UNITED STATES CELLULAR CORP, 10-K, 1994-03-29

UNITED STATES CELLULAR CORP
10-K, 1994-03-29
RADIOTELEPHONE COMMUNICATIONS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 1-9712

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UNITED STATES CELLULAR CORPORATION

(Exact name of Registrant as specified in its charter)
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<TABLE>
<S> <C>
DELAWARE 62-1147325
- ------------------------------ ------------------------------
(State or other jurisdiction (IRS Employer Identification
of incorporation or No.)
organization)
</TABLE>

8410 WEST BRYN MAWR, SUITE 700, CHICAGO, ILLINOIS 60631
(Address of principal executive offices) (Zip code)

REGISTRANT'S TELEPHONE NUMBER: (312) 399-8900

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<S> <C>
Name of each exchange
Title of each class on which registered
- ---------------------------- --------------------------
Common Shares, $1 par value American Stock Exchange
</TABLE>

Securities registered pursuant to Section 12(g) of the Act: None

-------------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No ____

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _X_

As of March 7, 1994, the aggregate market value of registrant's Common
Shares held by nonaffiliates was approximately $396.6 million (based upon the
closing price of the Common Shares on March 7, 1994, of $27.625, as reported by
the American Stock Exchange).

The number of shares outstanding of each of the registrant's classes of
common stock, as of March 7, 1994, is 43,739,215 Common Shares, $1 par value,
and 33,005,877 Series A Common Shares, $1 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Those sections or portions of the registrant's 1993 Annual Report to
Shareholders and of the registrant's Notice of Annual Meeting of Shareholders
and Proxy Statement for its Annual Meeting of Shareholders to be held May 5,
1994, described in the cross reference sheet and table of contents attached
hereto are incorporated by reference into Parts II and III of this report.

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<PAGE>
CROSS REFERENCE SHEET
AND
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE NUMBER
OR REFERENCE (1)
------------
<S> <C> <C>
Item 1. Business............................................ 3
Item 2. Properties.......................................... 21
Item 3. Legal Proceedings................................... 21
Item 4. Submission of Matters to a Vote of Security
Holders........................................... 22
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters............................... 23(2)
Item 6. Selected Financial Data............................. 23(3)
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 23(4)
Item 8. Financial Statements and Supplementary Data......... 23(5)
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............... 23
Item 10. Directors and Executive Officers of the
Registrant........................................ 24(6)
Item 11. Executive Compensation.............................. 24(7)
Item 12. Security Ownership of Certain Beneficial Owners and
Management........................................ 24(8)
Item 13. Certain Relationships and Related Transactions...... 24(9)
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K....................................... 25
<FN>
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(1) Parenthetical references are to information incorporated by reference from
Exhibit 13, which includes portions of the registrant's Annual Report to
Shareholders for the year ended December 31, 1993 ("Annual Report") and
from the registrant's Notice of Annual Meeting of Shareholders and Proxy
Statement for its Annual Meeting of Shareholders to be held on May 5, 1994
(the "Proxy Statement").
(2) Annual Report section entitled "United States Cellular Stock and Dividend
Information."
(3) Annual Report section entitled "Selected Consolidated Financial Data."
(4) Annual Report section entitled "Management's Discussion and Analysis of
Results of Operations and Financial Condition."
(5) Annual Report sections entitled "Consolidated Statements of Operations,"
"Consolidated Statements of Cash Flows," "Consolidated Balance Sheets,"
"Consolidated Statements of Changes in Common Shareholders' Equity," "Notes
to Consolidated Financial Statements," "Report of Independent Public
Accountants" and "Consolidated Quarterly Income Information (Unaudited)."
(6) Proxy Statement sections entitled "Election of Directors" and "Executive
Officers."
(7) Proxy Statement section entitled "Executive Compensation," except for the
information specified in Item 402(a)(8) of Regulation S-K under the
Securities Exchange Act of 1934, as amended.
(8) Proxy Statement section entitled "Security Ownership of Certain Beneficial
Owners and Management."
(9) Proxy Statement section entitled "Certain Relationships and Related
Transactions."
</TABLE>
<PAGE>
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[LOGO]

UNITED STATES CELLULAR CORPORATION
8410 WEST BRYN MAWR - CHICAGO, ILLINOIS 60631
TELEPHONE (312) 399-8900

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PART I

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ITEM 1. BUSINESS

THE COMPANY

United States Cellular Corporation (the "Company") is engaged through
subsidiaries and joint ventures primarily in the development and operation of
and in the acquisition of interests in cellular telephone markets ("cellular
markets"). The Company is a majority-owned subsidiary of Telephone and Data
Systems, Inc. ("TDS"), an Iowa corporation.

The Company acquires, manages, owns, operates and invests in cellular
systems throughout the United States. As of December 31, 1993, the Company owned
or had the right to acquire interests in Metropolitan Statistical Areas ("MSAs")
and Rural Service Areas ("RSAs") representing approximately 23.7 million
population equivalents in a total of 205 markets. The Company is the seventh
largest cellular telephone company in the United States, based on the aggregate
number of population equivalents it owns or has the right to acquire. The
Company's corporate development strategy is to acquire controlling interests in
MSA and RSA licensees in areas adjacent to or in proximity to its other markets
in order to build clusters. The Company anticipates that clustering markets will
expand its cellular service areas while enabling it to achieve marketing and
advertising benefits and to achieve economies in certain capital and operating
costs.

The following table summarizes the status of the Company's interests in
cellular markets at December 31, 1993.

<TABLE>
<CAPTION>
MSA RSA TOTAL
--- --- -----
<S> <C> <C> <C>
Owns Majority Interest and
Manages (all operational).... 31 85 116
--- --- -----
Right to Acquire Majority
Interest and Manage
Operational (1)............. 4 10 14
Not operational............. -- 2 2
--- --- -----
4 12 16
--- --- -----
Owns Minority Interest and
Manages (all operational)
(2).......................... 1 11 12
--- --- -----
Total Markets Managed or to be
Managed by the Company....... 36 108 144
--- --- -----
Markets Managed by Others (all
operational) (3)............. 39 22 61
--- --- -----
Total Markets................. 75 130 205
--- --- -----
--- --- -----
<FN>
- ----------
(1) Five markets are being operated by third parties until the Company
acquires a controlling interest in those markets.
(2) One market is being operated by a third party until the Company acquires
an interest in the market.
(3) Represents markets in which the Company owns or has the right to acquire a
minority or other noncontrolling interest and which are managed by third
parties.
</TABLE>

3
<PAGE>
The Company served 293,000 customers at December 31, 1993, through 614 cells
in 136 managed markets. The average penetration rate (i.e., the percentage of
total population of a market represented by customers) in the Company-managed
markets was 1.33% at December 31, 1993. The churn rate, or the portion of the
Company's customers discontinuing service each month, averaged 2.3% per month
during the twelve months ended December 31, 1993. The Company's 116
majority-owned and managed ("consolidated") markets served 261,000 customers at
December 31, 1993, through 522 cells. The average penetration rate in the
consolidated markets was 1.35% at December 31, 1993, and the churn rate in all
consolidated markets averaged 2.3% per month for the twelve months ended
December 31, 1993.

The Company, or TDS for the benefit of the Company, has entered into
agreements with third parties to acquire cellular interests which generally
require the issuance of securities of the Company or TDS securities. In
connection with agreements that require the delivery of TDS securities, the
Company reimburses TDS for TDS securities issued to third parties as
consideration for the acquisitions.

If all acquisitions pending at December 31, 1993, are completed as planned,
the Company will issue approximately 3.7 million Common Shares to TDS at or near
the respective closing dates of each of these acquisitions and approximately
49,000 Common Shares to third parties. In addition, approximately 5.0 million
Common Shares are issuable to third parties at December 31, 1993, in connection
with completed acquisitions. At December 31, 1993, the Company also had 197,000
outstanding shares of Preferred Stock, all held by TDS, which are redeemable by
the delivery of 1.2 million Common Shares between 1994 and 1996. Certain TDS
Preferred Shares delivered in connection with the Company's acquisitions are
also redeemable by the delivery of an additional 1.1 million USM Common Shares
between 1994 and 1996. The aggregate of 11.0 million Common Shares committed for
issuance in future years are scheduled to be issued as follows: approximately
6.8 million shares by March 21, 1994, 1.2 million shares in the remainder of
1994, 1.6 million shares in 1995 and 1.4 million shares in 1996.

TDS owned an aggregate of 59,548,450 shares of common stock of the Company
at December 31, 1993, representing over 85% of the combined total of the
Company's outstanding Common and Series A Common Shares and over 97% of their
combined voting power. Assuming the Company's Common Shares are issued in all
instances in which the Company has the choice to issue its Common Shares or
other consideration and assuming all other issuances of the Company's common
stock to TDS and third parties for completed and pending acquisitions and
redemptions of the Company's Preferred Stock and TDS's Preferred Shares had been
completed at December 31, 1993, TDS would have owned approximately 79.5% of the
total outstanding common stock of the Company and controlled over 95% of the
combined voting power of both classes of its common stock. In the event TDS's
ownership of the Company falls below 80% of the total value of all of the
outstanding shares of the Company's stock, TDS and the Company would be
deconsolidated for federal income tax purposes. TDS and the Company have the
ability to defer or prevent deconsolidation, if deferring or preventing
deconsolidation would be advantageous, by delivering TDS Common Shares and/or
cash, in lieu of the Company's Common Shares in connection with certain
acquisitions.

The Company was incorporated in Delaware in 1983. The Company's executive
offices are located at 8410 West Bryn Mawr, Chicago, Illinois 60631. Its
telephone number is 312-399-8900. The Common Shares of the Company are listed on
the American Stock Exchange under the symbol "USM."

Unless the context indicates otherwise: (i) references to the "Company"
refer to United States Cellular Corporation and its subsidiaries; (ii)
references to "MSA" or to a particular city refer to the Metropolitan
Statistical Area, as designated by the U.S. Office of Management and Budget and
used by the Federal Communications Commission ("FCC") in designating
metropolitan cellular market areas; (iii) references to "RSA" refer to the Rural
Service Area, as used by the FCC in designating non-MSA cellular market areas;
(iv) references to cellular "markets" or "systems" refer to MSAs, RSAs or both;
(v) references to "population equivalents" mean the population of a market,
based on 1993 Donnelley Marketing Service Estimates, multiplied by the
percentage interests that the Company owns or has the right to acquire in an
entity licensed, designated to receive a license or expected to receive a
construction permit ("licensee") by the FCC to construct or operate a cellular
system in such market.

4
<PAGE>
REGULATORY DEVELOPMENTS

The operations of the Company are subject to FCC and state regulation. The
licenses held by the Company which are granted by the FCC for the use of radio
frequencies are an important component of the overall value of the assets of the
Company. As discussed here, recent Congressional legislation and related FCC
regulatory proceedings may have significant impact on some or all of its
operations by altering FCC and state regulatory responsibilities for mobile
service, the procedures for the award by the FCC of licenses to conduct existing
and new mobile services, the terms and conditions of business relationships
between mobile service providers and Local Exchange Carriers ("LECs") and the
scope of the competitive opportunities available to mobile service providers.

The Omnibus Reconciliation Act of 1993 (the "Budget Act"), which became
effective in August 1993, amended the Communications Act of 1934 (the
"Communications Act") by eliminating legislatively enacted distinctions
affecting FCC and state regulation of common carrier and private carrier mobile
operations and directed the FCC to classify all mobile services, including
cellular, paging, Specialized Mobile Radio ("SMR") and other services under two
categories: Commercial Mobile Radio Services ("CMRS"), subject to common carrier
regulation; or Private Mobile Radio Services ("PMRS"), not subject to common
carrier regulation. At its February 3, 1994 public meeting, the FCC adopted a
decision classifying mobile service offerings as CMRS operations if they include
a service offering to the public, for a fee, which is interconnected to the
public switched network. Cellular, SMR and paging, among other services, will be
classified as CMRS if they fit this definition. In addition, the FCC decision
establishes a regulatory precedent for hybrid CMRS/PMRS regulation of mobile
operations which offer both CMRS service and PMRS service. The Company
anticipates that its service offerings will be classified as CMRS. The FCC
decision also states that it would forebear from requiring that CMRS providers
comply with a number of statutory provisions, otherwise applicable to common
carriers, such as the filing of tariffs. It requires LECs to provide reasonable
and fair interconnection to all CMRS providers, subject to mutual compensation,
reasonable charges for interstate interconnection and reasonable forms of
interconnection. Because the text of the FCC's decision has only recently been
released and addresses many complex and interrelated aspects of regulatory
policy, the impact of these aspects of the FCC proceedings on the Company cannot
be predicted with certainty.

The Budget Act also amended the Communications Act to authorize the FCC to
use a system of competitive bidding to issue initial licenses for the use of
radio frequencies for which there are mutually exclusive applications and where
the principal use of the license will be to offer service in return for
compensation from customers. At its March 8, 1994 public meeting, the FCC
adopted a decision, the text of which has not yet been released, that
establishes generic rules for competitive bidding, defines eligibility criteria
for small businesses, minority-and female-owned businesses and rural telephone
companies which qualify for preferential bidding treatment, as required under
the Budget Act, and describes the bidding mechanisms to be used by businesses
qualifying for preferential treatment in future spectrum auctions. The FCC
deferred adoption of the competitive bidding rules for specific licensing
situations.

Under other amendments to the Communications Act included in the Budget Act,
states will generally be prohibited from regulating the entry of, or the rates
charged by, any CMRS provider. The new law does not, however, prohibit a state
from regulating other terms and conditions of CMRS offerings and permits states
to petition the FCC for authority to continue rate regulation. These new
statutory provisions will take effect in August 1994.

On September 23, 1993, the FCC decided to allocate seven Personal
Communications Services ("PCS") frequency blocks for licensing, in the aggregate
120 Megahertz ("MHz") of spectrum for licensed operations, and an additional 40
MHz for unlicensed operations, including uses such as telephone PBX and wireless
local area network operations. Two 30 MHz frequency blocks will be awarded for
each of the 51 Rand McNally Major Trading Areas, while one 20 MHz and four 10
MHz frequency blocks will be awarded for each of the 492 Rand McNally Basic
Trading Areas. Cellular operators will be permitted to participate in the award
of these new PCS licenses, which will be made via a yet-to-be-defined auction
process, except for licenses reserved for rural, small, minority-and female-
owned businesses and licenses for markets in which such cellular operator owns a
20% or greater interest in a cellular licensee which holds a license covering
10% or more of the population of the

5
<PAGE>
respective PCS licensed area. In the latter case, the cellular licensee is
limited to one 10 MHz PCS channel block. Numerous requests for reconsideration
of the FCC's decision have been filed and remain pending before the FCC. In its
March 8, 1994 decision referenced above, the FCC presumptively classified PCS as
CMRS. The FCC has not adopted specific competitive bidding rules for the initial
licensing of PCS spectrum or established a schedule for the commencement of PCS
auctions.

PCS technology is currently under development and is expected to be similar
in some respects to cellular technology. When offered commercially, this
technology is expected to offer increased capacity for wireless two-way and
one-way voice, data and multimedia communications services and is expected to
result in increased competition in the Company's operations. The ability of
these future PCS licensees to complement or compete with existing cellular
licensees is uncertain and may be affected by future FCC rule-making. These and
other future technological developments in the wireless telecommunications
industry and the enhancement of current technologies will likely create new
products and services that are competitive with the services currently offered
by the Company. There can be no assurance that the Company will not be adversely
affected by such technological developments.

CELLULAR TELEPHONE OPERATIONS

THE CELLULAR TELEPHONE INDUSTRY. The cellular telephone industry has been
in existence for approximately eleven years in the United States. Although the
industry is still relatively new, it has grown significantly during this period.
According to the Cellular Telecommunications Industry Association, at December
31, 1993, there were estimated to be over 16 million cellular customer units in
service in the United States, generating nearly $11 billion of revenue per year.
Cellular service is now available throughout the United States. The commercial
feasibility of cellular systems in the United States has not, however, been
proven over a long period of time.

Cellular telephone technology provides high-quality, high-capacity
communications services to in-vehicle cellular telephones and hand-held portable
cellular telephones. Cellular technology is a major improvement over earlier
mobile telephone technologies. Cellular telephone systems are designed to allow
for maximum mobility of the customer. In addition to mobility, cellular
telephone systems provide access through system interconnections to local,
regional, national and world-wide telecommunications networks. Cellular
telephone systems also offer a full range of ancillary services such as
conference calling, call-waiting, call-forwarding, voice mail, facsimile and
data transmission.

Cellular telephone systems divide each service area into smaller geographic
areas or "cells." Each cell is served by radio transmitters and receivers
operating on discrete radio frequencies licensed by the FCC. All of the cells in
a system are connected to a computer-controlled Mobile Telephone Switching
Office ("MTSO"). The MTSO is connected to the conventional ("landline")
telephone network. Each conversation on a cellular phone involves a transmission
over a specific range of radio frequencies from the cellular phone to a
transmitter/receiver at a cell site. The transmission is forwarded from the cell
site to the MTSO and from there may be forwarded to the landline telephone
network to complete the call. As the cellular telephone moves from one cell to
another, the MTSO determines radio signal strength and transfers ("hands off")
the call from one cell to the next. This hand-off is not noticeable to either
party on the phone call.

The Company provides cellular telephone service under licenses granted by
the FCC. The FCC grants only two licenses to provide cellular telephone service
in each market. However, competition for customers includes competing
communications technologies such as conventional landline and mobile telephone,
SMR systems and radio paging. In addition, emerging technologies such as
Enhanced Specialized Mobile Radio ("ESMR"), mobile satellite communication
systems, second generation cordless telephones ("CT-2") and PCS may prove to be
competitive with cellular service in the future in some or all of the markets
where the Company has operations.

The services available to cellular customers and the sources of revenue
available to cellular system operators are similar to those provided by
conventional landline telephone companies. Customers are charged a separate fee
for system access, airtime, long-distance calls, and ancillary services.

Technical standards require that analog cellular telephones be compatible
with all cellular systems in all market areas in the United States. Because of
this compatibility feature, cellular system operators

6
<PAGE>
often provide service to customers of other operators' cellular systems while
the customers are temporarily located within the operators' service areas.
Customers using service away from their home system are called "roamers." The
system that provides the service to these roamers will generate usage revenue.
Many operators, including the Company, charge premium rates for this roaming
service.

There are a number of recent technical developments in the cellular
industry. Currently, while most of the MTSOs process information digitally, most
of the radio transmission is done on an analog basis. Digital radio technology
offers advantages, including less transmission noise, greater system capacity,
and potentially lower incremental costs for additional customers. The conversion
from analog to digital radio technology is expected to be an industry-wide
process that will take a number of years.

During 1992, a new transmission technique was approved for implementation by
the cellular industry. Time Division Multiple Access ("TDMA") technology was
selected as one industry standard by the cellular industry and has been deployed
in several markets, including the Company's operations in Tulsa, Oklahoma.
However, another digital technology, Code Division Multiple Access ("CDMA"), is
expected to be in a commercial trial by the end of 1994. The Company expects to
deploy some digital radio channels in other markets in the near future.

The cellular telephone industry is characterized by high initial fixed
costs. Accordingly, if and when revenues less variable costs exceed fixed costs,
incremental revenues should yield an operating profit. The amount of profit, if
any, under such circumstances is dependent on, among other things, prices and
variable marketing costs which in turn are affected by the amount and extent of
competition. Until technological limitations on total capacity are approached,
additional cellular system capacity can normally be added in increments that
closely match demand and at less than the proportionate cost of the initial
capacity.

THE COMPANY'S OPERATIONS. The Company is building a substantial presence in
selected geographic areas throughout the United States where it can efficiently
integrate and manage cellular telephone systems. Its cellular interests include
market clusters in the Northern Florida, Eastern Tennessee/Western North
Carolina, Eastern North Carolina/Virginia, Maine/New Hampshire/Vermont, West
Virginia/Pennsylvania/Maryland, Indiana/Kentucky, Iowa,
Wisconsin/Illinois/Minnesota, Oklahoma, Missouri, Southwestern Texas,
Texas/Oklahoma, Oregon/California and Washington/Idaho areas. See "The Company's
Cellular Interests." The Company has acquired its cellular interests through the
wireline application process (22%), including settlements and exchanges with
other applicants, and through acquisitions (78%), including acquisitions from
TDS and third parties.

Management plans to retain minority interests in certain cellular markets
which it believes will earn a favorable return on investment. Other minority
interests may be traded for interests in markets which enhance the Company's
market clusters or may be sold for cash or other consideration.

CERTAIN CONSIDERATIONS REGARDING CELLULAR TELEPHONE OPERATIONS

Since its inception in 1983, the Company has principally been in a start-up
phase in which its activities have been concentrated significantly on the
acquisition of interests in entities licensed or designated to receive a license
("licensees") from the FCC to provide cellular service and on the construction
and initial operation of cellular systems. The development of a cellular system
is capital-intensive and requires substantial investment prior to and subsequent
to initial operation. The Company has experienced operating losses and net
losses in all but a few quarters since its inception. The Company may incur
operating losses for the next few quarters, and there is no assurance that
future operations, individually or in the aggregate, will be profitable.

The licensing (including renewal of licenses), construction, operation,
sale, interconnection arrangements and acquisition of cellular systems are
regulated by the FCC and various state public utility commissions. Changes in
the regulation of cellular operators or their activities and of other mobile
service providers (such as the decision by the FCC to permit PCS licensees)
could have a material adverse effect on the Company's operations. See "Legal
Proceedings -- La Star Application" for a discussion of certain FCC proceedings
which have suspended the Company's and TDS's licensing authority in a Wisconsin
market pending the outcome of an FCC hearing.

7
<PAGE>
The number of population equivalents represented by the Company's cellular
interests bears no direct relationship to the number of potential cellular
customers or the revenues that may be realized from the operation of the related
cellular systems. The fair market value of the Company's cellular interests will
ultimately depend on the success of its operations. There is no assurance that
the value of cellular interests will not be significantly lower in the future
than at present.

While there are numerous cellular systems operating in the United States and
other countries, the industry has only a limited operating history. As a result,
there is uncertainty regarding its future, including, among other factors: (i)
the growth in customers; (ii) the usage and pricing of cellular services; (iii)
the percentage of customers who terminate service each month (the "churn rate");
(iv) the cost of providing cellular services, including the cost of attracting
new customers; and (v) continuing technological advances which may provide
competitive alternatives.

Media reports have suggested that certain radiofrequency ("RF") emissions
from portable cellular telephones might be linked to cancer. The Company has
reviewed relevant scientific information and, based on such information, is not
aware of any credible evidence linking the usage of portable cellular telephones
with cancer. The FCC currently has a rulemaking proceeding pending to update the
guidlines and methods it uses for evaluating RF emissions in radio equipment,
including cellular telephones. While the proposal would impose more restrictive
standards on RF emissions from low-power devices such as portable cellular
telphones, it is anticipated that all cellular telephones currently marketed and
in use will comply with those standards.

CELLULAR SYSTEMS DEVELOPMENT

ACQUISITIONS. During the last three years, the Company has aggressively
expanded its size, particularly in markets which share adjacency, through an
ongoing acquisition program aimed at strengthening the Company's position in the
cellular industry. This growth has resulted primarily from acquisitions of
interests in RSAs and has been based on obtaining interests with rights to
manage the underlying market.

Including transfers of RSA interests from TDS, the Company has nearly
tripled its population equivalents from approximately 8.0 million at December
31, 1988, to approximately 23.7 million at December 31, 1993. Similarly, markets
managed or to be managed by the Company have increased from 33 markets at
December 31, 1988, to 144 markets at December 31, 1993. As of December 31, 1993,
almost 86% of the Company's population equivalents represented interests in
markets the Company manages or expects to manage, compared to 62% at December
31, 1988.

The Company seeks and is currently negotiating for the acquisition of
additional cellular interests and plans to acquire significant additional
cellular interests in markets that complement its developing market clusters and
in other attractive markets. The Company also seeks to acquire minority
interests in markets where it already owns (or has the right to acquire) the
majority interest. At the same time the Company continues to evaluate the
disposition of interests which are not essential to its corporate development
strategy.

The Company will ordinarily make acquisitions using securities or cash or by
exchanging cellular interests it already owns. There is no assurance that the
Company will be able to purchase any additional interests, or that any such
additional interests, if purchased, will be purchased on terms that are
favorable to the Company.

