per share, as reported on the AMEX composite transactions.
 
    On December 31, 1997, there were 4,087 record holders of the Company's
Common Shares, 98 record holders of the Company's Series A Common Shares and 173
record holders of the Preferred Shares. No public market exists for the Series A
Common Shares or Preferred Shares.
 
                                      -43-
<PAGE>
                                DIVIDEND POLICY
 
    The Company has paid cash dividends on its Common Shares since 1974. The
holders of Common Shares are currently entitled to receive the same or greater
dividends on a per share basis as are paid to the holders of Series A Common
Shares. It is the current policy of the Board to declare dividends on the Common
Shares and Series A Common Shares at the same rate per share. The Company
currently pays a quarterly dividend of $0.11 per Common Share and Series A
Common Shares on a quarterly basis, or $0.44 annually per share.
 
    Following the Distribution, subject to the restrictions on the payment of
dividends described above, the Board currently intends to establish an annual
dividend on the Telecom Group Shares in an amount equal to $0.50 per share.
Based on the expected distribution ratio of two-thirds of a Telecom Group Share
for each existing Common Share and Series A Common Share, this dividend rate
would equate to a per share annual dividend of $0.33 per existing Common Share
and Series A Common Share (the "Telecom Equivalent Dividend Rate"). Following
the Distribution, the Board also currently intends to establish an annual
dividend on the Common Shares and Series A Common Shares in an amount equal to
$0.11 per share. The total of this rate and the Telecom Equivalent Dividend Rate
is equal to $0.44 per share per annum, which is the same as the current annual
dividend rate on the existing Common Shares and Series A Common Shares. The
intent is that, immediately after the Distribution, a current holder of Common
Shares and Series A Common Shares would continue to receive an aggregate
dividend which is at least equal to the aggregate dividend which such
shareholder currently receives from the Company (not considering reductions in
shares which may occur due to the payment of cash in lieu of fractional shares
in the Distribution).
 
    With regard to the Cellular Group Shares and the Aerial Group Shares, the
Board currently intends to retain future earnings, if any, for the development
of the businesses of the Cellular Group and Aerial Group, respectively, and does
not anticipate paying dividends on the Cellular Group Shares or the Aerial Group
Shares in the foreseeable future.
 
    The Company is a legal entity separate and distinct from its various
subsidiaries. As a company with no significant operations of its own, the
principal sources of its funds are dividends or other distributions from its
operating subsidiaries, borrowings and sales of equity. The ability of U.S.
Cellular, TDS Telecom, Aerial and other subsidiaries of the Company to pay
dividends or make distributions to the Company and, accordingly, the ability of
the Company to pay dividends on any class of its common stock, will depend on
the respective earnings, financial requirements and contractual restrictions of
such subsidiaries.
 
                         SELECTED FINANCIAL INFORMATION
 
    Set forth below is certain selected financial information on a consolidated
basis for the Company and on a separate basis for each of the Cellular Group,
the Telecom Group, the Aerial Group and the TDS Group. This information is
qualified by reference to the more complete financial information set forth in
Annexes I through V of this Proxy Statement/Prospectus.
 
                                      -44-
<PAGE>
                  SELECTED CONSOLIDATED FINANCIAL INFORMATION
 
    The following table sets forth selected consolidated financial information
for the Company for each of the fiscal years in the five-year period ended
December 31, 1997. The information for each of the five years ended December 31,
1997 has been derived from the audited Consolidated Financial Statements
contained in Annex I and other financial information contained in TDS's Annual
Reports on Form 10-K for such years. See "Where You Can Find More Information."
 
<TABLE>
<CAPTION>
                                                                              YEAR ENDED OR AT DECEMBER 31,
                                                                ----------------------------------------------------------
                                                                   1997        1996        1995        1994        1993
                                                                ----------  ----------  ----------  ----------  ----------
                                                                     (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                             <C>         <C>         <C>         <C>         <C>
INCOME STATEMENT DATA:
Operating Revenues (1)........................................  $1,471,533  $1,179,857  $  942,307  $  726,036  $  553,829
Operating Income (Loss).......................................      (3,702)    153,448     131,998     108,822      69,733
Other Income..................................................     113,979     141,190     103,857      33,686      28,126
Interest Expense..............................................      89,744      42,853      50,848      41,251      37,466
Income Taxes..................................................      28,559     123,646      81,029      40,713      26,497
Net Income (Loss) Before
  Cumulative Effect of Accounting Change......................      (9,549)    128,139     103,978      60,544      33,896
Cumulative Effect of Accounting Change (2)....................      --          --          --            (723)     --
Net Income (Loss).............................................      (9,549)    128,139     103,978      59,821      33,896
Net Income (Loss) Available to Common.........................  $  (11,441) $  126,182  $  101,469  $   57,362  $   31,510
Weighted Average Common Shares (000s).........................      60,211      60,464      57,456      53,295      46,995
Earnings Per Common Share--Basic:
  Before Cumulative Effect of Accounting Change...............  $     (.19) $     2.09  $     1.77  $     1.09  $     0.67
  Net Income (Loss)...........................................  $     (.19) $     2.09  $     1.77  $     1.08  $     0.67
Earnings Per Common Share--Diluted:
  Before Cumulative Effect of Accounting Change...............  $     (.19) $     2.07  $     1.74  $     1.08  $      .67
  Net Income (Loss)...........................................  $     (.19) $     2.07  $     1.74  $     1.06  $      .67
Dividends Per Common and Series A Common Share................  $      .42  $      .40  $      .38  $      .36  $      .34
 
OTHER DATA:
Capital Expenditures..........................................  $  786,317  $  550,204  $  359,996  $  319,701  $  200,984
 
BALANCE SHEET DATA:
Cash and Cash Equivalents and Temporary Investments...........  $   75,567  $  119,297  $   80,851  $   44,566  $   73,385
Property, Plant and Equipment (Net)...........................   2,465,653   1,828,889   1,293,410   1,063,656     846,089
Total Assets..................................................   4,971,601   4,200,969   3,469,082   2,790,127   2,259,182
Notes Payable.................................................     527,587     160,537     184,320      98,608       6,309
Long-term Debt (including current portion)(3).................   1,279,034   1,018,851     894,584     562,165     537,566
Redeemable Preferred Shares (including current portion).......       1,479       1,858      15,093      25,001      27,367
Common Stockholders' Equity...................................  $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.
 
(2) Effective January 1, 1994, TDS adopted Statement of Financial Accounting
    Standards ("SFAS") 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.
 
   Effective January 1, 1993, TDS adopted SFAS 109, "Accounting for Income
    Taxes." The cumulative effect of the change on years prior to 1993 did not
    have a material effect on net income or earnings per share. Prior years'
    financial information has not been restated.
 
(3) Long-term Debt does not reflect $150 million of Company-Obligated
    Mandatorily Redeemable Preferred Securities of a Subsidiary Trust Holding
    Solely Company Subordinated Debentures, or the repayment of certain Notes
    Payable with the proceeds thereof, which occurred on February 10, 1998.
 
                                      -45-
<PAGE>
       SELECTED FINANCIAL INFORMATION OF THE UNITED STATES CELLULAR GROUP
 
    The following table sets forth selected financial information for the
Cellular Group for each of the fiscal years in the five-year period ended
December 31, 1997. The information for each of the five years ended December 31,
1997 has been derived from the audited Financial Statements contained in Annex
II and other financial information.
 
<TABLE>
<CAPTION>
                                                                              YEAR ENDED OR AT DECEMBER 31,
                                                             ---------------------------------------------------------------
                                                                1997         1996         1995         1994         1993
                                                             -----------  -----------  -----------  -----------  -----------
                                                                                 (DOLLARS IN THOUSANDS)
<S>                                                          <C>          <C>          <C>          <C>          <C>
OPERATING FINANCIAL DATA:
Operating Revenues(1)(2)...................................  $   876,965  $   680,068  $   480,316  $   327,630  $   210,344
Operating Income (Loss)....................................      129,543       87,366       42,755       17,385       (8,656)
Other Income...............................................       95,306      177,314      116,766       25,808       19,097
Interest Expense...........................................       29,362       23,111       27,287       21,883       33,190
Income Taxes...............................................       83,948      111,640       32,492        4,917        2,692
Net Income (Loss)..........................................  $   111,539  $   129,929  $    99,742  $    16,393  $   (25,441)
OTHER DATA:
Capital Expenditures.......................................  $   318,748  $   248,123  $   206,182  $   168,095  $    90,328
 
BALANCE SHEET DATA:
Cash and Cash Equivalents and Temporary Investments........  $    13,851  $    14,377  $    38,404  $     5,800  $     6,274
Property, Plant and Equipment (Net)........................      940,253      650,754      530,027      368,181      246,414
Total Assets...............................................    2,508,916    2,085,899    1,880,144    1,534,787    1,245,396
Notes Payable..............................................        1,302        1,375        1,375          637      --
Long-term Debt (including current portion).................      515,330      353,761      355,748      302,218      204,455
United States Cellular Group Equity........................  $ 1,629,320  $ 1,476,202  $ 1,329,454  $ 1,093,967  $   940,128
</TABLE>
 
- ------------
 
(1) Beginning on January 1, 1997, the Company changed its financial reporting
    presentation for certain credits given to customers on their monthly bills.
    As of that date, the Company reported the foregone revenues resulting from
    these credits as a reduction of local retail revenue. Prior to that date,
    these foregone revenues were reported as marketing and selling expense (for
    new customers) and general and administrative expense (for current
    customers). 1993-1996 amounts have been reclassified to conform to 1997
    presentation.
 
(2) Beginning on January 1, 1994, the Company changed its financial reporting
    presentation for outbound, or pass-through, roaming revenue. Pass-through
    roaming revenue is now treated as an offset to the expense charged by other
    cellular carriers, with the net amount included in system operations
    expense. 1993 amounts have been reclassified to conform to 1994
    presentation.
 
                                      -46-
<PAGE>
       SELECTED FINANCIAL INFORMATION OF THE TDS TELECOMMUNICATIONS GROUP
 
    The following table sets forth selected financial information for the
Telecom Group for each of the fiscal years in the five-year period ended
December 31, 1997. The information for each of the five years ended December 31,
1997 has been derived from the audited Financial Statements contained in Annex
III and other financial information.
 
<TABLE>
<CAPTION>
                                                                              YEAR ENDED OR AT DECEMBER 31,
                                                                ----------------------------------------------------------
                                                                   1997        1996        1995        1994        1993
                                                                ----------  ----------  ----------  ----------  ----------
                                                                                  (DOLLARS IN THOUSANDS)
<S>                                                             <C>         <C>         <C>         <C>         <C>
INCOME STATEMENT DATA
Operating Revenue.............................................  $  444,203  $  395,602  $  354,841  $  306,341  $  268,122
Operating Income..............................................      98,613     102,708      98,240      91,605      78,585
Other Income..................................................      17,529      20,243      20,794      15,254      10,223
Interest Expense..............................................      63,151      61,572      60,648      50,676      47,016
Income Taxes..................................................      22,603      25,685      24,231      22,806      16,658
Net Income Before Cumulative Effect of Accounting Change......      30,388      35,694      34,155      33,377      25,134
Cumulative Effect of Accounting Changes (1)...................      --          --          --            (723)     --
Net Income....................................................  $   30,388  $   35,694  $   34,155  $   32,654  $   25,134
 
OTHER DATA
Capital Expenditures..........................................  $  151,460  $  144,440  $  104,372  $  115,483  $   80,818
 
BALANCE SHEET DATA
Cash and Cash Equivalents
  and Temporary Investments...................................  $  206,239  $  222,918  $  215,979  $  163,267  $  159,699
PP&E--Net.....................................................     830,767     769,361     659,339     611,450     524,322
Total Assets..................................................   1,406,048   1,352,929   1,228,232   1,138,242     959,582
Notes Payable.................................................      28,181      25,039      15,784      15,059      12,080
Long-term debt (including current portion)....................     563,374     560,844     536,379     492,946     470,257
Long-term debt--affiliated....................................     255,302     239,538     233,176     224,742     228,540
TDS Telecommunications Group Equity...........................  $  383,759  $  343,816  $  265,387  $  228,800  $  107,298
</TABLE>
 
- ------------
 
(1) Effective January 1, 1994, TDS adopted Statement of Financial Accounting
    Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment
    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.
 
                                      -47-
<PAGE>
       SELECTED FINANCIAL INFORMATION OF THE AERIAL COMMUNICATIONS GROUP
 
    The following table sets forth selected financial information for the Aerial
Group for each of the fiscal years in the five-year period ended December 31,
1997. The information for each of the five years ended December 31, 1997 has
been derived from the audited Financial Statements contained in Annex IV and
other financial information.
 
<TABLE>
<CAPTION>
                                                                              YEAR ENDED OR AT DECEMBER 31,
                                                                ----------------------------------------------------------
                                                                   1997        1996        1995        1994        1993
                                                                ----------  ----------  ----------  ----------  ----------
                                                                                  (DOLLARS IN THOUSANDS)
<S>                                                             <C>         <C>         <C>         <C>         <C>
OPERATING FINANCIAL DATA:
Operating Revenues............................................  $   55,952  $   --      $   --      $   --      $   --
Operating (Loss)..............................................    (196,551)     --          --          --          --
Investment and Other Income (Expense).........................     (21,635)    (36,026)     (7,513)     (1,975)        (63)
Interest Expense, Net.........................................      27,065       2,762       1,051          50          40
Income Tax Expense (Benefit)..................................       1,806        (867)     (2,096)       (742)        (36)
Net (Loss)....................................................  $ (247,057) $  (37,921) $   (6,468) $   (1,283) $      (67)
 
BALANCE SHEET DATA:
Cash and Cash Equivalents.....................................  $    5,012  $   35,284  $      261  $       10  $        4
Property, Plant and Equipment (Net)...........................     604,104     322,723      12,087      --          --
Investment in PCS Licenses (Net)..............................     297,043     304,354     305,818      20,401      --
Total Assets..................................................     960,648     672,827     360,444      21,320         512
Long-term Debt (Revolving Credit Agreement--TDS)..............     448,234      --          60,238      22,659         650
Long-term Debt................................................     196,439     103,743      --          --          --
Aerial Communications Group Equity (Deficit)..................     192,427     437,785     281,282      (1,444)       (161)
Capital Expenditures..........................................  $  274,709  $  112,940  $   12,134  $   --      $   --
</TABLE>
 
                                      -48-
<PAGE>
                SELECTED FINANCIAL INFORMATION OF THE TDS GROUP
 
    The following table sets forth selected financial information for the TDS
Group for each of the fiscal years in the five-year period ended December 31,
1997. The information for each of the five years ended December 31, 1997 has
been derived from the audited Financial Statements contained in Annex V and
other financial information.
 
<TABLE>
<CAPTION>
                                                                              YEAR ENDED OR AT DECEMBER 31,
                                                                ----------------------------------------------------------
                                                                   1997        1996        1995        1994        1993
                                                                ----------  ----------  ----------  ----------  ----------
                                                                                  (DOLLARS IN THOUSANDS)
<S>                                                             <C>         <C>         <C>         <C>         <C>
INCOME STATEMENT DATA:
Net Income....................................................  $   52,968  $   47,540  $   22,691  $   26,052  $   30,972
Net Income Available to Common and Series A Common Shares.....      51,076      45,583      20,182      23,594      28,586
 
OTHER DATA:
Cash and Cash Equivalents and Temporary Investments...........  $   11,990  $   43,798  $   13,487  $    7,194  $   30,527
Working Capital...............................................    (611,596)   (256,049)   (362,086)   (231,858)    (84,894)
Property, Plant and Equipment, net............................      90,528      86,051      91,693      84,120      75,485
Total Assets..................................................   1,519,829   1,079,975   1,006,728   1,038,484     802,280
Notes Payable-Affiliates......................................     165,686     201,641     186,786     128,530     123,511
Notes Payable-Other(2)........................................     530,175     159,162     182,625      97,724       6,059
TDS Group Equity..............................................     602,471     642,005     509,421     683,783     613,607
Capital Expenditures..........................................  $   41,400  $   44,560  $   36,905  $   37,737  $   29,267
</TABLE>
 
- ------------
 
(1) The TDS Group includes Telephone and Data Systems, Inc. and all of its
    subsidiaries and their respective properties and assets other than (except
    with respect to the Retained Interests): United States Cellular and its
    subsidiaries (which are included in the United States Cellular Group), TDS
    Telecom and its subsidiaries (which are included in the TDS
    Telecommunications Group), Aerial and its subsidiaries (which are included
    in the Aerial Communications Group) and any other assets or liabilities or
    subsidiaries of Telephone and Data Systems, Inc. attributed to the United
    States Cellular Group, the TDS Telecommunications Group or the Aerial
    Communications Group. The TDS Group reflects primarily the TDS Group's
    Retained Interest in the United States Cellular Group, the TDS Telecom Group
    and the Aerial Group, the Corporate operations (including corporate
    management, intercompany financing, cash management and intercompany income
    tax allocation activities) and the operations of American Paging, Inc., an
    81.9%-owned subsidiary.
    Under the Tracking Stock Proposal, prior to the Telecom Public Offering, the
    U.S. Cellular Merger, the Aerial Merger and the Distribution, the TDS Group
    would have an approximately 81% Retained Interest in the Cellular Group, a
    100% Retained Interest in the TDS Telecom Group, and an approximately 83%
    interest in the Aerial Group. Following completion of the Tracking Stock
    Proposal, it is currently anticipated that the TDS Group would have an
    approximately 20% Retained Interest in each of the Groups. For purposes of
    the TDS Group financial statements, the TDS Group's Retained Interest in the
    equity value of the Groups has been reflected on "Investments In Affiliated
    Groups." Similarly, the net income or loss of the Groups attributable to the
    TDS Group Retained Interest is reflected as "Equity in Net Income of
    Cellular Group, Equity in Net Income of Telecom Group and Equity in Net
    (Loss) of Aerial Group" in the Statements of Operations.
 
(2) Does not reflect the repayment of $150 million Notes Payable--Other on
    February 10, 1998, related to the issuance of Company-Obligated Mandatorily
    Redeemable Preferred Securities of a Subsidiary Trust Holding Solely Company
    Subordinated Debentures.
 
                                      -49-
<PAGE>
                                   PROPOSAL 1
                            TRACKING STOCK PROPOSAL
 
GENERAL
 
    The Tracking Stock Proposal would, among other things, create three new
classes of common stock which are intended to separately reflect the performance
of the Company's cellular telephone, landline telephone and personal
communications services businesses, and change the state of incorporation of the
Company from Iowa to Delaware. Capitalized terms used in the following
description of the Tracking Stock Proposal and not otherwise defined have the
meanings ascribed to them elsewhere in this Proxy Statement/Prospectus. See "--
Certain Definitions" and Exhibit G--Index of Certain Defined Terms.
 
    Under the Tracking Stock Proposal, you are being asked to approve the Merger
Agreement between the Company and TDS Delaware, which contemplates the Merger of
the Company with and into TDS Delaware, with TDS Delaware continuing as the
surviving corporation. A copy of the Merger Agreement is attached hereto as
EXHIBIT A. TDS Delaware has been organized for the sole purpose of effecting the
Merger. For purposes of the following discussion, the Company prior to the
effectiveness of the Merger (the "Effective Time") is hereinafter sometimes
referred to as "TDS Iowa." At the Effective Time, the separate existence of TDS
Iowa will cease and TDS Delaware will succeed to the business of TDS Iowa, and
TDS will cease to be subject to the Iowa Business Corporation Act ("IBCA") and
become subject to the Delaware General Corporation Law ("DGCL").
 
    If the Tracking Stock Proposal is approved, immediately prior to the
Effective Time, the Certificate of Incorporation of TDS Delaware would be
amended and restated (the "Restated Certificate"). A copy of the proposed
Restated Certificate is attached hereto as EXHIBIT B. The Restated Certificate
would, among other things, authorize 475,000,000 shares of capital stock, and
establish the rights, limitations and preferences of such shares. The Restated
Certificate will authorize 326,664 Preferred Shares, $.01 par value ("Delaware
Preferred Shares"), representing the number of issued Preferred Shares of TDS
Iowa, and reclassify the 4,673,336 authorized but unissued Preferred Shares of
TDS Iowa as Undesignated Shares, par value $.01 per share ("Undesignated
Shares"). The authorized shares of capital stock would also include 470,000,000
shares of common stock, to consist of 100,000,000 Common Shares, $.01 par value
("Delaware Common Shares"); 25,000,000 Series A Common Shares, $.01 par value
("Delaware Series A Common Shares"); 20,000,000 Special Common Shares, $.01 par
value ("Special Common Shares"); 140,000,000 Cellular Group Shares, $.01 par
value; 90,000,000 Telecom Group Shares, $.01 par value; and 95,000,000 Aerial
Group Shares, $.01 par value.
 
    The Cellular Group Shares, when issued, are intended to reflect the separate
performance of the Cellular Group, which consists of the Company's interest in
U.S. Cellular, a subsidiary of the Company which operates and invests in
cellular telephone companies and properties; the Telecom Group Shares, when
issued, are intended to reflect the separate performance of the Telecom Group,
which consists of the Company's interest in TDS Telecom, a subsidiary of the
Company which operates landline telephone companies and includes the notional
allocation of certain TDS debt; and the Aerial Group Shares, when issued, are
intended to reflect the separate performance of the Aerial Group, which consists
of the Company's interest in Aerial, a subsidiary of the Company which is
developing broadband personal communications services.
 
    Except as provided below under "Dissenting Shareholders' Rights," at the
Effective Time, by virtue of the Merger, each of the Common Shares, $1.00 par
value, of TDS Iowa consists of ("Iowa Common Shares") issued and outstanding
immediately prior to the Effective Time will be converted into one fully paid
Delaware Common Share; each of the Series A Common Shares, $1.00 par value, of
TDS Iowa ("Iowa Series A Common Shares") issued and outstanding immediately
prior to the Effective Time will be converted into one fully paid Delaware
Series A Common Share, and each of the Preferred Shares of TDS Iowa, without par
value ("Iowa Preferred Shares"), issued and outstanding immediately prior to the
Effective Time will be converted into one fully paid share of a corresponding
class of Delaware Preferred Shares. At the Effective Time, certificates which
immediately prior to the Effective Time represented Iowa Common Shares, Iowa
Series A Common Shares or Iowa Preferred Shares ("Iowa Shares"), other than
certificates held by holders of Iowa Shares who have properly taken action to
perfect dissenters' rights, will be deemed for all corporate purposes to
represent the number of Delaware Common Shares, Delaware Series A Common Shares
or Delaware Preferred Shares ("Delaware Shares"), into which such Iowa Shares
shall have been converted.
 
    IT WILL NOT BE NECESSARY FOR YOU TO EXCHANGE YOUR EXISTING STOCK
CERTIFICATES REPRESENTING IOWA SHARES FOR STOCK CERTIFICATES REPRESENTING
DELAWARE SHARES. YOU SHOULD RETAIN ALL CERTIFICATES WHICH REPRESENT SHARES OF
THE COMPANY SINCE SUCH
 
                                      -50-
<PAGE>
CERTIFICATES WILL CONTINUE TO REPRESENT SHARES OF THE SAME CLASS OR SERIES OF
TDS DELAWARE FOLLOWING THE MERGER.
 
    The reincorporation of the Company in Delaware will not result in any change
in the business, management, board of directors, assets, liabilities or net
worth of the Company, and the business of the Company will continue to be
managed from its corporate headquarters in Chicago, Illinois. It will, however,
allow the Company to benefit from Delaware's well-developed corporate laws,
which are periodically updated and revised to meet changing business needs.
Delaware courts have developed considerable expertise in dealing with corporate
issues and a substantial body of case law has been established construing
Delaware law and establishing public policies with respect to Delaware
corporations. As a consequence, a greater measure of predictability is possible
in Delaware with respect to corporate legal affairs than is available in other
states. In addition, the Company believes that Delaware law will offer clearer
guidance with respect to legal issues that may arise as a result of the
existence of separate classes of Tracking Stock.
 
    There will be no change in control of the Company as a result of the Merger
or the related Transactions. After the Merger, the TDS Voting Trust will
continue to control the election of a majority of the Board and a majority of
the voting power of TDS Delaware. However, if the Tracking Stock Proposal is
approved, the number of directors that the TDS Voting Trust will elect will
decrease by one director, and the number of directors that will be elected by
the voting group which includes the holders of Preferred Shares issued before
October 31, 1981 and Common Shares will increase by one director.
 
    The Merger Agreement may be amended prior to the Effective Time, either
before or after shareholder approval thereof; provided, however, that the Merger
Agreement may not be amended after such shareholder approval if such amendment
would (i) alter or change the amount or kind of shares or other consideration to
be received by shareholders in the Merger, (ii) alter or change any of the terms
and conditions of the Merger Agreement if such alteration or change would
adversely affect the shareholders or (iii) otherwise violate applicable law.
 
    If the Tracking Stock Proposal is approved by the shareholders, the Merger
will become effective following the filing of the Certificate of Merger with the
Secretary of State of Delaware and Articles of Merger with the Secretary of
State of Iowa. Subject to the receipt of all necessary regulatory consents and
approvals, as discussed below, it is anticipated that this will take place
promptly after the Special Meeting. However, the Merger Agreement provides that
the Merger may be abandoned by the Board prior to the Effective Time, either
before or after shareholder approval.
 
    Shareholders of the Company whose shares are not voted in favor of the
Tracking Stock Proposal and who otherwise duly take all action required by
statute will have statutory dissenter's rights under Iowa law. See "Dissenting
Shareholders' Rights." If, in the judgment of the Board, an excessive number of
shareholders assert dissenters' rights, it is contemplated that the Board may
abandon the Tracking Stock Proposal, even if it is approved by shareholders.
 
THE TRANSACTIONS
 
    Subject to the approval of the Tracking Stock Proposal by shareholders and
the effectiveness of the Merger, the Board intends to effect the Transactions
discussed below. The Transactions will not require approval by shareholders of
the Company. The Transactions are subject to various conditions and there can be
no assurance that all or any of the Transactions will take place or that they
will take place in the manner currently contemplated.
 
    TELECOM PUBLIC OFFERING.  Promptly after approval of the Tracking Stock
Proposal by shareholders and the effectiveness of the Merger, the Company
intends to offer and sell Telecom Group Shares in a public offering for cash,
and to allocate the net proceeds thereof to the Telecom Group. The Company
intends to file with the SEC a registration statement on Form S-3 relating to
the registration of between 10,000,000 and 17,000,000 Telecom Group Shares. This
offering is expected to commence promptly after the approval of the Tracking
Stock Proposal by shareholders and the effectiveness of the Merger, subject to
prevailing market conditions and other factors. See "--The Telecom Group."
 
    U.S. CELLULAR MERGER.  The Company has made an offer to issue Cellular Group
Shares in exchange for all of the Common Shares of U.S. Cellular which are not
owned by the Company pursuant to a merger between a subsidiary of the Company
and U.S. Cellular. The TDS offer to the Board of Directors of U.S. Cellular
proposes to exchange 1.14613 Cellular Group Shares for each issued Common Share
of U.S. Cellular (other than shares held by the Company) in the U.S. Cellular
Merger. This merger is subject to various conditions, including approval of the
Tracking Stock Proposal by shareholders of the Company, effectiveness of the
Merger, the negotiation of the other
 
                                      -51-
<PAGE>
terms of a merger agreement between the Company and U.S. Cellular, approval of
the U.S. Cellular Merger by a special committee of the board of directors, the
full board of directors and the shareholders of U.S. Cellular, and final
approval by the Board.
 
    The Common Shares of U.S. Cellular are currently traded on the AMEX under
the symbol "USM." If the U.S. Cellular Merger is consummated as contemplated,
U.S. Cellular would become a wholly-owned subsidiary of the Company and such
Common Shares of U.S. Cellular would be delisted from the AMEX. In the U.S.
Cellular Merger, holders of Common Shares of U.S. Cellular would receive
Cellular Group Shares of TDS, which would be listed on the AMEX. If the U.S.
Cellular Merger does not take place for any reason, U.S. Cellular may not become
a wholly-owned subsidiary of the Company and the Common Shares of U.S. Cellular
may continue to be publicly traded. Alternatively, although the Company has no
current plans or intentions to do so, the Company may consider acquiring such
Common Shares of U.S. Cellular in an exchange offer for Cellular Group Shares or
other securities, in a tender offer for cash or through open market or private
purchases, or taking other action to acquire some or all of the shares of U.S.
Cellular not owned by the Company. See "--The Cellular Group."
 
    AERIAL MERGER.  The Company has made an offer to issue Aerial Group Shares
in exchange for all of the Common Shares of Aerial which are not owned by the
Company pursuant to a merger between a subsidiary of the Company and Aerial. The
TDS offer to the Board of Directors of Aerial proposes to exchange .91485 Aerial
Group Shares for each issued Common Share of Aerial (other than shares held by
the Company) in the Aerial Merger. This merger is subject to various conditions,
including approval of the Tracking Stock Proposal by shareholders of the
Company, effectiveness of the Merger, the negotiation of the other terms of a
merger agreement between the Company and Aerial, approval of the Aerial Merger
by a special committee of the board of directors, the full board of directors
and the shareholders of Aerial, and final approval by the Board.
 
    The Common Shares of Aerial are currently traded on the Nasdaq National
Market under the symbol "AERL." If the Aerial Merger is consummated as
contemplated, Aerial would become a wholly-owned subsidiary of the Company and
such Common Shares of Aerial would be delisted from the Nasdaq National Market.
In the Aerial Merger, holders of Common Shares of Aerial would receive Aerial
Group Shares of TDS, which would be listed on the AMEX. If the Aerial Merger
does not take place for any reason, Aerial may not become a wholly-owned
subsidiary of the Company and the Common Shares of Aerial may continue to be
publicly traded. Alternatively, although the Company has no current plans or
intentions to do so, the Company may consider acquiring such Common Shares of
Aerial in an exchange offer for Aerial Group Shares or other securities, in a
tender offer for cash or through open market or private purchases, or taking
other action to acquire some or all of the shares of Aerial not owned by the
Company. See "--The Aerial Group."
 
    THE DISTRIBUTION.  After the completion of the Merger, the Telecom Public
Offering, the U.S. Cellular Merger and the Aerial Merger, the Board intends to
authorize the Distribution of Cellular Group Shares, Telecom Group Shares and
Aerial Group Shares in the form of a stock dividend to holders of Series A
Common Shares and Common Shares. It is currently expected that the Distribution
would take place in June 1998 or later. The Board intends to distribute one
Cellular Group Share, two-thirds of a Telecom Group Share and two-thirds of an
Aerial Group Share with respect to each Common Share and Series A Common Share
outstanding on the record date for the Distribution. The Distribution will be
made to all shareholders in proportion to the number of Common Shares and Series
A Common Shares owned on the Distribution record date. Although the Board
presently intends to make the Distribution if the Merger and the other
Transactions take place, the Board reserves the right not to effect all or any
part of the Distribution even if the Tracking Stock Proposal is approved by the
shareholders and the Merger and the other Transactions take place. In addition,
the Board reserves the right to effect all or any part of the Distribution
regardless of whether or not such other Transactions have taken place.
 
    No fractional shares of any of the Tracking Stocks will be issued or
distributed as part of the Distribution, except as discussed below under "--
Dividend Reinvestment Plans." If the number of shares of a particular Tracking
Stock that a holder of Common Shares or Series A Common Shares is entitled to
receive as part of the Distribution should include a fraction of a whole share,
the Company will pay such holder the cash equivalent of such fractional share.
As soon as practicable after the Distribution, Harris Trust and Savings Bank,
the transfer agent for TDS, will mail to each record holder of Common Shares or
Series A Common Shares on the Distribution record date three certificates, each
representing the number of whole shares of each Tracking Stock Group, as the
case may be, to which such holder is entitled and a check for any fractional
shares.
 
    Because the Distribution is to be made to all shareholders of common stock
in proportion to the number of Common Shares and Series A Common Shares owned on
the Distribution record date by each shareholder, the relative ownership
interest and voting power of each holder of whole Common Shares and Series A
Common
 
                                      -52-
<PAGE>
Shares will be substantially the same immediately after effectiveness of the
Merger and the Distribution as it was immediately prior thereto, except with
respect to the election of one director. With respect to the election of
directors, the holders of Preferred Shares issued after October 31, 1981 and
Series A Common Shares as such will elect one fewer director, and the holders of
Preferred Shares issued before October 31, 1981 and Common Shares will vote in
the election of one additional director together with holders of shares of
Tracking Stock.
 
    The shares of Tracking Stock which would be issued in the Distribution would
represent an Outstanding Interest of approximately 75% in each Tracking Group.
When considering the shares of Tracking Stock which are contemplated to be
issued in the Telecom Public Offering, the U.S. Cellular Merger and the Aerial
Merger, as well as the Distribution, the Outstanding Interest would initially
represent in the aggregate an approximately 80% interest in each Tracking Group.
Upon the completion of all of the Transactions as contemplated, the TDS Group
would have a Retained Interest of approximately 20% in each Tracking Group,
along with all other interests held by the Company. The common equity interests
in the TDS Group would be represented by the Delaware Series A Common Shares and
the Delaware Common Shares.
 
    The distribution ratios for the Cellular Group Shares, the Telecom Group
Shares and the Aerial Group Shares were determined by the Board in consultation
with the Financial Advisors, and are based upon the desired initial trading
ranges of such shares and other factors. The amount of the Retained Interest to
be initially retained by the TDS Group with respect to each of the Tracking
Groups was also established by the Board in consultation with the Financial
Advisors, considering, among other factors, the desired initial trading range of
the Common Shares.
 
    Since the Telecom Public Offering, the U.S. Cellular Merger and the Aerial
Merger are anticipated to precede the Distribution, after such other
Transactions but before the Distribution, the Retained Interest of the TDS Group
in each Tracking Group would initially be approximately 80% for the Telecom
Group, 81% for the Cellular Group and 83% for the Aerial Group. Assuming
completion of the Transactions as contemplated, approximately 20% of the common
equity of the Company attributable to the Telecom Group would be represented by
the Telecom Group Shares issued in the Telecom Public Offering, 19% of the
common equity of the Company attributable to the Cellular Group would be
represented by the Cellular Group Shares issued in the U.S. Cellular Merger, and
17% of the common equity of the Company attributable to the Aerial Group would
be represented by the Aerial Group Shares issued in the Aerial Merger.
 
    In addition to the shares of each of the Tracking Stocks to be issued in the
Transactions, shares of each of the Tracking Stocks are being reserved for
issuance upon conversion, exercise or exchange subsequent to the Distribution of
certain outstanding convertible securities issued by the Company, and certain
options to purchase Common Shares that are outstanding under the Company's
existing stock incentive plans. All such convertible securities and options will
be adjusted upon the Distribution such that the security or option is
convertible, or exercisable, as the case may be, into Common Shares and shares
of each of the Cellular Group, Telecom Group and Aerial Group as if such
convertible security, or option, was converted or exercised, as the case may be,
immediately prior to the Distribution.
 
    The following table shows the number of shares of capital stock of TDS which
would be issued in the Merger (based on shares outstanding as of November 30,
1997), the number of shares of TDS capital stock which would be issued if all of
the Transactions are completed as contemplated, the number of shares which are
expected to be reserved for issuance for certain purposes and the number of
authorized shares which would be available for other purposes.
<TABLE>
<CAPTION>
                                                                                       SHARES
                                                                                     ISSUABLE TO   AUTHORIZED    AVAILABLE
                                           ISSUED IN    ISSUED IN   ISSUED IN OTHER     THIRD         FOR           FOR
                                            MERGER     DISTRIBUTION TRANSACTIONS(2)  PARTIES(3)   ISSUANCE(4)    ISSUANCE
                                          -----------  -----------  ---------------  -----------  ------------  -----------
<S>                                       <C>          <C>          <C>              <C>          <C>           <C>
Preferred Shares........................      296,664      --             --              30,000       --           --
Undesignated Shares.....................      --           --             --             --            --         4,673,336
Common Shares...........................   53,878,129(1)     --           --           2,111,463    6,048,845    37,961,563
Series A Common Shares..................    6,933,233      --             --             --           175,567    17,891,200
Special Common Shares...................      --           --             --             --            --        20,000,000
  Total TDS Group Shares................   60,811,362      --             --           2,111,463    6,224,412    75,852,763
Cellular Group..........................      --       60,811,362       18,897,187    10,912,966    7,291,826    23,927,668
Telecom Group...........................      --       40,540,908       13,500,000     1,407,642    5,913,809    16,531,647
Aerial Group............................      --       40,540,908       11,453,996     2,779,917    5,116,534    23,002,651
 
<CAPTION>
 
                                           RETAINED       TOTAL
                                          INTEREST(5)   AUTHORIZED
                                          -----------  ------------
<S>                                       <C>          <C>
Preferred Shares........................      --            326,664
Undesignated Shares.....................      --          4,673,336
Common Shares...........................      --        100,000,000
Series A Common Shares..................      --         25,000,000
Special Common Shares...................      --         20,000,000
  Total TDS Group Shares................      --        145,000,000
Cellular Group..........................   18,158,991   140,000,000
Telecom Group...........................   12,105,994    90,000,000
Aerial Group............................   12,105,994    95,000,000
</TABLE>
 
- ------------
 
(1) Includes 484,012 Common Shares held by a subsidiary of the Company.
 
(2) The other Transactions include the U.S. Cellular Merger, the Telecom Public
    Offering and the Aerial Merger. See "--The Cellular Group," "--The Telecom
    Group" and "--The Aerial Group" for a discussion of how these numbers were
    determined.
 
                                      -53-
<PAGE>
(3) Includes shares issuable as Committed Acquisition Shares and shares issuable
    pursuant to the Pre-Distribution Convertible Securities by TDS, and shares
    which would become issuable as a result of the U.S. Cellular Merger and the
    Aerial Merger. See "--Certain Definitions."
 
(4) For further information with respect to the shares authorized for issuance,
    see "--The Cellular Group," "--The Telecom Group," "--The Aerial Group" and
    "--The TDS Group."
 
(5) Net of shares issuable from Retained Interest.
 
BACKGROUND AND REASONS FOR THE TRACKING STOCK PROPOSAL AND RELATED TRANSACTIONS;
RECOMMENDATION OF THE BOARD
 
    THE BOARD HAS UNANIMOUSLY APPROVED THE TRACKING STOCK PROPOSAL AND BELIEVES
ITS ADOPTION TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS.
ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
TRACKING STOCK PROPOSAL.
 
    TDS's management and Board have extensively studied the Tracking Stock
Proposal and the Transactions, and have consulted with financial and legal
advisors of TDS with respect to the advisability and terms of such proposal and
the related Transactions. The Board, including directors who are not trustees or
beneficiaries of the TDS Voting Trust, and directors who are not officers of
TDS, has unanimously approved the adoption of the Tracking Stock Proposal
 
    BACKGROUND.  In recent years, a number of publicly held companies have
adopted tracking stock capital structures. The Board and TDS's management have,
for several years, considered various alternatives regarding TDS's capital
structure as a means to enhance shareholder value, including the possibility of
(i) a spin-off to the Company's shareholders of all or part of one or more of
its subsidiaries, (ii) public offerings of a portion of the Company's interests
in one or more of its subsidiaries and (iii) the issuance of one or more
tracking stocks which would be defined by reference to the performance of one or
more of its subsidiaries. These deliberations resulted from the Board's and
management's concern that the historical price performance of the Common Shares
may not adequately reflect the value of the Company. The Board and management
believed that the Company was being undervalued by the capital markets, in part
because the capital markets focused primarily upon certain businesses and did
not give full value to certain other businesses held by the Company. The Board
believed that overall shareholder value could be enhanced if there was increased
recognition in the investment community of the Company's subsidiaries and their
individual lines of business and the value of the assets used in such
businesses.
 
    Over the course of several months in 1997, management met with
representatives of several investment banking firms and considered alternatives
for enhancing shareholder value. Several investment banking firms outlined
proposals involving tracking stocks. Following these meetings, management
engaged the Financial Advisors and worked with such firms and with legal
advisors in creating the preliminary terms of the Tracking Stock Proposal. The
Telecom Public Offering, the U.S. Cellular Merger, the Aerial Merger and the
Distributions were also conceived and developed during the course of the
discussions with the Financial Advisors and legal advisors. The terms of the
Tracking Stock Proposal and the Transactions were further refined and presented
to the Board by management in October, 1997.
 
    On October 31, 1997 and November 17, 1997, the Board of TDS, including
members of TDS's management, heard presentations from the Financial Advisors,
and considered and discussed the proposal to create three new classes of
Tracking Stock--the Cellular Group Shares, the Telecom Group Shares and the
Aerial Group Shares--as a means to enhance shareholder value as well as the
financial flexibility of TDS and its shareholders. The possibility of the
Telecom Public Offering, the U.S. Cellular Merger and the Aerial Merger were
also discussed. The terms, likely benefits and possible disadvantages of the
Tracking Stock Proposal and the related Transactions were discussed. Following
these discussions, the Board authorized TDS management to proceed with
finalizing the terms of the Tracking Stock Proposal and the related
Transactions, with the assistance of the Financial Advisors and legal advisors,
and to present such terms to the Board at a subsequent meeting.
 
    Following these meetings, the Company's management, the Financial Advisors
and legal advisors developed the terms of the Tracking Stock Proposal and
related Transactions and proposed them to the Board. At meetings of the Board on
December 15 and December 17, 1997, the directors discussed the proposed terms of
the Tracking Stock Proposal and the related Transactions. After discussion of
the Tracking Stock Proposal and related Transactions, on December 17, 1997, the
Board determined that the Tracking Stock Proposal was the best alternative
available to TDS to enhance shareholder value and that it was in the best
interests of the Company and its shareholders. The Board, including directors
who are not trustees or beneficiaries of the TDS Voting Trust, and
 
                                      -54-
<PAGE>
directors who are not officers of TDS, unanimously approved the Tracking Stock
Proposal and directed management to submit the proposal to the Company's
shareholders at the Special Meeting. The Board also authorized the Telecom
Public Offering, subject to approval of the Tracking Stock Proposal by the
shareholders and the effectiveness of the Merger, and certain other conditions.
In addition, the Board authorized management to make offers to U.S. Cellular and
Aerial to acquire the Common Shares of U.S. Cellular and Aerial, respectively,
which are not held by the Company pursuant to mergers between each of U.S.
Cellular and Aerial and wholly-owned subsidiaries of the Company, subject to
certain conditions, including approval by TDS shareholders of the Tracking Stock
Proposal, the effectiveness of the Merger, the negotiation of the other terms of
the merger agreements relating to such mergers and final TDS Board approval. The
U.S. Cellular Merger and Aerial Merger are also subject to approval by the
boards of directors and shareholders of U.S. Cellular and Aerial, respectively.
 
    REASONS.  The Board believes that the division of the Company's interests in
its principal businesses into the Tracking Groups would enable the Company to
benefit in a variety of ways described below, while also maintaining the
benefits of remaining a single entity, and would facilitate increased investor
understanding of the different businesses. The Board believes that a capital
structure which includes the three Tracking Stocks offers a number of potential
benefits which outweigh its disadvantages, as described below, and that adoption
of the Tracking Stock Proposal and the completion of the related Transactions is
in the best interests of TDS and all of its shareholders. The Board did not find
it practicable to, and did not, quantify or otherwise assign relative weights to
the advantages or disadvantages of the proposal, although the following factors
were considered important in its decision.
 
        GREATER MARKET RECOGNITION.  The Tracking Stock Proposal is intended to
    result in greater market recognition of the value (individually and
    collectively) of the Company and the Company's three principal business
    groups, thereby enhancing shareholder value over the long term. The Board of
    Directors believes that overall shareholder value would be enhanced if there
    was increased recognition in the investment community of the Company's
    individual lines of business and the value of the assets used in such
    businesses. Additionally, a public market for each of TDS's three principal
    business groups should make it easier for the capital markets to understand
    and value the Company's businesses and assets. The Company should also be
    able to reduce its cost of capital because of the improved equity valuation
    that should result from the implementation of the Tracking Stock Proposal.
 
        INCREASED LIQUIDITY FOR U.S. CELLULAR AND AERIAL.  The Board considered
    it important that the Tracking Stock Proposal would permit the Company to
    make offers to acquire the publicly-traded common equity of the Company
    attributable to U.S. Cellular and Aerial, subject to the conditions
    discussed above. Management believes that the Distribution of Cellular Group
    Shares and Aerial Group Shares would serve to increase the liquidity of the
    publicly-traded equity related to U.S. Cellular and Aerial. In order to
    maintain the benefits of consolidating U.S. Cellular and Aerial with TDS for
    tax purposes, including the preservation of the ability to spin-off such
    companies on a tax-free basis to shareholders, the publicly-traded Common
    Shares of U.S. Cellular and Aerial have been limited to less than 20% of the
    common equity of U.S. Cellular and Aerial. Management believes that the
    liquidity for U.S. Cellular and Aerial has been below the liquidity for many
    of their respective cellular and PCS peers and that this may have adversely
    affected the public market value of their equity. The Board has been advised
    by the Financial Advisors that the liquidity of the Cellular Group Shares
    and Aerial Group Shares should be superior to that of the Common Shares of
    U.S. Cellular and Aerial. Since the Cellular Group Shares and Aerial Group
    Shares would represent approximately 80% of the Company's equity interest in
    U.S. Cellular and Aerial (assuming the completion of the Transactions as
    contemplated), as compared to less than 20% currently, the Cellular Group
    Shares and the Aerial Group Shares should have greater liquidity than the
    existing U.S. Cellular and Aerial Common Shares. The Financial Advisors have
    advised the Company that this increased liquidity may increase the valuation
    of the Cellular Group Shares and Aerial Group Shares as compared to the
    recent public market values of the Common Shares of U.S. Cellular and
    Aerial.
 
        FINANCING FLEXIBILITY.  The Tracking Stock Proposal should provide the
    Company with greater flexibility in raising capital and making acquisitions,
    with equity securities specifically related to the Tracking Groups. Because
    the Board does not expect to declare a dividend on the Cellular Group Shares
    or Aerial Group Shares for the foreseeable future, any issuance of such
    stock, in connection with an acquisition or otherwise, would not reduce cash
    flow that would otherwise be available for capital investments. The Tracking
    Stock Proposal would provide the Company greater flexibility with regard to
    raising capital or making acquisitions for a Tracking Group's businesses,
    including strategic partnering transactions, independent of the other Groups
    by using equity securities specifically related to one of the Tracking
    Groups. The Tracking Stocks may also be used, rather than Common Shares, for
    TDS's employee stock purchase plans, stock option plans and other employee
    benefit plans. The listing of the Tracking Stocks on the AMEX will create a
    trading market, the
 
                                      -55-
<PAGE>
    existence of which would be an important factor in assessing the value of
    such stock in connection with and facilitating any such acquisition,
    financing or employee plan.
 
        SHAREHOLDER FLEXIBILITY.  The issuance and sale of the Tracking Stocks
    would also provide shareholders with the opportunity to continue to invest
    in all of the TDS businesses through the TDS Group or any one or more of the
    Tracking Groups individually, depending upon their investment objectives.
    While investors currently have the opportunity to invest directly in U.S.
    Cellular or Aerial, the Telecom Group Shares would offer investors the
    opportunity to separately participate in the performance of TDS Telecom, as
    well as U.S. Cellular and Aerial. The Tracking Stock Proposal creates
    investment vehicles that meet the requirements of distinct investor
    groups--those looking for yield and income of a relatively mature business,
    in the case of the Telecom Group Shares; those looking for the growth
    potential of a less mature business, in the case of Cellular Group Shares;
    those looking to capitalize on the possible opportunities offered by new
    technologies, in the case of the Aerial Group Shares; and those interested
    in owning an interest in a diversified telecommunications company, in the
    case of the Common Shares--which should encourage proper valuation of the
    assets in each of the Groups.
 
        CONSOLIDATED ENTERPRISE.  The Tracking Stock Proposal will retain for
    the Company the advantages of doing business as a single company. As part of
    a single entity, each Group would be in a position to benefit from synergies
    with the other, including synergies that may result from the eventual
    convergence of the telecommunications and wireless industries. In addition,
    by remaining a single entity, the Company will continue to enjoy certain
    strategic, financial and operational benefits that would not be available if
    the Groups were separate legal entities. It would also permit the Company to
    retain the advantages of tax consolidation and economies of scale.
    Furthermore, the Tracking Stock Proposal is not expected to have any
    material adverse impact on the Company's credit rating and cost of
    borrowing, which would occur if the Groups were divided into separate
    entities.
 
        ACCEPTANCE OF TRACKING STOCK CAPITAL STRUCTURES.  The use by other
    companies of equity securities intended to reflect separately the
    performance of specific businesses has increased in the last several years
    and several large, well-known companies have adopted capital structures
    involving tracking stocks. The Financial Advisors have advised the Company
    that, in general, the market performance of many of such securities has been
    favorable and has been comparable to industry peers that are separate
    companies. The market appears to value such securities based on the
    performance of the underlying business, and tracking stocks are now
    generally well-followed by financial analysts and accepted by investors.
 
        TAX FACTORS.  Implementation of the Tracking Stock Proposal should not
    be taxable to the Company or its shareholders. In comparison to a spin-off
    of the Company's shares of U.S. Cellular, TDS Telecom or Aerial to the
    holders of Common Shares and Series A Common Shares, implementation of the
    Tracking Stock Proposal allows for a tax-free distribution to the Company's
    shareholders without the significant limitations imposed by Section 355 of
    the Internal Revenue Code. Furthermore, the issuance of the Tracking Stocks
    will not prevent the Company from consolidating the operating results of the
    Tracking Groups for tax and accounting purposes.
 
        FUTURE ALTERNATIVES.  The Tracking Stock Proposal will not preclude
    other alternatives to increase shareholder value. The Board will continue to
    review other alternatives that may be available to the Company to realize
    additional value from the assets attributed to each of the Groups. In
    determining whether to pursue a particular alternative, the Board, in
    exercising its business judgment, will consider various factors, including
    market conditions, the financial and other effects of any such alternative
    on the Company and the Groups, and the preservation of its ability to engage
    in other restructuring options at such time as such alternatives become
    desirable.
 
        ELECTION OF DIRECTORS.  The Board also considered it significant that,
    as a result of the Tracking Stock Proposal, the election of one fewer
    director would be determined by the TDS Voting Trust, and that holders of
    Common Shares and, when issued, shares of the Tracking Stock, would be
    permitted to vote in the election of such one director.
 
        SUPPORT OF HOLDERS OF COMMON SHARES AND PREFERRED SHARES.  A very
    important consideration for the Board was the fact that the holders of
    Common Shares, Preferred Shares issued before October 31, 1981 and Preferred
    Shares issued after October 31, 1981, would each vote separately as groups
    on the Tracking Stock Proposal. Therefore, the Merger and the Transactions,
    including the Distribution, will not take place unless the Tracking Stock
    Proposal is approved by a majority of the votes entitled to be cast by the
    holders of each of the
 
                                      -56-
<PAGE>
    Common Shares, Preferred Shares issued before October 31, 1981 and Preferred
    Shares issued after October 31, 1981, as well as the Series A Common Shares,
    each voting as a separate group. Although the TDS Voting Trust controls a
    majority of the votes of the Series A Common Shares, the TDS Voting Trust
    does not own or vote any Common Shares or Preferred Shares. In addition,
    management beneficially owns only about 1% of the Common Shares and owns no
    Preferred Shares. As a result, the Tracking Stock Proposal will not be
    approved unless it is supported by a majority of the shareholders who are
    not affiliated with the TDS Voting Trust or management.
 
        SUPPORT OF TDS VOTING TRUST.  The Board also considered it important
    that the Tracking Stock Proposal would have the support of the trustees of
    the TDS Voting Trust which controls over 90% of the Series A Common Shares
    and a majority of the voting power of the Company. The trustees of the TDS
    Voting Trust have indicated to TDS's management that they would be unwilling
    to vote in favor of any proposal as shareholders of TDS which could result
    in the voting power of the TDS Voting Trust declining below 50%. On the
    other hand, the trustees of the TDS Voting Trust have indicated that they
    would support the Tracking Stock Proposal since it would enable TDS to issue
    shares of Tracking Stock, or other debt or equity securities convertible
    into shares of Tracking Stock, in acquisitions, public or private securities
    offerings or for other purposes, without reducing the voting power of the
    TDS Voting Trust below 50%.
 
        CONTINUITY OF LONG-TERM PLANS.  The adoption of the Tracking Stock
    Proposal would reduce the risk of a disruption in the continuity of TDS's
    long-term plans and objectives that could otherwise result if the TDS Voting
    Trust should find it necessary to sell or distribute a significant block of
    stock for diversification, estate tax obligations or for other reasons.
    Implementation of the Tracking Stock Proposal would allow the trustees of
    the TDS Voting Trust to continue to exercise control over a majority of
    TDS's voting power even after the TDS Voting Trust distributes the shares of
    the Tracking Stocks to the beneficiaries thereof, and would permit
    additional estate planning flexibility, including the determination of the
    succession of voting control through bequests of Series A Common Shares to
    the heirs of beneficial holders. Thus the Tracking Stock Proposal may
    provide a basis for continuity pursuant to such plans and objectives, if and
    when such circumstances arise, and should reduce the risk that TDS could at
    some future date be compelled to consider a potential acquisition of TDS in
    an environment that could be dictated to TDS and the Board by the financial
    circumstances of participants in the TDS Voting Trust or by third parties
    who may be anticipating or speculating about such circumstances.
 
        EMPLOYEE COMPENSATION AND CONTINUITY.  The ability to issue shares of
    one or more of the Tracking Stocks would increase TDS's flexibility in
    structuring compensation plans to tailor stock incentives to employees. The
    creation of three classes of stock that are intended to reflect separately
    distinct businesses increases the Company's ability to focus the management
    of the respective Groups and provide incentives for employees of each Group
    that are tied directly to the stock price performance of the Group in which
    they are employed. Implementation of the Tracking Stock Proposal may also
    allow employees to continue to concentrate on their responsibilities without
    undue concern that the future of TDS could be affected by real or perceived
    succession issues or a change in control that could otherwise be triggered
    by any substantial divestiture by the TDS Voting Trust in the future. By
    reducing the uncertainty that could result if the TDS Voting Trust should
    dispose of a significant block of Series A Common Shares, the Tracking Stock
    Proposal may, therefore, enhance the ability of TDS to attract and retain
    highly qualified key employees.
 
        BUSINESS RELATIONSHIPS.  Implementation of the Tracking Stock Proposal
    may facilitate strategic partnering transactions and may enhance the
    existing and potential business relationships of TDS with parties who may in
    the future become concerned about changes in control of TDS in the event
    that the voting power of the TDS Voting Trust is ever diluted. TDS may be
    better able to attract joint venture and marketing partners willing to make
    long-term plans and commitments if TDS is perceived to not be vulnerable to
    a takeover or disruption due to uncertainty concerning TDS's control.
 
        BENEFITS OF DELAWARE REINCORPORATION.  The Tracking Stock Proposal also
    contemplates that the Company will be reincorporated from Iowa to Delaware.
    The Company's Board believes that the best interests of the Company and its
    shareholders will be served by changing the Company's state of incorporation
    from Iowa to Delaware. The Board believes that the General Corporation Law
    of Delaware affords desirable flexibility and simplicity in the exercise of
    corporate powers which are not available to corporations that are organized
    under the laws of Iowa. Delaware is generally recognized as having a modern,
    flexible and nationally recognized corporate statute and a well-developed
    body of case law that provides predictability and certainty in business
    planning. Cases involving corporate law issues are decided in a separate
    Court of Chancery in Delaware,
 
                                      -57-
<PAGE>
    where judges have substantial experience and precedent in making their
    decisions. Due to the importance of corporate law in Delaware, the Delaware
    legislature puts a high priority on corporate law matters and is at the
    forefront of keeping the Delaware corporate statutes current in the face of
    changing business practices and legal developments. Corporate formalities
    and administrative procedures have been designed to be relatively simple and
    flexible in Delaware. Due to such factors, reincorporating in Delaware may
    reduce the impediments and increase the opportunities for structuring
    securities and financial transactions, which would facilitate acquisitions,
    raising capital and other financing transactions. Delaware law and courts
    are also more familiar to foreign investors and their advisors. As a result,
    foreign investment and financing opportunities may also be facilitated by
    reincorporating in Delaware. The Board therefore believes that the
    activities of the Company can be carried on to better advantage if the
    Company is able to operate under the corporate laws of Delaware. In
    addition, the Company believes that Delaware law will offer clearer guidance
    with respect to legal issues that may arise as a result of the existence of
    separate classes of Tracking Stock. However, shareholders in some instances
    may have fewer rights and less protection under Delaware law than under Iowa
    law. See "--Description of Restated Certificate of Incorporation of TDS
    Delaware" and "--Comparison of Shareholders' Rights Under Iowa and Delaware
    Law."
 
    CONSIDERATION OF POTENTIAL ADVERSE ASPECTS.  While the Board has determined
that implementation of the Tracking Stock Proposal is in the best interests of
TDS and its shareholders, the Board recognizes that implementation of the
Tracking Stock Proposal may have certain potentially adverse consequences,
including the lack of assurance as to the degree to which the market price of
the Tracking Stock will reflect the separate performance of the related Tracking
Group and the uncertainty as to the impact of the proposal on the market price
of the Common Shares, as well as the fact that implementation of the Tracking
Stock Proposal will, to an extent, make the capital structure of the Company
more complex, and may give rise to occasions when the interests of the holders
of the various classes of common stock may diverge or appear to diverge. See
"Risk Factors." The Board has given extensive consideration to the Tracking
Stock Proposal and has determined that the positive aspects of the Tracking
Stock Proposal outweigh any potentially adverse aspect and believes that the
Tracking Stock Proposal would be in the best interests of TDS and its
shareholders.
 
OPINIONS OF FINANCIAL ADVISORS
 
    Credit Suisse First Boston ("C.S. First Boston") and Salomon Brothers Inc
and Smith Barney Inc. (collectively doing business as "Salomon Smith Barney")
are acting as co-financial advisors to the Company in connection with the
Tracking Stock Proposal and each is assisting the Company in the solicitation of
proxies therefor (the "Financial Advisors").
 
    Each of C.S. First Boston and Salomon Smith Barney was asked to provide
advice to the Board of Directors with respect to the effect of the Tracking
Stock Proposal on (i) the market value of the Common Shares and the shares of
Tracking Stock to be distributed in the Distribution with respect to the Common
Shares (the "Proposed Common Equity") and (ii) the ability of TDS to raise
equity capital through an offering or offerings of shares of common equity or
securities convertible into common equity ("Equity Market Access"). The Telecom
Public Offering, U.S. Cellular Merger, Aerial Merger, Distribution and Merger
are herein collectively referred to as the "Recapitalization."
 
    Based upon and subject to the assumptions, limitations and qualifications
discussed below, the opinion of each Financial Advisor states that, assuming the
proposed Recapitalization had been effective as of the date of such opinion, the
Recapitalization would not have a material adverse effect from a financial point
of view on (i) the aggregate market value on a fully-distributed basis of the
Proposed Common Equity outstanding after such Recapitalization as compared with
the aggregate market value of the Common Shares of the Company outstanding
immediately prior to the announcement of such Recapitalization or (ii) the
Company's Equity Market Access after such Recapitalization as compared to the
Company's Equity Market Access prior to the announcement of such
Recapitalization.
 
    The Financial Advisors assumed, with the consent of the Board, that,
immediately prior to the proposed Recapitalization, the Company's Common Shares,
the Series A Common Shares, the Preferred Shares, the U.S. Cellular Common and
Series A Common Shares and the Aerial Common and Series A Common Shares (the
"Initial Shares") will continue to be the only classes of capital stock of the
Company, U.S. Cellular and Aerial, respectively, which are outstanding; that,
other than in connection with the proposed Recapitalization, there will be no
material change in the number of Initial Shares outstanding prior to the
implementation of the proposed Recapitalization; and that, immediately after the
proposed Recapitalization, the Company Common Shares, the Series A Common
Shares, the Preferred Shares and the Tracking Stocks will be the only classes of
capital stock then outstanding. They also assumed that the U.S. Cellular Merger
and the Aerial Merger are consummated on the terms set forth in the Proxy
Statement/Prospectus. They further assumed that, prior to the proposed
Recapitalization, the Initial Shares which are currently listed will continue to
be listed on their respective exchanges or trading markets, and
 
                                      -58-
<PAGE>
that, following the proposed Recapitalization, the Company's Common Shares and
the Tracking Stocks will be eligible for, and will be the only capital stock of
the Company listed on, the American Stock Exchange.
 
    In arriving at their opinions, the Financial Advisors reviewed certain
publicly available business and financial information relating to the Company,
as well as the Proxy Statement/Prospectus. They also reviewed certain other
information, including financial forecasts, provided to them by the Company, and
met with the Company's management to discuss the business and prospects of the
Company and the Tracking Groups and the potential impact of changes in the
competitive environment and in the Company's and the Tracking Groups' business
plans and strategies on those forecasts, businesses and prospects.
 
    The Financial Advisors also considered certain financial and stock market
data of the Company, and compared those data with similar data for other
publicly-held companies which have multiple classes of stock outstanding which
reflect the performance of specific lines of business, and considered the
financial terms of the different classes of stock of such companies. The
Financial Advisors also considered such other information, financial studies,
analyses and investigations, and financial, economic and market criteria which
they deemed relevant.
 
    In particular, the Financial Advisors considered the following financial and
other quantified information to be significant in arriving at their opinions.
 
    In their analysis for the October 31, 1997 board meeting (the "October
Analysis"), the Financial Advisors compared TDS' existing stock price to the sum
of the implied estimated values of its constituent businesses and found a public
market discount of 26% and, assuming that U.S. Cellular or Aerial trade at a
discount to their respective peers solely due to liquidity factors, and if such
liquidity factors were eliminated, a discount of 38%. The Financial Advisors
compared the enterprise value of U.S. Cellular as a multiple of population
equivalents ("POPs"), subscribers, 1997 estimated revenue, last twelve months
operating cash flow, and 1997 and 1998 estimated operating cash flow to that of
several other cellular companies (360 DEG. Communications, Air Touch
Communications, Centennial, CommNet Cellular, Palmer Wireless, Inc., PriCellular
Corporation and Vanguard Cellular) and found that, in all categories (other than
last 12 months operating cash flow) that U.S. Cellular traded at a lower
multiple than the mean and medium for the comparable companies. The Financial
Advisors compared Aerial with Omnipoint Corp. and Powertel Inc. on the basis of
adjusted license value per POP and found that Aerial traded at a discount to
Omnipoint and Powertel in this regard.
 
    The Financial Advisors' October Analysis included a comparison of existing
tracking stocks with peer comparables, a relative liquidity analysis of U.S.
Cellular and Aerial to their industry peers, and a "value pick up" analysis (all
of which were also repeated in December 1997 (with similar results) and are
summarized below). To analyze the implied equity value of TDS Telecom, assumed
EBITDA multiples were applied to the financial forecasts of 1997 EBITDA
(earnings before interest, taxes, depreciation and amortization) for TDS Telecom
($195.8 million).
 
    In both the October Analysis and the analysis for the December 15, 1997
board meeting (the "December Analysis"), the Financial Advisors compared nine
tracking stocks (Pittson Burlington, TCI, Pittston Minerals, US West
Communications, GM-Hughes Electronics, CMS Energy, USX-US Steel, Pittston Brinks
and USX-Marathon) with the common stock of other companies in their industry
groups on the basis of their estimated 1997 price/ earnings ratios and (for
certain industries) as a ratio of enterprise value to last 12-month EBITDA and
concluded they were neither consistently at the bottom nor consistently at the
top of their comparable groups.
 
    In both the October Analysis and the December Analysis, the Financial
Advisors also performed a relative liquidity analysis, in which they compared
the public float of TDS, U.S. Cellular and Aerial with six cellular companies
(Air Touch Communications, 360 DEG. Communications, CommNet Cellular,
PriCellular, Vanguard Cellular and Western Wireless) and two PCS companies
(Omnipoint, Powertel) and developed an indexed liquidity formula for each
company ("ILF"). The ILF compared the percentage of market value traded daily
(1997 year to date) to the ratio of average daily stock price change (1997 year
to date) to average share price (1997 year to date) and found that (indexing TDS
as 1.0) the ILF of U.S. Cellular was 0.31 and Aerial was 0.32 compared to a mean
of 1.27 for the cellular companies (a range of 0.29-3.97) and 0.91 for the PCS
companies (0.46 and 1.35).
 
    The Financial Advisors' December Analysis also performed a comparison of the
per share equity value of the tracking stocks to the existing TDS, U.S. Cellular
and Aerial shares and found an implied potential per share "value pick up" in
each of such shares, assuming, among other things, liquidity improvements and a
20% retained interest.
 
    In addition to the foregoing, the Financial Advisors reviewed certain other
financial and other quantified information, including the Company's budget for
1997 and five-year forecasts. Except as discussed above, such information was
not a significant factor to the Financial Advisors in arriving at their
opinions.
 
    In connection with their review, the Financial Advisors did not assume any
responsibility for independent verification of any of the foregoing information
(including the information contained in the Proxy Statement/
 
                                      -59-
<PAGE>
Prospectus) and relied on its being complete and accurate in all material
respects. With respect to the financial forecasts, the Financial Advisors
assumed that they had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the Company's management as to
the future financial performance of the Company and the Tracking Groups. In
addition, the Financial Advisors were not requested to make, and did not make,
an independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of the Company or the Tracking Groups, nor were they furnished
with any such evaluations or appraisals. The Financial Advisors did not express
any opinion as to what the actual value of the Tracking Stocks will be when
issued to the Company's shareholders pursuant to the Recapitalization or the
prices at which such Tracking Stocks will trade subsequent to the
Recapitalization. In addition, the Financial Advisors did not express any
opinion whatsoever as to the individual merits of the U.S. Cellular Merger, the
Aerial Merger, or the Telecom Public Offering, or any opinion whatsoever with
respect to the Reincorporation. The opinions of the Financial Advisors do not
address the Company's underlying business decision to effect the
Recapitalization and do not constitute a recommendation to any shareholder of
the Company as to how such shareholder should vote with respect to the
Recapitalization.
 
    The opinions of the Financial Advisors state that their analyses are
necessarily based on financial, economic, market and other conditions as they
exist and can be evaluated on the date of their opinions, and assume the
Recapitalization was effective as of the date of their opinions, and they note
that such conditions may change prior to the expected date of consummation of
the Recapitalization. The opinions also state that the Recapitalization may
cause a change in perception by some investors of the future plans of the
Company or the holders of Series A Common Shares. Consequently, the opinions
assume that the market has had a reasonable opportunity to understand and
evaluate the Recapitalization. In addition, the opinions state that the Tracking
Stocks which would be issued to the public shareholders of the Company in the
proposed Distribution might trade initially at market prices below those at
which they would trade on a fully distributed basis.
 
    The Board considered and found the assumptions, limitations and
qualifications in the opinions of the Financial Advisors to be reasonable and
appropriate under the circumstances. The Company's financial and legal advisors
also examined the prospectuses and/or proxy statements for each company which
they identified as having implemented a tracking stock capital structure.
Although most, if not all, of such companies were advised by financial advisors,
the Company and its advisors did not identify any company which requested or
received a written opinion from its financial advisors in connection with the
adoption of a tracking stock capital structure. Accordingly, the Board did not
believe that a written opinion from financial advisors was necessary or required
for the Board to approve the Tracking Stock Proposal or the related proposals.
The Board recognized the complexity of the Tracking Stock Proposal and the
related transactions and understood that there was no precedent for an opinion
from financial advisors under similar circumstances. Accordingly, the Board did
not request the Financial Advisors to deliver written opinions with regard to
all aspects of the transactions, nor did the Board believe that seeking such
opinions was necessary. Instead, the Board considered the oral advice of the
Financial Advisors regarding many aspects of the Recapitalization, in a manner
consistent with other companies which have adopted tracking stock capital
structures.
 
    The Board determined to seek letters from the Financial Advisors for the
limited purpose of obtaining their written opinions to the effect that the
Recapitalization would not have a material adverse effect on (i) shareholder
value (as measured by the aggregate market value on a fully-distributed basis of
the Proposed Common Equity outstanding after such Recapitalization as compared
with the aggregate market value of the Company's Common Shares outstanding
immediately prior to the announcement of such Recapitalization) or (ii) the
Company's ability to obtain equity capital in the public markets (as measured by
the Company's Equity Market Access after such Recapitalization as compared to
the Company's Equity Market Access prior to the announcement of such
Recapitalization). The Financial Advisors did not express any opinion as to what
the actual value of the Tracking Stocks will be when issued to the Company's
shareholders pursuant to the Recapitalization or the prices at which such
Tracking Stocks will trade subsequent to the Recapitalization. In addition, the
Financial Advisors did not express any opinion whatsoever as to the individual
merits of the U.S. Cellular Merger, the Aerial Merger, or the Telecom Public
Offering, or any opinion whatsoever with respect to the Reincorporation. The
opinions of the Financial Advisors do not address the Company's underlying
business decision to effect the Recapitalization and do not constitute a
recommendation to any shareholder of the Company as to how such shareholder
should vote with respect to the Recapitalization. The Board did not ask for a
written opinion with respect to such other matters. The Board did not believe
that a written opinion from the Financial Advisors was necessary or required for
such other matters. The Board did, in connection with such matters, seek the
advice of the Financial Advisors, legal counsel and management to the extent it
considered appropriate.
 
    The opinions also state that "The Recapitalization may cause a change in
perception by some investors of the future plans of the Company or the holders
of Series A Common Shares. Consequently, [the opinions assume] that the market
has had a reasonable opportunity to understand and evaluate the
Recapitalization." This qualification in the opinion exists in part because SEC
rules do not permit the Company to communicate with shareholders
 
                                      -60-
<PAGE>
regarding a proposed transaction prior to the filing of a proxy statement with
the SEC and the delivery of the proxy statement to shareholders if such
discussions would constitute the solicitation of proxies under the SEC's rules.
Accordingly, the Company and its representatives could not communicate with
shareholders relating to the plans of the Company or the holders of Series A
Common Shares as they relate to the Recapitalization prior to the filing of this
Proxy Statement/Prospectus with the SEC. Although the Company and the Financial
Advisors considered the range of possible perceptions that existing or
prospective investors might have with respect to the Tracking Stock Proposal,
neither had any specific knowledge of the actual perceptions of such investors.
In addition, both the Company and the Financial Advisors believed that, given
the complex nature of certain aspects of the proposal, the market would require
some time for complete information on the specific aspects of the proposals to
be adequately disseminated and analyzed and for investor questions and reactions
to be addressed. Therefore, the Financial Advisors believed that it was
necessary to qualify their opinions with respect to a possible change in
investors' perception of the future plans of the Company or the holders of
Series A Common Shares and to assume that the market has had a reasonable
opportunity to understand and evaluate the Recapitalization. This Proxy
Statement/ Prospectus discloses the plans of the Company and the holders of the
Series A Common Shares to the extent such plans are material to the proposed
Recapitalization.
 
    The opinions of the Financial Advisors also state that the Tracking Stocks
might trade initially at market prices below those at which they would trade on
a fully distributed basis. The Financial Advisors qualified their opinions in
this manner because they believed that there would be a period of up to several
months following the Distribution in which holders of Common Shares who received
Cellular Group Shares, Aerial Group Shares and Telecom Group Shares may
rebalance their portfolios based on their individual investment objectives. The
Financial Advisors believed that, during this time, sales by shareholders who
desire to reduce their holdings of Common Shares, Cellular Group Shares, Telecom
Group Shares or Aerial Group Shares could cause the market prices to be below
those at which they would trade on a fully distributed basis. The Board
understood this possibility in approving the Tracking Stock Proposal.
Nevertheless, the Board believes that this possible temporary adverse effect is
outweighed by the positive aspects of the Tracking Stock Proposal to long-term
shareholder value. See "--Reasons."
 
    The Company has agreed to pay the Financial Advisors (i) an advisory fee of
$2,000,000, to be split equally between C.S. First Boston and Salomon Smith
Barney, and payable upon the approval of the Tracking Stock Proposal by the
Board, and public announcement thereof; (ii) an advisory fee of $2,000,000, to
be split equally between C.S. First Boston and Salomon Smith Barney, payable
upon the Distribution; and (iii) an incentive fee of no more than $3,000,000, to
be split equally between C.S. First Boston and Salomon Smith Barney, payable
4 1/2 months after the Distribution. In general, an incentive fee is payable
only if the post-Distribution value of the aggregate market value of the
publicly-traded common equity exceeds 125% of the pre-announcement aggregate
market value of the TDS Common Shares and, in such event, the amount of the fee
which is payable is equal to $120,000 for each percentage point over 125%, up to
a maximum of $3,000,000. The Company has also agreed to reimburse the Financial
Advisors for reasonable out-of-pocket expenses (including fees and expenses of
legal counsel) and has agreed to indemnify the Financial Advisors against
certain liabilities, including liabilities under the Securities Act.
 
    C.S. First Boston and Salomon Smith Barney will also act as co-lead managers
of the Telecom Public Offering. Each of C.S. First Boston and Salomon Smith
Barney have also in the past provided services to one or more of the Company,
U.S. Cellular and/or Aerial.
 
INTERESTS OF CERTAIN PERSONS
 
    The TDS Voting Trust and its trustees and beneficiaries have an interest in
the implementation of the Tracking Stock Proposal because it may enhance the
ability of the TDS Voting Trust to retain voting control of TDS. The trustees of
the voting trust are LeRoy T. Carlson, Jr., a director and the President of TDS
and the son of LeRoy T. Carlson, Chairman of TDS; Walter C.D. Carlson, a
director of TDS and the son of LeRoy T. Carlson, Chairman of TDS, and the
brother of LeRoy T. Carlson, Jr.; Donald C. Nebergall, a director of TDS;
Letitia G.C. Carlson, a director of TDS and the daughter of LeRoy T. Carlson,
Chairman of TDS, and the sister of LeRoy T. Carlson, Jr. and Walter C.D.
Carlson; and Melanie J. Heald, the daughter of Lester O. Johnson, director
emeritus of TDS. Directors of TDS who are beneficiaries of the TDS Voting Trust
are LeRoy T. Carlson, LeRoy T. Carlson, Jr., Walter C.D. Carlson, Letitia G.C.
Carlson and Donald C. Nebergall. Walter C.D. Carlson is a partner of the law
firm of Sidley & Austin, which is counsel to the Company and is advising the
Company regarding the Tracking Stock Proposal and related matters. Donald C.
Nebergall is a consultant to TDS. In addition, certain directors may be
considered to have an interest in the Tracking Stock Proposal as officers of the
Company or its subsidiaries. Directors of the Company who are officers or
employees of the Company or its subsidiaries are: LeRoy T. Carlson (Chairman of
TDS), LeRoy T.
 
                                      -61-
<PAGE>
Carlson, Jr. (President of TDS), Murray L. Swanson (Executive Vice
President--Finance of TDS); Rudolph E. Hornacek (Vice President--Engineering of
TDS); James Barr III (President of TDS Telecom); and Donald R. Brown (Senior
Vice President of TDS Telecom). Shareholders are urged to carefully study and
consider the Tracking Stock Proposal in light of the above interests.
 
CHANGES TO BOARD OF DIRECTORS
 
    The Board has designated Mr. Kevin A. Mundt, age 43, to be the Board's
nominee for election as a Class II director by the Public Holders at the 1998
Annual Meeting of Shareholders. Mr. Mundt is a co-founder, and has been a
director since 1984, of Corporate Decisions, Inc., a strategy consulting firm
with 150 professionals in offices in North America and Europe. Corporate
Decisions, Inc. recently merged with Mercer Management Consulting. Mr. Mundt's
management consulting practice focuses on advising companies on strategies for
profitable growth in changing markets. Prior to his association with Corporate
Decisions, Mr. Mundt was associated with Bain and Company. Mr. Mundt holds a
B.A. degree in economics from Brown University and an M.B.A. from the Harvard
Graduate School of Business. Mr. Mundt has no current or prior relationships
with the Company and is not related to any other director of the Company.
 
    If elected, Mr. Mundt will fill the directorship currently held by Mr. James
Barr III, whose term will expire at the 1998 Annual Meeting of Shareholders.
However, it is expected that Mr. Barr will be appointed as a director to fill a
vacancy on the Board of Directors which is expected to occur following the 1998
Annual Meeting of Shareholders. Mr. Donald R. Brown, a current Class I director
who was elected by the Series A Holders in 1997, retired as an employee of the
Company in December 1997 and has advised the Board that he intends to resign
from the Board following the 1998 Annual Meeting of Shareholders. It is expected
that the Board of Directors will appoint Mr. Barr to fill the vacancy created by
the resignation of Mr. Brown at the Board meeting which will follow the 1998
Annual Meeting of Shareholders.
 
    For further information about Messrs. Barr and Brown and the other current
directors, and for information about director compensation and certain
relationships and related transactions involving the directors, see the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 which
is incorporated by reference herein. See "Where You Can Find More Information."
 
THE COMPANY
 
    TDS is a diversified telecommunications service company with established
cellular telephone, local telephone and radio paging operations and developing
personal communications services ("PCS") operations. At December 31, 1997, the
Company, through its subsidiaries, served approximately 3.2 million customer
units in 37 states, including 1,710,000 cellular telephones, 515,500 telephone
access lines, 125,000 PCS telephones, and 811,100 pagers. For the nine months
ended December 31, 1997, cellular telephone operations provided 60% of the
Company's consolidated revenues; telephone operations provided 30%; PCS
operations provided 4%; and paging operations provided 6% of such revenues. The
Company's long-term 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 operations through its majority-owned
subsidiary U.S. Cellular (AMEX symbol "USM"), which is the eighth largest
cellular telephone company in the United States, based on the aggregate number
of population equivalents it owns. The Company conducts substantially all of its
telephone operations through its wholly-owned subsidiary TDS Telecom. The
Company conducts substantially all of its PCS business through its
majority-owned subsidiary Aerial (NASDAQ National Market symbol "AERL"), which
launched commercial service in the first half of 1997.
 
    Notwithstanding the attribution of assets and liabilities, equity and items
of income and expense among the Groups for the purpose of preparing the combined
financial statements of the Cellular Group, the Telecom Group, the Aerial Group
and the TDS Group, the change in the capital structure of the Company
contemplated by the Tracking Stock Proposal will not affect legal title to such
assets or responsibility for such liabilities of the Company or any of its
subsidiaries, except that TDS Delaware will succeed to the assets and
liabilities of TDS Iowa. Holders of Cellular Group Shares, Telecom Group Shares,
Aerial Group Shares, Common Shares and Series A Common Shares will be common
shareholders of the Company and will be subject to risks associated with an
investment in the Company and all of its businesses, assets and liabilities. The
financial results of one or more of the Groups that affect the Company's
consolidated results of operations or financial condition could affect the
combined results of operations or financial condition of the TDS Group and the
Tracking Groups and the market price of the Common
 
                                      -62-
<PAGE>
Shares, the Cellular Group Shares, the Telecom Group Shares and the Aerial Group
Shares. In addition, any net losses of any Group, dividends or distributions on,
or repurchases of, any class of common stock, and dividends on, or certain
repurchases of, Preferred Shares, will reduce funds of the Company legally
available for the payment of dividends on all shares of common stock.
Accordingly, the combined financial statements of the TDS Group, the Cellular
Group, the Telecom Group and the Aerial Group should be read in conjunction with
the consolidated financial statements of the Company.
 