The Company, or TDS for the benefit of the Company, has negotiated
acquisitions of cellular interests from third parties primarily in consideration
for the Company's Common Shares or TDS's Common or Preferred Shares. Cellular
interests acquired by TDS are generally assigned to the Company. At that time,
the Company reimburses TDS for the value of TDS securities issued in such
transactions, generally by issuing Common Shares and Preferred Stock (redeemable
by the delivery of Common Shares) to TDS or by increases to the balance due TDS
under the Company's Revolving Credit Agreement in amounts equal to the value of
TDS capital stock at the time the acquisitions are closed. The fair market value
of the Common Shares and Preferred Stock issued to TDS in connection with these
transactions is equal to the fair market value of the TDS securities issued in
the transactions and is determined at the time the transactions are closed.

8
<PAGE>
In cases where the Company's Common Shares are used as consideration in
connection with acquisitions, most of the agreements call for such shares to be
delivered in 1994 and later years. In a limited number of transactions, the
Company has agreed to pay some portion of the purchase price in cash.

COMPLETED ACQUISITIONS. During 1993, the Company completed the acquisition
of controlling interests in 25 markets and several additional minority interests
representing approximately 3.8 million population equivalents for an aggregate
consideration of $284.6 million. The consideration consisted of 5.7 million of
the Company's Common Shares, 75,000 of the Company's Series A Common Shares, an
increase in the debt to TDS under the Revolving Credit Agreement of $101.5
million, $12.7 million in cash, cash paid by TDS of $9.4 million (treated as an
equity contribution to the Company), and the obligation to deliver approximately
140,000 of the Company's Common Shares to third parties in 1994. The debt under
the Revolving Credit Agreement and 5.5 million of the Company's Common Shares
were issued to TDS to reimburse TDS for TDS Common Shares issued and cash paid
to third parties in connection with these acquisitions.

Included in the above transactions is the transfer of a minority interest in
one RSA from TDS, representing 35,000 population equivalents. The consideration
consisted of the issuance of 31,000 of the Company's Common Shares and 75,000 of
the Company's Series A Common Shares to TDS. The Company's Common and Series A
Common Shares have been recorded at TDS's book value of the RSA interests
transferred, rather than the fair market value of the shares, due to the
intercompany nature of the transaction.

PENDING ACQUISITIONS. At December 31, 1993, the Company, or TDS for the
benefit of the Company, had entered into agreements to acquire controlling
interests in nine markets and a minority interest representing approximately 1.2
million population equivalents for an aggregate consideration estimated to be
approximately $128.4 million. If all of the pending acquisitions are completed
as planned, the Company will issue approximately 49,000 of its Common Shares and
will pay approximately $4.5 million in cash. TDS will pay approximately $123.0
million in TDS Common Shares and cash. Any interests acquired by TDS in these
transactions are expected to be assigned to the Company and at that time, the
Company will reimburse TDS for TDS's consideration delivered and costs incurred
in such acquisitions in the form of Common Shares of the Company or increases in
the balance under the Revolving Credit Agreement. Based on the estimated value
of the consideration at the time the agreements were entered into, the Company
expects to reimburse TDS by issuing 3.7 million of the Company's Common Shares
to TDS and by increasing the balance due TDS under the Revolving Credit
Agreement by $400,000.

In addition to the agreements discussed above, the Company has agreements to
acquire interests representing 302,000 population equivalents in three markets.
The consideration for these acquisitions will be determined based on future
appraisals of the fair market values of the interests to be acquired. All
population equivalents acquirable pursuant to these agreements and the
agreements in the previous paragraph are included in the table on pages 11 to
14.

In addition to the acquisitions completed in 1993 and the pending
acquisitions discussed above, the Company had commitments at December 31, 1993
to issue 4.8 million Common Shares in connection with acquisitions completed
prior to 1993. Approximately 3.8 million of these shares were issued in early
1994. The Company also had Preferred Stock outstanding (all of which is held by
TDS) which is redeemable into 1.2 million of the Company's Common Shares in 1994
through 1996. Certain series of TDS Preferred Shares are redeemable into an
additional 1.1 million of the Company's Common Shares in 1994 through 1996.

The Company maintains shelf registration of its Common Shares and Preferred
Stock under the Securities Act of 1933 for issuance specifically in connection
with acquisitions.

CELLULAR INTERESTS AND CLUSTERS

The Company operates clusters of adjacent cellular systems, enabling its
customers to benefit from a larger service area than otherwise possible. The
Company's strategy was initially implemented by filing for licenses to operate
cellular systems in MSAs. Following the MSA lotteries and settlements, the
Company acquired interests in certain additional MSAs through purchases. The
Company has acquired

9
<PAGE>
substantial additional population equivalents through the purchase of interests
in RSAs. The Company plans to continue to acquire controlling interests in
cellular licenses to provide service in systems that complement its developing
market clusters and in other attractive systems.

The Company anticipates that clustering markets will expand its cellular
service areas and provide certain economies in its capital and operating costs.
In areas where the Company has clusters of contiguous markets it may offer
wide-area coverage. This would allow uninterrupted service within the area and
allow the customer to make outgoing and receive incoming calls without special
roamer arrangements. Clustering also makes possible greater sharing of
facilities, personnel and other costs and may thereby reduce the costs of
serving each customer. The extent to which these revenue enhancements and
economies of operation will be realized through clustering is dependent upon
market conditions, population sizes of the clusters and engineering
considerations.

The Company's market clusters have grown rapidly. At December 31, 1993,
approximately 87%, or 17.7 million, of the Company's managed population
equivalents were in contiguous markets within market clusters. Additionally, 92%
of the Company's managed markets were adjacent to another Company-managed market
at that time. The Company anticipates continuing to pursue strategic
acquisitions and trades in order to complement its developing market clusters.
The Company has also acquired minority interests in markets where it already
owns, or has the right to acquire, a majority interest. From time to time, the
Company may consider trading or selling some of its cellular interests which do
not fit well with its long-term strategies.

The Company owned or had the right to acquire interests in cellular
telephone systems in 205 markets at December 31, 1993. At December 31, 1993,
approximately 86%, or 20.4 million, of the Company's population equivalents were
in markets that the Company manages or expects to manage. At that date,
approximately 95% of the Company's managed population equivalents were in
markets where cellular service has been initiated and where the Company is
currently operating the system. The following table summarizes the growth in the
Company's population equivalents in recent years and the development status of
these population equivalents.

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ -----
(THOUSANDS OF POPULATION
EQUIVALENTS)(1)
<S> <C> <C> <C> <C> <C>
Operational Markets:
Majority-Owned and Managed...................... 18,212 14,268 10,427 5,110 4,060
Minority-Owned and Managed (2).................. 1,139 2,007 1,755 1,291 994
Markets Under Construction and to be Managed: (3)
Majority-Owned.................................. 996 1,811 2,973 4,372 292
Minority-Owned (2).............................. 6 5 122 444 646
------ ------ ------ ------ -----
Total Markets Managed and to be Managed......... 20,353 18,091 15,277 11,217 5,992
Minority Interests in Markets Managed by Others... 3,378 3,474 3,229 3,428 3,244
------ ------ ------ ------ -----
Total........................................... 23,731 21,565 18,506 14,645 9,236
------ ------ ------ ------ -----
------ ------ ------ ------ -----
<FN>
- ----------
(1) Based on 1993 Donnelley Marketing Services estimates for all years.
(2) Includes markets where the Company has the right to acquire an interest but
does not currently own an interest.
(3) Includes markets which are operational but which are currently managed by
third parties.
</TABLE>

The following section details the Company's cellular interests, including
those it owned or had the right to acquire as of December 31, 1993. The table
presented therein lists clusters of markets, including both MSAs and RSAs, that
the Company operates or anticipates operating. The Company's market clusters
show the areas in which the Company is currently focusing its development
efforts. These clusters have been devised with a long-term goal of allowing
delivery of cellular service to areas of economic interest and along corridors
of economic activity.

10
<PAGE>
THE COMPANY'S CELLULAR INTERESTS

The table below sets forth certain information with respect to the interests
in cellular markets which the Company owned or had the right to acquire pursuant
to definitive agreements as of December 31, 1993.

<TABLE>
<CAPTION>
PERCENTAGE TOTAL
ACQUIRABLE CURRENT AND
CURRENT UNDER ACQUIRABLE
1993 PERCENTAGE DEFINITIVE POPULATION
CLUSTER/MARKET POPULATION INTEREST AGREEMENTS(1) TOTAL EQUIVALENTS
- -------------------------------------------------- ---------- ----------- -------------- ------- -----------
<S> <C> <C> <C> <C> <C>
MARKETS MANAGED BY THE COMPANY:
EASTERN NORTH CAROLINA/VIRGINIA:
Northampton (NC 8)............................ 282,000 100.00% 100.00% 282,000
Rockingham (NC 7)............................. 276,000 100.00 100.00 276,000
Harnett (NC 10)............................... 266,000 100.00 100.00 266,000
Greene (NC 13)................................ 235,000 100.00 100.00 235,000
Greenville (NC14)............................. 232,000 100.00 100.00 232,000
Hoke (NC 11).................................. 212,000 100.00 100.00 212,000
Chesterfield (SC 4)........................... 209,000 100.00 100.00 209,000
Bedford (VA 4)................................ 171,000 100.00 100.00 171,000
Sampson (NC 12)............................... 120,000 100.00 100.00 120,000
Chatham (NC 6)................................ 146,000 81.16 81.16 119,000
Camden (NC 9)................................. 117,000 100.00 100.00 117,000
Buckingham (VA 7)............................. 88,000 100.00 100.00 88,000
Bath (VA 5)................................... 62,000 100.00 100.00 62,000
---------- -----------
2,416,000 2,389,000
---------- -----------
WISCONSIN/ILLINOIS/MINNESOTA:
Peoria, IL.................................... 346,000 100.00 100.00 346,000
Jo Daviess (IL 1)............................. 313,000 100.00 100.00 313,000
Vernon (WI 8)(2)*............................. 227,000 100.00 100.00 227,000
Adams (IL 4)(3)*.............................. 216,000 100.00 100.00 216,000
Mercer (IL 3)................................. 204,000 100.00 100.00 204,000
Rochester, MN*................................ 113,000 69.80 30.20% 100.00 113,000
Pierce (WI 5)................................. 92,000 100.00 100.00 92,000
Wausau, WI*................................... 119,000 71.76 71.76 85,000
Trempealeau (WI 6)(3)......................... 81,000 100.00 100.00 81,000
LaCrosse, WI.................................. 99,000 52.08 52.08 52,000
---------- -----------
1,810,000 1,729,000
---------- -----------
EASTERN TENNESSEE/WESTERN NORTH CAROLINA:
Knoxville, TN*................................ 531,000 96.03 96.03 510,000
Henderson (NC 4)(3)*.......................... 271,000 100.00 100.00 271,000
Whitfield (GA 1).............................. 206,000 100.00 100.00 206,000
Asheville, NC*................................ 200,000 100.00 100.00 200,000
Bledsoe (TN 7)(3)*............................ 139,000 96.03 96.03 133,000
Giles (TN 6)*................................. 153,000 80.00 80.00 122,000
Hamblen (TN 4)(3)*............................ 121,000 100.00 100.00 121,000
Lake (TN 1)*.................................. 75,000 16.33 83.67 100.00 75,000
Macon (TN 3)*................................. 323,000 16.67 16.67 54,000
Yancey (NC 2)(3)*............................. 30,000 100.00 100.00 30,000
---------- -----------
2,049,000 1,722,000
---------- -----------
IOWA:
Des Moines, IA................................ 410,000 100.00 100.00 410,000
Davenport, IA-IL.............................. 360,000 97.37 97.37 350,000
Humboldt (IA 10).............................. 182,000 100.00 100.00 182,000
Cedar Rapids, IA.............................. 173,000 83.16 83.16 143,000
Waterloo-Cedar Falls, IA...................... 149,000 73.27 73.27 109,000
Kossuth (IA 14)............................... 108,000 100.00 100.00 108,000
Mitchell (IA 13).............................. 67,000 100.00 100.00 67,000
Mills (IA 1).................................. 62,000 100.00 100.00 62,000
Dubuque, IA................................... 88,000 70.01 70.01 61,000
Audubon (IA 7)................................ 55,000 100.00 100.00 55,000
Union (IA 2).................................. 50,000 100.00 100.00 50,000
Monroe (IA 3)*................................ 90,000 49.00 49.00 44,000
Winneshiek (IA 12)*........................... 115,000 24.50 24.50 28,000
Ida (IA 9)*................................... 63,000 16.67 16.67 11,000
---------- -----------
1,972,000 1,680,000
---------- -----------
</TABLE>

11
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE TOTAL
ACQUIRABLE CURRENT AND
CURRENT UNDER ACQUIRABLE
1993 PERCENTAGE DEFINITIVE POPULATION
CLUSTER/MARKET POPULATION INTEREST AGREEMENTS(1) TOTAL EQUIVALENTS
- -------------------------------------------------- ---------- ----------- -------------- ------- -----------
MARKETS MANAGED BY THE COMPANY: (CONTINUED)
<S> <C> <C> <C> <C> <C>
MAINE/NEW HAMPSHIRE/VERMONT:
Manchester-Nashua, NH......................... 336,000 86.43% 86.43% 291,000
Kennebec (ME 3)............................... 221,000 100.00 100.00 221,000
Coos (NH 1)*.................................. 221,000 100.00 100.00 221,000
Somerset (ME 2)............................... 158,000 100.00 100.00 158,000
Bangor, ME.................................... 148,000 73.33 73.33 108,000
Addison (VT 2)(3)*............................ 105,000 100.00 100.00 105,000
Washington (ME 4)*............................ 85,000 100.00 100.00 85,000
Oxford (ME 1)................................. 82,000 100.00 100.00 82,000
Lewiston-Auburn, ME........................... 103,000 75.06 75.06 78,000
---------- -----------
1,459,000 1,349,000
---------- -----------
WEST VIRGINIA/PENNSYLVANIA/MARYLAND:
Monongalia (WV 3)*............................ 266,000 100.00 100.00 266,000
Greene (PA 9)................................. 187,000 20.00 80.00% 100.00 187,000
Grant (WV 4)*................................. 164,000 100.00 100.00 164,000
Tucker (WV 5)*................................ 129,000 100.00 100.00 129,000
Hagerstown, MD*#.............................. 125,000 100.00 100.00 125,000
Cumberland, MD*............................... 102,000 100.00 100.00 102,000
Wetzel (WV 2)................................. 79,000 100.00 100.00 79,000
Bedford (PA 10)(3)*........................... 50,000 100.00 100.00 50,000
Garrett (MD 1)*............................... 30,000 100.00 100.00 30,000
---------- -----------
1,132,000 1,132,000
---------- -----------
MISSOURI:
Joplin, MO*................................... 138,000 49.67 50.33 100.00 138,000
Columbia, MO*................................. 119,000 100.00 100.00 119,000
Brown (KS 5).................................. 119,000 100.00 100.00 119,000
Stone (MO 15)................................. 103,000 100.00 100.00 103,000
Laclede (MO 16)............................... 92,000 100.00 100.00 92,000
Washington (MO 13)............................ 88,000 100.00 100.00 88,000
Callaway (MO 6)*.............................. 84,000 100.00 100.00 84,000
Madison (AR 1)................................ 70,000 51.00 49.00 100.00 70,000
Linn (MO 5)................................... 68,000 100.00 100.00 68,000
DeKalb (MO 4)................................. 68,000 100.00 100.00 68,000
Schuyler (MO 3)............................... 56,000 100.00 100.00 56,000
Shannon (MO 17)*.............................. 54,000 100.00 100.00 54,000
Atchison (MO 1)............................... 43,000 100.00 100.00 43,000
---------- -----------
1,102,000 1,102,000
---------- -----------
NORTHERN FLORIDA:
Worth (GA 14)................................. 237,000 100.00 100.00 237,000
Gainesville, FL............................... 216,000 100.00 100.00 216,000
Toombs (GA 11)................................ 147,000 100.00 100.00 147,000
Early (GA 13)*................................ 144,000 100.00 100.00 144,000
Walton (FL 10)#............................... 107,000 100.00 100.00 107,000
Putnam (FL 5)................................. 103,000 100.00 100.00 103,000
Jefferson (FL 8).............................. 52,000 100.00 100.00 52,000
Dixie (FL 6).................................. 50,000 100.00 100.00 50,000
Calhoun (FL 9)#............................... 39,000 100.00 100.00 39,000
---------- -----------
1,095,000 1,095,000
---------- -----------
WASHINGTON/IDAHO:
Clark (ID 6).................................. 281,000 100.00 100.00 281,000
Richland-Kennewick-Pasco, WA*................. 164,000 100.00 100.00 164,000
Butte (ID 5).................................. 149,000 100.00 100.00 149,000
Yakima, WA*................................... 202,000 54.55 54.55 110,000
Okanogan (WA 4)............................... 110,000 100.00 100.00 110,000
Umatilla (OR 3)*.............................. 145,000 60.42 60.42 88,000
Pacific (WA 6)*............................... 174,000 49.00 49.00 85,000
Kittitas (WA 5)(3)*........................... 66,000 83.50 83.50 55,000
Hood River (OR 2)*............................ 68,000 27.98 (5.98) 22.00 15,000
Skamania (WA 7)*#............................. 26,000 22.00 22.00 6,000
---------- -----------
1,385,000 1,063,000
---------- -----------
</TABLE>

12
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE TOTAL
ACQUIRABLE CURRENT AND
CURRENT UNDER ACQUIRABLE
1993 PERCENTAGE DEFINITIVE POPULATION
CLUSTER/MARKET POPULATION INTEREST AGREEMENTS(1) TOTAL EQUIVALENTS
- -------------------------------------------------- ---------- ----------- -------------- ------- -----------
MARKETS MANAGED BY THE COMPANY: (CONTINUED)
<S> <C> <C> <C> <C> <C>
INDIANA/KENTUCKY:
Meade (KY 3).................................. 300,000 100.00% 100.00% 300,000
Evansville, IN................................ 316,000 78.13 78.13 247,000
Owen (IN 7)................................... 219,000 100.00 100.00 219,000
Union (KY 2).................................. 126,000 100.00 100.00 126,000
Owensboro, KY................................. 89,000 78.69 78.69 70,000
Warren (IN 5)*................................ 119,000 33.33 33.33 40,000
Miami (IN 4)*................................. 182,000 14.29% 14.29 26,000
---------- -----------
1,351,000 1,028,000
---------- -----------
TEXAS/OKLAHOMA:
Cherokee (TX 11)(4)........................... 275,000 100.00 100.00 275,000
Garvin (OK 9)................................. 197,000 100.00 100.00 197,000
Tyler, TX (4)................................. 158,000 100.00 100.00 158,000
Haskell (OK 10)............................... 82,000 100.00 100.00 82,000
Wichita Falls, TX*............................ 130,000 49.66 1.99 51.65 67,000
Lawton, OK*................................... 112,000 100.00 (48.35) 51.65 58,000
Jackson (OK 8)*............................... 96,000 34.00 17.65 51.65 50,000
Hardeman (TX 5)(3)*........................... 37,000 16.33 35.32 51.65 19,000
Briscoe (TX 4)(3)*............................ 11,000 49.00 2.65 51.65 6,000
Beckham (OK 7)(3)*............................ 10,000 34.00 17.65 51.65 5,000
---------- -----------
1,108,000 917,000
---------- -----------
OREGON/CALIFORNIA:
Coos (OR 5)................................... 247,000 100.00 100.00 247,000
Del Norte (CA 1).............................. 209,000 100.00 100.00 209,000
Medford, OR*.................................. 158,000 100.00 100.00 158,000
Mendocino (CA 9).............................. 139,000 100.00 100.00 139,000
Modoc (CA 2).................................. 59,000 100.00 100.00 59,000
Crook (OR 6)*................................. 177,000 33.33 33.33 59,000
---------- -----------
989,000 871,000
---------- -----------
SOUTHWESTERN TEXAS:
Atascosa (TX 19).............................. 213,000 100.00 100.00 213,000
Edwards (TX 18)............................... 202,000 100.00 100.00 202,000
Laredo, TX.................................... 149,000 91.78 91.78 137,000
Wilson (TX 20)................................ 134,000 100.00 100.00 134,000
Victoria TX................................... 78,000 96.22 96.22 75,000
---------- -----------
776,000 761,000
---------- -----------
OKLAHOMA:
Tulsa, OK*.................................... 780,000 55.06 55.06 429,000
Seminole (OK 6)............................... 214,000 100.00 100.00 214,000
---------- -----------
994,000 643,000
---------- -----------
OTHER OPERATIONS:
Union (PA 8)*................................. 407,000 100.00 100.00 407,000
Jefferson (NY 1).............................. 256,000 54.00 46.00 100.00 256,000
Tuscarawas (OH 7)............................. 253,000 100.00 100.00 253,000
Poughkeepsie, NY.............................. 262,000 81.05 81.05 213,000
Newton (IN 1)+................................ 210,000 100.00 100.00 210,000
Glades (FL 2)+................................ 206,000 100.00 100.00 206,000
Atlantic City, NJ#............................ 327,000 8.74 50.01 58.75 192,000
Kosciusko (IN 2).............................. 163,000 100.00 100.00 163,000
Hawaii (HI 3)................................. 136,000 100.00 100.00 136,000
Fort Pierce, FL (5)*.......................... 271,000 49.00 49.00 133,000
Cheboygan (MI 4)*............................. 128,000 100.00 100.00 128,000
Williamsport, PA*............................. 121,000 100.00 100.00 121,000
Ross (OH 9)*.................................. 243,000 49.00 49.00 119,000
Copiah (MS 9)#................................ 117,000 100.00 100.00 117,000
Williams (OH 1)*.............................. 126,000 75.00 75.00 95,000
Vineland-Millville-Bridgeton, NJ.............. 139,000 67.23 67.23 94,000
St. Cloud, MN*................................ 202,000 14.29 14.29 29,000
---------- -----------
3,567,000 2,872,000
---------- -----------
Total Population Equivalents of Managed
Markets.................................... 23,205,000 20,353,000
---------- -----------
</TABLE>

13
<PAGE>

SYSTEM DESIGN AND CONSTRUCTION. The Company designs and constructs its
systems in a manner it believes will permit it to provide high-quality service
to mobile, transportable and portable cellular telephones, generally based on
market and engineering studies which relate to specific markets. Engineering
studies are performed by Company personnel or independent engineering firms. The
Company's switching equipment is digital, which reduces noise and crosstalk and
is capable of interconnecting in a manner which reduces costs of operation.
While digital microwave interconnections are typically made between the MTSO and
cell sites, primarily analog radio transmission is used between cell sites and
the cellular telephones themselves.

In accordance with its strategy of building and strengthening market
clusters, the Company has selected high capacity with service-upgraded digital
cellular switching systems that are capable of serving multiple markets via a
single MTSO. The Company's cellular systems are designed to facilitate the
installation of equipment which will permit microwave interconnection between
the MTSO and each cell site. The Company has implemented such microwave
interconnection in most of the cellular systems it manages. In other systems in
which the Company owns or has an option to purchase a majority interest and
where it is believed to be cost-efficient, such microwave technology will also
be implemented. Otherwise, such systems will rely upon landline telephone
connections or microwave links owned by others to link cell sites with the MTSO.
Although the installation of microwave network interconnection equipment
requires a greater initial capital investment, a microwave network enables a
system operator to avoid the current and future charges associated with leasing
telephone lines from the landline telephone company, while generally improving
system reliability. In addition, microwave facilities can be used to connect
separate cellular systems to allow shared switching, which reduces the aggregate
cost of the equipment necessary to operate both systems.

14
<PAGE>
The Company has continued to expand its internal, nationwide seamless
network in 1993 to encompass over 100 markets in the United States. This network
provides automatic call delivery for the Company's customers and handoff between
adjacent markets. The seamless network has also been extended, using IS-41
technology, via links with certain systems operated by several other carriers,
including GTE, US West, Ameritech, BellSouth, Centennial Cellular Corp.,
Southwestern Bell, McCaw Cellular Communications, Vanguard Cellular Systems,
Inc. and others. Additionally, the Company has conducted Signaling System 7
field trials with AT&T and with Independent Telephone Network to determine the
most viable approach to establish a backbone network that will enable the
Company to interface with other national networks.

During 1994, the Company expects to significantly extend the seamless
network for its customers into additional areas in Texas, Arkansas, Indiana,
Idaho, Utah, California, Louisiana, Massachusetts, Washington, Florida and
several other states. Not only will this expanded network increase the area in
which customers can automatically receive incoming calls, but it will also
reduce the incidence of fraud due to the pre-call validation feature of the
IS-41 technology.

Management believes that currently available technologies will allow
sufficient capacity on the Company's networks to meet anticipated demand over
the next few years.

COSTS OF SYSTEM CONSTRUCTION AND FINANCING

Construction of cellular systems is capital-intensive, requiring substantial
investment for land and improvements, buildings, towers, MTSOs, cell site
equipment, microwave equipment, customer equipment, engineering and
installation. The Company, consistent with FCC control requirements, uses
primarily its own personnel to engineer and oversee construction of each
cellular system where it owns or has the right to acquire a controlling
interest. In so doing, the Company expects to improve the overall quality of its
systems and to reduce the expense and time required to make them operational.

The costs (exclusive of license costs) of the operational systems in which
the Company owns or has the right to acquire an interest are generally financed
through capital contributions or intercompany loans to the partnerships or
subsidiaries owning the systems, and through certain vendor financing.

MARKETING AND CUSTOMER SERVICE

The Company's marketing plan is designed to capitalize on its clustering
strategy and to increase revenue by growing the Company's customer base,
increasing customers' usage of cellular service and reducing churn or customer
disconnects. The marketing plan stresses service quality and incorporates
programs aimed at developing and expanding new and existing distribution
channels, stimulating customer usage by offering new and enhanced services and
by increasing the public's awareness and understanding of the cellular services
offered by the Company. Most of the Company's operations market cellular service
under the "United States Cellular"-TM- name and service mark.

The Company's marketing strategy is to develop a local, customer-oriented
operation, the primary goal of which is to provide quality cellular service to
its customers. The Company's marketing program focuses on obtaining customers
who need cellular service, such as business people who, while out of their
offices, need to be in contact with others. The Company plans to follow the same
marketing program in the other systems it expects to manage.

The Company manages each cellular cluster, and in some cases individual
markets, with a local staff, including a manager and customer service
representatives. Sales consultants are typically maintained in each market
within the clusters. Customers are able to report cellular service problems or
concerns 24 hours a day. It is the Company's goal to respond to customers'
concerns and to correct reported service deficiencies within 24 hours of
notification. The Company has established local service centers in order to
repair and maintain most major brands of user equipment.

The Company has relied primarily on its own direct and retail sales channels
to obtain customers for the cellular markets it manages. The Company maintains
an ongoing training program to improve the effectiveness of the sales
consultants and retail associates in obtaining customers as well as maximizing
the sale of high-user packages. These packages commit customers to pay for a
minimum amount of usage at discounted rates per minute, even if usage falls
below the monthly minimum amount. The

15
<PAGE>
Company also uses agents, dealers and retailers to obtain customers. Agents and
dealers are independent business people who sell to customers on a commission
basis for the Company. The Company's agents are in the business of selling
cellular telephones, cellular service packages and other related products to
customers. The Company's dealers include car stereo companies and other
companies whose customers are also potential cellular customers. The Company's
retailers include car dealers, major appliance dealers, office supply dealers
and mass merchants.

The Company began to specifically address the fast-growing consumer market
by opening its own retail stores in late 1993. These small facilities are
located in high-traffic areas and are designed to cater to walk-in customers.
The Company plans to open more locations in 1994 to further its presence in the
local markets.

The Company also actively pursues national retail accounts which may
potentially yield new customer additions in multiple markets. The national
account effort is expected to enable the Company to reach segments of the market
other than those accessed by the local sales force. Agreements have been entered
into with such national distributors as Chrysler Corporation, Ford Motor
Company, General Motors, Honda, AT&T, Radio Shack, Best Buy, and Sears, Roebuck
& Co. for certain of the Company's markets. Upon the sale of a cellular
telephone by one of these national distributors, the Company receives, often
exclusively within the territories served, the resulting cellular customer. In
recognition of the needs of these national accounts, the Company initiated a
centralized customer support program. This program allows for customer
activation during peak retail business hours (weekends and evenings) when the
Company's local office might otherwise be closed.

The Company uses a variety of direct mail, billboard, radio, television and
newspaper advertising to stimulate interest by prospective customers in cellular
service and to establish familiarity with the Company's name. Advertising is
directed at gaining customers, increasing usage by existing customers and
increasing the public awareness and understanding of the cellular services
offered by the Company. The Company attempts to select the advertising and
promotion media that are most appealing to the targeted groups of potential
customers in each local market. The Company utilizes local advertising media and
public relations activities and establishes programs to enhance public awareness
of the Company, such as providing telephones and service for public events and
emergency uses.

CUSTOMERS AND SYSTEM USAGE

Company data for 1993 indicate that 52% of the Company's customers use their
cellular telephones primarily for business. Cellular customers come from a wide
range of occupations. They typically include a large proportion of individuals
who work outside of their offices such as people in the construction, real
estate, wholesale and retail distribution businesses, and professionals. Most of
the Company's customers use in-vehicle cellular telephones. However, more
customers (71% of new customers in 1993 compared to 21% in 1988) are selecting
portable and other transportable cellular telephones as these units become more
compact and fully featured as well as more attractively priced.

The Company's cellular systems are used most extensively during normal
business hours between 7:00 am and 6:00 pm. On average, the local retail
customers in the Company's majority-owned and managed systems used their
cellular systems approximately 103 minutes per unit each month and generated
retail revenue of approximately $49 per month during 1993, compared to 121
minutes and $52 per month in 1992. Revenue generated by roamers, together with
local, toll and other revenues, brought the Company's total average monthly
service revenue per customer unit in majority-owned and managed markets to $99
during 1993. Average monthly service revenue per customer unit decreased
approximately 6% during 1993, reflecting primarily the decline in average local
minutes per customer unit. The Company anticipates that average monthly service
revenue per customer unit may continue to decline as retail distribution
channels provide additional consumer customers who generate fewer local minutes
of use and as roamer revenues grow more slowly.

16
<PAGE>
Roaming is a service offered by the Company which allows a customer to place
or receive a call in a cellular service area away from the customer's home
market area. The Company has entered into "roaming agreements" with operators of
other cellular systems covering virtually all systems in the United States and
Canada. These agreements offer customers the opportunity to roam in these
systems. These reciprocal agreements automatically pre-register the customers of
the Company's systems in the other carriers' systems. Also, a customer of a
participating system roaming (i.e. travelling) in a Company market where this
arrangement is in effect is able to automatically make and receive calls on the
Company's system. The charge for this service is typically at premium rates and
is billed by the Company to the customer's home system, which then bills the
customer. The Company has entered into agreements with other cellular carriers
to transfer roaming usage at agreed-upon rates. In some instances, based on
competitive factors, the Company may charge a lower amount to its customers than
the amount actually charged to the Company by another cellular carrier for
roaming; however, these services include call delivery and call handoff.

The following table summarizes certain information about customers and
market penetration in the Company's managed operations.

<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31,
------------------------------------------------------------------
1993 1992 1991 1990 1989
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Majority-owned and managed markets:
Cellular markets in operation (1)............ 116 92 67 32 25
Total population of markets in service
(000s)...................................... 19,383 15,014 11,481 6,314 5,228
Customer Units:
at beginning of period (2)................. 150,800 97,000 57,300 36,100 13,600
additions during period (2)................ 165,300 88,600 59,800 31,800 28,000
disconnects during period (2).............. 55,100 34,800 20,100 10,600 5,500
at end of period (2)....................... 261,000 150,800 97,000 57,300 36,100
Market penetration at end of period (3)(4)... 1.35% 1.00 % 0.84 % 0.91 % 0.69 %
<FN>
- ----------
(1) Represents the number of markets in which the Company owned at least a 50%
interest and which it managed, including its reseller operation in
1989-1992. The revenues and expenses of these cellular markets are included
in the Company's consolidated revenues and expenses.
(2) Represents the approximate number of revenue-generating cellular telephones
served by the cellular markets referred to in footnote (1). The revenue
generated by such cellular telephones is included in consolidated revenues.
(3) Computed by dividing the number of customer units at the end of the period
by the total population of markets in service as estimated by Donnelley
Marketing Service for the respective years.
(4) The decrease from 1990 to 1991 is due to the addition of 32 majority-owned
and managed RSAs in 1991. Market penetration for majority-owned and managed
MSAs was 1.48% in 1991 and 1.07% in 1990.
</TABLE>

17
<PAGE>
The following table summarizes, by cluster, the total population, the
Company's customer units and penetration for the Company's majority-owned and
managed markets that were operational as of December 31, 1993.

<TABLE>
<CAPTION>
POPULATION CUSTOMERS PENETRATION
---------- --------- ------------
<S> <C> <C> <C>
Eastern North Carolina/Virginia................... 2,416,000 20,500 0.85%
Wisconsin/Illinois/Minnesota...................... 1,810,000 23,400 1.29%
Eastern Tennessee/Western North Carolina.......... 1,651,000 27,800 1.68%
Iowa.............................................. 1,704,000 31,500 1.85%
Maine/New Hampshire/Vermont....................... 1,459,000 19,700 1.35%
West Virginia/Pennsylvania/Maryland............... 820,000 5,100 0.62%
Missouri.......................................... 964,000 6,700 0.70%
Northern Florida.................................. 951,000 10,400 1.09%
Washington/Idaho.................................. 972,000 8,100 0.83%
Indiana/Kentucky.................................. 1,050,000 15,600 1.49%
Texas/Oklahoma.................................... 742,000 12,400 1.67%
Oregon/California................................. 812,000 8,100 1.00%
Southwestern Texas................................ 776,000 7,100 0.91%
Oklahoma.......................................... 994,000 34,900 3.51%
Other Operations.................................. 2,262,000 29,700 1.31%
---------- --------- ---
19,383,000 261,000 1.35%
---------- --------- ---
---------- --------- ---
</TABLE>

CELLULAR TELEPHONES AND INSTALLATION

There are a number of different types of cellular telephones, all of which
are currently compatible with cellular systems nationwide. The Company offers a
full range of vehicle-mounted, transportable, and hand-held portable cellular
telephones. Features offered in some of the cellular telephones include
hands-free calling, repeat dialing, horn alert and others.

The Company has established service and/or installation facilities in many
of its local markets to ensure quality installation and service of the cellular
telephones it sells. These facilities allow the Company to improve its service
by promptly assisting customers who experience equipment problems.

The Company negotiates volume discounts from its cellular telephone
suppliers. The Company discounts cellular telephones in most markets to meet
competition or to stimulate sales by reducing the cost of becoming a cellular
customer. In these instances, where permitted by law, customers are generally
required to sign an extended service contract with the Company. The Company also
cooperates with cellular equipment manufacturers in local advertising and
promotion of cellular equipment.

PRODUCTS AND SERVICES

The Company's customers are able to choose from a variety of packaged
pricing plans which are designed to fit different calling patterns. The
Company's customer bills typically show separate charges for custom-calling
features, airtime in excess of the packaged amount, and toll calls.
Custom-calling features provided by the Company include wide-area call delivery,
call forwarding, call waiting, three-way calling and no-answer transfer. The
Company also offers a voice message service in many of its markets. This
service, which functions like a sophisticated answering machine, allows
customers to receive messages from callers when they are not available to take
calls.

REGULATION

The construction, operation and transfer of cellular systems in the United
States are regulated to varying degrees by the FCC pursuant to the
Communications Act. The FCC has promulgated regulations governing construction
and operation of cellular systems, and licensing and technical standards for the
provision of cellular telephone service.

For licensing purposes, the FCC divided the United States into separate
geographic markets (MSAs and RSAs). In each market, the allocated cellular
frequencies are divided into two equal blocks. During the application process,
the FCC reserved one block of frequencies for nonwireline applicants and

18
<PAGE>
another block for wireline applicants. Subject to FCC approval, a cellular
system may be sold to either a wireline or nonwireline entity, but no entity
which controls a cellular system may own an interest in another cellular system
in the same MSA or RSA.

The completion of acquisitions involving the transfer of control of a
cellular system requires prior FCC approval. Acquisitions of minority interests
generally do not require FCC approval. Whenever FCC approval is required, any
interested party may file a petition to dismiss or deny the Company's
application for approval of the proposed transfer.

When the first cell of a cellular system has been constructed, the licensee
is required to notify the FCC that construction has been completed. Immediately
upon this notification, but not before, FCC rules authorize the licensee to
offer commercial service to the public. The licensee is then said to have
"operating authority." Initial operating licenses are granted for ten-year
periods. The FCC must be notified each time an additional cell is constructed.

The FCC's rules also generally require persons or entities holding cellular
construction permits or licenses to coordinate their proposed frequency usage
with other cellular users and licensees in order to avoid electrical
interference between adjacent systems. The height and power of base stations in
the cellular system are regulated by FCC rules, as are the types of signals
emitted by these stations. In addition to regulation by the FCC, cellular
systems are subject to certain Federal Aviation Administration regulations
respecting the siting and construction of cellular transmitter towers and
antennas.

On January 9, 1992, the FCC adopted a Report and Order ("R&O") which
establishes standards for conducting comparative renewal proceedings between a
cellular licensee seeking renewal of its license and challengers filing
competing applications. In the R&O, the FCC: (i) established criteria for
comparing the renewal applicant to challengers, including the standards under
which a "renewal expectancy" will be granted to the applicant seeking license
renewal; (ii) established basic qualifications standards for challengers; and
(iii) provided procedures for preventing possible abuses in the comparative
renewal process. The FCC has concluded that it will award a renewal expectancy
if the licensee has (i) substantially used its spectrum for its intended
purposes; (ii) complied with FCC rules, policies and the Communications Act, as
amended; and (iii) not engaged in substantial relevant misconduct. If a renewal
expectancy is awarded to an existing licensee, that expectancy will be more
significant in the renewal proceeding than any other criterion used to compare
the licensee to challengers. Licenses of the Company's affiliates in Knoxville
and Tulsa will be its first to come up for renewal in 1994. See "Legal
Proceedings -- La Star Application" for a discussion of certain FCC proceedings
which have suspended the Company's and TDS's licensing authority in a Wisconsin
market pending the outcome of an FCC hearing.

The Company conducts and plans to conduct its operations in accordance with
all relevant FCC rules and regulations and would anticipate being able to
qualify for a renewal expectancy. Accordingly, the Company believes that the
regulations will have no significant effect on its operations and financial
condition.

The FCC has also provided that five years after the initial licenses are
granted, unserved areas within markets previously granted to licensees may be
applied for by both wireline and nonwireline entities and by third parties. The
FCC established 1993 filing dates for filing "unserved area" applications in
MSAs in which the five-year period had expired and many unserved area
applications were filed in certain MSAs. The Company's strategy with respect to
system construction in its markets has been and will be to build cells covering
every area within such markets that the Company considers economically feasible
to serve or might conceivably wish to serve and to do so within the five-year
period following issuance of the license.

The Company is also subject to state and local regulation in some instances.
In 1981, the FCC preempted the states from exercising jurisdiction in the areas
of licensing, technical standards and market structure. However, certain states
require cellular system operators to go through a state certification process to
serve communities within their borders. All such certificates can be revoked for
cause. In addition, certain state authorities regulate several aspects of a
cellular operator's business, including the rates it charges its customers and
cellular resellers, the resale of long-distance service to its customers, the
technical arrangements and charges for interconnection with the landline network
and

19
<PAGE>
the transfer of interests in cellular systems. The siting and construction of
the cellular facilities, including transmitter towers, antennas and equipment
shelters may also be subject to state or local zoning, land use and other local
regulations. Public utility or public service commissions (or certain of the
commissioners) in several states have expressed an interest in examining whether
the cellular industry should be more closely regulated by such states.

COMPETITION

The Company's only facilities-based competitor for cellular telephone
service in each market is the licensee of the second cellular system in that
market. Competition for customers between the two systems in each market is
principally on the basis of quality of service, price, size of area covered,
services offered, and responsiveness of customer service. The competing entities
in many of the markets in which the Company has an interest have financial
resources which are substantially greater than those of the Company and its
partners in such markets.

The FCC's rules require all operational cellular systems to provide, on a
nondiscriminatory basis, cellular service to resellers which purchase blocks of
mobile telephone numbers from an operational system and then resell them to the
public.

In addition to competition from the other cellular licensee in each market,
there is also competition from, among other technologies, conventional mobile
telephone and SMR systems, both of which are able to connect with the landline
telephone network. The Company believes that conventional mobile telephone
systems and conventional SMR systems are competitively disadvantaged because of
technological limitations on the capacity of such systems. The FCC has recently
given approval, via waivers of its rules, to ESMR, an enhanced SMR system. ESMR
systems may have cells and frequency reuse like cellular, thereby potentially
eliminating any current technological limitation. The first ESMR systems were
implemented in 1993 in Los Angeles. Although less directly a substitute for
cellular service, wireless data services and one-way paging service (and in the
future, two-way paging services) may be adequate for those who do not need full
two-way voice service.

Continuing technological advances in the communications field make it
impossible to predict the extent of additional future competition for cellular
systems. For example, the FCC has allocated radio channels to a mobile satellite
system in which transmissions from mobile units to satellites would augment or
replace transmissions to cell sites, and a consortium to provide such service
has been formed. Such a system is designed primarily to serve the communications
needs of remote locations and a mobile satellite system could provide viable
competition for land-based cellular systems in such areas. It is also possible
that the FCC may in the future assign additional frequencies to cellular
telephone service to provide for more than two cellular telephone systems per
market.

CT-2, second generation cordless telephones, and PCS, personal
communications network services, may prove to be competitive with cellular
service in the future. CT-2 will allow a customer to make a call from a personal
phone as long as the person is within range of a telepoint base station which
connects the call to the public switched telephone network. PCS will be digital,
wireless communications systems which currently are primarily targeted for use
in very densely populated areas. Various CT-2 and PCS trials are in process
throughout the United States. CT-2 and PCS are not anticipated to be significant
sources of competition in the Company's markets in the near future. Similar
technological advances or regulatory changes in the future may make available
other alternatives to cellular service, thereby creating additional sources of
competition.

EMPLOYEES

The Company had 1,785 employees as of February 28, 1994. Of these, 1,491
were based at the various cellular markets operated or managed by the Company
with only 294 based at its corporate office in Chicago, Illinois. None of the
Company's employees is represented by a labor organization. The Company
considers its relationship with its employees to be good.

20
<PAGE>
- --------------------------------------------------------------------------------

ITEM 2. PROPERTIES

The property for mobile telephone switching offices and cell sites are
either owned or leased under long-term leases by the Company, one of its
subsidiaries or the partnership or corporation which holds the construction
permit or license. The Company has not experienced major problems with obtaining
zoning approval for cell sites or operating facilities and does not anticipate
any such problems in the future which are or will be material to the Company and
its subsidiaries as a whole. The Company's investment in property is small
compared to its investment in licenses and equipment.

The Company leases approximately 39,000 square feet of office space for its
headquarters in Chicago, Illinois.

The Company considers the properties owned or leased by it and its
subsidiaries to be suitable and adequate for their respective business
operations.

- --------------------------------------------------------------------------------

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in a number of legal proceedings before the FCC and
various state and federal courts. In some cases, the litigation involves
disputes regarding rights to certain cellular telephone markets. The more
significant proceedings affecting the Company are described in the following
paragraphs.

LA STAR APPLICATION. Star Cellular Telephone Company, Inc. ("Star
Cellular"), an indirect, wholly owned subsidiary of the Company, is a 49% owner
of La Star Cellular Telephone Company ("La Star"), an applicant for a
construction permit for a cellular system in St. Tammany Parish in the New
Orleans MSA. In June 1992, the FCC affirmed an Administrative Law Judge's order
which had granted the mutually exclusive application of New Orleans CGSA, Inc.
("NOCGSA") and dismissed La Star's application. The ground for the FCC's action
was its finding that Star Cellular, and not the 51% owner, SJI Cellular, Inc.
("SJI"), in fact controlled La Star. La Star, TDS and the Company have appealed
that order to the United States Court of Appeals of the District of Columbia
Circuit and those appeals are pending.

In a footnote to its decision, the FCC stated, in part, that "Questions
regarding the conduct of SJI and [the Company] in this case may be revisited in
light of the relevant findings and conclusions here in future proceedings where
the other interests of these parties have decisional significance." Certain
adverse parties have attempted to use the footnote in the LA STAR decision in a
number of unrelated, contested proceedings which TDS and the Company have
pending before the FCC. In addition, since the LA STAR proceeding, FCC
authorizations in uncontested FCC proceedings have been granted subject to any
subsequent action the FCC may take concerning the LA STAR footnote.

On February 1, 1994, in a proceeding involving a license originally issued
to TDS for a rural service area in Wisconsin, the FCC instituted a hearing to
determine whether in the La Star case the Company had misrepresented facts to,
lacked candor in its dealings with or attempted to mislead the FCC and, if so,
whether TDS possesses the requisite character qualifications to hold that
Wisconsin license. The FCC stated that, pending resolution of the issues in the
Wisconsin proceeding, further grants to TDS and its subsidiaries will be
conditioned on the outcome of that proceeding. TDS was granted interim authority
to continue to operate the Wisconsin system pending completion of the hearing.

An adverse finding in the Wisconsin hearing could result in a variety of
possible sanctions, ranging from a fine to loss of the Wisconsin license, and
could, as stated in the FCC order, be raised and considered in other proceedings
involving TDS and its subsidiaries. TDS and the Company believe they acted
properly in connection with the La Star application and that the findings and
record in the La Star proceeding are not relevant in any other proceeding
involving their FCC license qualifications.

21
<PAGE>
Company as defendants. Plaintiff Townes alleges that it entered into an oral
agreement with defendants which established a joint venture to develop cellular
business in certain markets. Townes alleges that defendants usurped a joint
venture opportunity and breached fiduciary duties to Townes by purchasing
interests in nonwireline markets in Texas RSA #11 and the Tyler (Texas) MSA on
their own behalf rather than on behalf of the alleged joint venture. In its
Fifth Amended Original Petition, Townes seeks unspecified damages not to exceed
$33 million for usurpation, breach of fiduciary duty, civil conspiracy, breach
of contract and tortious interference. Townes also seeks imposition of a
constructive trust on defendants' profits from Texas RSA #11 and the Tyler
(Texas) MSA and transfer of those interests to the alleged joint venture. In
addition Townes seeks reasonable attorneys' fees equal to one-third of the
judgment, along with the prejudgment interest. Plaintiffs Tatum Telephone and
Tatum Cellular seek a declaration that transfers by defendants of a 49% interest
in Tatum Cellular violated a five-year restriction on alienation of Tatum
Cellular shares contained in a written shareholders' agreement. Tatum Telephone
and Tatum Cellular seek to void the transfers. All plaintiffs together seek as
much as $200 million in punitive damages.

Defendants have asserted meritorious defenses to each of the plaintiffs'
claims and are vigorously defending this case. Discovery is ongoing. A jury
trial in this case is set to commence on April 25, 1994.

- --------------------------------------------------------------------------------

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of securities holders during the fourth
quarter of 1993.

22
<PAGE>
- --------------------------------------------------------------------------------

PART II

- --------------------------------------------------------------------------------

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Incorporated by reference from Exhibit 13, Annual Report section entitled
"United States Cellular Stock and Dividend Information."

- --------------------------------------------------------------------------------

ITEM 6. SELECTED FINANCIAL DATA

Incorporated by reference from Exhibit 13, Annual Report section entitled
"Selected Consolidated Financial Data," except for ratios of earnings to fixed
charges, which are incorporated herein by reference from Exhibit 12 to this
Annual Report on Form 10-K.

- --------------------------------------------------------------------------------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Incorporated by reference from Exhibit 13, Annual Report section entitled
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."

- --------------------------------------------------------------------------------

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Incorporated by reference from Exhibit 13, Annual Report sections entitled
"Consolidated Statements of Operations," "Consolidated Statements of Cash
Flows," "Consolidated Balance Sheets," "Consolidated Statements of Changes in
Common Shareholders' Equity," "Notes to Consolidated Financial Statements,"
"Report of Independent Public Accountants," and "Consolidated Quarterly Income
Information (Unaudited)."

- --------------------------------------------------------------------------------

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

23
<PAGE>
- --------------------------------------------------------------------------------

PART III

- --------------------------------------------------------------------------------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated by reference from Proxy Statement sections entitled "Election
of Directors" and "Executive Officers."