    Reference is made to Annex I for a further description of the Company and
the consolidated financial statements of the Company.
 
THE CELLULAR GROUP
 
    The Cellular Group Shares, when issued, are intended to reflect the separate
performance of the Cellular Group, which consists of the Company's interest in
U.S. Cellular, an 81%-owned subsidiary of the Company which operates and invests
in cellular telephone companies and properties. The Cellular Group would also
include such other businesses, assets and liabilities of the Company as the
Board may in the future determine to attribute to the Cellular Group and such
other businesses, assets and liabilities as the Company or any of its
subsidiaries may in the future acquire for the Cellular Group, as determined by
the Board.
 
    The U.S. Cellular Restated Certificate of Incorporation currently provides
that U.S. Cellular may not own, invest or otherwise have an interest in, lease,
operate or manage any business other than a business engaged solely in the
construction of, the ownership of interests in and/or the management of cellular
telephone systems (the "Cellular Business"), unless it first obtains the written
consent of the Company. If U.S. Cellular becomes a wholly-owned subsidiary of
the Company, this provision is expected to be eliminated from the U.S. Cellular
Restated Certificate of Incorporation. However, the Board intends to continue
this provision as a policy with respect to the Cellular Group. Accordingly, the
Cellular Group will generally only engage in the Cellular Business, unless the
Board determines to permit the Cellular Group to pursue other opportunities.
This will be done on a case-by-case basis. It is currently the intention of the
Board that any businesses, opportunities, assets and liabilities attributed to
the Cellular Group in the future would not include businesses, opportunities,
assets and liabilities of the TDS Group, the Telecom Group or the Aerial Group.
The Company could determine to pursue future business opportunities through one
Group instead of the other Groups, or jointly through more than one of the
Groups. The decision to allocate certain resources and financial support to a
Group other than the Cellular Group may adversely affect the ability of the
Cellular Group to obtain funds sufficient to implement its business strategies.
See "--Management and Allocation Policies."
 
    Holders of Cellular Group Shares will be subject to all of the risks
associated with an investment in the Company and all of its businesses, assets
and liabilities. There is no assurance as to the degree to which the market
value of the Cellular Group Shares will reflect the separate performance of
either the Cellular Group or U.S. Cellular.
 
    The Board currently intends to retain future earnings of the Cellular Group
for the development of the business of the Cellular Group, and does not
anticipate paying dividends on the Cellular Group Shares in the foreseeable
future.
 
    As of November 30, 1997, there were issued and outstanding 87,231,658 shares
of common stock of U.S. Cellular. As of such date, the Company held 70,743,836
shares of common stock of U.S. Cellular, representing approximately 81.1% of the
outstanding shares of common stock of U.S. Cellular, and 16,487,822 shares of
common stock of U.S. Cellular were held by persons other than the Company.
 
    The Company has made an offer to issue Cellular Group Shares in exchange for
all of the Common Shares of U.S. Cellular which are not owned by the Company
pursuant to a merger between a subsidiary of the Company and U.S. Cellular. The
Company has offered to exchange 1.14613 Cellular Group Shares for each
outstanding Common Share of U.S. Cellular (other than shares held by the
Company) in the U.S. Cellular Merger. This would represent an aggregate of
18,897,187 Cellular Group Shares based on Common Shares of U.S. Cellular
outstanding as of November 30, 1997. This exchange ratio was determined by
dividing (i) the sum of the number of Cellular Group Shares proposed to be
distributed in the Distribution and the Number of Shares Issuable with Respect
to Retained Interest considering only the Distribution by (ii) the number of
shares of common stock of U.S. Cellular held by the Company as of November 30,
1997.
 
    The board of directors of U.S. Cellular has established a special committee
consisting of an independent director to consider the TDS offer and to negotiate
the terms of the merger agreement with TDS on behalf of the
 
                                      -63-
<PAGE>
minority shareholders of U.S. Cellular. The special committee has engaged
independent financial and legal advisors in connection therewith.
 
    The U.S. Cellular Merger is subject to various conditions, including
approval of the Tracking Stock Proposal by shareholders of the Company,
effectiveness of the Merger, the negotiation of the other terms of a merger
agreement between the Company and U.S. Cellular, approval of the U.S. Cellular
Merger by the special committee of the board of directors, the full board of
directors and the shareholders of U.S. Cellular and final approval by the Board.
The Common Shares of U.S. Cellular are currently traded on the AMEX under the
symbol "USM." If the U.S. Cellular Merger is consummated as contemplated, U.S.
Cellular would become a wholly-owned subsidiary of the Company and such Common
Shares would be delisted from the AMEX. In the U.S. Cellular Merger, holders of
Common Shares of U.S. Cellular would receive Cellular Group Shares of TDS, which
would be listed on the AMEX. If the U.S. Cellular Merger does not take place for
any reason, U.S. Cellular may not become a wholly-owned subsidiary of the
Company and the Common Shares of U.S. Cellular may continue to be publicly
traded. Alternatively, although the Company has no current plans or intentions
to do so, the Company may consider acquiring such Common Shares of U.S. Cellular
in an exchange offer for Cellular Group Shares or other securities, in a tender
offer for cash or through open market or private purchases, or taking other
action to acquire some or all of the shares of U.S. Cellular not owned by the
Company.
 
    On December 29, 1997, Airmont Plaza Associates, which claims to be a holder
of U.S. Cellular Common Shares, filed a putative class action complaint on
behalf of common stockholders of U.S. Cellular in the Court of Chancery of the
State of Delaware in New Castle County. The complaint names as defendants TDS,
U.S. Cellular, and the directors of U.S. Cellular. The complaint alleges a
breach of fiduciary duties by the defendants and seeks to have the U.S. Cellular
Merger enjoined or, if it is consummated, to have it rescinded and to recover
unspecified damages, fees and expenses. The defendants have been served with the
complaint in this case but have not yet responded to the complaint. The time for
the defendants to respond has been extended. The timing for a response will be
determined based on discussions between counsel for plaintiffs and defendants,
but a response is not expected to take place for at least one or more months. On
January 30, 1998, a virtually identical complaint was also filed by John G.
Guillemont, Trustee of the John G. Guillemont Living Trust, who subsequently
withdrew as plaintiff and was substituted with Marcus Galt. None of the
defendants have been served with this complaint. It is expected that these cases
will be consolidated. The Company intends to vigorously defend against these
lawsuits. However, there can be no assurance that such lawsuits will not have a
material adverse effect on the Company or the transactions contemplated by the
Proxy Statement/Prospectus.
 
    Subject to the effectiveness of the Merger, and after the completion of the
Telecom Public Offering, the U.S. Cellular Merger and the Aerial Merger, the
Board intends to authorize the Distribution of Cellular Group Shares in the form
of a stock dividend to holders of Series A Common Shares and Common Shares. It
is currently expected that the Distribution would take place in July 1998 or
later. The Board intends to distribute one Cellular Group Share with respect to
each Common Share and Series A Common Share outstanding on the Distribution
record date. The Distribution will be made to shareholders in proportion to the
number of Common Shares and Series A Common Shares owned on the Distribution
record date.
 
    The aggregate number of Cellular Group Shares proposed to be issued and
distributed pursuant to the Distribution is intended initially to represent 75%
of the common shareholders' equity value of the Company attributable to the
Cellular Group. Accordingly, considering only the Distribution, the TDS Group
would have a Retained Interest in the Cellular Group representing 25% of the
common shareholders' equity value of the Company attributable to the Cellular
Group. The number of Cellular Group Shares deemed to represent 100 percent of
the common shareholders' equity value of the Company attributable to the
Cellular Group is expected to be determined by the Board in connection with the
U.S. Cellular Merger. This will be based on the number of outstanding Common
Shares and Series A Common Shares at such time and the distribution ratio.
 
    If all of the Transactions are completed as contemplated, the issued
Cellular Group Shares would initially reflect approximately 80% of the common
shareholders' equity value of the Company attributable to the Cellular Group.
The remaining 20% of the common shareholders' equity value of the Company
initially attributable to the Cellular Group will be retained by the TDS Group
as a Retained Interest. See "--Retained Interests."
 
    The Board reserves the right to effect all or any part of the Distribution
of Cellular Group Shares even if the Telecom Public Offering, the U.S. Cellular
Merger or the Aerial Merger have not been completed, or not to effect all or any
part of the Distribution even if such other Transactions have taken place. The
Board further reserves the right to modify the distribution ratio for the
Cellular Group Shares or to modify the percentage interest to be retained by TDS
through the Retained Interest in the Cellular Group.
 
                                      -64-
<PAGE>
    The following table shows the Cellular Group Shares that would be issued in
connection with the U.S. Cellular Merger and the Distribution considering the
exchange ratio offered by the Company and the intended distribution ratio, and
the number of Cellular Group Shares issuable, authorized for issuance for
various purposes and available for issuance (based on shares outstanding at
November 30, 1997).
 
<TABLE>
<CAPTION>
                                                                             PRO FORMA CELLULAR GROUP SHARES
                                                                      ---------------------------------------------
                                                                                        RETAINED
                                                                       OUTSTANDING      INTEREST         TOTAL
                                                                      --------------  -------------  --------------
<S>                                                                   <C>             <C>            <C>
U.S. Cellular Merger................................................      18,897,187       --            18,897,187
Distribution........................................................      60,811,362     20,270,454      81,081,816
                                                                      --------------  -------------  --------------
      Pro Forma Initial Shares......................................      79,708,549     20,270,454      99,979,003
                                                                      --------------  -------------  --------------
SHARES ISSUABLE TO THIRD PARTIES(1):
  Committed Acquisition Shares......................................         567,412       (567,412)       --
  Pre-Distribution Convertible Securities:
    TDS Preferred Shares............................................         969,025       (969,025)       --
    Existing Plans(1)...............................................         575,026       (575,026)       --
                                                                      --------------  -------------  --------------
      Subtotal......................................................       2,111,463     (2,111,463)       --
                                                                      --------------  -------------  --------------
ISSUABLE AS A RESULT OF U.S. CELLULAR MERGER:
  U.S. Cellular Employee Plans......................................         711,387       --               711,387
  U.S. Cellular LYONs...............................................       8,090,116       --             8,090,116
                                                                      --------------  -------------  --------------
      Subtotal......................................................       8,801,503       --             8,801,503
                                                                      --------------  -------------  --------------
SHARES RESERVED FOR ISSUANCE:
  Existing Plans(2).................................................         400,625       --               400,625
  1998 Long-Term Incentive Plan(3)..................................       2,888,613       --             2,888,613
  Tax-Deferred Savings Plan.........................................          70,000       --                70,000
  Acquisitions......................................................       3,932,588       --             3,932,588
                                                                      --------------  -------------  --------------
      Subtotal......................................................       7,291,826       --             7,291,826
                                                                      --------------  -------------  --------------
PRO FORMA SHARES ISSUED, ISSUABLE AND RESERVED FOR ISSUANCE.........      97,913,341     18,158,991     116,072,332
Shares Available for Issuance.......................................      23,927,668       --            23,927,668
                                                                      --------------  -------------  --------------
      Total.........................................................     121,841,009     18,158,991     140,000,000
                                                                      --------------  -------------  --------------
                                                                      --------------  -------------  --------------
</TABLE>
 
- ------------
 
(1) These shares would be issuable from the Retained Interest.
 
(2) See Proposal 2.
 
(3) See Proposal 3.
 
    Reference is made to Annex II for a further description of the Cellular
Group and the combined financial statements of the Cellular Group.
 
THE TELECOM GROUP
 
    The Telecom Group Shares, when issued, are intended to reflect the separate
performance of the Telecom Group, which includes the Company's interest in TDS
Telecom, a wholly-owned subsidiary of the Company which operates landline
telephone companies. The Telecom Group also includes the allocation of certain
TDS debt. The Telecom Group would also include such other businesses, assets and
liabilities of the Company as the Board may in the future determine to attribute
to the Telecom Group and such other businesses, assets and liabilities as the
Company or any of its subsidiaries may in the future acquire for the Telecom
Group, as determined by the Board.
 
    The Board intends to adopt a policy providing that the Telecom Group may not
own, invest or otherwise have an interest in, lease, operate or manage any
business other than a business engaged solely in the construction of, the
ownership of interests in and/or the management of landline telephone systems
(the "Telecom Business"), unless it first obtains the consent of the Board. At
the present time, the Telecom Group operates certain businesses which are not
considered Telecom Business. The Telecom Group will initially be permitted to
continue to operate these existing businesses. Except with respect to such
existing businesses, the Telecom Group will generally only engage in the Telecom
Business, unless the Board determines to permit the Telecom Group to pursue
other opportunities. This will be done on a case-by-case basis. It is currently
the intention of the Board that any
 
                                      -65-
<PAGE>
businesses, opportunities, assets and liabilities attributed to the Telecom
Group in the future would not include businesses, opportunities, assets and
liabilities of the TDS Group, the Cellular Group or the Aerial Group. The
Company could determine to pursue future business opportunities through one
Group instead of the other Groups, or jointly through more than one of the
Groups. The decision to allocate certain resources and financial support to a
Group other than the Telecom Group may adversely affect the ability of the
Telecom Group to obtain funds sufficient to implement its business strategies.
See "--Management and Allocation Policies."
 
    Holders of Telecom Group Shares will be subject to all of the risks
associated with an investment in the Company and all of its businesses, assets
and liabilities. There is no assurance as to the degree to which the market
value of the Telecom Group Shares will reflect the separate performance of
either the Telecom Group or TDS Telecom.
 
    Following the Distribution, subject to the legal restrictions on the payment
of dividends described below, the Board currently intends to establish an annual
dividend on the Telecom Group Shares in an amount equal to $0.50 per share.
Based on the expected distribution ratio of two-thirds of a Telecom Group Share
for each existing Common Share and Series A Common Share, this dividend rate
would equate to a per share annual dividend of $0.33 per existing Common Share
and Series A Common Share (the "Telecom Equivalent Dividend Rate"). Following
the Distribution, the Board also currently intends to establish an annual
dividend on the Common Shares and Series A Common Shares in an amount equal to
$0.11 per share. The total of this rate and the Telecom Equivalent Dividend Rate
is equal to $0.44 per share per annum, which is the same as the current annual
dividend rate on the existing Common Shares and Series A Common Shares. The
intent is that, immediately after the Distribution, a current holder of Common
Shares and Series A Common Shares would continue to receive an aggregate
dividend which is at least equal to the aggregate dividend which such
shareholder currently receives from the Company (not considering reductions in
shares which may occur due to the payment of cash in lieu of fractional shares
in the Distribution).
 
    TDS currently holds 100% of the issued and outstanding capital stock of TDS
Telecom.
 
    Promptly after approval of the Tracking Stock Proposal by shareholders and
the effectiveness of the Merger, the Company intends to offer and sell Telecom
Group Shares in a public offering for cash, and to allocate the net proceeds
thereof to the Telecom Group. The Company intends to file with the SEC a
registration statement on Form S-3 relating to the registration of between
10,000,000 and 17,000,000 Telecom Group Shares. This offering is expected to
commence promptly after the approval of the Tracking Stock Proposal by
shareholders and the effectiveness of the Merger, subject to prevailing market
conditions and other factors.
 
    Subject to the effectiveness of the Merger, after the completion of the
Merger, the Telecom Public Offering, the U.S. Cellular Merger and the Aerial
Merger, the Board intends to authorize the Distribution of Telecom Group Shares
in the form of a stock dividend to holders of Series A Common Shares and Common
Shares. The Board intends to distribute two-thirds of a Telecom Group Share with
respect to each Common Share and Series A Common Share outstanding on the
Distribution record date. The Distribution will be made to shareholders in
proportion to the number of Common Shares and Series A Common Shares owed on the
Distribution record date.
 
    The aggregate number of Telecom Group Shares proposed to be issued and
distributed pursuant to the Distribution is intended initially to represent 75%
of the common shareholders' equity value of the Company attributable to the
Telecom Group. Accordingly, considering only the Distribution, the TDS Group
would have a Retained Interest in the Telecom Group representing 25% of the
common shareholders' equity value of the Company attributable to the Telecom
Group. The number of Telecom Group Shares deemed to represent 100 percent of the
common shareholders' equity value of the Company attributable to the Telecom
Group is expected to be determined by the Board in connection with the Telecom
Public Offering. This will be based on the number of outstanding Common Shares
and Series A Common Shares at such time and the distribution ratio.
 
    If all of the Transactions are completed as contemplated, the issued Telecom
Group Shares would initially reflect approximately 80% of the common
shareholders' equity value of the Company attributable to the Telecom Group. The
remaining 20% of the common shareholders' equity value of the Company initially
attributable to the Telecom Group will be retained by the TDS Group as a
Retained Interest. See "--Retained Interests."
 
    The Board reserves the right to effect all or any part of the Distribution
of Telecom Group Shares even if the Telecom Public Offering, the U.S. Cellular
Merger or the Aerial Merger have not been completed, or not to effect all or any
part of the Distribution even if such other Transactions have taken place. The
Board further reserves the right to modify the distribution ratio for the
Telecom Group Shares or to modify the percentage interest to be retained by TDS
through the Retained Interest in the Telecom Group.
 
                                      -66-
<PAGE>
    The following table shows the Telecom Group Shares that would be issued in
connection with the Telecom Public Offering and the Distribution considering the
number of Telecom Group Shares being offered by the Company and the intended
distribution ratio, and the number of Telecom Group Shares issuable, authorized
for various purposes and available for issuance (based on shares outstanding at
November 30, 1997).
 
<TABLE>
<CAPTION>
                                                                             PRO FORMA TELECOM GROUP SHARES
                                                                      ---------------------------------------------
                                                                                        RETAINED
                                                                       OUTSTANDING      INTEREST         TOTAL
                                                                      --------------  -------------  --------------
<S>                                                                   <C>             <C>            <C>
Telecom Public Offering(1)..........................................      13,500,000       --            13,500,000
Distribution........................................................      40,540,908     13,513,636      54,054,544
                                                                      --------------  -------------  --------------
      Pro Forma Initial Shares......................................      54,040,908     13,513,636      67,554,544
                                                                      --------------  -------------  --------------
SHARES ISSUABLE TO THIRD PARTIES(2):
  Committed Acquisition Shares......................................         378,275       (378,275)       --
  Pre-Distribution Convertible Securities
    TDS Preferred Shares............................................         646,017       (646,017)       --
    Existing Plans(3)...............................................         383,350       (383,350)       --
                                                                      --------------  -------------  --------------
      Subtotal......................................................       1,407,642     (1,407,642)       --
                                                                      --------------  -------------  --------------
SHARES RESERVED FOR ISSUANCE:
  Existing Plans(3).................................................         267,084       --               267,084
  1998 Long-Term Incentive Plan(4)..................................       2,500,000       --             2,500,000
  Tax-Deferred Savings Plan.........................................         175,000       --               175,000
  Acquisitions......................................................       2,821,725       --             2,821,725
  Dividend Reinvestment Plan........................................         150,000       --               150,000
                                                                      --------------  -------------  --------------
      Subtotal......................................................       5,913,809       --             5,913,809
                                                                      --------------  -------------  --------------
PRO FORMA SHARES ISSUED, ISSUABLE AND RESERVED FOR ISSUANCE.........      61,362,359     12,105,994      73,468,353
Shares Available for Issuance.......................................      16,531,647       --            16,531,647
                                                                      --------------  -------------  --------------
      Total.........................................................      77,894,006     12,105,994      90,000,000
                                                                      --------------  -------------  --------------
                                                                      --------------  -------------  --------------
</TABLE>
 
- ------------
 
(1) The Company intends to offer between 10,000,000 and 17,000,000 Telecom Group
    Shares. For purposes of this Proxy Statement/ Prospectus, the midpoint of
    this amount is assumed for all purposes.
 
(2) These shares would be issuable from the Retained Interest.
 
(3) See Proposal 2.
 
(4) See Proposal 3.
 
    Reference is made to Annex III for a further description of the Telecom
Group and the combined financial statements of the Telecom Group.
 
                                      -67-
<PAGE>
THE AERIAL GROUP
 
    The Aerial Group Shares, when issued, are intended to reflect the separate
performance of the Aerial Group, which includes the Company's interest in
Aerial, a subsidiary of the Company which is developing broadband personal
communications services. The Aerial Group would also include such other
businesses, assets and liabilities of the Company as the Board may in the future
determine to attribute to the Aerial Group and such other businesses, assets and
liabilities as the Company or any of its subsidiaries may in the future acquire
for the Aerial Group, as determined by the Board.
 
    The Aerial Restated Certificate of Incorporation currently provides that
Aerial may not own, invest or otherwise have an interest in, lease, operate or
manage any business other than a business engaged solely in the construction of,
the ownership of interests in and/or the management of personal communications
systems (the "PCS Business"), unless it first obtains the written consent of the
Company. If Aerial becomes a wholly-owned subsidiary of the Company, this
provision is expected to be eliminated from the Aerial Restated Certificate of
Incorporation. However, the Board intends to continue this provision as a policy
with respect to the Aerial Group. Accordingly, the Aerial Group will generally
only engage in the PCS Business, unless the Board determines to permit the
Aerial Group to pursue other opportunities. This will be done on a case-by-case
basis. It is currently the intention of the Board that any businesses,
opportunities, assets and liabilities attributed to the Aerial Group in the
future would not include businesses, opportunities, assets and liabilities of
the TDS Group, the Cellular Group or the Telecom Group. The Company could
determine to pursue future business opportunities through one Group instead of
the other Groups, or jointly through more than one of the Groups. The decision
to allocate certain resources and financial support to a Group other than the
Aerial Group may adversely affect the ability of the Aerial Group to obtain
funds sufficient to implement its business strategies. See "--Management and
Allocation Policies."
 
    Holders of Aerial Group Shares will be subject to all of the risks
associated with an investment in the Company and all of its businesses, assets
and liabilities. There is no assurance as to the degree to which the market
value of the Aerial Group Shares will reflect the separate performance of either
the Aerial Group or Aerial.
 
    As of November 30, 1997, there were issued and outstanding 71,606,081 shares
of common stock of Aerial. As of such date, the Company held 59,086,000 shares
of common stock of Aerial, representing approximately 82.5% of the outstanding
shares of common stock of Aerial, and 12,520,081 shares of common stock of
Aerial were held by persons other than the Company.
 
    The Company has made an offer to issue Aerial Group Shares in exchange for
all of the Common Shares of Aerial which are not owned by the Company pursuant
to a merger between a subsidiary of the Company and Aerial. The Company has
offered to exchange .91485 Aerial Group Shares for each outstanding Common Share
of Aerial (other than shares owned by the Company) in the Aerial Merger. This
would represent an aggregate of 11,453,996 Aerial Group Shares based on Common
Shares of Aerial outstanding as of November 30, 1997. This exchange ratio was
determined by dividing (i) the sum of the number of Aerial Group Shares proposed
to be issued in the Distribution and the number of Shares Issuable with Respect
to Retained Interest assuming only the Distribution by (ii) the number of shares
of common stock of Aerial held by the Company as of November 30, 1997.
 
    The board of directors of Aerial has established a special committee
consisting of two independent directors to consider the TDS offer and to
negotiate the terms of the merger agreement with TDS on behalf of the minority
shareholders of Aerial. The special committee has engaged independent financial
and legal advisors in connection therewith.
 
    The Aerial Merger is subject to various conditions, including approval of
the Tracking Stock Proposal by shareholders of the Company, effectiveness of the
Merger, the negotiation of the other terms of a merger agreement between the
Company and Aerial, approval of the Aerial Merger by the special committee of
the board of directors, the full board of directors and the shareholders of
Aerial and final approval by the Board. The Common Shares of Aerial are
currently traded on the Nasdaq National Market under the symbol "AERL." If the
Aerial Merger is consummated as contemplated, Aerial would become a wholly-owned
subsidiary of the Company and such Common Shares would be delisted from the
Nasdaq National Market. In the Aerial Merger, holders of Common Shares of Aerial
would receive Aerial Group Shares of TDS, which would be listed on the AMEX. If
the Aerial Merger does not take place for any reason, Aerial may not become a
wholly-owned subsidiary of the Company and the Common Shares of Aerial may
continue to be publicly traded. Alternatively, although the Company has no
current plans or intentions to do so, the Company may consider acquiring such
Common Shares of Aerial in an exchange offer for Aerial Group Shares or other
securities, in a tender offer for cash or through open market or private
purchases, or taking other action to acquire some or all of the shares of Aerial
not owned by the Company.
 
                                      -68-
<PAGE>
    On January 5, 1998, Richard Greenfield, who claims to be a holder of Aerial
Common Shares, filed a putative class action complaint on behalf of common
stockholders of Aerial in the Court of Chancery of the State of Delaware in New
Castle County. The complaint names as defendants TDS, Aerial, and the directors
of TDS and Aerial. The complaint alleges a breach of fiduciary duties by the
defendants and seeks to have the Aerial Merger enjoined or, if it is
consummated, to have it rescinded and to recover unspecified damages, fees and
expenses. The defendants have been served with the complaint in this case but
have not yet responded to the complaint. The time for the defendants to respond
has been extended. The timing for a response will be determined based on
discussions between counsel for plaintiffs and defendants, but a response is not
expected to take place for at least one or more months. On February 6, 1998, a
virtually identical complaint was also filed by Jess Colvin. None of the
defendants have been served with this complaint. It is expected that these cases
will be consolidated. The Company intends to vigorously defend against these
lawsuits. However, there can be no assurance that such lawsuits will not have a
material adverse effect on the Company or the transactions contemplated by the
Proxy Statement/Prospectus.
 
    Subject to the effectiveness of the Merger, and after the completion of the
Telecom Public Offering, the U.S. Cellular Merger and the Aerial Merger, the
Board intends to authorize the Distribution of Aerial Group Shares in the form
of a stock dividend to holders of Series A Common Shares and Common Shares. The
Board intends to distribute two-thirds of an Aerial Group Share with respect to
each Common Share and Series A Common Share outstanding on the Distribution
record date. The Distribution will be made to shareholders in proportion to the
number of Common Shares and Series A Common Shares owned on the Distribution
record date.
 
    The aggregate number of Aerial Group Shares proposed to be issued and
distributed pursuant to the Distribution is intended initially to represent 75%
of the common shareholders' equity value of the Company attributable to the
Aerial Group. Accordingly, considering only the Distribution, the TDS Group
would have a Retained Interest in the Aerial Group representing 25% of the
common shareholders' equity value of the Company attributable to the Aerial
Group. The number of Aerial Group Shares deemed to represent 100 percent of the
common shareholders' equity value of the Company attributable to the Aerial
Group is expected to be determined by the Board in connection with the Aerial
Merger. This will be based on the number of outstanding Common Shares and Series
A Common Shares at such time and the distribution ratio.
 
    If all of the Transactions are completed as contemplated, the issued Aerial
Group Shares would initially reflect approximately 80% of the common
shareholders' equity value of the Company attributable to the Aerial Group. The
remaining 20% of the common shareholders' equity value of the Company initially
attributable to the Aerial Group will be retained by the TDS Group as a Retained
Interest. See "--Retained Interests."
 
    The Board reserves the right to effect all or any part of the Distribution
of Aerial Group Shares even if the Telecom Public Offering, the U.S. Cellular
Merger or the Aerial Merger have not been completed, or not to effect all or any
part of the Distribution even if such other Transactions have taken place. The
Board further reserves the right to modify the distribution ratio for the Aerial
Group Shares or to modify the percentage interest to be retained by TDS through
the Retained Interest in the Aerial Group.
 
    The Board currently intends to retain future earnings of the Aerial Group,
if any, for the development of the Aerial Group, and does not anticipate paying
dividends on the Aerial Group Shares in the foreseeable future.
 
                                      -69-
<PAGE>
    The following table shows the Aerial Group Shares that would be issued in
connection with the Aerial Merger and the Distribution considering the exchange
ratio offered by the Company and the intended distribution ratio, and the number
of Aerial Group Shares issuable, authorized for various purposes and available
for issuance (based on shares outstanding at November 30, 1997).
 
<TABLE>
<CAPTION>
                                                                                         PRO FORMA AERIAL GROUP SHARES
                                                                                  -------------------------------------------
                                                                                                   RETAINED
                                                                                   OUTSTANDING     INTEREST         TOTAL
                                                                                  -------------  -------------  -------------
<S>                                                                               <C>            <C>            <C>
Aerial Merger...................................................................     11,453,996             --     11,453,996
Distribution....................................................................     40,540,908     13,513,636     54,054,544
                                                                                  -------------  -------------  -------------
      Pro Forma Initial Shares..................................................     51,994,904     13,513,636     65,508,540
                                                                                  -------------  -------------  -------------
SHARES ISSUABLE TO THIRD PARTIES:
  Committed Acquisition Shares..................................................        378,275       (378,275)      --
  Pre-Distribution Convertible Securities.......................................
    TDS Preferred Shares........................................................        646,017       (646,017)      --
    Existing Plans(1)...........................................................        383,350       (383,350)      --
                                                                                  -------------  -------------  -------------
      Subtotal..................................................................      1,407,642     (1,407,642)      --
                                                                                  -------------  -------------  -------------
ISSUABLE AS A RESULT OF AERIAL MERGER:
  Aerial Employee Plans.........................................................      1,372,275       --            1,372,275
                                                                                  -------------                 -------------
SHARES RESERVED FOR ISSUANCE:
  Existing Plans(1).............................................................        267,084       --              267,804
  1998 Long-Term Incentive Plan(2)..............................................      1,827,725       --            1,827,725
  Tax-Deferred Savings Plan.....................................................        200,000       --              200,000
  Acquisitions..................................................................      2,821,725       --            2,821,725
                                                                                  -------------  -------------  -------------
      Subtotal..................................................................      5,116,534       --            5,116,534
                                                                                  -------------  -------------  -------------
PRO FORMA SHARES ISSUED, ISSUABLE AND RESERVED FOR ISSUANCE.....................     59,891,355     12,105,994     71,997,349
Shares Available for Issuance...................................................     23,002,651       --           23,002,651
                                                                                  -------------  -------------  -------------
      Total Authorized..........................................................     82,894,006     12,105,994     95,000,000
                                                                                  -------------  -------------  -------------
                                                                                  -------------  -------------  -------------
</TABLE>
 
- ------------
 
(1) These shares would be issuable from the Retained Interest.
 
(2) See Proposal 2.
 
(3) See Proposal 3.
 
    Reference is made to Annex IV for a further description of the Aerial Group
and the combined financial statements of the Aerial Group.
 
THE TDS GROUP
 
    Upon the completion of all of the Transactions as contemplated, the Series A
Common Shares and the Common Shares of TDS Delaware would represent an equity
interest in the TDS Group, which would have a Retained Interest of approximately
20% of the common shareholders' equity value of the Company attributable to each
Tracking Group, along with all other interests held by the Company. 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.
 
    The Board intends to adopt a policy providing that the TDS Group may own,
invest or otherwise have an interest in, lease, operate or manage any business
other than a Cellular Business, a Telecom Business or a PCS Business. At the
present time, the TDS Group owns interests in businesses which may be considered
to include such other businesses. The TDS Group will continue to be permitted to
operate these existing businesses. Except with respect to such existing
businesses, the TDS Group will generally not engage in the Cellular Business,
the Telecom Business or the PCS Business, except through the Retained Interests,
unless the Board determines to permit the TDS Group to pursue such
opportunities. This will be done on a case-by-case basis. It is currently the
intention of the Board that any businesses, opportunities, assets and
liabilities attributed to the TDS Group in the future would not include
businesses, opportunities, assets and liabilities of the Cellular Group, the
Telecom Group or the Aerial Group. The Company could determine to pursue future
business opportunities through one Group
 
                                      -70-
<PAGE>
instead of the other Groups, or jointly through more than one of the Groups. The
decision to allocate certain resources and financial support to a Group other
than the TDS Group may adversely affect the ability of the TDS Group to obtain
funds sufficient to implement its business strategies. See "--Management and
Allocation Policies."
 
    The Board expects to adopt a policy pursuant to which the benefits of tax
deductions which cannot be utilized by any Tracking Group would be allocated to
the TDS Group. The TDS Group would be required to compensate such Tracking Group
for such tax benefits at such time as such Tracking Group would be able to
utilize such tax benefits as a stand-alone entity. For example, the TDS Group
will derive the benefits of the tax losses of Aerial until such time as Aerial
would be able to utilize such tax benefits as a stand-alone entity.
 
    In structuring the terms of the Tracking Stock Proposal, the Board
determined that the retention by the TDS Group of Retained Interests in the
Cellular Group, the Telecom Group and the Aerial Group was appropriate. In
making this determination, the Board concluded that it would be desirable for
shareholders to have the option of continuing to maintain a common equity
investment in all of the businesses of the Company and its subsidiaries by
retaining ownership of the Common Shares and Series A Common Shares. The Board
also determined that it would be desirable for the Company to have a Group which
could enter into new ventures and possibly create additional tracking stocks for
such ventures by designating series of Undesignated Shares. Such new shares of
tracking stock could be distributed to the holders of Common Shares and Series A
Common Shares upon the creation or separation of a business, sold for cash in a
public or private offering to finance a new business for the benefit of the TDS
Group or delivered in connection with the acquisition of a business by the TDS
Group. The Company has no current plans to create any additional tracking stocks
or to make any material investments in any new businesses.
 
    Holders of Common Shares and Series A Common Shares will be subject to all
of the risks associated with an investment in the Company and all of its
businesses, assets and liabilities. There is no assurance as to the degree to
which the market value of the Common Shares will reflect the separate
performance of either the TDS Group or its Retained Interests in the Tracking
Groups.
 
    Following the Distribution, the Board currently intends to establish an
annual dividend on the Common Shares and Series A Common Shares in an amount
equal to $0.11 per share (the "TDS Group Dividend Rate"). Following the
Distribution, the Board also intends to establish an annual dividend on the
Telecom Group Shares in an amount equal to $0.50 per share. Based on the
expected distribution ratio of two-thirds of a Telecom Group Share for each
existing Common Share and Series A Common Share, this dividend rate would equate
to a per share annual dividend of $0.33 per existing Common Share and Series A
Common Share (the "Telecom Equivalent Dividend Rate"). The total of the TDS
Group Dividend Rate and the Telecom Equivalent Dividend Rate is equal to $0.44
per share per annum, as compared to the current annual dividend rate on the
existing Common Shares and Series A Common Shares of $0.44 per share. The intent
is that, immediately after the Distribution, a current holder of Common Shares
and Series A Common Shares would continue to receive an aggregate dividend which
is at least equal to the aggregate dividend which such shareholder currently
receives from the Company (not considering reductions in shares which may occur
due to the payment of cash in lieu of fractional shares in the Distribution).
 
    The following table shows the TDS Group Shares that would be issued in the
Merger and the number of TDS Group Shares issuable, authorized for issuance for
various purposes and available for issuance (based on shares outstanding at
November 30, 1997).
 
<TABLE>
<CAPTION>
                                                             SERIES A                           SPECIAL        TOTAL TDS
                                                           COMMON SHARES    COMMON SHARES    COMMON SHARES    GROUP SHARES
                                                          ---------------  ---------------  ---------------  --------------
<S>                                                       <C>              <C>              <C>              <C>
To Be Issued in Merger..................................       6,933,233       53,878,129(1)       --            60,811,362
                                                          ---------------  ---------------  ---------------  --------------
SHARES ISSUABLE TO THIRD PARTIES:
  Committed Acquisition Shares..........................        --                567,412         --                567,412
  Pre-Distribution Convertible Securities
    TDS Preferred Shares................................        --                969,025         --                969,025
    Existing Plans......................................        --                575,026         --                575,026
                                                          ---------------  ---------------  ---------------  --------------
      Subtotal..........................................        --              2,111,463         --              2,111,463
                                                          ---------------  ---------------  ---------------  --------------
</TABLE>
 
                                      -71-
<PAGE>
<TABLE>
<CAPTION>
                                                             SERIES A                           SPECIAL        TOTAL TDS
                                                           COMMON SHARES    COMMON SHARES    COMMON SHARES    GROUP SHARES
                                                          ---------------  ---------------  ---------------  --------------
<S>                                                       <C>              <C>              <C>              <C>
AUTHORIZED FOR ISSUANCE(2):
  Existing Plans(3).....................................        --                400,625         --                400,625
  1998 Long Term Incentive Plan(4)......................        --              1,800,000         --              1,800,000
  Other TDS Benefit Plans...............................        --                361,027         --                361,027
  Acquisitions..........................................        --              1,442,235         --              1,442,235
  Issuance for Cash.....................................        --              1,580,000         --              1,580,000
  Dividend Reinvestment Plan............................         175,567          464,958         --                640,525
                                                          ---------------  ---------------  ---------------  --------------
      Subtotal..........................................         175,567        6,048,845         --              6,224,412
                                                          ---------------  ---------------  ---------------  --------------
PRO FORMA SHARES ISSUED, ISSUABLE AND RESERVED FOR
 ISSUANCE...............................................       7,108,800       62,038,437         --             69,147,237
Shares Available for Issuance...........................      17,891,200       37,961,563       20,000,000       75,852,763
                                                          ---------------  ---------------  ---------------  --------------
      Total Authorized..................................      25,000,000      100,000,000       20,000,000      145,000,000
                                                          ---------------  ---------------  ---------------  --------------
                                                          ---------------  ---------------  ---------------  --------------
</TABLE>
 
- ------------
 
(1) Includes 484,012 shares held by a subsidiary of TDS.
 
(2) Does not include shares authorized for issuance upon conversion of Series A
    Common Shares, based on the assumption that such shares will not be
    converted.
 
(3) See Proposal 2.
 
(4) See Proposal 3.
 
    Reference is made to Annex V for a further description of the TDS Group and
the combined financial statements of the TDS Group.
 
EFFECT OF PRE-DISTRIBUTION CONVERTIBLE SECURITIES AND COMMITTED ACQUISITION
  SHARES
 
    After the Distribution, the Pre-Distribution Convertible Securities
outstanding will be adjusted so that such Pre-Distribution Convertible
Securities will be convertible into, or exercisable or exchangeable for, as the
case may be, immediately after the Distribution, such number of Cellular Group
Shares, Telecom Group Shares and Aerial Group Shares in addition to the Common
Shares such Pre-Distribution Convertible Securities were already convertible
into, exercisable or exchangeable for, as the case may be, as if such
conversion, exercise or exchange had occurred immediately prior to the
Distribution. In addition, pursuant to the provisions of the acquisition
agreements relating to the delivery of Committed Acquisition Shares, after the
Distribution, Common Shares that are issuable as Committed Acquisition Shares
will, immediately upon issuance and without any notice or any other action on
the part of the Company or its Board or otherwise, include Cellular Group
Shares, Telecom Group Shares and Aerial Group Shares in addition to each Common
Share issuable in such acquisition as if such acquisition had occurred
immediately prior to the Distribution. Approval of the Tracking Stock Proposal
will also constitute approval by shareholders of the full adjustment of all
Pre-Distribution Convertible Securities and obligations to deliver Committed
Acquisition Shares as described in this paragraph, including shares reserved for
issuance therefor.
 
    The obligations to deliver shares of common stock upon the conversion,
exercise or exchange of Pre-Distribution Convertible Securities and with respect
to any pre-Distribution Committed Acquisition Shares will be attributed to the
TDS Group. As indicated above, the Pre-Distribution Convertible Securities that
are currently convertible into Common Shares will become convertible into
Cellular Group Shares, Telecom Group Shares and Aerial Group Shares, as well as
Common Shares, as a result of the Distribution, and Committed Acquisition Shares
will require the delivery of Cellular Group Shares, Telecom Group Shares and
Aerial Group Shares, as well as Common Shares, as a result of the Distribution.
If and when such Pre-Distribution Convertible Securities are converted,
exercised or exchanged, or upon the delivery of Committed Acquisition Shares,
the shares to be issued upon such conversion, exercise, exchange or delivery
will be issued from the Retained Interest of the TDS Group, or from authorized
but unissued Cellular Group Shares, Telecom Group Shares and Aerial Group
Shares, provided that if shares of any Tracking Stock are issued from authorized
but unissued shares for such purposes, the TDS Group will be charged, and such
other Groups will be credited, with an amount equal to the product of the number
of shares of Tracking Stock of such Groups which are issued upon such
conversion, exercise, exchange or delivery, and the Market Value of one share of
such Tracking Stock over the twenty-Trading Day period ending five Trading Days
prior to the issuance of such shares. The consideration received by the Company
upon the conversion, exercise or exchange of any Pre-Distribution Convertible
Securities and with respect to the issuance of Committed Acquisition Shares will
be attributed to the TDS Group. If any such consideration attributed to the TDS
Group which
 
                                      -72-
<PAGE>
is received in connection with the delivery of pre-Distribution Committed
Acquisition Shares includes assets related to the Cellular Business, the Telecom
Business or the Aerial Business, the TDS Board may cause the TDS Group to
transfer such assets to the appropriate Tracking Group in consideration for an
increase in the Number of Shares Issuable with Respect to Retained Interest or
other consideration.
 
DESCRIPTION OF ARTICLES OF INCORPORATION OF TDS IOWA
 
    The Articles of Incorporation of the Company, as amended (the "Articles"),
provide that the authorized capital stock consists of 100,000,000 Common Shares,
$1.00 par value, 25,000,000 Series A Common Shares, $1.00 par value, and
5,000,000 Preferred Shares, without par value.
 
    PREFERRED SHARES.  The Board is authorized by the Articles to issue
Preferred Shares from time to time in series and to establish as to each series
the designation and number of shares to be issued, the dividend rate, the
redemption price and terms, if any, the amount payable upon voluntary or
involuntary dissolution of TDS, sinking fund provisions, if any, voting rights,
if any, and the terms of conversion into Common Shares, if provided for. The
current number of authorized Preferred Shares is 5,000,000, of which 296,664
were issued and 30,000 shares were issuable as of November 30, 1997.
 
    VOTING RIGHTS.  The Articles provide that the Board is divided into three
classes. Each class is elected for a three-year term. With respect to the
election of directors, the holders of Common Shares, and the holders of
Preferred Shares issued before October 31, 1981 (all of which have voting
rights), voting as a group, are entitled to elect 25% of the Board of TDS,
rounded up to the nearest whole number. The holders of Series A Common Shares,
and the holders of Preferred Shares issued after October 31, 1981 which have
voting rights, voting as a group, currently elect the remaining members of the
Board of TDS. The Board currently consists of twelve directors. Accordingly, the
holders of Common Shares and the holders of Preferred Shares issued before
October 31, 1981 currently elect three directors and the holders of Series A
Common Shares and Preferred Shares issued after October 31, 1981 which have
voting rights, currently elect nine directors. There is no provision in the
Articles permitting cumulative voting.
 
    The holders of Common Shares and all currently outstanding series of
Preferred Shares are entitled to one vote per share. The holders of Series A
Common Shares are entitled to ten votes per share. The holders of Common Shares,
Series A Common Shares and Preferred Shares which have voting rights vote as a
single class, except with respect to the election of directors as discussed
above and with respect to certain amendments to the Articles (E.G., amendments
having an effect on the holders of a class), as to which the IBCA grants class
voting rights.
 
    If the number of Series A Common Shares issued and outstanding at any time
falls below 500,000, because of the conversion of Series A Common Shares or
otherwise, the holders of Series A Common Shares would lose the right to vote as
a separate class (with the holders of Preferred Shares issued after October 31,
1981 which have voting rights) in the election of approximately 75% of the
directors, and thereafter the holders of Series A Common Shares (with ten votes
per share) would vote with the holders of Common Shares (with one vote per
share) and all Preferred Shares which have voting rights, as a single class in
the election of directors. It is unlikely that the number of outstanding Series
A Common Shares will fall below 500,000, because more than 6,000,000 Series A
Common Shares are held in the TDS Voting Trust, and the trustees of the TDS
Voting Trust have indicated that they have no present intention of converting
Series A Common Shares into Common Shares.
 
    DIVIDENDS.  Subject to the satisfaction of all Preferred Share dividend
preference and redemption provisions, holders of Common Shares are entitled to
receive such dividends as may be declared from time to time by the Board. Unless
the same, or greater, dividends, on a per share basis, are declared and paid at
the same time on the Common Shares, no dividends may be declared or paid on the
Series A Common Shares.
 
    SHARE DIVIDENDS.  In the case of share dividends, the Articles provide that
Common Shares may be paid to holders of Common Shares and proportionately to
holders of Series A Common Shares; Series A Common Shares may be paid to holders
of Common Shares and proportionately to holders of Series A Common Shares; and
Common Shares may be paid to holders of Common Shares and Series A Common Shares
may be paid proportionately to holders of Series A Common Shares. The Board is
authorized to permit both the holders of Common Shares and Series A Common
Shares to elect to receive cash in lieu of stock.
 
    DISTRIBUTION OF SUBSIDIARY IN DIVIDEND OR LIQUIDATION.  The Articles provide
that if a TDS subsidiary has classes of capital stock with relative rights,
preferences and limitations vis-a-vis each other that, in the judgment of the
Board, are similar in all material respects to the relative rights, preferences
and limitations of the Common
 
                                      -73-
<PAGE>
Shares vis-a-vis the Series A Common Shares, except for certain limited matters,
then the Board will distribute the subsidiary shares in a dividend or upon
liquidation to the extent practicable by distributing the subsidiary shares
which correspond to the Common Shares, to the holders of Common Shares, and the
subsidiary shares which correspond to the Series A Common Shares, to the holders
of Series A Common Shares, provided that the same number of shares of subsidiary
common stock on a combined basis must be distributed per Series A Common Share
and Common Share.
 
    LIQUIDATION.  Upon liquidation, holders of Common Shares and Series A Common
Shares are entitled to receive a pro rata share of all assets available to
shareholders after payment to holders of the Preferred Shares of the liquidation
value thereof, plus a sum equal to the amount of all accumulated and unpaid
dividends thereon at the dividend rate fixed for each series of cumulative
Preferred Shares by the Board, except as discussed above with respect to the
distribution of a subsidiary in liquidation.
 
    PREEMPTIVE RIGHTS.  The holders of Series A Common Shares have a preemptive
right to purchase any additional Series A Common Shares sold for cash, including
treasury shares. Holders of Common Shares and Preferred Shares have no
preemptive rights under the Articles.
 
    CONVERSION RIGHTS.  The Common Shares have no conversion rights. The Series
A Common Shares are convertible, on a share-for-share basis, into Common Shares.
 
    CONSIDERATION OF COMMUNITY INTERESTS IN ACQUISITION PROPOSALS.  Article IX
of the Iowa Articles provides that, when evaluating any offer of another party
to (i) make a tender or exchange offer for any equity of the Company; (ii) merge
or consolidate the Company with another corporation; or (iii) purchase or
otherwise acquire all or substantially all of the properties and assets of the
Company, the Board may, in connection with the exercise of its judgment in
determining what is in the best interests of the Company and its shareholders,
give due consideration to all factors the directors deem relevant, including,
without limitation, (a) the effects on the customers of the Company or any of
its subsidiaries, (b) not only the consideration being offered in relation to
the then current market price for the Company's outstanding shares of capital
stock, but also the Board's estimate of the future value of the Company
(including the unrealized value of its properties and assets) as an independent
going concern, and (c) the purpose of the Company and any of its subsidiaries to
provide quality products and services on a long-term basis.
 
DESCRIPTION OF RESTATED CERTIFICATE OF INCORPORATION OF TDS DELAWARE
 
    The Restated Certificate will authorize 475,000,000 shares of capital stock,
to consist of 326,664 Preferred Shares, par value $0.01 per share, 4,673,336
Undesignated Shares, par value $0.01 per share, 25,000,000 Series A Common
Shares, par value $0.01 per share, 100,000,000 Common Shares, par value $0.01
per share, 20,000,000 Special Common Shares, par value $0.01 per share,
90,000,000 Telecom Group Shares, par value $0.01 per share, 140,000,000 Cellular
Group Shares, par value $0.01 per share, and 95,000,000 Aerial Group Shares, par
value $0.01 per share. The numbers of Preferred Shares and Undesignated Shares
is estimated based on the number of Iowa Preferred Shares which are issued and
issuable on November 30, 1997. The actual numbers will be based on the number of
Iowa Preferred Shares which will be outstanding shortly prior to the Merger. The
total of the Preferred Shares and Undesignated Shares will equal 5,000,000. The
following describes the terms of the capital stock under the Restated
Certificate in comparison to the Articles in general terms. In addition, the
terms of the Tracking Stock are described in greater detail below under
"--Description of Terms of Tracking Stock."
 
    PAR VALUE.  The par value per share of each class of common stock will be
changed from $1.00 under the Articles to $.01 and the par value per share of the
Preferred Shares will be changed from no par value to par value of $.01 per
share. This is being done solely for the purposes of reducing the amount of
Delaware filing fees TDS Delaware will be required to pay in connection with the
reincorporation.
 
    AUTHORIZED SHARES.  The following table shows, with respect to each class of
capital stock, the number of shares which would be issued in the Merger, the
Distribution and the other Transactions as contemplated, the number of shares
which would be reserved for issuance for certain purposes and the number of
shares which
 
                                      -74-
<PAGE>
would be available for issuance for other proper corporate purposes, of the
shares of common stock (based on shares outstanding as of November 30, 1997).
 
<TABLE>
<CAPTION>
                                                  SERIES A                 SPECIAL     CELLULAR     TELECOM      AERIAL
                                                   COMMON      COMMON       COMMON       GROUP       GROUP       GROUP
                                                   SHARES      SHARES       SHARES      SHARES       SHARES      SHARES
                                                 ----------  -----------  ----------  -----------  ----------  ----------
<S>                                              <C>         <C>          <C>         <C>          <C>         <C>
Issued in Merger...............................   6,933,233   53,878,129(1)
Issued in Distribution.........................      --          --           --       60,811,362  40,540,908  40,540,908
Issued in Other Transactions(2)................      --          --           --       18,897,187  13,500,000  11,453,996
                                                 ----------  -----------  ----------  -----------  ----------  ----------
  Pro Forma Outstanding........................   6,933,233   53,878,129      --       79,708,549  54,040,908  51,994,904
Shares Issuable by TDS to Third Parties(3).....      --        2,111,463      --        2,111,463   1,407,642   1,407,642
Shares Issuable Due to Other Transactions(2)...      --          --           --        8,801,503      --       1,372,275
Reserved for Issuance..........................     175,567    6,048,845      --        7,291,826   5,913,809   5,116,534
Available for Issuance.........................  17,891,200   37,961,563  20,000,000   23,927,668  16,531,647  23,002,651
Retained Interest(4)...........................      --          --           --       18,158,991  12,105,994  12,105,994
                                                 ----------  -----------  ----------  -----------  ----------  ----------
  Total Authorized.............................  25,000,000  100,000,000  20,000,000  140,000,000  90,000,000  95,000,000
                                                 ----------  -----------  ----------  -----------  ----------  ----------
                                                 ----------  -----------  ----------  -----------  ----------  ----------
</TABLE>
 
- ------------
 
(1) Includes 484,012 shares held by a subsidiary of the Company.
 
(2) The other Transactions include the U.S. Cellular Merger, the Aerial Merger
    and the Telecom Public Offering.
 
(3) Represents shares issuable as Committed Acquisition Shares and pursuant to
    Pre-Distribution Convertible Securities.
 
(4) Net of shares issuable from Retained Interest
 
    In addition, there would be authorized and issued 326,664 Preferred Shares,
and there would be authorized and available for issuance 4,673,000 Undesignated
Shares, based on Preferred Shares issued and issuable as of November 30, 1997.
The actual number of Preferred Shares and Undesignated Shares to be included in
the Restated Certificate will be based on the number of Iowa Preferred Shares
which are outstanding shortly prior to the Merger. The total of the Preferred
Shares and Undesignated Shares will equal 5,000,000, which is the number of Iowa
Preferred Shares which are authorized under the Articles.
 
    The shares proposed to be authorized pursuant to the Restated Certificate
are necessary to implement the Tracking Stock Proposal and the related
Transactions. Although most of the shares of Tracking Stock being authorized
would be issued in the Transactions, the Tracking Stock Proposal would authorize
a greater number of shares than is required for the Transactions as well as
authorize Special Common Shares. The Board of TDS believes that it is desirable
to have the additional authorized shares of common stock available for future
financing and acquisition transactions, for conversions and for other general
corporate purposes. Having such additional authorized shares of common stock
available for issuance in the future will give TDS greater flexibility and may
allow such shares to be issued without the expense and delay of a special
shareholders' meeting. Unissued shares of common stock could be issued in
circumstances that would serve to preserve control of TDS's then existing
management. See "Risk Factors."
 
    The authorized but unissued shares of capital stock would be available for
issuance by the Company from time to time, as determined by the Board, for any
proper corporate purpose, which could include raising capital, payment of stock
dividends, stock splits, providing compensation or benefits to employees, or
acquiring or investing in other companies or businesses. Generally, no further
action or authorization by the shareholders would be necessary prior to the
issuance of the additional shares of the Tracking Stocks or any other shares of
capital stock authorized pursuant to the Tracking Stock Proposal unless
applicable laws or regulations would require such approval in a given instance.
The Company has no current plans to issue any shares of Tracking Stock except in
connection with the Transactions and as otherwise described herein. The Special
Common Shares are being authorized in connection with the possible future
conversion of shares of any class of Tracking Stock, as discussed herein. The
Board has no current plans or intentions to convert any shares of Tracking Stock
or to issue any Special Common Shares.
 
    INCREASES IN AUTHORIZED SHARES.  As permitted by Delaware law, the Restated
Certificate will permit the number of authorized shares of any class of capital
stock to be increased or decreased (but not below the number of shares then
outstanding in such class, respectively) by the affirmative vote of the holders
of a majority of the shares of capital stock of the Company entitled to vote
with respect to matters other than the election of directors. No similar
authority exists under Iowa law. This provision in the Restated Certificate will
give the Company increased flexibility to authorize additional shares of any
class of capital stock for use for any corporate purpose, without the need to
obtain the approval of a majority of the affected class or classes (as is the
case under Iowa law), by obtaining the approval of the holders of a majority of
the voting power of the shares of capital stock of the Company
 
                                      -75-
<PAGE>
entitled to vote with respect to matters other than the election of directors,
voting as a single group. The TDS Voting Trust presently holds a majority of the
voting power of the Company.
 
    This provision may allow TDS Delaware to authorize and issue shares of
capital stock under circumstances which could preserve the ability of the TDS
Voting Trust to continue to exercise control over a majority of the voting power
of TDS Delaware and, therefore, could deprive shareholders of TDS of an
opportunity to sell their shares at a premium over market prices or make it more
difficult to replace the current Board and management of TDS Delaware. See "Risk
Factors." The TDS Voting Trust has no current intention to take any action to
authorize any additional shares of capital stock, other than as described
herein.
 
    ISSUED PREFERRED SHARES; REDESIGNATION OF AUTHORIZED BUT UNISSUED PREFERRED
SHARES.  The Articles presently authorize 5,000,000 Preferred Shares, of which
326,664 are issued and issuable, and 4,673,336 are authorized but unissued and
available for issuance as of November 30, 1997. The Restated Certificate will
authorize up to 326,664 Preferred Shares, having substantially the same rights,
limitations and privileges as the issued Preferred Shares, except as described
herein. As a result of the Distribution, the outstanding Preferred Shares which
are convertible into Common Shares will be adjusted so that such convertible
Preferred Shares will be convertible into Cellular Group Shares, Telecom Group
Shares and Aerial Group Shares in addition to the Common Shares as if such
shares had been converted immediately prior to such action.
 
    All obligations with respect to the issued Preferred Shares will be
attributed to the TDS Group. As indicated above, the Preferred Shares which are
currently convertible into Common Shares will become convertible into Cellular
Group Shares, Telecom Group Shares and Aerial Group Shares, as well as Common
Shares, as a result of the Distribution. If and when such Preferred Shares are
converted, the shares to be issued upon such conversion will be issued either
from the Retained Interest, or from authorized but unissued Cellular Group
Shares, Telecom Group Shares and Aerial Group Shares, as the case may be,
provided that, if such shares are issued from authorized but unissued shares,
the TDS Group will be charged, and such other Groups will be credited, with an
amount equal to the product of the number of shares of Tracking Stock of such
Groups which are issued upon conversion and the Market Value of one share of
such Tracking Stock over the twenty-Trading Day period ending five Trading Days
prior to the issuance of such shares.
 
    The Restated Certificate would reclassify all of the authorized but unissued
Preferred Shares (4,673,336 as of November 30, 1997) as Undesignated Shares. The
Board would be authorized by the Restated Certificate to designate and issue
Undesignated Shares in one or more classes or series of preferred or common
stock from time to time, and to establish as to each class or series the
designation and number of shares to be issued, the dividend rate, the redemption
price and terms, if any, the amount payable upon voluntary or involuntary
dissolution of TDS, sinking fund provisions, if any, voting rights, if any, the
terms of conversion into shares of common stock, if provided for, and such other
rights, preferences or limitations as may be provided in such designation. The
Undesignated Shares will thereafter be available for designation and issuance as
common or preferred stock from time to time for any proper corporate purpose,
including issuances for cash, acquisitions, stock splits, stock dividends, stock
option plans and funding of employee benefit plans. Generally, no further action
or authorization by the shareholders would be necessary prior to the designation
or issuance of the additional Undesignated Shares authorized pursuant to the
Restated Certificate unless applicable laws or regulations would require such
approval in a given instance. Having such additional authorized shares of stock
available for designation and issuance in the future will give TDS greater
flexibility and may allow such shares to be issued without the expense and delay
of a special shareholders' meeting. Shares of common or preferred stock could be
issued in circumstances that would serve to preserve control of TDS's then
existing management. See "Risk Factors."
 
    The reclassification of the authorized but unissued Preferred Shares as
Undesignated Shares would continue to permit classes or series of preferred
stock to be designated and issued, and would also permit classes or series of
common stock to be designated and issued to track new businesses or to separate
existing businesses by any of the Groups. For instance, shares of tracking stock
could be designated and issued for the benefit of the TDS Group. Such new shares
of tracking stock could be distributed to the holders of Common Shares and
Series A Common Shares upon the creation or separation of a business, sold for
cash in a public or private offering to finance a new business for the benefit
of the TDS Group or delivered in connection with the acquisition of a business
by the TDS Group. Undesignated Shares could also be designated with respect to
any other Group. For instance, a series of Undesignated Shares could be
designated to represent the cellular telephone markets in which U.S. Cellular
has a minority interest. These shares could then be sold for cash to obtain
additional funds for the Cellular Group or distributed on a pro rata basis to
the holders of Cellular Group Shares. The Company has no current plans to create
any additional tracking stocks or to make any material investments in any new
businesses.
 
                                      -76-
<PAGE>
    Any future designation and issuance of Undesignated Shares as preferred or
common stock will be attributed to one or more of the Groups as may be
determined by the Board at such time, taking into consideration the use of the
proceeds of the issuance of such shares and any other relevant factors.
 
    VOTING RIGHTS.  The Restated Certificate continues to provide that the Board
will be divided into three classes and that each class will be elected for a
three-year term. Each director of TDS Iowa at the time of the Merger will
continue as a director of TDS Delaware of the same class immediately following
the Merger.
 
    In the election of directors, the holders of Preferred Shares issued before
October 31, 1981 and Common Shares would vote together with the holders of
Tracking Stocks and any issued Special Common Shares, in the election of 25% of
the directors (rounded up) plus one additional director (or four directors based
on a Board of twelve directors). The Preferred Shares issued before October 31,
1981 and Common Shares would have one vote per share in the election of such
directors and all other matters (other than the election of the directors
described in the following paragraph). Accordingly, the holders of Preferred
Shares issued before October 31, 1981 and Common Shares would have the power to
vote in the election of one additional director in addition to the directors
which they currently elect.
 
    The Tracking Stocks would have no votes except in the election of such
directors and as otherwise required by law. In the election of such directors,
each class of Tracking Stock would initially have one vote per share.
Thereafter, the number of votes which shares of each class of Tracking Stock
would have in the election of such directors would be adjusted or "float" based
on the Market Capitalization of such class as compared to the aggregate Market
Capitalization of all shares of Tracking Stock and the Common Shares and
Preferred Shares issued before October 31, 1981, calculated over a
twenty-Trading Day period ending ten Trading Days prior to the record date for
each annual meeting of shareholders. See "--Description of Terms of Tracking
Stock--Voting Rights." After adjustment of the voting power to reflect the
relative market values, it is expected that the Cellular Group Shares would
initially have more than one vote per share and that the Telecom Group Shares
and Aerial Group Shares would have approximately one vote per share based on
presently anticipated market values, although this may change over time.
 
    Under the Tracking Stock Proposal, the holders of Preferred Shares issued
after October 31, 1981 and Series A Common Shares would vote in the election of
75% of the directors (rounded down), less one director. Based on a Board of
twelve directors, the Series A Group would vote in the election of eight
directors, as compared to nine directors currently. Each of the currently
outstanding Preferred Shares issued after October 31, 1981 would continue to
have one vote and Series A Common Shares would continue to have ten votes per
share in the election of such directors, as well as all other matters (other
than the election of the directors elected by the voting group described in the
preceding paragraph).
 
    If the number of Series A Common Shares issued and outstanding at any time
falls below 500,000, because of the conversion of Series A Common Shares or
otherwise, the holders of Series A Common Shares would lose the right to vote as
a separate class (with the holders of Preferred Shares issued after October 31,
1981 which have voting rights) in the election of approximately 75% of the
directors less one director, and thereafter the holders of Series A Common
Shares (with ten votes per share) would vote with the holders of all other
classes of capital stock as a single class in the election of all directors. In
such election, holders of Common Shares and any issued Special Common Shares
would have one vote per share, holders of Tracking Stock would have per share
voting rights which would float, as discussed above, and Preferred Shares would
have the voting rights specified in the Restated Certificate or designation. It
is unlikely that the number of outstanding Series A Common Shares will fall
below 500,000, because more than 6,000,000 Series A Common Shares are held in
the TDS Voting Trust, and the trustees of the TDS Voting Trust have indicated
that they have no present intention of converting Series A Common Shares into
Common Shares.
 
    Actions submitted to a vote of shareholders other than the election of
directors will generally be voted on only by holders of Common Shares, Series A
Common Shares and series of Preferred Shares which have voting rights. Under the
Restated Certificate, except as required under the DGCL, only the affirmative
vote of the holders of a majority of the outstanding voting power of the Common
Shares, Series A Common Shares and such voting Preferred Shares, voting as a
group, will be required to amend the Restated Certificate, approve any merger or
consolidation of TDS with or into any other corporation, approve the dissolution
of TDS or approve any other matter required to be voted on by shareholders.
 
    Under Delaware law, the holders of the outstanding shares of a class are
entitled to vote as a class upon a proposed amendment, whether or not entitled
to vote thereon by the certificate of incorporation, if the amendment would
increase or decrease the par value of the shares of such class or alter or
change the powers, preferences or
 
                                      -77-
<PAGE>
special rights of the shares of such class so as to affect them adversely. As
discussed above, the Restated Certificate will permit the number of authorized
shares of any class of capital stock to be increased or decreased (but not below
the number of shares then outstanding in such class, respectively) by the
affirmative vote of a majority of the voting power of the shares of capital
stock entitled to vote with respect to matters other than the election of
directors, without a class vote of the affected class.
 
    DIVIDENDS.  Subject to the satisfaction of all Preferred Share dividend
preference and redemption provisions, holders of common stock are entitled to
receive such dividends as may be declared from time to time by the Board.
 
    Dividends on each of the Common Shares, the Series A Common Shares and any
issued Special Common Shares would be payable out of the lesser of assets of the
Company legally available therefor and the Available Dividend Amount for the TDS
Group. See "--Certain Definitions." Dividends on each class of Tracking Stock
would be payable out of the lesser of assets of the Company legally available
therefor and the Available Dividend Amount related to that Tracking Group, which
is intended to be similar to the product of the Outstanding Interest Fraction
and the amount that would be legally available for the payment of dividends on
the particular Tracking Stock under the DGCL if that Tracking Group were a
separate Delaware corporation. See "--Description of Terms of Tracking Stock."
 
    Subject to the provisions in the preceding paragraph, notwithstanding the
Available Dividend Amount for any Group, the respective amounts of prior
dividends paid on, or liquidation rights of any shares of common stock, or any
other factor, dividends may be declared and paid with respect to any class or
series of common stock in equal or unequal amounts, provided that, except as
described below, unless the same dividends, on a per share basis, are declared
and paid at the same time on any issued Special Common Shares, no dividends may
be declared or paid on the Common Shares and, unless the same, or greater,
dividends, on a per share basis, are declared and paid at the same time on the
Common Shares and any issued Special Common Shares, no dividends may be declared
or paid on the Series A Common Shares.
 
    Any decision to pay dividends in the future will depend on the financial
condition, results of operations and business requirements of the Company as a
whole. In making a determination as to the allocation of any future dividends
among the classes or series of common stock, the Board expects to follow a
policy under which it will consider, among other factors, the relative financial
condition, results of operations and business requirements of the respective
Groups. See "Dividend Policy."
 
    Following the Distribution, the Board currently intends to establish an
annual dividend on the Common Shares and Series A Common Shares in an amount
equal to $0.11 per share (the "TDS Group Dividend Rate"). Following the
Distribution, the Board also intends to establish an annual dividend on the
Telecom Group Shares in an amount equal to $0.50 per share. Based on the
expected distribution ratio of two-thirds of a Telecom Group Share for each
existing Common Share and Series A Common Share, this dividend rate would equate
to a per share annual dividend of $0.33 per existing Common Share and Series A
Common Share (the "Telecom Equivalent Dividend Rate"). The total of the TDS
Group Dividend Rate and the Telecom Equivalent Dividend Rate is equal to $0.44
per share per annum, which is the same as the current annual dividend rate on
the existing Common Shares and Series A Common Shares. The intent is that,
immediately after the Distribution, a current holder of Common Shares and Series
A Common Shares who retains the Telecom Group Shares received in the
Distribution would continue to receive an aggregate dividend which is at least
equal to the aggregate dividend which such shareholder currently receives from
the Company (not considering reductions in shares which may occur due to the
payment of cash in lieu of fractional shares in the Distribution).
 
    With regard to the Cellular Group Shares and the Aerial Group Shares, the
Board currently intends to retain future earnings of the Cellular Group and
Aerial Groups, if any, for the development of the businesses of the Cellular
Group and Aerial Group, respectively, and does not anticipate paying dividends
on the Cellular Group Shares or the Aerial Group Shares in the foreseeable
future.
 
    SHARE DISTRIBUTIONS.  In the case of dividends of shares of capital stock of
the Company, the Restated Certificate provides that shares of common stock (or
in each case, Convertible Securities convertible into or exercisable or
exchangeable for such common stock) may be distributed only as follows:
 
    (i) Common Shares may be distributed on an equal per share basis to holders
of Common Shares and holders of Series A Common Shares, and Special Common
Shares may be distributed on an equal per share basis to holders of Special
Common Shares;
 
                                      -78-
<PAGE>
    (ii) Series A Common Shares may be distributed on an equal per share basis
to holders of Common Shares and holders of Series A Common Shares, and Special
Common Shares may be distributed on an equal per share basis to holders of
Special Common Shares;
 
    (iii) Common Shares may be distributed on an equal per share basis to
holders of Common Shares, Series A Common Shares may be distributed on an equal
per share basis to holders of Series A Common Shares and Special Common Shares
may be distributed on an equal per share basis to holders of Special Common
Shares;
 
    (iv) Special Common Shares may be distributed on an equal per share basis to
holders of Series A Common Shares, Common Shares and Special Common Shares;
 
    (v) shares of any class of Tracking Stock may be distributed on an equal per
share basis to the holders of Common Shares, Series A Common Shares and Special
Common Shares up to the amount of the Number of Shares Issuable with Respect to
Retained Interest in such shares of Tracking Stock;
 
    (vi) Cellular Group Shares may be distributed pro rata to the holders of
Cellular Group Shares, in which case the Number of Shares Issuable with Respect
to Retained Interest and the Number of Shares Issuable with Respect to
Inter-Group Interest (if any) in the Cellular Group would also be
proportionately adjusted;
 
    (vii) Telecom Group Shares may be distributed pro rata to the holders of
Telecom Group Shares, in which case the Number of Shares Issuable with Respect
to Retained Interest and the Number of Shares Issuable with Respect to
Inter-Group Interest (if any) in the Telecom Group would also be proportionately
adjusted;
 
    (viii) Aerial Group Shares may be distributed pro rata to the holders of
Aerial Group Shares, in which case the Number of Shares Issuable with Respect to
Retained Interest and the Number of Shares Issuable with Respect to Inter-Group
Interest (if any) in the Aerial Group would also be proportionately adjusted;
 
    (ix) shares of a new class or series of capital stock which is intended to
represent a subdivision or new business of a Group, or any assets attributed by
the Board to such Group, may be distributed on an equal per share basis to
holders of common stock representing an interest in such Group; or
 
    (x) shares of Tracking Stock of the Tracking Group (the "Issuer Group") may
be distributed to the holders of shares of Tracking Stock of another Tracking
Group (the "Investor Group") up to the amount of the Number of Shares Issuable
with Respect to Inter-Group Interest attributed to the Investor Group in the
Issuer Group.
 
    Holders of Tracking Stock may not receive any TDS Group Shares as a dividend
since a Tracking Group may not have an Inter-Group Interest in the TDS Group.
The Board is authorized to permit the holders of common stock to elect to
receive cash in lieu of stock.
 
    DISTRIBUTION OF TDS GROUP SUBSIDIARY IN DIVIDEND.  The Restated Certificate
provides that if the Board intends to distribute a subsidiary included in the
TDS Group to the holders of shares of the Company in a dividend, the Board
shall, to the extent practicable, distribute subsidiary shares corresponding to
Series A Common Shares to the holders of Series A Common Shares, distribute
subsidiary shares corresponding to Common Shares to the holders of Common
Shares, and distribute subsidiary shares corresponding to Special Common Shares
to the holders of Special Common Shares, provided that the same number of shares
of subsidiary common stock on a combined basis must be distributed for each
Series A Common Share, Common Share and any issued Special Common Share. Holders
of Tracking Stock will not be entitled to participate in a distribution of any
shares of a subsidiary in a dividend or otherwise which is attributable to the
TDS Group, since a Tracking Group may not hold an Inter-Group Interest in the
TDS Group.
 
    The Restated Certificate provides that, if practicable, the Board must
recapitalize such subsidiary through an amendment to its charter or otherwise,
so that the shares of capital stock of such subsidiary substantially correspond
to the Series A Common Shares, Common Shares and Special Common Shares of the
Company, as may be determined to be necessary or appropriate in the sole
discretion of the Board, in order to permit the distribution to be effected in
the foregoing manner. The Restated Certificate provides further that, if Special
Common Shares are outstanding but the subsidiary has no shares corresponding to
Special Common Shares and it is impracticable to recapitalize the subsidiary as
provided in the preceding sentence, the Board must distribute subsidiary shares
corresponding to Common Shares to the holders of Special Common Shares.
 
    DISTRIBUTION OF TRACKING GROUP SUBSIDIARY IN DIVIDEND.  The Restated
Certificate provides that if the Board intends to distribute a subsidiary
included in a Tracking Group other than a Qualifying Subsidiary or Qualifying
Subsidiaries (See "--Certain Definitions") which hold all of the assets and
liabilities of a Tracking Group to the holders of shares of Tracking Stock of
such Tracking Group in a dividend, and if there is a Retained Interest in such
 
                                      -79-
<PAGE>
Tracking Group, the Board shall, to the extent practicable, distribute
subsidiary shares corresponding to Special Common Shares to the holders of
Tracking Stock of such Tracking Group with respect to the outstanding shares of
such Tracking Group. Holders of TDS Group Shares and shares of any other
Tracking Stock will not be entitled to participate in such distribution of any
shares of a subsidiary in a dividend or otherwise which is attributable to
another class of Tracking Stock, except with respect to a Retained Interest by
the TDS Group or an Inter-Group Interest by another Tracking Group. The
subsidiary shares relating to any Retained Interest or Inter-Group Interest may
be retained by the Company for the benefit of the TDS Group or the other
Tracking Group, respectively, or distributed pro rata to the holders of the TDS
Group Shares or the applicable Tracking Stock, at the sole discretion of the
Board.
 
    If the Board determines to distribute subsidiary shares with respect to such
a Retained Interest or Inter-Group Interest, it must, to the extent practicable,
distribute subsidiary shares corresponding to Special Common Shares to the
holders of Tracking Stock of another Tracking Group with respect to any such
Inter-Group Interest, and distribute subsidiary shares corresponding to Series A
Common Shares to the holders of Series A Common Shares, subsidiary shares
corresponding to Common Shares to the holders of Common Shares, and subsidiary
shares corresponding to Special Common Shares to the holders of Special Common
Shares with respect to any Retained Interest in such Tracking Group, provided
that the same number of shares of subsidiary common stock on a combined basis
must be distributed for each Series A Common Share, Common Share and any issued
Special Common Share.
 
    The Restated Certificate provides that, if practicable, the Board must
recapitalize such subsidiary through an amendment to its charter or otherwise,
so that the shares of capital stock of such subsidiary and the relative rights,
limitations and preferences thereof substantially correspond to the Series A
Common Shares, Common Shares and Special Common Shares of the Company and their
relative rights, limitations and preferences, as may be determined to be
necessary or appropriate in the sole discretion of the Board, in order to permit
the distribution to be effected in the foregoing manner. The Restated
Certificate provides further that, if the subsidiary has no shares corresponding
to Special Common Shares and it is impracticable to recapitalize the subsidiary
as provided in the preceding sentence, the Board must distribute subsidiary
shares corresponding to Common Shares to the holders of Special Common Shares
and to holders of Tracking Stock who would otherwise be entitled to receive
subsidiary shares corresponding to Special Common Shares.
 
    LIQUIDATION RIGHTS.  Subject to the following paragraph, in the event of a
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, after payment or provision for payment of the debts and other
liabilities of the Company and subject to the prior payment in full of the
preferential amounts to which any class or series of Preferred Shares or
Undesignated Shares is entitled, the holders of the outstanding shares of common
stock will be entitled to receive the remaining assets of the Company,
regardless of the Group to which such assets are attributed, divided among the
holders of common stock in accordance with the per share "Liquidation Units"
attributable to each class of Common Stock. Each Series A Common Share, Common
Share and Special Common Share is attributed one Liquidation Unit, each Cellular
Group Share is attributed 2.5 Liquidation Units, each Telecom Group Share is
attributed 0.9 of a Liquidation Unit and each Aerial Group Share is attributed
1.1 Liquidation Units. The Liquidation Units per share were determined by the
Board in consultation with the Financial Advisors, based on the anticipated
initial trading ranges of the shares of common stock and other factors. The
Liquidation Unit of each class or series of common stock will be adjusted by the
Board as appropriate to reflect equitably any subdivision (by stock split or
otherwise) or combination (by reverse stock split or otherwise) of such class of
common stock or any dividend or other distribution of shares with respect to
such class of common stock. Whenever a change in the Liquidation Units with
respect to any class or series of common stock occurs, the Company will prepare
and distribute a notice of such change to all holders of shares of such class or
series of common stock, together with a notice of such stock split, reverse
split, distribution or other transaction requiring such change.
 
    Prior to the distribution of the remaining assets of the Company as set
forth in the preceding paragraph, the Board may redeem all shares of Tracking
Stock of all Tracking Groups in exchange for shares of a Qualifying Subsidiary
or Qualifying Subsidiaries holding all of the assets and liabilities of the
related Tracking Group, as described under "--Redemption in Exchange for Stock
of Subsidiary." In such event, all shares of Tracking Stock would be redeemed
immediately prior to the liquidation, dissolution or winding-up and the Series A
Common Shares, Common Shares and any issued Special Common Shares would share
pari passu in any assets remaining for distribution after such redemptions.
 
    A consolidation, merger, or reorganization of the Company with any other
corporation or corporations, or a sale of all or substantially all of the assets
of the Company, will not be considered a dissolution, liquidation, or winding up
of the Company within the meaning of these provisions.
 
                                      -80-
<PAGE>
    CONVERSION RIGHTS.  None of the Common Shares, Cellular Group Shares,
Telecom Group Shares, Aerial Group Shares nor Special Common Shares will be
convertible at the option of the holder into another class of common stock or
any other security of TDS. The Series A Common Shares will continue to be
convertible on a share-for-share basis into Common Shares at any time and will
be convertible on a share-for-share basis into Special Common Shares.
 
    PREEMPTIVE RIGHTS.  None of the Common Shares, Cellular Group Shares,
Telecom Group Shares, Aerial Group Shares nor Special Common Shares will carry
any preemptive rights enabling a holder to subscribe for or receive shares of
any class of stock of TDS or any other securities convertible into shares of any
class of stock of TDS under the Restated Certificate. The Series A Common Shares
will continue to have a preemptive right to acquire additional Series A Common
Shares for cash, including treasury shares.
 
    MERGER CONSIDERATION.  The Restated Certificate provides that in the event
of a merger or consolidation of the Company, whether or not the Company is the
surviving entity, the holders of Special Common Shares and Common Shares are
entitled to receive the same per share consideration. For this purpose, the
foregoing will be deemed to be satisfied if the consideration received by the
holders of Special Common Shares consists of securities which have relative
rights, preferences and limitations vis-a-vis the securities received by the
holders of Common Shares that, in the judgment of the Board of Directors, are
substantially similar to the relative rights, preferences and limitations of the
Special Common Shares vis-a-vis the Common Shares, respectively.
 
    DISPOSITION OF ASSETS OF A TRACKING GROUP.  The Restated Certificate
provides that, in the event of a Disposition of all or substantially all of the
properties and assets of a Tracking Group in one transaction or a series of
related transactions, other than a transaction in which the Company receives
primarily equity securities of an entity engaged or proposing to engage
primarily in a similar or complementary business, and certain other
circumstances, the Company must either:
 
    (i) distribute to holders of the affected Tracking Stock an amount in cash,
securities or other property or any combination thereof equal to the product of
(A) the Outstanding Interest Fraction (in the case of a Disposition involving
substantially all, but not all of the assets of the Affected Tracking Group) or
the Adjusted Outstanding Interest Fraction (in the case of a Disposition
involving not less than all of the assets of the affected Tracking Group) and
(B) the Fair Value of the Net Proceeds of such Disposition, either by special
dividend or by redemption of all or part of the outstanding shares of the
affected Tracking Stock; or
 
    (ii) convert each outstanding share of the affected Tracking Stock into a
number (or fraction) of Special Common Shares or shares of any other Tracking
Stock (or any combination thereof on a pro rata basis) equal to 110% (the
"Disposition Conversion Percentage") of the average daily ratio (calculated to
the nearest five decimal places) of the Market Value of (A) one share of
Affected Tracking Stock to (B) the Market Value of one Special Common Share or
such other share of Tracking Stock (or any combination thereof on a pro rata
basis) during a forty-Trading Day period beginning on the 11th Trading Day after
consummation of the Disposition. See "--Description of Terms of Tracking
Stocks--Disposition of Assets of Tracking Group."
 
    The ratio of the Market Value of one share of Tracking Stock to be converted
into such Special Common Share and/or share of another class of Tracking Stock
could be influenced by many factors, including the results of operation of the
Company and each of the Groups, the regulatory environment, trading volumes,
share issuances and repurchases, and general economic and market conditions.
Such a conversion could be effected at a time when the market value of the
converted Tracking Stock or the shares issued in conversion thereof may be
considered to be overvalued or undervalued. Such conversion would also have the
effect of precluding holders of the converted Tracking Group from retaining
their investment in a security intended to reflect separately the businesses and
assets attributed to the converted Tracking Group. See "Risk Factors."
 
    CONVERSION AT OPTION OF COMPANY.  The Company may, in the sole discretion of
the Board, elect at any time to convert each outstanding share of any class of
Tracking Stock into a number (or fraction) of Special Common Shares or shares of
any other class of Tracking Stock, or any combination thereof on a pro rata
basis, equal to the Optional Conversion Percentage of the average daily ratio of
the Market Value of one share of Tracking Stock to be converted to the Market
Value of one Special Common Share or such other share of Tracking Stock,
calculated over the twenty-Trading Day period ending five Trading Days prior to
the date of notice of such conversion. The Optional Conversion Percentage will
initially be 115% and will be fixed for five years after the initial issuance
date of the applicable Tracking Stock. Beginning on the fifth anniversary of
such date, the Optional Conversion Percentage will decrease by one percent per
year, until it is equal to 110% percent on the ninth anniversary of the initial
issuance
 
                                      -81-
<PAGE>
date and for all periods thereafter. See "--Description of Terms of Tracking
Stocks--Conversion at Option of Company."
 
    The ratio of the Market Value of one share of Tracking Stock to be converted
to such Special Common Share or share of another class of Tracking Stock could
be influenced by many factors, including the results of operation of the Company
and each of the Groups, the regulatory environment, trading volumes, share
issuances and repurchases, and general economic and market conditions. Such a
conversion could be effected at a time when the market value of the converted
Tracking Stock or the shares issued in conversion thereof may be considered to
be overvalued or undervalued. Such conversion would also have the effect of
precluding holders of the converted Tracking Group from retaining their
investment in a security intended to reflect separately the businesses and
assets attributed to the converted Tracking Group. See "Risk Factors."
 
    REDEMPTION IN EXCHANGE FOR STOCK OF QUALIFYING SUBSIDIARY.  Subject to
certain restrictions, the Company could at any time, in the sole discretion of
the Board, redeem without premium all outstanding shares of any class of
Tracking Stock of a Tracking Group, in exchange for shares of a Qualifying
Subsidiary or Qualifying Subsidiaries which hold all of the assets and
liabilities of such Tracking Group. See "--Description of Terms of Tracking
Stocks-- Redemption in Exchange for Stock of Subsidiary."
 
    REDEMPTION TO PROTECT LICENSES.  As permitted by Delaware law, the Restated
Certificate also includes a provision permitting the Company to redeem shares of
capital stock (other than Series A Common Shares) to the extent necessary to
prevent the loss or secure the reinstatement of any license or franchise from
any governmental agency. No similar provision is included in the Articles
because of differences in Iowa law. See "--Comparison of Shareholder's Rights
Under Iowa and Delaware Law." Substantially similar provisions are included in
the current Certificates of Incorporation of each of U.S. Cellular and Aerial,
each of which is a Delaware corporation.
 
    The Board considers this provision important in order to permit the
redemption of shares, if necessary, to avoid the loss of any franchise or
license under the Communications Act of 1934, as amended (the "Communications
Act") and the rules and regulations of the Federal Communications Commission
(the "FCC"). Failure to comply with the requirements of the Communications Act
and the FCC may result in denial or revocation of FCC licenses.
 
    The Restated Certificate would permit TDS Delaware to redeem any shares of
capital stock (other than Series A Common Shares) from disqualified holders at
their fair market value to the extent necessary to prevent the loss of or secure
the reinstatement of, or to prevent the denial of applications for or the
renewal of any governmental license or franchise held by TDS Delaware or any of
its subsidiaries, or any person in which TDS has any direct or indirect
ownership or voting interest, if the license or franchise is conditioned upon
some or all of the holders of the corporation's stock, or persons entitled to
vote such stock, possessing prescribed qualifications or any other condition. A
disqualified holder is any holder of shares of capital stock of TDS Delaware
whose holding of such shares on behalf of such holder or on behalf of any other
person, either individually or when taken together with the holding or voting of
shares of capital stock of TDS Delaware by any other holders or persons entitled
to vote such shares, may result, in the good faith judgment of the Board, in the
loss of, or the failure to secure the reinstatement of, or the denial of
applications for or the renewal of, any license or franchise from any
governmental agency held by TDS Delaware or any of its subsidiaries, or any
person in which TDS has any direct or indirect ownership or voting interest.
 
    The redemption price of the shares to be redeemed will be equal to the
lesser of (i) the fair market value of such shares or (ii) if such shares were
purchased by the disqualified holder within one year of the redemption date, the
disqualified holder's purchase price for such shares (the "Required Price"). The
fair market value of a share of capital stock of any class or series of TDS
Delaware means the average closing price for such a share for each of the 20
most recent days on which shares of capital stock of such class or series have
traded preceding the day on which notice of redemption is given, except that if
shares of capital stock of such class or series are not traded on any securities
exchange or in the over-the-counter market, "fair market value" will be
determined by the Board in good faith. The redemption price of such shares may
be paid in cash, securities or any combination thereof.
 
    TDS Delaware may redeem any shares in exchange for any debt or equity
securities (other than Series A Common Shares or securities convertible into or
exchangeable for, or carrying a right to subscribe to or acquire, Series A
Common Shares) of TDS Delaware, any of its subsidiaries or any other
corporation, or any combination thereof, having such terms and conditions as may
be approved by the Board and which, together with any cash to be paid as part of
the redemption price, in the opinion of any nationally recognized investment
banking firm selected by the Board, has a value at the time of notice of
redemption at least equal to the Required Price.
 
                                      -82-
<PAGE>
    If less than all the shares held by disqualified holders are to be redeemed,
the shares to be redeemed will be selected in a manner to be determined by the
Board, which may include selection first of the most recently purchased shares
thereof, selection by lot or selection in any other manner determined by the
Board.
 
    At least 30 days' written notice of the redemption date will be given to the
record holders of the shares selected to be redeemed (unless waived in writing
by any such holder), except that the redemption date may be the date on which
written notice is given to record holders if the cash or securities necessary to
effect the redemption is deposited in trust for the benefit of such record
holders and subject to immediate withdrawal by them upon surrender of the stock
certificates for their shares to be redeemed.
 
    INDEMNIFICATION.  The Restated Certificate provides that TDS Delaware shall
indemnify directors and officers of TDS Delaware, its consolidated subsidiaries
and certain other related entities generally in the same manner and to the
extent permitted by the DGCL, as more specifically provided in the Bylaws of TDS
Delaware. No similar provision presently exists in the Iowa Articles. However,
the indemnification provision included in the Restated Certificate is
substantially similar to a provision included in the Iowa Bylaws, which provides
that TDS shall indemnify directors and officers of TDS, its consolidated
subsidiaries and certain other related entities, generally in the same manner
and to the extent permitted by Iowa law.
 
    The Delaware Bylaws provide for indemnification and permit the advancement
of expenses by TDS generally in the same manner and to the extent permitted by
the DGCL, subject to compliance with certain requirements and procedures
specified in the Delaware Bylaws. In general, the Delaware Bylaws require that
any person seeking indemnification must provide TDS Delaware with sufficient
documentation as described in the Bylaws and, if an undertaking to return
advances is required, to deliver an undertaking in the form prescribed by TDS
Delaware and provide security for such undertaking if considered necessary by
TDS Delaware. In addition, the Delaware Bylaws specify that, except to the
extent required by law, TDS Delaware does not intend to provide indemnification
to persons under certain circumstances, such as where the person was not acting
in the interests of TDS Delaware or was otherwise involved in a crime or tort
against TDS Delaware. For a comparison of the indemnification permitted under
Delaware law and Iowa law, see "--Comparison of Shareholder's Rights Under Iowa
and Delaware Law."
 
    CONSIDERATION OF COMMUNITY INTERESTS IN ACQUISITION PROPOSALS.  Article IX
of the Restated Certificate will include a provision similar to Article IX of
the Iowa Articles and will also address certain matters presently addressed by
Iowa law which are not addressed by Delaware Law. See "--Comparison of
Shareholder's Rights Under Iowa and Delaware Law." Article IX of the Delaware
Articles provides that, when evaluating any proposal or offer of another party
to (i) make a tender or exchange offer for any equity of the Company; (ii) merge
or consolidate the Company with another corporation; or (iii) purchase or
otherwise acquire all or substantially all of the properties and assets of the
Company, the Board may, in connection with the exercise of its judgment in
determining what is in the best interests of the Company and its shareholders,
give due consideration to all factors the directors deem relevant.
 
    Such factors may include, without limitation, (a) the effects on the
customers of the Company or any of its subsidiaries or on such other
constituencies of the Company or its subsidiaries that the Board considers
relevant under the circumstances, (b) not only the consideration (after taking
into account corporate and shareholder taxes) being offered in relation to the
then current market price for the Company's outstanding shares of capital stock,
but also the Board's estimate of the future value of the Company (including the
unrealized value of its properties and assets) as an independent going concern,
(c) the purpose of the Company and any of its subsidiaries to provide quality
products and services on a long-term basis and (d) the long-term as well as
short-term interests of the corporation and its shareholders, including the
possibility that such interests may be best served by the continued independence
of the corporation.
 
    If, on the basis of such factors, the Board determines that a proposal or
offer to acquire or merge the corporation, or to sell its assets, is not in the
best interests of the corporation, it may reject the proposal or offer. If the
Board determines to reject any such proposal or offer, the Board shall have no
obligation to facilitate, to remove any barriers to, or to refrain from
impeding, the proposal or offer, except as may be required by applicable law.
Except to the extent required by applicable law, the consideration of any or all
of such factors shall not be a violation of any duty of the directors to the
shareholders or a group of shareholders, even if the directors reasonably
determine that any such factor or factors outweigh the financial or other
benefits to the corporation or a shareholder or group of shareholders.
 
                                      -83-
<PAGE>
    This provision may serve to discourage or make more difficult a change in
control of the Company without the support of the Board and could, under certain
circumstances, prevent shareholders from profiting from an increase in the
market value of their shares as a result of a change in control of the Company
by delaying or preventing such change in control. See "Risk Factors."
 
    BYLAWS.  The Restated Certificate provides that, in furtherance and not in
limitation of the powers conferred by Delaware law, the Board of TDS Delaware is
expressly authorized to adopt, amend or repeal the Bylaws of TDS Delaware,
subject to any specific limitations on such power provided by any Bylaws adopted
by the shareholders. Due to differences in Delaware and Iowa law, this provision
is necessary in order to continue to permit the Company's Board to adopt, amend
or repeal the Bylaws of the Company. See "--Comparison of Shareholders' Rights
Under Iowa and Delaware Law." The Bylaws of TDS Delaware will be adopted by the
Board of TDS Delaware.
 
    SECTION 203 OF DGCL.  As permitted by Delaware law, the Restated Certificate
will provide that TDS Delaware elects not to be governed by Section 203 of the
DGCL. TDS is currently subject to a similar statute under the IBCA. See
"--Comparison of Shareholder's Rights Under Iowa and Delaware Law." Since
Section 203 will not be applicable to TDS, it may be possible for a person to
acquire the Series A Common Shares held by the TDS Voting Trust and to
immediately complete a business combination with TDS, without complying with any
of the exceptions to Section 203. The trustees of the TDS Voting Trust have
advised the Company that they have no current plans or intentions of disposing
of such Series A Common Shares.
 
    OTHER RIGHTS.  The Restated Certificate expressly permits the Board to issue
and sell shares of any class of capital stock even if the consideration which
could be obtained by issuing or selling any other class of capital stock would
be greater. The Restated Certificate also expressly permits the Board to
purchase shares of any class of capital stock, even if the consideration which
would be paid by purchasing another class of capital stock would be less.
 
    In no event will any of the Common Shares, Series A Common Shares, or
Special Common Shares be split, subdivided or combined unless all such classes
are proportionately split, subdivided or combined.
 
    The full text of the proposed Restated Certificate is set forth as EXHIBIT B
to this Proxy Statement/Prospectus and is incorporated herein by reference. The
above summary should be read in conjunction with, and is qualified in its
entirety by reference to, such EXHIBIT B. See also "--Description of Terms of
Tracking Stock."
 
    Shareholder approval of the Tracking Stock Proposal will also constitute
approval of the Restated Certificate and the provisions thereof, including those
which differ from or are in addition to those which are in the Iowa Articles, as
described in this Proxy Statement/Prospectus.
 
DESCRIPTION OF TERMS OF TRACKING STOCK
 
    The following summarizes certain terms of the Tracking Stock which would be
created by the Tracking Stock Proposal. See EXHIBIT F--ILLUSTRATION OF CERTAIN
TERMS, for illustrations of certain of the provisions described under this
section.
 
    VOTING RIGHTS.  In the election of directors, the holders of Tracking Stock
would vote together with the holders of Preferred Shares issued before October
31, 1981, Common Shares and any issued Special Common Shares, as well as any
issued Undesignated Shares which have been designated to vote in such group
(collectively, the "Public Holders"), in the election of 25% of the directors
plus one additional director (or four directors based on a Board of twelve
directors). Each of the Preferred Shares issued before October 31, 1981 and
Common Shares, as well as any issued Special Common Shares (the "One-Vote
Holders"), would have one vote per share in the election of such directors. In
the election of such directors, each share of Tracking Stock would initially
have one vote per share. Thereafter, the number of votes which shares of each
class of Tracking Stock would have in the election of such directors would be
adjusted or "float" in proportion to the aggregate Market Capitalization of such
class as compared to the aggregate Market Capitalization of the shares held by
the Public Holders, and would be calculated using Market Values over the
twenty-Trading Day period ending ten Trading Days prior to the record date for
each annual meeting of shareholders.
 
    In the election of directors elected by the Public Holders, the proportion
of the total votes of the Public Holders which a class of Tracking Stock will
have would be equal to the percentage (the "Voting Percentage") equal to 100%
multiplied by the average daily ratio (calculated to three decimal places) of
the aggregate Market Capitalization of the applicable class of Tracking Stock to
the aggregate Market Capitalization of the Preferred Shares issued before
October 31, 1981, Common Shares, Cellular Group Shares, Telecom Group Shares,
Aerial Group Shares
 
                                      -84-
<PAGE>
and Special Common Shares, if any are outstanding, and any outstanding
Undesignated Shares which have been designated to vote with the Public Holders,
calculated for the twenty-Trading Day period (the "Calculation Period") ending
ten Trading Days prior to the record date for each annual meeting of
shareholders (the "Adjustment Date"). In the election of such directors, the per
share voting power of each class of Tracking Stock will be calculated on the
basis that all shares of stock held by the One Vote Holders have one vote per
share for such purposes.
 
    As an illustration, if on any Adjustment Date, the One-Vote Holders
represent 20% of the Market Capitalization of the Public Holders, the shares of
Tracking Stock in the aggregate would have 80% of the voting power of the Public
Holders in the election of directors elected by the Public Holders. If there
were 53,000,000 shares held by the One Vote Holders, each with one vote per
share, the total voting power of the Public Holders would be 265,000,000 votes,
determined by dividing 53,000,000 by 20%. The aggregate voting power of the
shares of Tracking Stock would be 212,000,000 votes, determined by subtracting
53,000,000 from 265,000,000. The proportion of votes which each class of
Tracking Stock would have in the aggregate would be determined by multiplying
265,000,000 by the Voting Percentage of that class of Tracking Stock. The number
of votes per share of a class of Tracking Stock would be determined by dividing
the aggregate voting power of such class, determined pursuant to the preceding
sentence, by the average number of issued and outstanding shares of that class
of Tracking Stock during the Calculation Period. Any shares held in the Retained
Interest or Inter-Group Interest would not have any votes. See "--Retained
Interest" and "--Inter-Group Interest."
 
    Accordingly, in the election of directors elected by the Public Holders,
beginning on the first Adjustment Date prior to the record date for an annual
meeting of shareholders after issuance of the Tracking Stock, each Cellular
Group Share, Telecom Group Share and Aerial Group Share may have more or less
than one vote per share. It is expected that the Cellular Group Shares would
initially have more than one vote per share and that the Telecom Group Shares
and Aerial Group Shares would initially have approximately one vote per share
based on anticipated market values. The Market Capitalization of the classes of
stock could be influenced by many factors, including the results of operations
of the Company and each of the Groups, the regulatory environment, trading
volume, share issuances and repurchases and general economic and market
conditions. Such changes in the aggregate votes or relative voting power of the
Tracking Stock could result from the market's reaction to a decision by the
Company's management or Board that is perceived to disparately affect one class
of common stock in comparison to another. See "Risk Factors."
 
    The periodic adjustments in the number of votes of Cellular Group Shares,
Telecom Group Shares and Aerial Group Shares will reduce the opportunity of
investors in one Tracking Stock to acquire for the same aggregate consideration
relatively greater voting power per share in the election of directors elected
by the Public Holders than investors in the other classes. Because the
adjustment of voting power will occur only annually, some disparity in the
voting power purchasable for a specified dollar amount may exist among the
Tracking Stocks from time to time.
 
    The "Market Capitalization" of any class or series of capital stock of the
Company on any Trading Day means the product of (i) the Market Value of one
share of such class or series on such trading day and (ii) the number of shares
of such class or series outstanding on such Trading Day. The per share Market
Value of the Preferred Shares shall be the liquidation value per share. For this
purpose, if on any Adjustment Date with respect to an annual meeting, Special
Common Shares are issued and outstanding but are not listed on a stock exchange
or otherwise traded in the over-the-counter market, Special Common Shares will
be deemed to have a Market Value per share equal to the per share Market Value
of Common Shares with respect to that record date.
 
    The Tracking Stock will not be entitled to any votes per share except in the
election of certain directors and to the extent that separate class or series
votes are required by the DGCL. Actions submitted to a vote of shareholders
other than the election of directors will generally be voted on only by holders
of Common Shares, Series A Common Shares and series of Preferred Shares which
have voting rights. Under the Restated Certificate, except as required under the
DGCL, only the affirmative vote of the holders of a majority of the outstanding
voting power of the Common Shares, Series A Common Shares and such voting
Preferred Shares, voting as a group, will be required to amend the Restated
Certificate, approve any merger or consolidation of TDS with or into any other
corporation, approve the dissolution of TDS or approve any other matter required
to be voted on by shareholders. However, under Delaware law, the holders of the
outstanding shares of a class are entitled to vote as a class upon a proposed
amendment, whether or not entitled to vote thereon by the certificate of
incorporation, if the amendment would increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely.
 
                                      -85-
<PAGE>
    DIVIDENDS.  Following the Distribution, subject to the legal restrictions on
the payment of dividends described below, the Board currently intends to
establish an annual dividend on the Telecom Group Shares in an amount equal to
$0.50 per share. Based on the expected distribution ratio of two-thirds of a
Telecom Group Share for each existing Common Share and Series A Common Share,
this dividend rate would equate to a per share annual dividend of $0.33 per
existing Common Share and Series A Common Share (the "Telecom Equivalent
Dividend Rate"). Following the Distribution, the Board also currently intends to
establish an annual dividend on the Common Shares and Series A Common Shares in
an amount equal to $0.11 per share. The total of this rate and the Telecom
Equivalent Dividend Rate is equal to $0.44 per share per annum, which is the
same as the current annual dividend rate on the existing Common Shares and
Series A Common Shares. The intent is that, immediately after the Distribution,
a current holder of Common Shares and Series A Common Shares would continue to
receive an aggregate dividend which is at least equal to the aggregate dividend
which such shareholder currently receives from the Company (not considering
reductions in shares which may occur due to the payment of cash in lieu of
fractional shares in the Distribution).
 
    With regard to the Cellular Group Shares and the Aerial Group Shares, the
Board currently intends to retain future earnings, if any, for the development
of the businesses of the Cellular Group and Aerial Group, respectively, and does
not anticipate paying dividends on the Cellular Group Shares or the Aerial Group
Shares in the foreseeable future.
 
    Any decision to pay dividends in the future will depend on the financial
condition, results of operations and business requirements of the Company as a
whole. In making a determination as to the allocation of any future dividends
between the Cellular Group Shares, the Telecom Group Shares and the Aerial Group
Shares, as well as the Common Shares, the Series A Common Shares and any issued
Special Common Shares, the Board expects to follow a policy under which it will
consider, among other factors, the relative financial condition, results of
operations and business requirements of the respective Groups.
 
    The Company's assets consist almost entirely of investments in its
subsidiaries. Furthermore, the initial assets of each of the Tracking Groups
consist almost entirely of the Company's investment in a subsidiary (i.e., U.S.
Cellular, TDS Telecom and Aerial). As a result, the Company's ability to pay
dividends on any class of Tracking Stock is dependent in part on the earnings
of, or other funds available to, such subsidiaries and the distribution or other
payment of such earnings or other funds from such subsidiaries to the Company in
the form of dividends, loans or other advances, payment or reimbursement of
management fees and expenses and repayment of loans and advances from the
Company. Such subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay the dividends on any class or series
of preferred stock of the Company or to make any funds available therefor,
whether by dividends, loans or other payments. The payment of dividends or the
making of loans and advances to the Company by such subsidiaries may be subject
to statutory or regulatory restrictions, are contingent upon the earnings of
those subsidiaries and are subject to various business considerations.
 
    Dividends on all classes of capital stock are limited to the assets of the
Company legally available for the payment of dividends. The amount of assets of
the Company legally available for the payment of dividends will be reduced by
the amount of any net losses of the Groups and any dividends or distributions
on, or repurchases of, any class of common stock, and dividends on, or certain
repurchases of, Preferred Shares. Additionally, the assets of the Company
available for the payment of dividends may be restricted by future loan
agreements to which certain subsidiaries of the Company may enter into, or
become subject to, and such loan agreements may contain provisions that restrict
or otherwise limit the amount of dividends that those companies may pay.
 
    In addition to the limitations set forth in the foregoing paragraph,
dividends will be further limited to an amount not in excess of the applicable
Available Dividend Amount, which, in the case of a Tracking Group, is intended
to be similar to the amount that would be legally available for the payment of
dividends on a Tracking Group under the DGCL if the Tracking Group were a
separate Delaware corporation. There can be no assurance that there will be an
Available Dividend Amount with respect to any Group.
 
    The "Available Dividend Amount" for a Tracking Group, as of any date, means
the product of the Outstanding Interest Fraction and either (i) the excess of
(a) an amount equal to the total assets of the Tracking Group less the total
liabilities (not including preferred stock) of the Tracking Group as of such
date over (b) the aggregate par value of, or any greater amount determined to be
capital in respect of, all outstanding shares of the applicable Tracking Stock,
each class or series of Preferred Shares attributed to the Tracking Group; or
(ii) in case there is no such excess, an amount equal to the Company Earnings
(Losses) attributable to the Tracking Group (if positive) for the
 
                                      -86-
<PAGE>
fiscal year in which such date occurs and/or the preceding fiscal year. The
"Company Earnings (Losses)" attributable to the Group, for any period, means the
net earnings or losses of the Group for such period determined on a basis
consistent with the determination of the net earnings or losses of the Group for
such period as presented in the combined financial statements of the Group,
including income and expenses of the Company attributed to the operations of the
Group on a substantially consistent basis, including, without limitation,
corporate administrative costs, net interest and income taxes.
 
    The "Available Dividend Amount," as of any date, means, with respect to the
TDS Group, the greater of (i) the amount of all surplus (as defined in the DGCL)
of the Company or, if there is no surplus, the net profits (as contemplated by
the DGCL) of the Company for the fiscal year in which such date occurs and/or
the preceding fiscal year, less the sum of the Available Dividend Amount of all
of the Tracking Groups, or (ii) an amount equal to the sum of the product of the
Retained Interest Fraction and the Available Dividend Amount (if positive) with
respect to each Tracking Group plus, without duplication, either (a) the excess
of (i) an amount equal to the total assets of the TDS Group less the total
liabilities (not including preferred stock) of the TDS Group as of such date
over (ii) the aggregate par value of, or any greater amount determined to be
capital in respect of, all outstanding Series A Common Shares, Common Shares and
any issued Special Common Shares, and each class or series of Preferred Shares
or Undesignated Shares attributed to the TDS Group or (b) in case there is no
such excess, an amount equal to Company Earnings (Losses) attributable to the
TDS Group (if positive) for the fiscal year in which such date occurs and/or the
preceding fiscal year.
 
    At the time of any dividend or other distribution on the outstanding
Tracking Stock (including any dividend of the Fair Value of the Net Proceeds
from the Disposition of all or substantially all of the properties and assets of
a Tracking Group as described under "--Disposition of Assets of Tracking
Group"), the TDS Group (if at such time there is a Retained Interest), or
another Tracking Group (if at such time there is an Inter-Group Interest by such
other Tracking Group in the Tracking Group making the dividend or distribution),
will be credited, and the Tracking Group making the dividend or distribution be
charged (in addition to the charge for the dividend or other distribution paid
or distributed in respect of outstanding shares of Tracking Stock), with an
amount equal to the product of (i) the aggregate amount of such dividend or
distribution paid or distributed in respect of outstanding shares of Tracking
Stock times (ii) a fraction, the numerator of which is (a) the Retained Interest
Fraction or (b) any Inter-Group Interest Fraction in such Tracking Group, as the
case may be, and the denominator of which is the Outstanding Interest Fraction
for such Tracking Group, respectively.
 
    SHARE DISTRIBUTIONS.  The right of holders of any class of Tracking Stock to
receive a distribution of shares of capital stock of the Company is limited to
the right to receive a (i) distribution of shares of Tracking Stock of such
Tracking Group (or Convertible Securities convertible into or exercisable or
exchangeable for such Tracking Stock), (ii) shares of Tracking Stock of another
Tracking Group (or Convertible Securities convertible into or exercisable or
exchangeable for such Tracking Group) up to the amount of any Inter-Group
Interest in such other Tracking Group or (iii) shares of a new class or series
of capital stock which is intended to represent a subdivision or new business of
such Tracking Group or any assets attributed by the Board to such Tracking
Group. Holders of Tracking Stock may not receive any TDS Group Shares as a
dividend since a Tracking Group may not have an Inter-Group interest in the TDS
Group.
 
    DISTRIBUTION OF TRACKING GROUP SUBSIDIARY IN DIVIDEND.  The Restated
Certificate provides that if the Board intends to distribute a subsidiary
included in a Tracking Group (other than a Qualifying Subsidiary or Qualifying
Subsidiaries which hold all of the assets and liabilities of a Tracking Group)
to the holders of shares of Tracking Stock of such Tracking Group in a dividend,
and there is a Retained Interest in such Tracking Group, the Board shall, to the
extent practicable, distribute subsidiary shares corresponding to Special Common
Shares to the holders of Tracking Stock of such Tracking Group with respect to
the outstanding shares of such Tracking Group. Holders of TDS Group Shares and
shares of any other Tracking Stock will not be entitled to participate in such
distribution of any shares of a subsidiary in a dividend or otherwise which is
attributable to another class of Tracking Stock, except with respect to a
Retained Interest by the TDS Group or an Inter-Group Interest by another
Tracking Group. The subsidiary shares relating to any Retained Interest or
Inter-Group Interest may be retained by the Company for the benefit of the TDS
Group or the other Tracking Group, respectively, or distributed pro rata to the
holders of the TDS Group Shares or the applicable Tracking Stock, at the sole
discretion of the Board.
 
    If the Board determines to distribute subsidiary shares with respect to such
a Retained Interest or Inter-Group Interest, it must, to the extent practicable,
distribute subsidiary shares corresponding to Special Common Shares to the
holders of Tracking Stock of another Tracking Group with respect to any such
Inter-Group Interest, and distribute subsidiary shares corresponding to Series A
Common Shares to the holders of Series A Common Shares, subsidiary shares
corresponding to Common Shares to the holders of Common Shares, and subsidiary
shares corresponding to Special Common Shares to the holders of Special Common
Shares with respect to any
 
                                      -87-
<PAGE>
Retained Interest in such Tracking Group, provided that the same number of
shares of subsidiary common stock on a combined basis must be distributed for
each Series A Common Share, Common Share and any issued Special Common Share.
 
    The Restated Certificate provides that, if practicable, the Board must
recapitalize such subsidiary through an amendment to its charter or otherwise,
so that the shares of capital stock of such subsidiary and the relative rights,
limitations and preferences thereof substantially correspond to the Series A
Common Shares, Common Shares and Special Common Shares of the Company and their
relative rights, limitations and preferences, as may be determined to be
necessary or appropriate in the sole discretion of the Board, in order to permit
the distribution to be effected in the foregoing manner. The Restated
Certificate provides further that, if the subsidiary has or will have shares
corresponding to Series A Common Shares and Common Shares but does not have and
will not have shares corresponding to Special Common Shares and it is
impracticable to recapitalize the subsidiary as provided in the preceding
sentence to create Special Common Shares, the Board must distribute subsidiary
shares corresponding to Common Shares to the holders of Special Common Shares
and to holders of Tracking Stock who would otherwise be entitled to receive
subsidiary shares corresponding to Special Common Shares.
 
    DISTRIBUTION OF SUBSIDIARY OF TDS GROUP OR ANOTHER TRACKING GROUP.  Holders
of any class of Tracking Stock will not be entitled to participate in a
distribution of any shares of a subsidiary in a dividend or otherwise which is
attributable to the TDS Group. Holders of a class of Tracking Stock may, at the
sole discretion of the Board, participate in a distribution of a subsidiary of
any other Tracking Group, up to the amount of any Inter-Group Interest in such
other Tracking Group. If there is a Retained Interest in the Tracking Group
which is distributing subsidiary shares, all holders of Tracking Stock receiving
a distribution of subsidiary shares would normally receive subsidiary shares
corresponding to Special Common Shares.
 
    LIQUIDATION RIGHTS.  Subject to the following paragraph, in the event of a
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, after payment or provision for payment of the debts and other
liabilities of the Company and subject to the prior payment in full of the
preferential amounts to which any class or series of Preferred Shares or
Undesignated Shares is entitled, the holders of the outstanding shares of common
stock will be entitled to receive the remaining assets of the Company,
regardless of the Group to which such assets are attributed, divided among the
holders of common stock in accordance with the per share "Liquidation Units"
attributable to each class of Common Stock. Each Series A Common Share, Common
Share and Special Common Share is attributed one Liquidation Unit, each Cellular
Group Share is attributed 2.5 Liquidation Units, each Telecom Group Share is
attributed 0.9 of a Liquidation Unit and each Aerial Group Share is attributed
1.1 Liquidation Units. However, in the event of a liquidation, dissolution or
winding-up of the Company, the amount to be received by each holder of the
respective classes may not bear any relationship to the relative fair market
values or the relative voting rights of the classes. The Liquidation Units per
share were determined by the Board in consultation with the Financial Advisors,
based on the anticipated initial trading ranges of the shares as common stock
and other factors. The Liquidation Unit of each class or series of common stock
will be adjusted by the Board as appropriate to reflect equitably any
subdivision (by stock split or otherwise) or combination (by reverse stock split
or otherwise) of such class of common stock or any dividend or other
distribution of shares with respect to such class of common stock. Whenever a
change in the Liquidation Units with respect to any class or series of common
stock occurs, the Company will prepare and distribute a notice of such change to
all holders of shares of stock of such class or series of common stock, together
with a notice of such stock split, reverse split, distribution or other
transaction requiring such change.
 
    Prior to the distribution of the remaining assets of the Company as set
forth in the preceding paragraph, the Board may redeem all shares of Tracking
Stock of all Tracking Groups in exchange for shares of a Qualifying Subsidiary
or Qualifying Subsidiaries holding all of the assets and liabilities of the
related Tracking Group, as described under "--Redemption in Exchange for Stock
of Subsidiary." In such event, all shares of Tracking Stock would be redeemed
immediately prior to the liquidation, dissolution or winding-up and the Series A
Common Shares, Common Shares and any issued Special Common Shares would share
pari passu in any assets remaining for distribution after such redemptions.
 
    A consolidation, merger, or reorganization of the Company with any other
corporation or corporations, or a sale of all or substantially all of the assets
of the Company, will not be considered a dissolution, liquidation, or winding up
of the Company within the meaning of these provisions.
 
                                      -88-
<PAGE>
    CONVERSION AT THE OPTION OF THE HOLDER.  No shares of any class of Tracking
Stock are convertible into shares of any other class of common stock by the
holder.
 
    PREEMPTIVE RIGHTS.  No holders of shares of any class of Tracking Stock will
have any preemptive right under the terms of the Restated Certificate to acquire
or subscribe for any additional shares of capital stock or other obligations
convertible into or exercisable for shares of capital stock that may hereafter
be issued by the Company.
 
    DISPOSITION OF ASSETS OF A TRACKING GROUP.  If the Company disposes of all
or substantially all of the properties and assets of a Tracking Group (defined
as 80% or more of the then current market-value (as determined by the Board) of
the properties and assets of such Tracking Group as of such date) (a
"Disposition") in one transaction or a series of related transactions with any
one or more persons, entities or groups, other than in a transaction referred to
in the following sentence, the Company is required to take one of the actions
listed in the fourth paragraph of this Section on or prior to the 90th Trading
Day following the consummation of a Disposition.
 
    The requirement in the preceding paragraph does not apply to a Disposition
(i) in connection with the disposition by the Company of all of the Company's
properties and assets in one transaction or a series of related transactions or
in connection with the liquidation, dissolution or winding up of the Company,
(ii) by dividend, other distribution or redemption in accordance with any
provision described under "--Dividends," "--Share Distributions,"
"--Distribution of Tracking Group Subsidiary in Dividend," "--Redemption in
Exchange for Stock of Subsidiary" or "--Liquidation," (iii) to any person,
entity or group which the Company, directly or indirectly, after giving effect
to the Disposition, controls or (iv) in connection with a Related Business
Transaction. For purposes of this Section, the Tracking Group affected by the
Disposition of its assets is referred to as the "Affected Tracking Group," and
the Tracking Stock of such Affected Tracking Group is referred to as the
"Affected Tracking Stock."
 
    The Related Business Transaction exception to the requirements in the
following paragraph would enable the Company to enter into transactions in which
the properties or assets of the Affected Tracking Group may be considered to be
"disposed of " in exchange for equity securities of an entity engaged or
proposing to engage in similar or complementary business areas to those of the
Affected Tracking Group while maintaining the capital structure and delineation
of the Tracking Stocks contemplated by the Tracking Stock Proposal. See
"--Certain Definitions" for a definition of Related Business Transaction.
 
    Other than as described above, the Company is required to take one of the
following actions in the event of a Disposition:
 
        (i)  subject to the limitations described above under "--Dividends,"
    declare and distribute a special dividend in cash, securities or other
    property or any combination thereof (other than a dividend or distribution
    of common stock of the Company) to the holders of the outstanding shares of
    the Affected Tracking Stock, in an aggregate amount equal to the product of
    the applicable Outstanding Interest Fraction as of the record date for
    determining the holders entitled to receive such dividend and the Fair Value
    of the Net Proceeds of such Disposition;
 
        (ii) provided that there are assets of the Company legally available
    therefor and the Available Dividend Amount for the Affected Tracking Stock
    would have been sufficient to pay a dividend in lieu thereof as described in
    clause (i) of this paragraph, then:
 
       (A) if such Disposition involves all (not merely substantially all) of
          the properties and assets of the Affected Tracking Group, redeem all
          outstanding shares of the Affected Tracking Stock in exchange for
          cash, securities or other property (other than common stock of the
          Company) or any combination thereof in an aggregate amount equal to
          the product of the Adjusted Outstanding Interest Fraction for the
          Affected Tracking Group as of the date of such complete redemption and
          the Fair Value of the Net Proceeds of such Disposition; or
 
       (B) if such Disposition involves substantially all (but not all) of the
          properties and assets of the Affected Tracking Group, apply an
          aggregate amount of cash, securities or other property (other than
          common stock of the Company) or any combination thereof equal to the
          product of the Affected Tracking Group's Outstanding Interest Fraction
          as of the date shares are selected for redemption and the Fair Value
          of the Net Proceeds of such Disposition to the redemption of
          outstanding shares of the Affected Tracking Stock, on a pro rata basis
          or by lot; or
 
        (iii) convert each outstanding share of the Affected Tracking Stock of
    the Affected Tracking Group into a number (or fraction) of fully paid and
    nonassessable Special Common Shares or shares of any other class or classes
    of Tracking Stock (or any combination thereof on a pro rata basis) equal to
    the Disposition Conversion
 
                                      -89-
<PAGE>
    Percentage of the average daily ratio (calculated to the nearest five
    decimal places) of the Market Value of (A) one share of Affected Tracking
    Stock to (B) the Market Value of one Special Common Share or share of such
    other class or classes of Tracking Stock (or any combination thereof on a
    pro rata basis) during a forty-Trading Day period beginning on the 11th
    Trading Day after consummation of the Disposition.
 
        In the event of conversion of the Affected Tracking Stock into Special
    Common Shares or shares of another class of Tracking Stock, the Fair Value
    of the Net Proceeds of such Disposition will be attributed to the Group
    related to the shares which are issued upon such conversion (on a pro rata
    basis if a combination of such shares are issued).
 
        In the event there is no public market price for the Special Common
    Shares, the Market Value per share will be deemed to be the same as the per
    share Market Value of Common Shares.
 
    The Company may elect to pay the dividend or redemption price referred to in
clause (i) or (ii) of the preceding paragraph either in the same form as the
proceeds of the Disposition were received or in any other combination of cash or
securities or property (other than common stock of the Company), on a pro rata
basis, that the Board determines will have an aggregate market value on a fully
distributed basis, of not less than the amount of the Fair Value of the Net
Proceeds of such Disposition.
 
    If the dividend or redemption is paid in securities of an issuer other than
the Company (the "Successor"), and if there is a Retained Interest in the
Tracking Group at such time, the Board shall, to the extent practicable,
distribute Successor shares corresponding to Special Common Shares to the
holders of Tracking Stock of such Tracking Group with respect to the outstanding
shares of such Tracking Group. Holders of TDS Group Shares and shares of any
other Tracking Stock will not be entitled to participate in such distribution of
any shares of a Successor in a dividend or redemption which is attributable to
another class of Tracking Stock, except with respect to a Retained Interest by
the TDS Group or an Inter-Group Interest attributed to another Tracking Group.
The Successor shares relating to any Retained Interest or Inter-Group Interest
may be retained by the Company and attributed to the TDS Group or the other
Tracking Group, respectively, or distributed pro rata to the holders of the TDS
Group Shares or the applicable Tracking Stock, at the sole discretion of the
Board.
 
    If the Board determines to distribute Successor shares with respect to such
a Retained Interest or Inter-Group Interest, it must, to the extent practicable,
distribute Successor shares corresponding to Special Common Shares to the
holders of Tracking Stock of another Tracking Group with respect to any such
Inter-Group Interest, and distribute Successor shares corresponding to Series A
Common Shares to the holders of Series A Common Shares, Successor shares
corresponding to Common Shares to the holders of Common Shares, and Successor
shares corresponding to Special Common Shares to the holders of Special Common
Shares with respect to any Retained Interest in such Tracking Group, provided
that the same number of shares of Successor common stock on a combined basis
must be distributed for each Series A Common Share, Common Share and any issued
Special Common Share.
 
    If practicable, the Board must cause such Successor to be recapitalized
through an amendment to its charter or otherwise, so that the issued and
authorized shares of capital stock of such Successor and the relative rights,
limitations and preferences thereof substantially correspond to the Series A
Common Shares, Common Shares and Special Common Shares of the Company and their
relative rights, limitations and preferences, as may be determined to be
necessary or appropriate in the sole discretion of the Board, in order to permit
the distribution to be effected in the foregoing manner.
 
    The option to convert the Affected Tracking Stock into Special Common Shares
or shares of another class of Tracking Stock in the event of a Disposition
provides the Company with additional flexibility by allowing the Company to
deliver consideration in the form of Special Common Shares or shares of another
class or classes of Tracking Stock rather than cash or securities or other
properties. This alternative could be used, for example, in circumstances when
the Company did not have sufficient legally available assets under the DGCL to
pay the full amount of an otherwise required dividend or redemption or when the
Company desired to retain such proceeds. In addition, under current tax laws,
the conversion of Affected Tracking Stock into Special Common Shares or shares
of another class of Tracking Stock should not be taxable to shareholders,
whereas a dividend or redemption would be taxable to shareholders. See
"--Certain Federal Income Tax Considerations."
 
    The "Fair Value of the Net Proceeds" means the fair value of the gross
proceeds of such Disposition after payment of or provision for certain specified
costs, including taxes related to the Disposition or a dividend or
 
                                      -90-
<PAGE>
redemption in connection therewith, transaction costs and liabilities and other
obligations (contingent or otherwise), including obligations in respect of
committed acquisitions, Preferred Shares or Convertible Securities attributed to
such Tracking Group (without duplication). See "--Certain Definitions."
 
    The Board has complete discretion as to which option to select. However,
once the disposition option selected by the Board is publicly announced, the
selection becomes irrevocable. The Board is not required to select the
disposition option which would result in the distribution with the highest value
to the holders of the shares of the Affected Tracking Stock or with the smallest
effect on the remaining classes and series of the Company's common stock. In the
event of a Disposition, the Company is not required to make any payment or other
distributions to the holders of Common Shares, Series A Common Shares, Special
Common Shares or shares of any class of Tracking Stock other than the Affected
Tracking Stock. However, the Company may, at the option of the Board, make a
distribution to such other shareholders in respect of any Retained Interest or
any Inter-Group Interest in the Affected Tracking Group existing at the time of
a Disposition.
 
    The Company may, at any time prior to the first anniversary of a dividend
on, or partial redemption of, a class of the Affected Tracking Stock following a
Disposition, convert each remaining outstanding share of Affected Tracking Stock
into a number (or fraction) of Special Common Shares or shares of any other
class or classes of Tracking Stock equal to the product of the Disposition
Conversion Percentage and the average daily ratio (calculated to the nearest
five decimal places) of the Market Value of one Special Common Share or share of
such other class or classes of Tracking Stock during a twenty-Trading Day period
ending on the fifth Trading Day prior to the date of notice of such conversion.
 
    The effect of using the Adjusted Outstanding Interest Fraction, instead of
the Outstanding Interest Fraction, in the determination of amounts to be paid in
redemption of shares of the Affected Tracking Stock following a Disposition of
all of the properties and assets of the Affected Tracking Group is to allocate
to the TDS Group a portion of the Fair Value of the Net Proceeds of the
Disposition, in addition to the amount so allocated in respect of the Retained
Interest, sufficient to provide for the delivery of the portion of the
consideration deliverable by the Company with respect to Shares Issuable to
Third Parties. To the extent such Shares Issuable to Third Parties are included
in the determination of the Adjusted Outstanding Interest Fraction, the
Company's obligations in respect of such securities would not be a reduction in
the calculation of the Fair Value of the Net Proceeds.
 
    In the event any redemption of Tracking Stock is made in circumstances in
which cash, securities or property are allocated to the TDS Group in respect of
Shares Issuable to Third Parties (such cash, securities or other property, the
"Reserved Property"), the Company will be permitted to segregate and hold such
property separate (in the case of any Reserved Property other than Special
Common Shares or shares of another class of Tracking Stock). In the event the
Reserved Property is, for any reason, not delivered with respect to the
obligations under the Shares Issuable to Third Parties, then the former holders
of Tracking Stock shall have no interest in such Reserved Property, and such
Reserved Property shall revert to the TDS Group, subject to escheat laws. In the
event of any conversion of Tracking Stock into Special Common Shares or shares
of any other Tracking Stock, the Company will reserve Special Common Shares or
shares of such other class of Tracking Stock issuable with respect to Shares
Issuable to Third Parties.
 
    If less than substantially all of the properties and assets of a Tracking
Group are disposed of by the Company in one transaction, the Company would not
be required to pay a dividend on, redeem or convert the outstanding shares of
Tracking Stock related to such Group even if an additional transaction were
consummated at a later time in which additional properties and assets of such
Group were disposed of by the Company, which, together with the properties and
assets disposed of in the first transaction, would have constituted
substantially all of the properties and assets of such Group at the time of the
first transaction, unless such transactions constituted a series of related
transactions. The second transaction, however, could trigger such a requirement
if, at the time of the second transaction, the properties and assets disposed of
in such transaction constituted at least substantially all of the properties and
assets of such Group at such time. If less than substantially all of the
properties and assets of any Tracking Group were disposed of by the Company, the
proceeds would be allocated to such Tracking Group, but the holders of Tracking
Stock of such Group would not be entitled to receive any dividend or have their
shares redeemed or converted for Special Common Shares or shares of any other
Tracking Stock, although the Board could determine, in its sole discretion, to
pay a dividend to the holders of shares of Tracking Stock of such Group in an
amount related to the proceeds of such a disposition.
 
    At the time of any dividend made as a result of a Disposition referred to
above, the TDS Group will be credited, and the Affected Tracking Group will be
charged (in addition to the charge for the dividend paid in respect of
outstanding shares of Affected Tracking Stock), with an amount equal to the
product of (i) the aggregate amount
 
                                      -91-
<PAGE>
paid in respect of such dividend times (ii) a fraction the numerator of which is
the Retained Interest Fraction and the denominator of which is the Outstanding
Interest Fraction of such Group.
 
    If any Inter-Group Interests in a Tracking Group exist at the time of any
dividend made as a result of a Disposition referred to above, the Tracking Group
holding such an Inter-Group Interest will be credited, and the Affected Tracking
Group will be charged (in addition to the charge for the dividend paid in
respect of outstanding shares of Affected Tracking Stock) with an amount equal
to the product of (i) the aggregate amount paid in respect of such dividend
times (ii) a fraction the numerator of which is the Inter-Group Interest
Fraction and the denominator of which is the Outstanding Interest Fraction of
the Affected Group.
 
    PROCEDURES RELATING TO DISPOSITION RIGHTS.  Not later than the fifth Trading
Day following the consummation of a Disposition referred to above, the Company
will announce publicly by press release (i) the Fair Value of the Net Proceeds
of such Disposition, (ii) the number of outstanding shares of Affected Tracking
Stock, (iii) information describing and indicating the Number of Shares Issuable
to Third Parties of the Affected Tracking Stock, including the number of such
shares which are issuable as Committed Acquisition Shares and the number of such
shares into or for which Convertible Securities are then convertible,
exercisable or exchangeable, and the conversion, exercise or exchange prices
thereof (and stating which, if any, of such Convertible Securities are
Pre-Distribution Convertible Securities), (iv) the Disposition Conversion
Percentage, (v) the Outstanding Interest Fraction for the Affected Tracking
Stock as of a recent date preceding the date of such notice and (vi) the
Adjusted Outstanding Interest Fraction for the Affected Tracking Stock as of a
recent date preceding the date of such notice. Not earlier than the 51st Trading
Day and not later than the 55th Trading Day following the consummation of such
Disposition, the Company will announce publicly by press release which of the
redemption options or combinations thereof described under "--Disposition of
Assets of Tracking Group" it has irrevocably determined to take. As noted under
"--Disposition of Assets of Tracking Group," the Board has complete discretion
to select which disposition option or combination thereof to employ in the event
of a Disposition.
 
    NOTICE OF DIVIDEND FOLLOWING DISPOSITION.  If the Company determines to pay
a dividend of cash, securities or other property or any combination thereof
following a Disposition, as described in clause (i) of the fourth paragraph
under "--Disposition of Assets of Tracking Group," the Company will, not earlier
than the 51st Trading Day and not later than the 55th Trading Day following the
consummation of such Disposition, cause to be sent to each holder of outstanding
shares of the Affected Tracking Stock a notice setting forth (i) the record date
for determining holders entitled to receive such dividend, which will be not
earlier than the 61st Trading Day and not later than the 65th Trading Day
following the consummation of such Disposition, (ii) the anticipated payment
date of such dividend (which will not be more than 90 Trading Days following the
consummation of such Disposition), (iii) the kind and amount of cash, securities
or property or combination thereof to be distributed in respect of each share of
the Affected Tracking Stock, (iv) the amount of the Fair Value of the Net
Proceeds of such Disposition, (v) the Outstanding Interest Fraction as of a
recent date preceding the date of such notice, and (vi) the number of
outstanding shares of the Affected Tracking Stock subject to the Disposition and
the Number of Shares Issuable to Third Parties of the Affected Tracking Stock,
including the number of such shares which are issuable as Committed Acquisition
Shares and the number of shares of the Affected Tracking Stock into or for which
outstanding Convertible Securities are then convertible, exercisable or
exchangeable and the conversion, exercise or exchange prices thereof (and
stating which, if any, are Pre-Distribution Convertible Securities).
 
    NOTICE OF REDEMPTION OF ENTIRE CLASS FOLLOWING DISPOSITION.  If the Company
determines to undertake a redemption of a class of Tracking Stock following a
Disposition of all (not merely substantially all) of the properties and assets
of the Affected Tracking Group with respect to the Fair Value of the Net
Proceeds, as described in clause (ii)(A) of the third paragraph under
"--Disposition of Assets of Tracking Group," the Company will cause to be given
to each holder of outstanding shares of Tracking Stock of the Affected Tracking
Group a notice setting forth (i) a statement that all of the shares of the
Affected Tracking Stock outstanding on the redemption date will be redeemed,
(ii) the anticipated redemption date (which will not be more than 90 Trading
Days following the consummation of such Disposition), (iii) the kind and amount
of cash, securities or property or combination thereof to be paid as a
redemption price in respect of shares of the Affected Tracking Stock outstanding
on the redemption date, (iv) the amount of the Fair Value of the Net Proceeds of
such Disposition, (v) the Adjusted Outstanding Interest Fraction as of a recent
date preceding the date of such notice, (vi) the place or places where
certificates for shares of Affected Tracking Stock, properly endorsed or
assigned for transfer (unless the Company waives such requirement), are to be
surrendered for cash, securities or property or combination thereof, and (vii)
the number of outstanding shares of the Affected Tracking Stock and the Number
of Shares Issuable to Third Parties of the Affected Tracking Stock, including
the number of such shares which are issuable as Committed Acquisition Shares and
the number of shares of the Affected Tracking Stock into or for which
outstanding Convertible Securities are
 
                                      -92-
<PAGE>
then convertible, exercisable or exchangeable and the conversion, exercise or
exchange prices thereof (and stating which, if any, of such Convertible
Securities are Pre-Distribution Convertible Securities). Such notice will be
sent not less than 51 Trading Days nor more than 55 Trading Days following the
consummation of the Disposition and not less than 25 Trading Days prior to the
redemption date.
 
    NOTICE OF PARTIAL REDEMPTION FOLLOWING DISPOSITION.  If the Company
determines to undertake a partial redemption of Tracking Stock following a
Disposition of substantially all (but not all) of the properties and assets of
the Affected Tracking Group, as described in clause (ii)(B) of the fourth
paragraph under "--Disposition of Assets of Tracking Group," such partial
redemption will be done on a pro rata basis or by lot. The Company will, not
earlier than the 51st Trading Day and not later than the 55th Trading Day
following the consummation of such a Disposition, cause to be given to each
holder of record of outstanding shares of the Affected Tracking Stock a notice
setting forth (i) a statement that some of the shares of the Affected Tracking
outstanding on the redemption date will be redeemed, specifying the number of
such shares or how such number will be determined, (ii) a date not earlier than
the 61st Trading Day and not later than the 65th Trading Day following the
consummation of such Disposition which will be the date on which shares of the
Affected Tracking Stock then outstanding will be selected for redemption, (iii)
the anticipated redemption date (which will not be more than 90 Trading Days
following the consummation of such Disposition), (iv) the kind and amount of
cash, securities or property or combination thereof to be paid as a redemption
price in respect of the shares of the Affected Tracking Stock, (v) the amount of
the Fair Value of the Net Proceeds of such Disposition, (vi) the Outstanding
Interest Fraction as of a recent date preceding the date of such notice, (vii)
the Number of Shares Issuable to Third Parties of the Affected Tracking Stock,
including the number of such shares which are issuable as Committed Acquisition
Shares and the number of shares of Affected Tracking Stock into or for which
outstanding Convertible Securities are then convertible, exercisable or
exchangeable and the conversion, exercise or exchange prices thereof (and
stating which, if any, of such Convertible Securities are Pre-Distribution
Convertible Securities), and (viii) a statement that the Company will not be
required to register a transfer of any shares of the Affected Tracking Stock for
a period of up to 15 Trading Days next preceding the date referred to in clause
(ii) of this sentence. Promptly following the date referred to in clause (ii) of
the preceding sentence, but not earlier than the 61st Trading Day and not later
than the 65th Trading Day following the consummation of such Disposition, the
Company will cause to be given to each holder of shares of the Affected Tracking
Stock, a notice setting forth (i) the number of shares of Affected Tracking
Stock held by such holder to be redeemed, (ii) a statement that such shares of
Affected Tracking Stock will be redeemed, (iii) the redemption date (which will
not be more than 90 Trading Days following the consummation of such
Disposition), (iv) the kind and per share amount of cash, securities or property
or combination thereof to be received by such holder with respect to each share
of Affected Tracking Stock to be redeemed, including details as to the
calculation thereof, and (v) the place or places where certificates for such
shares of Affected Tracking Stock, properly endorsed or assigned for transfer
(unless the Company waives such requirement), are to be surrendered for delivery
of cash, securities or property or combination thereof.
 
    NOTICES UPON CONVERSION FOLLOWING DISPOSITION.  In the event of any
conversion following a Disposition, as described above in clause (iii) of the
fourth paragraph under "--Disposition of Assets of Tracking Group," the Company
will cause to be given to each holder of outstanding shares of the Affected
Tracking Stock a notice setting forth (i) a statement that some or all of the
outstanding shares of the Affected Tracking Stock will be converted, specifying
the number of such shares or how such number shall be determined, (ii) the
anticipated conversion date (which will not be more than 90 Trading Days
following the consummation of such Disposition), (iii) the per share number (or
fraction) of Special Common Shares or shares of another class or classes of
Tracking Stock, as applicable, to be received with respect to each share of
Affected Tracking Stock, specifying the shares or the combination of such shares
to be delivered, the Disposition Conversion Percentage and other details as to
the calculation thereof, (iv) the place or places where certificates for shares
of the Affected Tracking Stock, properly endorsed or assigned for transfer
(unless the Company waives such requirement), are to be surrendered, and (v) the
number of outstanding shares of the Affected Tracking Stock and the Number of
Shares Issuable to Third Parties of the Affected Tracking Stock, including the
number of such shares which are issuable as Committed Acquisition Shares and the
number of shares of the Affected Tracking Stock into or for which outstanding
Convertible Securities are then convertible, exercisable or exchangeable and the
conversion, exercise or exchange prices thereof (and stating which, if any, are
Pre-Distribution Convertible Securities). Such notice will be sent not less than
51 Trading Days nor more than 55 Trading Days following the consummation of the
Disposition and not less than 25 Trading Days prior to the conversion date.
 
    Upon the Company's decision to convert all of the remaining outstanding
shares of the Affected Tracking Stock at any time prior to the first anniversary
of a dividend on, or partial redemption of, shares of Affected Tracking Stock
 
                                      -93-
<PAGE>
following a Disposition, as described above under "--Disposition of Assets of
Tracking Group," the Company will announce publicly by press release (i) the
number of outstanding shares of Affected Tracking Stock to be converted, (ii)
the Number of Shares Issuable to Third Parties of such Tracking Stock, including
the number of such shares which are issuable as Committed Acquisition Shares and
into or for which Convertible Securities are then convertible, exercisable or
exchangeable and the conversion, exercise or exchange prices thereof (and
stating which, if any, of such Convertible Securities are Pre-Distribution
Convertible Securities), (iii) the Disposition Conversion Percentage and (iv)
the Outstanding Interest Fraction for such Tracking Stock as of a recent date
preceding the date of such notice. The Company will subsequently announce
publicly by press release whether the shares of such Tracking Stock are being
converted in exchange for Special Common Shares, shares of another Tracking
Stock or a combination thereof on a pro rata basis.
 
    In the event of any conversion at any time prior to the first anniversary of
a dividend on, or partial redemption of, shares of Affected Tracking Stock
following a Disposition, as described in the preceding paragraph, the Company
will cause to be given to each holder of outstanding shares of the Affected
Tracking Stock a notice setting forth (i) a statement that all of the
outstanding shares of the Affected Tracking Stock will be converted into a
number or fraction of Special Common Shares or shares of any other class of
Tracking Stock or combination thereof on a pro rata basis, (ii) the anticipated
conversion date (which will not be more than 90 Trading Days following the
following the press release that publicly announces such conversion), (iii) the
per share number (or fraction) of Special Common Shares or shares of another
class of Tracking Stock or combination thereof, as applicable, to be received
with respect to each share of Affected Tracking Stock, specifying such number or
fraction of shares or combination thereof, the Disposition Conversion Percentage
and other details as to the calculation thereof, (iv) the place or places where
certificates for shares of the Affected Tracking Stock, properly endorsed or
assigned for transfer (unless the Company waives such requirement), are to be
surrendered, and (v) the number of outstanding shares of the Affected Tracking
Stock and the Number of Shares Issuable to Third Parties of the Affected
Tracking Stock, including the number of such shares which are issuable as
Committed Acquisition Shares and the number of shares of the Affected Tracking
Stock into or for which outstanding Convertible Securities are then convertible,
exercisable or exchangeable and the conversion, exercise or exchange prices
thereof (and stating which, if any, are Pre-Distribution Convertible
Securities). Such notice will be sent not less than 25 Trading Days nor more
than 35 Trading Days prior to the conversion date.
 
    CONVERSION AT OPTION OF THE COMPANY.  The Company may, at the sole
discretion of the Board, at any time convert each outstanding share of any class
of Tracking Stock (the "Converted Tracking Stock"), of any Tracking Group (the
"Converted Tracking Group"), into a number of fully paid and nonassessable
Special Common Shares or shares of another class of Tracking Stock or any
combination thereof, equal to the applicable percentage set forth below (the
"Optional Conversion Percentage") on the conversion date, of the average daily
ratio (calculated to the nearest five decimal places) of the Market Value of one
share of Converted Tracking Stock to the Market Value of one Special Common
Share or share of such other class or classes of Tracking Stock (or any
combination thereof on a pro rata basis), during a twenty-Trading Day period
ending on the fifth Trading Day prior to the date of notice of such conversion:
 
<TABLE>
<CAPTION>
                         12-MONTH PERIOD PRIOR TO                            OPTIONAL CONVERSION
                   ANNIVERSARY OF INITIAL ISSUANCE DATE                          PERCENTAGE
- ---------------------------------------------------------------------------  -------------------
<S>                                                                          <C>
First through Fifth........................................................            115%
Sixth......................................................................            114%
Seventh....................................................................            113%
Eighth.....................................................................            112%
Ninth......................................................................            111%
Thereafter.................................................................            110%
</TABLE>
 
    In the event of the conversion of any class of Tracking Stock into Special
Common Shares or shares of another class or classes of Tracking Stock, the
assets and liabilities of the Converted Tracking Group will be attributed to the
Group related to the shares which are issued upon such conversion (on a pro rata
basis if a combination of such shares are issued).
 
    In the event there is no public market for the Special Common Shares, the
Market Value per share will be deemed to be the same as the per share Market
Value of the Common Shares.
 
    The foregoing provisions would provide the Company the flexibility to
recapitalize the capital structure of the Company in several ways. For instance,
one Tracking Group could be combined with another Tracking Group. As an example,
the Aerial Group Shares could be converted into Cellular Group Shares, in which
case the resulting
 
                                      -94-
<PAGE>
Cellular Group Shares would thereafter represent an equity interest in the
Cellular Business and the PCS Business. In addition, the Company could convert
any or all classes of Tracking Stock into Special Common Shares. For example, if
the Telecom Group Shares were converted into Special Common Shares, the TDS
Group would thereafter include the Telecom Business.
 
    If all shares of Tracking Stock were converted into Special Common Shares,
the Special Common Shares, together with Common Shares and Series A Common
Shares, would thereafter represent a common equity interest in all of the
Company's businesses and all Tracking Groups would cease to exist. The optional
conversion could be exercised at any time in the future if the Board determines
that, under the circumstances, a combination of some or all of the businesses of
the Company would be in the best interests of the Company and its shareholders.
However, such conversion may be exercised by the Company at a time that is
disadvantageous to holders of one or more of the shares of capital stock of the
Company. See "Risk Factors." The Company has no current intentions or plans to
convert any of the shares of Tracking Stock into Special Common Shares or shares
of any other Tracking Stock or to combine any of the Groups.
 
    REDEMPTION IN EXCHANGE FOR STOCK OF SUBSIDIARY.  The Company, in the sole
discretion of the Board, may at any time, redeem (at no premium) all of the
outstanding shares of any class of Tracking Stock of a Tracking Group, for a
number of outstanding shares of common stock of a Qualifying Subsidiary or
Qualifying Subsidiaries that hold all of the assets and liabilities attributed
to such Tracking Group equal to the product of the Adjusted Outstanding Interest
Fraction multiplied by the number of all of the outstanding shares of the
Qualifying Subsidiaries owned directly or indirectly by the Company, on a pro
rata basis, provided that there are funds of the Company legally available
therefor. The Company may retain the balance of the outstanding shares of the
common stock of the Qualifying Subsidiaries in respect of the Retained Interest
and any Inter-Group Interest in the Tracking Stock to be redeemed, or distribute
such shares in respect thereof as discussed below.
 
    In the event that the Board, in its sole discretion, decides to redeem all
of the outstanding shares of a class of Tracking Stock in exchange for a
proportionate interest in the outstanding shares of any one or more Qualifying
Subsidiaries that hold all of the assets and liabilities attributed to such
Tracking Group, the percentage of the stock of the Qualifying Subsidiary or
Qualifying Subsidiaries owned by the Company that is distributable in the
redemption would be based on the Adjusted Outstanding Interest Fraction for that
Tracking Stock. The effect of using the Adjusted Outstanding Interest Fraction,
instead of the Outstanding Interest Fraction, for the shares of Tracking Stock
to be redeemed, in the determination of shares of the Qualifying Subsidiaries
deliverable in such a redemption, is to allocate to the TDS Group a portion of
the shares of the Qualifying Subsidiaries, in addition to the number of such
shares so allocated in respect of the Retained Interest, sufficient to provide
for the delivery of the consideration deliverable by the Company with respect to
Shares Issuable to Third Parties of the Affected Tracking Stock.
 
    In the event the Board determines to redeem the shares of any class of
Tracking Stock for shares of a Qualifying Subsidiary, and if there is a Retained
Interest in such Tracking Group, the Board must, to the extent practicable,
distribute Qualifying Subsidiary shares corresponding to Special Common Shares
to the holders of Tracking Stock of such Tracking Group with respect to the
Adjusted Outstanding Interest Fraction in such Tracking Group. In such event, if
the Board determines to distribute shares of such Qualifying Subsidiary to other
shareholders with respect to any Retained Interest or Inter-Group Interest must,
to the extent practicable, distribute Qualifying Subsidiary shares corresponding
to Special Common Shares to the holders of any other Tracking Stock with respect
to any such Inter-Group Interest in such Tracking Group, and distribute
Qualifying Subsidiary shares corresponding to Series A Common Shares to the
holders of Series A Common Shares, Qualifying Subsidiary shares corresponding to
Common Shares to the holders of Common Shares, and Qualifying Subsidiary shares
corresponding to Special Common Shares to the holders of Special Common Shares
with respect to any Retained Interest in such Tracking Group, provided that the
same number of shares of Qualifying Subsidiary common stock on a combined basis
must be distributed for each Series A Common Share, Common Share and any issued
Special Common Share.
 
    If practicable, the Board must recapitalize such Qualifying Subsidiary or
Qualifying Subsidiaries through an amendment to its charter or otherwise, so
that the shares of capital stock of such subsidiary and the relative rights,
limitations and preferences thereof substantially correspond to the Series A
Common Shares, Common Shares and Special Common Shares of the Company and their
relative rights, limitations and preferences, as may be determined to be
necessary or appropriate in the sole discretion of the Board, in order to permit
the distribution to be effected in the foregoing manner. However, if the
Qualifying Subsidiary has or will have shares corresponding to Series A Common
and Common Shares but does not have and will not have shares corresponding to
Special Common Shares and it is impracticable to recapitalize the subsidiary as
provided in the preceding sentence to
 
                                      -95-
<PAGE>
create Special Common Shares, the Board must distribute Qualifying Subsidiary
shares corresponding to Common Shares to the holders of Tracking Stock which
would otherwise be entitled to receive Qualifying Subsidiary shares
corresponding to Special Common Shares, and to the holders of Special Common
Shares in respect of any Retained Interest.
 
    A "Qualifying Subsidiary" for this purpose is a subsidiary of the Company
that is either wholly-owned, directly or indirectly, by the Company or in which
the Company's direct or indirect ownership and voting interest is sufficient to
satisfy the requirements of the Internal Revenue Service for a distribution of
the Company's interest in such subsidiary to holders of the Company's common
stock to be tax-free to such holders, and which holds all of the assets and
liabilities attributed to a Tracking Group. A Qualifying Subsidiary for this
purpose may include an existing subsidiary of the Company that may in the future
hold all of the assets and liabilities attributed to a Tracking Group or any
future subsidiary of the Company that meets the definition of Qualifying
Subsidiary and holds such assets and liabilities, whether or not created
exclusively for such purpose.
 
    To the extent that any Qualifying Subsidiary did not hold all assets and
liabilities attributable to the Tracking Stock to be redeemed, it is expected
that such assets and/or liabilities would be transferred to such Qualifying
Subsidiary prior to the redemption. To the extent that any such Qualifying
Subsidiary held assets and/or liabilities in addition to those attributed to a
Tracking Group, it is expected that in connection with any such redemption such
additional assets or liabilities would either be attributed to such Tracking
Group or transferred by such Qualifying Subsidiary to the TDS Group or to a
different Tracking Group. Alternatively, in any such case, any then existing
Retained Interest or Inter-Group Interest could be appropriately adjusted or
other consideration that the Board may determine in its discretion to be
appropriate could be paid by one Tracking Group to the TDS Group or such other
Tracking Group. See "--Management and Allocation Policies."
 
    The ability of the Company to exercise its right to redeem the outstanding
shares of Tracking Stock in exchange for a proportionate interest in shares of
one or more Qualifying Subsidiaries may be limited by the tax consequences to
the Company.
 
    PROCEDURES RELATING TO CONVERSION OR REDEMPTION OF TRACKING STOCK.  Upon the
Company's decision to convert or redeem all of the outstanding shares of any
class of Tracking Stock as described under "--Conversion at the Option of the
Company" or "--Redemption in Exchange for Stock of Subsidiary," the Company will
announce publicly by press release (i) the number of outstanding shares of the
class of Tracking Stock which will be converted or redeemed, (ii) the Number of
Shares Issuable to Third Parties of such Tracking Stock, including the number of
such shares which are issuable as Committed Acquisition Shares and into or for
which Convertible Securities are then convertible, exercisable or exchangeable
and the conversion, exercise or exchange prices thereof (and stating which, if
any, of such Convertible Securities are Pre-Distribution Convertible
Securities), (iii) the Optional Conversion Percentage and details as to the
calculation thereof and (iv) the Outstanding Interest Fraction and the Adjusted
Outstanding Interest Fraction for such Tracking Stock as of a recent date
preceding the date of such notice. The Company will subsequently announce
publicly by press release whether the shares of such Tracking Stock are being
converted in exchange for Special Common Shares, shares of another class or
classes of Tracking Stock or a combination thereof, or are being redeemed for
shares of a Qualifying Subsidiary.
 
    Unlike the conversion feature described under "--Disposition of Assets of
Tracking Group," the Company's decision to convert or redeem all of the
outstanding shares of Tracking Stock as described under "--Conversion at the
Option of the Company" or "--Redemption in Exchange for Stock of Subsidiary," is
not an irrevocable decision, nor is its decision as to which securities the
Company will use to redeem the Tracking Stock irrevocable. The conversion or
redemption of all of the shares of Tracking Stock as described under
"--Conversion at the Option of the Company" or "--Redemption in Exchange for
Stock of Subsidiary" may be abandoned or modified by the Company at any time
prior to the Company's delivery of the replacement securities in exchange for
the converted or redeemed shares of Tracking Stock.
 
    NOTICE UPON OPTIONAL CONVERSION.  If the Company determines to convert the
shares of any class of Tracking Stock into Special Common Shares or shares of
any other class or classes of Tracking Stock or any combination thereof, as
described above under "--Conversion at the Option of the Company," the Company
will promptly cause to be given to each holder of shares of Tracking Stock to be
converted a notice setting forth (i) a statement that all outstanding shares of
such class of Tracking Stock will be converted in exchange for Special Common
Shares or shares of any other class of Tracking Stock or any combination
thereof, (ii) the anticipated conversion date (which will not be more than 90
Trading Days following the press release that publicly announces such
conversion), (iii) the per share number (or fraction) of Special Common Shares,
shares of another class or classes of Tracking Stock or shares of a Qualifying
Subsidiary as applicable, to be received with respect to each share of such
Tracking Stock,
 
                                      -96-
<PAGE>
specifying the shares or the combination of such shares to be delivered, the
Optional Conversion Percentage and other details as to the calculation thereof,
(iv) the place or places where certificates for shares of such Tracking Stock to
be redeemed, properly endorsed or assigned for transfer (unless the Company
waives such requirement), are to be surrendered for delivery of certificates for
Special Common Shares, shares of another class or classes of Tracking Stock or
combination thereof, and (v) the number of outstanding shares of such Tracking
Stock and the Number of Shares Issuable to Third Parties of such Tracking Stock,
including the number of such shares which are issuable as Committed Acquisition
Shares and the number of shares of such Tracking Stock into or for which
outstanding Convertible Securities are then convertible, exercisable or
exchangeable and the conversion, exercise or exchange prices thereof (and
stating which, if any, of such Convertible Securities are Pre-Distribution
Convertible Securities). Such notice will be sent not less than 25 Trading Days
nor more than 35 Trading Days prior to the conversion date.
 
    NOTICE UPON REDEMPTION IN EXCHANGE FOR STOCK OF SUBSIDIARY.  If the Company
determines to redeem the shares of any class of Tracking Stock Shares into
shares of a Qualifying Subsidiary as described above under "--Redemption in
Exchange for Stock of Subsidiary," the Company will promptly cause to be given
to each holder of shares of Tracking Stock to be redeemed a notice setting forth
(i) a statement that all outstanding shares of such class of Tracking Stock will
be redeemed in exchange for shares of a Qualifying Subsidiary, (ii) the
anticipated redemption date (which will not be more than 90 Trading Days
following the press release that publicly announces such redemption), (iii) the
Adjusted Outstanding Interest Fraction for such Tracking Stock as of a recent
date preceding the date of such notice, (iv) the place or places where
certificates for shares of such Tracking Stock to be redeemed, properly endorsed
or assigned for transfer (unless the Company waives such requirement), are to be
surrendered for delivery of certificates for shares of common stock of the
Qualifying Subsidiary, and (v) the number of outstanding shares of such Tracking
Stock and the Number of Shares Issuable to Third Parties of such Tracking Stock,
including the number of such shares which are issuable as Committed Acquisition
Shares and the number of shares of such Tracking Stock into or for which
outstanding Convertible Securities are then convertible, exercisable or
exchangeable and the conversion, exercise or exchange prices thereof (and
stating which, if any, of such Convertible Securities are Pre-Distribution
Convertible Securities). Such notice will be sent not less than 25 Trading Days
nor more than 35 Trading Days prior to the redemption date.
 
    GENERAL PROVISIONS RELATING TO CONVERSIONS OR REDEMPTIONS.  In each case in
which a notice is required to be given to holders of outstanding shares of any
class of Tracking Stock in accordance with the "--Procedures Relating to
Disposition Rights" or "--Procedures Relating to Conversion or Redemption of
Tracking Stock" (other than a notice to holders of shares selected for a partial
redemption), notice shall also be given, within the required time period, to
each holder of Convertible Securities that are convertible into or exercisable
or exchangeable for shares of such Tracking Stock (unless provision for such
notice is otherwise made pursuant to the terms of such Convertible Securities).
Such notice shall include, in addition to all of the information set forth in
the corresponding notice to holders of shares of such Tracking Stock, a
statement to the effect that the holders of such Convertible Securities will be
entitled to receive the dividend, participate in the redemption of shares
following a Disposition with respect to such Tracking Stock or in the selection
of shares for conversion or redemption, participate in the conversion of shares
or participate in the redemption of shares only if such holder appropriately
converts, exercises or exchanges such Convertible Securities on or prior to the
record date for the dividend, redemption date, date fixed for selection of
shares to be redeemed or conversion date, as applicable, set forth in such
notice. In the case of a conversion or redemption of shares of any class of
Tracking Stock, the notice to holders of Convertible Securities shall also state
what, if anything, such holders will be entitled to receive pursuant to the
terms of such Convertible Securities if such holders convert, exercise or
exchange such Convertible Securities following the conversion date or redemption
date, as applicable.
 
    All notices required to be given under this section and as described under
"--Procedures Relating to Disposition Rights" and "--Procedures Relating to
Conversion or Redemption of Tracking Stock," will be sent to a holder by first
class mail, postage prepaid, at the holder's address as the same appears on the
transfer books of the Company. Neither the failure to mail any notice to any
particular holder of shares of Tracking Stock or of Convertible Securities nor
any defect therein will affect the sufficiency thereof with respect to any other
holder of outstanding shares of Tracking Stock or of Convertible Securities, or
the validity of any redemption.
 
    The Company will not be required to issue or deliver fractional shares of
any class of capital stock or any fractional securities to any holder of shares
of Tracking Stock upon any conversion or redemption, dividend or other
distribution described above. In connection with the determination of the number
of shares of any class of capital stock that is issuable or the amount of
securities that is deliverable to any holder of record upon any conversion or
redemption, dividend or other distribution (including any fractions of shares or
securities), the Company may
 
                                      -97-
<PAGE>
aggregate the number of shares of Tracking Stock held at the relevant time by
such holder of record. If the number of shares of any class of capital stock or
the amount of securities remaining to be issued or delivered to any holder of
shares of Tracking Stock is a fraction, the Company will, if such fraction is
not issued or delivered to such holder, pay a cash adjustment in respect of such
fraction in an amount equal to the fair market value of such fraction on the
fifth Trading Day prior to the date such payment is to be made (without
interest). For purposes of the preceding sentence, "fair market value" of any
fraction will be (i) in the case of any fraction of a share of capital stock of
the Company, the product of such fraction and the Market Value of one share of
such capital stock and (ii) in the case of any other fractional security, such
value as is determined by the Board.
 
    No adjustments in respect of dividends will be made upon the conversion or
redemption of any shares of Tracking Stock; provided, however, that if the
conversion or redemption date with respect to a class of Tracking Stock is
subsequent to the record date for the payment of a dividend or other
distribution thereon or with respect thereto, the holders of shares of such
class of Tracking Stock at the close of business on such record date will be
entitled to receive the dividend or other distribution payable on or with
respect to such shares on the date set for payment of such dividend or other
distribution, notwithstanding a conversion or redemption by the Company of such
shares or the Company's default in payment of the dividend or distribution due
on such date.
 
    Before any holder of shares of any class of Tracking Stock will be entitled
to receive certificates representing shares of any kind of capital stock, cash,
securities or other property or combination thereof to be received by such
holder with respect to any conversion or redemption of such Tracking Stock, such
holder is required to surrender at such place as the Company will specify
certificates for such shares, properly endorsed or assigned for transfer (unless
the Company waives such requirement). The Company will as soon as practicable
after surrender of certificates representing shares of such Tracking Stock
deliver to the person for whose account such shares were so surrendered, or to
the nominee or nominees of such person, certificates representing the number of
whole shares of the kind of capital stock or cash, securities or other property
or combination thereof to which such person is entitled, together with any
payment for fractional securities referred to above. The Company will not be
required to register (i) a transfer of any shares of Tracking Stock for a period
of up to 15 Trading Days preceding the conversion or redemption date or (ii) any
shares of Tracking Stock selected for redemption.
 
    From and after any applicable conversion or redemption date, all rights of a
holder of shares of any class of Tracking Stock that were converted or redeemed
will cease except for the right, upon surrender of the certificates representing
such Tracking Stock, to receive certificates representing shares of the kind and
amount of capital stock or cash, securities or other property or combination
thereof for which such shares of Tracking Stock were converted or redeemed,
together with any payment for fractional securities, and such holder will have
no other or further rights in respect of the Tracking Stock so converted or
redeemed, including, but not limited to, any rights with respect to any capital
stock, cash, securities or other property which are reserved or otherwise
designated by the Company as being held for the satisfaction of the Company's
obligations to pay or deliver any capital stock, cash, securities or other
property upon the conversion, exercise or exchange of any Convertible Securities
outstanding or with respect to any other Shares Issuable to Third Parties
related to the conversion or redemption of such Tracking Stock as of the date of
such redemption. No holder of a certificate that, immediately prior to the
applicable conversion or redemption date for any class of Tracking Stock,
represented shares of Tracking Stock which were converted or redeemed will be
entitled to receive any dividend or other distribution with respect to shares of
any kind of capital stock or other securities into or in exchange for which the
shares of such Tracking Stock were converted or redeemed until surrender of such
holder's certificate for a certificate or certificates representing shares of
such kind of capital stock or other securities. Upon such surrender, there will
be paid to the holder the amount of any dividends or other distributions
(without interest) which theretofore became payable with respect to a record
date after the conversion date or redemption date, as the case may be, but that
were not paid by reason of the foregoing, with respect to the number of whole
shares of the kind of capital stock or other securities represented by the
certificate or certificates issued upon such surrender.
 
    The Company will pay any and all documentary, stamp or similar issue or
transfer taxes that may be payable in respect of the issue or delivery of any
shares of capital stock or other securities on the conversion or redemption of
any class of Tracking Stock. The Company will not, however, be required to pay
any tax that may be payable in respect of any transfer involved in the issue and
delivery of any shares of capital stock or other securities in a name other than
that in which the shares of Tracking Stock so converted or redeemed were
registered and no such issue or delivery will be made unless and until the
person requesting such issue has paid to the Company the amount of any such tax,
or has established to the satisfaction of the Company that such tax has been
paid.
 