- --------------------------------------------------------------------------------

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference from Proxy Statement section entitled "Executive
Compensation," except for the information specified in Item 402(a)(8) of
Regulation S-K under the Securities Exchange Act of 1934, as amended.

- --------------------------------------------------------------------------------

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated by reference from Proxy Statement section entitled "Security
Ownership of Certain Beneficial Owners and Management."

- --------------------------------------------------------------------------------

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated by reference from Proxy Statement section entitled "Certain
Relationships and Related Transactions."

24
<PAGE>
- --------------------------------------------------------------------------------

PART IV

- --------------------------------------------------------------------------------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as a part of this report:

(a)(1) Financial Statements

<TABLE>
<S> <C>
Consolidated Statements of Operations.................................... Annual Report*
Consolidated Balance Sheets.............................................. Annual Report*
Consolidated Statements of Cash Flows.................................... Annual Report*
Consolidated Statements of Changes in Common Shareholders' Equity........ Annual Report*
Notes to Consolidated Financial Statements............................... Annual Report*
Report of Independent Public Accountants................................. Annual Report*
Consolidated Quarterly Income Information (Unaudited).................... Annual Report*
<FN>
- ----------
* Incorporated by reference from Exhibit 13.
</TABLE>

<TABLE>
<CAPTION>
LOCATION
----------
<S> <C> <C>
(2) Schedules
Report of Independent Public Accountants on Financial Statement Schedules........................... page 27
II. Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other
Than Related Parties for each of the Three Years in the Period Ended December 31,
1993................................................................................... page 28
IV. Indebtedness of and to Related Parties Not Current for each of the Three Years in the
Period Ended December 31, 1993......................................................... page 29
V. Property, Plant and Equipment for each of the Three Years in the Period Ended December
31, 1993............................................................................... page 30
VI. Reserve for Depreciation for each of the Three Years in the Period Ended December 31,
1993................................................................................... page 33
VIII. Valuation and Qualifying Accounts for each of the Three Years in the Period Ended
December 31, 1993...................................................................... page 36
X. Supplementary Income Statement Information for each of the Three Years in the Period
Ended December 31, 1993................................................................ page 37

Los Angeles SMSA, Nashville/Clarksville MSA and Baton Rouge MSA Limited Partnership
Combined Financial Statements............................................................ page 38
Compilation Report of Independent Public Accountants on Combined Financial Statements.... page 39
Reports of Other Independent Accountants................................................. page 40
Combined Statements of Operations (Unaudited)............................................ page 44
Combined Balance Sheets (Unaudited)...................................................... page 45
Combined Statements of Cash Flows (Unaudited)............................................ page 46
Combined Statements of Changes in Partners' Capital (Unaudited).......................... page 47
Notes to Unaudited Combined Financial Statements......................................... page 48
</TABLE>

All other schedules have been omitted because they are not applicable or not
required or because the required information is shown in the financial
statements or notes thereto.

25
<PAGE>
(3) Exhibits

The exhibits set forth in the accompanying Index to Exhibits are filed as a
part of this Report. The following is a list of each management contract or
compensatory plan or arrangement required to be filed as an exhibit to this form
pursuant to Item 14(c) of this Report.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.1 Supplemental Benefit Agreement between the Company and H. Donald Nelson.
10.10 Stock Option and Stock Appreciation Rights Plan.
10.11 Summary of 1993 Bonus Program for Senior Corporate Staff of the Company.
</TABLE>

(b) Reports on Form 8-K filed during the quarter ended December 31, 1993.

The Company filed a Report on Form 8-K dated November 17, 1993, which included
as an exhibit a Press Release discussing the Company's completion of its rights
offering. No other reports on Form 8-K were filed during the quarter ended
December 31, 1993.

26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES

To the Shareholders and Board of Directors of
UNITED STATES CELLULAR CORPORATION:

We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in United States Cellular
Corporation and Subsidiaries Annual Report to Shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated February
7, 1994. Our report on the consolidated financial statements includes
explanatory paragraphs with respect to the change in the method of accounting
for cellular sales commissions and with respect to the change in the method of
accounting for income taxes as discussed in Note 1 and Note 10, respectively, of
the Notes to Consolidated Financial Statements and the uncertainties discussed
in Note 3 of the Notes to Consolidated Financial Statements; and an explanatory
paragraph calling attention to certain litigation as discussed in Note 15 of the
Notes to Consolidated Financial Statements.

Our audits were made for the purpose of forming an opinion on those
financial statements taken as a whole. The financial statement schedules listed
in Item 14(a)(2) are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
financial statement schedules have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN & CO.

Chicago, Illinois
February 7, 1994

27
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES

SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT THE END
BALANCE DEDUCTIONS OF PERIOD
AT ----------------------- ------------------
BEGINNING (1) (2) (2)
OF AMOUNTS AMOUNTS (1) NOT
NAME OF DEBTOR PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT CURRENT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, 1993
Independent Cellular Telephone
Company, Inc. (1) $ 542 $ -- $ -- $ -- $ -- $ 542
FOR THE YEAR ENDED DECEMBER 31, 1992
Independent Cellular Telephone
Company, Inc. (1) $ 542 $ -- $ -- $ -- $ -- $ 542
FOR THE YEAR ENDED DECEMBER 31, 1991
Independent Cellular Telephone
Company, Inc. (1) $ 381 $ 161 $ -- $ -- $ -- $ 542
<FN>
- ----------
(1) The promissory note face amount, together with simple interest at an annual
rate of 6.68%, is due June 29, 1994.
</TABLE>

28
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES

SCHEDULE IV--INDEBTEDNESS OF AND TO RELATED PARTIES--NOT CURRENT

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
- ----------------------------------------------------------------------------------------------------------------------
INDEBTEDNESS OF INDEBTEDNESS TO
BALANCE AT ---------------------- BALANCE BALANCE AT -------------------------- BALANCE
NAME OF PERSON BEGINNING ADDITIONS DEDUCTIONS AT END BEGINNING ADDITIONS(1) DEDUCTIONS(2) AT END
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN
THOUSANDS)
FOR THE YEAR ENDED
DECEMBER 31, 1993
Telephone and Data
Systems, Inc. $ -- $ -- $ -- $ -- $ 265,766 $ 254,543 $ 378,785 $141,524
FOR THE YEAR ENDED
DECEMBER 31, 1992
Telephone and Data
Systems, Inc. $ -- $ -- $ -- $ -- $ 166,501 $ 139,953 $ 40,688 $265,766
FOR THE YEAR ENDED
DECEMBER 31, 1991
Telephone and Data
Systems, Inc. $ -- $ -- $ -- $ -- $ 129,005 $ 191,526 $ 154,030 $166,501
<FN>
- ------------
(1) The Company converted accrued interest into long-term debt in the amounts
of approximately $28.2 million in 1993, $15.9 million in 1992 and $11.9
million in 1991.
(2) During 1993, the Company converted $341 million of long-term debt into
equity through the issuance of approximately 4.8 million Common Shares and
5.5 million Series A Common Shares to Telephone and Data Systems, Inc. in
connection with the rights offering. The Company also repaid $37 million
of long-term debt from the proceeds of the sale of 1.1 million Common
Shares to third parties in connection with the rights offering.

During 1991, the Company converted $110 million of long-term debt into
equity through the issuance of approximately 6.1 million Common Shares to
Telephone and Data Systems, Inc. upon TDS's exercise of its preemptive
rights in connection with a public offering of the Company's Common
Shares.
</TABLE>

29
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES

SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C1 COLUMN C2 COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------------------------------
BALANCE AT
DATE OF
ACQUISITION
OF LESS
BALANCE AT COMPANIES RETIREMENTS
BEGINNING ACQUIRED IN ADDITIONS OR SALES OTHER CHANGES BALANCE AT
CLASSIFICATION OF PERIOD 1993 AT COST AT COST ADD (DEDUCT) END OF PERIOD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Land and Improvements $ 11,946 $ 844 $ 6,257 $ -- $ (31) $ 19,016
Buildings 13,059 1,494 6,246 -- 16 20,815
Leasehold Improvements 7,225 868 3,714 18 (5) 11,784
Antenna 11,513 788 7,443 -- (11) 19,733
Power Equipment 8,264 499 4,604 -- 2 13,369
Switching Equipment 26,561 4,449 6,930 124 14 37,830
Base Site Controller 7,941 155 72 -- 2 8,170
Towers 19,754 5,636 8,908 -- 5 34,303
Radio Frequency Channel
Equipment 42,439 8,774 14,787 372 38 65,666
Transmission Equipment 26,887 2,856 17,119 1 25 46,886
Portable Cell Sites 335 -- 367 -- 1 703
Vehicles 1,331 191 680 23 -- 2,179
Test Equipment 4,250 186 2,353 100 1 6,690
Office Furniture and
Equipment 9,558 572 6,985 1,149 (1) 15,965
Plant Held for Future Use -- 160 -- -- -- 160
Demo Units 1,048 73 625 759 -- 987
Paging Equipment 1,113 -- 153 -- -- 1,266
Plant Under Construction 457 21 174 -- (56) 596
- -----------------------------------------------------------------------------------------------------------------------
$ 193,681 $ 27,566 $ 87,417 $ 2,546 $ -- $ 306,118
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

DEPRECIATION

The Company and its subsidiaries provide depreciation for book purposes on a
straight-line basis over the useful lives of the property ranging from three to
twenty-five years. The composite depreciation rate, as applied to the average
cost of depreciable property, was 10.5%.

30
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES

SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1992
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C1 COLUMN C2 COLUMN D COLUMN E COLUMN F
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT
DATE OF
ACQUISITION
OF LESS
BALANCE AT COMPANIES RETIREMENTS
BEGINNING ACQUIRED IN ADDITIONS OR SALES OTHER CHANGES BALANCE AT
CLASSIFICATION OF PERIOD 1992 AT COST AT COST ADD (DEDUCT) END OF PERIOD
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Land and Improvements $ 7,389 $ 921 $ 3,951 $ 178 $ (137) $ 11,946
Buildings 8,761 1,011 3,492 237 32 13,059
Leasehold Improvements 5,984 347 974 89 9 7,225
Antenna 6,487 677 4,528 179 -- 11,513
Power Equipment 5,666 849 1,868 128 9 8,264
Switching Equipment 20,193 3,156 3,735 551 28 26,561
Base Site Controller 6,706 707 731 205 2 7,941
Towers 12,810 1,648 5,536 243 3 19,754
Radio Frequency Channel
Equipment 24,133 4,024 14,649 393 26 42,439
Transmission Equipment 17,077 1,776 8,191 426 269 26,887
Portable Cell Sites 29 -- 307 1 -- 335
Vehicles 556 70 723 34 16 1,331
Test Equipment 2,906 292 1,074 23 1 4,250
Office Furniture and
Equipment 7,052 219 2,473 166 (20) 9,558
Demo Units 917 128 625 622 -- 1,048
Paging Equipment 787 -- 326 -- -- 1,113
Plant Under Construction -- 113 582 -- (238) 457
- ---------------------------------------------------------------------------------------------------------------------
$ 127,453 $ 15,938 $ 53,765 $ 3,475 $ -- $ 193,681
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

DEPRECIATION

31
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES

SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1991
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C1 COLUMN C2 COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------------------------------
BALANCE AT
DATE OF
ACQUISITION
OF LESS
BALANCE AT COMPANIES RETIREMENTS
BEGINNING ACQUIRED IN ADDITIONS OR SALES OTHER CHANGES BALANCE AT
CLASSIFICATION OF PERIOD 1991 AT COST AT COST ADD (DEDUCT) END OF PERIOD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Land and Improvements $ 2,009 $ 755 $ 4,523 $ 4 $ 106 $ 7,389
Buildings 3,625 807 4,402 -- (73) 8,761
Leasehold Improvements 2,897 570 2,462 -- 55 5,984
Antenna 2,237 727 3,477 -- 46 6,487
Power Equipment 2,371 502 2,758 -- 35 5,666
Switching Equipment 8,233 4,588 7,342 -- 30 20,193
Base Site Controller 4,141 931 1,634 42 42 6,706
Towers 4,047 1,592 7,138 -- 33 12,810
Radio Frequency Channel
Equipment 9,503 2,756 11,777 13 110 24,133
Transmission Equipment 7,169 2,047 7,804 -- 57 17,077
Portable Cell Sites -- -- 29 -- -- 29
Vehicles 89 -- 521 54 -- 556
Test Equipment 1,705 300 1,042 24 (117) 2,906
Office Furniture and
Equipment 4,197 336 2,702 127 (56) 7,052
Plant Held for Future Use 290 -- (22) -- (268) --
Demo Units 655 102 700 540 -- 917
Paging Equipment 454 190 143 -- -- 787
- -----------------------------------------------------------------------------------------------------------------------
$ 53,622 $ 16,203 $ 58,432 $ 804 $ -- $ 127,453
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

DEPRECIATION

32
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES

SCHEDULE VI--RESERVE FOR DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C1 COLUMN C2 COLUMN D COLUMN E COLUMN F
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT
DATE OF
ACQUISITION OF ADDITIONS LESS
BALANCE AT COMPANIES CHARGED TO RETIREMENTS
BEGINNING ACQUIRED IN COSTS AND OR SALES OTHER CHANGES BALANCE AT
CLASSIFICATION OF PERIOD 1993 EXPENSES AT COST ADD (DEDUCT)(1) END OF PERIOD
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Land Improvements $ 597 $ 9 $ 842 $ -- $ -- $ 1,448
Buildings 934 48 664 -- 1 1,647
Leasehold Improvements 2,156 81 1,046 12 10 3,281
Antenna 1,526 168 1,532 -- (5) 3,221
Power Equipment 1,607 45 989 -- (192) 2,449
Switching Equipment 5,349 797 4,554 54 (1,353) 9,293
Base Site Controller 3,519 25 2,141 -- (325) 5,360
Towers 1,205 737 610 -- 1 2,553
Radio Frequency Channel
Equipment 6,452 1,444 5,289 157 (1,084) 11,944
Transmission Equipment 4,356 306 3,588 -- (86) 8,164
Portable Cell Sites 41 -- 83 -- 36 160
Vehicles 327 35 546 9 (39) 860
Test Equipment 1,678 12 888 44 (7) 2,527
Office Furniture and
Equipment 3,928 87 2,346 757 (102) 5,502
Demo Units 339 7 324 287 (30) 353
Paging Equipment 719 -- 223 -- -- 942
- ---------------------------------------------------------------------------------------------------------------------
$ 34,733 $ 3,801 $ 25,665 $ 1,320 $ (3,175) $ 59,704
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<FN>
- ------------
NOTES:
(1) Represents primarily amounts transferred from USM's unconsolidated
partnerships and subsidiaries.
</TABLE>

33
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES

SCHEDULE VI--RESERVE FOR DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1992
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C1 COLUMN C2 COLUMN D COLUMN E COLUMN F
- ---------------------------------------------------------------------------------------------------------------------
BALANCE AT
DATE OF
ACQUISITION
OF ADDITIONS LESS
BALANCE AT COMPANIES CHARGED TO RETIREMENTS
BEGINNING ACQUIRED IN COSTS AND OR SALES OTHER CHANGES BALANCE AT
CLASSIFICATION OF PERIOD 1992 EXPENSES AT COST ADD (DEDUCT)(1) END OF PERIOD
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Land Improvements $ 117 $ 30 $ 459 $ 6 $ (3) $ 597
Buildings 560 34 370 28 (2) 934
Leasehold Improvements 1,197 73 1,067 9 (172) 2,156
Antenna 680 34 846 34 -- 1,526
Power Equipment 895 70 682 37 (3) 1,607
Switching Equipment 2,823 629 2,282 186 (199) 5,349
Base Site Controller 1,960 132 1,616 114 (75) 3,519
Towers 555 42 622 16 2 1,205
Radio Frequency Channel
Equipment 3,032 401 3,228 116 (93) 6,452
Transmission Equipment 2,147 182 2,204 82 (95) 4,356
Portable Cell Sites -- -- 39 -- 2 41
Vehicles 39 5 308 6 (19) 327
Test Equipment 911 93 688 11 (3) 1,678
Office Furniture and
Equipment 2,436 56 1,623 136 (51) 3,928
Demo Units 275 3 374 300 (13) 339
Paging Equipment 521 -- 198 -- -- 719
- ---------------------------------------------------------------------------------------------------------------------
$ 18,148 $ 1,784 $ 16,606 $ 1,081 $ (724) $ 34,733
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<FN>
- ----------
NOTES:
(1) Represents primarily amounts transferred from USM's unconsolidated
partnerships and subsidiaries.
</TABLE>

34
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES

SCHEDULE VI--RESERVE FOR DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1991
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C1 COLUMN C2 COLUMN D COLUMN E COLUMN F
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT
DATE OF
ACQUISITION OF ADDITIONS LESS
BALANCE AT COMPANIES CHARGED TO RETIREMENTS
BEGINNING ACQUIRED IN COSTS AND OR SALES OTHER CHANGES BALANCE AT
CLASSIFICATION OF PERIOD 1991 EXPENSES AT COST ADD (DEDUCT)(1) END OF PERIOD
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Land Improvements $ 2 $ 2 $ 112 $ $ 1 $ 117
Buildings 267 32 263 -- (2) 560
Leasehold Improvements 607 35 556 -- (1) 1,197
Antenna 286 44 361 -- (11) 680
Power Equipment 467 57 382 -- (11) 895
Switching Equipment 1,539 196 1,274 -- (186) 2,823
Base Site Controller 805 157 1,100 -- (102) 1,960
Towers 261 18 277 -- (1) 555
Radio Frequency Channel
Equipment 1,530 203 1,397 (4) (102) 3,032
Transmission Equipment 1,050 144 1,228 -- (275) 2,147
Vehicles 73 -- 41 66 (9) 39
Test Equipment 539 34 386 3 (45) 911
Office Furniture and
Equipment 1,397 114 1,060 121 (14) 2,436
Demo Units 202 30 216 159 (14) 275
Paging Equipment 263 97 161 -- -- 521
- ---------------------------------------------------------------------------------------------------------------------------
$ 9,288 $ 1,163 $ 8,814 $ 345 $ (772) $ 18,148
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
- ----------
NOTES:
(1) Represents primarily amounts transferred from USM's unconsolidated
partnerships and subsidiaries.
</TABLE>

35
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C1 COLUMN C2 COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, 1993
Deducted from deferred federal tax asset:
For unrealized net operating losses (1)......... $ (13,831) $ -- $ (8,045) $ -- $ (21,876)
Deducted from deferred state tax asset:
For unrealized net operating losses (1)......... (5,985) -- (2,456) -- (8,441)
Deducted from accounts receivable:
For doubtful accounts........................... (1,276) (4,161) -- 4,024 (1,413)
Deducted from marketable equity securities:
For unrealized loss............................. -- -- (626) -- (626)
FOR THE YEAR ENDED DECEMBER 31, 1992
Deducted from accounts receivable:
For doubtful accounts........................... (898) (3,894) -- 3,516 (1,276)
FOR THE YEAR ENDED DECEMBER 31, 1991
Deducted from accounts receivable:
For doubtful accounts........................... $ (564) $ (2,239) $ -- $ 1,905 $ (898)
<FN>
- ----------
(1) The beginning balance represents the implementation of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" on
January 1, 1993.
</TABLE>

36
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES

SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMN B
COLUMN A CHARGED TO COSTS AND EXPENSES
- ------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Maintenance and repairs.......................................................... $ 14,510 $ 9,611 $ 7,106
Taxes, other than payroll and income taxes
Gross receipts................................................................. 1,686 1,114 463
Property....................................................................... 2,097 1,202 738
Other tax expense.............................................................. 2,183 1,598 465
Advertising costs................................................................ 11,807 8,225 4,780
</TABLE>

37
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
COMBINED FINANCIAL STATEMENTS

The following financial statements are the combined financial statements of
the cellular system partnerships listed below which are accounted for by the
Company following the equity method. The combined financial statements were
compiled from financial statements and other information obtained by the Company
as a noncontrolling limited partner of the cellular limited partnerships listed
below. The cellular system partnerships included in the combined financial
statements, the periods each partnership is included, and the Company's
ownership percentage of each cellular system partnership at December 31, 1993
are set forth in the following table.

<TABLE>
<CAPTION>
THE
PERIODS COMPANY'S
INCLUDED LIMITED
IN COMBINED PARTNERSHIP
CELLULAR SYSTEM PARTNERSHIP STATEMENTS INTEREST
- --------------------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Los Angeles SMSA Limited Partnership................................................... 1991-93 5.5%
Nashville/Clarksville MSA Limited Partnership.......................................... 1991-93 49.0%
Baton Rouge MSA Limited Partnership.................................................... 1991-93 52.0%
</TABLE>

38
<PAGE>
COMPILATION REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of
UNITED STATES CELLULAR CORPORATION:

The accompanying combined balance sheets of the Los Angeles SMSA Limited
Partnership, the Nashville/Clarksville MSA Limited Partnership and the Baton
Rouge MSA Limited Partnership as of December 31, 1993 and 1992 and the related
combined statements of operations, changes in partners' capital, and cash flows
for each of the three years in the period ended December 31, 1993, have been
prepared from the separate financial statements, which are not presented
separately herein, of the Los Angeles SMSA, Nashville/Clarksville MSA and Baton
Rouge MSA limited partnerships, as described in Note 1. We have reviewed for
compilation only the accompanying combined financial statements, and, in our
opinion, those statements have been properly compiled from the amounts and notes
of the underlying separate financial statements of the Los Angeles SMSA,
Nashville/Clarksville MSA and Baton Rouge MSA limited partnerships, on the basis
described in Note 1.

The statements for the Los Angeles SMSA, Nashville/Clarksville MSA and Baton
Rouge MSA limited partnerships were audited by other auditors as set forth in
their reports included on pages 40 through 43. The report of the other auditors
of the Los Angeles SMSA Limited Partnership contains explanatory paragraphs with
respect to the uncertainties discussed in the fourth and fifth paragraphs of
Note 7. We have not been engaged to audit either the separate financial
statements of the aforementioned limited partnerships or the related combined
financial statements in accordance with generally accepted auditing standards
and to render an opinion as to the fair presentation of such financial
statements in accordance with generally accepted accounting principles.

As discussed in "Change in Accounting Principle" in Note 2, the method of
accounting for cellular sales commissions was changed effective January 1, 1991,
for the Nashville/Clarksville MSA Limited Partnership and the Baton Rouge MSA
Limited Partnership.

ARTHUR ANDERSEN & CO.

Chicago, Illinois
February 11, 1994

39
<PAGE>
REPORTS OF OTHER INDEPENDENT ACCOUNTANTS

To The Partners of
LOS ANGELES SMSA LIMITED PARTNERSHIP:

We have audited the balance sheets of Los Angeles SMSA Limited Partnership
as of December 31, 1993 and 1992, and the related statements of operations,
partners' capital and cash flows for each of the three years in the period ended
December 31, 1993; such financial statements are not included separately herein.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Los Angeles SMSA Limited
Partnership as of December 31, 1993 and 1992, and results of its operations and
its cash flows for each of the three years in the period ended December 31,
1993, in conformity with generally accepted accounting principles.

As discussed in Note 9 to the financial statements, two cellular agents
filed complaints against the Partnership. The outcome of these matters is
uncertain and, accordingly, no accrual for these matters has been made in the
financial statements.

In addition, as discussed in Note 9, a class action suit was filed against
the Partnership alleging violations of state and federal antitrust laws. The
outcome of this matter is uncertain and, accordingly, no accrual for this matter
has been made in the financial statements.

COOPERS & LYBRAND
Newport Beach, California
February 4, 1994

To The Partners of
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Nashville/Clarksville MSA Limited
Partnership as of December 31, 1993, and the related statements of income,
changes in partners' capital and cash flows for the year then ended; such
financial statements are not included separately herein. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nashville/Clarksville MSA
Limited Partnership as of December 31, 1993, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND
Atlanta, Georgia
February 11, 1994

40
<PAGE>
REPORTS OF OTHER INDEPENDENT ACCOUNTANTS

To The Partners of
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Nashville/Clarksville MSA Limited
Partnership as of December 31, 1992, and the related statements of income,
changes in partners' capital and cash flows for the year then ended; such
financial statements are not included separately herein. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nashville/Clarksville MSA
Limited Partnership as of December 31, 1992, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND
Atlanta, Georgia
February 11, 1993

To The Partners of
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Nashville/Clarksville MSA Limited
Partnership as of December 31, 1991, and the related statements of operations,
changes in partners' capital and cash flows for the year then ended; such
financial statements are not included separately herein. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nashville/Clarksville MSA
Limited Partnership as of December 31, 1991, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.