    EFFECT OF CONVERSION OR REDEMPTION ON SECURITIES CONVERTIBLE INTO TRACKING
STOCK.  Unless the provisions of the security provide specifically to the
contrary, after any conversion or redemption date on which all outstanding
 
                                      -98-
<PAGE>
shares of any class of Tracking Stock were converted or redeemed by the Company,
any shares of such Tracking Stock that would be issuable on conversion, exercise
or exchange of any pre-conversion or pre-redemption securities which are
convertible, exercisable or exchangeable for shares of such Tracking Stock will,
immediately upon issuance pursuant to such conversion, exercise or exchange and
without any notice or any other action on the part of the Company or its Board
or the holder of such security, be converted or redeemed in exchange for, as
applicable, the kind and amount of shares of capital stock, cash, securities or
other property that a holder of such pre-conversion or pre-redemption securities
would have been entitled to receive as a result of the conversion or redemption
had such pre-conversion or pre-redemption securities been converted, exercised
or exchanged immediately prior to such conversion or redemption.
 
    If Convertible Securities, as well as any other obligations to deliver
shares of a class of Tracking Stock to third parties, including obligations to
deliver Committed Acquisition Shares, remain outstanding at the time of any
redemption of all outstanding shares of any one of the Tracking Stocks following
the Disposition of all (not merely substantially all) of the properties and
assets of the that Tracking Group, the proportionate interest in the Fair Value
of the Net Proceeds of the Disposition to be distributed to the holders of
Affected Tracking Stock will be determined on the basis of the Adjusted
Outstanding Interest Fraction for the Affected Tracking Group. Such
determination will result in the allocation to the TDS Group of a portion of
such Fair Value of the Net Proceeds, in addition to the portion attributable to
any Retained Interest, sufficient to provide for the post-redemption delivery of
the portion of the consideration (if any) deliverable by the Company on any
conversion, exercise, exchange or delivery of Convertible Securities, Committed
Acquisition Shares or otherwise, that is in substitution for shares of the
Affected Tracking Group that would have been issuable upon such conversion,
exercise, exchange or delivery if it had occurred prior to the redemption of all
outstanding shares of such Tracking Stock.
 
    Similarly, if Convertible Securities, as well as any other obligations to
deliver shares of a class of Tracking Stock to third parties, including
obligations to deliver Committed Acquisition Shares, remain outstanding at the
time of any redemption of all the outstanding shares of any class of Tracking
Stock in exchange for stock of any one or more Qualifying Subsidiaries of the
Company which hold all of the assets and liabilities of the related Tracking
Group, the number of shares of such subsidiaries deliverable in redemption of
the outstanding shares of such Tracking Group will be determined on the basis of
the Adjusted Outstanding Interest Fraction for such Tracking Group, resulting in
the allocation to the TDS Group of a portion of the shares of such subsidiaries,
in addition to the number of shares so allocated in respect of any Retained
Interest, sufficient to provide for the post-redemption delivery of the portion
of the consideration (if any) deliverable by the Company upon any conversion,
exercise, or exchange or delivery of Convertible Securities, Committed
Acquisition Shares or otherwise, that is in substitution for shares of such
Tracking Stock that would have been issuable upon such conversion, exercise,
exchange or delivery if it had occurred prior to such redemption of all
outstanding shares of such Tracking Stock.
 
THE RETAINED INTERESTS
 
    In structuring the terms of the Tracking Stock Proposal, the Board
determined that the retention by the TDS Group of Retained Interests in the
Cellular Group, Telecom Group and the Aerial Group was appropriate. In making
this determination, the Board concluded that it would be desirable for
shareholders to have the option of continuing to maintain a common equity
investment in all of the businesses of the Company and its subsidiaries by
retaining ownership of the Common Shares or Series A Common Shares. The Board
also determined that it would be desirable for the Company to have a Group, such
as the TDS Group, which could enter into new ventures and possibly create
additional tracking stocks for such ventures by designating series of
Undesignated Shares. Such new shares of tracking stock could be distributed to
the holders of Common Shares and Series A Common Shares, sold for cash in a
public or private offering for the benefit of the TDS Group or delivered in
connection with the acquisition of a business by the TDS Group.
 
    If and when additional shares of one of the Tracking Stocks are issued
(E.G., a public offering), the Board will identify whether the issuance is for
the benefit of that Tracking Group or the TDS Group or both. If the issuance is
for the benefit of the Tracking Group, the proceeds would be attributed to such
Tracking Group and the shares issued would come from authorized but unissued
shares of the Tracking Group, which would proportionately dilute the existing
Outstanding Interest and the corresponding Retained Interest. If the issuance is
for the benefit of the Retained Interest, the proceeds would be attributed to
the TDS Group and the Retained Interest would be reduced accordingly. The
Retained Interest in a Tracking Group may change pursuant to such issuances as
well as any transfers of cash or other property between the TDS Group and the
Tracking Group.
 
    With respect to transfers of cash or other property between the TDS Group
and the Tracking Groups, there are no specific criteria for determining when
such a transfer will be reflected as a borrowing or as an increase or
 
                                      -99-
<PAGE>
reduction in a Retained Interest. The Board expects to make such determinations,
either in specific instances or by setting generally applicable policies from
time to time, after consideration of such factors as it deems relevant,
including, without limitation, the needs of the Company, the financing needs and
objectives of the Groups, the investment objectives of the Groups, the
availability, cost and time associated with alternative financing sources,
prevailing interest rates and general economic conditions.
 
    The Retained Interest in any Tracking Group may change pursuant to any
subsequent transfers of cash or other property from the Company to the Tracking
Group which are specifically designated by the Board as being made to alter the
Retained Interest (in contrast to transfers made for other consideration such as
transfers as loans or in purchase and sale transactions) or if outstanding
shares of a Tracking Group are retired or otherwise cease to be outstanding
following their purchase with funds attributed to the TDS Group.
 
    The amount of the Retained Interest for a Tracking Group at any point in
time would be expressed in terms of the "Number of Shares Issuable with Respect
to Retained Interest," which is intended to provide a measure of any Retained
Interest on a basis comparable to an investment in Tracking Stock. The full
definition of "Number of Shares Issuable with Respect to Retained Interest" is
set forth in "--Certain Definitions."
 
    The Retained Interest will not be represented by issued and outstanding
shares of Tracking Stock. None of the Number of Shares Issuable with Respect to
Retained Interest would be represented by outstanding Tracking Stock and,
therefore, would not be entitled to any voting rights. Accordingly, the Company
will not have any voting rights with respect to any Retained Interest, and the
outcome of any vote of any class of Tracking Stock would be determined by the
holders of the outstanding shares of such Tracking Stock. In addition,
outstanding shares of Tracking Stock that are held by majority-owned
subsidiaries of the Company (as to which the Company owns a majority of the
shares entitled to vote in the election of directors) would not, in accordance
with the DGCL, be entitled to vote on matters presented to shareholders or be
counted for quorum purposes.
 
    The Board could, in its sole discretion, determine from time to time to have
the Company contribute cash or other property as additional equity to any
Tracking Group, and have this be reflected as an increase in the Number of
Shares Issuable with Respect to Retained Interest. In such event, the Retained
Interest Fraction with respect to such Tracking Group will increase and the
related Outstanding Interest Fraction will decrease accordingly. The Board
could, in its sole discretion, also determine from time to time to transfer cash
or other property of a Tracking Group to the TDS Group and have such transfer
reflected as a reduction in the Retained Interest, in which case the Number of
Shares Issuable with Respect to Retained Interest would be decreased. In such
event, such Retained Interest Fraction would decrease and the related
Outstanding Interest Fraction would increase accordingly. The Board could, in
its sole discretion, determine to make contributions or other transfers referred
to in this paragraph after consideration of such factors as it deems relevant,
including, without limitation, the needs of the Company, the financing needs and
objectives of each of the Groups, the investment objectives of the Groups, the
availability, cost and time associated with alternative financing sources,
prevailing interest rates and general economic conditions.
 
    In general, if the Retained Interest is increased by a transfer of funds or
other assets from the TDS Group to a Tracking Group, the Number of Shares
Issuable with Respect to Retained Interest would be increased by an amount
determined by dividing the amount of funds or value of assets transferred by the
Market Value of a share of Tracking Stock of such Group as of the date of such
transfer. Any transfer of funds or other assets from a Tracking Group to the TDS
Group in respect of a decrease in the Number of Shares Issuable with Respect to
Retained Interest would be similarly calculated. To the extent outstanding
shares of Tracking Stock are retired or otherwise cease to be outstanding
following their purchase with funds attributed to the TDS Group, the Number of
Shares Issuable with Respect to Retained Interest would increase on a
share-for-share basis. Tracking Stock purchased with funds attributed to the TDS
Group which remain outstanding (as a result of being held by a subsidiary
included in the TDS Group) would not increase the Retained Interest but would
represent an outstanding interest in the common shareholders' equity value of
the TDS Group attributable to such Tracking Group. The Number of Shares Issuable
with Respect to Retained Interest, if any, would also (i) be adjusted from time
to time as appropriate to reflect (a) subdivisions (by stock split or otherwise)
and combinations (by reverse stock split or otherwise) of any Tracking Stock,
(b) dividends or distributions payable in shares of Tracking Stock to holders of
such Tracking Stock and (c) reclassifications of Tracking Stock and (ii) be
decreased by the number of shares of Tracking Stock (a) issued upon conversion,
exercise or exchange of Convertible Securities that are attributed to the TDS
Group or (b) issued by the Company as a dividend or distribution or by
reclassification or exchange to holders of Common Shares, Series A Common Shares
or Special Common Shares.
 
    For financial reporting purposes, shares of Tracking Stock acquired by
subsidiaries of the TDS Group which remain outstanding following such
acquisition would be combined with the Number of Shares Issuable with
 
                                     -100-
<PAGE>
Respect to Retained Interest, if any, and reported as part of the TDS Group's
interest in the related Tracking Group. Any differences between such reported
interest and any then existing Retained Interest would be reconcilable by adding
to any then existing Retained Interest the number of outstanding shares of
Tracking Stock held by subsidiaries of the TDS Group. Because these shares would
still be outstanding for purposes of the receipt of dividends and payment of
redemption or liquidation amounts, the TDS Group would obtain substantially the
same economic benefits from such outstanding shares as it would have received
had such shares been retired or otherwise ceased to be outstanding following
their purchase and added to the Number of Shares Issuable with Respect to
Retained Interest.
 
    The authorized shares of Tracking Stock in excess of the total number of
shares outstanding will be available for issuance or sale without further
approval by the Company's shareholders and may be issued at any time at prices
that would dilute the value of the outstanding shares of Tracking Stock.
Whenever shares of Tracking Stock are subsequently issued or sold by the
Company, the Company will identify (i) the number of shares of Tracking Stock
issued and sold that represent a Retained Interest, if any, the sale of which
shares will reduce the Number of Shares Issuable with Respect to Retained
Interest on a share-for-share basis and the net proceeds of which sale will be
reflected entirely in the combined financial statements of the TDS Group, and
(ii) the number of such shares that represent an additional equity interest in
the Tracking Group, the sale of which shares will reduce the available shares of
Tracking Stock and the net proceeds of which sale will be reflected entirely in
the combined financial statements of the applicable Tracking Group. The Board
expects to make such determination, in its sole discretion, after consideration
of such factors as it deems relevant, including, without limitation, the needs
of the Company, the financing needs and objectives of the Groups, the investment
objectives of the Groups, the availability, cost and time associated with
alternative financing sources, prevailing interest rates and general economic
conditions.
 
    In the event of any dividend or other distribution paid or distributed in
respect of the outstanding shares of any class of Tracking Stock (other than in
shares of Tracking Stock, which will result in the adjustment to the Number of
Shares Issuable with Respect to Retained Interest ), the TDS Group's combined
financial statements would be credited, and the related Tracking Group's
combined financial statements would be charged (in addition to the charge for
such dividend or other distribution paid upon outstanding shares of Tracking
Stock), with an amount equal to the product of (i) the aggregate amount of such
dividend or other distribution paid or distributed in respect of outstanding
shares of Tracking Stock (including any dividend related to the Fair Value of
the Net Proceeds from the Disposition of all or substantially all of the assets
and properties of a Tracking Group), times (ii) a fraction, the numerator of
which is the Retained Interest Fraction and the denominator of which is the
Outstanding Interest Fraction for such Tracking Group.
 
    If shares of Tracking Stock are retired or otherwise cease to be outstanding
following their purchase with funds attributed to the TDS Group, the Number of
Shares Issuable with Respect to Retained Interest would increase on a
share-for-share basis and the related Retained Interest Fraction would increase
and the related Outstanding Interest Fraction would decrease accordingly. If the
purchase of shares of Tracking Stock were made with funds attributed to the
Tracking Group, the Number of Shares Issuable with Respect to Retained Interest
would not be increased, but the Retained Interest Fraction would increase and
the Outstanding Interest Fraction would decrease accordingly. The Board would,
in its sole discretion, determine whether purchases of Tracking Stock should be
made with consideration attributed to the TDS Group or one of the Tracking Stock
Groups, by considering such factors as it deems relevant, including, without
limitation, the needs of the Company, the financing needs and objectives of the
Groups, the investment objectives of the Groups, the availability, cost and time
associated with alternative financing sources, prevailing interest rates and
general economic conditions.
 
    If the Number of Shares Issuable with Respect to Retained Interest is
reduced to zero as a result of any combination of one or more of issuances or
sales of shares of Tracking Stock for the benefit of the TDS Group or other
events, shares of Tracking Stock could no longer be issued or sold by the
Company for the benefit of the TDS Group unless a further Retained Interest is
subsequently created or some other appropriate allocation is made. See
"--Management and Allocation Policies." If the net proceeds of any issuance or
sale by the Company of Tracking Stock are allocated to a Tracking Group, the
Number of Shares Issuable with Respect to Retained Interest would not be
reduced, but the Retained Interest Fraction would decrease and the Outstanding
Interest Fraction would increase accordingly.
 
    The "Outstanding Interest Fraction" represents the percentage interest in
the common shareholders' equity value of the Company attributable to a Tracking
Group that is represented at any time by the outstanding shares of Tracking
Stock, and the "Retained Interest Fraction" represents any remaining percentage
interest in the common shareholders' equity value of the Company attributable to
a Tracking Group that is attributed to the TDS Group by virtue of a Retained
Interest. Assuming no Inter-Group Interest Fractions, the sum of the Outstanding
Interest
 
                                     -101-
<PAGE>
Fraction and the Retained Interest Fraction for a Tracking Group will always
equal 100%. Should an Inter-Group Interest Fraction exist, the sum of such
Inter-Group Interest Fraction(s), the Outstanding Interest Fraction and the
Retained Interest Fraction, if any, for a Tracking Group will always equal 100%.
See "-- Certain Definitions."
 
INTER-GROUP INTERESTS
 
    Initially, it is contemplated that no Tracking Group would have an
Inter-Group Interest in any other Tracking Group. It is possible that one or
more Inter-Group Interests could develop at some time in the future. For
example, as the result of an inter-Group transfer of assets from the Cellular
Group to the Aerial Group, the Cellular Group could acquire an interest in the
Aerial Group. In such a hypothetical event, the Cellular Group would have an
Inter-Group Interest in the Aerial Group for the benefit of the holders of the
Cellular Group Shares. A Tracking Group may not have an Inter-Group Interest in
the TDS Group.
 
    An Inter-Group Interest in a Tracking Group would be created only if a
transfer of cash or other property from one of the Tracking Groups to another
Tracking Group is specifically designated by the Board as being made to create
an Inter-Group Interest (in contrast to transfers made for other consideration,
such as cash transfers representing borrowings or in cash purchase or sale
transactions) or if outstanding shares of a Tracking Group are retired or
otherwise cease to be outstanding following their purchase with funds attributed
to one of the Tracking Groups.
 
    With respect to transfers of cash or other property between the Tracking
Groups, there are no specific criteria for determining when such a transfer will
be reflected as an increase or reduction in borrowings between Tracking Groups
or as a creation of, or an increase or reduction in, an Inter-Group Interest.
The Board expects to make such determinations, either in specific instances or
by setting generally applicable policies from time to time, after consideration
of such factors as it deems relevant, including, without limitation, the needs
of the Company, the financing needs and objectives of the Tracking Groups, the
investment objectives of the Tracking Groups, the availability, cost and time
associated with alternative financing sources, prevailing interest rates and
general economic conditions.
 
    For illustrative purposes hereof, the Tracking Group acquiring an
Inter-Group Interest in one of the other Groups will be referred to as the
"Investor Group" and the Tracking Group in which an Inter-Group Interest is
being acquired will be referred to as the "Issuer Group."
 
    The amount of any Inter-Group Interest of the Investor Group in the Issuer
Group (the "Inter-Group Interest in Issuer Group") at any point in time would be
expressed in terms of the "Number of Shares Issuable with Respect to Inter-Group
Interest" in the Issuer Group, which is intended to provide a measure of any
Inter-Group Interest of the Investor Group in the Issuer Group on a basis
comparable to an investment in shares of Tracking Stock of the Issuer Group (the
"Issuer Group Shares").
 
    The Board could, in its sole discretion, determine from time to time to have
the Company contribute cash or other property of the Investor Group as
additional equity to the Issuer Group, which would increase the Number of Shares
Issuable with Respect to Inter-Group Interest in Issuer Group as described
below. In such event, the Inter-Group Interest Fraction will increase and the
Issuer Group Outstanding Interest Fraction will decrease accordingly. The Board
could, in its sole discretion, also determine from time to time to transfer cash
or other property of the Issuer Group from the Issuer Group to the Investor
Group in respect of a reduction in its Inter-Group Interest in Issuer Group, in
which case the Number of Shares Issuable with Respect to the Inter-Group
Interest would be decreased as described below. In such event, the Inter-Group
Interest Fraction would decrease and the Issuer Group Outstanding Interest
Fraction would increase accordingly. The Board could, in its sole discretion,
determine to make contributions or other transfers referred to in this paragraph
after consideration of such factors as it deems relevant, including, without
limitation, the needs of the Company, the financing needs and objectives of the
each of Groups, the investment objectives of the Groups, the availability, cost
and time associated with alternative financing sources, prevailing interest
rates and general economic conditions.
 
    If an Inter-Group Interest in Issuer Group is created by a transfer of funds
or other assets from the Investor Group to the Issuer Group, the Number of
Shares Issuable with Respect to Inter-Group Interest in Issuer Group would be
increased by an amount determined by dividing the amount of funds or value of
assets transferred by the Market Value of an Issuer Group Share as of the date
of such transfer. In the event a subsequent transfer of funds or other assets
from the Investor Group to the Issuer Group is determined by the Board to be
made in respect of an increase in the Inter-Group Interest in Issuer Group, the
Number of Shares Issuable with Respect to Inter-Group Interest in Issuer Group
would be increased by an amount determined by dividing the amount of the
additional funds or value of the additional assets transferred by the Market
Value of an Issuer Group Share as of the date of
 
                                     -102-
<PAGE>
such transfer. Any decrease in the Number of Shares Issuable with Respect to
Inter-Group Interest in the Issuer Group resulting from a transfer of funds or
other assets from the Issuer Group to the Investor Group determined by the Board
to be made in respect of such a transfer would be similarly calculated.
 
    To the extent outstanding Issuer Group Shares are retired or otherwise cease
to be outstanding following their purchase with funds attributed to the Investor
Group, the Number of Shares Issuable with Respect to Inter-Group Interest in the
Issuer Group would increase on a share-for-share basis. Issuer Group Shares
purchased with funds attributed to the Investor Group which remain outstanding
(as a result of being held by a subsidiary included in the Investor Group) would
not create an Inter-Group Interest or increase any then existing Inter-Group
Interest in the Issuer Group but would represent an outstanding interest in the
common shareholders' equity value of the Company attributable to the Issuer
Group.
 
    The Number of Shares Issuable with Respect to Inter-Group Interest in the
Issuer Group, if any, would also (i) be adjusted from time to time as
appropriate to reflect (a) subdivisions (by stock split or otherwise) and
combinations (by reverse stock split or otherwise) of the Issuer Group Shares,
(b) dividends or distributions payable in Issuer Group Shares to holders of
Issuer Group Shares and (c) reclassifications of Issuer Group Shares and (ii) be
decreased by the number of shares of Issuer Group Shares (a) issued upon
conversion, exercise or exchange of Convertible Securities that are attributed
to the Investor Group or (b) issued by the Company as a dividend or distribution
or by reclassification or exchange to holders of Investor Group Shares. The
Inter-Group Interest in the Issuer Group, if any, would not be represented by
outstanding Issuer Group Shares and would have no voting rights.
 
    For financial reporting purposes, shares of Tracking Stock acquired by
subsidiaries of the Company included in an Investor Group which remain
outstanding following such acquisition would be combined with the Investor
Group's Number of Shares Issuable with Respect to Inter-Group Interest in the
Issuer Group, if any, and reported as the Investor Group's interest in the
Issuer Group. Any differences between such reported interest and any then
existing Inter-Group Interest in the Issuer Group Shares would be reconcilable
by adding to any then existing Inter-Group Interest the number of outstanding
Issuer Group Shares held by the consolidated subsidiaries of the Company
included in the Investor Group. Because these shares would still be outstanding
for purposes of the receipt of dividends and payment of redemption or
liquidation amounts, the Investor Group would obtain substantially the same
economic benefits from such outstanding shares as it would have received had
such shares been retired or otherwise ceased to be outstanding following their
purchase and added to the Investor Group's Number of Shares Issuable with
Respect to Inter-Group Interest in the Issuer Group.
 
    The authorized Issuer Group Shares in excess of the total number of shares
outstanding will be available for issuance or sale without further approval by
the Company's shareholders and may be issued at any time at prices that would
dilute the value of the outstanding Issuer Group Shares. If there is an
Inter-Group Interest in the future, whenever Issuer Group Shares are
subsequently issued or sold by the Company, the Company will identify (i) the
number of Issuer Group Shares issued and sold that represent the Inter-Group
Interest, if any, the sale of which shares will reduce the Number of Shares
Issuable with Respect to Inter-Group Interest in Issuer Group on a share-
for-share basis and the net proceeds of which sale will be reflected entirely in
the combined financial statements of the Investor Group, and (ii) the number of
such shares that represent an additional equity interest in the Issuer Group,
the sale of which shares will reduce the available shares of the Issuer Group
and the net proceeds of which sale will be reflected entirely in the combined
financial statements of the Issuer Group. The Board expects to make such
determination, in its sole discretion, after consideration of such factors as it
deems relevant, including, without limitation, the needs of the Company, the
financing needs and objectives of the Groups, the investment objectives of the
Groups, the availability, cost and time associated with alternative financing
sources, prevailing interest rates and general economic conditions.
 
    In the event of any dividend or other distribution paid or distributed in
respect of the outstanding Issuer Group Shares, (other than in Issuer Group
Shares, which will result in the adjustment to the Number of Shares Issuable
with Respect to Retained Interest in the Issuer Group ), an Investor Group's
combined financial statements would be credited, and the Issuer Group's combined
financial statements would be charged (in addition to the charge for such
dividend or other distribution paid upon outstanding Issuer Group Shares), with
an amount equal to the product of (i) the aggregate amount of such dividend or
other distribution paid or distributed in respect of outstanding Issuer Group
Shares (including any dividend related to the Fair Value of the Net Proceeds
from the Disposition of all or substantially all of the assets and properties of
the Issuer Group), times (ii) a fraction, the numerator of which is the
Inter-Group Interest Fraction in the Issuer Group and the denominator of which
is the Issuer Group Outstanding Interest Fraction.
 
                                     -103-
<PAGE>
    If Issuer Group Shares are retired or otherwise cease to be outstanding
following their purchase with funds attributed to the Investor Group, the Number
of Shares Issuable with Respect to Inter-Group Interest in the Issuer Group
would increase on a share-for-share basis and the Issuer Group Inter-Group
Interest Fraction would increase and the Issuer Group Outstanding Interest
Fraction would decrease accordingly. If the purchase of Issuer Group Shares were
made with funds attributed to the Issuer Group, the Number of Shares Issuable
with Respect to Inter-Group Interest in the Issuer Group would not be increased,
but the Issuer Group Inter-Group Interest Fraction would increase and the Issuer
Group Outstanding Interest Fraction would decrease accordingly. The Board would,
in its sole discretion, determine whether purchases of Tracking Stock of one
Group should be made with consideration attributed to such Group, the TDS Group
or one of the other Tracking Groups, by considering such factors as it deems
relevant, including, without limitation, the needs of the Company, the financing
needs and objectives of the Groups, the investment objectives of the Groups, the
availability, cost and time associated with alternative financing sources,
prevailing interest rates and general economic conditions.
 
    If the Number of Shares Issuable with Respect to Inter-Group Interest is
reduced to zero as a result of any combination of one or more issuances or sales
of Issuer Group Shares for the benefit of the Investor Group, Issuer Group
Shares could no longer be issued or sold by the Company for the account of the
Investor Group unless a further Inter-Group Interest in the Issuer Group is
subsequently created or unless some other appropriate allocation is made. If the
net proceeds of any issuance or sale by the Company of Issuer Group Shares are
allocated to the Issuer Group, the Number of Shares Issuable with Respect to
Inter-Group Interest in the Issuer Group would not be reduced, but the
Inter-Group Interest Fraction in the Issuer Group would decrease and the Issuer
Group Outstanding Interest Fraction would increase accordingly.
 
    The "Issuer Group Outstanding Interest Fraction" represents the percentage
interest in the common shareholders' equity value of the Company attributable to
the Issuer Group that is represented at any time by the outstanding Issuer Group
Shares, and the "Issuer Group Inter-Group Interest Fraction" represents any
percentage interest in the common shareholders' equity value of the Company
attributable to the Issuer Group that is attributed to the Investor Group by
virtue of an Inter-Group Interest. The sum of: (i) the Issuer Group Retained
Interest, if any, (ii) Issuer Group Outstanding Interest Fraction and (iii) the
Issuer Group Inter-Group Interest Fractions, would always equal 100% for any
Issuer Group. See "--Certain Definitions."
 
MANAGEMENT AND ALLOCATION POLICIES
 
    If the Tracking Stock Proposal is approved by shareholders, the Company will
prepare and include in its filings with the SEC under the Exchange Act,
consolidated financial statements of the Company and financial statements of the
Cellular Group (for so long as shares of the Cellular Group are outstanding),
the Telecom Group (for so long as shares of the Telecom Group are outstanding),
the Aerial Group (for so long as shares of the Aerial Group are outstanding) and
the TDS Group (for so long as any shares of Tracking Stock are outstanding).
Except for the financial statements included in this Proxy Statement/Prospectus,
the Company does not intend to provide separate financial statements for the TDS
Group, Cellular Group, Telecom Group and Aerial Group until Cellular Group
Shares, Telecom Group Shares or Aerial Group Shares are first issued, as
applicable. The financial statements of each Group, taken together and after
giving effect to inter-Group eliminations, would effectively comprise the
consolidated financial statements of the Company. The financial statements of
each Group will principally reflect the financial position, results of
operations and cash flows of the businesses attributed thereto. Consistent with
the Restated Certificate and applicable policies, the Group financial
information could also include allocated portions of individual assets and
liabilities that are not separately identified with the operations of a specific
Group. Notwithstanding allocations of assets and liabilities for the purpose of
preparing each Group's financial statements, holders of each series of common
stock would continue to be subject to risks associated with an investment in the
Company and all of its businesses, assets and liabilities.
 
    Subject to the consummation of the U.S. Cellular Merger and the Aerial
Merger, or other transactions pursuant to which U.S. Cellular or Aerial become
wholly-owned subsidiaries of the Company, the Company intends to terminate
certain intercompany agreements between the Company and U.S. Cellular and
Aerial, respectively. Thereafter, all of the relationships between the Company
and such subsidiaries would be determined solely under the management and
allocation policies described herein, similarly to TDS Telecom, which is
currently a wholly-owned subsidiary of TDS. Many of such policies would continue
substantially the same arrangements which presently exist between the Company
and U.S. Cellular or Aerial pursuant to the intercompany agreements, but the
Company would have no contractual obligation to continue such policies after the
intercompany agreements have been terminated.
 
                                     -104-
<PAGE>
    If the Tracking Stock Proposal is approved by shareholders, upon initial
issuance of the Cellular Group Shares, Telecom Group Shares or Aerial Group
Shares, cash management, taxes and allocation of principal corporate activities
among the Groups would be based upon methods that management of the Company
believes to be reasonable and would be reflected in the respective Group
financial information as follows:
 
        DEBT OR PREFERRED STOCK. Any debt incurred or preferred stock issued by
    the Company would be attributed to a Group by the Board based on the use of
    proceeds thereof and other factors. All debt incurred or preferred stock
    issued by the Company's subsidiaries would (unless the Board otherwise
    provides) be specifically attributed to and reflected on the financial
    statements of the Group that includes the entity which incurred the debt or
    issued the preferred stock. The Board could, however, determine from time to
    time that debt incurred or preferred stock issued by entities included in a
    Group should be specifically attributed to and reflected on the financial
    statements of one of the other Groups to the extent that the debt is
    incurred or the preferred stock is issued for the benefit of such other
    Group.
 
        ISSUANCE OF TRACKING STOCK. After the initial issuance of shares of
    Tracking Stock, (a) all financial impacts of issuances of additional shares
    of stock, the proceeds of which are attributed to the applicable Group, will
    be to such extent reflected in the financial statements of such Group, and
    (b) all financial impacts of issuances of stock, the proceeds of which are
    attributed to the TDS Group or one of the other Groups in respect of a
    reduction in any Retained Interest or Inter-Group Interest of another
    Tracking Group will be to such extent reflected in the financial statements
    of the TDS Group or such other Group, as the case may be. Financial impacts
    of dividends or other distributions on shares of a class of common stock
    will be attributed entirely to the Group making the dividend or
    distribution, except that dividends or other distributions will (if at the
    time there is a Retained Interest or an Inter-Group Interest in the Group
    making the dividend or distribution) result in the TDS Group or the Group
    with the Retained Interest or Inter-Group Interest, as the case may be,
    being credited, and the Group making the dividend or distribution being
    charged (in addition to the charge for the dividend or other distribution
    paid on the outstanding Tracking Stock), with an amount equal to the product
    of (x) the aggregate amount of such dividend or other distribution paid or
    distributed in respect of outstanding common stock and (y) a fraction, the
    numerator of which is the Retained Interest Fraction or the Inter-Group
    Interest Fractions (if any), as the case may be, and the denominator of
    which is the Outstanding Interest Fraction for such common stock. Financial
    impacts of repurchases of stock the consideration for which is charged to
    the related Group will be to such extent reflected in the financial
    statements of such Group, and financial impacts of repurchases of stock the
    consideration for which is charged to the TDS Group or another Group will be
    to such extent reflected in the financial statements of the TDS Group or
    such other Group and will result in the creation of a, or an increase in any
    then existing, Retained Interest or Inter-Group Interest, as the case may
    be, in such other Group.
 
        CASH TRANSFERS. To the extent cash needs of one Group exceed cash
    provided by such Group, one of the other Groups may transfer funds to such
    Group. The Company has provided and will continue to provide centralized
    cash management functions under which cash receipts of certain entities
    attributed to the other Groups will be remitted to the TDS Group and certain
    cash disbursements of the other Groups will be funded by the TDS Group on a
    daily basis. Such transfers of funds among the Groups will be reflected as
    borrowings or, if determined by the Board, reflected as the creation of a,
    or an increase in any then existing, Retained Interest or an Inter-Group
    Interest of the TDS Group or such other Group, as the case may be, in such
    recipient Group or, in the case of a reverse transfer from such recipient
    Group, reflected as a reduction in the Retained Interest or Inter-Group
    Interest in such recipient Group. There are no specific criteria for
    determining when a transfer will be reflected as borrowings or as an
    increase or reduction in a Retained Interest or an Inter-Group Interest. The
    Board expects to make such determinations, either in specific instances or
    by setting generally applicable policies from time to time, after
    consideration of such factors as it deems relevant, including, without
    limitation, the needs of the Company, the financing needs and objectives of
    the Groups, the investment objectives of the Groups, the availability, cost
    and time associated with alternative financing sources, prevailing interest
    rates and general economic conditions.
 
        LOANS. Loans from one Group to another Group would bear interest at such
    rates and have such repayment schedules and other terms as are established
    from time to time by, or pursuant to procedures established by, the Board.
    The Board expects to make such determinations, either in specific instances
    or by setting generally applicable policies from time to time, after
    consideration of such factors as it deems relevant, including, without
    limitation, the needs of the Company, the financing needs and objectives of
    the Groups, the investment objectives of the Groups, the availability, cost
    and time associated with alternative financing sources, prevailing interest
    rates and general economic conditions.
 
                                     -105-
<PAGE>
        RETAINED INTEREST OR INTER-GROUP INTEREST. In the event of a transfer of
    funds or other assets from one Group to another Group that the Board has
    determined to reflect as creating or increasing the Retained Interest or an
    Inter-Group Interest of such other Group, the Number of Shares Issuable with
    Respect to Retained Interest in such Tracking Group or the applicable
    Inter-Group Interest in the Issuer Group would be increased by an amount
    determined by dividing the amount of funds or the value of the assets
    transferred by the Market Value of an Issuer Group Share as of the date of
    such transfer, and the applicable Retained Interest Fraction or the
    applicable Inter-Group Interest Fraction, as the case may be, would be
    increased and the applicable Outstanding Interest Fraction would be
    decreased accordingly. In the event of a transfer of funds or other assets
    from one Group to another Group that the Board has determined to reflect as
    a decrease in the Retained Interest or an Inter-Group Interest of such other
    Group, the Number of Shares Issuable with Respect to Retained Interest or
    the applicable Inter-Group Interest in the Issuer Group would be decreased
    by an amount determined by dividing the amount of funds or the value of the
    assets transferred by the Market Value of an Issuer Group Share as of the
    date of such transfer, and the applicable Retained Interest Fraction or the
    applicable Inter-Group Interest Fraction, as the case may be, would be
    decreased and the applicable Outstanding Interest Fraction would be
    increased accordingly.
 
        FINANCIAL STATEMENT PRESENTATION. The balance sheets of each Group would
    reflect any net loans to or borrowings from the other Groups based on actual
    or estimated costs. Similarly, the respective statements of operations of
    each of the Groups would reflect interest income or expense, as the case may
    be, associated with any such loans or borrowings and the respective
    statements of cash flows of each of the Groups would reflect changes in the
    amounts of any such loans or borrowings deemed outstanding. Amounts borrowed
    by a Group from another Group, will be reflected on that Group's financial
    statements as indebtedness to the applicable lender.
 
        SERVICES BY TDS GROUP. Certain corporate general and administrative
    costs (including, but not limited to, certain corporate, legal, finance,
    accounting, tax, data processing, employee benefit and insurance costs)
    would be charged to the Tracking Groups at rates set at the beginning of
    each year based on projected utilization for that year, based on actual
    costs incurred or based on another reasonable method of allocation. The
    balance of such costs would be reflected in the financial statements of the
    TDS Group. The utilization-based or other allocation-based charges would be
    set at levels that corporate management believes to be reasonable, taking
    into account relevant factors, including the costs that the Groups might
    incur for comparable services on a stand-alone basis. Certain other
    corporate general and administrative costs related specifically to
    management of a Group would be allocated entirely to such Group. The scope
    of the services charged to the Groups on an allocated basis could be
    adjusted from time to time depending on various factors, including the
    extent to which it is determined that services should instead be performed
    directly by employees of entities attributed to such Group or by outside
    vendors.
 
        INTER-GROUP SERVICES. Certain companies with operations that would be
    attributed to one Group may from time to time provide services to companies
    attributed to one or more other Groups, and certain companies attributed to
    one Group may provide use of facilities to companies attributed to one or
    more other Group. Generally, services and rights to use facilities provided
    pursuant to contractual arrangements to which a member of one Group that is
    not a wholly-owned subsidiary of the Company is a party will continue to be
    provided in accordance with the terms of such arrangements. Charges for
    other services and rights to use facilities will be allocated at levels that
    corporate management believes to be reasonable, taking into account relevant
    factors, including the costs that the Groups might incur for comparable
    services on a stand-alone basis.
 
        TAXES. The Company has entered into Tax Allocation Agreements with each
    of U.S. Cellular and Aerial pursuant to which the Company and each of U.S.
    Cellular and Aerial have agreed to join in the filing of consolidated
    Federal income tax returns with TDS and its subsidiaries which are part of
    the TDS affiliated Group for tax purposes. Under such agreements, at the
    present time TDS does not reimburse U.S. Cellular or Aerial on a current
    basis for their respective losses or credits, if any, used by the TDS
    affiliated group. Instead, TDS is required to compensate (by an offset to
    amounts U.S. Cellular or Aerial would otherwise be required to reimburse TDS
    for Federal income taxes) for TDS's use of such tax benefits at such time as
    U.S. Cellular or Aerial could utilize such benefits as a stand-alone entity.
    After all loss and credit carryforwards have either been utilized or
    expired, U.S. Cellular and Aerial are required to reimburse TDS for Federal
    income taxes paid by the TDS affiliated group in an amount equal to the
    greater of the Federal income tax liability of U.S. Cellular or Aerial, as
    the case may be, calculated as if it were a separate affiliated group, or
    the tax calculated using the average tax rate (before taking into account
    tax credits) of the TDS affiliated group.
 
                                     -106-
<PAGE>
        Under the Tax Allocation Agreements, if U.S. Cellular or Aerial ceases
    to be a member of the TDS affiliated group, and for a subsequent year U.S.
    Cellular or Aerial or its subsidiaries are required to pay a greater amount
    of federal income tax than they would have paid if they had not been members
    of the TDS group, after June 30, 1987 in the case of U.S. Cellular and after
    December 31, 1995 in the case of Aerial, TDS must reimburse U.S. Cellular or
    Aerial, as the case may be, for the excess amount of tax, without interest.
    In determining the amount of reimbursement, any profits or losses from new
    business activities acquired by either U.S. Cellular or Aerial or its
    subsidiaries after either U.S. Cellular or Aerial leaves the TDS group would
    be disregarded. No reimbursement will be required on account of the income
    of any subsidiary of U.S. Cellular or Aerial if more than 50% of the voting
    power of such subsidiary is held by a person or group other than a person or
    group owning more than 50% of the voting power of TDS. Rules similar to
    those described above are applied to any state or local franchise or income
    tax liabilities to which TDS and either U.S. Cellular or Aerial and its
    subsidiaries are subject and which are required to be determined on a
    unitary, combined or consolidated basis.
 
        These Tax Allocation Agreements will continue unless and until U.S.
    Cellular or Aerial become wholly-owned subsidiaries of TDS, in which event
    they may be terminated or amended. In any event, the terms of such
    agreements are expected to be continued to be followed as agreements or
    policies on substantially similar terms, except to the extent of changes in
    circumstances, or as otherwise determined to be appropriate by the Board.
    The benefits of tax deductions and the obligations to compensate such
    subsidiaries at such times as such subsidiaries are able to utilize tax
    benefits as a stand-alone entity, will be attributed to the TDS Group.
 
        The Board expects to follow a policy with respect to the Telecom Group
    which is similar to the policies which are expected to be followed for U.S.
    Cellular and Aerial based on the existing Tax Allocation Agreements. Under
    this policy, in general, TDS Telecom would continue to join in the filing of
    consolidated income tax returns with TDS and its subsidiaries which are part
    of the TDS affiliated group for tax purposes. Provided that the Telecom
    Group continues to have taxable income, the Telecom Group will be required
    to reimburse the TDS Group for Federal income taxes paid by the TDS
    affiliated group in an amount equal to the greater of the Federal income tax
    liability of the Telecom Group calculated as if it were a separate
    affiliated group, or the tax calculated using the average tax rate (before
    taking into account tax credits) of the TDS affiliated group. In the event
    that the Telecom Group incurs any tax losses which it cannot utilize, the
    tax benefits of such losses would be allocated to the TDS Group, and the TDS
    Group would be required to reimburse the Telecom Group at such time that it
    would be able to utilize such tax benefits as a stand-alone entity.
 
    The Board expects to determine, either in specific instances or by setting
generally applicable policies from time to time, whether to allocate resources
and financial support to or pursue business opportunities or operational
strategies through one Group or one or more of the other Groups, after
consideration of such factors as it deems relevant.
 
    Notwithstanding the policies described above, determinations with respect to
the transfer of funds from one Group to one of the other Groups would be made at
the discretion of the Board, except to the extent that the Company is
contractually obligated to make a transfer of funds to an entity included in a
Group. Nothing in the foregoing policies (as opposed to any such contractual
obligation) obligates the Board to cause a Group to provide funds to one of the
other Groups if the Board determines that it is in the best interests of the
Company not to do so.
 
    The above management and allocation policies could be modified or rescinded
by the Board, in its sole discretion, without approval of shareholders, although
there is no present intention to do so. The Board could also adopt additional
policies depending upon the circumstances. The Board intends that any
determination it might make to modify or rescind such policies, or to adopt
additional policies, including any such decision that could have disparate
effects upon holders of different classes or series of common stock, would be
made by the Board considering the best interests of the Company and its
shareholders.
 
    Any determinations made by the Board under any provision described above
will be final and binding on all shareholders of the Company, except as may
otherwise be required by law. Such a determination would not be binding only if
it were established that the determination was made in breach of a fiduciary
duty of the Board.
 
COMPARISON OF SHAREHOLDER'S RIGHTS UNDER IOWA AND DELAWARE LAW
 
    In addition to the differences in the charter documents described above, the
rights of shareholders under Delaware law and the Restated Certificate and
Bylaws of TDS Delaware will differ in a number of respects from the rights of
shareholders under Iowa law and the Articles and the Bylaws of TDS Iowa.
Although it is impracticable to compare all of the aspects in which the rights
of the shareholders of TDS Iowa and TDS Delaware will differ, the following is a
summary of significant differences, as well as similarities, in such rights.
 
                                     -107-
<PAGE>
    VOTING TRUST.  The TDS Voting Trust, which became effective on June 30,
1989, provides by its terms that it will expire on June 30, 2009, unless
extended. The TDS Voting Trust is presently governed by Iowa law. Under the
current IBCA, a voting trust may not be established for more than ten years,
unless extended. In connection with the Reincorporation, the TDS Voting Trust
will be amended to be governed by Delaware law. After the Merger, it will be
possible to amend the TDS Voting Trust to provide for a longer term or no
expiration date since Delaware law does not have any limitation on the term of a
voting trust. The trustees of the TDS Voting Trust have informed the Company
that no decisions have been made with respect to the term thereof subsequent to
the Merger. Although the Board was cognizant of this potential change, it was
not one of the purposes of the Tracking Stock Proposal.
 
    BOARD OF DIRECTORS.  Both Iowa and Delaware law permit the Board to be
divided into up to three classes with staggered terms of office. Like the
Articles, the Restated Certificate divides the Board into three classes, with
staggered terms of office. Immediately after the Merger, the Board of TDS
Delaware, like the Board of TDS Iowa, will consist of twelve members divided
into three classes with terms of three years each. After the Merger, the Board
of TDS Delaware will consist of the same persons who are directors of TDS Iowa
at the time of the Merger. The initial terms of the directors of TDS Delaware
will expire at the same time that the terms of such directors would have expired
if the Reincorporation had not taken place.
 
    ELECTION OF DIRECTORS.  Under Iowa law, the election of a director of TDS
Iowa requires the affirmative vote of a majority of votes cast by Iowa Shares
entitled to vote with respect to such matter. Iowa law provides that
shareholders do not have a right to cumulate their votes for directors unless
the articles of incorporation so provide. The Articles do not provide for
cumulative voting in the election of directors.
 
    The election of a director of TDS Delaware will require the affirmative vote
of a plurality of the voting power of the Delaware Shares present in person or
represented by proxy at the meeting and entitled to vote on the election of such
director. Under Delaware law, cumulative voting in the election of directors is
not required unless provided in the certificate of incorporation. The Restated
Certificate does not provide for cumulative voting.
 
    REMOVAL OF DIRECTORS.  Under Iowa law, the shareholders may remove one or
more directors, with or without cause, unless the articles of incorporation
provide that directors may be removed only for cause. The Articles do not
provide that directors may be removed only for cause. However, if a director of
an Iowa corporation is elected by a voting group of shareholders, only the
shareholders of that voting group may participate in the vote to remove that
director.
 
    Under Delaware law, unless the certificate of incorporation provides
otherwise, shareholders may remove directors of a corporation with a classified
board only for cause. The Restated Certificate provides that directors may be
removed with or without cause by a vote of holders of a majority of the voting
power of shares entitled to vote in the election of such directors.
 
    PERSONAL LIABILITY OF DIRECTORS.  Both the IBCA and the DGCL permit
corporations to adopt provisions in their certificates of incorporation to
eliminate or limit the personal liability of corporate directors to the
corporation or its shareholders for monetary damages for violations of their
fiduciary duty. However, neither the Iowa statute nor the Delaware statute
permits a corporation to eliminate or limit the liability of a director for any
act or omission occurring before the effectiveness of the liability limitation
provision and, thereafter, for any breach of the director's duty of loyalty, for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of a law, for any transaction from which the director derived
an improper personal benefit or for approving an unlawful distribution by the
corporation.
 
    In order to continue to give the directors substantially the same protection
as they presently have under Iowa law, the Restated Certificate contains the
provisions permitted by Delaware law as described in the preceding paragraph,
which are substantially the same as the provisions included in the Articles.
 
    MEETINGS OF SHAREHOLDERS.  Under Iowa law, special meetings of the
shareholders of certain corporations, including TDS, may be called by the board
of directors, a person or persons so authorized by the articles of incorporation
or bylaws, or by holders of at least fifty percent of the votes entitled to be
cast on any issue proposed to be considered at the special meeting. The TDS Iowa
Bylaws authorize the principal executive officer to call special meetings of
shareholders. Under Delaware law, special meetings of the shareholders may be
called by the board of directors or such other person as may be authorized by
the certificate of incorporation or the bylaws. The Delaware Bylaws will provide
that special meetings of shareholders may be called by the Chairman or
President, or by holders of at least fifty percent of the votes entitled to be
cast thereat. In addition, the Delaware Bylaws will also provide that the right
of any group of shareholders to call a meeting may not be amended or eliminated
without approval by a majority of the voting power held by the shareholders in
such voting group.
 
                                     -108-
<PAGE>
    SHAREHOLDER ACTION BY WRITTEN CONSENT.  Under Iowa law, unless otherwise
provided in the articles of incorporation, any action required or permitted to
be taken at a shareholders' meeting may be taken without a meeting or vote, if
one or more written consents, describing the action taken, are signed by the
holders of outstanding shares having not less than 90% of the votes entitled to
be cast at a meeting at which all shares entitled to vote on the action were
present and voted. The Iowa Articles do not modify this provision. In addition,
prior notice of the action is not required, unless Iowa law requires that notice
of any proposed action be given to shareholders not entitled to vote, in which
case written notice must be given to all shareholders at least ten days before
the action is taken.
 
    Under Delaware law, unless otherwise provided in the certificate of
incorporation, any action which may be taken or is required to be taken at any
annual meeting or special meeting of shareholders, may be taken without a
meeting, without prior notice and without a vote, if one or more written
consents, setting forth the action so taken, are signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. The Restated Certificate
provides that shareholder action may be taken without a meeting or vote if a
written consent is signed by the holders of outstanding shares having at least
90% of the votes entitled to be cast at a meeting.
 
    ADVANCE NOTICE PROVISIONS FOR SHAREHOLDER PROPOSALS AND SHAREHOLDER
NOMINATIONS OF DIRECTORS.  The Bylaws of TDS Iowa include an advance notice
procedure for shareholders to make nominations of candidates for election to the
board of directors or to bring other business before an annual meeting of
shareholders of TDS Iowa. The Bylaws of TDS Delaware will contain a
substantially similar provision.
 
    PROXIES.  Under Iowa law, a proxy is not valid after eleven months from its
date unless a longer period is expressly provided in the form of proxy. Under
Delaware law, a proxy is not valid after three years from its date, unless such
proxy provides for a longer period. However, the Delaware Bylaws provide that a
proxy will not be valid after eleven months from its date unless such proxy
provides for a longer period.
 
    PREEMPTIVE RIGHTS.  Under Iowa law, the shareholders of a corporation do not
have a preemptive right to acquire unissued shares of the corporation, except to
the extent the articles of incorporation so provide. The Iowa Articles provide
that the holders of Series A Common Shares have a preemptive right to acquire
additional Series A Common Shares for cash.
 
    Delaware law provides that no shareholder has any preemptive right to
subscribe to additional shares of stock unless and except to the extent that
such right is expressly granted in the certificate of incorporation. The
Restated Certificate provides that the holders of Series A Common Shares will
have the same preemptive rights as are currently provided under the Iowa
Articles.
 
    AMENDMENTS TO CHARTER.  Unless the IBCA or the articles of incorporation
require a greater vote or a vote by voting groups, an amendment to the Articles
must be approved by the affirmative vote of a majority of the votes entitled to
be cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and the affirmative vote of a majority of the
votes cast for or opposing the action by every other voting group entitled to
vote on the amendment. Under the IBCA, shareholders of a class of capital stock
are entitled to vote as a separate class (even such shares are nonvoting) on a
proposed amendment to the Articles if such amendment would: (i) increase or
decrease the aggregate number of authorized shares of the class; (ii) effect an
exchange or reclassification of all or part of the shares of the class into
shares of another class; (iii) effect an exchange or reclassification, or create
the right of exchange, of all or part of the shares of another class into shares
of that class; (iv) change the designation, rights, preferences or limitations
of all or part of the shares of the class; (v) change the shares of all or part
of the class into a different number of shares of the same class; (vi) create a
new class of shares having rights or preferences with respect to distributions
or to dissolution that are prior, superior or substantially equal to, the shares
of the class; (vii) increase the rights, preferences or number of authorized
shares of any class that, after giving effect to the amendment, have rights or
preferences with respect to distributions or to dissolution that are prior,
superior or substantially equal to the shares of the class; (viii) limit or deny
an existing preemptive right of all or part of the shares of the class; or (ix)
cancel or otherwise affect rights to distributions or dividends that have
accumulated but not yet been declared on all or part of the shares of the class.
As a result, in the case of an amendment to the Articles on any matter which
falls into one of the foregoing categories, the holders of the Common Shares,
Series A Common Shares and Preferred Shares, as the case may be, are entitled to
vote as a class or voting group.
 
    Amendments to the Restated Certificate require the approval of the holders
of a majority of the voting power of all outstanding Delaware Shares. In
addition, under Delaware law, the holders of the outstanding shares of a class
 
                                     -109-
<PAGE>
are entitled to vote as a class upon a proposed amendment, whether or not
entitled to vote thereon by the certificate of incorporation, if the amendment
would increase or decrease the par value of the shares of such class or alter or
change the powers, preferences or special rights of the shares of such class so
as to affect them adversely. As permitted by Delaware law, the Restated
Certificate will permit the number of authorized shares of any class of capital
stock to be increased or decreased (but not below the number of shares then
outstanding in such class, respectively) by the affirmative vote of a majority
of the voting power of the shares of capital stock entitled to vote with respect
to matters other than the election of directors.
 
    SHARE EXCHANGES, MERGERS AND CONSOLIDATIONS.  Iowa law permits share
exchanges and mergers but does not provide for consolidations. In general, under
Iowa law, unless the articles of incorporation require a greater vote or a vote
by voting groups, a share exchange or merger must be approved by each voting
group entitled to vote separately on the plan by a majority of all the votes
entitled to be cast on the plan by the voting group. Separate voting by voting
groups is required on a plan of merger if the plan contains a provision that, if
contained in a proposed amendment to articles of incorporation, would require
action by one or more separate voting groups on the proposed amendment and, on a
plan of share exchange, by each class or series of shares included in the
exchange, with each class or series constituting a separate voting group. Under
Iowa law, action by the shareholders of the surviving corporation on a plan of
merger is not required if all of the following apply: (i) the articles of
incorporation of the surviving corporation will not differ from its articles
before the merger; (ii) each shareholder of the surviving corporation whose
shares were outstanding immediately before the effective date of the merger will
hold the same number of shares, with identical designations, preferences,
limitations and relative rights, immediately after; (iii) the number of shares
entitled to vote unconditionally in the election of directors outstanding
immediately after the merger, plus the number of such voting shares issuable as
a result of the merger, will not exceed by more than 20% the total number of
such voting shares of the surviving corporation outstanding immediately before
the merger; and (iv) the number of shares entitled to participate without
limitation in distributions outstanding immediately after the merger, plus the
number of such participating shares issuable as a result of the merger, will not
exceed by more than twenty percent the total number of such participating shares
outstanding immediately before the merger.
 
    Delaware law permits mergers and consolidations but does not provide for
share exchanges as permitted by Iowa law. Under Delaware law, the approval of
the holders of a majority of the voting power of the outstanding Delaware Shares
entitled to vote with respect to such matter would be required to authorize
mergers and consolidations. Unlike Iowa law, separate voting by class or voting
group is not required for the approval of a merger under the DGCL. Under
Delaware law, unless required by its certificate of incorporation, no vote of
shareholders of the surviving corporation is necessary to approve a merger if
all of the following apply: (i) the agreement of merger does not amend the
certificate of incorporation of the surviving corporation; (ii) each share of
stock of the surviving corporation outstanding immediately prior to the merger
is to be an identical share of the surviving corporation after the merger; and
(iii) either no shares or securities convertible into shares of common stock of
the surviving corporation are to be issued under the plan of merger, or the
shares of the common stock of the surviving corporation to be issued under the
plan of merger or upon conversion of any other securities to be issued under
such plan do not exceed 20% of the shares of common stock of the surviving
corporation outstanding immediately prior to the merger.
 
    SALES OF ASSETS.  Under Iowa law, unless the articles of incorporation
require a greater vote or a vote by voting groups, a sale of substantially all
assets not in the ordinary course of business must be approved by a majority of
all the votes entitled to be cast on the transaction.
 
    Under Delaware law, the approval of the holders of a majority of the voting
power of the outstanding Delaware Shares entitled to vote with respect to such
matter would be required to authorize the sale of all or substantially all of
the property or assets of TDS Delaware.
 
    DISSOLUTIONS.  Under Iowa law, unless the articles of incorporation require
a greater vote or a vote by voting groups, a proposal to dissolve must be
approved by a majority of all the votes entitled to be cast on that proposal.
 
    Under Delaware law, the approval of the holders of a majority of the voting
power of the outstanding Delaware Shares entitled to vote with respect to such
matter would be required to authorize a dissolution.
 
    APPRAISAL RIGHTS.  Under Iowa law, a shareholder is entitled to dissent
from, and obtain payment of the fair value of the shareholder's shares in the
event of, any of the following corporate actions: (i) consummation of a plan of
merger to which the corporation is a party if either (a) shareholder approval is
required for the merger under Iowa law or the articles of incorporation and the
shareholder is entitled to vote on the merger or (b) the corporation is a
subsidiary that is merged with its parent under the short-form merger provisions
of Iowa law; (ii) consummation of a
 
                                     -110-
<PAGE>
plan of share exchange to which the corporation is a party as the corporation
whose shares will be acquired, if the shareholder is entitled to vote on the
plan; (iii) consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to a court
order or a sale for cash pursuant to which all or substantially all of the net
proceeds of the sale will be distributed to the shareholders within one year
after the date of sale; (iv) an amendment of the articles of incorporation that
materially and adversely affects rights in respect of a dissenter's shares
because it does any or all of (a) alters or abolishes a preferential right of
the shares, (b) creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or repurchase
of the shares, (c) alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities, (d) excludes or limits the right
of the shares to vote on any matter or to cumulate votes, other than a
limitation by dilution through issuance of shares or other securities with
similar voting rights, or (e) reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional share so created is to be
acquired for cash; or (v) any corporate action taken pursuant to a shareholder
vote to the extent the articles of incorporation, bylaws or a resolution of the
board of directors provides that voting or nonvoting shareholders are entitled
to dissent and obtain payment for their shares.
 
    Under Delaware law, appraisal rights will be generally available for the
shares of any class of stock of TDS Delaware only in connection with a merger or
consolidation, provided that no appraisal rights will be available for the
shares of any class or series of stock which, at the record date for the meeting
held to approve such transaction, were either (i) listed on a national
securities exchange or a national market system or (ii) held of record by more
than 2,000 shareholders. However, if the shares of any class or series of stock
meet the requirements of clause (i) or (ii) above, appraisal rights will be
available for such class or series if the holders thereof receive in the merger
or consolidation anything except: (i) shares of stock of the corporation
surviving or resulting from such merger or consolidation; (ii) shares of stock
of any other corporation which at the effective date of the merger or
consolidation is either listed on a national securities exchange or a national
market system or held of record by more than 2,000 shareholders; (iii) cash in
lieu of fractional shares; or (iv) any combination of the foregoing. However,
appraisal rights are not available if the corporation is the surviving
corporation and no vote of its shareholders is required for the merger.
 
    ANTI-TAKEOVER LAW.  The IBCA currently has a provision which restricts the
completion of certain unsolicited or hostile business combinations. Under Iowa
law, a corporation is prohibited from engaging in any "business combination"
(which is broadly defined in the statute) with an "interested shareholder"
(defined as a person beneficially owning 15% or more of a corporation's voting
stock) for a period of three years following the time that such person became an
interested shareholder unless: (i) before such person became an interested
shareholder, the board of directors approved the transaction in which the
shareholder became an interested shareholder; (ii) upon consummation of the
transaction which resulted in the shareholder becoming an interested
shareholder, the interested shareholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
shares owned by directors and officers or employee stock ownership plans that do
not provide for confidential voting by plan participants); or (iii) at or
following the time such person became an interested shareholder, the business
combination is approved by the board of directors and authorized at a meeting of
shareholders by the affirmative vote of the holders of 66 2/3% of the
outstanding voting stock of the corporation not owned by the interested
shareholder.
 
    Section 203 of the DGCL is substantially similar to the Iowa statute, as
described above. However, as permitted by Delaware law, the Restated Certificate
will provide that TDS Delaware elects not to be governed by such provision.
Since Section 203 will not be applicable to TDS, it may be possible for a person
to acquire the Series A Common Shares held by the TDS Voting Trust and to
immediately complete a business combination with TDS, without complying with any
of the exceptions to Section 203. The trustees of the TDS Voting Trust have
advised the Company that they have no current plans or intentions of disposing
of such Series A Common Shares.
 
    DIVIDENDS AND STOCK REPURCHASES.  No distribution, including a purchase,
redemption or other acquisition of the corporation's shares, may be made by an
Iowa corporation if, after giving it effect, the corporation would not be able
to pay its debts as they become due in the usual course of business, or the
corporation's total assets would be less than the sum of its total liabilities
plus, unless the articles of incorporation permit otherwise, the amount that
would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution.
 
                                     -111-
<PAGE>
    A Delaware corporation may pay dividends out of any surplus and, if it has
no surplus, out of any net profits for the fiscal year in which the dividend was
declared or for the preceding fiscal year (provided that such payment may not
reduce capital below the amount of capital represented by all classes of shares
having a preference upon the distribution of assets). Under Delaware law, a
corporation may purchase or redeem shares of its own stock only when its capital
is not impaired and such purchase or redemption would not cause any impairment
of the capital of the corporation, except that a corporation may purchase or
redeem out of capital any of its preferred shares if such shares will be retired
upon their acquisition and the capital of the corporation will be reduced in
accordance with Delaware law. Under Delaware law, a corporation may not purchase
any of its redeemable shares for more than the price at which they may then be
redeemed.
 
    TRANSACTIONS INVOLVING OFFICERS OR DIRECTORS.  Under Iowa law, a conflict of
interest transaction is not voidable by the corporation solely because of the
director's interest in the transaction if any one of the following is true: (i)
the material facts of the transaction and the director's interest were disclosed
or known to the board of directors or a committee of the board of directors, and
the board of directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and they
authorized, approved or ratified the transaction; or (iii) the transaction was
fair to the corporation. A conflict of interest transaction can be authorized,
approved or ratified by the affirmative vote of a majority of the directors on
the board of directors or on the committee, who have no direct or indirect
interest in the transaction, but a transaction may not be authorized, approved
or ratified by a single director. A conflict of interest transaction may also be
authorized, approved or ratified if it receives the vote of a majority of the
shares entitled to be counted under Iowa law. Shares owned or voted under the
control of a director who has a direct or indirect interest in the transaction,
and shares owned by or voted under the control of an entity in which an
interested director has an interest may not be counted in a vote of shareholders
to determine whether to authorize, approve or ratify a conflict of interest
transaction.
 
    Under Delaware law, a corporation may make loans to, guarantee the
obligations of or otherwise assist its officers or employees and those of its
subsidiaries (including directors who are also officers or employees) without
shareholder approval when such action, in the judgment of the directors, may
reasonably be expected to benefit the corporation. With respect to any other
contract or transaction between the corporation and one or more of its directors
or officers, such contracts or transactions are neither void nor voidable if the
material facts as to the director's or officer's interest are made known to the
disinterested directors or the shareholders of the corporation, who thereafter
approve the contract or transaction in good faith, or the contract or
transaction is fair to the corporation as of the time it is approved or ratified
by the board of directors, a committee thereof or the shareholders. Such a
contract or transaction may be approved by only one disinterested director and
all shares may be counted in a vote to approve such contract or transaction. As
a result, TDS Delaware will have greater flexibility to approve contracts and
other transactions with directors under Delaware law.
 
    BYLAWS.  Under Iowa law, a corporation's board of directors may generally
adopt, amend or repeal the corporation's bylaws unless the articles of
incorporation reserve such power exclusively to the shareholders. The Iowa
Articles do not reserve such power to the shareholders. As a result, the
Company's Bylaws may be amended or repealed by the Board. Nevertheless, Iowa law
provides further that a corporation's shareholders may amend or repeal the
corporation's bylaws even though the bylaws may also be amended or repealed by
its board of directors.
 
    Delaware law provides that the original bylaws of a corporation may be
adopted, amended or repealed by the incorporators, by the initial directors if
they were named in the certificate of incorporation or by the directors before a
corporation has received any payment for any of its stock. After a corporation
has received any payment for any of its stock, the power to adopt, amend or
repeal bylaws is conferred on the shareholders entitled to vote, provided that a
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. Therefore, the Restated Certificate
must expressly confer power upon the directors in order to permit the directors
to amend or repeal the Bylaws of TDS Delaware. However, Delaware law provides
that the fact that such power has been conferred upon the directors does not
divest the shareholders of the power, nor limit their power, to adopt, amend or
repeal bylaws. As a result, the Restated Certificate provides that, in
furtherance and not in limitation of the powers conferred by Delaware law, the
Board of TDS Delaware is expressly authorized to adopt, amend or repeal the
Bylaws of TDS Delaware, subject to any specific limitations on such power
provided by any Bylaws adopted by the shareholders. See "--Description of
Restated Certificate of Incorporation of TDS Delaware."
 
    REDEMPTION TO PROTECT LICENSES.  The DGCL expressly states that any stock of
a corporation which holds (directly or indirectly) a license or franchise from a
governmental agency to conduct its business or is a member of a
 
                                     -112-
<PAGE>
national securities exchange, which license, franchise or membership is
conditioned upon some or all of the holders of its stock possessing prescribed
qualifications, may be made subject to redemption by the corporation to the
extent necessary to prevent the loss of such license, franchise or membership or
to reinstate it. The IBCA has no similar provisions. As permitted by Delaware
law, the Restated Certificate includes a provision permitting the Company to
redeem shares of capital stock (other than Series A Common Shares) to the extent
necessary to prevent the loss or secure the reinstatement of any license or
franchise from any governmental agency. See "--Description of Restated
Certificate of Incorporation of TDS Delaware."
 
    INDEMNIFICATION.  Under Iowa law, a corporation may indemnify an individual
made a party to a proceeding because the individual is or was a director,
against liability incurred in the proceeding if the individual acted in good
faith and reasonably believed that the individual's conduct was in or not
opposed to the corporation's best interests and, with respect to any criminal
action or proceeding, had no reasonable cause to believe the individual's
conduct was unlawful. Nevertheless, a corporation may not indemnify a director
in a derivative action (as defined below) in which the director was adjudged
liable to the corporation, or in any other proceeding in which the director was
adjudged liable, on the basis that a personal benefit was improperly received.
Indemnification permitted in connection with a derivative action is limited to
reasonable expenses incurred in connection with the proceeding.
 
    Iowa law also provides that, unless limited by its articles of
incorporation, a corporation must indemnify a director or officer who was wholly
successful on the merits or otherwise against reasonable expenses incurred in
defending the proceedings. Iowa law provides that a court may order
indemnification if the court determines that a director or officer is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not the director or officer met the standard of
conduct required or was adjudged liable, except that if the director or officer
was adjudged liable, indemnification is limited to reasonable expenses incurred.
 
    Iowa law further permits a corporation to advance reasonable expenses
incurred by a director, officer, employee or agent of a corporation if, among
other things, such person undertakes to repay the advance if it is determined
that such person did not meet the standard of conduct required for
indemnification.
 
    An Iowa corporation may purchase and maintain insurance on individuals
against liability arising from the individual's capacity as a director, officer,
employee or agent, whether or not the corporation would have the power to
indemnify that individual against the same liability. The Company has directors'
and officers' liability insurance which provides, subject to certain policy
limits, deductible amounts and exclusions, coverage for all persons who have
been, are or may in the future be, directors or officers of the Company, against
amounts which such persons must pay resulting from claims against them by reason
of their being such directors or officers during the policy period for certain
breaches of duty, omissions or other acts done or wrongfully attempted or
alleged.
 
    The indemnification and advancement of expenses permitted by Iowa law is not
exclusive of any other rights which a person may have under the articles of
incorporation, bylaws, agreements or otherwise, provided that an Iowa
corporation may not provide indemnification for any breach of the director's
duty of loyalty, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of a law, for approving a
distribution which was unlawful, or for any transaction from which the director
derived an improper personal benefit.
 
    Under the DGCL, directors and officers, as well as other employees or
persons, may be indemnified against judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation--a "derivative action"), and against expenses
(including attorney's fees) in any action (including a derivative action), if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. However, in the case of a derivative action, a person cannot be
indemnified for expenses in respect of any matter as to which the person is
adjudged to be liable to the corporation unless and to the extent a court
determines that such person is fairly and reasonably entitled to indemnity for
such expenses.
 
    Delaware law also provides that, to the extent a director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action or matter, the corporation must indemnify such party against expenses
(including attorneys' fees) actually and reasonably incurred by such party in
connection therewith.
 
    Expenses incurred by a director or officer in defending any action may be
paid by a Delaware corporation in advance of the final disposition of the action
upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it is ultimately determined that such party is not entitled
to be indemnified by the corporation.
 
                                     -113-
<PAGE>
    The DGCL provides that the indemnification and advancement of expenses
provided thereby are not exclusive of any other rights granted by bylaws,
agreements or otherwise, and provides that a corporation shall have the power to
purchase and maintain insurance on behalf of any person, whether or not the
corporation would have the power to indemnify such person under Delaware law.
TDS Delaware will continue the existing directors' and officers' liabilities
policy of TDS Iowa.
 
    The Restated Certificate provides that TDS Delaware shall indemnify
directors and officers of TDS Delaware, its consolidated subsidiaries and
certain other related entities generally in the same manner and to the extent
permitted by the DGCL, as more specifically provided in the Bylaws of TDS
Delaware. See "--Description of Restated Certificate of Incorporation of TDS
Delaware."
 
    CONSIDERATION OF COMMUNITY INTERESTS IN ACQUISITION PROPOSALS.  Under Iowa
law, in determining what is in the best interest of the corporation when
considering a tender offer or proposal of acquisition, merger, consolidation or
similar proposal, the board of directors may consider, in addition to
considering the effects of any action on the shareholders, (i) the effects of
the action on the corporation's employees, suppliers, creditors and customers;
(ii) the effects of the action on the communities in which the corporation
operates and/or (iii) the long-term as well as short-term interests of the
corporation and its shareholders, including the possibility that such interests
may be best served by the continued independence of the corporation. If, on the
basis of such community interest factors, the board of directors determines that
a proposal or offer to acquire or merge the corporation is not in the best
interests of the corporation, it may reject the proposal or offer. If the board
of directors determines to reject any such proposal or offer, the board of
directors has no obligation to facilitate, to remove any barriers to, or to
refrain from impeding, the proposal or offer. Under Iowa law, the consideration
of any or all of the community interest factors is not a violation of the
business judgment rule or of any duty of the directors to the shareholders, or a
group of shareholders, even if the directors reasonably determine that a
community interest factor or factors outweigh the financial or other benefits to
the corporation or a shareholder or group of shareholders. Delaware law has no
similar provision. However, the Restated Certificate includes a provision which
includes substantially the provisions included under Iowa law. See
"--Description of Restated Certificate of Incorporation of TDS Delaware."
 
DISSENTING SHAREHOLDERS' RIGHTS
 
    Under Iowa law, all shareholders are entitled to assert dissenters' rights
with respect to the Merger. However, even if the shareholders approve the
Merger, the Board of TDS reserves the right not to effect the Merger if, in its
sole determination, the number of dissenting shareholders is excessive so as to
make the Merger inadvisable. In such event, the Tracking Stock Proposal would
not be adopted and TDS would remain an Iowa corporation.
 
    The trustees of the TDS Voting Trust have advised the Company that they do
not intend to exercise dissenters' rights with respect to the Merger. The TDS
Voting Trust holds over 90% of the Series A Common Shares.
 
    A holder of Iowa Shares who dissents from the Merger and exercises
dissenter's rights will be generally required to treat the difference between
the tax basis of the Iowa Shares held by such shareholder and the amount
received through the exercise of such appraisal rights as capital gain or loss,
although depending on the holder's particular circumstances, the amount received
through the exercise of such rights might be dividend income to the extent of
TDS Iowa's current and accumulated earnings and profits.
 
    Any shareholder who wishes to assert dissenters' rights must (i) deliver to
the Company before the vote on the actions proposed in this Proxy
Statement/Prospectus is taken, written notice of the shareholder's intent to
demand payment for the shareholder's shares if the proposed actions are
effectuated and (ii) not vote his or her shares in favor of the proposal
entitling such shareholder to the fair value of his or her shares.
 
    Within ten days after the proposed corporate action is authorized by the
shareholders, the Company must send a written dissenters' notice to each
dissenting shareholder who has delivered to the Company written notice of the
shareholder's intent to demand payment for such shareholder's shares and who has
not voted his or her shares in favor of the proposal. The written dissenters'
notice must (i) state where the payment demand must be sent and where and when
certificates for certificated shares must be deposited, (ii) inform holders of
uncertificated shares of the extent to which transfer of the shares will be
restricted after the payment demand is received, (iii) supply a form for
demanding payment that meets statutory requirements, (iv) set a date by which
the Company must receive the payment demand, which date shall not be fewer than
30 nor more than 60 days after the Company delivered the written dissenters'
notice to the dissenting shareholder and (v) be accompanied by a copy of the
Iowa statute pertaining to dissenters' rights.
 
                                     -114-
<PAGE>
    Any shareholder sent a dissenters' notice must (i) demand payment, (ii)
certify whether the shareholder acquired beneficial ownership of the shares
before the date set forth in the dissenters' notice and (iii) deposit the
shareholder's certificates in accordance with the terms of the notice. Except as
otherwise required by law, as soon as the proposed action is taken by the
Company, or upon receipt of a payment demand, whichever is later, the Company
shall pay each dissenter who demanded payment the amount the Company estimates
to be the fair value of the dissenter's shares, plus accrued interest. The
payment by the Company must be accompanied by (i) the Company's financial
statements for the latest fiscal year, as well as the Company's latest available
interim statements, (ii) a statement of the Company's estimate of the fair value
of the shares, (iii) an explanation of how the interest was calculated, (iv) a
statement of the dissenter's right to demand payment under Iowa code section
490.1328 and (v) a copy of the IBCA section which sets forth the procedure to be
followed by a shareholder in the event that such shareholder is dissatisfied
with the Company's payment or offer.
 
    A dissenter may notify the Company within 30 days of the Company's offer for
payment for the dissenter's shares in writing of the dissenter's own estimate of
the fair value of the dissenter's shares and amount of interest due, and demand
payment of the dissenter's estimate less any payment made by the Company or
reject the Company's previously made offer and demand payment of the fair value
of the dissenter's shares and interest due if (i) the dissenter believes that
the amount paid or offered by the Company is less than the fair value of the
dissenter's shares or that the interest due was incorrectly calculated, (ii) the
Company fails to make payment within 60 days of the date set for demanding
payment or (iii) the Company, having failed to take the proposed action, does
not return deposited certificates or uncertificated shares within 60 days after
the date set for demanding payment.
 
    If the Company and any dissenting shareholder are unable to agree on a fair
value for such dissenting shareholder's shares, the Company shall commence a
proceeding in the district court of Wapello County, Iowa asking for a judicial
determination of the fair value of such shares and accrued interest. Such
proceeding must be commenced by the Company within 60 days after receiving the
dissenter's demand for payment of the dissenter's estimated fair value of such
dissenter's shares. The Company shall notify all dissenters and make such
dissenters, whether or not residents of the State of Iowa, whose demands remain
unsettled, parties to the proceeding. Each dissenter made a party to the
proceeding is generally entitled to judgment for the amount, if any, by which
the court finds the fair value of the dissenter's shares, plus interest, exceeds
the amount paid by the Company.
 
    The foregoing description of the rights of dissenting shareholders is
qualified in its entirety by reference to the applicable provisions of the IBCA
attached as EXHIBIT E to this Proxy Statement/Prospectus, which the shareholders
are encouraged to carefully review.
 
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
 
    The following discussion summarizes the material United States federal
income tax consequences of the Merger and the Distribution. The discussion does
not address all aspects of federal taxation that may be relevant to particular
shareholders of the Company, and it may not be applicable to shareholders who,
for federal income tax purposes, are subject to special tax treatment, such as
insurance companies, corporations subject to the alternative minimum tax, banks,
dealers in securities, tax-exempt organizations or, except as specifically
discussed below, foreign persons or to shareholders who acquired their shares
pursuant to the exercise of employee stock options or otherwise as compensation.
The discussion does not address the effect of any applicable state, local or
foreign laws or any federal tax laws other than those pertaining to the income
tax. EACH SHAREHOLDER OF THE COMPANY SHOULD CONSULT SUCH SHAREHOLDER'S OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH SHAREHOLDER OF THE MERGER
AND THE DISTRIBUTION.
 
    The discussion is based on the Internal Revenue Code, regulations and
rulings now in effect or proposed thereunder, current administrative rulings and
practice, and judicial precedent, all of which are subject to change. Any such
change, which may or may not be retroactive, could alter the tax consequences to
shareholders of the Company discussed herein. This discussion is also based on
certain assumptions regarding the factual circumstances that will exist at the
Effective Time of the Merger and at the time of the Distribution, including
certain representations made or to be made by the Company. This discussion
assumes that shareholders of the Company hold their Preferred Shares, Series A
Common Shares and Common Shares of the Company as capital assets within the
meaning of Section 1221 of the Internal Revenue Code, and, except as
specifically discussed below, assumes that such shareholders will not exercise
appraisal rights as described above under "Dissenting Shareholders' Rights."
 
                                     -115-
<PAGE>
    THE MERGER.  In the opinion of Sidley & Austin, counsel to the Company, for
United States federal income tax purposes:
 
         (i) The Merger will constitute a reorganization within the meaning of
    Section 368(a) of the Internal Revenue Code, and the Company and TDS
    Delaware will each be a party to the reorganization;
 
        (ii) no gain or loss will be recognized by the Company or TDS Delaware
    as a result of the Merger;
 
        (iii) no gain or loss will be recognized by the shareholders of the
    Company upon the conversion of their Preferred Shares, Series A Common
    Shares and Common Shares of the Company into Preferred Shares, Series A
    Common Shares and Common Shares of TDS Delaware, respectively, pursuant to
    the Merger;
 
        (iv) the aggregate tax bases of the Preferred Shares, Series A Common
    Shares and Common Shares of TDS Delaware received in exchange for Preferred
    Shares, Series A Common Shares and Common Shares of the Company,
    respectively, pursuant to the Merger will be the same as the aggregate tax
    bases of such Preferred Shares, Series A Common Shares and Common Shares of
    the Company, respectively; and
 
        (v) the holding periods for Preferred Shares, Series A Common Shares and
    Common Shares of TDS Delaware issued in exchange for Preferred Shares,
    Series A Common Shares and Common Shares of the Company, respectively,
    pursuant to the Merger will include the holder's holding periods for such
    Preferred Shares, Series A Common Shares and Common Shares of the Company,
    respectively.
 
    A shareholder of the Company who exercises appraisal rights as described
above under "Dissenting Shareholders' Rights" should, in general, treat the
difference between the tax basis of the Preferred Shares, the Series A Common
Shares and Common Shares of the Company held by such shareholder with respect to
which such rights are exercised and the amount received through the exercise of
such rights (other than any interest awarded by a court with respect to such
rights) as capital gain or loss for federal income tax purposes although,
depending on the shareholder's particular circumstances, the amount received
through the exercise of such rights (other than any interest awarded by a court
with respect to such rights) might be treated for federal income tax purposes as
dividend income. Any interest awarded by a court to a shareholder of the Company
with respect to exercised appraisal rights generally will be includable in such
shareholder's income as ordinary income.
 
    A shareholder of the Company that, for federal income tax purposes, is a
non-resident alien individual, a foreign corporation, a foreign partnership or a
foreign estate or trust (a "Non-U.S. Shareholder") generally will not be subject
to federal income tax (by withholding or otherwise) on any gain realized on the
receipt of Preferred Shares, Series A Common Shares or Common Shares of TDS
Delaware in exchange for Preferred Shares, Series A Common Shares or Common
Shares of the Company pursuant to the Merger.
 
    THE DISTRIBUTION.  In the opinion of Sidley & Austin, counsel to the
Company, for United States federal income tax purposes:
 
         (i) the Distribution will not result in income, gain or loss to the
    Company;
 
        (ii) the Distribution will not result in income, gain or loss to any
    shareholder of the Company, except with respect to cash, if any, received in
    lieu of fractional Cellular Group Shares, Telecom Group Shares or Aerial
    Group Shares;
 
        (iii) a shareholder's tax basis for Series A Common Shares prior to the
    Distribution will be allocated after the Distribution among such
    shareholder's Series A Common Shares and Cellular Group Shares, Telecom
    Group Shares and Aerial Group Shares (including fractional shares, if any,
    for which cash is received) received in the Distribution (pursuant to a
    deemed exchange for Series A Common Shares) in proportion to their relative
    fair market values at the time of the Distribution;
 
        (iv) a shareholder's tax basis for Common Shares prior to the
    Distribution will be allocated after the Distribution among such
    shareholder's Common Shares and Cellular Group Shares, Telecom Group Shares
    and Aerial Group Shares (including fractional shares, if any, for which cash
    is received) received in the Distribution (pursuant to a deemed exchange for
    Common Shares) in proportion to their relative fair market values at the
    time of the Distribution;
 
        (v) a shareholder's holding period for Cellular Group Shares, Telecom
    Group Shares and Aerial Group Shares received in the Distribution (pursuant
    to a deemed exchange for Series A Common Shares) will include such
    shareholder's holding period for the Series A Common Shares deemed
    surrendered therefor;
 
        (vi) a shareholder's holding period for Cellular Group Shares, Telecom
    Group Shares and Aerial Group Shares received in the Distribution (pursuant
    to a deemed exchange for Common Shares) will include such shareholder's
    holding period for the Common Shares deemed surrendered therefor;
 
                                     -116-
<PAGE>
       (vii) a shareholder who receives cash in lieu of a fractional share will
    recognize gain or loss equal to the difference, if any, between such
    shareholder's basis in the fractional share (determined under clause (iii)
    or (iv) above) and the amount of cash received; and
 
       (viii) neither Cellular Group Shares, Telecom Group Shares nor Aerial
    Group Shares will be "section 306 stock" within the meaning of the Internal
    Revenue Code.
 
    The Internal Revenue Service (the "Service") announced in 1987 that it was
studying and would not issue advance rulings on the classification of an
instrument that has certain voting and liquidation rights in an issuing
corporation but the dividend rights of which are determined by reference to the
earnings of a segregated portion of the issuing corporation's assets, including
assets held by a subsidiary. In 1995 the Service withdrew such stock from its
list of matters under consideration and reiterated that it would not issue
advance rulings regarding such stock. There are no court decisions or other
authorities that bear directly on transactions similar to the Distribution. It
is possible, therefore, that the Service could assert that the Cellular Group
Shares, Telecom Group Shares and Aerial Group Shares represent property other
than stock of the Company. If such shares were treated as property other than
stock of the Company, (i) the Company or its subsidiaries would recognize a
significant taxable gain on the Distribution of the Cellular Group Shares,
Telecom Group Shares and Aerial Group Shares in an amount equal to the excess of
the fair market value of the distributed property over its federal income tax
basis to the Company or its subsidiaries and (ii) the Company could lose its
ability to file consolidated federal income tax returns with U.S. Cellular, TDS
Telecom and Aerial (one consequence being that dividends paid or deemed to be
paid by U.S. Cellular, TDS Telecom or Aerial to the Company would be taxable to
the Company, subject to any applicable dividends received deduction).
Furthermore, the receipt of Cellular Group Shares, Telecom Group Shares or
Aerial Group Shares by a shareholder of the Company might be treated as a fully
taxable dividend to such shareholder in an amount equal to the fair market value
of such stock (subject, in the case of shareholders of the Company that are
corporations, to any applicable dividends received deduction). As indicated
above, however, it is the opinion of counsel that the Service would not prevail
in any such assertion.
 
    Dividend payments received by a Non-U.S. Shareholder of Cellular Group
Shares, Telecom Group Shares or Aerial Group Shares with respect to such shares
will be subject to the withholding of United States federal income tax in the
same manner as dividends received by such Non-U.S. Shareholder on Series A
Common Shares and Common Shares. A Non-U.S. Shareholder will generally be
subject to federal income tax on any gain realized on the taxable sale or
exchange of Cellular Group Shares, Telecom Group Shares or Aerial Group Shares
if (i) the gain is effectively connected with the conduct of a trade or business
of the Non-U.S. Shareholder within the United States, (ii) the gain is derived
from sources within the United States and the Non-U.S. Shareholder is a
non-resident alien individual who is present in the United States for 183 days
or more in the taxable year of such sale or exchange, (iii) the Non-U.S.
Shareholder is subject to tax pursuant to the provisions of federal tax law
applicable to certain United States expatriates, or (iv) the Company is a
"United States real property holding corporation" under the Foreign Investment
in Real Property Tax Act of 1980 and the Non-U.S. Shareholder has owned,
directly or indirectly, more than five percent of the value of all outstanding
shares of the Tracking Group in question at any time during the five-year period
ending at the time of the sale or exchange. The Company does not believe that it
is a United States real property holding corporation as of the date hereof,
although it has not determined or established whether it will be a United States
real property holding corporation in the future.
 
    Certain non-corporate holders of Cellular Group Shares, Telecom Group Shares
or Aerial Group Shares might be subject to backup withholding at a rate of 31%
on the payment of dividends on such stock. Backup withholding will apply only if
the shareholder (i) fails to furnish his, her or its Taxpayer Identification
Number ("TIN") which, for an individual, is his or her Social Security number,
(ii) furnishes an incorrect TIN, (iii) is notified by the Service that he, she
or it has failed properly to report payments of interest or dividends, or (iv)
under certain circumstances, fails to certify under penalties of perjury that
he, she or it has furnished a correct TIN and has not been notified by the
Service that he, she or it is subject to backup withholding for failure to
report payments of interest or dividends. Shareholders should consult their tax
advisors regarding their qualifications for an exemption from backup withholding
and the procedure for obtaining such an exemption if applicable. The amount of
any backup withholding from a payment to a holder of Cellular Group Shares,
Telecom Group Shares or Aerial Group Shares will be allowed as a credit against
such shareholder's federal income tax liability and may entitle such shareholder
to a refund, provided that the required information is furnished to the Service.
 
    The foregoing is for general information only. Shareholders should consult
their own tax advisors as to the federal, state, local and foreign tax
consequences of the Merger and the Distribution and of the holding of Cellular
Group Shares, Telecom Group Shares and Aerial Group Shares.
 
                                     -117-
<PAGE>
SECURITIES LAW CONSEQUENCES OF THE MERGER
 
    The Company has been advised by its counsel, Sidley & Austin, that
shareholders who hold Iowa Shares which may be sold without registration under
the Securities Act of 1933, as amended (the "Securities Act") before the Merger
will have, after the Merger, Delaware Shares which may be sold without
registration under the Securities Act. Shareholders holding restricted Iowa
Shares, and affiliates of TDS Delaware (as defined in the Securities Act), will
have Delaware Shares which are subject to the same restrictions on transfer as
those to which their Iowa Shares are presently subject. For purposes of
computing compliance with the holding period requirements of Rule 144 under the
Securities Act, shareholders will be deemed to have acquired their Delaware
Shares on the date they acquired their Iowa Shares.
 
    Cellular Group Shares, Telecom Group Shares and Aerial Group Shares received
in the Distribution, other than any shares received by affiliates of TDS within
the meaning of the Securities Act, may be offered for sale and sold without
registration under the Securities Act in the same manner as the Common Shares or
Series A Common Shares with respect to which they were distributed. Holders of
restricted shares and affiliates of TDS, as defined in the Securities Act,
including the TDS Voting Trust, will continue to be subject to the restrictions
specified in Rule 144 under the Securities Act with respect to shares of
Tracking Stock received in the Distribution.
 
    Executive officers, directors and holders of more than 10% of any class of
registered equity securities of the Company will continue to be subject to the
short-swing profit prohibitions and reporting obligations contained in Section
16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
is the case presently with respect to the Common Shares, and the Series A Common
Shares since they can be converted into Common Shares. Furthermore, because the
Cellular Group Shares, Telecom Group Shares, Aerial Group Shares and Special
Common Shares would be entitled to vote in the election of directors, holders of
Cellular Group Shares, Telecom Group Shares, Aerial Group Shares and any issued
Special Common Shares will be subject to Section 13(d) of the Exchange Act and
the rules thereunder, which generally require public disclosure of acquisitions
of more than five percent of a class of voting equity securities that is
registered under the Exchange Act. Common Shares (and Series A Common Shares,
since they are convertible into Common Shares) will continue to be subject to
Section 13(d). Persons or groups who are not now subject to the requirements of
Section 16 or 13(d) may, after the Distribution, become subject to such
requirements with respect to the ownership of Cellular Group Shares, Telecom
Group Shares, Aerial Group Shares or Special Common Shares, if and when issued.
 
    After the Merger, TDS Delaware will continue to be a publicly held company
and its Common Shares, Cellular Group Shares, Telecom Group Shares and Aerial
Group Shares will be registered under the Exchange Act with the SEC. TDS
Delaware will file periodic reports and other documents with the SEC and provide
to its shareholders the same types of information that TDS Iowa has previously
filed and provided, as well as additional financial and other information
related to the Groups.
 
LISTING ON THE AMEX
 
    The Common Shares of TDS Iowa are listed on the AMEX under the symbol "TDS"
and the Common Shares of TDS Delaware as the surviving company will continue to
be listed on the AMEX immediately following the Merger under the symbol "TDS."
Application is also being made to list each of the Tracking Stocks on the AMEX.
 
STOCK TRANSFER AGENT AND REGISTRAR
 
    The Harris Trust and Savings Bank will continue to act as transfer agent and
registrar for the Preferred Shares, Common Shares and Series A Common Shares and
will also act as transfer agent for shares of Tracking Stock upon issuance
thereof.
 
ACCOUNTING TREATMENT
 
    For financial reporting purposes, the historical financial statements and
accounts of TDS Iowa will be carried forward to TDS Delaware as a result of the
Merger. The financial statements of TDS appearing elsewhere in this Proxy
Statement/Prospectus have been restated to reflect the effects of the Tracking
Stock Proposal.
 
REGULATORY APPROVALS AND CONSENTS
 
    The Merger requires the consent of, or notice to, the FCC, several state
utility regulatory commissions and certain other third parties. The Merger is
expected to be consummated as soon as practicable after shareholder approval and
following receipt of all regulatory approvals and other consents which are
necessary for the transfer of
 
                                     -118-
<PAGE>
all material licenses, permits or franchises or other rights of the Company and
its subsidiaries. Due to the fact that the Merger simply represents a change in
the Company's state of incorporation rather than a change in control of the
Company, it is expected that the Company will duly receive all necessary
regulatory approvals and other consents. However, the Board reserves the right
to abandon the Merger if, in the judgment of the Board, circumstances arise
which make proceeding with the Merger inadvisable, such as the imposition of
unacceptable conditions to the receipt of such approvals or consents.
 
DIVIDEND REINVESTMENT PLANS
 
    The Company's Common Share Automatic Dividend Reinvestment and Stock
Purchase Plan ("Common Share DRIP") and the Series A Common Share Automatic
Dividend Reinvestment Plan ("Series A DRIP") will be adopted and continued by
TDS Delaware on the effective date of the Merger. Shareholders then
participating in such plans will automatically become participants in the
corresponding TDS Delaware plans. TDS Delaware will adopt a similar dividend
reinvestment plan for the holders of Telecom Group Shares ("Telecom DRIP") since
the Board intends to pay dividends on the Telecom Group Shares. Shareholders
participating in the Common Share DRIP or the Series A DRIP at the time of the
Distribution will automatically become participants in the Telecom DRIP with
respect to the Telecom Group Shares distributed to participants of such plans.
 
    Since the Board does not currently intend to pay dividends on the Cellular
Group Shares or the Aerial Group Shares, no dividend reinvestment plans for such
shares are expected to be adopted at this time. However, TDS Delaware has
requested the Transfer Agent to create a bookkeeping entry facility for the
Cellular Group Shares and the Aerial Group Shares so that Shareholders
participating in the Common Share DRIP or the Series A DRIP will not be required
to take possession of certificates for such shares received in the Distribution
with respect to shares distributed under the Common Share DRIP or the Series A
DRIP.
 
    Accordingly, shareholders receiving shares of Tracking Stock in the
Distribution with respect to shares held in the Common Share DRIP or the Series
A DRIP will automatically have all whole and fractional Telecom Group Shares
credited to the Telecom DRIP and will have all whole and fractional Cellular
Group Shares and Aerial Group Shares credited in bookkeeping entry form.
Shareholders will be permitted to receive certificates representing whole shares
plus cash in lieu of fractional shares at any time after the Distribution upon
request to the Transfer Agent.
 
EMPLOYEE BENEFIT PLANS
 
    The Company's 1996 Employee Stock Purchase Plan, 1988 Stock Option and Stock
Appreciation Rights Plan, 1994 Long-Term Incentive Plan and certain Stock Option
and Appreciation Rights Agreements were previously approved by shareholders.
Each such TDS benefit plan and agreement, as amended, as well as all other
employee benefit plans and agreements of TDS Iowa, will be assumed and adopted
by TDS Delaware upon the effectiveness of the Merger. Approval of the Tracking
Stock Proposal will also constitute approval by the shareholders of the adoption
of such plans and agreements by TDS Delaware, including all shares reserved for
issuance thereunder. In connection with the Merger, Shareholders are also being
asked to approve the amendment and adjustment of certain of such plans and
agreements to reflect the effects of the Tracking Stock Proposal and the
Distribution, and to adopt a new plan which will permit the grant of stock
awards relating to shares of Tracking Stock. See "Proposal 2" and "Proposal 3."
 
CERTAIN DEFINITIONS
 
    As used in this Proxy Statement/Prospectus, unless the context requires
otherwise, the following terms have the meanings specified below:
 
    "ADJUSTED OUTSTANDING INTEREST FRACTION," as of any date, means, with
respect to a particular class of Tracking Stock, a fraction the numerator of
which is the aggregate number of shares of such class of Tracking Stock
outstanding on such date and the denominator of which is the sum of (a) such
aggregate number of outstanding shares, (b) the Number of Shares Issuable with
Respect to Retained Interest for such class of Tracking Stock as of such date,
(c) the aggregate Number of Shares Issuable with Respect to Inter-Group Interest
by all other Tracking Groups in such Tracking Stock, if any, and (d) the Number
of Shares Issuable to Third Parties with respect to such Tracking Stock.
 
                                     -119-
<PAGE>
    "ADJUSTMENT DATE," means the date which is ten Trading Days before the
record date for each annual meeting of shareholders of the Company.
 
    "AERIAL" means Aerial Communications, Inc., a Delaware corporation.
 
    "AERIAL GROUP" means, as of any date that any shares of Aerial Group Shares
have been issued and continue to be outstanding: (a) the interest of the Company
or of any of its subsidiaries in Aerial and its subsidiaries (including any
successor thereto by merger, consolidation or sale of all or substantially all
of its assets, whether or not in connection with a Related Business Transaction)
and their businesses, assets and liabilities, (b) all businesses, assets and
liabilities of the Company or any of its subsidiaries to the extent attributed
to the Aerial Group by the Board, whether or not such businesses, assets or
liabilities are businesses, assets and liabilities of Aerial or its subsidiaries
(or a successor as described in clause (a) of this sentence), (c) all
businesses, assets and liabilities contributed or otherwise transferred to the
Aerial Group from the TDS Group or any of the other Tracking Groups, (d) the
interest of the Company or any of its subsidiaries in the businesses, assets and
liabilities acquired by the Company or any of its subsidiaries for the Aerial
Group, as determined by the Board, (e) a proportionate undivided interest in
each and every business, asset and liability attributed to another Tracking
Group equal to the Inter-Group Interest Fraction, if any, of the Aerial Group in
such other Tracking Group and (f) such adjustments to the foregoing as may be
contemplated by the Restated Certificate or which may be determined in good
faith by the Board.
 
    "AERIAL MERGER" means the proposed merger between Aerial and a wholly-owned
subsidiary of TDS pursuant to which Aerial Group Shares would be issued in
exchange for all outstanding Common Shares of Aerial not owned by TDS and Aerial
would become a wholly-owned subsidiary of TDS.
 
    "AFFECTED TRACKING GROUP" means a Tracking Group which is affected by a
Disposition of all or substantially all of its assets, as provided under
"--Disposition of Assets of Tracking Group."
 
    "AFFECTED TRACKING STOCK" means a class of Tracking Stock which is affected
by a Disposition of all or substantially all of the assets of the related Group,
as provided under "--Disposition of Assets of Tracking Group."
 
    "AMEX" means the American Stock Exchange.
 
    "AVAILABLE DIVIDEND AMOUNT," as of any date, means, with respect to any
Tracking Group, the product of the Outstanding Interest Fraction of such
Tracking Group and either (a) the excess of (i) an amount equal to the total
assets of such Tracking Group less the total liabilities (not including
preferred stock) of such Tracking Group as of such date over (ii) the aggregate
par value of, or any greater amount determined to be capital in respect of, all
outstanding shares of such class of Tracking Stock and each class or series of
Preferred Shares or Undesignated Shares attributed to such Tracking Group or (b)
in case there is no such excess, an amount equal to Company Earnings (Losses)
attributable to such Tracking Group (if positive) for the fiscal year in which
such date occurs and/ or the preceding fiscal year. The Available Dividend
Amount is intended to be similar to an amount equal to the product of the
Outstanding Interest Fraction and the amount that would be legally available for
the payment of dividends on shares of Tracking Stock under Delaware law if the
related Tracking Group were a separate Delaware corporation. The "Available
Dividend Amount" as of any date, means, with respect to the TDS Group, the
greater of (x) the amount of all surplus (as defined in the DGCL) of the Company
or, if there is no surplus, the net profits (as contemplated by the DGCL) of the
Company for the fiscal year in which such date occurs and/or the preceding
fiscal year (if positive), less the sum of the Available Dividend Amounts of all
of the Tracking Groups, or (y) an amount equal to the sum of the Retained
Interest Available Dividend Amounts (if positive) with respect to all of the
Tracking Groups, plus, without duplication, either (a) the excess of (i) an
amount equal to the total assets of the TDS Group less the total liabilities
(not including preferred stock) of the TDS Group as of such date over (ii) the
aggregate par value of, or any greater amount determined to be capital in
respect of, all outstanding Series A Common Shares, Common Shares and any issued
Special Common Shares, and each class or series of Preferred Shares or
Undesignated Shares attributed to the TDS Group or (b) in case there is no such
excess, an amount equal to Company Earnings (Losses) attributable to the TDS
Group (if positive) for the fiscal year in which such date occurs and/or the
preceding fiscal year.
 
    "BOARD" means the Board of Directors of the Company.
 
    "CELLULAR GROUP" means, as of any date that any shares of Cellular Group
Shares have been issued and continue to be outstanding: (a) the interest of the
Company or of any of its subsidiaries in U.S. Cellular and its subsidiaries
(including any successor thereto by merger, consolidation or sale of all or
substantially all of its assets, whether or not in connection with a Related
Business Transaction) and their respective businesses, assets and
 
                                     -120-
<PAGE>
liabilities, (b) all businesses, assets and liabilities of the Company or any of
its subsidiaries to the extent attributed to the Cellular Group by the Board,
whether or not such businesses, assets or liabilities are businesses, assets and
liabilities of U.S. Cellular or any of its subsidiaries (or a successor as
described in clause (a) of this sentence), (c) all businesses, assets and
liabilities contributed or otherwise transferred to the Cellular Group from the
TDS Group or any of the other Tracking Groups, (d) the interest of the Company
or any of its subsidiaries in the businesses, assets and liabilities acquired by
the Company or any of its subsidiaries for the Cellular Group, as determined by
the Board, (e) a proportionate undivided interest in each and every business,
asset and liability attributed to another Tracking Group equal to the
Inter-Group Interest Fraction, if any, of the Cellular Group in such other
Tracking Group and (f) such adjustments to the foregoing as may be contemplated
by the Restated Certificate or which may be determined in good faith by the
Board.
 
    "COMMITTED ACQUISITION SHARES" as of any date, means (a) Common Shares that
the Company had, prior to such date, agreed to issue in connection with
acquisitions, but as of such date had not been issued, and (b) Common Shares
that are issuable upon conversion, exercise or exchange of Convertible
Securities that the Company had, prior to such date, agreed to issue in
connection with acquisitions, but as of such date had not been issued, in each
case including obligations of the Company to issue Cellular Group Shares,
Telecom Group Shares and Aerial Group Shares as a result of the Distribution
pursuant to anti-dilution provisions in the acquisition agreements providing for
the issuance of Common Shares or Convertible Securities which are convertible
into or exercisable or exchangeable for Common Shares, without duplication of
any Common Shares issuable upon conversion, exercise or exchange of Convertible
Securities.
 
    "COMMON SHARES" means the Common Shares, par value $1.00 per share, of TDS
Iowa, which will be converted into Common Shares, par value $.01 per share, of
TDS Delaware in the Merger.
 
    "COMMON STOCK" means shares of capital stock of the Company designated as
common stock, including Series A Common Shares, Common Shares, Special Common
Shares, Cellular Group Shares, Telecom Group Shares and Aerial Group Shares.
 
    "COMPANY" means Telephone and Data Systems, Inc., an Iowa corporation, and
unless the context requires otherwise, its successor, Telephone and Data
Systems, Inc., a Delaware Corporation.
 
    "COMPANY EARNINGS (LOSS)" for any period, with respect to any Group, means
the net earnings or loss of such Group for such period determined on a basis
consistent with the determination of the net earnings or loss of such Group for
such period as presented in the combined financial statements of such Group for
such period, including income and expenses of the Company attributed to the
operations of such Group on a substantially consistent basis, including without
limitation, corporate, general and administrative costs, net interest and income
taxes.
 
    "CONVERTED TRACKING STOCK" means a class of Tracking Stock which has been
selected for conversion by the Company as provided under "--Optional Conversion
by the Company."
 
    "CONVERTIBLE SECURITIES" means any securities of the Company, including
preferred stock, options and other rights (other than common stock), that are
convertible into, exchangeable for or evidence the right to purchase any shares
of any series of common stock, whether upon conversion, exercise or exchange,
pursuant to anti-dilution provisions of such securities or otherwise.
 
    "DGCL" means the Delaware General Corporation Law.
 
    "DISPOSITION" means the sale, transfer, assignment or other disposition
(whether by merger, consolidation, sale or contribution of assets or stock or
otherwise) of all or substantially all of the properties or assets of a Tracking
Group, as described under "--Disposition of Assets of a Tracking Group."
 
    "DISTRIBUTION" means the contemplated distribution of all or any part of the
Cellular Group Shares, Telecom Group Shares and/or Aerial Group Shares to be
made to the holders of Common Shares and Series A Shares, as described in this
Proxy Statement/Prospectus.
 
    "FAIR VALUE OF NET PROCEEDS" means, as of any date, with respect to any
Disposition of any of the business, assets and liabilities of a Tracking Group,
an amount, if any, equal to the fair value of the gross proceeds of such
Disposition less any payment of, or reasonable provision for, (a) any taxes
related to the Disposition or in respect of any resulting dividend or
redemption, including deferred taxes, but not including any deductions or other
offsets which may be available to the Company which are not attributed to such
Tracking Group, (b) any transaction costs, including, without limitation, any
legal, investment banking and accounting fees and expenses and (c) any
liabilities
 
                                     -121-
<PAGE>
and other obligations (contingent or otherwise) of, or attributed to, that
Tracking Group, including, without limitation, obligations with respect to
committed acquisitions and Convertible Securities attributed to the Tracking
Group, any indemnity or guarantee obligations incurred in connection with the
Disposition or any liabilities for future purchase price adjustments, and any
preferential amounts plus any accumulated and unpaid dividends and other
obligations in respect of Preferred Shares attributed to such Tracking Group
(without duplication). For purposes of this definition, any businesses, assets
and liabilities of the affected Tracking Group which the Board determines to
retain after such Disposition shall be deemed to constitute "reasonable
provision" for such amount of taxes, costs and liabilities (contingent or
otherwise). To the extent the proceeds of any Disposition include any securities
or other property other than cash, the Board shall determine the fair value of
such securities or property, including for the purpose of determining comparable
value thereof if the Board determines to pay a dividend or redemption price in
cash or securities or other property as provided under the terms of the Tracking
Stock.
 
    "GROUP" means the Aerial Group, the Cellular Group, the Telecom Group and
the TDS Group and any other Group so designated by the Board.
 
    "IBCA" means the Iowa Business Corporation Act.
 
    "INTER-GROUP INTEREST," as of any date, means that part of the Company's
equity interest in a Tracking Group which is retained (or subsequently acquired)
by the Company and attributed to a Group other than the TDS Group.
 
    "INTER-GROUP INTEREST FRACTION," as of any date, with respect to any
Investor Group, means a fraction the numerator of which is the Number of Shares
Issuable with Respect to Inter-Group Interest in an Issuer Group by such
Investor Group as of such date, and the denominator of which is the sum of (a)
the aggregate Number of Shares Issuable with Respect to Inter-Group Interest in
such Issuer Group by all Investor Groups as of such date, (b) the aggregate
number of shares of Tracking Stock of such Issuer Group outstanding as of such
date and (c) the Number of Shares Issuable with Respect to Retained Interest in
such Issuer Group as of such date.
 
    "ISSUER GROUP" means a Tracking Group in which there is an Inter-Group
Interest by an Investor Group.
 
    "INVESTOR GROUP" means a Tracking Group which holds an Inter-Group Interest
in an Issuer Group.
 
    "LIQUIDATION UNIT" means the number or fraction associated with each share
of common stock which determines the proportionate amount of assets such share
is entitled to upon the liquidation, dissolution or winding-up of the Company as
described under "--Description of Restated Certificate of Incorporation of TDS
Delaware-- Liquidation Rights."
 
    "MARKET CAPITALIZATION" of any class or series of capital stock of the
Company on any Trading Day means the product of (a) the Market Value of one
share of such class or series on such Trading Day and (b) the number of shares
of such class or series outstanding on such Trading Day.
 
    "MARKET VALUE" of a share of any class or series of capital stock of the
Company on any day means the average of the high and low reported sale prices
regular way of a share of such class or series on such day (if such day is a
Trading Day, and if such day is not a Trading Day, on the Trading Day
immediately preceding such day) or in case no such reported sale takes place on
such Trading Day the average of the reported closing bid and asked prices
regular way of a share of such class or series on such Trading Day, in either
case on the American Stock Exchange or such other national securities exchange
or the Nasdaq National Market on which such class or series is listed, or if the
shares of such class or series are not quoted on the American Stock Exchange or
any other national securities exchange or the Nasdaq National Market on such
Trading Day, the average of the closing bid and asked prices of a share of such
class or series in the over-the-counter market on such Trading Day as furnished
by any New York Stock Exchange member firm selected from time to time by the
Company, or if such closing bid and asked prices are not made available by any
such New York Stock Exchange member firm on such Trading Day, the market value
of a share of such class or series as determined by the Board; provided, that if
the Special Common Shares or Series A Common Shares are not trading on a
national securities exchange or the Nasdaq National Market, and if bid and asked
prices are not available for the Special Common Shares or the Series A Common
Shares, the Market Value of a Special Common Share or a Series A Common Share,
as applicable, shall be deemed to be the same as a Common Share for purposes of
determining Market Value under "Description of Terms of Tracking Stock--Voting
Rights,--Dispositions of Assets of a Tracking Group,--Conversion at Option of
the Company and--Liquidation"; and provided further, that for purposes of
determining Market Values under "Description of Terms of Tracking Stock--Voting
Rights,--Disposition of Assets of a Tracking Group,--Conversion at Option of the
Company and-- Liquidation," (a) the "Market Value" of a share of any series of
common stock on any day prior to the "ex" date or
 
                                     -122-
<PAGE>
any similar date for any dividend or distribution paid or to be paid with
respect to such series of common stock will be reduced by the fair market value
of the per share amount of such dividend or distribution as determined by the
Board and (b) the "Market Value" of a share of any series of common stock on any
day prior to (i) the effective date of any subdivision (by stock split or
otherwise) or combination (by reverse stock split or otherwise) of outstanding
shares of such series of common stock or (ii) the "ex" date or any similar date
for any dividend or distribution with respect to any such series of common stock
in shares of such series of common stock, will be appropriately adjusted to
reflect such subdivision, combination, dividend or distribution.
 
    "MERGER" means the proposed merger of TDS Iowa with and into TDS Delaware,
with TDS Delaware as the surviving corporation, pursuant to which the Company
would be reincorporated from Iowa to Delaware.
 
    "MERGER AGREEMENT" means the Agreement and Plan of Merger between TDS Iowa
and TDS Delaware, with respect to the Merger.
 
    "NUMBER OF SHARES ISSUABLE WITH RESPECT TO INTER-GROUP INTEREST" means, with
respect to any Tracking Group (for purposes of this definition, the "Issuer
Group"), the number of Issuer Group Shares (the "Issuer Group Shares") which are
attributed to, and that could be issued or sold by the Company for the benefit
of, another Tracking Group (for purposes of this definition, the "Investor
Group"). Initially, the Number of Shares Issuable with Respect to Inter-Group
Interest in each Tracking Group shall be zero, and shall from time to time
thereafter, as applicable, be:
 
        (a) adjusted as appropriate to reflect subdivisions (by stock split or
    otherwise) and combinations (by reverse stock split or otherwise) of the
    Issuer Group Shares and dividends or distributions of Issuer Group Shares to
    the holders thereof and other reclassifications of the Issuer Group Shares
    and similar transactions;
 
        (b) decreased (but not to less than zero) by (i) the aggregate number of
    Issuer Group Shares issued or sold by the Company, for cash, securities or
    other property, the proceeds of which are attributed to the Investor Group,
    (ii) the aggregate number of Issuer Group Shares issued or delivered upon
    conversion, exercise or exchange of Convertible Securities (other than
    Pre-Distribution Convertible Securities), the proceeds of which are
    attributed to the Investor Group, (iii) the aggregate number of Issuer Group
    Shares issued or delivered by the Company as a dividend or distribution to
    holders of shares of the Investor Group, (iv) the aggregate number of Issuer
    Group Shares issued or delivered upon the conversion, exercise or exchange
    of any Convertible Securities (other than Pre-Distribution Convertible
    Securities) issued or delivered by the Company as a dividend or distribution
    or by reclassification or exchange to holders of shares of the Investor
    Group, and (v) the aggregate number of Issuer Group Shares (rounded, if
    necessary, to the nearest whole number), equal to the aggregate fair value
    (as determined by the Board) of assets or properties attributed to the
    Issuer Group that are transferred from the Issuer Group to the Investor
    Group in consideration of a reduction in the Number of Shares Issuable with
    Respect to Inter-Group Interest by the Investor Group in the Issuer Group,
    divided by the Market Value of one Issuer Group Share as of the date of such
    transfer;
 
        (c) increased by (i) the aggregate number of any Issuer Group Shares
    which are retired or otherwise cease to be outstanding following their
    purchase with funds attributed to the Investor Group and (ii) a number
    (rounded, if necessary, to the nearest whole number) equal to the fair value
    (as determined by the Board) of assets or properties theretofore attributed
    to the Investor Group that are contributed to the Issuer Group in
    consideration of an increase in the Number of Shares Issuable with Respect
    to Inter-Group Interest in the Issuer Group by the Investor Group, divided
    by the Market Value of one Issuer Group Share as of the date of such
    contribution; and
 
        (d) adjusted as may be appropriate to reflect other transactions between
    the Issuer Group and the Investor Group, as determined in good faith by the
    Board.
 
        Whenever a change in the Number of Shares Issuable with Respect to
    Inter-Group Interest with respect to any Group occurs, the Company shall
    prepare and file a statement of such change with the Secretary of the
    Company.
 
    "NUMBER OF SHARES ISSUABLE WITH RESPECT TO RETAINED INTEREST" means the
number of shares of a class of Tracking Stock of a Tracking Group (for purposes
of this definition, the "Issuer Group") that are attributed to, and could be
issued or sold by the Company for the account of, the TDS Group in respect of a
Retained Interest by the TDS Group in such Issuer Group. The Number of Shares
Issuable with Respect to Retained Interest shall initially be determined by the
Board, and shall from time to time thereafter, as applicable, be:
 
                                     -123-
<PAGE>
        (a) adjusted as appropriate to reflect subdivisions (by stock split or
    otherwise) and combinations (by reverse stock split or otherwise) of the
    Issuer Group Shares, and dividends or distributions of Issuer Group Shares
    to the holders thereof and other reclassifications of Issuer Group Shares
    and similar transactions;
 
        (b) decreased (but not to less than zero) by (i) the aggregate number of
    Issuer Group Shares issued or sold by the Company, for cash, securities or
    other property, the proceeds of which are attributed to the TDS Group, (ii)
    the aggregate number of Issuer Group Shares issued or delivered upon
    conversion, exercise or exchange of Convertible Securities (including
    Pre-Distribution Convertible Securities), the proceeds of which are
    attributed to the TDS Group, (iii) the aggregate number of Issuer Group
    Shares issued or delivered by the Company as a dividend or distribution to
    holders of Common Shares, Series A Shares or Special Common Shares, (iv) the
    aggregate number of Issuer Group Shares issued or delivered upon the
    conversion, exercise or exchange of any Convertible Securities issued or
    delivered by the Company as a dividend or distribution or by
    reclassification or exchange to holders of shares of Common Shares, Series A
    Shares or Special Common Shares, and (v) the aggregate number of Issuer
    Group Shares (rounded, if necessary, to the nearest whole number), equal to
    the aggregate fair value (as determined by the Board) of assets or
    properties attributed to the Issuer Group that are transferred from the
    Issuer Group to the TDS Group in consideration of a reduction in the Number
    of Shares Issuable with Respect to Retained Interest in the Issuer Group,
    divided by the Market Value of one Issuer Group Share as of the date of such
    transfer;
 
        (c) increased by (i) the aggregate number of any Issuer Group Shares
    which are retired or otherwise cease to be outstanding following their
    purchase with funds attributed to the TDS Group and (ii) a number (rounded,
    if necessary, to the nearest whole number) equal to the fair value (as
    determined by the Board) of assets or properties theretofore attributed to
    the TDS Group that are contributed to the Issuer Group in consideration of
    an increase in the Number of Shares Issuable with Respect to Retained
    Interest in the Issuer Group, divided by the Market Value of one Issuer
    Group Share as of the date of such contribution; and
 
        (d) adjusted as may be appropriate to reflect other transactions between
    the Issuer Group and the TDS Group, as determined in good faith by the
    Board.
 
        Whenever a change in the Number of Shares Issuable with Respect to
    Retained Interest in any Tracking Group occurs, the Company shall prepare
    and file a statement of such change with the Secretary of the Company.
 
    "NUMBER OF SHARES ISSUABLE TO THIRD PARTIES" means, as of any date, the
number of shares of any class of common stock which represent Shares Issuable to
Third Parties, as may be determined in good faith by the Board, considering any
relevant factors, including whether the holders of Convertible Securities would
receive an economic benefit from the conversion, exercise or exchange of such
Convertible Securities which exceeds the economic cost thereof, or the economic
benefit of not converting, exercising or exchanging such Convertible Securities.
 
    "OUTSTANDING INTEREST," as of any date, means, with respect to any class of
Tracking Stock, that part of the Company's interest in a Tracking Group which is
represented by outstanding shares of such Tracking Stock.
 
    "OUTSTANDING INTEREST FRACTION," as of any date, shall mean, with respect to
any class of Tracking Stock, a fraction the numerator of which is the aggregate
number of shares of such class of Tracking Stock outstanding on such date and
the denominator of which is the sum of (a) such aggregate number of shares, (b)
the Number of Shares Issuable with Respect to Retained Interest of such class of
Tracking Stock as of such date and (c) the aggregate Number of Shares Issuable
with Respect to Inter-Group Interest by all other Tracking Groups in such
Tracking Stock, if any.
 
    "PRE-DISTRIBUTION CONVERTIBLE SECURITIES" means Convertible Securities that
are outstanding on the record date for the Distribution and are, prior to such
date, convertible into or exercisable or exchangeable for either Common Shares
or Series A Common Shares, assuming the record date for the Distribution of
Cellular Group Shares, Telecom Group Shares and Aerial Group shares is the same
date. If the record date for any such shares is not the same date, the Board
shall determine which Convertible Securities issued after the first record date
relating to any part of the Distribution shall represent Pre-Distribution
Convertible Securities.
 
    "PREFERRED SHARES" means the Preferred Shares, without par value per share,
of TDS Iowa, which will be converted into Preferred Shares, par value $.01 per
share, of TDS Delaware in the Merger.
 
                                     -124-
<PAGE>
    "QUALIFYING SUBSIDIARY" or "QUALIFYING SUBSIDIARIES" means a Subsidiary or
Subsidiaries of the Company (a) in which (i) the Company's ownership and voting
interest is sufficient to satisfy the requirements of the Internal Revenue
Service for a distribution of the Company's interest in such Subsidiary to the
holders of common stock of the Company that is tax-free to such holders or (ii)
the Company owns, directly or indirectly, all of the issued and outstanding
capital stock and (b) which currently or at any time in the future hold(s) all
of the assets and liabilities attributed to a Tracking Group.
 
    "RELATED BUSINESS TRANSACTION" means any Disposition of all or substantially
all of the properties and assets of a Tracking Group in which the Company
receives as proceeds of such Disposition primarily equity securities (including,
without limitation, capital stock, convertible securities, partnership or
limited partnership interests and other types of equity securities, without
regard to the voting power or contractual or other management or governance
rights related to such equity securities) of the purchaser or acquiror of such
assets and properties of such Tracking Group, any entity which succeeds (by
merger, formation of a joint venture enterprise or otherwise) to such assets and
properties of such Tracking Group or a third party issuer, which purchaser,
acquiror or other issuer is engaged or proposes to engage primarily in one or
more businesses similar or complementary to the businesses conducted by such
Tracking Group prior to such Disposition, as determined in good faith by the
Board.
 
    "RESTATED CERTIFICATE" means the Restated Certificate of Incorporation of
TDS Delaware.
 
    "RETAINED INTEREST," as of any date, means that part of the Company's equity
interest in a Tracking Group, which is retained (or subsequently acquired) by
the Company and attributed to the TDS Group for the benefit of the Common
Shares, Series A Common Shares and any issued Special Common Shares.
 
    "RETAINED INTEREST AVAILABLE DIVIDEND AMOUNT," as of any date, means, with
respect to any Tracking Group, an amount (not less than zero) which is equal to
the product of (a) a fraction, the numerator of which is the Retained Interest
Fraction and the denominator of which is the Outstanding Interest Fraction with
respect to such Tracking Group multiplied by (b) the Available Dividend Amount
of such Tracking Group.
 
    "RETAINED INTEREST FRACTION," as of any date, means, with respect to any
class of Tracking Stock, a fraction the numerator of which is the Number of
Shares Issuable with Respect to Retained Interest of such class of Tracking
Stock as of such date and the denominator of which is the sum of (a) such Number
of Shares Issuable with Respect to Retained Interest as of such date, (b) the
aggregate Number of Shares Issuable with Respect to Inter-Group Interest by all
other Tracking Groups in such Tracking Stock, if any, and (c) the aggregate
number of shares of such class of Tracking Stock outstanding as of such date.
 
    "SERIES A COMMON SHARES" means the Series A Common Shares, par value $1.00
per share, of TDS Iowa, which will be converted into Series A Common Shares, par
value $.01 per share, of TDS Delaware in the Merger.
 
    "SHARES ISSUABLE TO THIRD PARTIES" means, as of any date, shares of any
class of common stock which are issuable (a) as Committed Acquisition Shares,
(b) pursuant to the conversion, exercise or exchange of Convertible Securities
or (c) otherwise.
 
    "SUBSIDIARY" means, with respect to any person or entity, any corporation or
partnership 50% or more of whose outstanding voting securities or partnership
interests, as the case may be, are directly or indirectly owned by such person
or entity.
 
    "TDS" or "TDS IOWA" means Telephone and Data Systems, Inc., an Iowa
corporation.
 
    "TDS DELAWARE" means Telephone and Data Systems, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company.
 
    "TDS GROUP" means, as of any date that any shares of any class of Tracking
Stock have been issued and continue to be outstanding: (a) the interest of the
Company and all of its subsidiaries, (including any successors thereto by
merger, consolidation or sale of all or substantially all of its assets) and
their respective businesses, assets and liabilities, other than (except as
provided in clause (e) of this definition) the interest of the Company and its
subsidiaries in Aerial and its subsidiaries, TDS Telecom and its subsidiaries,
U.S. Cellular and its subsidiaries, and any other subsidiaries attributed by the
Board to a Group other than the TDS Group (including any successors thereto by
merger, consolidation or sale of all or substantially all of its assets, whether
or not in connection with a Related Business Transaction) and their respective
businesses, assets and liabilities; (b) all businesses, assets and liabilities
of the Company or any of its subsidiaries to the extent attributed to the TDS
Group by the Board, whether or not such businesses, assets or liabilities are
businesses, assets and liabilities of the TDS Group or any of its
 
                                     -125-
<PAGE>
subsidiaries (or a successor as described in clause (a) of this sentence); (c)
all businesses, assets and liabilities contributed or otherwise transferred to
the TDS Group from any of the Tracking Groups; (d) the interest of the Company
or any of its subsidiaries in the businesses, assets and liabilities acquired by
the Company or any of its subsidiaries for the TDS Group, as determined by the
Board; (e) a proportionate undivided interest in each and every business, asset
and liability attributed to a Tracking Group equal to the Retained Interest
Fraction of the TDS Group in such other Tracking Group; and (f) such other
businesses, assets and liabilities and such adjustments to the foregoing as may
be contemplated hereby or which may be approved by the Board.
 
    "TDS GROUP SHARES" means the Series A Common Shares, Common Shares and any
issued Special Common Shares of the Company and any other shares designated as
TDS Group Shares by the Board.
 
    "TDS TELECOM" means TDS Telecommunications Corporation, a Delaware
corporation.
 
    "TDS VOTING TRUST" means the voting trust which expires June 30, 2009, that
controls a majority of the voting power of TDS in the election of directors and
all other matters.
 
    "TELECOM GROUP" means, as of any date that any shares of Telecom Group Stock
have been issued and continue to be outstanding: (a) the interest of the Company
or of any of its subsidiaries in TDS Telecom, and its subsidiaries (including
any successor thereto by merger, consolidation or sale of all or substantially
all of its assets, whether or not in connection with a Related Business
Transaction) and their respective businesses, assets and liabilities, (b) all
businesses, assets and liabilities of the Company or any of its subsidiaries to
the extent attributed to the Telecom Group by the Board, whether or not such
businesses, assets or liabilities are businesses, assets and liabilities of TDS
Telecom or any of its subsidiaries (or a successor as described in clause (a) of
this sentence), (c) all businesses, assets and liabilities contributed or
otherwise transferred to the Telecom Group from the TDS Group or any other
Tracking Group, (d) the interest of the Company or any of its subsidiaries in
the businesses, assets and liabilities acquired by the Company or any of its
subsidiaries for the Telecom Group, as determined by the Board, (e) a
proportionate undivided interest in each and every business, asset and liability
attributed to another Tracking Group equal to the Inter-Group Interest Fraction,
if any, of the Telecom Group in such other Tracking Group and (f) such
adjustments to the foregoing as may be contemplated by the Restated Certificate
or which may be determined in good faith by the Board.
 
    "TRACKING GROUP" means the Aerial Group, the Cellular Group and the Telecom
Group, and any other business group designated as a Tracking Group by the Board.
 
    "TRACKING STOCK" means the Aerial Group Shares, the Cellular Group Shares
and the Telecom Group Shares, and any other shares of capital stock of the
Company which the Board designates as Tracking Stock.
 
    "TRACKING STOCK PROPOSAL" means the proposal to reincorporate the Company
from Iowa to Delaware and to authorize a capital structure which will permit the
issuance of shares of Tracking Stock.
 
    "TRADING DAY" means each weekday other than a day on which the relevant
class of common stock of the Company is not traded on any national securities
exchange or quoted on the Nasdaq National Market or on the over-the-counter
market.
 
    "TRANSACTIONS" means the Aerial Merger, the Distribution, the Telecom Public
Offering and the U.S. Cellular Merger.
 
    "UNDESIGNATED SHARES" means the Undesignated Shares, par value $.01 per
share, of TDS Delaware to be authorized by the Restated Certificate.
 
    "U.S. CELLULAR" means United States Cellular Corporation, a Delaware
corporation.
 
    "U.S. CELLULAR MERGER" means the proposed merger between U.S. Cellular and a
wholly-owned subsidiary of TDS pursuant to which Cellular Group Shares would be
issued in exchange for all outstanding Common Shares of U.S. Cellular not owned
by TDS and U.S. Cellular would become a wholly-owned subsidiary of TDS.
 
                                     -126-
<PAGE>
                                   PROPOSAL 2
                AMENDMENT AND ADJUSTMENT OF EMPLOYEE STOCK PLANS
 
    Subject to the approval of the Tracking Stock Proposal by the shareholders,
the Board of Directors recommends approval of amendments and adjustments to the
Company's employee stock plans and a stock option agreement (the "Existing
Plans") to conform the Existing Plans to the changes in the Company's capital
structure being made by the Tracking Stock Proposal.
 
    The amendments and adjustments to the Existing Plans would provide that
options and stock appreciation rights granted under the Existing Plans would be
adjusted so that, as a result of the Distribution, participants who are entitled
to acquire one Common Share pursuant to the Existing Plans will be entitled to
acquire one Common Share and such number or fraction of shares of Tracking Stock
as were distributed with respect to each Common Share (the "Distribution Ratio")
at the original exercise price. In order to permit the issuance of Tracking
Stock pursuant to the Existing Plans, it is also necessary to authorize a
proportionate amount of Tracking Stock for the Existing Plans.
 
    If this proposal is approved, in the event of the Distribution, shares of
Tracking Stock will be authorized under the Existing Plans in an amount equal to
the number of unissued Common Shares authorized under the Existing Plans times
the Distribution Ratio. The amendments and adjustments to the Existing Plans
will not make any changes to the terms of the Existing Plans except to authorize
the issuance of Cellular Group Shares, Telecom Group Shares and Aerial Group
Shares in addition to the Common Shares previously authorized.
 
    The following table shows the number of Common Shares currently reserved for
issuance under the Existing Plans, and the number of Cellular Group Shares,
Telecom Group Shares and Aerial Group Shares proposed to be authorized for
issuance pursuant to the Existing Plans based on the expected Distribution Ratio
for such shares.
 
<TABLE>
<CAPTION>
                                                                                 CURRENTLY
                                                                                AUTHORIZED
                                                                                    BUT         PROPOSED TO BE AUTHORIZED
                                                                                 UNISSUED    -------------------------------
                                                                                -----------  CELLULAR    TELECOM    AERIAL
                                                                                  COMMON       GROUP      GROUP      GROUP
                                                                                  SHARES      SHARES     SHARES     SHARES
                                                                                -----------  ---------  ---------  ---------
<S>                                                                             <C>          <C>        <C>        <C>
1994 Long-Term Incentive Plan:
  Issuable....................................................................     396,776     396,776    264,517    264,517
  Authorized..................................................................     400,625     400,625    267,084    267,084
                                                                                -----------  ---------  ---------  ---------
    Subtotal..................................................................     797,401     797,401    531,601    531,601
Issuable Pursuant to 1988 Stock Option and Stock Appreciation Rights Plan.....     124,250     124,250     82,833     82,833
Issuable Pursuant to Stock Option Agreement...................................      54,000      54,000     36,000     36,000
                                                                                -----------  ---------  ---------  ---------
    Total.....................................................................     975,651     975,651    650,434    650,434
                                                                                -----------  ---------  ---------  ---------
                                                                                -----------  ---------  ---------  ---------
Distribution Ratio                                                                                   1        2/3        2/3
</TABLE>
 
    THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENTS
AND ADJUSTMENTS TO THE EMPLOYEE STOCK PLANS AND AGREEMENTS.
 
                                     -127-
<PAGE>
                                   PROPOSAL 3
                   APPROVAL OF 1998 LONG-TERM INCENTIVE PLAN
 
    Subject to the approval by shareholders of the Tracking Stock Proposal and
the effectiveness of the merger of TDS Iowa into TDS Delaware, the Board has
determined that it is in the best interest of the Company and the shareholders
to approve the Telephone and Data Systems, Inc. 1998 Long-Term Incentive Plan
(the "Plan"). The purposes of the Plan are (i) to align the interests of the
shareholders of the Company and selected employees of the Company and certain of
its affiliates who receive awards under the Plan by increasing the interest of
such employees in the Company's growth and success, (ii) to advance the
interests of the Company by attracting and retaining key executive and
management employees of the Company and certain of its affiliates, and (iii) to
motivate such employees to act in the long-term best interests of the Company's
shareholders The Plan was adopted by the Board of Directors on December 17,
1997.
 
DESCRIPTION OF THE PLAN
 
    GENERAL.  Under the Plan, the Company may grant incentive stock options
("ISOs") and nonqualified options, stock appreciation rights ("SARs"), bonus
stock awards which are vested upon grant, stock awards which may be subject to a
restriction period or specified performance measures or both, performance shares
and Employer match awards for deferred bonus payments, as described below. A
total of 2,000,000 Common Shares, 3,200,000 Aerial Communications Group Common
Shares, 3,600,000 United States Cellular Group Common Shares and 2,500,000 TDS
Telecommunications Group Common Shares (collectively, "Plan Stock") have been
reserved for issuance under the Plan, subject to adjustment in the event of a
stock split, stock dividend or other changes in capital structure. No grants may
be made under the Plan after ten years after its effective date. Certain
employees of the Company and of affiliates of the Company who are selected by
the Committee are eligible to participate in the Plan. The maximum number of
shares of Plan Stock with respect to which options, SARs, bonus stock awards,
stock awards and performance shares may be granted during any three-calendar
year period to any participant in the Plan is 500,000.
 
    ADMINISTRATION.  The Plan is administered by a committee (the "Committee")
made up of two or more members of the Board of Directors, each of whom may be an
"outside director" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended and a "Non-Employee Director" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended. Subject to the
terms of the Plan, the Committee is authorized to select employees for
participation in the Plan and to determine the form, amount and timing of each
grant of an award and, if applicable, the number of shares of Plan Stock subject
to each award granted thereunder, the purchase price or base price per share of
Plan Stock upon the exercise of the award, the time and conditions of exercise
or settlement of the award, and all other terms and conditions of such award.
 
    The Committee may establish performance measures that must be attained (i)
during a performance period in order for an employee eligible to participate in
the Plan to be granted a performance stock option, (ii) during the applicable
restriction period or performance period as a condition to the award recipient's
receipt of shares of Plan Stock subject to the award in the case of a restricted
stock award or receipt of shares of Plan Stock or cash in the case of
performance share award, or (iii) as a condition to exercisability of all or a
portion of an option or SAR. The performance measures are one or more of the
following: the attainment by a share of stock of a specified fair market value
for a specified period of time, earnings per share, return on equity, return on
capital, earnings on investments, cash flows, revenues, sales, costs, market
share, attainment of cost reduction goals, customer count, attainment of
business efficiency measures (I.E., cost per gross or net customer addition,
revenue per customer, customer turnover rate, ratios of employees to volume
measures of business, and population in licensed or operating markets),
financing costs, ratios of capital spending and investment to volume of business
measures and customer satisfaction survey results. In the case of an option or
SAR granted at fair market value on the date of grant, such performance measures
also may include the attainment of individual performance objectives, or any
other criteria and objectives established by the Committee or any combination
thereof.
 
    The Committee may delegate some or all of its power and authority under the
Plan to the Chairman of the Board and Chief Executive Officer or other executive
officer of the Company as it deems appropriate; provided, however, that such
Committee may not delegate its power and authority regarding (A) the selection
for participation in the Plan of (i) the Chief Executive Officer of the Company
(or any employee who is acting in such capacity), one of the four highest
compensated officers of the Company (other than the Chief Executive Officer), or
any other person deemed to be a "covered employee" within the meaning of section
162(m) of the Code or who, in the Committee's judgment, is likely to be a
covered employee at any time during the exercise period of the option to be
granted to such employee, or (ii) an officer or other person subject to section
16 of the Exchange Act, or (B) decisions concerning the timing, pricing or
number of shares subject to an award granted to such an employee, officer or
other person who is, or who in the Committee's judgment is likely to be, a
covered employee.
 
                                     -128-
<PAGE>
    EFFECTIVE DATE, TERMINATION AND AMENDMENT.  The Plan will become effective
as of the effective date of the merger of TDS Iowa into TDS Delaware and will
terminate ten years thereafter, unless terminated earlier by the Board of
Directors. The Board of Directors generally may amend the Plan at any time
except that, without the approval of the shareholders of the Company, no
amendment may, among other things, (i) increase the number of shares of any
class of Plan Stock available under the Plan, or (ii) reduce the minimum
purchase price of a share of Plan Stock subject to an option or base price of an
SAR.
 
    EMPLOYEE STOCK OPTIONS.  The Plan provides for the grant of ISOs and
nonqualified stock, and that the Committee will determine the exercise period
and the purchase price of shares of Plan Stock at the time of grant, provided
that the purchase price per shares of Plan Stock subject to an ISO is not less
than 100% of the fair market value of such shares of stock on the date of grant.
The exercise of an option entitles the optionee thereof to receive (subject to
withholding tax) whole shares of Plan Stock (which may be restricted stock). The
aggregate fair market value (determined as of the date the option is granted) of
the stock with respect to which ISOs are exercisable for the first time by the
optionee in any calendar year (under the Plan and any other incentive stock
option plan of the Company) may not exceed $100,000. ISOs granted under the Plan
may not be exercised after ten years from the date of grant. In the case of any
eligible employee who owns or is deemed to own stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or any of
its subsidiaries, the exercise price of any ISOs granted under the Plan may not
be less than 110% of the fair market value of the stock on the date of grant,
and the exercise period may not exceed five years from the date of grant. ISOs
granted under the Plan are not transferable other than pursuant to a beneficiary
designation effective on the award recipient's death. Nonqualified options
granted under the Plan are not transferable by the optionee other than (a)
pursuant to a beneficiary designation effective on the award recipient's death,
(b) pursuant to a court order entered in connection with a dissolution of
marriage or child support, or (c) to the extent permitted under (i) securities
laws relating to the registration of securities subject to employee benefit
plans and (ii) the agreement evidencing the grant of such award, by transfer to
a permitted transferee (determined under the terms of the Plan). All stock
options will become immediately exercisable upon certain changes of control of
the Company.
 
    STOCK APPRECIATION RIGHTS.  The Plan provides for the grant of SARs. The
number of shares of Plan Stock subject to an SAR, the period for the exercise of
an SAR, the base price of an SAR and any performance measures applicable to an
SAR will be determined by the Committee, provided that the base price per share
of Plan Stock subject to an SAR shall not be less than 100% of the fair market
value of a share of stock on the date of grant. The exercise of an SAR entitles
the holder thereof to receive (subject to withholding taxes) whole shares of
Plan Stock (which may be restricted stock), cash or a combination thereof with a
value equal to the difference between the fair market value of the stock on the
exercise date and the base price of the SAR, multiplied by the number of shares
of Plan Stock with respect to which such SAR is issued. SARs granted under the
Plan are not transferable by the award recipient other than (a) pursuant to a
beneficiary designation effective on the award recipient's death, (b) pursuant
to a court order entered in connection with a dissolution of marriage or child
support or (c) to the extent permitted under (i) securities laws relating to the
registration of securities subject to employee benefit plans and (ii) the
agreement evidencing the grant of such award, by transfer to a permitted
transferee (determined under the terms of the Plan). All SARs will become
immediately exercisable upon certain changes of control of the Company.
 
    BONUS STOCK AND RESTRICTED STOCK AWARDS.  The Plan provides for the grant of
bonus stock awards, which are vested upon grant. The Plan also provides for
stock awards which may be subject to a restriction period ("restricted stock").
An award of restricted stock may be subject to specified performance measures
for the applicable restriction period. The terms of restricted stock, the
restriction period and any performance measures will be determined by the
Committee. Shares of restricted stock will be subject to forfeiture if the
holder does not remain continuously in the employment of the Company or any
affiliate or during the restriction period or, if the restricted stock is
subject to performance measures, if such performance measures are not attained
during the restriction period. Stock awards granted under the Plan are not
transferable by the award recipient other than (a) pursuant to a beneficiary
designation effective on the award recipient's death, (b) pursuant to a court
order entered in connection with a dissolution of marriage or child support or
(c) to the extent permitted under (i) securities laws relating to the
registration of securities subject to employee benefit plans and (ii) the
agreement evidencing the grant of such award, by transfer to a permitted
transferee (determined under the terms of the Plan). Subject to the change in
control provisions of the Plan and unless otherwise specified in the agreement
with respect to a particular restricted stock award, (i) in the event of a
termination of employment by reason of disability, retirement after age 65,
resignation with prior consent of the board of directors of the award
recipient's employer or death, any applicable restriction period will terminate
and any applicable performance measures will be deemed satisfied at the target
level and (ii) in the event of a termination of employment for any other reason,
the portion of a restricted stock award which is then subject to a restriction
period will be forfeited and canceled. All restriction periods applicable to
 
                                     -129-
<PAGE>
restricted stock awards will lapse and any performance measures will be deemed
satisfied at the target level upon certain changes of control of the Company.
 
    PERFORMANCE SHARE AWARDS.  The Plan provides for the grant of performance
share awards. Each performance share is a right, contingent upon the attainment
of performance measures within a specified performance period, to receive shares
of Plan Stock, which may be a restricted stock, or the fair market value of such
shares in cash or a combination thereof, as specified by the agreement
evidencing the award. The number of shares of Plan Stock subject to a
performance award, the applicable performance measures and performance period,
and the terms of a performance share award will be determined by the Committee.
If the specified performance measures are not attained during the applicable
performance period, then the award recipient forfeits all rights to receive the
shares of Plan Stock subject to the performance share award. Performance share
awards granted under the Plan are not transferable by the award recipient other
than (a) pursuant to a beneficiary designation effective on the award
recipient's death, (b) pursuant to a court order entered in connection with a
dissolution of marriage or child support or (c) to the extent permitted under
(i) securities laws relating to the registration of securities subject to
employee benefit plans and (ii) the agreement evidencing the grant of such
award, by transfer to a permitted transferee (determined under the terms of the
Plan). Subject to the change in control provisions of the Plan and unless
otherwise specified in the agreement with respect to a performance share award,
(i) in the event of a termination of employment by reason of disability,
retirement after age 65, resignation with prior consent of the board of
directors of the award recipient's employer or death, any applicable performance
period will terminate and any applicable performance measures will be deemed
satisfied at the target level and (ii) in the event of a termination of
employment for any other reason, the portion of a performance share award which
is then subject to a performance period will be forfeited and canceled. All
performance periods applicable to performance share awards will lapse and any
performance measures will be deemed satisfied at the target level upon certain
changes of control of the Company.
 
    EMPLOYER MATCH AWARDS.  The Plan permits an employee selected by the
Committee to elect to defer all or a portion of his annual bonus under the Plan
to a deferred compensation account, provided, however, that the amount subject
to such deferral election with respect to any year shall not exceed $250,000. If
a selected employee elects to defer all or a portion of his annual bonus under
the Plan, an Employer match award will be allocated to the employee's deferred
compensation account in an amount equal to a percentage specified by the
Committee of the employee's deferred annual bonus amount, provided that such
percentage shall not exceed 33 1/3%. An employee will be fully vested in the
deferred bonus amounts credited to his deferred compensation account. One-third
of the Employer match awards credited to the employee's deferred compensation
account shall become vested on each of the first three anniversaries of the last
day of the year for which the applicable bonus is payable, provided that such
employee is an employee of the Company or an affiliate on such date and the
amount credited to his deferred compensation account has not been distributed
before such date. An employee's deferred compensation account will be deemed to
be invested in phantom shares of the class of Plan Stock which reflects the
performance of his employer at the time the employee earned the annual bonus.
 
    An employee will receive an amount equal to his vested deferred compensation
account balance when he terminates employment with the Company and all of its
affiliates, provided, however, that an employee may elect to receive all or a
portion of his deferred annual bonus, any related vested Employer match awards
and all deemed investment earnings on such amounts at an earlier date if (i)
such election is made at the time the employee elects to defer the bonus amount
and (ii) such earlier date is at least two years after the date of his deferral
election. In addition, the Committee may approve a distribution of all or a
portion of an employee's vested deferred compensation account in the event of an
unforeseeable emergency causing severe financial hardship. Amounts credited to
an employee's deferred compensation account under the Plan are not transferable
by the award recipient other than (a) pursuant to a beneficiary designation
effective on the award recipient's death or (b) pursuant to a court order
entered in connection with a dissolution of marriage or child support. Subject
to the change in control provisions of the Plan and unless otherwise specified
in the agreement with respect to an Employer match award, (i) in the event of a
termination of employment by reason of disability, retirement after age 65,
resignation with prior consent of the board of directors of the award
recipient's employer or death, any Employer match award will become vested and
(ii) in the event of a termination of employment for any other reason, any
unvested Employer match award will be forfeited. All Employer match awards will
become fully vested upon certain changes of control of the Company.
 
FEDERAL INCOME TAX CONSEQUENCES
 
    The following is a brief summary of the U.S. federal income tax consequences
of awards made under the Plan.
 
    STOCK OPTIONS.  An award recipient will not recognize any income upon the
grant of a stock option. An award recipient will recognize compensation taxable
as ordinary income (and subject to income tax withholding) upon exercise of a
nonqualified stock option equal to the excess of the fair market value of the
shares purchased over
 
                                     -130-
<PAGE>
their exercise price, and the Company will be entitled to a corresponding
deduction. An award recipient will not recognize income (except for purposes of
the alternative minimum tax) upon exercise of an ISO. If the shares acquired by
exercise of an ISO are held for the longer of two years from the date the option
was granted and one year from the date the shares were transferred, any gain or
loss arising from a subsequent disposition of such shares will be taxed as
long-term capital gain or loss, and the Company will not be entitled to any
deduction. If, however, such shares are disposed of within such two or one year
periods, then in the year of such disposition the award recipient generally will
recognize compensation taxable as ordinary income equal to the excess of the
lesser of (i) the amount realized upon such disposition and (ii) the fair market
value of such shares on the date of exercise over the exercise price, and the
Company will be entitled to a corresponding deduction, except to the extent the
limit of Section 162(m) of the Code applies.
 
    SARS.  An award recipient will not recognize any taxable income upon the
grant of an SAR. An award recipient will recognize compensation taxable as
ordinary income (and subject to income tax withholding) upon exercise of an SAR
equal to the fair market value of any unrestricted shares of Plan Stock
delivered and the amount of cash paid by the Company upon such exercise, and the
Company will be entitled to a corresponding deduction, except to the extent the
limit of Section 162(m) of the Code applies. If restricted stock is delivered
upon exercise of an SAR, the tax consequences associated with such restricted
stock shall be determined in accordance with the section below titled
"Restricted Stock".
 
    BONUS STOCK.  An award recipient will recognize compensation taxable as
ordinary income (and subject to income tax withholding) in respect of an award
of shares of bonus stock at the time such shares are awarded in an amount equal
to the then fair market value of such shares and the Company will be entitled to
a corresponding deduction, except to the extent the limit of Section 162(m) of
the Code applies.
 
    RESTRICTED STOCK.  An award recipient will not recognize taxable income at
the time of an award of shares of restricted stock, and the Company will not be
entitled to a tax deduction at such time, unless the award recipient makes an
election to be taxed at the time restricted stock is granted. If such election
is made, the award recipient will recognize compensation taxable as ordinary
income at the time of the grant equal to the excess of the fair market value of
the shares at such time over the amount, if any, paid for such shares. If such
election is not made, the award recipient will recognize compensation taxable as
ordinary income at the time the restrictions lapse in an amount equal to the
excess of the fair market value of the shares at such time over the amount, if
any, paid for such shares. The Company is entitled to a corresponding deduction
at the time the ordinary income is recognized by the award recipient, except to
the extent the limit of Section 162(m) of the Code applies. In addition, an
award recipient receiving dividends with respect to restricted stock for which
the above-described election has not been made and prior to the time the
restrictions lapse will recognize taxable compensation (subject to income tax
withholding), rather than dividend income, in an amount equal to the dividends
paid, and the Company will be entitled to a corresponding deduction, except to
the extent the limit of Section 162(m) of the Code applies.
 
    PERFORMANCE SHARES.  An award recipient will not recognize taxable income
upon the grant of performance shares and the Company will not be entitled to a
tax deduction at such time. Upon the settlement of performance shares in the
form of unrestricted shares of Plan Stock or cash or a combination of both, the
award recipient will recognize compensation taxable as ordinary income (and
subject to income tax withholding) in an amount equal to the fair market value
of any shares delivered and any cash paid by the Company, and the Company will
be entitled to a corresponding deduction, except to the extent the limit of
Section 162(m) of the Code applies. Upon the settlement of performance shares in
the form of restricted stock, the tax consequences associated with such
restricted stock shall be determined in accordance with the immediately
preceding section titled "Restricted Stock".
 
    DEFERRAL OF ANNUAL BONUS AMOUNT AND EMPLOYER MATCH AWARD.  An award
recipient will not recognize taxable income (i) on any annual bonus amount which
he elects not to receive currently by deferring such amount into a deferred
compensation account or (ii) upon the grant of an Employer match award, and the
Company will not be entitled to a tax deduction at such time. At the time the
award recipient receive a distribution from his deferred compensation account,
the award recipient will recognize the distributed amount as compensation
taxable as ordinary income (and subject to income tax withholding), and the
Company will be entitled to a corresponding deduction, except to the extent the
limit of Section 162(m) of the Code applies.
 
    AWARDS GRANTED TO EXECUTIVES, EMPLOYEES AND EMPLOYEE GROUPS.  No awards have
been made under the Plan. It is anticipated that nonqualified stock option
awards will be granted in 1998 to certain executives and employees of the
Company based on the achievement of certain individual performance measures in
1997. It is also anticipated that Employer match awards will be made to
executives' and employees' deferred compensation accounts as described above.
 
                                     -131-
<PAGE>
        BENEFICIAL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
SECURITY OWNERSHIP OF MANAGEMENT
 
    The following table sets forth at December 31, 1997, the number of Common
Shares and Series A Common Shares beneficially owned, and the percentage of the
outstanding shares of each such class so owned by each director and nominee for
director of the Company, by the principal executive officer and the other four
most highly compensated executive officers and by all directors and executive
officers as a group.
 
<TABLE>
<CAPTION>
                                                                                         AMOUNT AND
                                                                                          NATURE OF
                NAME OF INDIVIDUAL OR                                                    BENEFICIAL    PERCENT OF     PERCENT OF
              NUMBER OF PERSONS IN GROUP                        TITLE OF CLASS          OWNERSHIP(1)      CLASS      VOTING POWER
- ------------------------------------------------------  ------------------------------  -------------  -----------  ---------------
<S>                                                     <C>                             <C>            <C>          <C>
LeRoy T. Carlson, Jr.,
Walter C.D. Carlson,
Letitia G.C. Carlson,
Donald C. Nebergall and
Melanie J. Heald(2)...................................          Series A Common Shares     6,337,187         91.4%          51.4%
 
LeRoy T. Carlson, Jr.,
C. Theodore Herbert and
Michael G. Hron(3)....................................  Common Shares                        148,876        *              *
                                                                Series A Common Shares         1,008        *              *
 
LeRoy T. Carlson, Jr.,
C. Theodore Herbert and
Michael G. Hron(4)....................................  Common Shares                        142,575        *              *
 
LeRoy T. Carlson(5)...................................  Common Shares                         62,407        *              *
                                                                Series A Common Shares        51,975        *              *
 
LeRoy T. Carlson, Jr. (6)(12).........................  Common Shares                        157,760        *              *
 
Walter C.D. Carlson(7)................................  Common Shares                            405        *              *
 
Letitia G.C. Carlson(8)...............................  Common Shares                            470        *              *
 
Murray L. Swanson(9)(12)..............................  Common Shares                         47,324        *              *
                                                                Series A Common Shares         2,506        *              *
 
Rudolph E. Hornacek(10)...............................  Common Shares                         22,410        *              *
                                                                Series A Common Shares         1,669        *              *
 
James Barr III(12)....................................  Common Shares                         19,958        *              *
 
Donald C. Nebergall(11)...............................  Common Shares                          1,463        *              *
 
Donald R. Brown(9)....................................  Common Shares                          4,001        *              *
                                                                Series A Common Shares         4,735        *              *
 
Herbert S. Wander.....................................  Common Shares                            334        *              *
 
George W. Off.........................................  Common Shares                          1,127        *              *
 
Martin L. Solomon.....................................  Common Shares                         15,000        *              *
 
Kevin A. Mundt........................................                --                     --            --             --
 
H. Donald Nelson......................................  Common Shares                          4,098        *              *
                                                                Series A Common Shares         5,308        *              *
 
Donald W. Warkentin(12)...............................  Common Shares                         29,566        *              *
 
Terrence T. Sullivan..................................                --                     --            --             --
 
All directors, director nominee and executive officers
as a group (25 persons)(12)...........................  Common Shares                        861,754          1.6%         *
                                                                Series A Common Shares     6,424,580         92.6%          52.1%
</TABLE>
 
- ------------
 
*   Less than 1%
 
(1) The nature of beneficial ownership for shares in this column is sole voting
    and investment power, except as otherwise set forth in these footnotes.
 
                                     -132-
<PAGE>
(2) The shares listed are held by the persons named as trustees under a voting
    trust which expires June 30, 2009, created to facilitate longstanding
    relationships among the trust certificate holders. Under the terms of the
    voting trust, the trustees hold and vote the Series A Common Shares held in
    the trust. If the voting trust were terminated, the following persons would
    each be deemed to own beneficially more than 5% of the outstanding Series A
    Common Shares: Margaret D. Carlson (wife of LeRoy T. Carlson), LeRoy T.
    Carlson, Jr., Walter C.D. Carlson, Prudence E. Carlson, Letitia G.C. Carlson
    (children of LeRoy T. Carlson and Margaret D. Carlson) and Donald C.
    Nebergall, as trustee under certain trusts for the benefit of the heirs of
    LeRoy T. and Margaret D. Carlson and an educational institution.
 
(3) Voting and investment control is shared by the persons named as members of
    the investment management committee of the Telephone and Data Systems, Inc.
    Employees' Pension Trust I and the Wireless Companies' Pension Plan. Such
    members disclaim beneficial ownership of such shares, which are held for the
    benefit of plan participants.
 
(4) Voting and investment control with respect to Company-match shares is shared
    by the persons named as members of the investment management committee of
    the Telephone and Data Systems, Inc. Tax-Deferred Savings Trust. Does not
    include 55,125 shares acquired by trust employee contributions for which
    voting and investment control is passed-through to plan participants.
 
(5) Includes 51,975 Series A Common Shares held by Mr. Carlson's wife. Mr.
    Carlson disclaims beneficial ownership of such shares. Does not include
    252,668 Series A Common Shares held for the benefit of LeRoy T. Carlson,
    630,525 Series A Common Shares held for the benefit of Mr. Carlson's wife or
    50,526 Series A Common Shares held for the benefit of certain grandchildren
    of Mr. Carlson (an aggregate of 933,719 shares, or 13.5% of class) in the
    voting trust described in footnote (2). Beneficial ownership is disclaimed
    as to Series A Common Shares held for the benefit of his wife and
    grandchildren in such voting trust.
 
(6) Does not include 1,068,186 Series A Common Shares (15.4% of class) held in
    the voting trust described in footnote (2), of which 1,037,084 shares are
    held for the benefit of LeRoy T. Carlson, Jr. Beneficial ownership is
    disclaimed with respect to an aggregate of 31,102 Series A Common Shares
    held for the benefit of his wife, his children and others in such voting
    trust.
 
(7) Does not include 1,087,366 Series A Common Shares (15.7% of class) held in
    the voting trust described in footnote (2), of which 1,058,143 shares are
    held for the benefit of Walter C.D. Carlson. Beneficial ownership is
    disclaimed with respect to an aggregate of 29,223 Series A Common Shares
    held for the benefit of his wife and children in such voting trust.
 
(8) Does not include 1,070,127 Series A Common Shares (15.4% of class) held in
    the voting trust described in footnote (2), of which 1,061,477 shares are
    held for the benefit of Letitia G.C. Carlson. Beneficial ownership is
    disclaimed with respect to an aggregate of 8,650 Series A Common Shares held
    for the benefit of her husband and child in such voting trust.
 
(9) Includes shares as to which voting and/or investment power is shared, and/or
    shares held by spouse and/or children.
 
(10) Does not include Series A Common Shares held as custodian for his children,
    for which beneficial ownership is disclaimed.
 
(11) Does not include 641,540 Series A Common Shares (9.2% of class) held as
    trustee under trusts for the benefit of the heirs of LeRoy T. and Margaret
    D. Carlson and an educational institution, or 31 Series A Common Shares held
    for the benefit of Donald C. Nebergall, which are included in the voting
    trust described in footnote (2).
 
(12) Includes the following number of Common Shares that may be purchased
    pursuant to stock options and/or stock appreciation rights which are
    currently exercisable or exercisable within 60 days: Mr. LeRoy T. Carlson,
    55,978 shares; Mr. LeRoy T. Carlson, Jr., 152,297 shares; Mr. Swanson,
    28,541 shares; Mr. Barr, 16,000 shares; Mr. Hornacek, 14,551 shares; Mr.
    Warkentin, 29,026 shares; all other executive officers, 151,508 shares; and
    all directors and officers as a group, 431,901 shares.
 
                                     -133-
<PAGE>
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
 
    In addition to persons listed in the preceding table and the footnotes
thereto, the following table sets forth as of December 31, 1997, information
regarding each person who is known to the Company to beneficially own more than
5% of any class of voting securities of TDS, based on publicly available
information and the Company's stock records as of such date. The nature of
beneficial ownership in this table is sole voting and investment power except as
otherwise set forth in footnotes thereto.
 
<TABLE>
<CAPTION>
 SHAREHOLDER'S NAME AND                              SHARES OF    PERCENT OF     PERCENT OF
         ADDRESS               TITLE OF CLASS       CLASS OWNED      CLASS      VOTING POWER
- -------------------------  ----------------------  -------------  -----------  ---------------
<S>                        <C>                     <C>            <C>          <C>
The Equitable Companies
 Inc.(1)
 787 Seventh Avenue
 New York, New York 10019           Common Shares     10,988,100        20.5%           8.9%
Franklin Mutual Advisers,
 Inc. (2)
 51 John F. Kennedy
 Parkway
 Short Hills, New Jersey
 07078                              Common Shares      5,279,200         9.8%           4.3%
William and Betty
 McDaniel
 160 Stowell Road
 Salkum, Washington 98582        Preferred Shares         46,666        14.4%         *
Bennet R. Miller
 1212 Wea Avenue
 Lafayette, Indiana 47905        Preferred Shares         30,000         9.2%         *
The Peterson Revocable
 Living Trust
 Kenneth M. & Audrey M.
 Peterson, Trustees
 108 Avocado Lane
 Weslaco, Texas 78596            Preferred Shares         20,637         6.4%         *
Roland G. and Bette B.
 Nehring
 5253 North Dromedary
 Road
 Phoenix, Arizona 85018          Preferred Shares         20,012         6.2%         *
</TABLE>
 
- ------------
 
*   Less than 1%
 
(1) Based on the most recent Schedule 13G (Amendment No. 11) filed with the SEC.
    Includes shares held by the following affiliates: The Equitable Life
    Assurance Society of the United States--4,176,200 shares; Alliance Capital
    Management, L.P.--6,782,543 shares; Wood, Struthers & Winthrop Management
    Corp.--28,976 shares; and Donaldson Lufkin & Jenrette Securities
    Corporation--381 shares. In such Schedule 13G, Equitable reported sole
    voting power with respect to 5,644,753 shares, shared voting power with
    respect to 5,255,600 shares, sole dispositive power with respect to
    10,987,719 shares and shared dispositive power with respect to 381 shares.
    Alpha Assurance I.A.R.D. Mutuelle, Alpha Assurances Vie Mutuelle, AXA
    Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, Uni Europe
    Assurance Mutuelle and AXA, corporations organized under the laws of France,
    are affiliates of The Equitable Companies, Inc.
 
(2) Based on the most recent Schedule 13D filed with the SEC (Amendment No. 4).
    Such Schedule 13D reports that Franklin Mutual Advisers, Inc. exercised sole
    voting and investment power with respect to all such shares. Such Schedule
    13D is also filed on behalf of Franklin Resources, Inc., the parent holding
    company of Franklin Mutual Advisers, Inc., and by Charles B. Johnson and
    Rupert H. Johnson, Jr., principal shareholders of such parent holding
    company.
 
                                     -134-
<PAGE>
                             SHAREHOLDER PROPOSALS
 
    Proposals of shareholders intended to be presented at the 1998 Special
Meeting of Shareholders were required to have been received by the Company at
its principal executive offices not later than December 19, 1997 for inclusion
in the Company's proxy statement and form of proxy relating to that meeting.
 
                            SOLICITATION OF PROXIES
 
    Your proxy is solicited by the Board of Directors and its agents and the
cost of solicitation will be paid by the Company. Officers, directors and
regular employees of the Company, acting on its behalf, may also solicit proxies
by telephone, telegraph or personal interview. The Company has also retained
MacKenzie Partners, Inc. to assist in the solicitation of proxies for a fee of
$25,000 plus out-of-pocket expenses. The Company will, at its expense, request
brokers and other custodians, nominees and fiduciaries to forward proxy
soliciting material to the beneficial owners of shares held of record by such
persons.
 
    The Company anticipates that certain employees of the Financial Advisors may
communicate in person, by telephone or otherwise with certain institutions or
other persons who are shareholders or representatives of shareholders of the
Company for the purpose of assisting in the solicitation of proxies by the Board
of Directors. The Financial Advisors will not receive any fees for or in
connection with such solicitation apart from the fees they are otherwise
entitled to receive as described above.
 
                                    EXPENSES
 
    The cost of adopting and implementing the Tracking Stock Proposal is
estimated to be approximately $7,000,000, and such costs have been or will be
charged against TDS's pre-tax earnings. The costs include the fees and expenses
of the Financial Advisors, MacKenzie Partners, Inc., legal fees, AMEX listing
fees, transfer agent fees, printing costs, stock certificate engraving, mailing
costs, and FCC and state filing fees and taxes. The costs do not include up to
$3,000,000 in contingent fees which may be payable to the Financial Advisors.
 
                                    EXPERTS
 
    The audited consolidated financial statements of TDS and the audited
financial statements of each of the Cellular Group, the Telecom Group, the
Aerial Group and the TDS Group included in this Proxy Statement/ Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports included herein. The financial statements referred to
above have been included in reliance upon the authority of such firm as an
expert in accounting and auditing in giving said reports.
 
                                 LEGAL MATTERS
 
    Certain matters of Delaware law relating to the legality of the shares of
common stock of TDS Delaware and certain United States federal income taxation
matters will be passed upon by Sidley & Austin, Chicago. Walter C.D. Carlson, a
director of TDS and a beneficiary and trustee of the voting trust which controls
TDS, is a partner of Sidley & Austin. Michael G. Hron and William S. DeCarlo,
the Secretary and Assistant Secretary of TDS and certain TDS subsidiaries,
respectively, and Stephen P. Fitzell and Sherry S. Treston, the Secretary and
Assistant Secretary of certain TDS subsidiaries, respectively, are partners of
Sidley & Austin.
 
                                 OTHER BUSINESS
 
    It is not anticipated that any action will be asked of the shareholders
other than that set forth above, but if other matters properly are brought
before the Special Meeting, the persons named in the proxy will vote in
accordance with their best judgment.
 
                                          By order of the Board of Directors
 
                                                   [SIGNATURE]
 
                                          Michael G. Hron
                                          SECRETARY
 
   ALL SHAREHOLDERS ARE URGED TO SIGN, DATE AND MAIL THEIR PROXIES PROMPTLY.
 