As discussed in Note 2 to the financial statements, the Partnership changed
its method of accounting for commissions in 1991.

COOPERS & LYBRAND
Atlanta, Georgia
February 10, 1992

41
<PAGE>
REPORTS OF OTHER INDEPENDENT ACCOUNTANTS

To The Partners of
BATON ROUGE MSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Baton Rouge MSA Limited Partnership as
of December 31, 1993, and the related statements of income, changes in partners'
capital and cash flows for the year then ended; such financial statements are
not included separately herein. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Baton Rouge MSA Limited
Partnership as of December 31, 1993, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND
Atlanta, Georgia
February 11, 1994

To The Partners of
BATON ROUGE MSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Baton Rouge MSA Limited Partnership as
of December 31, 1992, and the related statements of income, changes in partners'
capital and cash flows for the year then ended; such financial statements are
not included separately herein. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Baton Rouge MSA Limited
Partnership as of December 31, 1992, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND
Atlanta, Georgia
February 11, 1993

42
<PAGE>
REPORTS OF OTHER INDEPENDENT ACCOUNTANTS

To The Partners of
BATON ROUGE MSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Baton Rouge MSA Limited Partnership as
of December 31, 1991, and the related statements of income, changes in partners'
capital and cash flows for the year then ended; such financial statements are
not included separately herein. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Baton Rouge MSA Limited
Partnership as of December 31, 1991, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

As discussed in Note 2 to the financial statements, the Partnership changed
its method of accounting for commissions in 1991.

COOPERS & LYBRAND
Atlanta, Georgia
February 10, 1992

43
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues................................................................... $ 506,028 $ 400,738 $ 338,494
Expenses
Selling, general and administrative...................................... 287,299 235,038 169,912
Depreciation and amortization............................................ 57,357 46,740 40,687
----------- ----------- -----------
Total expenses........................................................... 344,656 281,778 210,599
----------- ----------- -----------
Operating income........................................................... 161,372 118,960 127,895
Other income............................................................... 272 477 81
----------- ----------- -----------
Net income before cumulative effect of a change in accounting principle.... 161,644 119,437 127,976
Cumulative effect of a change in accounting principle (Note 2)............. -- -- (3,178)
----------- ----------- -----------
Net Income................................................................. $ 161,644 $ 119,437 $ 124,798
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

44
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
COMBINED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1992
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current Assets
Cash.................................................................................. $ 27 $ 26
Accounts receivable--customers, net................................................... 81,656 58,141
Accounts receivable--affiliates....................................................... 29,981 16,074
Notes receivable--affiliates.......................................................... 3,756 3,751
Other current assets.................................................................. 5,689 7,823
----------- -----------
121,109 85,815
Property, Plant and Equipment, net...................................................... 304,926 277,228
Other................................................................................... 1,631 4,846
----------- -----------
Total Assets............................................................................ $ 427,666 $ 367,889
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' CAPITAL

<CAPTION>
DECEMBER 31,
------------------------
1993 1992
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current Liabilities
Accounts payable--other............................................................... $ 38,776 $ 33,433
Accounts payable--affiliates.......................................................... 1,039 1,061
Customer deposits..................................................................... 2,996 2,499
Other current liabilities............................................................. 22,101 18,721
----------- -----------
64,912 55,714
----------- -----------
Deferred Rent........................................................................... 4,571 4,015
Capital Lease Obligation................................................................ 713 592
Long-Term Debt.......................................................................... -- 281
Partners' Capital....................................................................... 357,470 307,287
----------- -----------
Total Liabilities and Partners' Capital................................................. $ 427,666 $ 367,889
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

45
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
DECEMBER 31, 1993
---------------------------------------
1993 1992 1991
------------ ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income............................................................. $ 161,644 $ 119,437 $ 124,798
Add (Deduct) adjustments to reconcile net income to net cash provided
by operating activities
Cumulative effect of a change in accounting principle................ -- -- 3,178
Depreciation and amortization........................................ 57,357 46,740 40,687
Deferred revenue and other credits................................... 497 (3) (4)
Loss on asset dispositions........................................... 3,838 4,294 397
Change in prepaid expenses........................................... (22) 4 14
Change in accounts receivable........................................ (37,422) (3,417) (28,599)
Change in accounts payable and accrued expenses...................... 6,097 17,307 1,997
Change in other assets and liabilities............................... 4,942 3,967 834
------------ ------------ -----------
196,931 188,329 143,302
------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in notes payable.............................................. -- (2,305) 2,114
Change in notes receivable........................................... (5) (3,751) 556
Principal payments on capital lease obligations...................... (612) (442) --
Capital contribution................................................. -- 2,474 5,802
Capital distribution................................................. (111,461) (114,876) (71,032)
------------ ------------ -----------
(112,078) (118,900) (62,560)
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment, net of retirements....... (86,011) (68,595) (76,297)
Decreases (increases) in other assets................................ 1,335 (856) (4,180)
Change in deferred charges........................................... (202) (36) (266)
Proceeds from sale of assets......................................... 26 61 --
------------ ------------ -----------
(84,852) (69,426) (80,743)
------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH.......................................... 1 3 (1)
CASH
Beginning of period.................................................. 26 23 24
------------ ------------ -----------
End of period........................................................ $ 27 $ 26 $ 23
------------ ------------ -----------
------------ ------------ -----------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

46
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(UNAUDITED)

<TABLE>
<S> <C>
(DOLLARS IN THOUSANDS)
Balance at January 1, 1991...................................................... $ 240,684
Contributions................................................................. 5,802
Distributions................................................................. (71,032)
Net Income for the year ended December 31, 1991............................... 124,798
---------
Balance at December 31, 1991.................................................... 300,252
Contributions................................................................. 2,474
Distributions................................................................. (114,876)
Net Income for the year ended December 31, 1992............................... 119,437
---------
Balance at December 31, 1992.................................................... 307,287
Distributions................................................................. (111,461)
Net Income for the year ended December 31, 1993............................... 161,644
---------
Balance at December 31, 1993.................................................... $ 357,470
---------
---------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

47
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS

1. BASIS OF COMBINATION:

The combined financial statements and notes thereto were compiled from the
individual financial statements of cellular limited partnerships listed below in
which United States Cellular Corporation (AMEX symbol "USM") has a
noncontrolling ownership interest and which it accounts for using the equity
method. The cellular partnerships, the period each partnership is included in
the combined financial statements and USM's ownership interest in each
partnership are set forth in the table below. The combined financial statements
and notes thereto present 100% of each partnership whereas USM's ownership
interest is shown in the table.

<TABLE>
<CAPTION>
PERIOD INCLUDED LIMITED
IN COMBINED PARTNERSHIP
STATEMENTS INTEREST
--------------- -------------
<S> <C> <C>
Los Angeles SMSA Limited Partnership................................................ 1991-93 5.5%
Nashville/Clarksville MSA Limited Partnership....................................... 1991-93 49.0%
Baton Rouge MSA Limited Partnership................................................. 1991-93 52.0%
</TABLE>

Profits, losses and distributable cash are allocated to the partners based
upon respective partnership interests. Distributions are made quarterly at the
discretion of the General Partner for one of the Partnerships.

Of the partnerships included in the combined financial statements, the Los
Angeles SMSA Limited Partnership is the most significant, accounting for
approximately 89% of the combined total assets at December 31, 1993, and
substantially all of the combined net income for the year then ended.

USM's investment in and advances to Los Angeles SMSA Limited Partnership
totalled $15,212,000 as of December 31, 1993, of which $17,398,000 represents
its proportionate share of net assets of the Partnership. USM's investment in
and advances to the Nashville/Clarksville MSA Limited Partnership totalled
$14,300,000 as of December 31, 1993, which represents its proportionate share of
net assets. USM's investment in and advances to the Baton Rouge MSA Limited
Partnership totalled $8,935,000 as of December 31, 1993, $6,207,000 of which
represents its proportionate share of net assets.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR COMBINED ENTITIES:

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is computed
using the straight-line method over the following estimated lives:

<TABLE>
<S> <C>
Buildings.............................................. 10-15 years
Equipment.............................................. 3-10 years
Furniture and Fixtures................................. 5-10 years
Leasehold Improvements................................. 10 years
</TABLE>

48
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Property, Plant and Equipment consists of:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1992
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land.................................................................................... $ 1,819 $ 1,510
Buildings and Leasehold Improvements.................................................... 79,704 69,150
Equipment............................................................................... 355,376 293,176
Furniture and Fixtures.................................................................. 19,734 12,634
Under Construction...................................................................... 32,052 31,677
----------- -----------
488,685 408,147
Less Accumulated Depreciation........................................................... 183,759 130,919
----------- -----------
$ 304,926 $ 277,228
----------- -----------
----------- -----------
</TABLE>

Included in buildings are costs relating to the acquisition of cell site
leases; such as legal, consulting, and title fees. Lease acquisition costs are
capitalized when incurred and amortized over the period of the lease. Costs
related to unsuccessful negotiations are expensed in the period the negotiations
are terminated.

Gains and losses on disposals are included in income at amounts equal to the
difference between net book value and proceeds received upon disposal.

During 1993 and 1992, one of the Partnerships recorded capital lease
additions of $827,000 and $513,000, respectively.

Commitments for future equipment acquisitions amounted to $22,734,000 at
December 31, 1993.

On January 10, 1994, one of the Partnerships entered into an agreement with
its major supplier to purchase $77 million in equipment.

OTHER ASSETS

Other assets consist primarily of the costs of acquiring the right to serve
certain customers previously served by resellers and are being amortized over
three years using the straight-line method. Accumulated amortization was
$4,806,000 and $2,797,000 at December 31, 1993 and 1992, respectively.

CHANGE IN ACCOUNTING PRINCIPLE

In the third quarter of 1991, the General Partner of two of the Partnerships
changed its policy of capitalizing certain third party sales commissions and
amortizing them over the average customer life. The General Partner's parent
effected this change to standardize the accounting treatment of sales
commissions throughout its consolidated cellular operations. These amounts will
be expensed in the period in which they are incurred by the agent. In 1991, this
change in accounting principle was retroactively applied as of January 1, 1991.
Had the change not been made, 1991 net income before the cumulative effect of a
change in accounting principle would have increased $1,838,000.

REVENUE RECOGNITION

Revenues from operations primarily consist of charges to customers for
monthly access charges, cellular airtime usage, and roamer charges. Revenues are
recognized as services are rendered. Unbilled revenues, resulting from cellular
service provided from the billing cycle date to the end of each month and from
other cellular carriers' customers using the partnership's cellular systems for
the last half of each month, are estimated and recorded as receivables. Unearned
monthly access charges relating to the periods after month-end are deferred and
netted against accounts receivable.

49
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

INCOME TAXES

No provisions have been made for federal or state income taxes since such
taxes, if any, are the responsibility of the individual partners.

3. LEASE COMMITMENTS:

Future minimum rental payments required under operating leases for real
estate that have initial or remaining noncancellable lease terms in excess of
one year as of December 31, 1993, are as follows:

<TABLE>
<S> <C>
(DOLLARS IN THOUSANDS)
1994............................................................. $ 11,445
1995............................................................. 10,890
1996............................................................. 10,643
1997............................................................. 9,983
1998............................................................. 9,696
Thereafter....................................................... 51,910
---------
$ 104,567
---------
---------
</TABLE>

The initial lease terms generally range from 5 to 25 years with the majority
of them having initial terms of 10 years and providing for one renewal option of
5 years and for rental escalation. Included in selling, general and
administrative expense are rental costs of $7,897,000, $5,996,000 and $4,463,000
for the years ended December 31, 1993, 1992 and 1991, respectively. One of the
Partnerships leases office facilities under a ten-year lease agreement which
provides for free rent incentives for six months and rent escalation over the
ten-year period. The Partnership recognizes rent expense on a straight-line
basis and recorded the related deferred rent as a noncurrent liability to be
amortized as an adjustment to rental costs over the life of the lease.

4. CAPITAL LEASE OBLIGATION:

One of the Partnerships leases equipment under capital lease agreements. At
December 31, 1993 and 1992, respectively, the amount of such equipment included
in property, plant and equipment is $3,324,000 and $2,638,000 less accumulated
amortization of $1,914,000 and $1,451,000. Future minimum annual lease payments
on noncancellable capital leases are as follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
1994............................................................... $ 768
1995............................................................... 526
1996............................................................... 216
1997............................................................... 20
---------
Total future minimum lease payments................................ 1,530
Less amounts representing interest............................... 129
---------
Present value of net future minimum lease payments................. 1,401
Less current portion............................................. 688
---------
Lease obligation, noncurrent....................................... $ 713
---------
---------
</TABLE>

5. RELATED PARTY TRANSACTIONS:

Certain affiliates of these cellular limited partnerships provide services
for the system operations, legal, financial, management and administration of
these entities. These affiliates are reimbursed for both direct and allocated
costs (totaling $57.1 million in 1993 $52.2 million in 1992 and $50.0 million in
1991) related to providing these services. In addition, certain affiliates have
established a credit facility with certain partnerships to provide working
capital to the partnership. One of the partnerships participates in a
centralized cash management arrangement with its general partner. At December
31, 1993

50
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)
and 1992, the interest-bearing balance amounted to $29,981,000 and $16,074,000,
respectively. Effective January 1, 1989, the general partner pays or charges the
Partnership monthly interest, computed using the general partner's average
borrowing rate, on the amounts due to or from the Partnership. Interest earned
in 1993, 1992 and 1991 was $1,294,000, $1,396,000 and $675,000, respectively.

6. REGULATORY INVESTIGATIONS:

The California Public Utilities Commission (CPUC) has issued an Order
Instituting Investigation of the regulation of cellular radiotelephone utilities
operating in the State of California under Order Number I.88-11-040. The intent
of the investigation was to determine the appropriate regulatory objectives for
the cellular industry, and whether current regulations applicable to the
cellular industry and its operators meet those objectives or should be modified.

On October 6, 1992, the CPUC adopted an Order which, among other things,
imposes an accounting methodology on cellular utilities to separate wholesale
and retail costs, permits resellers to operate a reseller switch interconnected
to the cellular carrier's facilities, and requires the unbundling of certain
wholesale rates to the resellers. On May 19, 1993, the CPUC granted limited
rehearing of the decision. In addition, the CPUC rescinded its order to modify
the method for allocating costs between wholesale and retail operations.

On December 17, 1993, the CPUC adopted a new Order Instituting Investigation
into the regulation of mobile telephone service and wireless communications,
Order Number I.93-12-007. The investigation proposes a regulatory program which
would encompass all forms of mobile telephone service. Currently, one of the
Partnerships affected is unable to quantify the precise impact of these Orders
on its future operations, but that impact may be material to the Partnership
under certain circumstances.

In January 1992, the CPUC commenced a separate investigation of all cellular
companies operating in the State to determine their compliance with General
Order number 159 (G.O. 159). The investigation will address whether cellular
utilities have complied with local, state or federal regulations governing the
approval and construction of cellular sites in the State. The CPUC may advise
other agencies of violations in their jurisdictions.

One of the Partnerships affected has prepared and filed the information
requested by the CPUC. The CPUC will review the information provided by the
Partnership and, if violations of G.O. 159 are found, it may assess penalties
against the Partnership. The outcome of this investigation is uncertain and
accordingly, no accrual for this matter has been made.

7. CONTINGENCIES AND COMMITMENTS:

On June 28, 1993, an applicant for an unserved area license in the Los
Angeles market filed an informal objection with the FCC to one of the
Partnerships' System Information Update map. The applicant claims the
Partnership was not legally authorized to provide service in parts of its
described service area. The applicant requests that the FCC correct the
Partnership's service area to eliminate such areas and suggests the FCC impose
"such sanctions as it deems appropriate." The Partnership filed a response with
the FCC in which it reported that, in its review of the applicant's allegations,
it found certain errors that were made in its filings but disputed any of these
were intentional. The FCC could assess penalties against the Partnership for
nonconformance with its license. The outcome of this matter remains uncertain
and, accordingly, the Partnership has not recorded an accrual. The Partnership
intends to defend its position vigorously.

The Partnership filed for its 10-year license renewal for the Los Angeles
market on August 30, 1993. The Partnership is currently operating with FCC
authority while the renewal application is pending resolution of the FCC's
decision on claims mentioned above. The Partnership fully expects that its
license will be renewed.

51
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Two agents of a competing carrier have named one of the Partnerships in
several complaints against the carrier. The general allegations include
violations of California Unfair Practices Act and price fixing. The ultimate
outcome of both these actions is uncertain at this time. Accordingly, no accrual
for these contingencies has been made. The Partnership intends to defend its
position vigorously.

On November 24, 1993, a class action suit was filed against one of the
Partnerships and another cellular carrier alleging conspiracy to fix the price
of cellular service in violation of state and federal antitrust laws. The
plaintiffs are seeking substantial monetary damages and injunctive relief in
excess of $100 million. The outcome of this matter is uncertain and,
accordingly, the Partnership has not recorded an accrual. The Partnership
intends to defend its position vigorously.

One of the Partnerships is a party to various other lawsuits arising in the
ordinary course of business. In the opinion of management, based on a review of
such litigation with legal counsel, any losses resulting from these actions are
not expected to materially impact the financial condition of the Partnership.

Two of the Partnerships provide cellular service and sell cellular
telephones to diversified groups of consumers within concentrated geographical
areas. The general partner performs credit evaluations of the Partnerships'
customers and generally does not require collateral. Receivables are generally
due within 30 days. Credit losses related to customers have been within
management's expectations.

One of the Partnerships purchases substantially all of its equipment from
one supplier.

The General Partner of two of the Partnerships entered into agreements with
an equipment vendor on behalf of the Partnerships to replace the Partnerships'
cellular equipment with new cellular technology which will support both analog
and digital voice transmissions.

52
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

UNITED STATES CELLULAR CORPORATION

By: /S/ H. DONALD NELSON

-----------------------------------
H. Donald Nelson
PRESIDENT (CHIEF EXECUTIVE OFFICER)

By: /S/ K. R. MEYERS

-----------------------------------
K. R. Meyers
VICE PRESIDENT--FINANCE AND TREASURER
(PRINCIPAL FINANCIAL OFFICER)

By: /S/ PHILLIP A. LORENZINI

-----------------------------------
Phillip A. Lorenzini
CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)

Dated March 28, 1994

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------- ------------------
<S> <C> <C>
/S/ H. DONALD NELSON DIRECTOR March 28, 1994
------------------------------------------
H. Donald Nelson
/S/ LEROY T. CARLSON, JR. DIRECTOR March 28, 1994
------------------------------------------
LeRoy T. Carlson, Jr.
/S/ LEROY T. CARLSON DIRECTOR March 28, 1994
------------------------------------------
LeRoy T. Carlson
/S/ WALTER C. D. CARLSON DIRECTOR March 28, 1994
------------------------------------------
Walter C. D. Carlson
/S/ MURRAY L. SWANSON DIRECTOR March 28, 1994
------------------------------------------
Murray L. Swanson
/S/ PAUL-HENRI DENUIT DIRECTOR March 28, 1994
------------------------------------------
Paul-Henri Denult
/S/ ALLAN Z. LOREN DIRECTOR March 28, 1994
------------------------------------------
Allan Z. Loren
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT PAGE
- ------------ --------------------------------------------------------------------------------------------- -----
<C> <S> <C>
3.1 Restated Certificate of Incorporation, as amended, is hereby incorporated by reference to an
exhibit to the Company's Amendment No. 2 on Form 8 dated December 28, 1992, to the Company's
Report on Form 8-A.
3.2 Restated Bylaws, as amended, are hereby incorporated by reference to an exhibit to the
Company's Amendment No. 2 on Form 8 dated December 28, 1992, to the Company's Report on Form
8-A.
4.1 Restated Certificate of Incorporation, as amended, is hereby incorporated by reference to an
exhibit to the Company's Amendment No. 2 on Form 8 dated December 28, 1992 to the Company's
Report on Form 8-A.
4.2 Restated by-laws, as amended, are hereby incorporated by reference to an exhibit to the
Company's Amendment No. 2 on Form 8 dated December 28, 1992 to the Company's Report on Form
8-A.
4.3 Term Loan Agreement between Northern Telecom Finance Corporation and the Company dated
October 1, 1991, is hereby incorporated by reference to Exhibit 4.6 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1991.
9.1 Voting Trust Agreement, dated as of June 30, 1989, with respect to Common Shares of TDS, is
hereby incorporated by reference to an exhibit to the Company's Registration Statement on
Form S-1 (Registration No. 33-38644).
9.2 Amendment dated as of May 9, 1991, to the Voting Trust Agreement dated as of June 30, 1989,
is hereby incorporated by reference to Exhibit 9.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1991.
9.3 Amendment dated as of November 20, 1992, to the Voting Trust Agreement dated as of June 30,
1989, as amended is hereby incorporated by reference to Exhibit 9.3 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992.
10.1 Supplemental Benefit Agreement between the Company and H. Donald Nelson is hereby
incorporated by reference to an exhibit to the Company's Registration Statement on Form S-1
(Registration No. 33-16975).
10.2 (a) Revolving Credit Agreement, between the Company and TDS, as amended, is hereby incorporated
by reference to an exhibit to Post-Effective Amendment No. 2 to the Company's Registration
Statement on Form S-1 (Registration No. 33-23492).
10.2 (b) Amendment dated as of November 15, 1993, to Revolving Credit Agreement between the Company
and TDS.
10.3 Tax Allocation Agreement, between the Company and TDS, is hereby incorporated by reference to
an exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).
10.4 Cash Management Agreement, between the Company and TDS, is hereby incorporated by reference
to an exhibit to the Company's Registration Statement on Form S-1 (Registration No.
33-16975).
10.5 Registration Rights Agreement, between the Company and TDS, is hereby incorporated by
reference to an exhibit to the Company's Registration Statement on Form S-1 (Registration No.
33-16975).
</TABLE>

<PAGE>

Exhibit 10.2(b)

November 15, 1993

United States Cellular Corporation
8410 West Bryn Mawr Avenue
Suite 700
Chicago, Illinois 60631

Re: Revolving Credit Agreement, dated as of July 1, 1987, last
amended as of September 30, 1993, (the "Revolving Credit
Agreement"), between United States Cellular Corporation and
Telephone and Data Systems, Inc. ("TDS")
-----------------------------------------------------------

Gentlemen:

This letter will constitute TDS's agreement to amend the Revolving
Credit Agreement by changing all of the references to "$500,000,000" in the
Revolving Credit Agreement to "$250,000,000". All of the other terms and
conditions of the Revolving Credit Agreement shall remain in full force and
effect.

Please acknowledge your agreement to this amendment by executing the
copy of this letter and returning it to the undersigned.

Very truly yours,

TELEPHONE AND DATA SYSTEMS, INC.

By: /s/ Murray L. Swanson
----------------------------
Murray L. Swanson
Executive Vice President/
Finance

Accepted and agreed to as of the date set forth above.

UNITED STATES CELLULAR CORPORATION

By: /s/ Kenneth R. Meyers
----------------------------
Kenneth R. Meyers
Vice President/Finance

<PAGE>

Exhibit 10.11

SUMMARY OF 1993 BONUS PROGRAM FOR
SENIOR CORPORATE STAFF OF
UNITED STATES CELLULAR CORPORATION

The objectives of the 1993 Bonus Program for Senior Corporate Staff
(the "1993 Bonus Plan") of United States Cellular Corporation ("USM") are: (i)
to provide suitable incentives for the senior corporate management of USM to
extend their best efforts to achieve superior results in relation to key
performance targets, (ii) to suitably reward USM's senior corporate management
team in relation to their success in meeting and exceeding these performance
targets, and (iii) to help USM attract and retain talented management personnel
in positions of critical importance to the success of USM. A team performance
award and an individual performance award are available under the 1993 Bonus
Plan.