                                     -135-
<PAGE>
                               INDEX TO EXHIBITS
 
<TABLE>
<S>           <C>        <C>                                                                              <C>
EXHIBIT A            --  Agreement and Plan of Merger...................................................        A-1
EXHIBIT B            --  Proposed Restated Certificate of Incorporation of TDS Delaware.................        B-1
EXHIBIT C-1          --  Opinion of Credit Suisse First Boston..........................................       C1-1
EXHIBIT C-2          --  Opinion of Salomon Smith Barney................................................       C2-1
EXHIBIT D            --  1998 Long-Term Incentive Plan..................................................        D-1
EXHIBIT E            --  Dissenters' Rights Under Iowa Law..............................................        E-1
EXHIBIT F            --  Illustration of Certain Terms..................................................        F-1
EXHIBIT G            --  Index of Certain Defined Terms.................................................        G-1
</TABLE>
 
                                INDEX TO ANNEXES
 
<TABLE>
<S>           <C>        <C>                                                                              <C>
ANNEX I              --  THE COMPANY
                         Description of the Company's Business..........................................        I-1
                         Management's Discussion and Analysis for Three Years Ended December 31, 1997...       I-39
                         Consolidated Financial Statements for Three Years Ended December 31, 1997......       I-58
 
ANNEX II             --  THE CELLULAR GROUP
                         Description of Cellular Business...............................................       II-1
                         Management's Discussion and Analysis for Three Years Ended December 31, 1997...      II-19
                         Financial Statements for Three Years Ended December 31, 1997...................      II-30
 
ANNEX III            --  THE TELECOM GROUP
                         Description of Telecom Business................................................      III-1
                         Management's Discussion and Analysis for Three Years Ended December 31, 1997...     III-14
                         Financial Statements for Three Years Ended December 31, 1997...................     III-22
 
ANNEX IV             --  THE AERIAL GROUP
                         Description of Aerial Business.................................................       IV-1
                         Management's Discussion and Analysis for Three Years Ended December 31, 1997...      IV-10
                         Financial Statements for Three Years Ended December 31, 1997...................      IV-16
 
ANNEX V              --  THE TDS GROUP
                         Description of TDS Group.......................................................        V-1
                         Management's Discussion and Analysis for Three Years Ended December 31, 1997...        V-8
                         Financial Statements for Three Years Ended December 31, 1997...................       V-16
</TABLE>
 
                                     -136-
<PAGE>
                                                                       EXHIBIT A
 
                          AGREEMENT AND PLAN OF MERGER
 
    This Agreement and Plan of Merger, dated as of March 6, 1998 (the "Merger
Agreement"), between Telephone and Data Systems, Inc., an Iowa corporation ("TDS
Iowa"), and Telephone and Data Systems, Inc., a Delaware corporation ("TDS
Delaware"), (collectively, the "Constituent Corporations");
 
                              W I T N E S S E T H:
 
    WHEREAS, the Board of Directors of each of the Constituent Corporations
deems it advisable and in the best interests of such corporation and its
shareholders that TDS Iowa be merged with and into TDS Delaware, with TDS
Delaware being the surviving corporation (the "Merger"); and, except as set
forth herein, that in such Merger all outstanding shares of capital stock of TDS
Iowa be converted into corresponding shares of capital stock of TDS Delaware as
hereinafter provided; and
 
    WHEREAS, the Board of Directors of each of the Constituent Corporations has
approved this Merger Agreement;
 
    NOW, THEREFORE, in consideration of the premises and of mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
 
                                   ARTICLE I
                                   THE MERGER
 
    SECTION 1.1  The effective time of the Merger (the "Effective Time") shall
occur at the latest of (i) the time and date that a certificate of merger is
duly filed with the Secretary of State of the State of Delaware with respect to
the Merger or such later date and time as is set forth therein and (ii) the time
and date that articles of merger are duly filed with the Secretary of State of
the State of Iowa with respect to the Merger or such later date and time as is
set forth herein.
 
    SECTION 1.2  At the Effective Time, TDS Iowa shall be merged with and into
TDS Delaware, with TDS Delaware being the surviving corporation of the Merger
(the "Surviving Corporation"). At the Effective Time, the corporate existence of
TDS Iowa shall cease and TDS Delaware, as the Surviving Corporation, shall
succeed to all the business, properties, assets and liabilities of TDS Iowa and
TDS Delaware. The Merger shall have the effect set forth in Section 259(a) of
the Delaware General Corporation Law; the Surviving Corporation shall possess
all assets and property of every description, and every interest in the assets
and property, wherever located, and the rights, privileges, immunities, powers,
franchises and authority, of a public as well as a private nature, of each of
the Constituent Corporations, and all obligations belonging to or due each of
the Constituent Corporations, all of which shall be vested in the Surviving
Corporation without further act or deed; title to any real estate or any
interest in the real estate vested in either Constituent Corporation shall not
revert or in any way be impaired by reason of the Merger; the Surviving
Corporation shall thenceforth be liable for all the pre-existing obligations of
each Constituent Corporation, including liabilities to dissenting shareholders.
 
    SECTION 1.3  From and after the Effective Time, the Certificate of
Incorporation of TDS Delaware, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until altered, amended or repealed in accordance with the laws of the State of
Delaware and the Certificate of Incorporation of the Surviving Corporation.
 
    SECTION 1.4  From and after the Effective Time, the Bylaws of TDS Delaware,
as in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation, until altered, amended or repealed in accordance with the
laws of the State of Delaware and the Certificate of Incorporation and Bylaws of
the Surviving Corporation.
 
    SECTION 1.5  The number of directors in each class of directors of TDS Iowa
immediately prior to the Effective Time shall be the number of directors in each
class of directors of TDS Delaware from and after the Effective Time until such
number is altered in accordance with the laws of the State of Delaware and the
Certificate of Incorporation
 
                                      A-1
<PAGE>
and Bylaws of the Surviving Corporation. The directors of TDS Iowa immediately
prior to the Effective Time shall be the directors of TDS Delaware from and
after the Effective Time and shall hold office from and after the Effective Time
in the same classes as in effect immediately prior to the Effective Time in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until their respective successors are duly appointed or elected and
qualified.
 
    SECTION 1.6  The officers of TDS Iowa immediately prior to the Effective
Time shall be the officers of the Surviving Corporation from and after the
Effective Time and shall hold the same offices from and after the Effective Time
in accordance with the Bylaws of the Surviving Corporation until their
respective successors are duly appointed or elected and qualified.
 
    SECTION 1.7  At the Effective Time, each agreement, option or other right to
acquire shares of capital stock of TDS Iowa outstanding immediately prior to the
Effective Time shall, automatically and without further act of TDS Iowa, TDS
Delaware or any holder thereof, become an agreement, option or such other right
to acquire shares of capital stock of TDS Delaware, as the Surviving
Corporation, subject to the same terms and conditions and the same price
applicable to such agreement, option or other right immediately prior to the
Effective Time.
 
    SECTION 1.8  Except as contemplated herein, the assets, liabilities,
reserves and accounts of TDS Iowa and TDS Delaware shall be taken up or
continued on the books of the Surviving Corporation in the amounts at which such
assets, liabilities, reserves and accounts shall have been carried on the books
of TDS Iowa and TDS Delaware immediately prior to the Effective Time, subject to
such adjustments, and such elimination of intercompany items, as may be
appropriate to give effect to the Merger, including any Dissenting Shares (as
hereinafter defined).
 
    SECTION 1.9  The Surviving Corporation hereby consents to be sued and served
with process in the State of Iowa in any proceeding in the State of Iowa to
enforce against the Surviving Corporation any obligation of TDS Iowa, or to
enforce the rights of a dissenting shareholder of TDS Iowa, and the Surviving
Corporation hereby irrevocably appoints the Secretary of the State of Iowa as
its agent to accept service of process in any such proceeding in the State of
Iowa.
 
                                   ARTICLE II
                              CONVERSION OF SHARES
 
    SECTION 2.1  At the Effective Time, all of the shares of capital stock of
TDS Delaware issued or outstanding immediately prior to the Effective Time
shall, automatically and without further act of TDS Iowa, TDS Delaware or any
holder thereof, be cancelled and cease to exist, without any consideration being
payable therefor.
 
    SECTION 2.2  At the Effective Time and as a result of the Merger, each
issued share of capital stock (including any such share held as a treasury
share) of TDS Iowa shall, automatically and without further act of either of the
Constituent Corporations or of the holder thereof, be extinguished and converted
into corresponding issued shares of capital stock of the Surviving Corporation
as follows:
 
<TABLE>
<CAPTION>
    EACH SHARE OF TDS IOWA          SHARES OF SURVIVING CORPORATION
- -------------------------------  -------------------------------------
<S>                              <C>
Common Share                     One Common Share
Series A Common Share            One Series A Common Share
Series A Preferred Share         One Series A Preferred Share
Series B Preferred Share         One Series B Preferred Share
Series D Preferred Share         One Series D Preferred Share
Series G Preferred Share         One Series G Preferred Share
Series H Preferred Share         One Series H Preferred Share
Series N Preferred Share         One Series N Preferred Share
Series O Preferred Share         One Series O Preferred Share
Series S Preferred Share         One Series S Preferred Share
Series U Preferred Share         One Series U Preferred Share
Series BB Preferred Share        One Series BB Preferred Share
Series DD Preferred Share        One Series DD Preferred Share
Series EE Preferred Share        One Series EE Preferred Share
</TABLE>
 
                                      A-2
<PAGE>
<TABLE>
<CAPTION>
    EACH SHARE OF TDS IOWA          SHARES OF SURVIVING CORPORATION
- -------------------------------  -------------------------------------
<S>                              <C>
Series GG Preferred Share        One Series GG Preferred Share
Series HH Preferred Share        One Series HH Preferred Share
Series II Preferred Share        One Series II Preferred Share
Series JJ Preferred Share        One Series JJ Preferred Share
Series KK Preferred Share        One Series KK Preferred Share
Series LL Preferred Share        One Series LL Preferred Share
Series QQ Preferred Share        One Series QQ Preferred Share
Series RR Preferred Share        One Series RR Preferred Share
Series SS Preferred Share        One Series SS Preferred Share
Series TT Preferred Share        One Series TT Preferred Share
</TABLE>
 
    SECTION 2.3  (a) Each person who, as a result of the Merger holds one or
more certificates which theretofore represented one or more shares of TDS Iowa
shall surrender such certificate to the Surviving Corporation (or to any agent
designated for such purpose by it) and, upon such surrender, the Surviving
Corporation shall, within a reasonable time, deliver to such person in
substitution and exchange therefor one or more certificates evidencing the
number of shares of any class of capital stock of the Surviving Corporation
which such person is entitled to receive in accordance with the terms of this
Merger Agreement in substitution for the number of shares of TDS Iowa
theretofore represented by each certificate so surrendered; PROVIDED, HOWEVER,
that such holders shall not be required to surrender any such certificates until
such certificates would normally be surrendered for transfer on the books of the
issuing corporation in the ordinary course of business.
 
    (b) If there be delivered to the Surviving Corporation (or to an agent
designated for such purpose by it) by any person who is unable to produce a
certificate for surrender to the Surviving Corporation in accordance with
Section 2.3(a):
 
         (i) evidence to the satisfaction of the Surviving Corporation that such
    certificate has been lost, wrongfully taken or destroyed, and
 
        (ii) such security or indemnity as may be requested or required by the
    Surviving Corporation to save it harmless, and
 
        (iii) evidence to the satisfaction of the Surviving Corporation that
    such person was the owner of the shares theretofore represented by each
    certificate claimed by him to be lost, wrongfully taken or destroyed and
    that he is the person who would be entitled to present such certificate for
    exchange pursuant to this Merger Agreement,
 
then the Surviving Corporation, in the absence of actual notice to it that any
shares of TDS Iowa theretofore represented by any such certificate have been
acquired by a bona fide purchaser, may deliver to such person one or more
certificates evidencing the share of the Surviving Corporation, that such person
would have been entitled to receive upon surrender of each such lost, wrongfully
taken or destroyed certificate.
 
    (c) If one or more shares of the Surviving Corporation, issuable as provided
in this Merger Agreement upon surrender of a certificate formerly representing
shares of TDS Iowa, are to be issued to a person other than the person in whose
name such surrendered certificate was registered on the books of TDS Iowa at the
Effective Time, it shall be a condition precedent to the issuance of each such
share of the Surviving Corporation that such surrendered certificate shall be
properly endorsed and otherwise in proper form for transfer and accompanied by
such documents as may be required by the Surviving Corporation, in its
discretion, and that the person surrendering such certificate pay to the
Surviving Corporation (or to any agent designated for such purpose by it) any
transfer or other taxes required by reason of issuance of one or more shares of
the Surviving Corporation to a person other than the registered holder of such
surrendered certificate, or establish to the satisfaction of the Surviving
Corporation (or of such agent) that such tax has been paid or is not payable.
 
    SECTION 2.4  The provisions of Sections 2.1 through 2.3 inclusive shall not
apply to TDS Iowa Shares (the "Dissenting Shares") held by TDS Iowa shareholders
who do not vote such TDS Iowa Shares in favor of the approval and adoption of
this Merger Agreement and the Merger and who deliver a written notice to TDS
Iowa in the manner required by Division XIII of the Iowa Business Corporation
Act, stating the intention to demand payment of
 
                                      A-3
<PAGE>
the fair value of such TDS Iowa Shares if the Merger is effected, and if such
holders of TDS Iowa Shares take all other action required in the manner provided
in Division XIII of the Iowa Business Corporation Act. Such holders shall be
entitled to payment for such TDS Iowa Shares in accordance with the provisions
of Division XIII of the Iowa Business Corporation Act if applicable.
 
                                  ARTICLE III
                     TERMINATION AND ABANDONMENT; AMENDMENT
 
    SECTION 3.1  The Merger contemplated by this Merger Agreement may be
terminated and abandoned by the Board of Directors of either of the Constituent
Corporations at any time prior to the Effective Time and for any reason, without
notice of such action to the other Constituent Corporation, notwithstanding
approval of this Merger Agreement by the stockholders of one or both of the
Constituent Corporations.
 
    SECTION 3.2  From time to time and at any time prior to the Merger Date, the
Merger Agreement may be amended by an agreement in writing executed in the same
manner as this Merger Agreement, after authorization of such action by the
Boards of Directors of the Constituent Corporations, but no such amendment made
subsequent to the adoption of this Merger Agreement by the stockholders of
either of the Constituent Corporations shall (a) alter or change the amount or
kind of shares or other consideration to be received by the stockholders in the
Merger, (b) alter or change any of the terms and conditions of this Merger
Agreement if such alternation or change would adversely affect the holders of
any class or series of stock of such Constituent Corporation or (c) otherwise
violate applicable law.
 
                                   ARTICLE IV
                                 MISCELLANEOUS
 
    SECTION 4.1  EXPENSES OF MERGER. From and after the Effective Time, TDS
Delaware shall pay all unpaid expenses of carrying this Merger Agreement into
effect and accomplishing the Merger.
 
    SECTION 4.2  FURTHER ASSURANCES. If, at any time from and after the
Effective Time, TDS Delaware shall consider or be advised that if any further
assignment or assurance in law is necessary or desirable to vest in TDS Delaware
the title to any property or rights of TDS Iowa, the proper officers of TDS
Delaware are hereby authorized, in the name of TDS Iowa, to execute and make all
such proper assignments and assurances in law, and to do all other things
necessary or proper to vest such property or rights in TDS Delaware and
otherwise to carry out the purposes of this Merger Agreement.
 
    SECTION 4.3  APPROVAL. This Merger Agreement shall be submitted for approval
by the shareholders of TDS Iowa at an annual or special meeting of shareholders.
 
                                      A-4
<PAGE>
    IN WITNESS WHEREOF, this Merger Agreement has been executed on behalf of the
Constituent Corporations by their duly authorized officers on this 6th day of
March, 1998.
 
<TABLE>
<CAPTION>
                                                         TELEPHONE AND DATA SYSTEMS, INC.,
                                                         an Iowa corporation
 
<S>        <C>                                           <C>        <C>
                                                         By:        /s/ LEROY T. CARLSON
                                                                    -------------------------------------------
                                                                    LeRoy T. Carlson
                                                                    Chairman
Attest:
 
By:        /s/ MICHAEL G. HRON
           -------------------------------------------
           Michael G. Hron
           Secretary
 
                                                         TELEPHONE AND DATA SYSTEMS, INC.
                                                         a Delaware corporation
 
                                                         By:        /s/ LEROY T. CARLSON, JR.
                                                                    -------------------------------------------
                                                                    LeRoy T. Carlson, Jr.
                                                                    President
Attest:
 
By:        /s/ MICHAEL G. HRON
           -------------------------------------------
           Michael G. Hron
           Secretary
</TABLE>
 
             SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER BETWEEN
                           TDS IOWA AND TDS DELAWARE
 
                                      A-5
<PAGE>
                                                                       EXHIBIT B
 
                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                        TELEPHONE AND DATA SYSTEMS, INC.
 
    Telephone and Data Systems, Inc., a corporation organized and existing under
and pursuant to the provisions of the General Corporation Law of the State of
Delaware (the "Corporation"), does hereby certify as follows:
 
    FIRST: The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on December 12, 1997.
The Corporation hereby restates and integrates and further amends the
Certificate of Incorporation of the Corporation by revising such document in its
entirety as follows:
 
                                   ARTICLE I
 
    The name of the Corporation is Telephone and Data Systems, Inc.
 
                                   ARTICLE II
 
    The period of its duration is perpetual.
 
                                  ARTICLE III
 
    The Corporation shall have unlimited power to engage in, and to do any
lawful act concerning, any and all lawful business for which corporations may be
organized under the Delaware General Corporation Law above mentioned.
 
                                   ARTICLE IV
 
A.  AUTHORIZED SHARES
 
    1.  Subject to paragraph 3 of this Section A and Section B.1, the aggregate
number of shares of capital stock which the Corporation is authorized to issue
is 475,000,000 shares, and the designation of each class or series, the number
of shares of each class or series and the par value of the shares of each class
or series, are as follows:
 
<TABLE>
<CAPTION>
                CLASS                        SERIES         NO. OF SHARES       PAR VALUE
- -------------------------------------  -------------------  --------------  -----------------
<S>                                    <C>                  <C>             <C>
Common Shares                          None                    100,000,000   $.01 per share
Series A Common Shares                 None                     25,000,000   $.01 per share
Special Common Shares                  None                     20,000,000   $.01 per share
United States Cellular Group Common    None                    140,000,000   $.01 per share
  Shares
TDS Telecommunications Group Common    None                     90,000,000   $.01 par value
  Shares
Aerial Communications Group Common     None                     95,000,000   $.01 par value
  Shares
Undesignated Shares                    See Section B.1           4,673,336(1)  $.01 par value
Preferred Shares                       See below                   326,664(1)  $.01 par value
</TABLE>
 
   THE FOLLOWING SERIES OF PREFERRED SHARES ORIGINALLY ISSUED BY TDS IOWA (AS
DEFINED IN SECTION B.19 OF THIS ARTICLE IV) BEFORE OCTOBER 31, 1981 ARE REFERRED
                      TO AS THE "PRE-81 PREFERRED SHARES"
 
<TABLE>
<CAPTION>
 SERIES    NO. OF SHARES(1)
- ---------  -----------------
<S>        <C>
    A              1,395
    B              1,955
    D                646
    G              1,368
    H              1,188
    N              3,134
</TABLE>
 
- ------------
 
    (1) Based on shares outstanding as of November 30, 1997. To be revised based
on shares prior to filing.
 
                                      B-1
<PAGE>
  THE FOLLOWING SERIES OF PREFERRED SHARES ORIGINALLY ISSUED BY TDS IOWA AFTER
       OCTOBER 31, 1981 ARE REFERRED TO AS THE "POST-81 PREFERRED SHARES"
 
<TABLE>
<CAPTION>
               NO. OF
 SERIES       SHARES(1)
- ---------  ---------------
<S>        <C>
    O                684
    S              1,209
    U              1,100
   BB             18,500
   DD             47,940
   EE              8,667
   GG             35,247
   HH              2,627
   II              3,946
   JJ              1,310
   KK              1,403
   LL              1,487
   QQ              8,368
   RR             29,490
   SS            125,000
   TT             30,000
</TABLE>
 
    2.  As of the effective date of this Restated Certificate of Incorporation,
the series of Preferred Shares set forth above shall have the preferences,
qualifications, limitations, restrictions and rights set forth in this Restated
Certificate of Incorporation, including Attachment I hereto, which Attachment is
incorporated herein and made a part hereof.
 
    3.  The number of authorized Common Shares, Series A Common Shares, Special
Common Shares, Cellular Group Common Shares, Telecom Group Common Shares, Aerial
Group Common Shares or Undesignated Shares may be increased or decreased at any
time or from time-to-time (but not below the number of such shares then
outstanding in such class, respectively) by the affirmative vote of the holders
of a majority of the voting power of shares of capital stock of the Corporation
entitled to vote on all matters (not including shares entitled to vote only in
the election of directors or as otherwise required by law, including Section
242(b)(2) of the DGCL) pursuant to paragraph 8(c) of Section B of this Article
IV.
 
    4.  The Board shall have the authority to designate, prior to the time of
the first issuance of shares of any class or series of Tracking Stock (as
defined in Section B.19), the number of such shares which shall initially
constitute number of shares which shall represent 100% of the equity of the
related Tracking Group, the Number of Shares Issuable with Respect to Retained
Interest and the Number of Shares Issuable with Respect to Inter-Group Interest,
if any.
 
    5.  As of the first date of issuance of any class of Tracking Stock, the
outstanding series of Preferred Shares shall be attributed entirely to the TDS
Group. After the first date of issuance of any class of Tracking Stock, any
series of Undesignated Shares which are designated and issued, as preferred or
common stock, shall be attributed entirely to one Group or among two or more
Groups, as may be determined by the Board, taking into consideration the use of
proceeds from and purposes for such issuance and other factors.
 
    6.  As of the first date of issuance of any class of Tracking Stock, all
Pre-Distribution Convertible Securities (as defined in Section B.19) shall be
attributed entirely to the TDS Group. After the first date of issuance of any
class of Tracking Stock, any Convertible Securities which are issued shall be
attributed entirely to one Group or among two or more Groups, as may be
determined by the Board, taking into consideration the use of proceeds from and
purposes for such issuance and other factors.
 
    7.  As of the first date of issuance of any class of Tracking Stock, any
Committed Acquisition Shares shall be attributed entirely to the TDS Group.
After the first date of issuance of any class of Tracking Stock, any Committed
Acquisition Shares shall be attributed entirely to one Group or among two or
more Groups, as may be determined by the Board, taking into consideration the
use of proceeds from and purposes for such issuance and other factors.
 
    B.  PREFERENCES, QUALIFICATIONS, LIMITATIONS, RESTRICTIONS AND RIGHTS OF
SHARES.  The preferences, qualifications, limitations, restrictions, and the
special or relative rights of the Common, Series A Common, Special
 
- ---------
 
(1) Based on shares outstanding as of November 30, 1997. To be revised based on
    shares prior to filing.
 
                                      B-2
<PAGE>
Common, Cellular Group Common, Telecom Group Common, Aerial Group Common,
Undesignated and Preferred Shares are:
 
    1.  ISSUE OF UNDESIGNATED SHARES IN SERIES.  Authority is hereby vested in
the Board to divide any or all of the Undesignated Shares into one or more
classes or series of common or preferred stock, and to further divide any of
those classes or series, and to fix and determine by resolution as to each class
or series so established:
 
        (a) the designation of such class or series, the number of shares to
    constitute such class or series and par value or stated value thereof;
 
        (b) the rate of dividend and the terms thereof;
 
        (c) the price at and terms and conditions by which shares may be
    redeemed;
 
        (d) the amount payable upon shares in event of voluntary or involuntary
    liquidation;
 
        (e) sinking fund provisions for the redemption or purchase of shares;
 
        (f)  the terms and conditions on which shares may be converted, if the
    shares of any series are issued with the privilege of, or subject to
    mandatory, conversion;
 
        (g) voting rights, if any, but in no event more than ten votes per share
    in connection with any matter; and
 
        (h) such other designations, preferences and relative, participating,
    optional or other special rights, and qualifications or restrictions
    thereof, as shall be stated and expressed in a resolution or resolutions
    providing for the issuance of such stock adopted by the Board. Any of the
    voting powers, designations, preferences, rights and qualifications,
    limitations or restrictions of any such class or series of stock may be made
    dependent upon facts ascertainable outside this Restated Certificate of
    Incorporation or of any amendment thereto, or outside the resolution or
    resolutions providing for the issue of such stock adopted by the Board
    pursuant to the foregoing authority vested in it by this Restated
    Certificate of Incorporation, provided that the manner in which such facts
    shall operate upon the voting powers, designations, preferences, rights and
    qualifications, limitations or restrictions of such class or series is
    clearly and expressly set forth in the resolution or resolutions providing
    for the issue of such stock adopted by the Board. The term "facts" as used
    in this paragraph includes, but is not limited to, the occurrence of any
    event, including a determination or action by any person or body, including
    the Corporation.
 
    2.  DIVIDENDS.
 
        (a) Except as otherwise set forth in Attachment I hereto or as otherwise
    provided in any designation of a class or series of Undesignated Shares at
    the time that such class or series is originally established: (i) the
    holders of Preferred Shares and of each class or series of Undesignated
    Shares which has been designated as preferred stock shall be entitled to
    receive, when and as declared by the Board, dividends at the rate fixed for
    such series, and no more, payable in quarterly installments on the first
    days of March, June, September and December in each year; (ii) dividends on
    all series of Preferred Shares and all classes and series of Undesignated
    Shares which have been designated as preferred stock shall be cumulative
    from and after the respective dates of issuance; (iii) no dividends shall be
    declared on the shares of any series of Preferred Shares or any class or
    series of Undesignated Shares which have been designated as preferred stock
    for any dividend period unless the full dividend for all prior dividend
    periods shall have been declared or shall be declared at the same time upon
    all Preferred Shares, and all classes and series of Undesignated Shares
    which have been designated as preferred stock, outstanding during such prior
    dividend periods; (iv) no dividends shall be declared on the shares of any
    series of Preferred Shares, or any class or series of Undesignated Shares
    which have been designated as preferred stock, unless a dividend for the
    same period shall be declared at the same time upon all series of Preferred
    Shares and all classes and series of Undesignated Shares which have been
    designated as preferred stock, outstanding during said period, in like
    proportion to the dividend rate upon such shares; and (v) no dividends shall
    be paid on any shares of Common Stock unless full dividends on all series of
    Preferred Shares, and all classes and series of Undesignated Shares which
    have been designated as preferred stock, for all past dividend periods and
    for the current dividend period, shall have been declared and the
    Corporation shall have paid such dividends or shall have set apart a sum
    sufficient for the payment thereof.
 
        (b) Dividends on any class or series of Common Stock may be declared and
    paid only out of the lesser of (i) assets of the Company legally available
    therefor and (ii) the Available Dividend Amount (as defined in paragraph 19
    of this Section B) with respect to such class or series. Subject to the
    foregoing, the Board shall have the authority to declare and pay dividends
    on all or less than all of the classes or series of Common Stock
 
                                      B-3
<PAGE>
    in equal or unequal amounts, notwithstanding the amount of assets available
    for dividends on any class or series, the respective voting and liquidation
    rights of any class or series, the amount of prior dividends declared on any
    class or series or any other factor; PROVIDED, HOWEVER, that no dividends
    shall be declared or paid on the Series A Common Shares unless the same, or
    greater, dividends, on a per share basis, are declared and paid at the same
    time on the Common Shares and the Special Common Shares, and if dividends
    shall be declared or paid on the Common Shares or the Special Common Shares,
    the same dividends, on a per share basis, shall be declared and paid at the
    same time on the Special Common Shares and the Common Shares, respectively,
    except, in each case, as otherwise expressly provided in this Restated
    Certificate of the Corporation.
 
    3.  SHARE DISTRIBUTIONS.  Notwithstanding anything to the contrary herein,
if at any time a dividend or other distribution is to be paid in shares of
Common Stock on shares of Common Stock, such dividend or other distribution
shall be paid as only as follows (including, in each case, Convertible
Securities which are exercisable for or convertible or exchangeable into such
shares to be distributed):
 
        (a) Common Shares may be distributed on an equal per share basis to
    holders of Common Shares, Series A Common Shares may be distributed on an
    equal per share basis to holders of Series A Common Shares, and Special
    Common Shares may be distributed on an equal per share basis to holders of
    Special Common Shares (if any are then outstanding);
 
        (b) Common Shares may be distributed on an equal per share basis to
    holders of Common Shares and Series A Common Shares, and Special Common
    Shares may be distributed on an equal per share basis to holders of Special
    Common Shares (if any are then outstanding);
 
        (c) Series A Common Shares may be distributed on an equal per share
    basis to holders of Common Shares and Series A Common Shares, and Special
    Common Shares may be distributed on an equal per share basis to holders of
    Special Common Shares (if any are then outstanding);
 
        (d) Special Common Shares may be distributed on an equal per share basis
    to holders of Common Shares, Series A Common Shares and Special Common
    Shares (if any are then outstanding);
 
        (e) shares of a class or series of Tracking Stock may be distributed on
    an equal per share basis to holders of that class or series of Tracking
    Stock;
 
        (f)  shares of a new class or series of capital stock which is intended
    to represent a subdivision or new business of a Group, or any assets
    attributed by the Board to such Group, may be distributed on an equal per
    share basis to holders of common stock representing an interest in such
    Group;
 
        (g) shares of any class or series of Tracking Stock of a Tracking Group
    may be distributed on an equal per share basis to holders of Common Shares,
    Series A Common Shares and Special Common Shares (if any are then
    outstanding), but only if the sum of (i) the number of shares of such class
    or series of Tracking Stock to be so distributed (or the number of such
    shares which would be issuable at such time upon the exercise, conversion or
    exchange of any Convertible Securities to be so distributed) and (ii) the
    Number of Shares Issuable to Third Parties related to such class or series
    of Tracking Stock which are then are attributable to the TDS Group, is less
    than or equal to the Number of Shares Issuable with Respect to Retained
    Interest in such Tracking Group; and
 
        (h) shares of any class or series of Tracking Stock of a Tracking Group
    (for this purpose, the "Issuer Group"), may be distributed on an equal per
    share basis to holders of a class or series of Tracking Stock of any other
    Tracking Group (for this purpose, the "Investor Group"), but only if the sum
    of (i) the number of shares of such class or series of Tracking Stock of the
    Issuer Group to be so distributed (or the number of such shares which would
    be issuable at such time upon the exercise, conversion or exchange of any
    Convertible Securities to be so distributed) and (ii) the Number of Shares
    Issuable to Third Parties related to the class or series of Tracking Stock
    of the Issuer Group which are then are attributable to the Investor Group,
    is less than or equal to the Number of Shares Issuable with Respect to
    Inter-Group Interest in the Issuer Group by the Investor Group.
 
    In the case of any such share dividend the Board may permit the holders of
Common Stock to elect to receive cash in lieu of shares of stock. In any
dividend or distribution of Common Stock, the same number of shares of Common
Stock on a per share basis shall be distributed with respect to Common Shares,
Series A Common Shares and Special Common Shares.
 
    4.  DISTRIBUTION OF TDS GROUP SUBSIDIARY IN DIVIDEND.  Subject to paragraph
2(b) of Section B of Article IV, if at any time a distribution is to be made of
shares of capital stock of a subsidiary included in the TDS Group (for this
 
                                      B-4
<PAGE>
purpose, a "TDS Group Subsidiary"), such TDS Group Subsidiary shares may only be
distributed to the holders of Series A Common Shares, Common Shares and any
issued Special Common Shares and, in such event, the Board shall, to the extent
practicable, distribute TDS Group Subsidiary shares corresponding to Series A
Common Shares to the holders of Series A Common Shares, distribute TDS Group
Subsidiary shares corresponding to Common Shares to the holders of Common
Shares, and distribute TDS Group Subsidiary shares corresponding to Special
Common Shares to the holders of Special Common Shares, if any are then
outstanding; PROVIDED, HOWEVER, that the same number of shares of common stock
of the TDS Group Subsidiary must be distributed with respect to each Series A
Common Share, Common Share and any issued Special Common Share. If practicable,
the Board shall recapitalize such TDS Group Subsidiary through an amendment to
its charter or otherwise, such that the relative rights, limitations and
preferences of the shares of capital stock of such TDS Group Subsidiary
substantially correspond to the Series A Common Shares, Common Shares and
Special Common Shares of the Corporation and their relative rights, limitations
and preferences, as may be determined to be necessary or appropriate in the sole
discretion of the Board, in order to permit the distribution to be effected in
the foregoing manner; PROVIDED, HOWEVER, that if Special Common Shares are then
outstanding and the TDS Group Subsidiary has or will have shares corresponding
to Series A Common Shares and Common Shares but does not and will not have
shares corresponding to Special Common Shares and the Board determines that it
is impracticable to recapitalize the subsidiary as provided in this sentence to
create shares corresponding to Special Common Shares, the Board shall distribute
TDS Group Subsidiary shares corresponding to Common Shares of such TDS Group
Subsidiary to the holders of Special Common Shares.
 
    5.  DISTRIBUTION OF TRACKING GROUP SUBSIDIARY IN DIVIDEND.  Subject to
paragraph 2(b) of Section B of Article IV, if at any time a distribution is to
be made of shares of capital stock of a subsidiary (for this purpose, a Non-
Qualifying Subsidiary") included in a Tracking Group (for this purpose, the
"Distributing Group"), other than a Qualifying Subsidiary or Qualifying
Subsidiaries holding all of the assets and liabilities of a Tracking Group, and
if there is a Retained Interest in such Distributing Group, the Board shall, to
the extent practicable, distribute Non-Qualifying Subsidiary shares
corresponding to Special Common Shares to the holders of Tracking Stock of such
Distributing Group equal to the product of the Outstanding Interest Fraction
multiplied by the number of all of the outstanding shares of the Non-Qualifying
Subsidiary owned directly or indirectly by the Corporation, on a pro rata basis.
The Board, in its sole discretion, may cause the Corporation to retain the
balance of the outstanding shares of the common stock of the Non-Qualifying
Subsidiaries in respect of the Retained Interest and any Inter-Group Interest in
the Distributing Group or, in the sole discretion of the Board, Non-Qualifying
Subsidiary shares may be distributed to the holders of TDS Group Shares or
shares of any other Tracking Stock as follows: (a) if the Board determines to
distribute Non-Qualifying Subsidiary shares to the holders of TDS Group Shares
with respect to the Retained Interest, it shall, to the extent practicable,
distribute Non-Qualifying Subsidiary shares corresponding to Series A Common
Shares to the holders of Series A Common Shares, subsidiary shares corresponding
to Common Shares to the holders of Common Shares, and subsidiary shares
corresponding to Special Common Shares to the holders of Special Common Shares
with respect to any Retained Interest in such Tracking Group, PROVIDED, that the
same number of shares of Non-Qualifying Subsidiary common stock must be
distributed with respect to each Series A Common Share, Common Share and any
issued Special Common Share and (b) if the Board determines to distribute
Non-Qualifying Subsidiary shares to the holders of any class or series of
Tracking Stock of a Tracking Group other than the Distributing Group with
respect to any Inter-Group Interest by such Tracking Group in the Distributing
Group, it must, to the extent practicable, distribute Non-Qualifying Subsidiary
shares corresponding to Special Common Shares to the holders of Tracking Stock
of such other Tracking Group with respect to any such Inter-Group Interest in
the Distributing Group. If practicable, the Board shall recapitalize such
Non-Qualifying Subsidiary through an amendment to its charter or otherwise, such
that the relative rights, limitations and preferences of the shares of capital
stock of the Non-Qualifying Subsidiary substantially correspond to the Series A
Common Shares, Common Shares and Special Common Shares of the Corporation and
their relative rights, limitations and preferences, as may be determined to be
necessary or appropriate in the sole discretion of the Board, in order to permit
the distribution to be effected in the foregoing manner; PROVIDED, that if the
Non-Qualifying Subsidiary has or will have shares corresponding to Series A
Common Shares and Common Shares but does not have and will not have shares
corresponding to Special Common Shares and the Board determines that it is
impracticable to recapitalize such subsidiary as provided in this sentence to
create shares corresponding to Special Common Shares, the Board shall distribute
Non-Qualifying Subsidiary shares corresponding to Common Shares to the holders
of Special Common Shares and to holders of any class of Tracking Stock who would
otherwise be entitled to receive subsidiary shares corresponding to Special
Common Shares.
 
                                      B-5
<PAGE>
    6.  CERTAIN PROVISIONS RELATING TO LIQUIDATION.
 
        (a) Subject to paragraph 6(b) of this Section B, in the event of a
    liquidation, dissolution or winding up of the Corporation, whether voluntary
    or involuntary, after payment or provision for payment of the debts and
    other liabilities of the Corporation and subject to the prior payment in
    full of the preferential amounts to which any class or series of Preferred
    Shares or Undesignated Shares is entitled, the holders of the outstanding
    shares of Common Stock shall be entitled to receive the remaining assets of
    the Corporation, regardless of the Group to which such assets are attributed
    in accordance with this Article IV, divided among the holders of Common
    Stock in accordance with the per share "Liquidation Units" attributable to
    each class of Common Stock. Each Series A Common Share, Common Share and
    Special Common Share is hereby attributed one Liquidation Unit, each
    Cellular Group Common Share is hereby attributed 2.5 Liquidation Units, each
    Telecom Group Common Share is hereby attributed .9 of a Liquidation Unit and
    each Aerial Group Common Share is hereby attributed 1.1 Liquidation Units.
    The Liquidation Unit of each class or series of Common Stock shall be
    adjusted by the Board as appropriate to reflect equitably any subdivision
    (by stock split or otherwise) or combination (by reverse stock split or
    otherwise) of such class of Common Stock or any dividend or other
    distribution of shares or similar transaction with respect to such class of
    Common Stock. Whenever a change in the Liquidation Units with respect to any
    class or series of Common Stock occurs, the Corporation shall prepare and
    file a statement of such change with the Secretary of the Corporation and
    distribute a notice of such change to all holders of shares of such class or
    series of Common Stock, together with a notice of such stock split, reverse
    split, distribution or other transaction requiring such change.
 
        (b) Prior to the distribution of the remaining assets of the Corporation
    as set forth in paragraph 6(a) of this Section B, the Board may redeem all
    shares of Tracking Stock of all Tracking Groups in exchange for shares of a
    Qualifying Subsidiary or Qualifying Subsidiaries holding all of the assets
    and liabilities of the related Tracking Group pursuant to paragraph 13 of
    this Section B.
 
        (c) A consolidation, merger, or reorganization of the Corporation with
    any other corporation or corporations, or a sale of all or substantially all
    of the assets of the Corporation, shall not be considered a dissolution,
    liquidation, or winding up of the Corporation within the meaning of these
    provisions.
 
    7.  PREEMPTIVE RIGHTS.  No holder of shares of any class or series of the
Corporation shall have any preemptive right pursuant to this Restated
Certificate of Incorporation to subscribe for or acquire any unissued or
treasury shares or other securities of the Corporation of the same or any other
class or series, whether such shares or securities be hereby or hereafter
authorized, except that holders of Series A Common Shares shall have a
preemptive right to acquire unissued or treasury Series A Common Shares or
securities convertible into or exchangeable for Series A Common Shares or
carrying a right to subscribe to or acquire Series A Common Shares; PROVIDED,
HOWEVER, that no preemptive right shall exist to acquire any Series A Common
Shares sold otherwise than for cash.
 
    8.  VOTING.
 
        (a) With respect to the election of directors, the holders of (i) Pre-81
    Preferred Shares, (ii) Common Shares, (iii) Special Common Shares, (iv)
    shares of all classes or series of Tracking Stock and (v) any series of
    Undesignated Shares which, at the time such series of Undesignated Shares
    was originally established, provided that the holders of such series shall
    vote in the election of directors together with the holders of Pre-81
    Preferred Shares, Common Shares, Special Common Shares and shares of
    Tracking Stock (for this purpose, the "Public Holders"), voting together as
    one group, shall be entitled to elect at each annual meeting that number of
    directors which (together with all directors whose terms do not expire at
    the time of such meeting and who were previously elected by such holders)
    constitutes 25% of the total number of directors of the Corporation (rounded
    up to the nearest whole number), plus one director, and for this purpose the
    total number of directors of the Corporation shall be determined without
    regard to any director(s) whom the holders of one or more classes or series
    of Undesignated Shares have elected or have the right to elect (without
    regard to this Section B.8), and in such election each holder of Common
    Shares and Special Common Shares shall be entitled to one vote for each
    share of such stock standing in the name of the holder on the books of the
    Corporation, the holders of Tracking Stock shall have the votes set forth in
    paragraph 8(d) of this Section B, the holders of series of Pre-81 Preferred
    Shares shall have the voting rights set forth on Attachment I hereto and the
    holders of any class or series of Undesignated Shares shall have the voting
    rights fixed and determined by the Board at the time such series of
    Undesignated Shares was originally established.
 
        (b) The holders of (i) Post-81 Preferred Shares, (ii) Series A Common
    Shares and (iii) any class or series of Undesignated Shares which, at the
    time such class or series of Undesignated Shares was originally
 
                                      B-6
<PAGE>
    established, provided that the holders of such class or series shall vote in
    the election of directors together with the holders of Post-81 Preferred
    Shares and Series A Common Shares (for this purpose, the "Series A
    Holders"), voting together as one group, shall be entitled to elect at each
    annual meeting that number of directors which (together with all directors
    whose terms do not expire at the time of such meeting and who were
    previously elected by such holders) are not elected by the Public Holders,
    as provided in paragraph 8(a) of this Section B, subject to the rights, if
    any, of the holders of any class or series of Undesignated Shares to elect
    one or more directors (without regard to this Section B.8), and in such
    election each holder of Series A Common Shares shall be entitled to ten
    votes for each share of such stock standing in the name of the holder on the
    books of the Corporation, the holders of series of Post-81 Preferred Shares
    shall have the voting rights set forth on Attachment I hereto and the
    holders of any class or series of Undesignated Shares shall have the voting
    rights fixed and determined by the Board at the time such class or series of
    Undesignated Shares was originally established.
 
        (c) With respect to all matters other than the election of directors,
    each holder of a series of Pre-81 Preferred Shares or Post-81 Preferred
    Shares shall have the voting rights set forth on Attachment I hereto, each
    holder of Common Shares shall be entitled to one vote for each share of such
    stock standing in the name of the holder on the books of the Corporation,
    each holder of Series A Common Shares shall be entitled to ten votes for
    each share of such stock standing in the name of the holder on the books of
    the Corporation and the holders of any class or series of Undesignated
    Shares shall have the voting rights fixed and determined by the Board at the
    time such class or series of Undesignated Shares was originally established.
    Neither the holders of Special Common Shares nor the holders of shares of
    any class of Tracking Stock shall be entitled to vote with respect to any
    matter other than the election of directors as set forth in subparagraph (a)
    of this paragraph 8, unless such holders must vote as required by the DGCL
    or other applicable law or regulation.
 
        (d) Upon the first issuance of shares of any class or series of Tracking
    Stock, each of such shares shall be entitled to one vote per share in the
    election of directors elected by the Public Holders; PROVIDED, HOWEVER, if
    shares of a class of Tracking Stock have been traded on a national
    securities exchange or the Nasdaq Stock Market, or traded in the
    over-the-counter market, for at least 25 Trading Days immediately prior to
    any Adjustment Date (as hereinafter defined), the votes per share which each
    share of a class of Tracking Stock shall have in the election of directors
    at each annual meeting of shareholders pursuant to paragraph 8(a) of this
    Section B shall be equal to the quotient (calculated to three decimal
    places) determined by dividing the Aggregate Votes (as hereinafter defined)
    of such class of Tracking Stock on the Adjustment Date for such annual
    meeting, by the average daily number of outstanding shares of such class of
    Tracking Stock during the Calculation Period (as hereinafter defined) for
    such Adjustment Date. The Aggregate Votes of a class of Tracking Stock on an
    Adjustment Date shall be equal to the product of the Market Capitalization
    Percentage (as hereinafter defined) of such class of Tracking Stock
    multiplied by the Aggregate Public Holder Votes (as hereinafter defined) on
    the Adjustment Date for such annual meeting. The Aggregate Public Holder
    Votes shall be equal to the quotient (calculated to the nearest whole
    number) determined by dividing the sum of the average daily number of
    outstanding Pre-81 Preferred Shares, Common Shares and Special Common Shares
    (the "One-Vote Shares") during the Calculation Period, by the Market
    Capitalization Percentage of the One-Vote Shares. The Market Capitalization
    Percentage of any class of Tracking Stock and of the One-Vote Shares shall
    be equal to the average daily ratio (represented as a percentage calculated
    to three decimal places) of the Market Capitalization of such class of
    Tracking Stock or the aggregate Market Capitalization of the One-Vote
    Shares, as the case may be, to the aggregate Market Capitalization of all
    shares held by the Public Holders, calculated for the twenty-Trading Day
    period (the "Calculation Period") ending ten Trading Days prior to the
    record date for each annual meeting of shareholders (the "Adjustment Date").
    The number of votes per share to which shares of classes of Tracking Stock
    shall be entitled at any time in connection with the election or removal of
    directors by the Public Holders shall be such number of votes per share that
    were determined on the last preceding Adjustment Date relating to an annual
    meeting of shareholders of the Corporation, and such number of votes per
    share to which shares of Tracking Stock shall be entitled shall not be
    changed until the next succeeding Adjustment Date for the next succeeding
    annual meeting of shareholders of the Corporation.
 
        (e) In the event the number of issued and outstanding Series A Common
    Shares at any time falls below 500,000, then with respect to the election of
    directors at the next annual meeting and at each annual meeting thereafter,
    the holders of all outstanding Preferred Shares, Common Shares, Series A
    Common Shares, Special Common Shares, Cellular Group Common Shares, Telecom
    Group Common Shares and Aerial Group Common Shares, and any class or series
    of Undesignated Shares which, at the time such class or series of
    Undesignated Shares was originally established, provided that the holders of
    such class or series shall vote in the election of directors with the Public
    Holders or the Series A Holders, shall be entitled to elect
 
                                      B-7
<PAGE>
all of the directors of the Corporation standing for election at any meeting of
shareholders, subject to the rights, if any, of the holders of one or more
classes or series of Undesignated Shares to elect one or more directors (without
regard to this Section B.8), and in each such election of directors each holder
of Pre-81 Preferred Shares or Post-81 Preferred Shares shall have the voting
rights set forth on Attachment I hereto, each holder of Common Shares and each
holder of Special Common Shares shall be entitled to one vote for each share of
such stock standing in the name of the holder on the books of the Corporation,
each holder of Series A Common Shares shall be entitled to ten votes for each
share of such stock standing in the name of the holder on the books of the
Corporation, the holders of Tracking Stock shall have the votes set forth in
paragraph 8(f) of this Section B and the holders of any class or series of
Undesignated Shares shall have the voting rights fixed and determined by the
Board at the time such class or series of Undesignated Shares was originally
established.
 
        (f)  In the event the number of issued and outstanding Series A Common
    Shares at any time falls below 500,000, the votes per share which each share
    of a class of Tracking Stock shall have in the election of directors at each
    annual meeting of shareholders shall be equal to the quotient (calculated to
    three decimal places) determined by dividing the Adjusted Aggregate Votes
    (as hereinafter defined) of such class of Tracking Stock on the Adjustment
    Date for such annual meeting by the average daily number of outstanding
    shares of such class of Tracking Stock during the Calculation Period for
    such Adjustment Date. The Adjusted Aggregate Votes of a class of Tracking
    Stock on an Adjustment Date shall be equal to the product of the Adjusted
    Market Capitalization Percentage (as hereinafter defined) of such class of
    Tracking Stock multiplied by the Aggregate Director Votes (as hereinafter
    defined) on the Adjustment Date for such annual meeting. The Aggregate
    Director Votes shall be equal to the quotient (calculated to the nearest
    whole number) determined by dividing (i) the sum of (A) the average daily
    number of One-Vote Shares and (B) the product of 10 and the average daily
    number of Series A Common Shares, in each case during the Calculation
    Period, by (ii) the Aggregate Market Capitalization Percentage of the
    One-Vote Shares and the Series A Common Shares. The Aggregate Market
    Capitalization Percentage of the One-Vote Shares and the Series A Common
    Shares shall be equal to the average daily ratio (expressed as a percentage
    calculated to three decimal places) of the aggregate Market Capitalization
    of the One-Vote Shares and the Series A Common Shares to the aggregate
    Market Capitalization of all shares of capital stock which are entitled to
    vote in the election of directors pursuant to paragraph 8(e) of this Section
    B, calculated during the Calculation Period ending on the Adjustment Date
    for an annual meeting. The Adjusted Market Capitalization Percentage of any
    class of Tracking Stock shall be equal to the average daily ratio (expressed
    as a percentage calculated to three decimal places) of the Market
    Capitalization of such class of Tracking Stock to the aggregate Market
    Capitalization of all shares of capital stock which are entitled to vote in
    the election of directors pursuant to paragraph 8(e) of this Section B,
    calculated during the Calculation Period ending on the Adjustment Date for
    an annual meeting. The number of votes per share to which shares of classes
    of Tracking Stock shall be entitled at any time in connection with the
    election or removal of directors shall be such number of votes per share
    that were determined on the last preceding Adjustment Date relating to an
    annual meeting of shareholders of the Corporation, and such number of votes
    per share to which shares of Tracking Stock shall be entitled shall not be
    changed until the next succeeding Adjustment Date for the next succeeding
    annual meeting of shareholders of the Corporation.
 
    9.  CONVERSION AT THE OPTION OF THE HOLDER.  Each outstanding Series A
Common Share shall be convertible into one Common Share or one Special Common
Share at any time at the holder's choice. Any such conversion shall be effected
by the presentation and surrender of the certificates representing the Series A
Common Shares to be converted at the office of the Corporation or at such other
place as may from time to time be designated by the Corporation, in such form
and accompanied by all transfer taxes (or proof of payment thereof), if any, as
shall be required for such transfer, and upon such surrender, the holder of such
stock shall be entitled to receive in exchange therefor certificates for fully
paid and non-assessable Common Shares or Special Common Shares, as the case may
be, of the Corporation at the rate aforesaid, and such holder shall be
registered as the holder of such Common Shares or Special Common Shares, as the
case may be.
 
    10.  DISPOSITION OF ASSETS OF A TRACKING GROUP.
 
        (a) If the Corporation disposes of all or substantially all of the
    properties and assets of a Tracking Group (defined as 80% or more of the
    then current market-value (as determined by the Board) of the properties and
    assets of such Tracking Group as of such date), whether by sale, transfer,
    assignment, merger, consolidation, contribution of assets or stock or
    otherwise (a "Disposition"), in one transaction or a series of related
    transactions with any one or more persons, entities or groups, other than in
    a transaction referred to in the following sentence, the Corporation shall
    take one of the actions listed in paragraph 10(b) of this Section B on or
    prior to the 90th Trading Day following the consummation of a Disposition.
    This requirement shall not apply
 
                                      B-8
<PAGE>
    to a Disposition (i) in connection with the disposition by the Corporation
    of all of the Corporation's properties and assets in one transaction or a
    series of related transactions or in connection with the liquidation,
    dissolution or winding up of the Corporation, (ii) by dividend, other
    distribution or redemption in accordance with any provision described under
    paragraphs 2, 3, 4, 5, 6 or 13 of this Section B, (iii) to any person,
    entity or group which the Corporation, directly or indirectly, after giving
    effect to the Disposition, controls (as determined by the Board) or (iv) in
    connection with a Related Business Transaction. For purposes of this
    paragraph 10, the Tracking Group affected by the Disposition of its assets
    is referred to as the "Affected Tracking Group" and the Tracking Stock of
    such Affected Tracking Group is referred to as the "Affected Tracking
    Stock."
 
        (b) Other than as described in paragraph (a), the Corporation shall take
    one of the following actions in the event of a Disposition:
 
             (i) subject to paragraph 2(b) of this Section B, declare and
       distribute a special dividend in cash, securities or other property
       (other than a dividend or distribution of Common Stock of the
       Corporation) or any combination thereof to the holders of the outstanding
       shares of the Affected Tracking Stock, in an aggregate amount equal to
       the product of the Outstanding Interest Fraction of the Affected Tracking
       Group as of the record date for determining the holders entitled to
       receive such dividend and the Fair Value of the Net Proceeds of such
       Disposition, such dividend to be distributed equally on a share-for-share
       basis to all outstanding shares of the Affected Tracking Stock, except as
       provided in paragraph 2(d) of this Section B;
 
            (ii) provided that there are assets of the Corporation legally
       available therefor and the Available Dividend Amount for the Affected
       Tracking Stock would have been sufficient to pay a dividend in lieu
       thereof as described in subparagraph (i) of this paragraph, then:
 
              (A) if such Disposition involves all (not merely substantially
          all) of the properties and assets of the Affected Tracking Group,
          redeem all outstanding shares of the Affected Tracking Stock in
          exchange for cash, securities or other property (other than Common
          Stock of the Corporation) or any combination thereof on a pro rata
          basis in an aggregate amount equal to the product of the Adjusted
          Outstanding Interest Fraction for the Affected Tracking Group as of
          the date of such complete redemption and the Fair Value of the Net
          Proceeds of such Disposition, such aggregate amount to be allocated on
          a pro rata basis to all outstanding shares of the Affected Tracking
          Stock, except as provided in paragraph 2(d) of this Section B; or
 
              (B) if such Disposition involves substantially all (but not all)
          of the properties and assets of the Affected Tracking Group, apply an
          aggregate amount of cash, securities or other property (other than
          Common Stock of the Corporation) or any combination thereof equal to
          the product of the Affected Tracking Group's Outstanding Interest
          Fraction as of the date shares are selected for redemption and the
          Fair Value of the Net Proceeds of such Disposition to the redemption
          of outstanding shares of the Affected Tracking Stock, such aggregate
          amount to be allocated on a pro rata basis or by lot (except as
          provided in paragraph 2(d) of this Section B) to the shares of the
          Affected Tracking Stock to be redeemed in a manner such that there
          shall be redeemed the number of whole shares of Affected Tracking
          Stock which have in the aggregate an average Market Value during the
          forty-Trading Day period beginning on the 11th Trading Day following
          the consummation of the Disposition closest to the product of the
          Outstanding Interest Fraction as of the date such shares are selected
          for redemption multiplied by the Fair Value of the Net Proceeds of
          such Disposition (but in no event more than all of the shares of
          Affected Tracking Stock then outstanding); or
 
            (iii) convert each outstanding share of the Affected Tracking Stock
       of the Affected Tracking Group into a number (or fraction) of fully paid
       and non-assessable Special Common Shares or shares of any other class or
       classes of Tracking Stock (or any combination thereof on a pro rata
       basis) equal to 110% (the "Disposition Conversion Percentage") of the
       average daily ratio (calculated to the nearest five decimal places) of
       the Market Value of (y) one share of Affected Tracking Stock to (z) the
       Market Value of one Special Common Share or share of such other class or
       classes of Tracking Stock (or any combination thereof on a pro rata
       basis) during a forty-Trading Day period beginning on the 11th Trading
       Day after consummation of the Disposition.
 
               In the event of the conversion of the Affected Tracking Stock
       into Special Common Shares or shares of another class or classes of
       Tracking Stock, the Fair Value of the Net Proceeds of such Disposition
       shall be attributed to the Group related to the shares which are issued
       upon such conversion (on a pro rata basis if a combination of such shares
       are issued).
 
                                      B-9
<PAGE>
        (c) The Corporation may elect to pay the dividend or redemption price
    referred to in subparagraph (i) or (ii) of paragraph 10(b) of this Section B
    either in the same form as the proceeds of the Disposition were received or
    in any other combination of cash or securities or property (other than
    Common Stock of the Corporation) that the Board determines will have an
    aggregate market value on a fully distributed basis of not less than the
    amount equal to:
 
             (i) in the case of subparagraph (i) or clause (B) of subparagraph
       (ii) of this paragraph 10(b), the product of the applicable Outstanding
       Interest Fraction and the Fair Value of the Net Proceeds of such
       Disposition; or
 
            (ii) in the case of clause (A) of subparagraph (ii) of this
       paragraph 10(b), the product of the applicable Adjusted Outstanding
       Interest Fraction and the Fair Value of the Net Proceeds of such
       Disposition.
 
        (d) If the dividend or redemption referred to in paragraph 10(b) of
    Section B is paid in securities of an issuer other than the Corporation (the
    "Successor"), and if there is a Retained Interest in the Affected Tracking
    Group at such time, the Board shall, to the extent practicable, distribute
    Successor shares corresponding to Special Common Shares to the holders of
    shares of the Affected Tracking Stock. In the event of a Disposition, the
    Corporation shall not be required to make any payment or other distributions
    to the holders of TDS Group Shares or shares of any class of Tracking Stock
    other than the Affected Tracking Stock. The Successor shares relating to any
    Retained Interest or Inter-Group Interest at the time of the Disposition may
    be retained by the Corporation and attributed to the TDS Group or the other
    Tracking Group, respectively, or some or all of such shares may be
    distributed pro rata to the holders of the TDS Group Shares or the
    applicable Tracking Stock, respectively, in the sole discretion of the
    Board. If the Board determines to distribute Successor shares with respect
    to such a Retained Interest or Inter-Group Interest, it shall, to the extent
    practicable, distribute Successor shares corresponding to Special Common
    Shares to the holders of Tracking Stock of another Tracking Group with
    respect to any such Inter-Group Interest, and distribute Successor shares
    corresponding to Series A Common Shares to the holders of Series A Common
    Shares, Successor shares corresponding to Common Shares to the holders of
    Common Shares, and Successor shares corresponding to Special Common Shares
    to the holders of Special Common Shares with respect to any Retained
    Interest in such Tracking Group; PROVIDED that the same number of shares of
    Successor common stock on a combined basis must be distributed for each
    Series A Common Share, Common Share and any issued Special Common Share. If
    practicable, the Board shall cause such Successor to be recapitalized
    through an amendment to its charter or otherwise, such that the shares of
    capital stock of such Successor and the relative rights, limitations and
    preferences thereof substantially correspond to the Series A Common Shares,
    Common Shares and Special Common Shares of the Corporation and their
    relative rights, limitations and preferences, as may be determined to be
    necessary or appropriate in the sole discretion of the Board, in order to
    permit the distribution to be effected in the foregoing manner.
 
        (e) Subject to the terms of paragraph 10(b) of this Section B, the Board
    shall have complete discretion as to which option in paragraph 10(b) to
    select; PROVIDED, HOWEVER, that once the disposition option selected by the
    Board is publicly announced pursuant to paragraph 11 of this Section B, the
    selection shall be irrevocable. The Board shall not be required to select
    the option which results in the distribution with the highest value to the
    holders of the shares of the Affected Tracking Stock or with the smallest
    effect on the remaining classes and series of the Corporation's Common
    Stock. In the event of a Disposition, the Corporation shall not be required
    to make any payment or other distributions to the holders of Common Shares,
    Series A Common Shares, Special Common Shares or shares of any class of
    Tracking Stock other than the Affected Tracking Stock; PROVIDED, HOWEVER,
    the Corporation may, in the sole discretion of the Board, make a
    distribution to such other shareholders in respect of any Retained Interest
    or any Inter-Group Interest in the Affected Tracking Group existing at the
    time of a Disposition; PROVIDED FURTHER, that if the dividend or redemption
    referred to in paragraph 10(b) of this Section B is paid in securities of a
    Successor, and if there is a Retained Interest in the Affected Tracking
    Group at such time, the Board shall make any such distribution in the manner
    provided pursuant to paragraph 10(d) of this Section B.
 
        (f)  The Corporation may, in the sole discretion of the Board, at any
    time prior to the first anniversary of a dividend on, or partial redemption
    of, shares of Affected Tracking Stock following a Disposition, convert each
    remaining outstanding share of Affected Tracking Stock into a number (or
    fraction) of Special Common Shares or shares of any other class or classes
    of Tracking Stock (or combination thereof on a pro rata basis) equal to the
    product of the Disposition Conversion Percentage and the average daily ratio
    (calculated to the nearest five decimal places) of the Market Value of one
    Special Common Share or share of such other class or classes of
 
                                      B-10
<PAGE>
    Tracking Stock (or any combination thereof on a pro rata basis) during a
    twenty-Trading Day period ending on the fifth Trading Day prior to the date
    of notice of such conversion.
 
        (g) To the extent that any Shares Issuable to Third Parties are included
    in the determination of the Adjusted Outstanding Interest Fraction, the
    Corporation's obligations in respect of such securities shall not be a
    reduction in the calculation of the Fair Value of the Net Proceeds. In the
    event any redemption of Tracking Stock is made in circumstances in which
    cash, securities or property are allocated to the TDS Group in respect of
    Shares Issuable to Third Parties (such cash, securities or other property
    being referred to herein as the "Reserved Property"), the Corporation shall
    be permitted to segregate and hold such property separate (in the case of
    any Reserved Property other than Special Common Shares or shares of another
    class of Tracking Stock). In the event the Reserved Property is, for any
    reason, not delivered with respect to the obligations relating to such
    Shares Issuable to Third Parties, such Reserved Property shall revert to the
    TDS Group, subject to escheat laws, and the former holders of the Affected
    Tracking Stock shall have no interest in such Reserved Property. In the
    event of any conversion of Tracking Stock into Special Common Shares or
    shares of any other class or classes of Tracking Stock, the Corporation
    shall duly reserve Special Common Shares or shares of such other class or
    classes of Tracking Stock or combination thereof issuable with respect to
    Shares Issuable to Third Parties of the Affected Tracking Stock.
 
        (h) At the time of any dividend made as a result of a Disposition, the
    TDS Group shall be credited, and the Affected Tracking Group shall be
    charged (in addition to the charge for the dividend paid in respect of
    outstanding shares of Affected Tracking Stock), with an amount equal to the
    product of (i) the aggregate amount paid in respect of such dividend times
    (ii) a fraction the numerator of which is the Retained Interest Fraction and
    the denominator of which is the Outstanding Interest Fraction of such
    Tracking Group.
 
        (i)  If any Inter-Group Interests in a Tracking Group exist at the time
    of any dividend made as a result of a Disposition, each Tracking Group
    holding such an Inter-Group Interest in the Affected Tracking Group shall be
    credited, and the Affected Tracking Group shall be charged (in addition to
    the charge for the dividend paid in respect of outstanding shares of
    Affected Tracking Stock) with an amount equal to the product of (i) the
    aggregate amount paid in respect of such dividend times (ii) a fraction the
    numerator of which is the Inter-Group Interest Fraction and the denominator
    of which is the Outstanding Interest Fraction of the Affected Tracking
    Group.
 
        (j)  In the case of a Disposition in a series of related transactions,
    the Disposition shall be deemed to have been consummated upon the
    consummation of the last of the series of related transactions.
 
        (k) The Board shall determine the redemption date or conversion date
    pursuant to Section B.11 hereof.
 
    11.  PROCEDURES RELATING TO DISPOSITION RIGHTS.
 
        (a) Not later than the fifth Trading Day following the consummation of a
    Disposition referred to above, the Corporation shall announce publicly by
    press release (i) the Fair Value of the Net Proceeds of such Disposition,
    (ii) the number of outstanding shares of Affected Tracking Stock, (iii)
    information describing and indicating the number of Shares Issuable to Third
    Parties of the Affected Tracking Stock, including the number of such shares
    which are issuable as Committed Acquisition Shares and the number of such
    shares into or for which Convertible Securities are then convertible,
    exercisable or exchangeable, and the conversion, exercise or exchange prices
    thereof (and stating which, if any, of such Convertible Securities are
    Pre-Distribution Convertible Securities), (iv) the Disposition Conversion
    Percentage, (v) the Outstanding Interest Fraction for the Affected Tracking
    Stock as of a recent date preceding the date of such notice and (vi) the
    Adjusted Outstanding Interest Fraction for the Affected Tracking Stock as of
    a recent date preceding the date of such notice. Not earlier than the 51st
    Trading Day and not later than the 55th Trading Day following the
    consummation of such Disposition, the Corporation shall announce publicly by
    press release which of the redemption options thereof described in paragraph
    10(b) of this Section B it has irrevocably determined to take and the kind
    of capital stock or cash, securities or other property or combination
    thereof to be delivered pursuant to the option selected.
 
        (b) If the Corporation determines to pay a dividend of cash, securities
    or other property or combination thereof following a Disposition, as
    described in subparagraph (i) of paragraph 10(b) of Section B, the
    Corporation shall, not earlier than the 51st Trading Day and not later than
    the 55th Trading Day following the consummation of such Disposition, cause
    to be sent to each holder of outstanding shares of the Affected Tracking
    Stock a notice setting forth (i) the record date for determining holders
    entitled to receive such dividend, which
 
                                      B-11
<PAGE>
    shall be not earlier than the 61st Trading Day and not later than the 65th
    Trading Day following the consummation of such Disposition, (ii) the
    anticipated payment date of such dividend (which shall not be more than 90
    Trading Days following the consummation of such Disposition), (iii) the kind
    and amount of cash, other securities or property or combination thereof to
    be distributed in respect of each share of the Affected Tracking Stock, (iv)
    the amount of the Fair Value of the Net Proceeds of such Disposition, (v)
    the Outstanding Interest Fraction as of a recent date preceding the date of
    such notice, and (vi) the number of outstanding shares of the Affected
    Tracking Stock subject to the Disposition and the Number of Shares Issuable
    to Third Parties of the Affected Tracking Stock, including the number of
    such shares which are issuable as Committed Acquisition Shares and the
    number of shares of the Affected Tracking Stock into or for which
    outstanding Convertible Securities are then convertible, exercisable or
    exchangeable and the conversion, exercise or exchange prices thereof (and
    stating which, if any, are Pre-Distribution Convertible Securities).
 
        (c) If the Corporation determines to undertake a redemption of a class
    of Tracking Stock following a Disposition of all (not merely substantially
    all) of the properties and assets of the Affected Tracking Group with
    respect to the Fair Value of the Net Proceeds, as described in clause (A) of
    subparagraph (ii) of paragraph 10(b) of this Section B, the Corporation
    shall cause to be given to each holder of outstanding shares of Tracking
    Stock of the Affected Tracking Group a notice setting forth (i) a statement
    that all of the shares of the Affected Tracking Stock outstanding on the
    redemption date shall be redeemed, (ii) the anticipated redemption date
    (which shall not be more than 90 Trading Days following the consummation of
    such Disposition), (iii) the kind and amount of cash, securities or property
    or combination thereof to be paid as a redemption price in respect of shares
    of the Affected Tracking Stock outstanding on the redemption date, (iv) the
    amount of the Fair Value of the Net Proceeds of such Disposition, (v) the
    Adjusted Outstanding Interest Fraction as of a recent date preceding the
    date of such notice, (vi) the place or places where certificates for shares
    of Affected Tracking Stock, properly endorsed or assigned for transfer
    (unless the Corporation waives such requirement), are to be surrendered for
    delivery of cash, securities or property, and (vii) the number of
    outstanding shares of the Affected Tracking Stock and the Number of Shares
    Issuable to Third Parties of the Affected Tracking Stock, including the
    number of such shares which are issuable as Committed Acquisition Shares and
    the number of shares of the Affected Tracking Stock into or for which
    outstanding Convertible Securities are then convertible, exercisable or
    exchangeable and the conversion, exercise or exchange prices thereof (and
    stating which, if any, of such Convertible Securities are Pre-Distribution
    Convertible Securities). Such notice shall be sent not less than 51 Trading
    Days nor more than 55 Trading Days following the consummation of such
    Disposition and not less than 25 Trading Days prior to the redemption date.
 
        (d) If the Corporation determines to undertake a partial redemption of
    Tracking Stock following a Disposition of substantially all (but not all) of
    the properties and assets of the Affected Tracking Group as described in
    clause (B) of subparagraph (ii) of paragraph 10(b)of this Section B, such
    partial redemption shall be done on a pro rata basis or by lot. The
    Corporation shall, not earlier than the 51st Trading Day and not later than
    the 55th Trading Day following the consummation of such a Disposition, cause
    to be given to each holder of record of outstanding shares of the Affected
    Tracking Stock a notice setting forth (i) a statement that some of the
    shares of the Affected Tracking Stock outstanding on the redemption date
    shall be redeemed, specifying the number of such shares or how such number
    shall be determined, (ii) a date not earlier than the 61st Trading Day and
    not later than the 65th Trading Day following the consummation of such
    Disposition which shall be the date on which shares of the Affected Tracking
    Stock then outstanding shall be selected for redemption, (iii) the
    anticipated redemption date (which shall not be more than 90 Trading Days
    following the consummation of such Disposition), (iv) the kind and amount of
    cash, securities or property or combination thereof to be paid as a
    redemption price in respect of the shares of the Affected Tracking Stock,
    (v) the amount of the Fair Value of the Net Proceeds of such Disposition,
    (vi) the Outstanding Interest Fraction as of a recent date preceding the
    date of such notice, (vii) the Number of Shares Issuable to Third Parties of
    the Affected Tracking Stock, including the number of such shares which are
    issuable as Committed Acquisition Shares and the number of shares of
    Affected Tracking Stock into or for which outstanding Convertible Securities
    are then convertible, exercisable or exchangeable and the conversion,
    exercise or exchange prices thereof (and stating which, if any, of such
    Convertible Securities are Pre-Distribution Convertible Securities), and
    (viii) a statement that the Corporation shall not be required to register a
    transfer of any shares of the Affected Tracking Stock for a period of up to
    15 Trading Days next preceding the date referred to in clause (ii) of this
    sentence. Promptly following the date referred to in clause (ii) of the
    preceding sentence, but not earlier than the 61st Trading Day and not later
    than the 65th Trading Day following the consummation of such Disposition,
    the Corporation shall cause to be given to each holder of shares of the
    Affected Tracking Stock, a notice setting forth (i) the number of shares of
    Affected Tracking Stock held by such holder to be redeemed, (ii) a statement
    that such shares of Affected
 
                                      B-12
<PAGE>
    Tracking Stock shall be redeemed, (iii) the anticipated redemption date
    (which shall not be more than 90 Trading Days following the consummation of
    such Disposition), (iv) the kind and amount of cash, other securities or
    property to be received by such holder with respect to each share of
    Affected Tracking Stock to be redeemed, including details as to the
    calculation thereof, and (v) the place or places where certificates for such
    shares of Affected Tracking Stock, properly endorsed or assigned for
    transfer (unless the Corporation waives such requirement), are to be
    surrendered for delivery of such cash, other securities or property or
    combination thereof.
 
        (e) In the event of any conversion following a Disposition, as described
    in subparagraph (iii) of paragraph 10(b) of this Section B, the Corporation
    shall cause to be given to each holder of outstanding shares of the Affected
    Tracking Stock a notice setting forth (i) a statement that all of the
    outstanding shares of the Affected Tracking Stock shall be converted into a
    number or fraction of Special Common Shares or shares of any other class of
    Tracking Stock or combination thereof on a pro rata basis, and the
    calculation pursuant to which such number or fraction was determined or will
    be determined, (ii) the anticipated conversion date (which shall not be more
    than 90 Trading Days following the consummation of such Disposition), (iii)
    the per share number (or fraction) of Special Common Shares or shares of
    another class of Tracking Stock or combination thereof, as applicable, to be
    received with respect to each share of Affected Tracking Stock, specifying
    such number or fraction of shares or combination thereof, the Disposition
    Conversion Percentage and other details as to the calculation thereof, (iv)
    the place or places where certificates for shares of the Affected Tracking
    Stock, properly endorsed or assigned for transfer (unless the Corporation
    waives such requirement), are to be surrendered, and (v) the number of
    outstanding shares of the Affected Tracking Stock and the Number of Shares
    Issuable to Third Parties of the Affected Tracking Stock, including the
    number of such shares which are issuable as Committed Acquisition Shares and
    the number of shares of the Affected Tracking Stock into or for which
    outstanding Convertible Securities are then convertible, exercisable or
    exchangeable and the conversion, exercise or exchange prices thereof (and
    stating which, if any, are Pre-Distribution Convertible Securities). Such
    notice shall be sent not less than 51 Trading Days nor more than 55 Trading
    Days following the consummation of the Disposition and not less than 25 days
    prior to the conversion date.
 
        (f)  Upon the Corporation's decision to convert all of the remaining
    outstanding shares of the Affected Tracking Stock as described in paragraph
    10(f), the Corporation shall announce publicly by press release (i) the
    number of outstanding shares of Affected Tracking Stock to be converted,
    (ii) the Number of Shares Issuable to Third Parties of such Tracking Stock,
    including the number of such shares which are issuable as Committed
    Acquisition Shares and into or for which Convertible Securities are then
    convertible, exercisable or exchangeable and the conversion, exercise or
    exchange prices thereof (and stating which, if any, of such Convertible
    Securities are Pre-Distribution Convertible Securities), (iii) the
    Disposition Conversion Percentage and (iv) the Outstanding Interest Fraction
    for such Tracking Stock as of a recent date preceding the date of such
    notice. The Corporation shall subsequently announce publicly by press
    release whether the shares of such Tracking Stock are being converted in
    exchange for Special Common Shares, shares of another Tracking Stock or a
    combination thereof on a pro rata basis.
 
        (g) In the event of any conversion as described paragraph 10(f) of this
    Section B, the Corporation shall cause to be given to each holder of
    outstanding shares of the Affected Tracking Stock a notice setting forth (i)
    a statement that all of the outstanding shares of the Affected Tracking
    Stock shall be converted into a number or fraction of Special Common Shares
    or shares of any other class of Tracking Stock or combination thereof on a
    pro rata basis, specifying the shares or combination thereof, (ii) the
    anticipated conversion date (which shall not be more than 90 Trading Days
    following the press release that publicly announces such conversion), (iii)
    the per share number (or fraction) of Special Common Shares or shares of
    another class of Tracking Stock or combination thereof, as applicable, to be
    received with respect to each share of Affected Tracking Stock, specifying
    such number or fraction of shares or combination thereof, the Disposition
    Conversion Percentage and other details as to the calculation thereof, (iv)
    the place or places where certificates for shares of the Affected Tracking
    Stock, properly endorsed or assigned for transfer (unless the Corporation
    waives such requirement), are to be surrendered, and (v) the number of
    outstanding shares of the Affected Tracking Stock and the Number of Shares
    Issuable to Third Parties of the Affected Tracking Stock, including the
    number of such shares which are issuable as Committed Acquisition Shares and
    the number of shares of the Affected Tracking Stock into or for which
    outstanding Convertible Securities are then convertible, exercisable or
    exchangeable and the conversion, exercise or exchange prices thereof (and
    stating which, if any, are Pre-Distribution Convertible Securities). Such
    notice shall be sent not less than 25 Trading Days nor more than 35 Trading
    Days prior to the conversion date.
 
                                      B-13
<PAGE>
    12.  CONVERSION AT OPTION OF THE CORPORATION.  The Corporation may, in the
sole discretion of the Board, at any time convert each outstanding share of any
class of Tracking Stock (the "Converted Tracking Stock") of any Tracking Group
(the "Converted Tracking Group") into a number (or fraction) of fully paid and
non-assessable Special Common Shares or shares of another class or classes of
Tracking Stock or any combination thereof on a pro rata basis, equal to the
product of the applicable percentage set forth below (the "Optional Conversion
Percentage") on a conversion date selected by the Board pursuant to Section B.14
hereof, and the average daily ratio (calculated to the nearest five decimal
places) of the Market Value of one share of Converted Tracking Stock to the
Market Value of one Special Common Share or share of such other class of
Tracking Stock or any combination thereof on a pro rata basis, during a
twenty-Trading Day period ending on the fifth Trading Day prior to the date of
notice of such conversion, on a pro rata basis:
 
<TABLE>
<CAPTION>
                              12-MONTH PERIOD PRIOR TO                                 OPTIONAL CONVERSION
                        ANNIVERSARY OF INITIAL ISSUANCE DATE                               PERCENTAGE
- -------------------------------------------------------------------------------------  -------------------
<S>                                                                                    <C>
First through Fifth..................................................................            115%
Sixth................................................................................            114%
Seventh..............................................................................            113%
Eighth...............................................................................            112%
Ninth................................................................................            111%
Thereafter...........................................................................            110%
</TABLE>
 
    In the event of the conversion of any class of Tracking Stock into Special
Common Shares or shares of another class or classes of Tracking Stock, the
assets and liabilities of the Converted Tracking Group shall be attributed to
the Group related to the shares which are issued upon such conversion (on a pro
rata basis if a combination of such shares are issued).
 
    13.  REDEMPTION IN EXCHANGE FOR STOCK OF SUBSIDIARY.
 
        (a) Subject to paragraph 2(b) of this Section B, the Corporation, in the
    sole discretion of the Board, may at any time redeem (at no premium) all of
    the outstanding shares of any class of Tracking Stock (the "Redeemed
    Tracking Stock") of a Tracking Group (the "Redeemed Tracking Group"), for a
    number of outstanding shares of common stock of a Qualifying Subsidiary or
    Qualifying Subsidiaries holding all of the assets and liabilities attributed
    to the Redeemed Tracking Group equal to the product of the Adjusted
    Outstanding Interest Fraction of the Redeemed Tracking Group multiplied by
    the number of all of the outstanding shares of the Qualifying Subsidiaries
    owned directly or indirectly by the Corporation, on a pro rata basis. The
    Corporation shall retain the balance of the outstanding shares of the common
    stock of the Qualifying Subsidiaries as (i) Reserved Property with respect
    to the obligations related to the Number of Shares Issuable to Third Parties
    used in calculating such Adjusted Outstanding Interest Fraction, or (ii) in
    respect of the Retained Interest and any Inter-Group Interest in the
    Converted Tracking Group; PROVIDED, HOWEVER, in the sole discretion of the
    Board, shares of common stock of the Qualifying Subsidiaries retained in
    respect of the Retained Interest and any Inter-Group Interest in such
    Tracking Group may be distributed as provided in paragraph 13(b) of this
    Section B.
 
        (b) In the event the Board determines to redeem the shares of any class
    of Tracking Stock for shares of a Qualifying Subsidiary, and if there is a
    Retained Interest in such Tracking Group, the Board shall, to the extent
    practicable, distribute Qualifying Subsidiary shares corresponding to
    Special Common Shares to the holders of Tracking Stock of such Tracking
    Group with respect to the Adjusted Outstanding Interest Fraction in such
    Tracking Group and, if the Board determines to distribute shares of such
    Qualifying Subsidiary to other shareholders with respect to any Retained
    Interest or Inter-Group Interest shall, to the extent practicable,
    distribute Qualifying Subsidiary shares corresponding to Special Common
    Shares to the holders of any other Tracking Stock with respect to any such
    Inter-Group Interest in such Tracking Group, and distribute Qualifying
    Subsidiary shares corresponding to Series A Common Shares to the holders of
    Series A Common Shares, Qualifying Subsidiary shares corresponding to Common
    Shares to the holders of Common Shares, and Qualifying Subsidiary shares
    corresponding to Special Common Shares to the holders of Special Common
    Shares with respect to any Retained Interest in such Tracking Group,
    provided that the same number of shares of Qualifying Subsidiary common
    stock on a combined basis shall be distributed for each Series A Common
    Share, Common Share and any issued Special Common Share. If practicable, the
    Board shall recapitalize such Qualifying Subsidiary or Qualifying
    Subsidiaries through an amendment to its charter or otherwise, such that the
    shares of capital stock of such subsidiary and the relative rights,
    limitations and preferences thereof substantially correspond to the Series A
    Common Shares, Common Shares and Special Common Shares of
 
                                      B-14
<PAGE>
    the Corporation and their relative rights, limitations and preferences, as
    may be determined to be necessary or appropriate in the sole discretion of
    the Board, in order to permit the distribution to be effected in the
    foregoing manner; PROVIDED that, if the Qualifying Subsidiary has or will
    have shares corresponding to Series A Common Shares and Common Shares but
    does not and will not have shares corresponding to Special Common Shares and
    it is impracticable to recapitalize the subsidiary as provided in this
    sentence to create shares corresponding to Special Common Shares, the Board
    shall distribute Qualifying Subsidiary shares corresponding to Common Shares
    to the holders of Tracking Stock which would otherwise be entitled to
    receive Qualifying Subsidiary shares corresponding to Special Common Shares,
    and shall distribute Qualifying Subsidiary shares corresponding to Common
    Shares to the holders of Special Common Shares in respect of the Retained
    Interest.
 
    14.  PROCEDURES RELATING TO CONVERSION OR REDEMPTION OF TRACKING STOCK.
 
        (a) Upon the Corporation's decision to convert or redeem all of the
    outstanding shares of any class of Tracking Stock as described in paragraphs
    12 or 13 of this Section B, the Corporation shall announce publicly by press
    release (i) the number of outstanding shares of the class of Tracking Stock
    which will be converted or redeemed, (ii) the Number of Shares Issuable to
    Third Parties of such Tracking Stock, including the number of such shares
    which are issuable as Committed Acquisition Shares and into or for which
    Convertible Securities are then convertible, exercisable or exchangeable and
    the conversion, exercise or exchange prices thereof (and stating which, if
    any, of such Convertible Securities are Pre-Distribution Convertible
    Securities), (iii) the Optional Conversion Percentage and other details as
    to the calculation thereof, and (iv) the Outstanding Interest Fraction and
    the Adjusted Outstanding Interest Fraction for such Tracking Stock as of a
    recent date preceding the date of such notice. The Corporation shall
    subsequently announce publicly by press release whether the shares of such
    Tracking Stock are being converted in exchange for Special Common Shares,
    shares of another Tracking Stock or a combination thereof on a pro rata
    basis, or are being redeemed for shares of a Qualifying Subsidiary. A notice
    by the Corporation that the Corporation is considering a conversion or
    redemption or is seeking a ruling from the Internal Revenue Service relating
    to a possible conversion or redemption shall not constitute an announcement
    of a decision with respect to a redemption or conversion pursuant to this
    paragraph 14.
 
        (b) The Corporation's decision to convert or redeem all of the
    outstanding shares of Tracking Stock as described in paragraphs 12 or 13 of
    this Section B shall be revocable, and the determination of the Board with
    respect to which securities the Corporation shall use to convert or redeem
    such Tracking Stock shall be revocable, and any such conversion or
    redemption may be abandoned or modified by the Corporation, in the sole
    discretion of the Board, at any time prior to the Corporation's delivery of
    the replacement securities in exchange for the converted or redeemed shares
    of Tracking Stock.
 
        (c) If the Corporation determines to convert the shares of any class of
    Tracking Stock into Special Common Shares or shares of any other class or
    classes of Tracking Stock or any combination thereof, as described in
    paragraph 12 of this Section B, the Corporation shall promptly cause to be
    given to each holder of shares of Tracking Stock to be converted a notice
    setting forth (i) a statement that all outstanding shares of such class of
    Tracking Stock shall be converted in exchange for Special Common Shares or
    shares of any other class of Tracking Stock or any combination thereof on a
    pro rata basis, specifying the shares or combination thereof, (ii) the
    anticipated conversion date (which shall not be more than 90 Trading Days
    following the press release that publicly announces such a conversion),
    (iii) the per share number (or fraction) of Special Common Shares or shares
    of another class of Tracking Stock or combination thereof, as applicable, to
    be received with respect to each share of the Converted Tracking Stock,
    specifying such number or fraction of shares or combination thereof, the
    Optional Conversion Percentage and other details as to the calculation
    thereof, (iv) the place or places where certificates for shares of such
    Tracking Stock to be redeemed, properly endorsed or assigned for transfer
    (unless the Corporation waives such requirement), are to be surrendered for
    delivery of certificates for Special Common Shares, shares of another class
    of Tracking Stock or both, and (v) the number of outstanding shares of such
    Tracking Stock to be redeemed and the Number of Shares Issuable to Third
    Parties of such Tracking Stock, including the number of such shares which
    are issuable as Committed Acquisition Shares and the number of shares of
    such Tracking Stock into or for which outstanding Convertible Securities are
    then convertible, exercisable or exchangeable and the conversion, exercise
    or exchange prices thereof (and stating which, if any, of such Convertible
    Securities are Pre-Distribution Convertible Securities). Such notice shall
    be sent not less than 25 Trading Days nor more than 35 Trading Days prior to
    the conversion date.
 
                                      B-15
<PAGE>
        (d) If the Corporation determines to redeem the shares of any class of
    Tracking Stock Shares into shares of a Qualifying Subsidiary as described in
    paragraph 13 of this Section B, the Corporation shall promptly cause to be
    given to each holder of shares of Tracking Stock to be redeemed a notice
    setting forth (i) a statement that all outstanding shares of such class of
    Tracking Stock shall be redeemed in exchange for shares of a Qualifying
    Subsidiary, (ii) the anticipated redemption date (which shall not be more
    than 90 Trading Days following the press release that publicly announces
    such a redemption), (iii) the Adjusted Outstanding Interest Fraction for
    such Tracking Stock as of a recent date preceding the date of such notice,
    (iv) the place or places where certificates for shares of such Tracking
    Stock are to be redeemed, properly endorsed or assigned for transfer (unless
    the Corporation waives such requirement), are to be surrendered for delivery
    of certificates for shares of common stock of the Qualifying Subsidiary, and
    (v) the number of outstanding shares of such Tracking Stock and the Number
    of Shares Issuable to Third Parties of such Tracking Stock, including the
    number of such shares which are issuable as Committed Acquisition Shares and
    the number of shares of such Tracking Stock into or for which outstanding
    Convertible Securities are then convertible, exercisable or exchangeable and
    the conversion, exercise or exchange prices thereof (and stating which, if
    any, of such Convertible Securities are Pre-Distribution Convertible
    Securities). Such notice shall be sent not less than 25 Trading Days nor
    more than 35 Trading Days prior to the redemption date.
 
    15.  GENERAL PROVISIONS RELATING TO CONVERSIONS AND REDEMPTIONS.
 
        (a) In each case in which a notice is required to be given to holders of
    outstanding shares of any class of Tracking Stock in accordance with
    paragraphs 11 or 14 (other than a notice to holders of shares selected for a
    partial redemption), notice shall also be given, within the required time
    period, to each holder of Convertible Securities that are convertible into
    or exercisable or exchangeable for shares of such Tracking Stock (unless
    provision for such notice is otherwise made pursuant to the terms of such
    Convertible Securities), which notice shall include, in addition to all of
    the information set forth in the corresponding notice to holders of shares
    of such Tracking Stock, a statement to the effect that the holders of such
    Convertible Securities shall be entitled to receive the dividend,
    participate in the redemption of shares following a Disposition with respect
    to such Tracking Stock or in the selection of shares for conversion or
    redemption, participate in the conversion of shares or participate in the
    redemption of shares in exchange for stock of the Qualifying Subsidiaries
    only if such holder appropriately converts, exercises or exchanges such
    Convertible Securities on or prior to the record date for the dividend,
    redemption date, date fixed for selection of shares to be redeemed or
    conversion date, as applicable, set forth in such notice. In the case of a
    conversion or redemption of shares of any class of Tracking Stock, the
    notice to holders of Convertible Securities shall also state what, if
    anything, such holders shall be entitled to receive pursuant to the terms of
    such Convertible Securities if such holders convert, exercise or exchange
    such Convertible Securities following the conversion date or redemption
    date, as applicable.
 
        (b) All notices required to be given in accordance with this paragraph
    15 or paragraphs 11 or 14 shall be sent to a holder by first class mail,
    postage prepaid, at the holder's address as the same appears on the transfer
    books of the Corporation. Neither the failure to mail any notice to any
    particular holder of shares of Tracking Stock or of Convertible Securities
    nor any defect therein shall affect the sufficiency thereof with respect to
    any other holder of outstanding shares of Tracking Stock or of Convertible
    Securities, or the validity of any conversion or redemption.
 
        (c) The Corporation shall not be required to issue or deliver fractional
    shares of any class of capital stock or any fractional securities to any
    holder of shares of Tracking Stock upon any conversion or redemption,
    dividend or other distribution described in paragraphs 10, 12 or 13 of this
    Section B. In connection with the determination of the number of shares of
    any class of capital stock that is issuable or the amount of securities that
    is deliverable to any holder of record upon any conversion or redemption,
    dividend or other distribution (including any fractions of shares or
    securities), the Corporation may aggregate the number of shares of Tracking
    Stock held at the relevant time by such holder of record. If the number of
    shares of any class of capital stock or the amount of securities remaining
    to be issued or delivered to any holder of shares of Tracking Stock is a
    fraction, the Corporation shall, if such fraction is not issued or delivered
    to such holder, pay a cash adjustment in respect of such fraction in an
    amount equal to the fair market value of such fraction on the fifth Trading
    Day prior to the date such payment is to be made (without interest). For
    purposes of the preceding sentence, "fair market value" of any fraction
    shall be (i) in the case of any fraction of a share of capital stock of the
    Corporation, the product of such fraction and the Market Value of one share
    of such capital stock and (ii) in the case of any other fractional security,
    such value as is determined by the Board.
 
                                      B-16
<PAGE>
        (d) No adjustments in respect of dividends shall be made upon the
    conversion or redemption of any shares of Tracking Stock; PROVIDED, HOWEVER,
    that if the conversion or redemption date with respect to a class of
    Tracking Stock is subsequent to the record date for the payment of a
    dividend or other distribution thereon or with respect thereto, the holders
    of shares of such class of Tracking Stock at the close of business on such
    record date shall be entitled to receive the dividend or other distribution
    payable on or with respect to such shares on the date set for payment of
    such dividend or other distribution, notwithstanding a conversion or
    redemption by the Corporation of such shares or the Corporation's default in
    payment of the dividend or distribution due on such date.
 
        (e) Before any holder of shares of any class of Tracking Stock shall be
    entitled to receive certificates representing shares of any kind of capital
    stock or cash, securities or other property or combination thereof to be
    received by such holder with respect to any conversion or redemption of such
    Tracking Stock, such holder shall be required to surrender at such place as
    the Corporation shall specify certificates for such shares, properly
    endorsed or assigned for transfer (unless the Corporation waives such
    requirement). The Corporation shall as soon as practicable after surrender
    of certificates representing shares of such Tracking Stock deliver to the
    person for whose account such shares were so surrendered, or to the nominee
    or nominees of such person, certificates representing the number of whole
    shares of the kind of capital stock or cash, securities or other property or
    combination thereof to which such person is entitled, together with any
    payment for fractional securities referred to above. The Corporation shall
    not be required to register (i) a transfer of any shares of Tracking Stock
    for a period of up to 15 Trading Days preceding the conversion date or
    redemption date or (ii) any shares of Tracking Stock selected for
    redemption.
 
        (f)  From and after any applicable conversion or redemption date, all
    rights of a holder of shares of any class of Tracking Stock that were
    converted or redeemed shall cease except for the right, upon surrender of
    the certificates representing such Tracking Stock, to receive certificates
    representing shares of the kind and amount of capital stock or cash,
    securities or other property or combination thereof for which such shares of
    Tracking Stock were converted or redeemed, together with any payment for
    fractional securities, and such holder shall have no other or further rights
    in respect of the Tracking Stock so converted or redeemed, including, but
    not limited to, any rights with respect to any shares of capital stock or
    cash, securities or other property or combination thereof which are reserved
    or otherwise designated by the Corporation as being held for the
    satisfaction of the Corporation's obligations to pay or deliver any shares
    of capital stock, cash, securities or other property or combination thereof
    upon the conversion, exercise or exchange of any outstanding Convertible
    Securities or with respect to any other Shares Issuable to Third Parties
    related to the conversion or redemption of such Tracking Stock as of the
    date of such conversion or redemption. No holder of a certificate that,
    immediately prior to the applicable conversion or redemption date for any
    class of Tracking Stock, represented shares of Tracking Stock which were
    converted or redeemed shall be entitled to receive any dividend or other
    distribution with respect to shares of any kind of capital stock or other
    securities into or in exchange for which the shares of such Tracking Stock
    were converted or redeemed until surrender of such holder's certificate for
    a certificate or certificates representing shares of such kind of capital
    stock or other securities. Upon such surrender, there shall be paid to the
    holder the amount of any dividends or other distributions (without interest)
    which theretofore became payable with respect to a record date after the
    conversion date or redemption date, as the case may be, but that were not
    paid by reason of the foregoing, with respect to the number of whole shares
    of the kind of capital stock or other securities represented by the
    certificate or certificates issued upon such surrender.
 
        (g) The Corporation shall pay any and all documentary, stamp or similar
    issue or transfer taxes that may be payable in respect of the issue or
    delivery of any shares of capital stock or other securities on the
    conversion or redemption of any class of Tracking Stock. The Corporation
    shall not be required to pay any tax that may be payable in respect of any
    transfer involved in the issue and delivery of any shares of capital stock
    or other securities in a name other than that in which the shares of
    Tracking Stock so converted or redeemed were registered and no such issue or
    delivery shall be made unless and until the person requesting such issue has
    paid to the Corporation the amount of any such tax, or has established to
    the satisfaction of the Corporation that such tax has been paid.
 
    16.  EFFECTS ON CONVERTIBLE SECURITIES.
 
        (a) The following provisions with respect to Convertible Securities
    shall apply only to the extent that the terms of such Convertible Securities
    do not provide for adjustments in the event of a conversion or redemption
    described in paragraphs 10, 12 or 13 of this Section B.
 
                                      B-17
<PAGE>
        (b) After any conversion date or redemption date on which all
    outstanding shares of any class of Tracking Stock were converted or
    redeemed, any share of such class of Tracking Stock that is to be issued on
    conversion, exchange or exercise of any Convertible Security shall,
    immediately upon such conversion, exchange or exercise and without any
    notice or any other action on the part of, the Corporation or its Board or
    the holder of such Convertible Security:
 
             (i) in the event the shares of such class of Tracking Stock
       outstanding on such conversion date were converted into Special Common
       Shares or shares of another class or classes of Tracking Stock or
       combination thereof pursuant to the provisions described in subparagraph
       (iii) of paragraph 10(b), paragraph 10(f) or paragraph 12 of this Section
       B, be converted into the number of Special Common Shares or shares of
       another class or classes of Tracking Stock or combination thereof that
       the number of shares of such class of Tracking Stock, that were to be
       issued upon such conversion, exchange or exercise, would have received
       had such shares been outstanding on such conversion date; or
 
            (ii) in the event the shares of such class of Tracking Stock
       outstanding on such redemption date were redeemed pursuant to the
       provisions described in subparagraph (ii)(A) of paragraph 10(b) of this
       Section B or redeemed for shares of capital stock of a Qualifying
       Subsidiary or Qualifying Subsidiaries pursuant to paragraph 13 of this
       Section B, be redeemed, to the extent of funds of the Corporation legally
       available therefor, for the kind and amount of cash, securities or
       property or any combination thereof, or shares of capital stock of a
       Qualifying Subsidiary or Qualifying Subsidiaries, that the number of
       shares of such class of Tracking Stock, that were to be issued upon such
       conversion, exchange or exercise, would have received had such shares
       been outstanding on such redemption date.
 
        (c) If determined to be appropriate in the sole discretion of the Board,
    any such capital stock or cash, securities or property or any combination
    thereof to be delivered upon such conversion or redemption may be
    irrevocably transferred in trust for the benefit of holders of such
    Convertible Securities.
 
    17.  OTHER PROVISIONS.
 
        (a) The Board shall have the power to issue or sell any class or series
    of stock herein or hereafter authorized, for such consideration as the Board
    shall from time to time, in its discretion, determine, whether or not
    greater consideration could be received upon the issue or sale of shares of
    another class or series, and as otherwise permitted by law.
 
        (b) The Board shall have the power to purchase any class or series of
    stock herein or hereafter authorized for such consideration as the Board
    shall from time to time, in its discretion, determine, whether or not lesser
    consideration could be paid upon the purchase of shares of another class or
    series, and as otherwise permitted by law.
 
        (c) If the Corporation shall in any manner split, subdivide or combine
    the outstanding Common Shares, Series A Common Shares or Special Common
    Shares, all outstanding Common Shares, Series A Common Shares and Special
    Common Shares shall be proportionally split, subdivided or combined in the
    same manner and on the same basis.
 
        (d) In the event of a merger or consolidation of the Corporation with or
    into another entity (whether or not the Corporation is the surviving
    entity), the holders of Special Common Shares and Common Shares shall be
    entitled to receive the same consideration per share as a result of such
    merger or consolidation; provided, that this requirement shall be deemed to
    be satisfied if the consideration received by the holders of Special Common
    Shares consists of securities which have relative rights, preferences and
    limitations vis-a-vis the securities received by the holders of Common
    Shares that, in the judgment of the Board, are substantially similar in all
    material respects to the relative rights, preferences and limitations of the
    Special Common Shares vis-a-vis the Common Shares, respectively.
 
        (e) Every reference in this Restated Certificate of Incorporation or
    under Delaware law to a majority or other proportion of shares of capital
    stock shall, to the extent permitted under Delaware law, refer to a majority
    or such other proportion of the votes entitled to be cast by such shares of
    capital stock.
 
        (f)  In accordance with Section 203(b)(3) of the DGCL, the Corporation
    expressly elects not be governed by Section 203 of the DGCL.
 
        (g) Advance notice of shareholder nominations for election of directors
    and other business to be brought by shareholders before a meeting of
    shareholders shall be given in the manner provided in the Bylaws of the
    Corporation.
 
                                      B-18
<PAGE>
        (h) Any action required to be taken or which may be taken at any annual
    or special meeting of stockholders may be taken without a meeting, without
    prior notice and without a vote if a consent or consents in writing, setting
    forth the action so taken, shall be signed by persons entitled to vote
    capital stock of the Corporation representing not less than ninety percent
    of the voting power of the shares that would be necessary to authorize or
    take such action at a meeting at which all shares of capital stock of the
    Corporation entitled to vote thereon were present and voted.
 
    18.  REDEMPTION TO PROTECT LICENSES.
 
        (a) Notwithstanding any other provision of this Restated Certificate of
    Incorporation, as amended, to the contrary, any outstanding shares of stock
    of the Corporation (other than Series A Common Shares) shall be subject to
    redemption by the Corporation, by action of the Board, if in the judgment of
    the Board such action should be taken, pursuant to Section 151(b)(2) of the
    Delaware General Corporation Law or any other applicable provision of law,
    to the extent necessary to prevent the loss or secure the reinstatement of,
    or to prevent the denial of applications for or the renewal of, any license
    or franchise from any governmental agency held by the Corporation or any of
    its Subsidiaries, or of any person in which the Corporation has any
    ownership or voting interest, direct or indirect, to conduct any portion of
    the business of the Corporation or any of its Subsidiaries, or any person in
    which the Corporation has any ownership or voting interest, direct or
    indirect, which license or franchise is conditioned upon some or all of the
    holders of the Corporation's stock, or any other person with the right to
    vote such stock or on whose behalf such stock is owned or voted, possessing
    prescribed qualifications or any other condition. The terms and conditions
    of such redemption shall be as follows:
 
             (i) The redemption price of the shares to be redeemed pursuant to
       this paragraph 18 shall be equal to the lesser of (A) the Fair Market
       Value of such shares or (B) if such shares were purchased by such
       Disqualified Holder within one year of the Redemption Date, such
       Disqualified Holder's purchase price for such shares;
 
            (ii) The redemption price of such shares may be paid in cash,
       Redemption Securities or any combination thereof;
 
            (iii) If less than all the shares held by Disqualified Holders are
       to be redeemed, the shares to be redeemed shall be selected in such
       manner as shall be determined by the Board, which may include selection
       first of the most recently purchased shares thereof, selection by lot or
       selection in any other manner determined by the Board;
 
            (iv) At least 30 days' written notice of the Redemption Date shall
       be given to the record holders of the shares selected to be redeemed
       (unless waived in writing by any such holder); PROVIDED that the
       Redemption Date may be the date on which written notice shall be given to
       record holders if the cash or Redemption Securities necessary to effect
       the redemption shall have been deposited in trust for the benefit of such
       record holders and subject to immediate withdrawal by them upon surrender
       of the stock certificates for their shares to be redeemed;
 
            (v) From and after the Redemption Date, any and all rights of
       whatever nature, which may be held by the owners of shares selected for
       redemption (including without limitation any rights to vote or
       participate in dividends declared on stock of the same class or series as
       such shares), shall cease and terminate and they shall thenceforth be
       entitled only to receive the cash or Redemption Securities payable upon
       redemption; and
 
            (vi) Such other terms and conditions as the Board shall determine.
 
        (b) For purposes of this paragraph 18:
 
        "DISQUALIFIED HOLDER" shall mean any holder of shares of stock of the
    Corporation whose holding of such stock on behalf of such holder or on
    behalf of any other person involving any beneficial or other indirect
    ownership interest or voting power with respect to such stock, either
    individually or when taken together with the holding or voting of shares of
    stock of the Corporation by any other holders or persons entitled to vote
    such stock, may result, in the good faith judgment of the Board, in the loss
    of, or the failure to secure the reinstatement of, or the denial of
    applications for or the renewal of, any license or franchise from any
    governmental agency held by the Corporation or any of its Subsidiaries or of
    any person in which the Corporation has any ownership or voting interest to
    conduct any portion of the business of the Corporation or any of its
    Subsidiaries or of any person in which the Corporation has any ownership or
    voting interest, direct or indirect.
 
                                      B-19
<PAGE>
        "FAIR MARKET VALUE" of a share of the Corporation's stock of any class
    or series shall mean the average Closing Price for such a share for each of
    the 20 most recent days on which shares of stock of such class or series
    shall have been traded preceding the day on which notice of redemption shall
    be given pursuant to this paragraph 18; PROVIDED, HOWEVER, that if shares of
    stock of such class or series are not traded on any securities exchange or
    in the over-the-counter market, "Fair Market Value" shall be determined by
    the Board in good faith. "Closing Price" on any day means the reported
    closing sales price or, in case no such sale takes place, the average of the
    reported closing bid and asked prices on the principal United States
    securities exchange registered under the Securities Exchange Act of 1934 on
    which such stock is listed, or, if such stock is not listed on any such
    exchange, the highest closing sales price or bid quotation for such stock on
    the Nasdaq Stock Market or any system then in use, or if no such prices or
    quotations are available, the fair market value on the day in question as
    determined by the Board in good faith.
 
        A "PERSON" shall mean an individual, a corporation, a partnership, a
    joint venture, a trust or unincorporated organization, a joint stock company
    or similar organization, a government or any political subdivision thereof,
    or any other legal entity.
 
        "REDEMPTION DATE" shall mean the date fixed by the Board for the
    redemption of shares of stock of the Corporation pursuant to this paragraph
    18.
 
        "REDEMPTION SECURITIES" shall mean any debt or equity securities (other
    than Series A Common Shares or securities convertible into or exchangeable
    for, or carrying a right to subscribe to or acquire, Series A Common Shares)
    of the Corporation, any of its Subsidiaries or any other corporation, or any
    combination thereof, having such terms and conditions as shall be approved
    by the Board and which, together with any cash to be paid as part of the
    redemption price, in the opinion of any nationally recognized investment
    banking firm selected by the Board (which may be a firm which provides other
    investment banking, brokerage or other services to the Corporation), has a
    value, at the time notice of redemption is given pursuant to subparagraph
    (a)(iv) of this paragraph 18, at least equal to the price required to be
    paid pursuant to subparagraph (a)(i) of this paragraph 18 (assuming, in the
    case of Redemption Securities to be publicly traded, such Redemption
    Securities were fully distributed and subject only to normal trading
    activity).
 
    19.  DEFINITIONS.  In addition to the definitions set forth above in this
Restated Certificate of Incorporation, unless the context requires otherwise,
the following terms shall have the meanings specified below:
 
    "ADJUSTED OUTSTANDING INTEREST FRACTION," as of any date, shall mean, with
respect to a particular class of Tracking Stock, a fraction the numerator of
which is the aggregate number of shares of such class of Tracking Stock
outstanding on such date and the denominator of which is the sum of (a) such
aggregate number of outstanding shares, (b) the Number of Shares Issuable with
Respect to Retained Interest for such class of Tracking Stock as of such date,
(c) the aggregate Number of Shares Issuable with Respect to Inter-Group Interest
by all other Tracking Groups in such Tracking Stock, if any, as of such date and
(d) the Number of Shares Issuable to Third Parties with respect to such Tracking
Stock as of such date.
 
    "AERIAL" shall mean Aerial Communications, Inc., a Delaware corporation.
 
    "AERIAL GROUP" shall mean, as of any date that any Aerial Group Common
Shares have been issued and continue to be outstanding:
 
        (a) the interest of the Corporation or any of its subsidiaries in Aerial
    and its subsidiaries (including any successor thereto by merger,
    consolidation or sale of all or substantially all of its assets, whether or
    not in connection with a Related Business Transaction) and their respective
    businesses, assets and liabilities, except any of such businesses, assets or
    liabilities which have been attributed by the Board to another Group;
 
        (b) all businesses, assets and liabilities of the Corporation or any of
    its subsidiaries to the extent attributed to the Aerial Group by the Board,
    whether or not such businesses, assets or liabilities are businesses, assets
    and liabilities of Aerial or any of its subsidiaries (or a successor as
    described in clause (a) of this sentence);
 
        (c) all businesses, assets and liabilities contributed or otherwise
    transferred to the Aerial Group from the TDS Group or any of the other
    Tracking Groups;
 
        (d) the interest of the Corporation or any of its subsidiaries in the
    businesses, assets and liabilities acquired by the Corporation or any of its
    subsidiaries for the Aerial Group, as determined by the Board;
 
                                      B-20
<PAGE>
        (e) a proportionate undivided interest in each and every business, asset
    and liability attributed to another Tracking Group equal to the Inter-Group
    Interest Fraction, if any, of the Aerial Group in such other Tracking Group;
    and
 
        (f)  such other businesses, assets and liabilities and such adjustments
    to the foregoing as may be contemplated hereby or which may be determined in
    good faith by the Board.
 
    If a Retained Interest in the Aerial Group is then existing and if the
Corporation shall pay a dividend or make any other distribution with respect to
Aerial Group Common Shares payable in cash, securities or other property of the
Corporation attributed to the Aerial Group, other than Aerial Group Common
Shares, the TDS Group shall be deemed to hold an amount or fair value thereof
(as determined in good faith by the Board) of such cash, securities or other
property equal to the amount or fair value so distributed multiplied by a
fraction the numerator of which is the Aerial Group's Retained Interest Fraction
and the denominator of which is the Aerial Group's Outstanding Interest Fraction
in effect immediately prior to the record date for such dividend or other
distribution and, to the extent interest or dividends are paid or other
distributions are made on any securities other than Aerial Group Common Shares
so distributed to the holders of Aerial Group Common Shares, the Aerial Group
shall no longer include a corresponding ratable amount or fair value of the kind
of assets paid as such interest or dividends or other distributions in respect
of such securities deemed to be held by the TDS Group.
 
    If an Inter-Group Interest in the Aerial Group is then existing and if the
Corporation shall pay a dividend or make any other distribution with respect to
Aerial Group Common Shares payable in cash, securities or other property of the
Corporation attributed to the Aerial Group other than Aerial Group Common
Shares, the Tracking Group(s) holding the Inter-Group Interest(s) in the Aerial
Group shall be deemed to hold an amount or fair value thereof (as determined in
good faith by the Board) of such cash, securities or other property equal to the
amount or fair value so distributed multiplied by a fraction the numerator of
which is the Inter-Group Interest Fraction in the Aerial Group in effect
immediately prior to the record date for such dividend or other distribution and
the denominator of which is equal to the Aerial Group's Outstanding Interest
Fraction in effect immediately prior to the record date for such dividend or
other distribution and, to the extent interest or dividends are paid or other
distributions are made on any securities other than Aerial Group Common Shares
so distributed to the holders of Aerial Group Common Shares, the Aerial Group
shall no longer include a corresponding ratable amount or fair value of the kind
of assets paid as such interest or dividends or other distributions in respect
of such securities deemed to be held by the Tracking Group holding the
Inter-Group Interest in the Aerial Group.
 
    From and after any transfer of cash, securities or other property from the
Aerial Group to the TDS Group or to another Tracking Group, the Aerial Group
shall no longer include the cash, securities or other property so transferred
and the TDS Group or such other Tracking Group, as the case may be, shall
include such cash, securities or other property, and from and after any transfer
of cash, securities or other property from the TDS Group or another Tracking
Group to the Aerial Group, the TDS Group or such other Tracking Group, as the
case may be, shall no longer include the cash, securities or other property so
transferred and the Aerial Group shall include such cash, securities or other
property.
 
    "AERIAL GROUP COMMON SHARES," shall mean the Aerial Communications Group
Common Shares, par value $0.01 per share.
 
    "AVAILABLE DIVIDEND AMOUNT," as of any date, shall mean, with respect to any
Tracking Group, the product of the Outstanding Interest Fraction of such
Tracking Group and either (a) the excess of (i) an amount equal to the total
assets of such Tracking Group less the total liabilities (not including
preferred stock) of such Tracking Group as of such date over (ii) the aggregate
par value of, or any greater amount determined to be capital in respect of, all
outstanding shares of such class of Tracking Stock of such Tracking Group and
each class or series of Preferred Shares or Undesignated Shares attributed to
such Tracking Group or (b) in case there is no such excess, an amount equal to
Corporation Earnings (Losses) attributable to such Tracking Group (if positive)
for the fiscal year in which such date occurs and/or the preceding fiscal year.
The Available Dividend Amount for a Tracking Group is intended to be similar to
an amount equal to the product of the Outstanding Interest Fraction and the
amount that would be legally available for the payment of dividends on shares of
Tracking Stock under Delaware law if the related Tracking Group were a separate
Delaware corporation. The "Available Dividend Amount" as of any date, shall
mean, with respect to the TDS Group, the greater of (x) the amount of all
surplus (as defined in the DGCL) of the Corporation or, if there is no surplus,
the net profits (as contemplated by the DGCL) of the Corporation for the fiscal
year in which such date occurs and/or the preceding fiscal year (if positive),
less the sum of the Available Dividend Amounts of all of the Tracking Groups, or
(y) an amount equal to the sum of the Retained Interest Available Dividend
Amounts (if positive) with respect to all of the Tracking Groups, plus, without
duplication, either (a) the
 
                                      B-21
<PAGE>
excess of (i) an amount equal to the total assets of the TDS Group less the
total liabilities (not including preferred stock) of the TDS Group as of such
date over (ii) the aggregate par value of, or any greater amount determined to
be capital in respect of, all outstanding Series A Common Shares, Common Shares
and any issued Special Common Shares, and each class or series of Preferred
Shares or Undesignated Shares attributed to the TDS Group or (b) in case there
is no such excess, an amount equal to Corporation Earnings (Losses) attributable
to the TDS Group (if positive) for the fiscal year in which such date occurs
and/or the preceding fiscal year.
 
    "BOARD" shall mean the Board of Directors of the Corporation.
 
    "CELLULAR GROUP" shall mean, as of any date that any shares of Cellular
Group Stock have been issued and continue to be outstanding:
 
        (a) the interest of the Corporation or any of its subsidiaries in U.S.
    Cellular and its subsidiaries (including any successor thereto by merger,
    consolidation or sale of all or substantially all of its assets, whether or
    not in connection with a Related Business Transaction) and their respective
    businesses, assets and liabilities, except any of such businesses, assets or
    liabilities which have been attributed by the Board to another Group;
 
        (b) all businesses, assets and liabilities of the Corporation or any of
    its subsidiaries to the extent attributed to the Cellular Group by the
    Board, whether or not such businesses, assets or liabilities are businesses,
    assets and liabilities of U.S. Cellular or any of its subsidiaries (or a
    successor as described in clause (a) of this sentence);
 
        (c) all businesses, assets and liabilities contributed or otherwise
    transferred to the Cellular Group from the TDS Group or any of the other
    Tracking Groups;
 
        (d) the interest of the Corporation or any of its subsidiaries in the
    businesses, assets and liabilities acquired by the Corporation or any of its
    subsidiaries for the Cellular Group, as determined by the Board;
 
        (e) a proportionate undivided interest in each and every business, asset
    and liability attributed to another Tracking Group equal to the Inter-Group
    Interest Fraction, if any, of the Cellular Group in such other Tracking
    Group; and
 
        (f)  such other businesses, assets and liabilities and such adjustments
    to the foregoing as may be contemplated hereby or which may be determined in
    good faith by the Board.
 
    If a Retained Interest in the Cellular Group is then existing and if the
Corporation shall pay a dividend or make any other distribution with respect to
Cellular Group Common Shares payable in cash, securities or other property of
the Corporation attributed to the Cellular Group, other than Cellular Group
Common Shares, the TDS Group shall be deemed to hold an amount or fair value
thereof (as determined in good faith by the Board) of such cash, securities or
other property equal to the amount or fair value so distributed multiplied by a
fraction the numerator of which is the Cellular Group's Retained Interest
Fraction and the denominator of which is the Cellular Group's Outstanding
Interest Fraction in effect immediately prior to the record date for such
dividend or other distribution and, to the extent interest or dividends are paid
or other distributions are made on any securities other than Cellular Group
Common Shares so distributed to the holders of Cellular Group Common Shares, the
Cellular Group shall no longer include a corresponding ratable amount or fair
value of the kind of assets paid as such interest or dividends or other
distributions in respect of such securities deemed to be held by the TDS Group.
 
    If an Inter-Group Interest in the Cellular Group is then existing and if the
Corporation shall pay a dividend or make any other distribution with respect to
Cellular Group Common Shares payable in cash, securities or other property of
the Corporation attributed to the Cellular Group other than Cellular Group
Common Shares, the Tracking Group holding the Inter-Group Interest in the
Cellular Group shall be deemed to hold an amount or fair value thereof (as
determined in good faith by the Board) of such cash, securities or other
property equal to the amount or fair value so distributed multiplied by a
fraction the numerator of which is the Inter-Group Interest Fraction in the
Cellular Group in effect immediately prior to the record date for such dividend
or other distribution and the denominator of which is equal to the Cellular
Group's Outstanding Interest Fraction in effect immediately prior to the record
date for such dividend or other distribution and, to the extent interest or
dividends are paid or other distributions are made on any securities other than
Cellular Group Common Shares so distributed to the holders of Cellular Group
Common Shares, the Cellular Group shall no longer include a corresponding
ratable amount or fair value of the kind of assets paid as such interest or
dividends or other distributions in respect of such securities deemed to be held
by the Tracking Group holding the Inter-Group Interest in the Cellular Group.
 
                                      B-22
<PAGE>
    From and after any transfer of cash, securities or other property from the
Cellular Group to the TDS Group or to another Tracking Group, the Cellular Group
shall no longer include the cash, securities or other property so transferred
and the TDS Group or such other Tracking Group, as the case may be, shall
include such cash, securities or other property, and from and after any transfer
of cash, securities or other property from the TDS Group or another Tracking
Group to the Cellular Group, the TDS Group or such other Tracking Group, as the
case may be, shall no longer include the cash, securities or other property so
transferred and the Cellular Group shall include such cash, securities or other
property.
 
    "CELLULAR GROUP COMMON SHARES" means the United States Cellular Group Common
Shares, par value $0.01 per share.
 
    "COMMITTED ACQUISITION SHARES" as of any date, shall mean (a) Common Shares
that the Corporation had, prior to such date, agreed to issue in connection with
acquisitions, but as of such date had not been issued, and (b) Common Shares
that are issuable upon conversion, exercise or exchange of Convertible
Securities that the Corporation had, prior to such date, agreed to issue in
connection with acquisitions, but as of such date had not been issued, in each
case including obligations of the Corporation to issue Cellular Group Common
Shares, Telecom Group Common Shares and Aerial Group Common Shares as a result
of the Distribution pursuant to anti-dilution provisions in the acquisition
agreements providing for the issuance of Common Shares or Convertible Securities
which are convertible into or exercisable or exchangeable for Common Shares,
without duplication of any Common Shares issuable upon conversion, exercise or
exchange of Convertible Securities.
 
    "COMMON STOCK" shall mean shares of capital stock of the Corporation
designated as common stock, including Series A Common Shares, Common Shares,
Special Common Shares, Cellular Group Common Shares, Telecom Group Common Shares
and Aerial Group Common Shares.
 
    "CORPORATION EARNINGS (LOSS)" for any period, with respect to any class of
Common Stock, shall mean the net earnings or loss of the related Group for such
period determined on a basis consistent with the determination of the net
earnings or loss of such Group for such period as presented in the combined
financial statements of such Group for such period, including income and
expenses of the Corporation attributed to the operations of such Group on a
substantially consistent basis, including without limitation, corporate, general
and administrative costs, net interest and income taxes.
 
    "CONVERTIBLE SECURITIES" shall mean any securities of the Corporation,
including preferred stock, options and other rights (other than Common Stock),
that are convertible into, exchangeable for or evidence the right to purchase
any shares of any class or series of Common Stock, whether upon conversion,
exercise or exchange, pursuant to anti-dilution provisions of such securities or
otherwise.
 
    "DGCL" shall mean the Delaware General Corporation Law.
 
    "DISTRIBUTION" shall mean the contemplated initial distribution of Cellular
Group Shares, Telecom Group Shares and/or Aerial Group Shares or any part
thereof to be made to the holders of Common Shares and Series A Common Shares.
 
    "FAIR VALUE OF NET PROCEEDS" shall mean, as of any date, with respect to any
Disposition of any of the businesses, assets and liabilities of a Tracking
Group, an amount, if any, equal to the fair value of the gross proceeds of such
Disposition less any payment of, or reasonable provision for, (a) any taxes
related to such Disposition or in respect of any resulting dividend or
redemption, including deferred taxes, but not including any deductions or other
offsets which may be available to the Corporation which are not attributed to
such Tracking Group, (b) any transaction costs, including, without limitation,
any legal, investment banking and accounting fees and expenses and (c) any
liabilities and other obligations (contingent or otherwise) of, or attributed
to, that Tracking Group, including, without limitation, obligations with respect
to committed acquisitions and Convertible Securities attributed to the Tracking
Group, any indemnity or guarantee obligations incurred in connection with the
Disposition or any liabilities for future purchase price adjustments, and any
preferential amounts plus any accumulated and unpaid dividends and other
obligations in respect of any class or series of Preferred Shares or
Undesignated Shares attributed to such Tracking Group (without duplication). For
purposes of this definition, any businesses, assets and liabilities of the
affected Tracking Group which the Board determines to retain after such
Disposition shall be deemed to constitute "reasonable provision" for such amount
of taxes, costs and liabilities (contingent or otherwise). To the extent the
proceeds of any Disposition include any securities or other property other than
cash, the Board shall determine the fair value of such securities or property,
including for the purpose of determining the comparable value thereof if the
Board determines to pay a dividend or redemption price in cash or securities or
other property as provided in this Restated Certificate of Incorporation.
 
                                      B-23
<PAGE>
    "GROUP" shall mean the Aerial Group, the Cellular Group, the Telecom Group
and the TDS Group and any other Group so designated by the Board.
 
    "INITIAL ISSUANCE DATE" shall mean, with respect to a class of stock, the
initial date of issuance of shares of such class of stock.
 
    "INTER-GROUP INTEREST," as of any date, shall mean that part of the
Corporation's equity interest in a Tracking Group which is deemed to be held (or
subsequently acquired) by the Corporation and attributed to a Group other than
the TDS Group. A Tracking Group may not hold an Inter-Group interest in the TDS
Group.
 
    "INTER-GROUP INTEREST FRACTION," as of any date, with respect to any
Investor Group, shall mean a fraction the numerator of which is the Number of
Shares issuable with Respect to Inter-Group Interest in an Issuer Group by such
Investor Group as of such date and the denominator of which is the sum of (a)
the aggregate Number of Shares Issuable with Respect to Inter-Group Interest in
such Issuer Group by all Investor Groups as of such date, (b) the aggregate
number of shares of Tracking Stock of such Issuer Group outstanding as of such
date and (c) the Number of Shares Issuable with Respect to Retained Interest in
such Issuer Group as of such date.
 
    "ISSUER GROUP" shall mean a Tracking Group in which there is an Inter-Group
Interest by an Investor Group.
 
    "INVESTOR GROUP" means a Tracking Group which holds an Inter-Group Interest
in an Issuer Group.
 
    "MARKET CAPITALIZATION" of any class or series of capital stock of the
Corporation on any Trading Day shall mean the product of (a) the Market Value of
one share of such class or series on such Trading Day and (b) the number of
shares of such class or series outstanding at the close of business on such
Trading Day.
 
    "MARKET VALUE" of a share of any class or series of capital stock of the
Corporation on any day shall mean the average of the high and low reported sale
prices regular way of a share of such class or series on such day (if such day
is a Trading Day, and if such day is not a Trading Day, on the Trading Day
immediately preceding such day) or in case no such reported sale takes place on
such Trading Day the average of the reported closing bid and asked prices
regular way of a share of such class or series on such Trading Day, in either
case on the American Stock Exchange or such other national securities exchange
or the Nasdaq National Market on which such class or series is listed, or if the
shares of such class or series are not quoted on the American Stock Exchange or
any other national securities exchange or the Nasdaq National Market on such
Trading Day, the average of the closing bid and asked prices of a share of such
class or series in the over-the-counter market on such Trading Day as furnished
by any New York Stock Exchange member firm selected from time to time by the
Corporation, or if such closing bid and asked prices are not made available by
any such New York Stock Exchange member firm on such Trading Day, the market
value of a share of such class or series as determined by the Board; PROVIDED,
that if the Special Common Shares or Series A Common Shares are not trading on a
national securities exchange or the Nasdaq National Market, and if bid and asked
prices are not available for the Special Common Shares or the Series A Common
Shares, the Market Value of a Special Common Share or a Series A Common Share,
as applicable, shall be deemed to be the same as a Common Share for purposes of
determining Market Value under Sections 8, 10 and 12 hereof; and PROVIDED
FURTHER, that for purposes of determining Market Values under Sections 8, 10 and
12 hereof (a) the "Market Value" of a share of any series of Common Stock on any
day prior to the "ex" date or any similar date for any dividend or distribution
paid or to be paid with respect to such series of Common Stock shall be reduced
by the fair market value of the per share amount of such dividend or
distribution as determined by the Board and (b) the "Market Value" of a share of
any series of Common Stock on any day prior to (i) the effective date of any
subdivision (by stock split or otherwise) or combination (by reverse stock split
or otherwise) of outstanding shares of such series of Common Stock or (ii) the
"ex" date or any similar date for any dividend or distribution with respect to
any such series of Common Stock in shares of such series of Common Stock, shall
be appropriately adjusted to reflect such subdivision, combination, dividend or
distribution.
 
    "MERGER," shall mean the merger of TDS Iowa with and into the Corporation.
 
    "NUMBER OF SHARES ISSUABLE WITH RESPECT TO INTER-GROUP INTEREST" shall mean,
with respect to any Tracking Group (for purposes of this definition, the
("Issuer Group"), the number of shares of Tracking Stock of the Issuer Group
(the ("Issuer Group Shares") which are attributed to, and that could be issued
or sold by the Corporation for the benefit of, another Tracking Group (for
purposes of this definition, the ("Investor Group"). Initially, the Number of
Shares Issuable with Respect to Inter-Group Interest in each Tracking Group
shall be zero, and shall from time to time thereafter, as applicable, be:
 
                                      B-24
<PAGE>
        (a) adjusted as appropriate to reflect subdivisions (by stock split or
    otherwise) and combinations (by reverse stock split or otherwise) of the
    Issuer Group Shares and dividends or distributions of Issuer Group Shares to
    the holders thereof and other reclassifications of the Issuer Group Shares
    or similar transactions;
 
        (b) decreased (but not to less than zero) by (i) the aggregate number of
    Issuer Group Shares issued or sold by the Corporation, for cash, securities
    or other property, the proceeds of which are attributed to the Investor
    Group, (ii) the aggregate number of Issuer Group Shares issued or delivered
    upon conversion, exercise or exchange of Convertible Securities, the
    proceeds of which are attributed to the Investor Group, (iii) the aggregate
    number of Issuer Group Shares issued or delivered by the Corporation as a
    dividend or distribution to holders of shares of the Investor Group, (iv)
    the aggregate number of Issuer Group Shares issued or delivered upon the
    conversion, exercise or exchange of any Convertible Securities issued or
    delivered by the Corporation as a dividend or distribution or by
    reclassification or exchange to holders of shares of the Investor Group, and
    (v) the aggregate number of Issuer Group Shares (rounded, if necessary, to
    the nearest whole number), equal to the aggregate fair value (as determined
    by the Board) of assets or properties attributed to the Issuer Group that
    are transferred from the Issuer Group to the Investor Group in consideration
    of a reduction in the Number of Shares Issuable with Respect to Inter-Group
    Interest by the Investor Group in the Issuer Group, divided by the Market
    Value of one Issuer Group Share as of the date of such transfer;
 
        (c) increased by (i) the aggregate number of any Issuer Group Shares
    which are retired or otherwise cease to be outstanding following their
    purchase with funds attributed to the Investor Group and (ii) a number
    (rounded, if necessary, to the nearest whole number), equal to the fair
    value (as determined by the Board) of assets or properties theretofore
    attributed to the Investor Group that are contributed to the Issuer Group in
    consideration of an increase in the Number of Shares Issuable with Respect
    to Inter-Group Interest in the Issuer Group by the Investor Group, divided
    by the Market Value of one Issuer Group Share as of the date of such
    contribution; and
 
        (d) adjusted as may be appropriate to reflect other transactions between
    the Issuer Group and the Investor Group, as determined in good faith by the
    Board.
 
    Whenever a change in the Number of Shares Issuable with Respect to
Inter-Group Interest with respect to any Group occurs, the Corporation shall
prepare and file a statement of such change with the Secretary of the
Corporation.
 
    "NUMBER OF SHARES ISSUABLE WITH RESPECT TO RETAINED INTEREST" shall mean the
number of shares of a class of Tracking Stock of a Tracking Group (for purposes
of this definition, the "Issuer Group") that are attributed to, and could be
issued or sold by the Corporation for the account of, the TDS Group in respect
of a Retained Interest by the TDS Group in such Issuer Group. The Number of
Shares Issuable with Respect to Retained Interest shall initially be determined
by the Board, and shall from time to time thereafter, as applicable, be:
 
        (a) adjusted as appropriate to reflect subdivisions (by stock split or
    otherwise) and combinations (by reverse stock split or otherwise) of the
    Issuer Group Shares, and dividends or distributions of Issuer Group Shares
    to the holders thereof and other reclassifications of Issuer Group Shares or
    similar transactions;
 
        (b) decreased (but not to less than zero) by (i) the aggregate number of
    Issuer Group Shares issued or sold by the Corporation, for cash, securities
    or other property, the proceeds of which are attributed to the TDS Group,
    (ii) the aggregate number of Issuer Group Shares issued or delivered upon
    conversion, exercise or exchange of Convertible Securities (including
    Pre-Distribution Convertible Securities), the proceeds of which are
    attributed to the TDS Group, (iii) the aggregate number of Issuer Group
    Shares issued or delivered by the Corporation as a dividend or distribution
    to holders of Common Shares, Series A Common Shares or Special Common
    Shares, (iv) the aggregate number of Issuer Group Shares issued or delivered
    upon the conversion, exercise or exchange of any Convertible Securities
    issued or delivered by the Corporation as a dividend or distribution or by
    reclassification or exchange to holders of shares of Common Shares, Series A
    Common Shares or Special Common Shares, and (v) the aggregate number of
    Issuer Group Shares (rounded, if necessary, to the nearest whole number),
    equal to the aggregate fair value (as determined by the Board) of assets or
    properties attributed to the Issuer Group that are transferred from the
    Issuer Group to the TDS Group in consideration of a reduction in the Number
    of Shares Issuable with Respect to Retained Interest in the Issuer Group,
    divided by the Market Value of one Issuer Group Share as of the date of such
    transfer;
 
        (c) increased by (i) the aggregate number of any Issuer Group Shares
    which are retired or otherwise cease to be outstanding following their
    purchase with funds attributed to the TDS Group and (ii) a number
 
                                      B-25
<PAGE>
    (rounded, if necessary, to the nearest whole number), equal to the fair
    value (as determined by the Board) of assets or properties theretofore
    attributed to the TDS Group that are contributed to the Issuer Group in
    consideration of an increase in the Number of Shares Issuable with Respect
    to Retained Interest in the Issuer Group, divided by the Market Value of one
    Issuer Group Share as of the date of such contribution; and
 
        (d) adjusted as may be appropriate to reflect other transactions between
    the Issuer Group and the TDS Group, as determined in good faith by the
    Board.
 
        Whenever a change in the Number of Shares Issuable with Respect to
    Retained Interest in any Tracking Group occurs, the Corporation shall
    prepare and file a statement of such change with the Secretary of the
    Corporation.
 
    "NUMBER OF SHARES ISSUABLE TO THIRD PARTIES" shall mean, as of any date, the
number of shares of any class or series of Common Stock (such shares are herein
referred to as "Shares Issuable to Third Parties") which are issuable (a) as
Committed Acquisition Shares, (b) pursuant to the conversion, exercise or
exchange of Convertible Securities or (c) otherwise, other than shares which are
deemed to be issuable with respect to a Retained Interest or with respect to an
Inter-Group Interest, as may be determined in good faith by the Board
considering any relevant factors, including whether the holders of Convertible
Securities would derive an economic benefit from the conversion, exercise or
exchange of such Convertible Securities which exceeds the economic cost thereof
or the economic benefit of not converting, exercising or exchanging such
Convertible Securities.
 
    "OUTSTANDING INTEREST FRACTION," as of any date, shall mean, with respect to
any class of Tracking Stock, a fraction the numerator of which is the aggregate
number of shares of such class of Tracking Stock outstanding on such date and
the denominator of which is the sum of (a) such aggregate number of shares, (b)
the Number of Shares Issuable with Respect to Retained Interest of such class of
Tracking Stock as of such date and (c) the aggregate Number of Shares Issuable
with Respect to Inter-Group Interest by all other Tracking Groups in such
Tracking Stock, if any, as of such date.
 
    "PRE-81 PREFERRED SHARES," as of any date shall mean the series of Preferred
Shares of the Corporation which are issued in the Merger in exchange for series
of Preferred Shares of TDS Iowa that were originally issued before October 31,
1981, as identified in Section A of Article IV.
 
    "PRE-DISTRIBUTION CONVERTIBLE SECURITIES" shall mean Convertible Securities
that are outstanding on the record date for the Distribution and are, prior to
such date, convertible into or exercisable or exchangeable for either Common
Shares or Series A Common Shares; PROVIDED, if the record date for the
Distribution of any of the Cellular Group Shares, Telecom Group Shares or Aerial
Group Shares is not the same date, the Board shall determine which, if any,
Convertible Securities (or proportion thereof) that are issued after the first
record date for any part of the Distribution, shall represent Pre-Distribution
Convertible Securities.
 
    "POST-81 PREFERRED SHARES," as of any date shall mean the series of
Preferred Shares of the Corporation which are issued in the Merger in exchange
for series of Preferred Shares of TDS Iowa that were originally issued after
October 31, 1981, as identified in Section A of Article IV.
 
    "QUALIFYING SUBSIDIARY" or "QUALIFYING SUBSIDIARIES" as of any date shall
mean a Subsidiary or Subsidiaries of the Corporation (a) in which (i) the
Corporation's ownership and voting interest is sufficient to satisfy the
requirements of the Internal Revenue Service for a distribution of the
Corporation's interest in such Subsidiary to the holders of Common Stock of the
Corporation that is tax-free to such holders or (ii) the Corporation owns,
directly or indirectly, all of the issued and outstanding capital stock and (b)
which hold(s) all of the assets and liabilities attributed to a Tracking Group.
 
    "RELATED BUSINESS TRANSACTION" shall mean any Disposition of all or
substantially all of the properties and assets of a Tracking Group in which the
Corporation receives as proceeds of such Disposition primarily equity securities
(including, without limitation, capital stock, convertible securities,
partnership or limited partnership interests and other types of equity
securities, without regard to the voting power or contractual or other
management or governance rights related to such equity securities) of the
purchaser or acquiror of such assets and properties of such Tracking Group, any
entity which succeeds (by merger, formation of a joint venture enterprise or
otherwise) to such assets and properties of such Tracking Group or a third party
issuer, which purchaser, acquiror or other issuer is engaged or proposes to
engage primarily in one or more businesses similar or complementary to the
businesses conducted by such Tracking Group prior to such Disposition, as
determined in good faith by the Board.
 
                                      B-26
<PAGE>
    "RETAINED INTEREST AVAILABLE DIVIDEND AMOUNT," as of any date, shall mean,
with respect to a Tracking Group, an amount (not less than zero) equal to the
product of (a) a fraction, the numerator of which is the Retained Interest
Fraction and the denominator of which is the Outstanding Interest Fraction with
respect to such Tracking Group multiplied by (b) the Available Dividend Amount
of such Tracking Group.
 
    "RETAINED INTEREST FRACTION," as of any date, shall mean, with respect to
any class of Tracking Stock, a fraction the numerator of which is the Number of
Shares Issuable with Respect to Retained Interest of such class of Tracking
Stock as of such date and the denominator of which is the sum of (a) such Number
of Shares Issuable with Respect to Retained Interest as of such date, (b) the
aggregate Number of Shares Issuable with Respect to Inter-Group Interest by all
other Tracking Groups in such Tracking Stock, if any, as of such date, and (c)
the aggregate number of shares of such class of Tracking Stock outstanding as of
such date.
 
    "SHARES ISSUABLE TO THIRD PARTIES" shall have the meaning set forth in the
definition of "Number of Shares Issuable to Third Parties."
 
    "SUBSIDIARY" shall mean, with respect to any person or entity, any
corporation or partnership 50% or more of whose outstanding voting securities or
partnership interests, as the case may be, are directly or indirectly owned by
such person or entity.
 
    "TDS GROUP" shall mean, as of any date that any shares of any class or
series of Tracking Stock have been issued and continue to be outstanding:
 
        (a) the interest of the Corporation and all of its subsidiaries,
    (including any successors thereto by merger, consolidation or sale of all or
    substantially all of its assets) and their respective properties and assets,
    other than (except as provided in paragraph (e) of this definition) the
    interest of the Corporation and its subsidiaries in Aerial and its
    subsidiaries, TDS Telecom and its subsidiaries, U.S. Cellular and its
    subsidiaries, and any other subsidiaries attributed by the Board to a Group
    other than the TDS Group (including any successors thereto by merger,
    consolidation or sale of all or substantially all of its assets, whether or
    not in connection with Related Business Transactions) and their respective
    businesses, assets and liabilities;
 
        (b) all businesses, assets and liabilities of the Corporation or any of
    its subsidiaries to the extent attributed to the TDS Group by the Board,
    whether or not such businesses, assets or liabilities are businesses, assets
    and liabilities of the TDS Group or any of its subsidiaries (or a successor
    as described in clause (a) of this sentence);
 
        (c) all businesses, assets and liabilities contributed or otherwise
    transferred to the TDS Group from any of the Tracking Groups;
 
        (d) the interest of the Corporation or any of its subsidiaries in the
    businesses, assets and liabilities acquired by the Corporation or any of its
    subsidiaries for the TDS Group, as determined by the Board;
 
        (e) a proportionate undivided interest in each and every business, asset
    and liability attributed to a Tracking Group equal to the Retained Interest
    Fraction of the TDS Group in such other Tracking Group; and
 
        (f)  such other businesses, assets and liabilities and such adjustments
    to the foregoing as may be contemplated hereby or which may be determined in
    good faith by the Board.
 
    If a Retained Interest in any Tracking Group is then existing and if the
Corporation shall pay a dividend or make any other distribution with respect to
holders of Tracking Stock of such Tracking Group payable in cash, securities or
other property of the Corporation attributed to such Tracking Group, other than
shares of Tracking Stock, the TDS Group shall be deemed to hold an amount or
fair value thereof (as determined in good faith by the Board) of such cash,
securities or other property equal to the amount or fair value so distributed
multiplied by a fraction the numerator of which is such Tracking Group's
Retained Interest Fraction and the denominator of which is such Tracking Group's
Outstanding Interest Fraction in effect immediately prior to the record date for
such dividend or other distribution and, to the extent interest or dividends are
paid or other distributions are made on any securities other than shares of
Tracking Stock so distributed to the holders of such shares of Tracking Stock,
such Tracking Group shall no longer include a corresponding ratable amount or
fair value of the kind of assets paid as such interest or dividends or other
distributions in respect of such securities deemed to be held by the TDS Group.
 
    From and after any transfer of cash, securities or other property from a
Tracking Group to the TDS Group, such Tracking Group shall no longer include the
cash, securities or other property so transferred and the TDS Group shall
include such cash, securities or other property and from and after any transfer
of cash, securities or other
 
                                      B-27
<PAGE>
property from the TDS Group to a Tracking Group, the TDS Group shall no longer
include the cash, securities or other property so transferred and such Tracking
Group shall include such cash, securities or other property.
 
    "TDS GROUP SHARES" shall mean the Series A Common Shares, Common Shares and
any issued Special Common Shares of the Corporation and any other shares of
capital stock designated by the Board as TDS Group Shares.
 
    "TDS IOWA" shall mean Telephone and Data Systems, Inc., an Iowa corporation.
 
    "TDS TELECOM" shall mean TDS Telecommunications Corporation, a Delaware
corporation.
 
    "TELECOM GROUP" shall mean, as of any date that any shares of Telecom Group
Stock have been issued and continue to be outstanding:
 
        (a) the interest of the Corporation or any of its subsidiaries in TDS
    Telecom and its subsidiaries (including any successor thereto by merger,
    consolidation or sale of all or substantially all of its assets, whether or
    not in connection with a Related Business Transaction) and their respective
    businesses, assets and liabilities, except any of such businesses, assets or
    liabilities which have been attributed by the Board to another Group;
 
        (b) all businesses, assets and liabilities of the Corporation or any of
    its subsidiaries to the extent attributed to the Telecom Group by the Board,
    whether or not such businesses, assets or liabilities are businesses, assets
    and liabilities of TDS Telecom or any of its subsidiaries (or a successor as
    described in clause (a) of this sentence);
 
        (c) all businesses, assets and liabilities contributed or otherwise
    transferred to the Telecom Group from the TDS Group or any of the other
    Tracking Groups;
 
        (d) the interest of the Corporation or any of its subsidiaries in the
    businesses, assets and liabilities acquired by the Corporation or any of its
    subsidiaries for the Telecom Group, as determined by the Board;
 
        (e) a proportionate undivided interest in each and every business, asset
    and liability attributed to another Tracking Group equal to the Inter-Group
    Interest Fraction, if any, of the Telecom Group in such other Tracking
    Group; and
 
        (f)  such other businesses, assets and liabilities and such adjustments
    to the foregoing as may be contemplated hereby or which may be determined in
    good faith by the Board.
 
    If a Retained Interest in the Telecom Group is then existing and if the
Corporation shall pay a dividend or make any other distribution with respect to
Telecom Group Common Shares payable in cash, securities or other property of the
Corporation attributed to the Telecom Group, other than Telecom Group Common
Shares, the TDS Group shall be deemed to hold an amount or fair value thereof
(as determined in good faith by the Board) of such cash, securities or other
property equal to the amount or fair value so distributed multiplied by a
fraction the numerator of which is the Telecom Group's Retained Interest
Fraction and the denominator of which is the Telecom Group's Outstanding
Interest Fraction in effect immediately prior to the record date for such
dividend or other distribution and, to the extent interest or dividends are paid
or other distributions are made on any securities other than Telecom Group
Common Shares so distributed to the holders of Telecom Group Common Shares, the
Telecom Group shall no longer include a corresponding ratable amount or fair
value of the kind of assets paid as such interest or dividends or other
distributions in respect of such securities deemed to be held by the TDS Group.
 
    If an Inter-Group Interest in the Telecom Group is then existing and if the
Corporation shall pay a dividend or make any other distribution with respect to
Telecom Group Common Shares payable in cash, securities or other property of the
Corporation attributed to the Telecom Group other than Telecom Group Common
Shares, the Tracking Group holding the Inter-Group Interest in the Telecom Group
shall be deemed to hold an amount or fair value thereof (as determined in good
faith by the Board) of such cash, securities or other property equal to the
amount or fair value so distributed multiplied by a fraction the numerator of
which is the Inter-Group Interest Fraction in the Telecom Group in effect
immediately prior to the record date for such dividend or other distribution and
the denominator of which is equal to the Telecom Group's Outstanding Interest
Fraction in effect immediately prior to the record date for such dividend or
other distribution and, to the extent interest or dividends are paid or other
distributions are made on any securities other than Telecom Group Common Shares
so distributed to the holders of Telecom Group Common Shares, the Telecom Group
shall no longer include a corresponding ratable amount or fair value of the kind
of assets paid as such interest or dividends or other distributions in respect
of such securities deemed to be held by the Tracking Group holding the
Inter-Group Interest in the Telecom Group.
 
                                      B-28
<PAGE>
    From and after any transfer of cash, securities or other property from the
Telecom Group to the TDS Group or to another Tracking Group, the Telecom Group
shall no longer include the cash, securities or other property so transferred
and the TDS Group or such other Tracking Group, as the case may be, shall
include such cash, securities or other property, and from and after any transfer
of cash, securities or other property from the TDS Group or another Tracking
Group to the Telecom Group, the TDS Group or such other Tracking Group, as the
case may be, shall no longer include the cash, securities or other property so
transferred and the Telecom Group shall include such cash, securities or other
property.
 
    "TELECOM GROUP COMMON SHARES" shall mean the TDS Telecommunications Group
Common Shares, par value $0.01 per share.
 
    "TRACKING GROUP" shall mean the Aerial Group, the Cellular Group and the
Telecom Group, and any other business group designated as a Tracking Group by
the Board.
 
    "TRACKING STOCK" shall mean the Aerial Group Common Shares, the Cellular
Group Common Shares and the Telecom Group Common Shares, and any other shares of
capital stock of the Corporation which the Board designates as Tracking Stock.
 
    "TRADING DAY" shall mean each weekday other than a day on which the relevant
class of Common Stock of the Corporation is not traded on any national
securities exchange or quoted on the Nasdaq Stock Market or on the
over-the-counter market.
 
    "U.S. CELLULAR" shall mean United States Cellular Corporation, a Delaware
corporation.
 
    20.  DETERMINATIONS BY BOARD.  The Board of Directors shall make such
determinations with respect to the businesses, assets and liabilities to be
attributed to the Groups, the items of income and expenses for purposes of
determining the Corporation Earnings (Loss) attributable to the Groups, the
application of the provisions of this Article IV to transactions to be engaged
in by the Corporation and the powers, preferences and relative, participating,
optional and other special rights of the holders of the classes of Common Stock,
and the qualifications and restrictions thereon, provided by the Restated
Certificate of Incorporation of the Corporation, as may be or become necessary
or appropriate to the exercise of such powers, preferences and relative,
participating, optional and other special rights, including, without limiting
the foregoing, the determinations referred to in the following paragraphs of
this paragraph 20. A record of any such determination shall be filed with the
records of the actions of the Board of Directors.
 
        (a) Upon any acquisition by the Corporation or its subsidiaries of any
    assets or business, or any assumption of liabilities, outside of the
    ordinary course of business of any then existing Group, the Board of
    Directors shall determine whether such assets, business and liabilities (or
    an interest therein) shall be for the benefit of one Group or that an
    interest therein shall be partly for the benefit of one or more Groups.
 
        (b) Upon any issuance of any shares of Tracking Stock at a time when the
    Number of Shares Issuable with Respect to Retained Interest or the Number of
    Shares Issuable with Respect to Inter-Group Interest is more than zero, the
    Board of Directors shall determine, based on the use of the proceeds of such
    issuance and any other relevant factors, whether all or any part of the
    shares of such Tracking Stock so issued should reduce the Number of Shares
    Issuable with Respect to Retained Interest or the Number of Shares Issuable
    with Respect to Inter-Group Interest, as the case may be.
 
        (c) Upon any issuance by the Corporation or any subsidiary thereof of
    any Convertible Securities that are convertible into or exchangeable or
    exercisable for shares of a class of Tracking Stock, if at the time such
    Convertible Securities are issued the Number of Shares Issuable with Respect
    to Retained Interest or the Number of Shares Issuable with Respect to
    Inter-Group Interest is greater than zero, the Board of Directors shall
    determine whether, upon conversion, exchange or exercise of such Convertible
    Securities, the issuance of shares of such Tracking Stock pursuant thereto
    shall, in whole or in part, reduce the Number of Shares Issuable with
    Respect to Retained Interest or the Number of Shares Issuable with Respect
    to Inter-Group Interest, taking into consideration the use of the proceeds
    of such issuance of Convertible Securities and any other relevant factors.
 
        (d) Upon any repurchase by the Corporation or any subsidiary thereof of
    shares of any class of Tracking Stock, the Board of Directors shall
    determine, based on the source of funds used and any other relevant factors,
    whether all or any part of the shares of such Tracking Stock so purchased
    shall increase the Number of
 
                                      B-29
<PAGE>
    Shares Issuable with Respect to Retained Interest or the Number of Shares
    Issuable with Respect to Inter-Group Interest, as the case may be.
 
    If the Board designates any new class or series of capital stock, the Board
shall make such determinations under this Restated Certificate of Incorporation
as the Board determines may be necessary or appropriate in connection therewith.
 
    Subject to applicable law, any determinations made in good faith by the
Board under any provision of this Article IV or any certificate of designation
filed pursuant hereto, and any determinations with respect to any Group or the
rights of holders of any class or series of capital stock made pursuant to or in
furtherance of this Article IV, shall be final and binding on all shareholders.
 
                                   ARTICLE V
 
    The address of the registered office of the Corporation is Corporation Trust
Company, in the County of New Castle, and the name of its registered agent at
such address is Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801.
 
                                   ARTICLE VI
 
    A.  NUMBER AND CLASSES OF DIRECTORS.  The number of directors of the
Corporation shall be fixed by or pursuant to the Bylaws of the Corporation, but
shall not be less than three. The directors shall be divided into three classes
and each class shall be as nearly equal in number as possible. The term of
office of directors of the second class shall expire at the annual meeting of
shareholders in 1998; that of the third class shall expire at the annual meeting
of shareholders in 1999; and that of the first class shall expire at the annual
meeting of shareholders in 2000. At each annual meeting after such
classification, the number of directors equal to the number of the class, the
term of which expired at the time of such meeting, shall be elected to hold
office until the third succeeding annual meeting of shareholders. If the number
of directors fixed by or pursuant to the Bylaws of the Corporation is changed at
any time, any newly created directorships or any decrease in directorships shall
be so apportioned among the classes by the Board so as to make all classes as
nearly equal in number as possible; PROVIDED, HOWEVER, that no decrease in the
number of directors shall shorten the term of any incumbent director.
 
    B.  REMOVAL.  Any one or more of or all of the directors may be removed with
or without cause only by a vote of the holders of at least a majority of the
voting power of shares then entitled to vote in the election of such directors.
 
    C.  BALLOTS.  The election of directors need not be by written ballot unless
the Bylaws of the Corporation so provide.
 
                                  ARTICLE VII
 
    To the extent permitted by the DGCL or any other applicable law presently or
hereafter in effect, no director of the Corporation shall be personally liable
to the Corporation or its shareholders for monetary damages for breach of any
fiduciary duty owed to the Corporation or its shareholders; PROVIDED that this
provision shall not relieve a director from liability (a) for any breach of the
director's duty of loyalty to the Corporation or its shareholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) for transactions from which the director derives
an improper personal benefit or (d) under Section 174 of the DGCL. This Article
shall not apply to acts or omissions occurring prior to its effectiveness. No
amendment to, expiration of or repeal of this Article shall apply to or have any
effect on the liability or alleged liability of any director of the Corporation
for or with respect to any acts or omissions of such director occurring prior to
such amendment, expiration or repeal.
 
                                  ARTICLE VIII
 
    The Board of the Corporation, when evaluating any proposal or offer of
another party to (a) make a tender or exchange offer for any equity security of
the Corporation; (b) merge or consolidate the Corporation with another
corporation; or (c) purchase or otherwise acquire all or substantially all of
the properties and assets of the Corporation may, in connection with the
exercise of its judgment in determining what is in the best interests of the
Corporation and its shareholders, give due consideration to all factors the
directors deem relevant, including without limitation (i) the effects on the
customers of the Corporation or any of its subsidiaries or on such other
constituencies of the Corporation as the Board considers relevant under the
circumstances; (ii) not only the
 
                                      B-30
<PAGE>
consideration being offered (after taking into account corporate and shareholder
taxes) in relation to the then current market price for the Corporation's
outstanding shares of capital stock, but also the Board's estimate of the future
value of the Corporation (including the unrealized value of its properties and
assets) as an independent going concern; (iii) the purpose of the Corporation,
and any of its subsidiaries, to provide quality products and services on a
long-term basis; and (iv) the long-term as well as short-term interests of the
Corporation and its shareholders, including the possibility that such interests
may be best served by the continued independence of the Corporation. If, on the
basis of such factors, the Board so determines that a proposal or offer to
acquire or merge the Corporation, or to sell its assets, is not in the best
interests of the Corporation, it may reject the proposal or offer. If the Board
determines to reject any such proposal or offer, the Board shall have no
obligation to facilitate, to remove any barriers to, or to refrain from impeding
the proposal or offer except as may be required by applicable law. Except to the
extent required by applicable law, the consideration of any or all of such
factors shall not be a violation of the business judgment rule or of any duty of
the directors to the shareholders or a group of shareholders, even if the
directors reasonably determine that any such factor or factors outweigh the
financial or other benefits to the Corporation or a shareholder or group of
shareholders.
 
                                   ARTICLE IX
 
    In furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized to adopt, amend or repeal the Bylaws
of the Corporation.
 
                                   ARTICLE X
 
    Subject to the last sentence of this paragraph, each person who is or was a
director or officer of the Corporation, and each person who serves or served at
the request of the Corporation as a director or officer of another enterprise,
shall be indemnified by the Corporation in accordance with, and to the fullest
extent authorized by, the DGCL as it may be in effect from time to time. The
right of indemnity provided herein shall not be deemed exclusive of any other
rights to which any person may be entitled under any Bylaw, agreement, vote of
shareholders or directors, or otherwise. The Corporation may provide
indemnification to any such person, by agreement or otherwise, on such terms and
conditions as the Board of Directors may approve. Any agreement for
indemnification of any director, officer, employee or other person may provide
indemnification rights which are broader or otherwise differ from those set
forth herein. In furtherance and not in limitation of the powers conferred by
statute, the Board is expressly authorized to adopt, amend or repeal the Bylaws
of the Corporation regarding the manner and conditions under which
indemnification shall be provided hereunder by the Corporation and the extent
thereof from time to time as deemed appropriate by the Board in the best
interests of the Corporation.
 
    SECOND:    The Board of Directors of the Corporation, at a meeting duly
called at which a quorum existed, duly adopted resolutions proposing and
approving and declaring advisable this Restated Certificate of Incorporation of
the Corporation.
 
    THIRD:    Pursuant to Section 228 of the DGCL, the adoption of this Restated
Certificate of Incorporation was consented to in writing by the sole shareholder
of the Corporation.
 
    FOURTH:    This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of sections 242 and 245 of the General
Corporation Law of the State of Delaware.
 
    IN WITNESS WHEREOF, Telephone and Data Systems, Inc. has caused this
Restated Certificate to be signed by its President this     day of
             , 1998.
 
<TABLE>
<S>                             <C>  <C>
                                TELEPHONE AND DATA SYSTEMS, INC.
 
                                By:
                                     --------------------------------------
                                     LeRoy T. Carlson, Jr.
                                     PRESIDENT
</TABLE>
 
                                      B-31
<PAGE>
                                  ATTACHMENT I
                                       TO
                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                        TELEPHONE AND DATA SYSTEMS, INC.
 
    INTRODUCTORY NOTE:  This Attachment I to the Restated Certificate of
Incorporation of Telephone and Data Systems, Inc., a Delaware corporation ("TDS
Delaware"), describes the designations, rights, privileges and limitations of
the series of Preferred Shares of TDS Delaware which will be issued in the
Merger (as defined in the Restated Certificate of Incorporation) in exchange for
Preferred Shares of Telephone and Data Systems, Inc., an Iowa corporation ("TDS
Iowa"). Unless otherwise required by the context, for purposes of this
Attachment I, (i) references to dates of issuance of any series of Preferred
Shares shall mean the original dates of issuance of the related series of
Preferred Shares of TDS Iowa, (ii) references to conversion rates of any series
of Preferred Shares shall mean the conversion rates included in the original
certificate of designation of such series by TDS Iowa, without giving effect to
stock splits or other events after the original dates of issuance requiring
adjustment to such conversion rates, and (iii) references to all conversion or
redemption dates and periods shall be based on the original issuance date of
each series of Preferred Shares by TDS Iowa.
 
1. $6.00 CUMULATIVE VOTING SERIES A PREFERRED STOCK, $.01 PAR VALUE, LIQUIDATION
   VALUE $100.00 PER SHARE
 
    (a)  DESIGNATION--The designation of this preferred stock shall be "$6.00
Cumulative Voting Series A Preferred Stock" (hereinafter referred to as "Series
A Preferred Stock").
 
    (b)  DIVIDENDS--The holders of the Series A Preferred Stock shall be
entitled to receive, when and as declared by the board of directors of the
Corporation, out of any assets of the Corporation available for dividends
pursuant to the laws of the State of Delaware, preferential dividends at the
rate of six dollars ($6.00) per annum per share and no more. The dividends, when
payable, shall be paid quarterly on the first days of January, April, July, and
October in each year, before any dividends shall be declared or paid upon or set
apart for the common stock of the Company for that year. Such dividends upon the
preferred stock shall be cumulative from the date of issue thereof so that if
dividends for any past dividend period at the rate of six dollars ($6.00) per
annum shall not have been paid thereon or declared and a sum sufficient for
payment thereof set apart, the deficiency shall be fully paid or set apart but
without interest, before any dividend shall be paid upon or set apart for the
common stock. Whenever the full dividend upon the preferred stock for all past
dividend periods shall have been paid and the full dividend thereon for the then
current dividend period shall have been paid or declared and a sum sufficient
for the payment thereof set apart, dividends upon the common stock may be
declared by the board of directors out of the remainder of the assets available
therefor.
 
    (c)  REDEMPTION--The Corporation may, at the option of the board of
directors, redeem the whole or any part of the outstanding Series A Preferred
Stock at any time after January 3, 1974. If such redemption is made, the holders
of any shares of Series A Preferred Stock redeemed shall be entitled to receive:
 
    $105.00 per share if redeemed on or before January 3, 1975;
 
    $104.50 if redeemed after January 3, 1975 but on or before January 3, 1976;
 
    $104.00 if redeemed after January 3, 1976 but on or before January 3, 1977;
 
    $103.50 if redeemed after January 3, 1977 but on or before January 3, 1978;
 
    $103.00 if redeemed after January 3, 1978 but on or before January 3, 1979;
 
    $102.50 if redeemed after January 3, 1979 but on or before January 3, 1980;
 
    $102.00 if redeemed after January 3, 1980 but on or before January 3, 1981;
 
    $101.50 if redeemed after January 3, 1981 but on or before January 3, 1982;
 
    $101.00 if redeemed after January 3, 1982 but on or before January 3, 1983;
 
    $100.50 if redeemed after January 3, 1983 but on or before January 3, 1984;
 
    $100.00 if redeemed after January 3, 1984;
 
plus an amount equal to all dividends accrued and unpaid to the redemption date.
 
                                      BI-1
<PAGE>
    Notice of election to redeem shall be mailed to each holder of stock to be
redeemed not less than thirty (30) days prior to the date upon which the stock
is to be redeemed. In case less than all of the outstanding Series A Preferred
Stock is to be redeemed, the amount to be redeemed and the method of effecting
such redemption, whether by lot or pro rata or otherwise, may be determined by
the board of directors. If on or before the redemption date named in such
notice, the funds necessary for such redemption shall have been set aside by the
Corporation so as to be available for payment on demand to the holders of the
preferred stock so called for redemption, then, notwithstanding that any
certificate of the preferred stock so called for redemption shall not have been
surrendered for cancellation, the dividends thereon shall cease to accrue from
and after the date of redemption so designated, and all rights with respect to
such preferred stock so called for redemption, including any right to vote or
otherwise participate in the determination of any proposed corporate action,
shall forthwith after such redemption date cease and determine, except only the
right of the holder to receive the redemption price therefor, but without
interest. Stock redeemed pursuant to the provisions hereof or any Series A
Preferred Stock purchased or otherwise acquired shall not be reissued but shall
be canceled and proceedings shall be taken in the manner prescribed by statute
to reduce the shares accordingly.
 
    (d)  VOTING RIGHTS--The holders of the shares of Series A Preferred Stock
shall be entitled to one vote for each share of such stock standing in the name
of the holder on the books of the Corporation and shall vote together with the
holders of the common stock of the Corporation as one class.
 
    (e)  PREEMPTIVE RIGHTS--No holder of any shares of Series A Preferred Stock
shall have any preemptive right to subscribe for or acquire additional shares of
the Corporation of the same or any other class, whether such shares be hereby or
hereafter authorized; and no holder of Series A Preferred Stock shall have any
preemptive right to acquire any shares which may be held in the treasury of the
Corporation; all such additional or treasury shares may be sold for such
consideration at such time and to such person or persons as the board of
directors may from time to time determine.
 
    (f)  LIQUIDATION RIGHTS--In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
the holders of the Series A Preferred Stock shall be entitled, before any assets
of the Corporation shall be distributed among or paid over to the holders of the
common stock, to receive out of the assets of the Company $100.00 per share of
Series A Preferred Stock. If upon any such dissolution, liquidation or winding
up, the assets of the Corporation available for payment to stockholders are not
sufficient to make payment in full to the holders of the Series A Preferred
Stock, payment shall be made to such holders ratably in accordance with the
number of shares held by them and, in case there shall then be more than one
series of the Preferred Stock ratably in accordance with the respective
distributive amount to which such holders shall be entitled.
 