For target performance on the team and individual categories, the 1993
Bonus Plan was designed to generate a targeted 1993 bonus pool equal to the
total of 25% of the aggregate of the base salaries of the Company's executive
officers other than the President. Under the 1993 Bonus Plan, the size of the
target bonus pool is increased or decreased depending on USM's 1993 achievements
with respect to the performance categories. No bonus pool is paid under such
plan if minimum performance levels are not achieved in these categories. The
maximum bonus pool that could be generated, which would require exceptional
performance in all areas, would equal the total of 40% of the aggregate base
salaries of the Company's executive officers. At target performance, the bonus
pool would be equal to 25% of the aggregate salaries of the Company's executive
officers other than the President. Of this percentage, 7.5% represents a
targeted individual performance award and a total of 17.5% represents a targeted
team bonus award. The targeted team award includes a discretionary team award
of 3.5% and an objective award which represents 14% of the targeted award of
25%. The objective performance categories include (i) the increase in net
revenue subscribers (4.375% of the targeted award), (ii) the increase in
earnings before interest and taxes (7.0% of the targeted award) and (iii) the
increase in net service revenues (2.625% of the targeted amount).

The discretionary team performance category, representing 3.5% of the
targeted award of 25%, permits the participants to earn bonus dollars through
USM's performance and their individual performance in areas not measured or not
adequately measured by objective team performance categories. The President of
USM determines a bonus percentage to award for discretionary team performance
and presents his recommendation to the Chairman for his approval. This decision
is made in a similar manner to that described above for the base salary decision
and is based primarily on an assessment of the team performance in general,
considering all facts and circumstances. This award may range from 40% of the
targeted award for adequate

<PAGE>
performance on a team level to 160% of the targeted award for outstanding
performance on a team level.

The 1993 Bonus Plan also provides a discretionary individual
performance category, representing 7.5% of the targeted percentage of 25%, to
permit the participants to earn bonus dollars through USM's performance and
their individual performance in areas not measured or not adequately measured by
team performance categories. The President of USM determines a bonus percentage
to award for discretionary individual performance and presents his
recommendation to the Chairman for his approval. This decision is made based
primarily on an assessment of the executive's personal performance. This award
may range from 40% of the targeted award for adequate performance on an
individual basis to 160% of the targeted award for outstanding performance on an
individual basis.

<PAGE>

EXHIBIT 11

UNITED STATES CELLULAR CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

YEAR ENDED DECEMBER 31, 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

PRIMARY EARNINGS
Net (Loss) Income Before Cumulative Effect of
a Change in Accounting Principle . . . . . . . . . . . . . . . . . $ (25,441) $ 6,194 $ (24,373)
Cumulative effect of a change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . - - (10,269)
---------- ---------- ----------
Net (Loss) Income. . . . . . . . . . . . . . . . . . . . . . . . . . $ (25,441) $ 6,194 $ (34,642)
---------- ---------- ----------
---------- ---------- ----------

PRIMARY SHARES
Weighted average number of Common and Series A
Common Shares Outstanding. . . . . . . . . . . . . . . . . . . . . 57,152 50,349 38,715
Additional shares assuming issuance of:
Options and Stock Appreciation Rights. . . . . . . . . . . . . . . - 34 -
Convertible Preferred Shares . . . . . . . . . . . . . . . . . . . - 1,126 -
Common Shares Issuable . . . . . . . . . . . . . . . . . . . . . . - 6,269 -
---------- ---------- ----------
Primary Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,152 57,778 38,715
---------- ---------- ----------
---------- ---------- ----------

PRIMARY EARNINGS PER COMMON SHARE
Net (Loss) Income Before Cumulative Effect of
a Change in Accounting Principle . . . . . . . . . . . . . . . . . $ (.45) $ .11 $ (.63)
Cumulative effect of a change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . - - (.26)
---------- ---------- ----------
Net (Loss) Income. . . . . . . . . . . . . . . . . . . . . . . . . . $ (.45) $ .11 $ (.89)
---------- ---------- ----------
---------- ---------- ----------

FULLY DILUTED EARNINGS*
Net (Loss) Income Before Cumulative Effect of
a Change in Accounting Principle . . . . . . . . . . . . . . . . . $ (25,441) $ 6,194 $ (24,373)
Cumulative effect of a change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . - - (10,269)
---------- ---------- ----------
Net (Loss) Income. . . . . . . . . . . . . . . . . . . . . . . . . . $ (25,441) $ 6,194 $ (34,642)
---------- ---------- ----------
---------- ---------- ----------

FULLY DILUTED SHARES
Weighted average number of Common and Series A
Common Shares Outstanding. . . . . . . . . . . . . . . . . . . . . 57,152 50,349 38,715
Additional shares assuming issuance of:
Options and Stock Appreciation Rights. . . . . . . . . . . . . . . - 41 -
Convertible Preferred Shares . . . . . . . . . . . . . . . . . . . - 1,126 -
Common Shares Issuable . . . . . . . . . . . . . . . . . . . . . . - 6,269 -
---------- ---------- ----------
Fully Diluted Shares . . . . . . . . . . . . . . . . . . . . . . . . 57,152 57,785 38,715
---------- ---------- ----------
---------- ---------- ----------

FULLY DILUTED EARNINGS PER COMMON SHARE
Net (Loss) Income Before Cumulative Effect of
a Change in Accounting Principle . . . . . . . . . . . . . . . . . $ (.45) $ .11 $ (.63)
Cumulative effect of a change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . - - (.26)
---------- ---------- ----------
Net (Loss) Income. . . . . . . . . . . . . . . . . . . . . . . . . . $ (.45) $ .11 $ (.89)
---------- ---------- ----------
---------- ---------- ----------
<FN>
- ----------------

* This calculation is submitted in accordance with Securities Act of 1934
Release No. 9083 although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
</TABLE>

<PAGE>

EXHIBIT 12

UNITED STATES CELLULAR CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1993

(Dollars in thousands)
<TABLE>
<CAPTION>

Twelve Months
Ended
December 31, 1993
-----------------
<S> <C>
EARNINGS
(Loss) from Continuing Operations before income taxes . . $ (22,749)
Add (Deduct):
Minority Share of Losses . . . . . . . . . . . . . . . (590)
Earnings on Equity Method. . . . . . . . . . . . . . . (16,922)
Distributions from Minority Subsidiaries . . . . . . . 11,265
Amortization of Capitalized Interest . . . . . . . . . 20
Minority share of income in majority-owned subsidiaries
that have fixed charges. . . . . . . . . . . . . . . 48
--------
(28,928)

Add fixed charges:
Consolidated interest expense. . . . . . . . . . . . . 33,190
Interest Portion (1/3) of Consolidated Rent Expense. . 1,554
--------
$ 5,816
--------
--------
FIXED CHARGES
Consolidated interest expense . . . . . . . . . . . . . $ 33,190
Interest Portion (1/3) of Consolidated Rent Expense . . 1,554
--------
$ 34,744
--------
--------

RATIO OF EARNINGS TO FIXED CHARGES . . . . . . . . . . . . .17
--------
--------
Tax-Effected Preferred Dividends. . . . . . . . . . . . . $ -
Fixed Charges . . . . . . . . . . . . . . . . . . . . . . 34,744
--------
Fixed Charges and Preferred Dividends . . . . . . . . . $ 34,744
--------
--------

RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . .17
--------
--------

ADDITIONAL FUNDS REQUIRED TO COVER FIXED CHARGES
AND PREFERRED DIVIDEND PAYMENTS . . . . . . . . . . . . . $ 28,928
--------
--------
</TABLE>

<PAGE>
Exhibit 13
UNITED STATES CELLULAR CORPORATION
INCORPORATED PORTIONS OF 1993 ANNUAL REPORT TO SECURITY HOLDERS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION

RESULTS OF OPERATIONS

United States Cellular Corporation (the "Company" or "USM") owns, operates and
invests in cellular markets throughout the United States. USM owns or has the
right to acquire both majority and minority interests in 205 cellular markets at
December 31, 1993, representing 23,731,000 population equivalents ("pops"). USM
manages the operations of 136 cellular markets at December 31, 1993 and expects
to manage the operations of eight additional markets. Interests in the 61
remaining markets are managed by others. All 61 of these markets were served by
operational systems at December 31, 1993. The following table is a summary of
the Company's markets and consolidated operations.

<TABLE>
<CAPTION>
Year Ended or at December 31,
-----------------------------------
1993 1992 1991
-----------------------------------
<S> <C> <C> <C>
Majority-Owned, Managed
and Consolidated
Markets: (1)
Population equivalents
(in thousands) (2) 18,212 14,268 10,427
Customers 261,000 150,800 97,000
Market penetration 1.35% 1.00% .84%
Markets in operation 116 92 67
Cell sites in service 522 320 186
Average monthly revenue
per customer $ 99 $ 105 $ 100
Churn rate per month 2.3% 2.4% 2.2%
Marketing cost per net
customer addition $ 677 $ 765 $ 710

Minority-Owned and
Managed Markets: (3)
Population equivalents
(in thousands) (2) 1,139 2,007 1,755
Markets in operation 20 24 24

Markets to be Managed: (4)
Population equivalents
(in thousands) (2) 1,002 1,816 3,095
Markets 8 13 21

Total Markets Managed and to
be Managed by USM:
Population equivalents
(in thousands) (2) 20,353 18,091 15,277
Markets 144 129 112

Markets Managed by
Others: (5)
Population equivalents
(in thousands) (2) 3,378 3,474 3,229
Markets in operation 61 64 65

Total Markets:
Population equivalents
(in thousands) (2) 23,731 21,565 18,506
Markets 205 193 177
-----------------------------------

<FN>
(1) Includes one market managed by a third party in 1993 and 1992, and one
wholly owned reseller operation in 1992 and 1991.
(2) 1993 Donnelley Marketing Service estimates are used for all years. Includes
population equivalents relating to interests which are acquirable in the
future.
(3) Includes markets where the Company has the right to acquire an interest but
did not own an interest at the respective dates (two markets in 1993, six
in 1992 and seven in 1991).
(4) Represents markets which are not yet operational or which are managed by
third parties until the Company acquires a majority interest in the
markets.
(5) Represents markets in which the Company owns or has the right to acquire a
minority or other noncontrolling interest and which are managed by others.
Some markets were not in operation in 1991.
</TABLE>

The Company's consolidated results of operations include 100% of the revenues
and expenses of the systems serving majority-owned and managed markets plus its
corporate office operations. The December 31, 1993 consolidated results of
operations include 116 markets with a total population of 19.4 million, compared
to 92 markets with a total population of 15.0 million, in 1992 and 67 markets
with a total population of 11.5 million, in 1991.

Investment income includes the Company's share of the net income or loss of the
minority-owned and managed markets and also includes the Company's share of the
net income or loss of those markets managed by others for which the Company
follows the equity method of accounting. USM follows the cost method of
accounting for its remaining interests in markets managed by others. (See Note 3
of Notes to Consolidated Financial Statements.) This information is shown in the
table below.

<TABLE>
<CAPTION>
December 31,
----------------------------------
1993 1992 1991
----------------------------------
<S> <C> <C> <C>
Minority-Owned and Managed 18 18 17
Managed by Others-
Equity Method 15 13 13
----------------------------------

Total Markets Included
in Investment Income 33 31 30
----------------------------------
Managed by Others-
Cost Method 46 51 52
----------------------------------
</TABLE>

Operating results for 1993 primarily reflect improvement in the Company's more
established markets (those 67 markets consolidated at December 31, 1991), a full
year's operations from the 26 markets added to the consolidated group in 1992,
the acquisition of majority interests in 22 operational markets and the start-up
expenses associated with initiating operations in three additional
majority-owned and managed markets during 1993. Operating revenues, driven
primarily by increases in customers served, rose $83.2 million, or 51%.
Operating expenses rose $79.1 million, or 45%. Operating cash flow (operating
loss before minority share plus depreciation and amortization expense) increased
$19.4 million, or 115%.

<PAGE>

Investment and other income decreased $21.0 million due primarily to gains
recognized on the sale or exchange of cellular interests totaling $31.4 million
in 1992 while gains from sales transactions in 1993 totaled $4.9 million.
Investment income increased $4.5 million due to improved results in markets
managed by others. Interest expense increased $13.1 million primarily due to
increased borrowings under a Revolving Credit Agreement with USM's parent
company, Telephone and Data Systems, Inc. ("TDS"). USM used financing from TDS
as a major source of external funding requirements during 1993. Net (loss)
totaled ($25.4 million) in 1993 compared to net income of $6.2 million in 1992,
primarily reflecting the larger gains in 1992 and additional interest expense in
1993, offset somewhat by improved operating results in 1993. On a comparable
basis (net of tax), excluding nonrecurring and unusual items, net loss increased
23% to $30.3 million as compared to $24.6 million during 1992.

The Company expects to add 14 additional markets to consolidated operations by
the end of 1994. The Company currently owns a minority interest in and manages
eight of these markets. The Company expects to acquire a majority interest in
these eight and six additional markets by the end of 1994. Management
anticipates that operating losses from and funding requirements for these
acquired markets and for markets which recently began operations could result in
operating losses for the Company over the next several quarters.

OPERATING REVENUES
OPERATING REVENUES totaled $247.3 million in 1993, up $83.2 million, or 51%,
over 1992. Operating revenues totaled $164.1 million in 1992, up $64.6 million,
or 65%, over 1991. The effect of market acquisitions and start-ups increased
operating revenues $26.2 million, or 16%, in 1993 and $31.7 million, or 32%, in
1992. This effect is defined as: (1) the operations of markets added to the
consolidated group in the current year since their respective dates of
acquisition, plus (2) for any market added to the consolidated group in the
previous year, the portion of current year operations which correspond to that
portion of the previous year prior to the market's addition to the consolidated
group.

SERVICE REVENUES primarily consist of: (i) charges for access, airtime and
value-added services provided to the Company's local retail customers who use
the local systems operated by the Company; (ii) charges to customers of other
systems who use the Company's cellular systems when roaming ("inbound roamer");
(iii) charges for the Company's customers' use of systems other than their local
systems ("pass-through roamer"); and (iv) charges for long-distance calls made
on the Company's systems. Service revenues totaled $236.7 million in 1993, up
$81.9 million, or 53%, over 1992. Service revenues totaled $154.8 million in
1992, up $62.8 million, or 68%, over 1991. These increases were primarily due to
the growing number of local retail customers and the growth in inbound roamer
revenue. The effects of acquisitions increased service revenues $25.2 million,
or 16%, in 1993 and $30.2 million, or 33%, in 1992. Average monthly service
revenue per customer totaled $99 in 1993 compared to $105 in 1992 and $100 in
1991. The 6% decrease in average monthly service revenue per customer in 1993
was primarily a result of the decline in average local minutes of use per retail
customer and a decrease in per customer pass-through roamer revenue. The 5%
increase in average monthly service revenue per customer in 1992 was primarily a
result of the increase in inbound roamer revenue. This increase more than offset
the decrease in local retail revenue due to the decline in average local minutes
of use per retail customer. Management anticipates that average monthly service
revenue per customer will continue to decrease as local minutes of use per
customer decline and as the growth rate of the Company's customer base exceeds
the growth rate of inbound roamer revenue.

REVENUE FROM LOCAL CUSTOMERS' usage of USM's systems increased $40.5 million, or
53%, in 1993 and $26.8 million, or 53%, in 1992. Growth in the number of
customers in the systems serving the Company's consolidated markets was the
primary reason for the increase in local revenue. The number of customers
increased 73% to 261,000 at December 31, 1993 from 150,800 at December 31, 1992.
The number of customers increased 56% in 1992, up from 97,000 at December 31,
1991. Excluding the effects of acquisitions and dispositions, the Company's
consolidated markets added 86,600 customers in 1993. Of these additions, 72,400
were in markets in service and consolidated at December 31, 1992, representing a
48% increase over the 150,800 customers served at December 31, 1992.

<PAGE>

While the percentage increase is expected to be lower in future periods,
management anticipates that the total number of net customer additions will
increase. The effects of acquisitions increased local revenue $8.7 million, or
11%, in 1993 and $10.2 million, or 20%, in 1992.

Average monthly retail revenue per customer declined to $49 in 1993 from $52 in
1992 and $55 in 1991. Monthly local minutes of use per customer averaged 103 in
1993 compared to 121 in 1992 and 130 in 1991. This decline in average local
minutes of use follows an industry-wide trend and is believed to be related to
the tendency of the early customers in a market to be the heaviest users. It
also reflects the Company's and the industry's continued penetration of the
consumer market, which tends to include more lower-usage customers.

INBOUND ROAMER REVENUE increased $31.6 million, or 68%, in 1993 and $24.5
million, or 110%, in 1992. These increases are attributable to increases in the
number of customers from other systems using the Company's systems when roaming.
Also contributing were the increased number of Company-managed systems and cell
sites within those systems. Monthly inbound roamer revenue per customer averaged
$33 in 1993, $32 in 1992 and $24 in 1991. The effects of acquisitions increased
inbound roamer revenue $11.9 million, or 26%, in 1993 and $15.5 million, or 70%,
in 1992.

PASS-THROUGH ROAMER REVENUE increased $5.2 million, or 27%, in 1993 and $7.8
million, or 67%, in 1992. The primary reason for the increases were the growth
in the number of customers in the Company's consolidated markets using systems
other than their local systems. Monthly pass-through roamer revenue per customer
averaged $10 in 1993 and $13 in 1992 and 1991.

LONG-DISTANCE REVENUE increased $4.4 million, or 46%, in 1993 and $4.2 million,
or 77%, in 1992 as the volume of long-distance calls made on the Company's
systems increased. Monthly long-distance revenue per customer averaged $6 in
1993, 1992 and 1991.

EQUIPMENT SALES REVENUES totaled $10.5 million in 1993, up $1.2 million, or 13%,
over 1992. Equipment sales revenues totaled $9.3 million in 1992, up $1.8
million, or 24%, over 1991. Equipment sales reflect the sale of 83,000, 44,400
and 29,400 cellular telephone units in 1993, 1992 and 1991, respectively, plus
installation revenue. The average revenue per unit was $127 in 1993 compared to
$208 in 1992 and $255 in 1991. The average revenue per unit decline partially
reflects the Company's decision to reduce sales prices on cellular telephones to
increase the number of customers, to maintain its market position and to meet
competitive prices as well as to reflect reduced manufacturers' prices. Also,
during the second half of 1993, the Company used specific promotions which were
based on increased equipment discounting. The success of these promotions led
to both an increase in units sold and a decrease in average equipment sales
revenue per unit. The effects of acquisitions increased equipment sales revenues
$1.0 million, or 11%, in 1993 and $1.5 million, or 20%, in 1992.

OPERATING EXPENSES
OPERATING EXPENSES totaled $255.9 million in 1993, up $79.1 million, or 45%,
over 1992. Operating expenses totaled $176.8 million, up $60.5 million, or 52%,
over 1991. The effect of market acquisitions and start-ups increased expenses
$33.6 million, or 19%, in 1993 and $38.1 million, or 33%, in 1992.

SYSTEM OPERATIONS EXPENSES increased $18.9 million, or 39%, in 1993 and $17.6
million, or 57%, in 1992 as a result of increases in customer usage expenses and
costs associated with operating the Company's increased number of cellular
systems and increased number of cell sites within those systems. Costs are
expected to continue to increase as the number of cell sites within these
systems grows. Customer usage expenses represent charges from other
telecommunications service providers for USM's customers' use of their
facilities as well as for the Company's inbound roamer traffic on these
facilities. These expenses include local interconnection to the landline
network, toll charges and roamer expenses from the Company's customers' use of
systems other than their local systems. Customer usage expenses grew $13.5
million, or 36%, in 1993 and $15.7 million, or 72%, in 1992 primarily due to the
increase in roamer expenses. Customer usage expenses represented 22% of service
revenues in 1993 and 24% in 1992 and 1991. Maintenance, utility and cell site
expenses grew $5.4 million, or 49%, in 1993 and $1.9 million, or 22%, in 1992
primarily reflecting increases in the number of

<PAGE>

cell sites in the systems serving all majority-owned and managed markets, from
186 in 1991 to 320 in 1992 to 522 in 1993. The effects of acquisitions increased
system operations expenses $8.6 million, or 18%, in 1993 and $10.2 million, or
33%, in 1992.

MARKETING AND SELLING EXPENSES increased $12.8 million, or 42%, in 1993 and
$12.6 million, or 70%, in 1992. Marketing and selling expenses primarily consist
of salaries, commissions and expenses of field sales personnel, agent
commissions, promotional expenses, local advertising and public relations
expenses. The 1993 increase was primarily due to a 66% rise in the number of
gross customer activations, from 85,400 in 1992 to 141,700 in 1993. Excluding
acquisitions and dispositions, the Company added 86,600 net new customers in
1993 compared to 50,600 in 1992, a 71% increase. The 1992 increase in marketing
and selling expense was primarily due to the increased number of gross customer
activations and the use of various marketing programs which increased
promotional expense. Excluding acquisitions and divestitures, the Company added
49% more net new customers in 1992 compared to 1991. The effects of acquisitions
increased marketing and selling expenses $4.8 million, or 16%, in 1993 and $5.8
million, or 32%, in 1992.

COST OF EQUIPMENT SOLD increased $8.4 million, or 48%, in 1993 and $3.7 million,
or 28%, in 1992. The increase reflects the increased unit sales related to both
the rise in gross customer activations made through the Company's direct sales
channels and the third and fourth quarter 1993 promotional sales which were
discussed previously, offset somewhat by falling manufacturer prices per unit.
The average cost to the Company of a telephone unit sold, including accessories
and installation, was $309 in 1993 compared to $390 in 1992 and $462 in 1991.
The effects of acquisitions increased cost of goods sold $2.6 million, or 15%,
in 1993 and $2.4 million, or 18%, in 1992.

GENERAL AND ADMINISTRATIVE EXPENSES increased $23.6 million, or 47%, in 1993 and
$16.2 million, or 47%, in 1992. These expenses include the cost of operating the
Company's local business offices and its corporate expenses. This increase
includes the effects of an increase in the number of consolidated markets,
increases in expenses required to serve the growing customer base in existing
markets and an expansion of both local office and corporate staff, necessitated
by growth in the Company's business and the start-up and acquisition of
additional operations. The Company is using its clustering concept to combine
local operations wherever feasible in order to reduce its administrative
expenses. The effects of acquisitions increased direct field-related general and
administrative expenses $8.3 million, or 16%, in 1993 and $10.2 million, or 29%,
in 1992.

DEPRECIATION EXPENSE increased $9.1 million, or 55%, in 1993, reflecting an
increase in the average fixed asset balance of 56% since 1992. Depreciation
expense increased $7.8 million, or 88%, in 1992, reflecting an increase in the
average fixed asset balance of 77% since 1991. The effects of acquisitions
increased depreciation expense $3.1 million, or 19%, in 1993 and $4.0 million,
or 46%, in 1992.

AMORTIZATION OF INTANGIBLES increased $6.3 million, or 49%, in 1993 and $2.6
million, or 25%, in 1992, primarily due to increases in license costs as a
result of the acquisitions of or the commencement of service in 25 markets
during 1993 and 26 markets during 1992. License costs related to consolidated
markets increased $310 million, or 63%, in 1993 and $183 million, or 59%, in
1992. Effective January 1, 1992, the Company prospectively changed its
amortization period for license costs from 20 years to 40 years to conform with
industry practices. Amortization expense was reduced by $4.5 million in 1992 due
to this change.

OPERATING LOSS BEFORE MINORITY SHARE
OPERATING LOSS BEFORE MINORITY SHARE totaled $8.7 million in 1993 compared to
$12.7 million in 1992 and $16.8 million in 1991. The operating loss margin
improved to (4%) in 1993 from (8%) in 1992 and (17%) in 1991. The decrease in
the 1993 operating loss reflects improved results in the more established
markets and increased revenues resulting from the growth in the number of
customers served by the Company's systems, partially offset by costs associated
with the growth of the Company's operations, increased losses on equipment sales
and increased system start-up expenses. The decrease in 1992 operating loss
reflects the improved results in the more established markets, growth in the
number of customers served by the Company's systems and the change in the
license cost amortization period, offset somewhat by system start-up expenses,

<PAGE>

increased losses on equipment sales and the costs associated with the growth of
the Company's operations. The effects of acquisitions increased operating loss
$7.3 million, or 58%, in 1993 and $6.4 million, or 38%, in 1992.

The Company expects service revenues to continue to grow during the next few
quarters as it continues to add customers and cell sites to its existing
systems, realizes a full year of revenues from customers and cell sites added in
1993, acquires the operations of existing markets and begins operations in new
markets. Additionally, the Company expects expenses to increase significantly in
the next few quarters as it incurs expenses for markets and cell sites added in
1993, incurs expenses associated with customer and system growth, acquires
existing markets and initiates service in new markets. At least 14 additional
markets are expected to be added to consolidated operations before the end of
1994. Of these, 13 markets (eight of which are currently minority-owned and
managed by the Company) were operational at December 31, 1993. The Company
expects to acquire a majority interest in these markets, and one nonoperational
market, before the end of 1994. Upon the commencement of operations in the new
markets and upon completion of any related acquisitions, the Company will begin
to amortize the related license costs. The Company expects that the costs
related to acquiring, constructing and operating its markets may exceed revenues
over the next few quarters. As a result, operating losses before minority share
could be generated over the next few quarters.

INVESTMENT AND OTHER INCOME
INVESTMENT AND OTHER INCOME totaled $22.6 million in 1993, $43.6 million in
1992 and $10.4 million in 1991. Investment income was $16.9 million in 1993
compared to $12.5 million in 1992 and $8.0 million in 1991. The Company's
share of the income or loss from the markets managed by others that are
accounted for by the equity method totaled $16.8 million in 1993 compared to
$13.0 million in 1992 and $9.7 million in 1991. There were 15 such markets in
1993 compared to 13 in 1992 and 1991. The Company's share of income from
minority-owned markets it manages totaled $143,000 in 1993 compared to losses
of $499,000 in 1992 and $1.7 million in 1991. There were 18 such markets
in 1993 and 1992 and 17 in 1991.

INTEREST INCOME was $2.7 million in 1993 compared to $3.2 million in 1992 and
1991. The $529,000, or 17%, decline in 1993 reflects primarily decreased loans
to unconsolidated subsidiaries and lower interest rates in 1993.

OTHER (EXPENSE), NET was $915,000 in 1993, $2.8 million in 1992 and $224,000 in
1991. In 1993, other (expense), net was reduced by both the sale of the
Company's customer base in its reseller operation and income recognized related
to the settlements of disputes concerning two of the Company's markets. Income
related to these transactions totaled $495,000 and $925,000, respectively. Also
in 1993, other (expense), net was increased by the writeoff of equipment no
longer used which totaled $677,000. In 1992, $1.3 million of costs applicable to
unsuccessful license applications and acquisitions were charged to expense.

GAIN ON SALE OF CELLULAR INTERESTS of $4.9 million in 1993 reflects the sale of
two cellular minority interests. In 1992, the $31.4 million gain includes a
$17.1 million gain from the completion of a sale to another company in which the
Company divested its 100% interest in a market it managed, an $11.4 million gain
on the exchange of cellular interests with another cellular company and a $2.9
million gain from the sale of an additional minority interest. (See "Financial
Resources and Liquidity" and Note 12 of the Notes to Consolidated Financial
Statements.) In 1991, the $557,000 gain reflects the sale of two cellular
minority interests.

INTEREST AND INCOME TAXES
INTEREST EXPENSE increased $13.1 million, or 65%, in 1993 and $3.7 million, or
22%, in 1992, on 66% and 72% increases, respectively, in the average amount of
debt outstanding. Interest expense is primarily related to borrowings under
the Revolving Credit Agreement with TDS and borrowings under a vendor financing
agreement. Borrowings under the Revolving Credit Agreement bear interest at a
floating rate equal to prime plus 1.5% (for a rate of 7.5% at December 31, 1993)
and are used to finance the acquisitions of cellular interests, system
construction and losses related to system development, and investments in and
advances to entities in which the Company has a minority interest. Interest
expense relating to the Revolving Credit Agreement was $29.1 million in 1993,
$16.8 million in 1992 and $14.6 million in 1991. The average amount of debt
outstanding under the Revolving Credit Agreement was $372.8 million in 1993,
$216.0 million in 1992 and $138.6 million in 1991. The average interest rate
on such debt was 7.5% in 1993, 7.8% in 1992 and 10.0% in 1991.

Most of the borrowings under the vendor financing agreement bear interest at a
rate of 2.3% over the 90-day Commercial Paper Rate of high-grade, unsecured
notes (for a rate of 5.6% at December 31, 1993). The remainder of the borrowings
bear interest at a rate approximating the prime rate (6.0% at December 31,
1993). Borrowings under the vendor financing agreement were used to finance
certain of USM's equipment purchases and construction costs. Interest expense
related to the vendor financing agreement was approximately $4.0 million in
1993, $3.1 million in 1992 and $1.4 million in 1991. The average amount of debt
under the vendor financing agreement was $66.4 million in 1993, $48.8 million in
1992 and $15.4 million in 1991. The average interest rate on such debt was 5.7%
in 1993, 6.2% in 1992 and 7.7% in 1991.

<PAGE>

The completion of pending acquisitions, continued capital expenditures,
operating losses and investments in and advances to entities in which the
Company has a minority interest will require additional funding over the next
few years. These funding requirements are anticipated to be at least partially
met through additional debt, which will likely result in increased interest
expense as debt balances increase. Additional borrowings also may be required to
fund additional future acquisitions and their construction and operations. See
"Financial Resources and Liquidity."

The Company completed a rights offering to its common shareholders on November
15, 1993, which resulted in the reduction of approximately $378 million in debt
outstanding under the Revolving Credit Agreement. See "Financial Resources and
Liquidity."

INCOME TAX EXPENSE was $2.7 million in 1993, $2.0 million in 1992 and $16,000 in
1991. Income tax expense includes the federal taxes of a consolidated subsidiary
not included in the TDS consolidated federal income tax return. State income tax
expense in 1993 was primarily related to subsidiaries generating taxable income
after utilization of state net operating losses. The 1992 income tax expense
resulted primarily from state income taxes generated by the gains on the sale
and exchange of cellular interests completed in the first half of 1992. No such
taxes were generated by the 1993 or 1991 gains. The Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
effective January 1, 1993. The cumulative effect of the new principle on years
prior to 1993 had an immaterial effect on net loss and loss per share. Income
tax expense for 1993 reflects the new accounting principle. Income tax expense
amounts for 1992 and 1991 have not been restated.

USM is included in a consolidated federal income tax return with other members
of the TDS consolidated group. TDS and USM are parties to a Tax Allocation
Agreement under which USM is able to carry forward its losses and credits and
use them to offset any current or future income tax liabilities to TDS. The
amount of the federal net operating loss carryforward available to offset future
taxable income aggregated approximately $148.2 million at December 31, 1993, and
expires between 2002 and 2008.

The amount of the state net operating loss carryforward available to offset
future taxable income aggregated approximately $197.1 million at December 31,
1993, and expires between 1998 and 2008.

NET (LOSS) INCOME
NET (LOSS) INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
totaled ($25.4 million) in 1993 compared to $6.2 million in 1992 and ($24.4
million) in 1991. The 1993 net loss resulted from improved operating results in
the established markets, increased investment income and the $4.9 million gain
on the sale of cellular interests, offset by increased interest expense and the
effects of the addition of new markets. The 1992 net income reflects the $31.4
million gain on the sale or exchange of cellular interests and improved
operating results offset by increased interest and income tax expense.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE reflects the ($10.3
million) effect on years prior to 1991 of the change in the Company's and two of
its equity-method investees' method of accounting for sales commissions. NET
(LOSS) INCOME totaled ($25.4 million) in 1993, $6.2 million in 1992 and ($34.6
million) in 1991. On a comparable basis (net of tax), excluding nonrecurring and
unusual items, net loss increased 23% to $30.3 million in 1993 and decreased 1%
to $24.6 million in 1992.

NET (LOSS) INCOME PER SHARE BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE was ($.45) in 1993 compared to $.11 in 1992 and ($.63) in 1991. The
weighted average number of Common and Series A Common Shares outstanding for
1993 decreased 1% over the shares outstanding for 1992 primarily as a result of
Common Shares issued in connection with acquisitions and the 1993 rights
offering offset by the addition of dilutive common stock equivalents in 1992 as
a result of the 1992 net income. The weighted average number of Common and
Series A Common Shares outstanding for 1992 increased 49% over the shares
outstanding for 1991 primarily as a result of the addition of dilutive common
stock equivalents, Common Shares issued in connection with acquisitions and a
1991 public offering and related debt conversion. CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE PER SHARE was ($.26) in 1991. NET (LOSS) INCOME PER
SHARE was ($.45) in 1993, $.11 in 1992 and ($.89) in 1991, primarily reflecting
improved operating results in 1993, the gain on the sale or exchange of cellular
interests in 1992, the cumulative effect of the change in accounting principle
in 1991 and the increase in weighted average shares outstanding. On a comparable
basis (net of tax), excluding nonrecurring and unusual items, net (loss) per
share rose 8% to ($.53) in 1993 and declined 9% to ($.49) in 1992.

<PAGE>

controlled over 95% of the combined voting power of both classes of its common
stock. In the event TDS's ownership of the Company falls below 80% of the total
value of all of the outstanding shares of the Company's stock, TDS and the
Company would be deconsolidated for federal income tax purposes. TDS and the
Company have the ability to defer or prevent deconsolidation, if deferring or
preventing deconsolidation would be advantageous, by delivering TDS Common
Shares and/or cash, in lieu of the Company's Common Shares in connection with
certain acquisitions.

INFLATION
Management believes that inflation affects the Company's business to no greater
extent than the general economy.

ACCOUNTING FOR POSTEMPLOYMENT BENEFITS
The Financial Accounting Standards Board ("FASB") issued SFAS No. 112,
"Employers' Accounting for Postemployment Benefits" which requires employers to
recognize the obligation to provide benefits to former or inactive employees
after employment but before retirement. Based on a study of the provisions of
SFAS No. 112, the Company has determined that it should not have a material
impact on results of operations or financial condition.

ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES
The FASB issued SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," in May 1993, which becomes effective in January 1994. SFAS
No. 115 addresses the accounting and reporting for investments in equity
securities that have readily determinable fair values and for all investments
in debt securities. Those investments are to be classified in one of three
categories; a) held-to-maturity securities, reported at amortized cost;
b) trading securities, reported at fair value; and c) available-for-sale
securities, reported at fair value with unrealized gains and losses excluded
from earnings and reported in a separate component of shareholders' equity.
Based on a review of the provisions of SFAS No. 115, management believes that
implementation will not have a material effect on results of operations or
financial condition.

FINANCIAL RESOURCES AND LIQUIDITY

The Company operates a capital- and marketing-intensive business. Rapid growth
in markets operated by the Company and customers served has caused financing
requirements for acquisitions, construction and operations to exceed internally
generated cash flow. The Company requires capital to complete acquisitions in
process; to fund construction and operating expenses of the cellular systems it
operates; to fund investments in minority partnership interests in other
cellular markets; and to pay principal and interest on its outstanding debt.
Management anticipates that each new cellular market the Company acquires and
places in service will require significant capital expenditures and will incur
substantial losses during its initial operating stage. The Company has
experienced operating losses and net losses in all but a few quarters since its
inception. The Company has obtained substantial funds from external sources
during the past several years.

CASH FLOWS FROM OPERATING ACTIVITIES provided $35.3 million in 1993 and $3.5
million in 1992 and required $18.9 million in 1991. Operating cash flow
(operating loss before minority share plus depreciation and amortization
expense) provided cash totaling $36.4 million in 1993, $16.9 million in 1992 and
$2.4 million in 1991. The 1993 increase in operating cash flow primarily
reflects improvement in the more mature markets. The effects of acquisitions
increased operating cash flow $1.8 million, or 11%, in 1993 and $3.2 million, or
130%, in 1992. The 1992 increase reflects improvement in the more mature
markets. Cash flows from other operating activities (investment and other
income, interest expense, changes in working capital and changes in other assets
and liabilities) required cash investments totaling $1.1 million in 1993, $13.4
million in 1992 and $21.3 million in 1991.

CASH FLOWS FROM FINANCING ACTIVITIES provided $65.4 million in 1993, $57.5
million in 1992 and $106.2 million in 1991. Cash flows from financing activities
include cash flows from borrowings under the Revolving Credit Agreement with TDS
and vendor financing transactions and sales of Common Shares. Borrowings under
the Revolving Credit Agreement with TDS totaling $45.4 million provided a
majority of the Company's external financing requirements in 1993. The sale of
Common Shares to parties other than TDS in connection with the rights offering
pro-

<PAGE>

vided an additional $36.8 million of the Company's external financing
requirements. In connection with the rights offering, debt to TDS under the
Revolving Credit Agreement was reduced by $340.7 million upon the issuance to
TDS of 4.8 million Common Shares and 5.5 million Series A Common Shares.
Borrowings under the vendor financing arrangement totaling $36.6 million
provided a majority of the Company's external financing requirements in 1992.
Increases in the amount outstanding under the Revolving Credit Agreement also
provided $22.2 million of external financing in 1992. Increases in the amount
outstanding under the Revolving Credit Agreement of $49.3 million and the sale
of 2.0 million Common Shares to the public at $18 per share provided most of the
Company's external financing requirements during 1991. Proceeds to the Company,
after the underwriting discount, amounted to $34.4 million. In connection with
the 1991 public offering, the Company converted $110 million of notes payable
under the Revolving Credit Agreement and Demand Notes with TDS into 6.1 million
Common Shares.

CASH FLOWS FROM INVESTING ACTIVITIES required cash totaling $98.6 million in
1993, $69.6 million in 1992 and $84.1 million in 1991. Such cash requirements
primarily consisted of cash additions to property, plant and equipment and cash
requirements for acquisitions and for investments in cellular markets. Cash
expenditures for property, plant and equipment totaled $91.5 million in 1993 (of
which $6.6 million relates to 1992 additions), representing the construction of
138 cell sites and other plant additions. Cash expenditures for property, plant
and equipment totaled $56.1 million in 1992 (of which $2.8 million relates to
1991 additions), representing the construction of 107 cell sites and other plant
additions. Cash expenditures for property, plant and equipment totaled $59.5
million in 1991 (of which $3.1 million relates to 1990 additions), representing
the construction of 67 cell sites and other plant additions.

Anticipated capital requirements for 1994 reflect the Company's construction and
system expansion program, funding of anticipated operating losses and working
capital needs, investments in entities in which the Company has a minority
interest, scheduled debt repayments and pending acquisitions. The Company's
consolidated construction budget for 1994 is approximately $160 million,
including anticipated expenditures for both enhancements to existing systems and
construction of new systems. Planned expenditures for enhancements of existing
majority-owned cellular systems, including additional radio channel capacity as
well as new cell sites, total about $140 million. Anticipated expenditures for
construction of switching offices and digital expansion total $7 million.
Investments in partnerships, primarily in minority-owned and managed markets,
are expected to total $5 million in 1994.

The Company is expanding its operations through acquisitions. During 1993, the
Company completed the acquisition of controlling interests in 25 markets and
several additional minority interests. During 1992, the Company completed the
acquisition of controlling interests in 16 markets and several additional
minority interests. During 1991, the Company completed the acquisition of
controlling interests in 41 markets and several additional minority interests.
Some of the markets acquired during 1993, 1992 and 1991 were subject to
acquisition agreements which were entered into prior to the year in which
acquisitions were completed. The following table summarizes the consideration
issued for these acquisitions.

COMPLETED ACQUISITIONS
Year Ended December 31,
------------------------------------
1993 1992 1991
------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
Pops Acquired 3.8 3.0 5.8
Total Consideration $284.6 $161.3 $271.1
Details of Total
Consideration:
USM Common Shares
Shares Issued 5.7 3.3 3.4
Recorded Cost $155.0 $ 58.3 $ 29.3
USM Series A Common Shares
Shares Issued .1 .9 4.6
Recorded Cost $ .1 $ .3 $ 5.3
USM Preferred Stock
Shares Issued -- -- .2
Recorded Cost $ -- $ -- $ 19.7
USM Common Shares
to be issued in the future
(mostly in 1994)
Shares Issuable .1 .8 5.2
Recorded Cost $ 3.0 $ 16.7 $109.9
Demand Notes - TDS -- -- 56.9
Revolving Credit
Agreement - TDS 101.5 70.7 38.6
Accounts Payable - TDS -- -- 1.9
Subsidiary Preferred Stock 2.9 -- --
Cash 12.7 8.4 7.9
Long-Term Debt -- -- .9
Equity Contribution
from TDS $ 9.4 $ 6.9 $ .7
------------------------------------
</TABLE>

Of the 1993 consideration, the debt under the Revolving Credit Agreement and 5.5
million of the USM Common Shares were issued to TDS to reimburse TDS for TDS
Common Shares issued and cash paid to third parties in connection with 1993
acquisitions. Of the 1992 consideration, the debt under the Revolving Credit
Agreement and 2.8 million of the USM Common Shares were issued to TDS to
reimburse TDS for TDS Common and Series A Common Shares issued and cash paid to
third parties in connection with 1992 acquisitions. Of the 1991 consideration,
the Demand Notes, the debt under the Revolving Credit Agreement, the accounts
payable, the shares of Preferred Stock and 1.2 million of the USM Common Shares
were issued to TDS to reimburse TDS for TDS Common Shares

<PAGE>

and shares of TDS Preferred Stock issued and cash paid to third parties in
connection with 1991 acquisitions. Additionally, the Company had commitments to
issue 5.0 million Common Shares in 1994 through 1996 related to certain
completed acquisitions. The Company and TDS have the option to deliver TDS
Common Shares and/or cash in lieu of the Company's Common Shares in connection
with certain of these acquisitions. In January, 1994, 3.9 million Common Shares
were issued to third parties in connection with these commitments.

Included in the acquisitions in the table are the transfers of interests in one
market from TDS in 1993, five in 1992 and 25 in 1991, representing 35,000,
508,000 and 1.8 million population equivalents, respectively. The 1993 transfer
was completed by the issuance of 31,000 USM Common Shares and 75,000 USM Series
A Common Shares. The 1992 transfer was completed by the issuance of 742,000 USM
Common Shares and 924,000 USM Series A Common Shares. The 1991 transfer was
completed by the issuance of 1.9 million USM Common Shares and 4.6 million USM
Series A Common Shares. The USM Common and Series A Common Shares were recorded
at TDS's book value of the market transferred, rather than the fair market value
of the shares, due to the intercompany nature of the transaction.

In addition to the acquisitions in the table, in 1992 the Company completed the
exchange of cellular interests involving the acquisition by USM of controlling
interests in two markets and the remaining minority interest in a market managed
by USM. In exchange for these interests, USM transferred its 100% interest in
two markets, its minority interest in two markets and $2.9 million in cash.

The Company has an ongoing acquisition program, the funding requirements of
which may be substantial. The Company maintains an ongoing acquisition program
to seek to maximize its future potential, including seeking opportunities to
combine operations and achieve increased economies of scale. These economies of
scale include the sharing of market personnel, equipment and office resources.
The Company plans to continue its acquisition program as long as it is feasible
to acquire cellular interests that fit into its business objectives.

At December 31, 1993, the Company, or TDS for the benefit of the Company, had
entered into agreements to acquire controlling interests in nine markets and a
minority interest. The following table summarizes the consideration to be issued
by USM for these acquisitions if they are completed as planned.

PENDING ACQUISITIONS
<TABLE>
<CAPTION>

December 31, 1993
-----------------
(in millions)
<S> <C>
Pops to be Acquired 1.2
Estimated Consideration to be Paid $128.4
Details of Consideration:
USM Common Shares
Shares to be Issued 3.7
Estimated Cost at Agreement Date $122.8
Revolving Credit Agreement - TDS .4
Cash 4.5
Equity Contribution from TDS $ .7
</TABLE>

Cellular interests acquired by TDS in these transactions are expected to be
assigned to the Company and at the time this occurs the Company will reimburse
TDS for TDS's consideration delivered and costs incurred in such acquisitions.
Of the consideration for these pending acquisitions, the debt under the
Revolving Credit Agreement and 3.7 million of the USM Common Shares are to be
issued to TDS to reimburse TDS for TDS Common Shares to be issued and cash to be
paid to third parties in connection with these pending acquisitions. Most of the
3.7 million Common Shares to be issued in connection with pending acquisitions
are expected to be issued in 1994.

In addition to the agreements above, the Company has agreements to acquire
interests representing 302,000 population equivalents in three markets. The
consideration for these acquisitions will be determined based on future
appraisals of the fair market values of the interests to be acquired.

TDS and USM are parties to a legal proceeding before the Federal Communications
Commission ("FCC") involving its cellular license in a Wisconsin Rural Service
Area. Pending the resolution of the issues in the Wisconsin proceeding, further
FCC grants to TDS and its subsidiaries will be conditioned on the outcome of
that proceeding. TDS's and USM's ability to sell or exchange properties with
third parties while such proceeding is pending may be affected.

<PAGE>

See Note 15 of Notes to Consolidated Financial Statements, Legal Proceedings (La
Star Application), for a discussion of the proceeding involving the Wisconsin
Rural Service Area.

LIQUIDITY
The Company anticipates that the aggregate resources required for 1994 will
include approximately: (i) $160 million for capital spending; (ii) $5 million
for investments in cellular partnerships; (iii) $4 million for cash
acquisitions; and (iv) $12 million of scheduled debt repayments. Additionally,
the Company anticipates it will reimburse TDS, as each acquisition is completed,
for TDS Common Shares valued at approximately $121 million to be issued and $1
million in cash to be paid by TDS to third parties in connection with
acquisitions anticipated to be primarily completed by the end of 1994. The
reimbursement to TDS is expected to be in the form of 3.7 million Common Shares
of the Company. Not included in the above amounts are acquisitions that may be
signed in 1994. These potential acquisitions may require substantial funding for
both their acquisition and operation during 1994.

At December 31, 1993, the Company had $6 million of cash and cash equivalents,
$108 million remaining under the $250 million Revolving Credit Agreement with
TDS as amended effective November 15, 1993, and $6 million of anticipated
minority partner capital contributions. Additionally, the Company anticipates
generating an increasing amount of positive cash flows from operating activities
during 1994.

Pursuant to the Revolving Credit Agreement, the Company may borrow up to an
aggregate of $250 million from TDS, at an interest rate equal to 1.5% above the
prime rate. The advances made by TDS under the Revolving Credit Agreement are
unsecured. Interest on the balance due under the Revolving Credit Agreement is
payable quarterly and no principal is payable until March 31, 1996, subject to
acceleration under certain circumstances, at which time the entire principal
balance then outstanding is scheduled to become due and payable. The Company may
prepay the balance due under the Revolving Credit Agreement at any time, in
whole or in part, without premium.

The Company initiated a rights offering to holders of its common stock which
commenced on October 25, 1993. Pursuant to this rights offering, common
stockholders received one right for every five shares owned on October 22, 1993.
Each right enabled the holder to purchase one additional share of common stock
at the exercise price of $33.00 per share, which was a 10% discount from the
market price of the Company's Common Shares on October 22, 1993. TDS agreed to
purchase any unsubscribed shares at the exercise price. The rights offering
concluded on November 15, 1993, and shortly after that date the Company reduced
its debt to TDS under the Revolving Credit Agreement with the cash proceeds of
the rights offering, which totaled approximately $37 million. Pursuant to the
rights offering, TDS purchased additional common stock with a value of $341
million by reducing the amount the Company owes TDS under the Revolving Credit
Agreement.

The Company anticipates requiring substantial funding to acquire cellular
markets and build and operate cellular systems during 1994. The timing and
amount of such funding requirements will depend on the timing of the completion
of pending acquisitions, the number of additional licenses acquired by the
Company, the construction and operational plans for the individual cellular
projects, and other relevant factors. The Company will need to raise additional
capital to meet these requirements. These additional requirements may be met
through additional borrowings from TDS, the issuance of equity or debt
securities or a combination thereof, vendor financing, bank financing, or the
sale of assets. There can be no assurance that sufficient funds will be made
available to the Company on terms or at prices acceptable to the Company. If
sufficient funding is not made available to the Company on terms and prices
acceptable to the Company, the Company would have to reduce its construction,
development and acquisition programs. In the long term, reduction of the
Company's construction, development and acquisition programs would have a
negative impact on the ability of the Company to increase its consolidated
revenues and cash flows.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

United States Cellular Corporation (the "Company" or "USM"), is an 85.1%-owned
subsidiary of Telephone and Data Systems, Inc. ("TDS").

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of USM, its
majority-owned subsidiaries and partnerships in which USM manages the system and
has a majority partnership interest. There were 116 consolidated entities in
1993, 92 in 1992 and 67 in 1991. All material intercompany accounts and
transactions have been eliminated.