2. $7.00 CUMULATIVE CONVERTIBLE VOTING SERIES B PREFERRED STOCK, $.01 PAR VALUE,
   LIQUIDATION VALUE $100.00 PER SHARE
 
    (a)  DESIGNATION--The designation of this preferred stock shall be "$7.00
Cumulative Convertible Voting Series B Preferred Stock" (hereinafter referred to
as "Series B Preferred Stock").
 
    (b)  DIVIDENDS--The holders of the Series B Preferred Stock shall be
entitled to receive, when and as declared by the board of directors of the
Corporation, out of any assets of the Corporation available for dividends
pursuant to the laws of the State of Delaware, preferential dividends at the
rate of seven dollars ($7.00) per annum per share and no more. The dividends,
when payable, shall be paid quarterly on the first days of March, June,
September and December in each year, before any dividends shall be declared or
paid upon or set apart for the common stock of the Company for that year. Such
dividends upon the Series B Preferred Stock shall be cumulative from the date of
issue thereof so that if dividends for any past dividend period at the rate of
seven dollars ($7.00) per annum shall not have been paid thereon or declared and
a sum sufficient for payment thereof set apart, the deficiency shall be fully
paid or set apart but without interest, before any dividend shall be paid upon
or set apart for the common stock. Provided, however, that no dividends shall be
declared on the shares of any series of preferred stock for any dividend period
unless the full dividend for all prior dividend periods shall have been declared
or shall be declared at the same time upon all preferred stock outstanding
during such prior dividend periods, and further provided, that no dividends
shall be declared on the shares of any series of preferred stock unless a
dividend for the same period shall be declared at the same time upon all
preferred stock outstanding during said period in like proportion to the
dividend rate upon such shares. Whenever the full dividend upon all the
preferred stock for all past dividend periods shall have been paid and the full
dividend thereon for the then current dividend period shall have been paid or
declared and a sum sufficient for the payment thereof set apart, dividends upon
the common stock may be declared by the board of directors out of the remainder
of the assets available therefor.
 
                                      BI-2
<PAGE>
    (c)  REDEMPTION--The Corporation may, at the option of the board of
directors, redeem the whole or any part of the outstanding Series B Preferred
Stock at any time commencing five years after the date of issuance. If such
redemption is made, the holders of any shares of Series B Preferred Stock
redeemed shall be entitled to receive $100 per share plus an amount equal to all
dividends accrued and unpaid to the redemption date.
 
    Notice of election to redeem shall be mailed to each holder of Series B
Preferred Stock to be redeemed not less than thirty (30) days prior to the date
upon which such stock is to be redeemed. In case less than all of the
outstanding Series B Preferred Stock is to be redeemed, the amount to be
redeemed and the method of effecting such redemption, whether by lot or pro rata
or otherwise, may be determined by the board of directors. If on or before the
redemption date named in such notice, the funds necessary for such redemption
shall have been set aside by the Corporation so as to be available for payment
on demand to the holders of the Series B Preferred Stock so called for
redemption, then, notwithstanding that any certificate of the Series B Preferred
Stock so called for redemption shall not have been surrendered for cancellation,
the dividends thereon shall cease to accrue from and after the date of
redemption so designated, and all rights with respect to such Series B Preferred
Stock so called for redemption, including any right to vote or otherwise
participate in the determination of any proposed corporate action, shall
forthwith after such redemption date cease and terminate, except only the right
of the holder to receive the redemption price therefor, but without interest.
Stock redeemed pursuant to the provisions hereof or any Series B Preferred Stock
purchased or otherwise acquired shall not be reissued but shall be canceled and
proceedings shall be taken in the manner prescribed by statute to reduce the
shares accordingly.
 
    (d)  VOTING RIGHTS--The holders of the shares of Series B Preferred Stock
shall be entitled to one vote for each share of such stock standing in the name
of the holder on the books of the Corporation and shall vote together with the
holders of the common stock and the holders of other series of the preferred
stock of the Corporation as one class.
 
    (e)  PREEMPTIVE RIGHTS--No holder of any shares of Series B Preferred Stock
shall have any preemptive right to subscribe for or acquire additional shares of
the Corporation of the same or any other class or series, whether such shares be
hereby or hereafter authorized; and no holder of Series B Preferred Stock shall
have any preemptive right to acquire any shares which may be held in the
treasury of the Corporation; all such additional or treasury shares may be sold
for such consideration at such time and to such person or persons as the board
of directors may from time to time determine.
 
    (f)  CONVERSION--
 
        (1) The Series B Preferred Stock shall be convertible into Common Stock
    as hereinafter provided, and, when and as so converted, such Series B
    Preferred Stock shall be canceled and retired and shall not be reissued as
    such. Any holder of the Series B Preferred Stock may at any time prior to
    five years from the date of issuance convert such stock into full shares of
    the Common Stock of the Corporation at the rate of ten (10) shares of Common
    Stock for each share of Series B Preferred Stock. On presentation and
    surrender to the Corporation at its Offices of the certificates for shares
    of the Series B Preferred Stock to be converted, the holder of such stock
    shall be entitled to receive in exchange therefor certificates for shares of
    the fully paid and non-assessable Common Stock of the Corporation at the
    rate aforesaid, all under suitable regulations to be prescribed by the board
    of directors of the Corporation. Conversion of Series B Preferred Stock in
    the manner aforesaid shall not affect the right of the holder of such stock
    to receive dividends accrued but unpaid on such shares as of the dividend
    payment date immediately prior to conversion.
 
        (2) The number of shares of Common Stock into which each share of Series
    B Preferred Stock is convertible, shall be subject to adjustment from time
    to time as in clauses (A) and (B) of this subparagraph (2):
 
           (A) In case the Corporation shall (i) pay a dividend on its Common
       Stock in shares of the Corporation, (ii) subdivide its outstanding Common
       Stock, (iii) combine the outstanding Common Stock into a smaller number
       of shares, or (iv) issue by reclassification of its Common Stock (whether
       pursuant to a merger or consolidation or otherwise) any shares of the
       Corporation, then the holder of each share of Series B Preferred Stock
       shall be entitled to receive upon the conversion of such share, the
       number of shares of the Corporation which he would have owned or would
       have been entitled to receive after the happening of any of the events
       described above had such share been converted immediately prior to the
       happening of such event. An adjustment made pursuant to this provision
       shall become effective retroactively with respect to conversions made
       subsequent to the record date in the case of a dividend, and shall become
       effective on the effective date in the case of a subdivision, combination
       or reclassification.
 
           (B) No adjustment in the conversion rate shall be required unless
       such adjustment would require an increase or decrease in such rate of at
       least one-tenth of a common share; provided, however, that any
 
                                      BI-3
<PAGE>
       adjustments which by reason of this clause (B) are not required to be
       made shall be carried forward and taken into account in any subsequent
       adjustment.
 
        (3) The Corporation shall at all times reserve and keep available out of
    its authorized Common Stock, solely for the purpose of issue upon conversion
    of shares of Series B Preferred Stock as herein provided, such number of
    shares of Common Stock as shall then be issuable upon the conversion of all
    outstanding shares of Series B Preferred Stock.
 
        (4) Fractional shares of Common Stock shall not be issued upon
    conversion of Series B Preferred Stock nor shall cash adjustments be made
    for fractional shares upon such conversion.
 
        (5) For the purposes of this paragraph (f), the term "Common Stock"
    shall mean (A) the class of stock designated as the Common Stock of the
    Corporation at the date of this Restated Certificate of Incorporation, or
    (B) any other class of stock resulting from successive changes or
    reclassifications of such Common Stock consisting solely of change in par
    value, or from par value to no par value, or from no par value to par value.
 
    (g)  LIQUIDATION RIGHTS--In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
the holders of the Series B Preferred Stock shall be entitled, before any assets
of the Corporation shall be distributed among or paid over to the holders of the
common stock, to receive out of the assets of the Company $100.00 per share of
Series B Preferred Stock. If upon any such dissolution, liquidation or winding
up, the assets of the Corporation available for payment to stockholders are not
sufficient to make payment in full to the holders of the Series B Preferred
Stock, payment shall be made to such holders ratably in accordance with the
number of shares held by them and, in case there shall then be more than one
series of the Preferred Stock outstanding at that time, ratably in accordance
with the respective distributive amount to which such holders shall be entitled.
 
3. 6.00 CUMULATIVE CONVERTIBLE VOTING SERIES D PREFERRED STOCK, $.01 PAR VALUE,
   LIQUIDATION VALUE $100.00 PER SHARE
 
    (a)  DESIGNATION--The designation of this preferred stock shall be $6.00
Cumulative Convertible Voting Series D Preferred Stock (hereinafter referred to
as "Series D Preferred Stock").
 
    (b)  DIVIDENDS--The holders of the Series D Preferred Stock shall be
entitled to receive, when and as declared by the board of directors of the
Corporation, out of any assets of the Corporation available for dividends
pursuant to the laws of the State of Delaware, preferential dividends at the
rate of six dollars ($6.00) per annum per share and no more. The dividends, when
payable, shall be paid quarterly on the first days of March, June, September,
and December in each year, before any dividends shall be declared or paid upon
or set apart for the common stock of the Company for that year. Such dividends
upon the Series D Preferred Stock shall be cumulative from the date of issue
thereof so that if dividends for any past dividend period at the rate of six
dollars ($6.00) per annum shall not have been paid thereon or declared and a sum
sufficient for payment thereof set apart, the deficiency shall be fully paid or
set apart but without interest, before any dividend shall be paid upon or set
apart for the common stock. Provided, however, that no dividends shall be
declared on the shares of any series of preferred stock for any dividend period
unless the full dividend for all prior dividend periods shall have been declared
or shall be declared at the same time upon all preferred stock outstanding
during said prior dividend periods, and further provided, that no dividends
shall be declared on the shares of any series of preferred stock unless a
dividend for the same period shall be declared at the same time upon all
preferred stock outstanding during said period in like proportion to the
dividend rate upon such shares. Whenever the full dividend upon all the
preferred stock for all past dividend periods shall have been paid and the full
dividend thereon for the then current dividend period shall have been paid or
declared and a sum sufficient for the payment thereof set apart, dividends upon
the common stock may be declared by the board of directors out of the remainder
of the assets available therefor.
 
    (c)  REDEMPTION--The Corporation may, at the option of the board of
directors, redeem the whole or any part of the outstanding Series D Preferred
Stock at any time commencing ten years after the date of issuance. If such
redemption is made, the holders of any shares of Series D Preferred Stock
redeemed shall be entitled to receive $100 per share plus an amount equal to all
dividends accrued and unpaid to the redemption date.
 
    Notice of election to redeem shall be mailed to each holder of Series D
Preferred Stock to be redeemed not less than thirty (30) days prior to the date
upon which such stock is to be redeemed. In case less than all of the
outstanding Series D Preferred Stock is to be redeemed, the amount to be
redeemed and the method of effecting such redemption, whether by lot or pro rata
or otherwise, may be determined by the board of directors. If on or before the
redemption date named in such notice, the funds necessary for such redemption
shall have been set aside by the Corporation so as to be available for payment
on demand to the holders of the Series D Preferred
 
                                      BI-4
<PAGE>
Stock so called for redemption then, notwithstanding that any certificate of the
Series D Preferred Stock so called for redemption shall not have been
surrendered for cancellation, the dividends thereon shall cease to accrue from
and after the date of redemption so designated, and all rights with respect to
such Series D Preferred Stock so called for redemption, including any right to
vote or otherwise participate in the determination of any proposed corporate
action, shall forthwith after such redemption date cease and terminate, except
only the right of the holder to receive the redemption price therefor, but
without interest. Stock redeemed pursuant to the provisions hereof or any Series
D Preferred Stock purchased or otherwise acquired shall not be reissued but
shall be canceled and proceedings shall be taken in the manner prescribed by
statute to reduce the shares accordingly.
 
    (d)  VOTING RIGHTS--The holders of the shares of Series D Preferred Stock
shall be entitled to one vote for each share of such stock standing in the name
of the holder on the books of the Corporation and shall vote together with the
holders of the common stock and the holders of other series of the preferred
stock of the Corporation as one class.
 
    (e)  PREEMPTIVE RIGHTS--No holder of any shares of Series D Preferred Stock
shall have any preemptive right to subscribe for or acquire additional shares of
the Corporation of the same or any other class or series, whether such shares be
hereby or hereafter authorized; and no holder of Series D Preferred Stock shall
have any preemptive right to acquire any shares which may be held in the
treasury of the Corporation; all such additional or treasury shares may be sold
for such consideration at such time and to such person or persons as the board
of directors may from time to time determine.
 
    (f)  CONVERSION--
 
        (1) The Series D Preferred Stock shall be convertible into Common Stock
    as hereinafter provided and, when and as so converted, such Series D
    Preferred Stock shall be canceled and retired and shall not be reissued as
    such. Any holder of the Series D Preferred Stock may at any time commencing
    two (2) years and terminating upon the expiration of ten (10) years from the
    date of issuance convert such stock into full shares of the Common Stock of
    the Corporation at the rate of ten (10) shares of Common Stock for each
    share of Series D Preferred Stock. On presentation and surrender to the
    Corporation at its offices of the certificates for shares of the Series D
    Preferred Stock to be converted, the holder of such stock shall be entitled
    to receive in exchange therefor certificates for shares of the fully paid
    and non-assessable Common Stock of the Corporation at the rate aforesaid,
    all under suitable regulations to be prescribed by the board of directors of
    the Corporation. Conversion of Series D Preferred Stock in the manner
    aforesaid shall not affect the right of the holder of such stock to receive
    dividends accrued but unpaid on such shares as of the dividend payment date
    immediately prior to conversion.
 
        (2) The number of shares of Common Stock into which each share of Series
    D Preferred Stock is convertible, shall be subject to adjustment from time
    to time as in clauses (A) and (B) of this subparagraph (2):
 
           (A) In case the Corporation shall (i) pay a dividend on its Common
       Stock in shares of the Corporation, (ii) subdivide its outstanding Common
       Stock, (iii) combine the outstanding Common Stock into a smaller number
       of shares, or (iv) issue by reclassification of its Common Stock (whether
       pursuant to a merger or consolidation or otherwise) any shares of the
       Corporation, then the holder of each share of Series D Preferred Stock
       shall be entitled to receive upon the conversion of such share, the
       number of shares of the Corporation which he would have owned or would
       have been entitled to receive after the happening of any of the events
       described above had such share been converted immediately prior to the
       happening of such event. An adjustment made pursuant to this provision
       shall become effective retroactively with respect to conversions made
       subsequent to the record date in the case of a dividend, and shall become
       effective on the effective date in the case of a subdivision, combination
       or reclassification.
 
           (B) No adjustment in the conversion rate shall be required unless
       such adjustment would require an increase or decrease in such rate of at
       least one-tenth of a share of Common Stock; provided, however, that any
       adjustments which by reason of this clause (B) are not required to be
       made shall be carried forward and taken into account in any subsequent
       adjustment.
 
        (3) The Corporation shall at all times reserve and keep available out of
    its authorized Common Stock, solely for the purpose of issue upon conversion
    of shares of Series D Preferred Stock as herein provided, such number of
    shares of Common Stock as shall then be issuable upon the conversion of all
    outstanding shares of Series D Preferred Stock.
 
           (4) Fractional shares of Common Stock shall not be issued upon
       conversion of Series D Preferred Stock nor shall cash adjustments be made
       for fractional shares upon such conversion.
 
                                      BI-5
<PAGE>
           (5) For the purposes of this paragraph (f), the term "Common Stock"
       shall mean (A) the class of stock designated as the Common Stock of the
       Corporation at the date of this Restated Certificate of Incorporation, or
       (B) any other class of stock resulting from successive changes or
       reclassifications of such Common Stock consisting solely of change in par
       value, or from par value to no par value, or from no par value to par
       value.
 
    (g)  LIQUIDATION RIGHTS--In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
the holders of the Series D Preferred Stock shall be entitled, before any assets
of the Corporation shall be distributed among or paid over to the holders of the
common stock, to receive out of the assets of the Company $100.00 per share of
Series D Preferred Stock. If upon any such dissolution, liquidation or winding
up, the assets of the Corporation available for payment to stockholders are not
sufficient to make payment in full to the holders of the Series D Preferred
Stock, payment shall be made to such holders ratably in accordance with the
number of shares held by them and, in case there shall then be more than one
series of the Preferred Stock outstanding at that time, ratably in accordance
with the respective distributive amount to which such holders shall be entitled.
 
4. $7.00 CUMULATIVE CONVERTIBLE VOTING SERIES G PREFERRED STOCK, $.01 PAR VALUE,
   LIQUIDATION VALUE $100.00 PER SHARE
 
    (a)  DESIGNATION--The designation of this preferred stock shall be $7.00
Cumulative Convertible Voting Series G Preferred Stock (hereinafter referred to
as "Series G Preferred Stock").
 
    (b)  DIVIDENDS--The holders of the Series G Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors of the
Corporation, out of any assets of the Corporation available for dividends
pursuant to the laws of the State of Delaware, preferential dividends at the
rate of seven dollars ($7.00) per annum per share. The dividends, when payable,
shall be paid quarterly on the first days of March, June, September and December
in each year, before any dividends shall be declared or paid upon or set apart
for the common stock of the Company for that year. Such dividends upon the
Series G Preferred Stock shall be cumulative from the date of issue thereof so
that if dividends for any past dividend period at the rate of seven dollars
($7.00) per annum shall not have been paid thereon or declared and a sum
sufficient for payment thereof set apart, the deficiency shall be fully paid or
set apart before any dividend shall be paid upon or set apart for the common
stock. Provided however, that no dividends shall be declared on the shares of
any series of preferred stock for any dividend period unless the full dividend
for all prior dividend periods shall have been declared or shall be declared at
the same time upon all preferred stock outstanding during said prior dividend
periods, and further provided, that no dividends shall be declared on the shares
of any series of preferred stock unless a dividend for the same period shall be
declared at the same time upon all preferred stock outstanding during said
period in like proportion to the dividend rate upon such shares. Whenever the
full dividend upon all the preferred stock for all past dividend periods shall
have been paid and the full dividend thereon for the then current dividend
period shall have been paid or declared and a sum sufficient for the payment
thereof set apart, dividends upon the common stock may be declared by the Board
of Directors out of the remainder of the assets available therefor.
 
    (c)  REDEMPTION--Commencing ten years after the date of issuance, the
Corporation may, at the option of the Board of Directors, redeem in any one year
all or any part of the outstanding shares of Series G Preferred Stock at a price
of $100.00 per share.
 
    Notice of redemption shall be mailed to each holder of Series G Preferred
Stock to be redeemed not less than thirty (30) days prior to the date upon which
the stock is to be redeemed. In case less than all of the outstanding Series G
Preferred Stock is to be redeemed, the amount to be redeemed and the method of
effecting such redemption, whether by lot or pro rata or otherwise, may be
determined by the Board of Directors. If on or before the redemption date named
in such notice, the funds necessary for such redemption shall have been set
aside by the Corporation so as to be available for payment on demand to the
holders of the Series G Preferred Stock so called for redemption then,
notwithstanding that any certificate of the Series G Preferred Stock so called
for redemption shall not have been surrendered for cancellation, the dividends
thereon shall cease to accrue from and after the date of redemption so
designated and all rights with respect to such Series G Preferred Stock so
called for redemption, including any right to vote or otherwise participate in
the determination of any proposed corporate action, shall forthwith after such
redemption date cease and determine, except only the right of the holder to
receive the redemption price therefor, but with interest on the unpaid dividends
calculated only until the date of redemption and without any further interest
whatsoever. Stock redeemed pursuant to the provisions hereof or any Series G
Preferred Stock purchased or otherwise acquired by the Corporation shall not be
reissued but shall be canceled and proceedings shall be taken in the manner
prescribed by statute to reduce the shares accordingly.
 
                                      BI-6
<PAGE>
    (d)  VOTING RIGHTS--The holders of the shares of Series G Preferred Stock
shall be entitled to one vote for each share of such stock standing in the name
of the holder on the books of the Corporation and shall vote together with the
holders of the common stock and the holders of other series of the preferred
stock of the Corporation as one class.
 
    (e)  PREEMPTIVE RIGHTS--No holder of any shares of Series G Preferred Stock
shall have any preemptive right to subscribe for or acquire additional shares of
the Corporation of the same or any other class or series, whether such shares be
hereby or hereafter authorized; and no holder of Series G Preferred Stock shall
have any preemptive right to acquire any shares which may be held in the
treasury of the Corporation; all such additional or treasury shares may be sold
for such consideration at such time and to such person or persons as the Board
of Directors may from time to time determine, unless otherwise restricted by the
terms of this statement of designations, powers and preferences.
 
    (f)  CONVERSION--
 
        (1) The Series G Preferred Stock shall be convertible into Common Stock
    as hereinafter provided and, when and as so converted, such Series G
    Preferred Stock shall be canceled and retired and shall not be reissued as
    such.
 
        (2) Any holder of the Series G Preferred Stock, at any time commencing
    immediately upon the issuance of the Series G Preferred Stock and
    terminating upon the expiration of ten years from the date of issuance, may
    convert such stock into full shares of the Common Stock of the Corporation
    at the rate of nine (9) shares of Common Stock for each share of Series G
    Preferred Stock upon 90 days written notice.
 
        (3) On presentation and surrender to the Corporation at its offices of
    the certificates for shares of the Series G Preferred Stock to be converted,
    the holder of such stock shall be entitled to receive in exchange therefor
    certificates for shares of the fully paid and non-assessable Common Stock of
    the Corporation at the rate aforesaid, all under suitable regulations to be
    prescribed by the Board of Directors of the Corporation. Conversion of
    Series G Preferred Stock in the manner aforesaid shall not affect the right
    of the holder of such stock to receive dividends accrued but unpaid on such
    shares as of the dividend payment date immediately prior to conversion.
 
        (4) The number of shares of Common Stock into which each share of Series
    G Preferred Stock is convertible shall be subject to adjustment from time to
    time as in clauses (A) and (B) of this subparagraph (4):
 
           (A) In case the Corporation shall (i) pay a dividend on its Common
       Stock in shares of the Corporation, (ii) subdivide its outstanding Common
       Stock, (iii) combine the outstanding Common Stock into a smaller number
       of shares, or (iv) issue by reclassification of its Common Stock (whether
       pursuant to a merger or consolidation or otherwise) any shares of the
       Corporation, then the holder of each share of Series G Preferred Stock
       shall be entitled to receive upon the conversion of such share, the
       number of shares of the Corporation which he would have owned or would
       have been entitled to receive after the happening of any of the events
       described above had such share been converted immediately prior to the
       happening of such event. An adjustment made pursuant to this provision
       shall become effective on the effective date in the case of a
       subdivision, combination or reclassification.
 
           (B) No adjustment in the conversion rate shall be required unless
       such adjustment would require an increase or decrease in such rate of at
       least one-tenth of a common share; provided, however, that any
       adjustments which by reason of this clause (B) are not required to be
       made shall be carried forward and taken into account by any subsequent
       adjustment.
 
        (5) The Corporation shall at all times reserve and keep available out of
    its authorized Common Stock solely for the purpose of issue upon conversion
    of shares of Series G Preferred Stock as herein provided, such number of
    shares of Common Stock as shall then be issuable upon the conversion of all
    outstanding shares of Series G Preferred Stock.
 
        (6) Fractional shares of Common Stock shall not be issued upon
    conversion of Series G Preferred Stock nor shall cash adjustments be made
    for fractional shares upon such conversion.
 
        (7) For the purpose of this paragraph (f), the term "Common Stock" shall
    mean (A) the class of stock designated as the Common Stock of the
    Corporation at the date of this Restated Certificate of Incorporation, or
    (B) any other class of stock resulting from successive changes or
    reclassifications of such Common Stock consisting solely of change in par
    value, or from par value to no par value, or from no par value to par value.
 
    (g)  LIQUIDATION RIGHTS--In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
the holders of the Series G Preferred Stock shall be entitled, before any
 
                                      BI-7
<PAGE>
assets of the Corporation shall be distributed among or paid over to the holders
of the common stock, to receive out of the assets of the Company $100.00 per
share of Series G Preferred Stock. If upon any such dissolution, liquidation or
winding up, the assets of the Corporation available for payment to stockholders
are not sufficient to make payment in full to the holders of the Series G
Preferred Stock, payment shall be made to such holders ratably in accordance
with the number of shares held by them and, in case there shall then be more
than one series of the Preferred Stock outstanding at that time, ratably in
accordance with the respective distributive amount to which such holders shall
be entitled.
 
5. $7.00 CUMULATIVE CONVERTIBLE VOTING SERIES H PREFERRED STOCK, $.01 PAR VALUE,
   LIQUIDATION VALUE $100.00 PER SHARE
 
    (a)  DESIGNATION--The designation of this preferred stock shall be $7.00
Cumulative Convertible Voting Series H Preferred Stock (hereinafter referred to
as "Series H Preferred Stock").
 
    (b)  DIVIDENDS--The holders of the Series H Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors of the
Corporation, out of any assets of the Corporation available for dividends
pursuant to the laws of the State of Delaware, preferential dividends at the
rate of seven dollars ($7.00) per annum per share. The dividends, when payable,
shall be paid quarterly on the first days of March, June, September and December
in each year, before any dividends shall be declared or paid upon or set apart
for the common stock of the Company for that year. Such dividends upon the
Series H Preferred Stock shall be cumulative from the date of issue thereof so
that if dividends for any past dividend period at the rate of seven dollars
($7.00) per annum shall not have been paid thereon or declared and a sum
sufficient for payment thereof set apart, the deficiency shall be fully paid or
set apart before any dividend shall be paid upon or set apart for the common
stock. Provided, however, that no dividends shall be declared on the shares of
any series of preferred stock for any dividend period unless the full dividend
for all prior dividend periods shall have been declared or shall be declared at
the same time upon all preferred stock outstanding during said prior dividend
periods, and further provided, that no dividends shall be declared on the shares
of any series of preferred stock unless a dividend for the same period shall be
declared at the same time upon all preferred stock outstanding during said
period in like proportion to the dividend rate upon such shares. Whenever the
full dividend upon all the preferred stock for all past dividend periods shall
have been paid and the full dividend thereon for the then current dividend
period shall have been paid or declared and a sum sufficient for the payment
thereof set apart, dividends upon the common stock may be declared by the Board
of Directors out of the remainder of the assets available therefor.
 
    (c)  REDEMPTION--
 
        (1) Unless the holder of Series H Preferred Stock elects not to have his
    shares redeemed in any one or more years in accordance with this
    subparagraph (c)(1) by so informing the Corporation at any time or times in
    writing (which election, if made, shall be irrevocable and shall forever bar
    redemption of the Series H Preferred Stock except in accordance with the
    provisions of subparagraph (c)(2)), the Corporation will redeem more than
    twenty percent of the shares of Series H Preferred Stock then held by each
    holder of Series H Preferred Stock at an aggregate price of $119.06 per
    share on the anniversary of the date of issuance of the Series H Preferred
    Stock in the following years: 1981, 1984, 1987 and 1989 through and
    including 1995.
 
        (2) Beginning on the twenty-first anniversary of the date of issuance of
    the Series H Preferred Stock, the holders of Series H Preferred Stock shall
    have the right, at their option, to have the Corporation redeem any or all
    of the outstanding shares of Series H Preferred Stock at a price of $100.00
    per share.
 
        (3) If, on or before the applicable redemption date named above, the
    funds necessary for such redemption shall have been set aside by the
    Corporation so as to be available for payment on demand to the holders of
    the Series H Preferred Stock so called for redemption, then, notwithstanding
    that any certificate of the Series H Preferred Stock so called for
    redemption shall not have been surrendered for cancellation, the dividends
    thereon shall cease to accrue from and after the date of redemption so
    designated and all rights with respect to such Series H Preferred Stock so
    called for redemption, including any right to vote or otherwise participate
    in the determination of any proposed corporate action, shall forthwith after
    such redemption date cease and determine, except only the right of the
    holder to receive the redemption price therefor, but with interest on the
    unpaid dividends calculated only until the date of redemption and without
    any further interest whatsoever.
 
        (4) Stock redeemed pursuant to any of the provisions of paragraph (c) or
    any Series H Preferred Stock purchased or otherwise acquired by the
    Corporation shall not be reissued but shall be canceled and proceedings
    shall be taken in the manner prescribed by statute to reduce the shares
    accordingly.
 
                                      BI-8
<PAGE>
    (d)  VOTING RIGHTS--The holders of the shares of Series H Preferred Stock
shall be entitled to one vote for each share of such stock standing in the name
of the holder on the books of the Corporation and shall vote together with the
holders of the common stock and the holders of other series of the preferred
stock of the Corporation as one class.
 
    (e)  PREEMPTIVE RIGHTS--No holder of any shares of Series H Preferred Stock
shall have any preemptive right to subscribe for or acquire additional shares of
the Corporation of the same or any other class or series, whether such shares be
hereby or hereafter authorized; and no holder of Series H Preferred Stock shall
have any preemptive right to acquire any shares which may be held in the
treasury of the Corporation; all such additional or treasury shares may be sold
for such consideration at such time and to such person or persons as the Board
of Directors may from time to time determine, unless otherwise restricted by the
terms of this statement of designations, powers and preferences.
 
    (f)  CONVERSION--
 
        (1) The Series H Preferred Stock shall be convertible into Common Stock
    as hereinafter provided and, when and as so converted, such Series H
    Preferred Stock shall be canceled and retired and shall not be reissued as
    such.
 
        (2) Any holder of the Series H Preferred Stock, at any time commencing
    immediately upon the issuance of the Series H Preferred Stock and
    terminating upon the expiration of ten years from the date of issuance, may
    convert such stock into full shares of the Common Stock of the Corporation
    at the rate of nine (9) shares of Common Stock for each share of Series H
    Preferred Stock upon 90 days written notice to the Corporation by the holder
    of the Series H Preferred Stock. The Corporation, at its option, may consent
    to shorter notice.
 
        (3) On presentation and surrender to the Corporation at its offices of
    the certificates for shares of the Series H Preferred Stock to be converted,
    the holder of such stock shall be entitled to receive in exchange therefor
    certificates for shares of the fully paid and non-assessable Common Stock of
    the Corporation at the rate aforesaid, all under suitable regulations to be
    prescribed by the Board of Directors of the Corporation. Conversion of
    Series H Preferred Stock in the manner aforesaid shall not affect the right
    of the holder of such stock to receive dividends accrued but unpaid on such
    shares as of the dividend payment date immediately prior to conversion.
 
        (4) The number of shares of Common Stock into which each share of Series
    H Preferred Stock is convertible shall be subject to adjustment from time to
    time as in clauses (A) and (B) of this subparagraph (4):
 
           (A) In case the Corporation shall (i) pay a dividend on its Common
       Stock in shares of the Corporation, (ii) subdivide its outstanding Common
       Stock, (iii) combine the outstanding Common Stock into a smaller number
       of shares, or (iv) issue by reclassification of its Common Stock (whether
       pursuant to a merger or consolidation or otherwise) any shares of the
       Corporation, then the holder of each share of Series H Preferred Stock
       shall be entitled to receive upon the conversion of such share, the
       number of shares of the Corporation which he would have owned or would
       have been entitled to receive after the happening of any of the events
       described above had such share been converted immediately prior to the
       happening of such event. An adjustment made pursuant to this provision
       shall become effective on the effective date in the case of a
       subdivision, combination or reclassification.
 
           (B) No adjustment in the conversion rate shall be required unless
       such adjustment would require an increase or decrease in such rate of at
       least one-tenth of a common share; provided, however, that any
       adjustments which by reason of this clause (B) are not required to be
       made shall be carried forward and taken into account by any subsequent
       adjustment.
 
        (5) The Corporation shall at all times reserve and keep available out of
    its authorized Common Stock solely for the purpose of issue upon conversion
    of shares of Series H Preferred Stock as herein provided, such number of
    shares of Common Stock as shall then be issuable upon the conversion of all
    outstanding shares of Series H Preferred Stock.
 
        (6) Fractional shares of Common Stock shall not be issued upon
    conversion of Series H Preferred Stock nor shall cash adjustments be made
    for fractional shares upon such conversion.
 
        (7) For the purposes of this paragraph (f), the term "Common Stock"
    shall mean (A) the class of stock designated as the Common Stock of the
    Corporation at the date of this Restated Certificate of Incorporation, or
    (B) any other class of stock resulting from successive changes or
    reclassifications of such Common Stock consisting solely of change in par
    value, or from par value to no par value, or from no par value to par value.
 
                                      BI-9
<PAGE>
    (g)  LIQUIDATION RIGHTS--In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
the holders of the Series H Preferred Stock shall be entitled, before any assets
of the Corporation shall be distributed among or paid over to the holders of the
Common Stock, to receive out of the assets of the Company $100.00 per share of
Series H Preferred Stock. If upon any such dissolution, liquidation or winding
up, the assets of the Corporation available for payment to stockholders are not
sufficient to make payment in full to the holders of the Series H Preferred
Stock, payment shall be made to such holders ratably in accordance with the
number of shares held by them and, in case there shall then be more than one
series of the Preferred Stock outstanding at that time, ratably in accordance
with the respective distributive amount to which such holders shall be entitled.
 
6. $8.00 CUMULATIVE CONVERTIBLE AND REDEEMABLE VOTING SERIES N PREFERRED STOCK,
   $.01 PAR VALUE, LIQUIDATION VALUE $100.00 PER SHARE
 
    (a)  DESIGNATION--The designation of this series of Preferred Shares shall
be "$8.00 Cumulative Convertible and Redeemable Voting Series N Preferred
Shares" (hereinafter referred to as the "Series N Preferred Shares").
 
    (b)  DIVIDENDS--The holders of the Series N Preferred Shares shall be
entitled to receive, when and as declared by the board of directors of the
Corporation, out of any assets of the Corporation available for dividends
pursuant to the laws of the State of Delaware, preferential dividends at the
rate of eight dollars ($8.00) per annum per share and no more. The dividends,
when payable, shall be paid quarterly on the first days of March, June,
September and December in each year, before any dividends shall be declared or
paid upon or set apart for the Common Shares or Series A Common Shares of the
Corporation for that quarter. Such dividends upon the Series N Preferred Shares
shall be cumulative from the date of issue thereof so that if dividends for any
past dividend period at the rate of eight dollars ($8.00) per annum shall not
have been paid thereon or declared and a sum sufficient for payment thereof set
apart, the deficiency shall be fully paid or set apart but without interest,
before any dividend shall be paid upon or set apart for the Common Shares or
Series A Common Shares; provided, however, that no dividends shall be declared
on the shares of any series of preferred stock for any dividend period unless
the full dividend for all prior dividend periods shall have been declared or
shall be declared at the same time upon all preferred stock outstanding during
such prior dividend periods, and further provided that no dividends shall be
declared on the shares of any series of preferred stock unless a dividend for
the same period shall be declared at the same time upon all preferred stock
outstanding during said period in like proportion to the dividend rate upon such
shares. Whenever the full dividend upon all the series of the preferred stock
for all past dividend periods shall have been paid and the full dividend thereon
for the then current dividend period shall have been paid or declared and a sum
sufficient for the payment thereof set apart, dividends upon the Common Shares
or Series A Common Shares may be declared by the board of directors out of the
remainder of the assets available therefor.
 
    (c)  REDEMPTION--
 
        (1) Unless such shares have been converted pursuant to paragraph (f)
    hereof prior to the sixth anniversary of the date of issue thereof, the
    Corporation shall, beginning with the seventh anniversary of the date of
    issue thereof, and annually thereafter on each subsequent anniversary of the
    date of issue thereof, redeem one-fourteenth of the number of Series N
    Preferred Shares outstanding on the sixth anniversary of the date of issue
    thereof, until all such shares have been redeemed, and the holders thereof
    shall be entitled to receive $100.00 per share plus an amount equal to all
    dividends accrued and unpaid thereon to the redemption date.
 
        (2) Notice of any redemption shall be mailed to each holder of Series N
    Preferred Shares to be redeemed not less than thirty (30) days prior to the
    date upon which such stock is to be redeemed. If on or before the redemption
    date specified in such notice, the funds necessary for such redemption shall
    have been set aside by the Corporation so as to be available for payment on
    demand to the holders of Series N Preferred Shares so called for redemption
    then, notwithstanding that any certificate representing Series N Preferred
    Shares so called for redemption shall not have been surrendered for
    cancellation, the dividends thereon shall cease to accrue from and after the
    date of such redemption so specified, and all rights with respect to such
    Series N Preferred Shares so called for redemption, including any right to
    vote or otherwise participate in the determination of any proposed corporate
    action, shall forthwith after such redemption date cease and terminate,
    except only the right of the holder to receive the redemption price
    therefor, but without interest. Series N Preferred Shares redeemed pursuant
    to the provisions hereof or any such shares purchased or otherwise acquired
    shall not be reissued but shall be canceled and proceedings shall be taken
    in the manner prescribed by statute to reduce the number of outstanding
    Series N Preferred Shares accordingly.
 
                                     BI-10
<PAGE>
    (d)  VOTING RIGHTS--The holders of Series N Preferred Shares shall be
entitled to one vote for each share of such stock standing in the name of the
holder on the books of the Corporation and shall vote together with the holders
of the common stock and the holders of other series of the preferred stock of
the Corporation as one class.
 
    (e)  PREEMPTIVE RIGHTS--No holder of any Series N Preferred Shares shall
have any preemptive right to subscribe for or acquire additional shares of the
Corporation of the same or any other class or series, whether such shares be
hereby or hereafter authorized; and no holder of Series N Preferred Shares shall
have any preemptive right to acquire any shares which may be held in the
treasury of the Corporation; all such additional or treasury shares may be sold
for such consideration at such time and to such person or persons as the board
of directors may from time to time determine.
 
    (f)  CONVERSION--
 
        (1) The Series N Preferred Shares shall be convertible into the
    Corporation's Common Shares as hereinafter provided, and when and as so
    converted, such Series N Preferred Shares shall be canceled and retired and
    shall not be reissued as such. Commencing upon the issuance and terminating
    at the close of business on the third anniversary thereof, the Series N
    Preferred Shares may be converted, upon thirty (30) days' written notice to
    the Corporation into Common Shares of the Corporation at the rate of ten
    (10) Common Shares for each Series N Preferred Share. Thereafter, until the
    close of business on the sixth anniversary of the date of issue, the Series
    N Preferred Shares may be converted, upon thirty (30) days' written notice
    to the Corporation, into Common Shares of the Corporation at the rate of
    nine (9) Common Shares for each Series N Preferred Share. On presentation
    and surrender to the Corporation at its offices of the certificates
    representing Series N Preferred Shares to be converted, the holder thereof
    shall be entitled to receive in exchange therefor certificates for the fully
    paid and non-assessable Common Shares of the Corporation at the rate
    aforesaid, all under suitable regulations to be prescribed by the board of
    directors of the Corporation. Conversion of Series N Preferred Shares in the
    manner aforesaid shall not affect the right of the converting holder thereof
    to receive dividends accrued but unpaid thereon as of the dividend payment
    date immediately prior to conversion.
 
        (2) The number of Common Shares into which each Series N Preferred
    Shares is convertible shall be subject to adjustment from time to time as
    set forth in clauses (A) and (B) of this subparagraph (2):
 
           (A) In case the Corporation shall (i) pay a dividend on its Common
       Shares in shares of the Corporation, (ii) subdivide its outstanding
       Common Shares, (iii) combine the outstanding Common Shares into a smaller
       number of shares or (iv) issue by reclassification of its Common Shares
       (whether pursuant to a merger or consolidation or otherwise) any shares
       of the Corporation, then the holder of each Series N Preferred Share
       shall be entitled to receive upon the conversion of such share, the
       number of shares of the Corporation which he would have owned or would
       have been entitled to receive after the happening of any of the events
       described above had such share been converted immediately prior to the
       happening of such event. An adjustment made pursuant to this provision
       shall become effective retroactively with respect to conversions made
       subsequent to the record date in the case of a dividend, and shall become
       effective on the effective date in the case of a subdivision, combination
       or reclassification.
 
           (B) No adjustment in the conversion rate shall be required unless
       such adjustment would require an increase or decrease in such rate of at
       least one-tenth (1/10) of a Common Shares; provided, however, that any
       adjustments which by reason of this clause (B) are not required to be
       made shall be carried forward and taken into account by any subsequent
       adjustment.
 
        (3) The Corporation shall at all times reserve and keep available out of
    its authorized Common Shares, solely for the purpose of issuance upon
    conversion of Series N Preferred Shares as herein provided, such number of
    Common Shares as shall then be issuable upon the conversion of all
    outstanding Series N Preferred Shares.
 
        (4) Fractional Common Shares shall not be issued upon conversion of
    Series N Preferred Shares, nor shall cash adjustments be made for fractional
    shares upon such conversion.
 
        (5) For the purposes of this paragraph (f), the term "Common Shares"
    shall mean (A) the class of stock designated as the Common Shares of the
    Corporation at the date of this Restated Certificate of Incorporation, or
    (B) any other class of stock resulting from successive changes or
    reclassifications of such class consisting solely of a change in par value,
    or a change from no par value to par value.
 
    (g)  LIQUIDATION RIGHTS--In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
the holders of the Series N Preferred Shares shall be entitled, before any
assets of the Corporation shall be distributed among or paid over to the holders
of Common Shares or Series A
 
                                     BI-11
<PAGE>
Common Shares, to receive out of the assets of the Corporation $100.00 per
Series N Preferred Share. If upon any such dissolution, liquidation or winding
up, the assets of the Corporation available for payment to stockholders are not
sufficient to make payment in full to the holders of the Series N Preferred
Shares, payment shall be made to such holders ratably in accordance with the
number of shares held by them, and in case there shall then be more than one
series of the preferred stock outstanding at that time, ratably in accordance
with the respective distributive amount to which such holders shall be entitled.
 
7. $9.00 CUMULATIVE CONVERTIBLE AND REDEEMABLE VOTING SERIES O PREFERRED SHARES,
   $.01 PAR VALUE, LIQUIDATION VALUE $100.00 PER SHARE
 
    (a)  DESIGNATION--The designation of this series of Preferred Shares shall
be "$9.00 Cumulative Convertible and Redeemable Voting Series O Preferred
Shares" (hereinafter referred to as the "Series O Preferred Shares").
 
    (b)  DIVIDENDS--The holders of the Series O Preferred Shares shall be
entitled to receive, when and as declared by the board of directors of the
Corporation, out of any assets of the Corporation available for dividends
pursuant to the laws of the State of Delaware, preferential dividends at the
rate of nine dollars ($9.00) per annum per share and no more. The dividends,
when payable, shall be paid quarterly on the first days of March, June,
September and December in each year (prorated if the period such stock is
outstanding prior to the first quarterly dividend date is less than a calendar
quarter), before any dividends shall be declared or paid upon or set apart for
the Common Shares or Series A Common Shares of the Corporation for that quarter.
Such dividends upon the Series O Preferred Shares shall be cumulative from the
date of issue thereof so that if dividends for any past dividend period at the
rate of nine dollars ($9.00) per annum per share shall not have been paid
thereon or declared and a sum sufficient for payment thereof set apart, the
deficiency shall be fully paid or set apart but without interest, before any
dividend shall be paid upon or set apart for the Common Shares or Series A
Common Shares; provided, however, that no dividends shall be declared on the
shares of any series of preferred stock for any dividend period unless the full
dividend for all prior dividend periods shall have been declared or shall be
declared at the same time upon all preferred stock outstanding during such prior
dividend periods, and further provided that no dividends shall be declared on
the shares of any series of preferred stock unless a dividend for the same
period shall be declared at the same time upon all preferred stock outstanding
during said period in like proportion to the dividend rate upon such shares.
Whenever the full dividend upon all series of preferred stock for all past
dividend periods shall have been paid and the full dividend thereon for the then
current dividend period shall have been paid or declared and a sum sufficient
for the payment thereof set apart, dividends upon the Common Shares or Series A
Common Shares may be declared by the board of directors out of the remainder of
the assets available therefor.
 
    (c)  REDEMPTION--
 
        (1) Unless such shares have been converted pursuant to paragraph (f)
    hereof prior to January 1, 1990, the Corporation may, at its option from
    time to time and in such amounts as it may determine, redeem the Series O
    Preferred Shares for $100.00 per share plus an amount equal to all dividends
    accrued and unpaid thereon to the redemption date.
 
        (2) Unless such shares have been converted pursuant to paragraph (f)
    hereof prior to January 1, 1990, the holder of Series O Preferred Shares
    may, at the holder's option, during the period commencing January 1, 1990
    and ending December 31, 1999, elect to have redeemed in any one year as much
    as one-third (1/3) of the number of Series O Preferred Shares held by such
    person on January 1, 1990.
 
        (3) Notice of an election under either of the redemption provisions in
    subparagraphs (c)(1) and (c)(2) above shall be mailed (A) in case of a
    redemption at the election of the Corporation to each holder of Series O
    Preferred Shares to be redeemed or (B) in the case of a redemption at the
    election of the holder of Series O Preferred Shares to the Corporation not
    less than thirty (30) days prior to the date upon which such stock is to be
    redeemed. In case less than all of the outstanding Series O Preferred Shares
    are to be redeemed by the Corporation, the amount to be redeemed and the
    method of effecting such redemption, whether by lot or pro rata or
    otherwise, may be determined by the Board of Directors. If on or before the
    redemption date specified in such notice, the funds necessary for such
    redemption shall have been set aside by the Corporation so as to be
    available for payment on demand to the holders of the Series O Preferred
    Shares so called for or requesting redemption, then, notwithstanding that
    any certificate representing Series O Preferred Shares so called for or
    requesting redemption shall not have been surrendered for cancellation, the
    dividends thereon shall cease to accrue from and after the date of such
    redemption so specified, and all rights with respect to such Series O
    Preferred Shares so called for or requesting redemption, including any right
    to vote or otherwise participate in the determination of any proposed
    corporate action, shall forthwith after such redemption date cease and
    terminate, except only the right of the holder to receive the redemption
    price therefor, but without
 
                                     BI-12
<PAGE>
    interest. Series O Preferred Shares redeemed pursuant to the provisions
    hereof or any such shares purchased or otherwise acquired shall not be
    reissued but shall be canceled and proceedings shall be taken in the manner
    prescribed by statute to reduce the number of outstanding Series O Preferred
    Shares accordingly.
 
    (d)  VOTING RIGHTS--
 
        (1) For all purposes, the holders of Series O Preferred Shares shall be
    entitled to one vote for each share of such stock standing in the name of
    the holder on the books of the Corporation.
 
        (2) Subject to the rights, if any, of the holders of one or more series
    of Preferred Shares, voting as a class, to elect one or more directors, in
    the election of directors, the holders of Series O Preferred Shares shall
    vote together as one class with the Series A Common Shares. The total number
    of directors of the Corporation shall be determined without regard to any
    director(s) whom the holders of one or more series of Preferred Shares,
    voting as a class, have elected or have the right to elect. In the event the
    number of issued and outstanding Series A Common Shares at any time falls
    below 500,000, then with respect to the election of directors at the next
    annual meeting thereafter the holders of Common Shares, Series A Common
    Shares and Preferred Shares shall be entitled to elect all of the directors
    of the Corporation.
 
    (e)  PREEMPTIVE RIGHTS--No holder of any Series O Preferred Shares shall
have any preemptive right to subscribe for or acquire additional shares of the
Corporation of the same or any other class or series, whether such shares be
hereby or hereafter authorized; and no holder of Series O Preferred Shares shall
have any preemptive right to acquire any shares which may be held in the
treasury of the Corporation; all such additional or treasury shares may be sold
for such consideration at such time and to such person or persons as the board
of directors may from time to time determine.
 
    (f)  CONVERSION--
 
        (1) (A) The Series O Preferred Shares shall be convertible into the
    Corporation's Common Shares as hereinafter provided, and when and as so
    converted, such Series O Preferred Shares shall be canceled and retired and
    shall not be reissued as such. Commencing upon issuance and terminating at
    the close of business on December 31, 1988, the Series O Preferred Shares
    may be converted, upon sixty (60) days' written notice to the Corporation,
    into Common Shares of the Corporation at the rate of nine (9) Common Shares
    for each Series O Preferred Share. Thereafter, until the close of business
    on December 31, 1989, the Series O Preferred Shares may be converted, upon
    sixty (60) days' written notice to the Corporation, into Common Shares of
    the Corporation at the rate of eight (8) Common Shares for each Series O
    Preferred Share. On presentation and surrender to the Corporation at its
    offices of the certificates representing the Series O Preferred Shares to be
    converted, the holder thereof shall be entitled to receive in exchange
    therefor certificates for fully paid and non-assessable Common Shares of the
    Corporation at the rate aforesaid, all under suitable regulations to be
    prescribed by the board of directors of the Corporation. Conversion of
    Series O Preferred Shares in the manner aforesaid shall not affect the right
    of the converting holder thereof to receive dividends accrued but unpaid
    thereon as of the dividend payment date immediately prior to conversion.
 
           (B) Notwithstanding the provisions of clause (A) above, if the Market
       Value (as defined below) of a Common Share does not exceed $12.875 per
       share on each of five consecutive trading days for at least two periods
       of five days each from the date of issuance to December 31, 1987, then
       the Corporation will deliver additional Common Shares to qualified
       shareholders, in an amount equal to the Price Differential (as defined
       below). The payment of additional Common Shares is limited to those
       shareholders electing to receive stock in connection with the acquisition
       of Chatham Telephone Company and others who receive such stock from such
       shareholders through inheritance or gift, and who complete the conversion
       of their Series O Preferred Shares, as provided herein, prior to August
       1, 1988, and is further limited to those Common Shares owned by the
       shareholder on August 1, 1988 which were (i) issued in the original
       distribution of Series O Preferred Shares, or (ii) acquired pursuant to a
       conversion of Series O Preferred Shares (the "Qualified Shares"). For
       purposes of calculating the number of additional Common Shares to be
       issued, the value of each additional Common Share being issued shall be
       the highest average Market Value for two periods of five consecutive
       trading days from the date of issuance through December 31, 1987. This
       value is referred to hereinafter as the "Additional Share Value." The
       number of additional Common Shares to be issued shall be determined by
       dividing the Price Differential by the Additional Share Value. No
       fractional shares will be issued in connection with the payment of
       additional shares. An equivalent amount of cash for such fractional
       shares shall be distributed based upon the Additional Share Value.
 
        For purposes hereof:
 
                                     BI-13
<PAGE>
          1.  "Market Value" means the high sales price of a Common Share, as
              reported in the Wall Street Journal.
 
          2.  "Price Differential" means the difference between the highest
              average Market Value for five (5) consecutive trading days during
              the period from the date of issuance through December 31, 1987,
              and $12.875, multiplied by the number of Qualified Shares.
 
        (2) The number of Common Shares into which each Series O Preferred Share
    is convertible shall be subject to adjustment from time to time as set forth
    in clauses (A) and (B) of this subparagraph (2):
 
           (A) In case the Corporation shall (i) pay a dividend on its Common
       Shares in shares of the Corporation, (ii) subdivide its outstanding
       Common Shares, (iii) combine the outstanding Common Shares into a smaller
       number of shares or (iv) issue by reclassification of its Common Shares
       (whether pursuant to a merger or consolidation or otherwise) any shares
       of the Corporation, then the holder of each Series O Preferred Share
       shall be entitled to receive upon the conversion of such share, the
       number of shares of the Corporation which the holder would have owned or
       would have been entitled to receive after the happening of any of the
       events described above had such share been converted immediately prior to
       the happening of such event. An adjustment made pursuant to this
       provision shall become effective retroactively with respect to
       conversions made subsequent to the record date in the case of a dividend,
       and shall become effective on the effective date in the case of a
       subdivision, combination or reclassification.
 
           (B) No adjustment in the conversion rate shall be required unless
       such adjustment would require an increase or decrease in such rate of at
       least one-tenth (1/10) of a Common Share; provided, however, that any
       adjustments which by reason of this clause (B) are not required to be
       made shall be carried forward and taken into account by any subsequent
       adjustment.
 
        (3) The Corporation shall at all times reserve and keep available out of
    its authorized Common Shares, solely for the purpose of issuance upon
    conversion of Series O Preferred Shares as herein provided, such number of
    Common Shares as shall then be issuable upon the conversion of all
    outstanding Series O Preferred Shares.
 
        (4) Fractional Common Shares shall not be issued upon conversion of
    Series O Preferred Shares, nor shall cash adjustments be made for fractional
    shares upon such conversion.
 
        (5) For the purposes of this paragraph (f), the term "Common Shares"
    shall mean (A) the class of stock designated as the Common Shares of the
    Corporation at the date of this Restated Certificate of Incorporation, or
    (B) any other class of stock resulting from successive changes or
    reclassifications of such class consisting solely of a change in par value,
    or a change from no par value to par value.
 
    (g)  LIQUIDATION RIGHTS--In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
the holders of the Series O Preferred Shares shall be entitled, before any
assets of the Corporation shall be distributed among or paid over to the holders
of Common Shares or Series A Common Shares, to receive out of the assets of the
Corporation $100.00 per Series O Preferred Share. If upon any such dissolution,
liquidation or winding up, the assets of the Corporation available for payment
to shareholders are not sufficient to make payment in full to the holders of the
Series O Preferred Shares, payment shall be made to such holders ratably in
accordance with the number of shares held by them and, in case there shall then
be more than one series of preferred stock outstanding at that time, ratably in
accordance with the respective distributive amount to which such holders shall
be entitled.
 
8. $10.50/$7.00 CUMULATIVE AND CONVERTIBLE VOTING SERIES S PREFERRED SHARES,
   $.01 PAR VALUE, LIQUIDATION VALUE $100.00 PER SHARE
 
    (a)  DESIGNATION--The designation of this series of Preferred Shares shall
be "$10.50/$7.00 Cumulative and Convertible Voting Series S Preferred Shares"
(hereinafter referred to as the "Series S Preferred Shares").
 
    (b)  DIVIDENDS--The rate of dividend payable upon Series S Preferred Shares
shall be ten and 50/100 dollars ($10.50) per share per annum during the first
year after issuance and seven and no/100 dollars ($7.00) per share per annum
thereafter.
 
    (c)  VOTING RIGHTS--
 
        (1) With respect to all matters, each holder of Series S Preferred
    Shares shall be entitled to one vote for each share of such stock standing
    in the name of the holder on the books of the Corporation.
 
        (2) With respect to the election of directors, the holders of Series S
    Preferred Shares shall have class voting rights (voting together with the
    holders of (A) other Preferred Shares that are entitled to vote thereon and
 
                                     BI-14
<PAGE>
    that were issued after October 31, 1981, and (B) Series A Common Shares) to
    the extent provided in Article IV of the Restated Certificate of
    Incorporation of the Corporation.
 
    (d)  CONVERSION--
 
        (1) The Series S Preferred Shares shall be convertible into the
    Corporation's Common Shares as hereinafter provided, and when and as so
    converted, such Series S Preferred Shares shall be canceled and retired and
    shall not be reissued as such. Commencing upon issuance and terminating four
    (4) years thereafter, the Series S Preferred Shares may be converted, upon
    written notice to the Corporation, into Common Shares of the Corporation at
    the rate of four (4) Common Shares for each Series S Preferred Share. On
    presentation and surrender to the Corporation at its offices of the
    certificate representing the Series S Preferred Shares to be converted, the
    holder thereof shall be entitled to receive in exchange therefor
    certificates for the fully paid and non-assessable Common Shares of the
    Corporation at the rate aforesaid, all under suitable regulations to be
    prescribed by the board of directors of the Corporation. Conversion of
    Series S Preferred Shares in the manner aforesaid shall not affect the right
    of the converting holder thereof to receive dividends accrued but unpaid
    thereon as of the dividend payment date immediately prior to conversion.
 
        (2) The number of Common Shares into which each Series S Preferred Share
    is convertible shall be subject to adjustment from time to time as set forth
    in clauses (A) and (B) of this subparagraph (2):
 
           (A) In case the Corporation shall (i) pay a dividend on its Common
       Shares in shares of the Corporation (ii) subdivide its outstanding Common
       Shares, (iii) combine the outstanding Common Shares into a smaller number
       of shares or (iv) issue by reclassification of its Common Shares (whether
       pursuant to a merger or consolidation or otherwise) any shares of the
       Corporation, then the holder of each Series S Preferred Share shall be
       entitled to receive upon the conversion of such share, the number of
       shares of the Corporation which he would have owned or would have been
       entitled to receive after the happening of any of the events described
       above had such share been converted immediately prior to the happening of
       such event. An adjustment made pursuant to this provision shall become
       effective retroactively with respect to conversions made subsequently to
       the record date in the case of a dividend, and shall become effective on
       the effective date in the case of a subdivision, combination or
       reclassification.
 
           (B) No adjustment in the conversion rate shall be required unless
       such adjustment would require an increase or decrease in such rate of at
       least one-tenth (1/10) of a Common Share; provided, however, that any
       adjustments which by reason of this clause (B) are not required to be
       made shall be carried forward and taken into account by any subsequent
       adjustment.
 
        (3) The Corporation shall at all times reserve and keep available out of
    its authorized Common Shares, solely for the purpose of issuance upon
    conversion of Series S Preferred Shares as herein provided, such number of
    Common Shares as shall then be issuable upon the conversion of all
    outstanding Series S Preferred Shares.
 
        (4) Fractional Common Shares shall not be issued upon conversion of
    Series S Preferred Shares, nor shall cash adjustments be made for fractional
    shares upon such conversion.
 
        (5) For the purposes of this paragraph (d), the term "Common Shares"
    shall mean (A) the class of stock designated as the Common Shares of the
    Corporation at the date of this Restated Certificate of Incorporation, or
    (B) any other class of stock resulting from successive changes or
    reclassifications of such class consisting solely of a change in par value,
    or a change from no par value to par value.
 
    (e)  LIQUIDATION--The amount payable upon each Series S Preferred Share in
the event of either voluntary or involuntary liquidation shall be $100.00, plus
a sum equal to the amount of all accumulated and unpaid dividends thereon.
 
9. $8.50 CUMULATIVE, NON-CONVERTIBLE, REDEEMABLE AND VOTING SERIES U PREFERRED
   SHARES, $.01 PAR VALUE, LIQUIDATION VALUE $100.00 PER SHARE
 
    (a)  DESIGNATION--The designation of this series of Preferred Shares shall
be "$8.50 Cumulative, Non-Convertible, Redeemable and Voting Series U Preferred
Shares" (hereinafter referred to as "Series U Preferred Shares").
 
                                     BI-15
<PAGE>
    (b)  DIVIDENDS--The rate of dividend payable upon Series U Preferred Shares
shall be eight and 50/100 dollars ($8.50) per share per annum. Such dividends
shall be cumulative from and commence to accrue on the date of issuance.
 
    (c)  REDEMPTION--
 
        (1) After the fifth anniversary of the date of issuance, the Corporation
    may, at its option, redeem annually up to twenty percent (20%) of the Series
    U Preferred Shares outstanding on such fifth anniversary for $100.00 per
    share. After the tenth anniversary of their issuance, the Corporation may at
    any time redeem, in whole or in part, the then outstanding Series U
    Preferred Shares for $100.00 per share. In addition to the redemption price,
    the following shall be paid:
 
           (A) any accrued and unpaid dividends with respect to each Series U
       Preferred Share redeemed, and
 
           (B) an amount equal to $2.125 for each Series U Preferred Share
       redeemed MULTIPLIED BY the number of days between the date fixed for
       redemption and the March 1, June 1, September 1, or December 1
       immediately preceding the date fixed for redemption and DIVIDED BY 90.
 
        (2) Notice of an election under the redemption provision in subparagraph
    (c)(1) above shall be delivered to each holder of Series U Preferred Shares
    to be redeemed at the address appearing on the records of the Corporation
    not less than thirty (30) days prior to the date upon which such stock is to
    be redeemed. If on or before the redemption date specified in such notice,
    the funds necessary for such redemption shall have been set aside by the
    Corporation so as to be available for payment on demand to the holder of the
    Series U Preferred Shares so called for redemption, then, notwithstanding
    that any certificate representing Series U Preferred Shares so called for
    redemption shall not have been surrendered for cancellation, the dividends
    thereon shall cease to accrue from and after the date of such redemption so
    specified, and all rights with respect to such Series U Preferred Shares so
    called for redemption, including any right to vote or otherwise participate
    in the determination of any proposed corporate action, shall terminate at
    the close of business on such redemption date, except only the right of the
    holder to receive the redemption price therefor, but without interest. The
    Series U Preferred Shares purchased or otherwise acquired shall not be
    reissued but shall be canceled and proceedings shall be taken in the manner
    prescribed by statute to reduce the number of Preferred Shares which the
    Corporation is authorized to issue by the number of shares canceled.
 
    (d)  VOTING RIGHTS--
 
        (1) With respect to all matters, each holder of Series U Preferred
    Shares shall be entitled to one vote for each share of such stock standing
    in the name of the holder on the books of the Corporation.
 
        (2) With respect to the election of directors, the holders of Series U
    Preferred Shares shall have class voting rights (voting together with the
    holders of (A) other Preferred Shares that are entitled to vote thereon and
    that were issued after October 31, 1981, and (B) Series A Common Shares) to
    the extent provided in Article IV of the Restated Certificate of
    Incorporation of the Corporation.
 
    (e)  CONVERSION--The Series U Preferred Shares shall not be convertible.
 
    (f)  LIQUIDATION--The amount payable upon each Series U Preferred Share in
the event of either voluntary or involuntary liquidation shall be $100.00, plus
a sum equal to the amount of all accumulated and unpaid dividends thereon.
 
10. $9.00 CUMULATIVE AND CONVERTIBLE VOTING SERIES BB PREFERRED SHARES, $.01 PAR
    VALUE, LIQUIDATION VALUE $100.00 PER SHARE
 
    (a)  DESIGNATION--The designation of this series of Preferred Shares shall
be $9.00 Cumulative, Convertible and Redeemable Voting Series BB Preferred
Shares" (hereinafter referred to as the "Series BB Preferred Shares").
 
    (b)  DIVIDENDS--The rate of dividend payable upon Series BB Preferred Shares
shall be nine and no/100 dollars ($9.00) per share per annum.
 
    (c)  REDEMPTION--
 
        (1) Unless the Series BB Preferred Shares have been converted, or
    written notice to convert has been received prior to the expiration of the
    conversion period set forth in paragraph (e) hereof, then commencing with
    the tenth anniversary of the issuance of the Series BB Preferred Shares and
    ending ten years thereafter, the Corporation may, at its sole option, at any
    time thereafter, redeem up to two thousand (2,000) shares per
 
                                     BI-16
<PAGE>
    annum of the then outstanding Series BB Preferred Shares for $100.00 per
    share, plus an amount equal to all dividends accrued and unpaid thereon on
    the redemption date.
 
        (2) Notice of an election under the redemption provision in subparagraph
    (c)(1) above shall be delivered to the Corporation not less than thirty (30)
    days prior to the date upon which such stock is to be redeemed. If on or
    before the redemption date specified in such notice, the funds necessary for
    such redemption shall have been set aside by the Corporation so as to be
    available for payment on demand to the holder of Series BB Preferred Shares
    so offered for redemption, then, notwithstanding that any certificate
    representing Series BB Preferred Shares so offered for redemption shall have
    not been so surrendered for cancellation, the dividends thereon shall cease
    to accrue from and after the date of such redemption so specified, and all
    rights with respect to such Series BB Preferred Shares so offered for
    redemption, including any right to vote or otherwise participate in the
    determination of any proposed corporate action, shall forthwith after such
    redemption date shall cease and terminate, except only the right of the
    holder to receive the redemption price therefor, but without interest.
 
    (d)  VOTING RIGHTS--
 
        (1) With respect to all matters, each holder of Series BB Preferred
    Shares shall be entitled to one vote for each share of such stock standing
    in the name of the holder on the books of the Corporation.
 
        (2) With respect to the election of directors, the holders of Series BB
    Preferred Shares shall have class voting rights (voting together with the
    holders of (A) other Preferred Shares that are entitled to vote thereon and
    that were issued after October 31, 1981, and (B) Series A Common Shares) to
    the extent provided in Article IV of the Restated Certificate of
    Incorporation of the Corporation.
 
    (e)  CONVERSION--
 
        (1) The Series BB Preferred Shares shall be convertible into the
    Corporation's Common Shares as hereinafter provided. Commencing upon
    issuance and terminating ten (10) years thereafter, the Series BB Preferred
    Shares may be converted, upon written notice to the Corporation, into Common
    Shares of the Corporation at the rate of six (6) Common Shares for each
    Series BB Preferred Share. On presentation and surrender to the Corporation
    at its offices of the certificate representing the Series BB Preferred
    Shares to be converted, the holder thereof shall be entitled to receive in
    exchange therefor certificates for the fully paid and non-assessable Common
    Shares of the Corporation at the rate aforesaid, all under suitable
    regulations to be prescribed by the board of directors of the Corporation.
    Conversion of Series BB Preferred Shares in the manner aforesaid shall not
    affect the right of the converting holder thereof to receive dividends
    accrued but unpaid thereon as of the dividend payment date immediately prior
    to conversion.
 
        (2) The number of Common Shares into which each Series BB Preferred
    Share is convertible shall be subject to adjustment from time to time as set
    forth in clauses (A) and (B) of this subparagraph (2):
 
           (A) In case the Corporation shall (i) pay a dividend on its Common
       Shares in shares of the Corporation (ii) subdivide its outstanding Common
       Shares, (iii) combine the outstanding Common Shares into a smaller number
       of shares, or (iv) issue by reclassification of its Common Shares
       (whether pursuant to a merger or consolidation or otherwise) any shares
       of the Corporation, then the holder of each Series BB Preferred Share
       shall be entitled to receive upon the conversion of such share, the
       number of shares of the Corporation which he would have owned or would
       have been entitled to receive after the happening of any of the events
       described above had such share been converted immediately prior to the
       happening of such event. An adjustment made pursuant to this provision
       shall become effective retroactively with respect to conversions made
       subsequent to the record date in the case of a dividend, and shall become
       effective on the effective date in the case of a subdivision, combination
       or reclassification.
 
           (B) No adjustment in the conversion rate shall be required unless
       such adjustment would require an increase or decrease in such rate of at
       least one-tenth (1/10) of a Common Share; provided, however, that any
       adjustments which by reason of this clause (B) are not required to be
       made shall be carried forward and taken into account in any subsequent
       adjustment.
 
        (3) The Corporation shall at all times reserve and keep available out of
    its authorized Common Shares, solely for the purpose of issuance upon
    conversion of Series BB Preferred Shares as herein provided, such number of
    Common Shares as shall then be issuable upon the conversion of all
    outstanding Series BB Preferred Shares.
 
                                     BI-17
<PAGE>
        (4) Fractional Common Shares shall not be issued upon conversion of
    Series BB Preferred Shares, nor shall cash adjustments be made for
    fractional shares upon such conversion.
 
        (5) For the purposes of this paragraph (e), the term "Common Shares"
    shall mean (A) the class of stock designated as the Common Shares of the
    Corporation at the date of this Restated Certificate of Incorporation, or
    (B) any other class of stock resulting from successive changes or
    reclassifications of such class consisting solely of a change in par value,
    or a change from no par value to par value.
 
    (f)  LIQUIDATION--The amount payable upon each Series BB Preferred Share in
the event of either voluntary or involuntary liquidation shall be $100.00, plus
a sum equal to the amount of all accumulated and unpaid dividends thereon.
 
11. $7.00 CUMULATIVE, CONVERTIBLE AND REDEEMABLE VOTING SERIES DD PREFERRED
    SHARES, $.01 PAR VALUE, LIQUIDATION VALUE $100.00 PER SHARE
 
    (a)  DESIGNATION.--The designation of this series of Preferred Shares shall
be $7.00 Cumulative, Convertible and Redeemable Voting Series DD Preferred
Shares (hereinafter referred to as the "Series DD Preferred Shares").
 
    (b)  DIVIDENDS.--The rate of dividend payable upon Series DD Preferred
Shares shall be seven and no/100 dollars ($7.00) per share per annum.
 
    (c)  CONVERTIBILITY.--Commencing upon issuance and terminating on the day
before the fifteenth anniversary thereof, the Series DD Preferred Shares shall
be convertible, at the election of the holder of Series DD Preferred Shares and
upon surrender to the Corporation of the certificate or certificates
representing the shares to be converted, into fully paid and non-assessable TDS
Common Shares, $1.00 par value (hereinafter referred to as the "Common Shares"),
at the rate of five and one-quarter (5.25) Common Shares for each Series DD
Preferred Share. Certificates representing any Series DD Preferred Shares
surrendered for conversion shall be delivered to the Corporation duly endorsed,
or accompanied by proper instruments of transfer, to the Corporation or in
blank, together with a written notice to the Corporation of the holder's
election to make the conversion and of the name or names in which the
certificate or certificates for Common Shares shall be issued. The Corporation
shall pay all documentary, stamp, and similar taxes that may be payable in
respect of the issue or delivery of Common Shares upon conversion of any Series
DD Preferred Shares. The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
Common Shares the full number of Common Shares that would be deliverable upon
the conversion of Series DD Preferred Shares then outstanding.
 
    If at any time the Corporation elects to redeem part or all of the
outstanding Series DD Preferred Shares (pursuant to paragraph (e) of this
Statement of Designation, Preferences and Rights), the holders of the Series DD
Preferred Shares that the Corporation elects to redeem shall be entitled to
convert those shares to Common Shares by delivering to the Corporation, not less
than ten (10) days before the redemption date specified in the Corporation's
notice of redemption, a written notice of the holder's election to convert part
or all of his Series DD Preferred Shares to Common Shares, together with the
certificate or certificates representing the Series DD Preferred Shares to be
converted duly endorsed (or accompanied by proper instruments of transfer) to
the Corporation or in blank.
 
    The number of Common Shares into which each Series DD Preferred Share is
convertible shall be subject to adjustment from time to time as set forth below:
 
    In case the Corporation shall (1) pay a dividend on its Common Shares (in
shares of the Corporation), (2) subdivide its outstanding Common Shares, (3)
combine the outstanding Common Shares into a smaller number of shares or (4)
issue by reclassification of its Common Shares (whether pursuant to a merger or
consolidation or otherwise) any shares of the Corporation, then the holder of
each Series DD Preferred Share shall be entitled to receive upon the conversion
of such share, the number of shares of the Corporation which he or she would
have owned or would have been entitled to receive after the happening of any of
the events described above had such share been converted immediately prior to
the happening of such event. An adjustment made pursuant to this provision shall
become effective retroactively with respect to conversions made subsequent to
the record date in the case of a dividend, and shall become effective on the
effective date in the case of a subdivision, combination or reclassification.
Fractional Common Shares shall not be issued upon conversion of Series DD
Preferred Shares, nor shall cash adjustments be made for fractional shares upon
such conversion.
 
    (d)  LIQUIDATION VALUE.--Each Series DD Preferred Share shall have a
liquidation value of $100.00.
 
    (e)  REDEEMABILITY.--The Series DD Preferred Shares shall be redeemable upon
the second anniversary of their issuance, and on each anniversary thereafter
through the sixth such anniversary, at the election of the holder of
 
                                     BI-18
<PAGE>
Series DD Preferred Shares, which election shall be made not less than ten (10)
days before each such anniversary. The Corporation shall redeem on a pro-rata
basis for each holder, up to twenty percent (20%) of the number of Series DD
Preferred Shares issued and outstanding on each anniversary of their issuance
without premium, upon payment to the holder of Series DD Preferred Shares to be
redeemed of $100.00 per share PLUS
 
        (1) any accrued and unpaid dividends with respect to each Series DD
    Preferred Share redeemed, and
 
        (2) an amount equal to $1.75 for each Series DD Preferred Share redeemed
    MULTIPLIED BY the number of days between the date fixed for redemption and
    the March 1, June 1, September 1, or December 1 immediately preceding the
    date fixed for redemption and DIVIDED BY 90.
 
The right of redemption provided in the preceding sentence shall not be
cumulative. In the event that a holder of Series DD Preferred Shares fails to
exercise its right of redemption during any year, such right of redemption with
respect to the Series DD Preferred Shares eligible for redemption during such
year shall lapse. A holder of Series DD Preferred Shares shall exercise its
right of redemption by mailing to the Corporation written notice of its election
to redeem Series DD Preferred Shares, together with a certificate or
certificates representing the Series DD Preferred Shares to be redeemed, duly
endorsed or accompanied by proper instruments of transfer. The foregoing right
of redemption may only be exercised if the price of the Common Shares at the
time the holder of Series DD Preferred Shares gives notice of his or her desire
to have Series DD Preferred Shares redeemed is below $19.00 per share (or such
equivalent price as may exist as a result of any stock split, stock dividend,
reclassification or similar event).
 
    After the fifteenth anniversary of their issuance, the Series DD Preferred
Shares outstanding may be redeemed at the election of the Corporation from time
to time in whole or in part, without premium, upon payment to the holder of
Series DD Preferred Shares to be redeemed of $100 per share PLUS
 
        (1) any accrued and unpaid dividends with respect to each Series DD
    Preferred Share redeemed, and
 
        (2) an amount equal to $1.75 for each Series DD Preferred Share redeemed
    MULTIPLIED BY the number of days between the date fixed for redemption and
    the March 1, June 1, September 1, or December 1 immediately preceding the
    date fixed for redemption and DIVIDED BY 90.
 
Notice of any redemption shall be mailed to each holder of Series DD Preferred
Shares to be redeemed not less than thirty (30) days prior to the date upon
which such stock is to be redeemed. If on or before the redemption date
specified in such notice, the funds necessary for such redemption shall have
been set aside by the Corporation so as to be available for payment on demand to
the holders of Series DD Preferred Shares so called for redemption then,
notwithstanding that any certificate representing Series DD Preferred Shares so
called for redemption shall not have been surrendered for cancellation, the
dividends thereon shall cease to accrue from and after the date of such
redemption so specified, and all rights with respect to such Series DD Preferred
Shares so called for redemption, including any right to vote or otherwise
participate in the determination of any proposed corporate action, shall
forthwith after such redemption date cease and terminate, except only the right
of the holder to receive the redemption price therefor, but without interest.
 
    (f)  VOTING RIGHTS.--With respect to all matters, each holder of Series DD
Preferred Shares shall be entitled to one vote for each share of such stock
standing in the name of the holder on the books of the Corporation. With respect
to the election of directors, the holders of Series DD Preferred Shares shall
have class voting rights (voting together with the holders of (1) other
Preferred Shares that are entitled to vote thereon and that were issued after
October 31, 1981, and (2) Series A Common Shares) to the extent provided in
Article IV of the Restated Certificate of Incorporation of the Corporation.
 
    (g)  LIQUIDATION PREFERENCE.--For purposes of Article IV of this Restated
Certificate of Incorporation, the "fixed amount payable" for the Series DD
Preferred Shares shall be $100.00 per share.
 
12. $6.00 CUMULATIVE, CONVERTIBLE, REDEEMABLE AND VOTING SERIES EE PREFERRED
    SHARES, $.01 PAR VALUE, LIQUIDATION VALUE $100.00 PER SHARE
 
    (a)  DESIGNATION--The designation of this series of Preferred Shares shall
be "$6.00 Cumulative, Convertible, Redeemable and Voting Series EE Preferred
Shares" (hereinafter referred to as the "Series EE Preferred Shares").
 
    (b)  DIVIDENDS--The rate of dividend payable upon Series EE Preferred Shares
shall be six and no/100 dollars ($6.00) per share per annum. Such dividends
shall be cumulative from and commence to accrue on the date of issuance.
 
                                     BI-19
<PAGE>
    (c)  REDEMPTION--
 
        (1) After the twentieth anniversary of the date of issuance, the
    Corporation may, at its option, at any time redeem all or a portion of the
    then outstanding Series EE Preferred Shares for $100.00 per share, plus an
    amount equal to all accumulated and unpaid dividends thereon.
 
        (2) Notice of an election under the redemption provision in subparagraph
    (c)(1) above shall be delivered to each holder of Series EE Preferred Shares
    to be redeemed at the address appearing on the records of the Corporation
    not less than thirty (30) days prior to the date upon which such stock is to
    be redeemed. If, on the redemption date specified in such notice, the funds
    necessary for such redemption shall have been set aside by the Corporation
    so as to be available for payment on demand to the holder of Series EE
    Preferred Shares so called for redemption, then notwithstanding that any
    certificate representing Series EE Preferred Shares so called for redemption
    shall not have been surrendered for cancellation, the dividends thereon
    shall cease to accrue from and after the date of such redemption so
    specified, and all rights with respect to such Series EE Preferred Shares so
    called for redemption, including any right to vote or otherwise participate
    in the determination of any proposed corporate action, shall terminate at
    the close of business on such redemption date, except only the right of the
    holder to receive the redemption price therefor, but without interest.
 
    (d)  VOTING RIGHTS--
 
        (1) With respect to all matters, each holder of Series EE Preferred
    Shares shall be entitled to one vote for each share of such stock standing
    in the name of the holder on the books of the Corporation.
 
        (2) With respect to the election of directors, the holders of Series EE
    Preferred Shares shall have class voting rights (voting together with the
    holders of (A) other Preferred Shares that are entitled to vote thereon and
    that were issued after October 31, 1981, and (B) Series A Common Shares) to
    the extent provided in Article IV of the Restated Certificate of
    Incorporation of the Corporation.
 
    (e)  CONVERSION--
 
        (1) Commencing upon issuance and terminating at the close of business on
    the day before the tenth anniversary of the date of issuance, each
    outstanding Series EE Preferred Share may be converted, upon fifteen (15)
    days' written notice into four and one-half (4.5) Common Shares. On
    presentation and surrender to the Corporation at its offices of the
    certificate representing the Series EE Preferred Shares to be converted, the
    holder thereof shall be entitled to receive in exchange therefor
    certificates for the fully paid and non-assessable Common Shares of the
    Corporation at the rate aforesaid, all under suitable regulations to be
    prescribed by the board of directors of the Corporation. Conversion of
    Series EE Preferred Shares in the manner aforesaid shall not affect the
    right of the converting holder thereof to receive dividends accrued but
    unpaid thereon as of the dividend payment date immediately prior to
    conversion.
 
        (2) The number of Common Shares into which each Series EE Preferred
    Share is convertible shall be subject to adjustment from time to time. In
    the event the Corporation shall (A) pay a dividend on its Common Shares (in
    Common Shares of the Corporation) of more than 20% of the number of
    outstanding Common Shares, (B) subdivide its outstanding Common Shares, (C)
    combine the outstanding Common Shares into a smaller number of shares or (D)
    issue by reclassification of its Common Shares (whether pursuant to a merger
    or consolidation or otherwise) any shares of the Corporation, then the
    holder of each Series EE Preferred Share shall be entitled to receive, upon
    the conversion of such share, the number of shares of the Corporation which
    he would have owned or would have been entitled to receive after the
    happening of any of the events described above had such share been converted
    immediately prior to the happening of such event. An adjustment made
    pursuant to this provision shall become effective retroactively with respect
    to conversions made after the record date in the case of a dividend, and
    shall become effective on the effective date in the case