REVENUES
Revenues from operations primarily consist of charges to customers for monthly
access, cellular airtime usage, roamer charges, toll charges and vertical
services. Revenues are recognized as services are rendered. Unbilled revenues,
resulting from cellular service provided from the billing cycle date to the end
of each month and from other cellular carriers' customers using USM's cellular
systems for the last half of each month, are estimated and recorded. Equipment
sales are recognized upon delivery to the customer and reflect charges to
customers for cellular telephone equipment purchased.

EARNINGS PER SHARE
Net (Loss) per Common and Series A Common Share for the years ended December 31,
1993 and 1991 was computed by dividing Net (Loss) by the weighted average number
of Common Shares and Series A Common Shares outstanding during the year.

Net Income per Common and Series A Common Share for the year ended December 31,
1992 was computed by dividing Net Income by the weighted average number of
Common Shares, Series A Common Shares and dilutive common equivalent shares
outstanding during the year. Dilutive common stock equivalents consist of
Common Shares issuable upon conversion of preferred stock, Common Shares
issuable in the future to third parties in connection with completed
acquisitions and Common Share options and stock appreciation rights.

Pro forma Net (Loss) for the year ended December 31, 1993 would have been
reduced by $25.1 million for the interest expense eliminated by the pro forma
retirement, as of January 1, 1993, of the amount outstanding under the Revolving
Credit Agreement-TDS through the conversion of 4.8 million Common Shares and 5.5
million Series A Common Shares purchased by TDS in connection with the November
1993 rights offering ("Rights Offering") ($340.7 million) and the application of
the proceeds from the sale of 1.1 million Common Shares to parties other than
TDS in connection with the Rights Offering ($36.8 million). Pro forma (Loss) per
Common Share would have been reduced by $.45 to zero for the year ended December
31, 1993 had the debt under the Revolving Credit Agreement been retired as of
January 1, 1993, by the conversion of the Revolving Credit Agreement into Common
Shares and from the proceeds of the Rights Offering.

Pro forma Net (Loss) for the year ended December 31, 1991, would have been
reduced by $8.2 million for the interest expense eliminated by the pro forma
retirement, as of January 1, 1991, of the Demand Notes and the Revolving Credit
Agreement-TDS through the conversion of $110 million of the amount outstanding
under the Demand Notes and the Revolving Credit Agreement into approximately 6.1
million Common Shares, through the sale of 2.0 million Common Shares of the
Company's June 1991 public offering and the sale of 368,000 Common Shares to
Coditel Brabant, S. A. ("Coditel") pursuant to a Common Stock Purchase Agreement
at the public offering price of $18.00 per share. Pro forma (Loss) per Common
Share would have been ($.38) for the year ended December 31, 1991, had $150.7
million of Demand Notes and debt under the Revolving Credit Agreement at June
1991 been retired as of January 1, 1991, by the conversion of the Demand Notes
and Revolving Credit Agreement into Common Shares, and from the proceeds of the
public offering and the sale to Coditel.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the plant assets.
The provision for depreciation as a percentage of average depreciable property,
plant and equipment was 10.5% in 1993, 10.5% in 1992 and 10.4% in 1991.

<PAGE>

Property, plant and equipment in service consists of:

December 31,
-------------------------
1993 1992
-------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land $ 19,016 $ 11,946
Operating plant and
equipment 234,310 148,603
Office furniture and
equipment 18,014 11,517
Vehicles 2,179 1,331
Buildings and leasehold
improvements 32,599 20,284
-------------------------
$306,118 $193,681
-------------------------
-------------------------

</TABLE>

See Note 13 Lease Commitments for a discussion of property leased by USM.

NOTES AND INTEREST RECEIVABLE
Notes and interest receivable reflect primarily loans to other partners for
capital calls paid on their behalf. The carrying amount reported in the balance
sheet for notes and interest receivable approximates their fair value.

CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and those short-term, highly-liquid
investments with original maturities of three months or less. The carrying
amount reported in the balance sheet for cash and cash equivalents approximates
its fair value.

ACCOUNTS RECEIVABLE
Accounts receivable consists of amounts owed by customers for both service
provided and equipment sales, by other cellular carriers whose customers have
used USM's cellular systems, by affiliated entities and by other partners for
capital contributions and distributions.

INVENTORY
Inventory is stated at the lower of cost or market with cost determined on a
specific identification basis.

DEFERRED CHARGES
Deferred start-up costs represent expenses incurred prior to the commencement of
service in each individual market. These costs are capitalized and, upon
commencement of operations, amortized over five years. Deferred start-up costs
include expenses related to constructing the systems and expenses incurred in
preparing to market cellular service.

Other deferred charges primarily represent costs incurred for the development of
new systems and legal and other charges incurred relating to the preparation of
vendor financing agreements. Capitalized costs of systems development are
amortized over a five year period starting when the new system is placed in
service. When vendor financing is finalized for an entity, deferred charges
recorded on that entity's books are amortized over the financing period.

CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1991, USM changed its method of accounting for sales
commissions from capitalizing and amortizing these costs over 36 months to
expensing as incurred. Also in 1991, two of USM's equity-method investees made a
similar change.

The ($10.3 million) cumulative effect of both USM's and its equity-method
investees' changes on prior years is included in income for the year ended
December 31, 1991. The effect of the changes in 1991 was to increase net (loss)
and (loss) per share before the cumulative effect of a change in accounting
principle by $846,000 and $.02, respectively, and to increase net (loss) and
(loss) per share by $11.1 million and $.28, respectively.

For a discussion of the change in accounting for income taxes, see Note 10
Income Taxes.

<PAGE>

SUPPLEMENTAL CASH FLOW DISCLOSURES
USM acquired certain cellular licenses and interests during 1993, 1992 and 1991.
In conjunction with these acquisitions, the following assets were acquired,
liabilities assumed, Common Shares and shares of Redeemable Preferred Stock
issued and equity contributions made by TDS.

Year Ended December 31,
-----------------------------------
1993 1992 1991
-----------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Property, plant
and equipment, net $ 23,767 $ 14,154 $ 15,041
Cellular licenses 284,736 159,308 266,530
(Decrease) in
equity-method
investment in
cellular interests (13,069) (5,885) (2,591)
Accounts receivable 2,689 2,127 1,058
Long-term debt (12,094) -- (1,477)
Demand Notes-TDS -- -- (56,947)
Revolving Credit
Agreement-TDS (101,507) (73,226) (40,472)
Accounts payable (3,005) (3,153) (10,217)
Other assets and
liabilities, excluding
cash acquired (4,069) 825 808
Common Shares
issued and
issuable (158,059) (76,395) (144,486)
Preferred Stock
issued to TDS -- -- (19,690)
Equity contributions
from TDS (9,425) (6,625) (427)
-----------------------------------
Decrease in cash due
to acquisitions $ 9,964 $ 11,130 $ 7,130
-----------------------------------
-----------------------------------

</TABLE>

Following are supplemental cash flow disclosures regarding interest and income
taxes paid and other noncash transactions.

Year Ended December 31,
-----------------------------------
1993 1992 1991
-----------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest paid $ 3,007 $ 901 $ 1,800
Income taxes paid 2,237 1,406 13
-----------------------------------
-----------------------------------
Depreciation and
amortization expense:
Depreciation $25,665 $16,606 $8,814
Amortization
- License 18,189 11,445 9,992
- Deferred start-up 1,817 1,980 1,461
- Other 273 205 139
-----------------------------------
Total depreciation
and amortization
expense $45,944 $30,236 $20,406
-----------------------------------
-----------------------------------

</TABLE>

During 1993, USM converted $340.7 million of debt under the Revolving Credit
Agreement into equity through the issuance of approximately 4.8 million Common
Shares and 5.5 million Series A Common Shares to TDS in connection with the
Rights Offering.

During 1993, USM recorded $40.3 million of additional borrowings under the
Revolving Credit Agreement as reimbursement to TDS for TDS Common Shares issued
and issuable in lieu of 1.7 million USM Common Shares that were to be issued in
1994 through 1996 in connection with completed acquisitions.

USM converted accrued interest into debt under the Revolving Credit Agreement of
approximately $28.2 million in 1993, $15.9 million in 1992 and $11.9 million in
1991. Approximately $6.6 million, $2.8 million and $2.6 million of additions to
property, plant and equipment were financed through Accounts Payable-Other in
1993, 1992 and 1991, respectively.

During 1992, USM recorded a gain on the exchange of its minority interests in
two Metropolitan Statistical Areas ("MSAs") which is not included in the table
above. See Note 12 Gain on Sale of Cellular Interests for a discussion of the
effects of the exchange.

During 1991, USM converted $110 million of Demand Notes and debt under the
Revolving Credit Agreement into equity through the issuance of approximately 6.1
million USM Common Shares to TDS.

2. ACQUISITIONS

USM has acquired cellular interests for cash, promissory notes, USM and TDS
Common Shares, and shares of TDS Preferred Stock.

TDS made capital contributions totaling $9.4 million in 1993 and $7.5 million in
1992 pursuant to TDS's agreement to fund certain cellular license investments
made by USM.

INFORMATION WITH RESPECT TO RSA TRANSFERS
USM entered into two agreements during 1990 to acquire from TDS certain rights,
held directly and indirectly by TDS, in construction permits, licenses and
licensees for 51 Rural Service Areas ("RSAs"). USM agreed to issue an aggregate
of 10.15 million shares of common stock to TDS, consisting of 3.05 million
Common Shares and 7.10 million Series A Common Shares.

<PAGE>

In 1993, one RSA Interest was transferred to USM for which USM delivered 31,281
Common Shares and 75,002 Series A Common Shares to TDS. In 1992, four RSA
Interests were transferred to USM for which USM delivered 385,206 Common Shares
and 923,588 Series A Common Shares to TDS.

INFORMATION WITH RESPECT TO ACQUISITIONS
COMPLETED ACQUISITIONS. In addition to the RSA transferred from TDS during 1993,
USM completed the acquisition of controlling interests in 25 markets and several
minority interests representing approximately 3.8 million population equivalents
for a total consideration of $284.5 million as shown in the following table.

Consideration
-------------
(MILLIONS)
<S> <C>
5.5 million Common Shares to TDS (1) $ 150.3
157,000 Common Shares issued to third parties 4.7
140,000 Common Shares Issuable to
third parties in the future 3.0
Increase in Revolving Credit Agreement(1) 101.5
Equity contribution from TDS 9.4
Subsidiary Preferred Stock 2.9
Cash 12.7
-------------
Total $ 284.5
-------------
-------------

<FN>

(1) ISSUED TO REIMBURSE TDS FOR TDS SECURITIES AND CASH PAID TO THIRD PARTIES IN
CONNECTION WITH THE ACQUISITIONS.

</TABLE>

In addition to the RSAs transferred from TDS during 1992, USM completed the
acquisition of controlling interests in 13 markets and several minority
interests representing approximately 2.6 million population equivalents for a
total consideration of $160.9 million as shown in the following table.

Consideration
-------------
(MILLIONS)
<S> <C>
2.8 million Common Shares to TDS (1) $ 55.4
130,000 Common Shares issued to third parties 2.8
778,000 Common Shares Issuable to
third parties in the future 16.7
Increase in Revolving Credit Agreement (1) 70.7
Equity contribution from TDS 6.9
Cash 8.4
-------------
Total $ 160.9
-------------
-------------

<FN>

(1) ISSUED TO REIMBURSE TDS FOR TDS SECURITIES AND CASH PAID TO THIRD PARTIES IN
CONNECTION WITH THE ACQUISITIONS.

</TABLE>

Assuming that the 1993 and 1992 acquisitions discussed above, which were
accounted for as purchases, had taken place on January 1, 1992, unaudited pro
forma results of operations would have been as follows:

Year Ended December 31,
------------------------
1993 1992
------------------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Service Revenues $ 247,412 $ 179,880
Equipment Sales 11,324 10,877
Interest Expense
(including cost to
finance acquisitions) 34,036 30,861
Net (Loss) (34,772) (23,053)
(Loss) per
Common Share $ (.58) $ (.35)
------------------------
------------------------

</TABLE>

PENDING ACQUISITIONS. At December 31, 1993, the Company, or TDS for the benefit
of the Company, had entered into agreements to acquire controlling interests in
nine markets and a minority interest representing approximately 1.2 million
population equivalents for an aggregate consideration estimated to be
approximately $128.4 million. If all of the pending acquisitions are completed
as planned, the Company will issue approximately 49,000 of its Common Shares and
pay approximately $4.5 million in cash. TDS will pay approximately $123.0
million in cash and TDS Common Shares. Any cellular interests acquired by TDS in
these transactions will be assigned to the Company and the Company will
reimburse TDS for TDS's consideration delivered and costs incurred in such
acquisitions in the form of Common Shares of the Company and notes payable.

3. INVESTMENTS IN CELLULAR PARTNERSHIPS

Investments in cellular partnerships consist of amounts invested in cellular
entities in which USM holds a minority or noncontrolling interest. Investments
in cellular partnerships consist of

<PAGE>

long-term investments and investments held for sale or exchange, as follows:

December 31,
------------------------
1993 1992
------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term Investments:
Capital contributions,
loans and advances $ 66,515 $ 67,941
Cumulative share of
partnership income 52,296 32,994
Cumulative share of
partnership distributions (41,633) (29,934)
------------------------
77,178 71,001
Investments Held for
Sale or Exchange:
Capital contributions, net
of partnership distributions 12,926 15,405
------------------------
Total investment in
nonconsolidated partnerships $ 90,104 $ 86,406
------------------------
------------------------

</TABLE>

USM follows the equity method of accounting for its long-term investments which
recognizes, on a current basis, USM's proportionate share of the incomes and
losses accruing to it under the terms of its partnership and shareholder
agreements. The equity method is followed for minority interests in markets that
are managed by USM and for certain markets managed by others.

USM follows the cost method of accounting for its investments in markets held
for sale or exchange, and such investments are recorded at the lower of cost or
market value. It is not practicable to estimate the fair value of USM's
investments in cellular partnerships held for sale or exchange due to the lack
of quoted market prices and the inability to estimate fair values without
incurring excessive costs. The $12.9 million carrying amount at December 31,
1993, represents primarily the original cost of the investments, which
management believes is not impaired. USM's unaudited proportionate share of the
incomes or (losses) of cellular investments accounted for under the cost method
and therefore not included in the Consolidated Statements of Operations were
approximately $838,000, $302,000, and ($354,000) for the years December 31,
1993, 1992 and 1991, respectively. USM's proportionate share of all such incomes
or (losses) since the inception of operations or acquisition was ($2.1 million)
at December 31, 1993.

The following summarizes the unaudited assets, liabilities and partners'
capital, and the results of operations of the cellular system partnerships in
which USM's investments are accounted for by the equity method.

December 31,
------------------------
1993 1992
------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets
Current $ 134,289 $ 102,644
Due from affiliates 34,156 18,949
Property and other 453,150 419,492
------------------------
$ 621,595 $ 541,085
------------------------
------------------------
Liabilities and
Partners' capital
Current liabilities $ 110,960 $ 80,776
Due to affiliates 34,363 37,251
Deferred credits 1,296 226
Long-term debt 4,462 20,063
Partners' capital 470,514 402,769
------------------------
$ 621,595 $ 541,085
------------------------
------------------------

</TABLE>

Year Ended December 31,
---------------------------------------
1993 1992 1991
---------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Results of Operations
Revenues $ 703,601 $ 537,813 $ 447,692
Costs and
expenses 518,142 399,409 307,532
Other income
(expense) (14,246) (2,531) 1,352
---------------------------------------
Net income
before cumulative
effect of accounting
changes 171,213 135,873 141,512
Cumulative effect
of accounting
changes 110 (1,495) (4,658)
---------------------------------------
Net income $ 171,323 $ 134,378 $ 136,854
---------------------------------------
---------------------------------------

</TABLE>

Two agents of a competing carrier of the Los Angeles SMSA Limited Partnership
(the "Partnership") have named the Partnership in several complaints against
the carrier. The general allegations include violations of California Unfair
Practices Act and price fixing.

On November 24, 1993, a class action suit was filed against the Partnership and
another cellular carrier alleging conspiracy to fix the price of cellular
service in violation of state and federal antitrust laws. The plaintiffs are
seeking substantial monetary damages and injunctive relief.

The ultimate outcome of these actions is uncertain at this time. Accordingly, no
accrual for these matters has been made.

<PAGE>

4. INVESTMENT IN LICENSES

Investment in licenses consists of the costs incurred in acquiring Federal
Communications Commission ("FCC") licenses or interests in entities which have
filed for or have been awarded FCC licenses to provide cellular service. These
costs include amounts paid to license applicants and owners of interests in
cellular entities awarded licenses; amounts paid for legal, engineering and
consulting services; amounts incurred by USM and its parent, TDS, in acquiring
these interests; and goodwill. These costs are being amortized over 40 years,
upon commencement of operations, or at the date of acquisition when USM's
interest is in an operating system. Effective January 1, 1992, USM prospectively
changed its amortization period for license costs from 20 years to 40 years to
conform with industry practices. Costs applicable to unsuccessful license
applications and acquisitions are charged to expense. Cellular license costs
with an unamortized financial reporting basis of approximately $258.0 million
have no tax basis because the associated purchase transactions were structured
to be tax-free. This basis difference is goodwill and no deferred taxes have
been provided.

Investment in licenses consists of the following:

December 31,
-----------------------
1993 1992
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
License acquisitions and goodwill $854,991 $561,534
Professional services 12,144 10,001
USM and TDS costs 3,814 3,806
-----------------------
870,949 575,341
Less accumulated
amortization 46,458 28,170
-----------------------
$824,491 $547,171
-----------------------
-----------------------

</TABLE>

5. MARKETABLE EQUITY SECURITIES

At December 31, 1993 and 1992 USM's noncurrent marketable equity securities are
carried at the lower of cost ($18.2 million) or market value ($17.6 million in
1993 and $19.5 million in 1992) resulting in an unrealized loss of $626,000 in
1993 and an unrealized gain of $1.3 million in 1992. The market value for the
marketable equity securities is based on quoted market prices.

6. REVOLVING CREDIT AGREEMENT

USM has unsecured notes payable to TDS and Telecommunications Technologies Fund,
Inc. ("TTF"), a wholly owned subsidiary of TDS, pursuant to a Revolving Credit
Agreement. USM repaid approximately $377.5 million of debt under the Revolving
Credit Agreement with the proceeds of its 1993 Rights Offering.

The terms of the Revolving Credit Agreement provide for borrowings with
interest, at the prime rate plus 1.5% (for a rate of 7.5% at December 31, 1993),
due quarterly. The Revolving Credit Agreement has been amended by TDS from time
to time to change the size of the borrowing facility. Most recently, the
facility was amended effective November 15, 1993, in connection with the Rights
Offering to provide for borrowings up to a maximum of $250 million. Any
borrowing under the Revolving Credit Agreement may be prepaid in whole or in
part, without premium, with any prepayment reinstating credit in the amount of
such prepayment. No principal under the Revolving Credit Agreement is due until
March 31, 1996, on which date the Revolving Credit Agreement terminates and all
unpaid principal and accrued interest thereon are due and payable. The terms of
the Revolving Credit Agreement also include, among others, restrictions on
incurring additional indebtedness and on paying dividends. The carrying value of
USM's borrowings under the Revolving Credit Agreement approximates their fair
value, as the Revolving Credit Agreement is variable debt with the interest rate
based on the prime rate.

7. LONG-TERM DEBT

USM has two arrangements for the financing of cellular system equipment and
construction costs with an equipment vendor. One is arranged through the
individual entities which USM manages and the other is with USM directly. The
carrying value of USM's borrowings under the two vendor financing arrangements
approximates their fair value. The fair value of USM's long-term debt is
estimated using a discounted cash flow analysis. The loans under the first
arrangement bear interest at a rate approximating the prime rate (6.0% at
December 31, 1993) and have interest deferred during the first year. Deferred
interest and principal must be repaid over the succeeding seven years. The loans
are secured by all of the assets of these individual entities and by some or all
of the various owners' interests in the entities. Amounts borrowed which
relate to goods or services not provided by the vendor are guaranteed by USM.

As of December 31, 1993, $22.2 million of financing had been completed under
this arrangement, including $21.0 million for those subsidiaries and
partnerships included in the consolidated financial statements, and $1.2 million
for those managed

<PAGE>

subsidiaries and partnerships in which USM has a minority interest and follows
the equity method of accounting. The amount of financing outstanding for all
managed subsidiaries and partnerships at December 31, 1993 was $5.0 million.

During 1991, USM entered into an additional long-term financing agreement with
the same equipment vendor. The agreement provided for new borrowings of up to
$52 million to finance USM's equipment purchases and construction costs, and for
the refinancing of previous borrowings of up to $4 million. The borrowings are
senior obligations of USM and are collateralized by a secured interest in the
tangible assets (excluding customer accounts receivable) and certain intangible
assets of certain of USM's operating subsidiaries, excluding any interest in
such operating subsidiaries' FCC licenses. Borrowings have terms of seven to
eight years at an interest rate of 2.3% over the 90-day Commercial Paper Rate of
high-grade, unsecured notes (for a rate of 5.6% at December 31, 1993). At
December 31, 1993, the amount of new borrowings outstanding was $49.0 million
and the amount of refinancing of previous borrowings outstanding was $3.9
million.

Long-term debt is as follows:

December 31,
----------------------
1993 1992
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Vendor financing arrangement
(including deferred interest) $57,433 $64,866
Other long-term notes issued
in connection with an
acquisition, 8.0% to 10.0% 5,498 685
----------------------
62,931 65,551
Less current portion 11,801 8,906
----------------------
$51,130 $56,645
----------------------
----------------------

</TABLE>

Long-term debt principal payment requirements are $11.8 million, $11.4 million,
$9.7 million, $9.7 million and $9.8 million for the years 1994 through 1998,
respectively.

8. COMMON STOCK

COMMON SHARES ISSUABLE
Certain of the cellular acquisition agreements closed during 1993, 1992, 1991
and 1990 require USM to deliver Common Shares in the future. USM is required to
issue Common Shares to third parties as follows:

Common Shares
Issuable
-------------
<S> <C>
1994 4,524,883
1995 263,013
1996 178,823
-------------
4,966,719
-------------
-------------

</TABLE>

EMPLOYEE BENEFIT PLANS

The following table summarizes Common Shares issued for the employee benefit
plans described below.

Year Ended December 31,
--------------------------
1993 1992 1991
--------------------------
<S> <C> <C> <C>
Tax-Deferred Savings Plan 23,058 18,944 9,827
Employee Stock
Purchase Plan 21,584 16,716 18,693
Employee stock options and
stock appreciation rights 6,210 1,140 --
--------------------------
50,852 36,800 28,520
--------------------------
--------------------------

</TABLE>

TAX-DEFERRED SAVINGS PLAN. USM has reserved 52,004 Common Shares for issue under
the TDS Tax-Deferred Savings Plan, a qualified profit-sharing plan pursuant to
Sections 401(a) and 401(k) of the Internal Revenue Code. Participating employees
have the option of investing their contributions in TDS Common Shares, USM
Common Shares or four other non-affiliated funds.

EMPLOYEE STOCK PURCHASE PLAN. USM sold 35,409 Common Shares to its employees and
employees of its subsidiaries at $13.45 per share in connection with the 1990
Employee Stock Purchase Plan.

USM has reserved 80,000 Common Shares for sale to employees of USM and its
subsidiaries at $16.15 per share in connection with the 1992 Employee Stock
Purchase Plan.

STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN. USM has reserved 260,000 Common
Shares and 55,000 Series A Common Shares for options granted to key employees.
USM has established a Stock Option and Stock Appreciation Rights Plan (as
amended on February 1, 1991) that provides for the grant of stock options and
stock appreciation rights to officers and employees. The options are exercisable
one year from the date of the award through November 1, 1997, or thirty days
following the date of the employee's termination of employment, if earlier. At
December 31, 1993, 56,659 stock options were outstanding at a price of $15.67
per share.

<PAGE>

Stock Appreciation Rights ("SARs") allow the grantee to receive an amount in
Common Shares or cash, or a combination thereof, equivalent to the difference
between the excercise price and the fair market value of the Common Shares on
the exercise date. At December 31, 1993, 51,600 Common Share SARs and 36,000
Series A Common Share SARs were outstanding at $15.00 per share. These rights
expire from 1998 to 2003 or the date of the person's termination of employment,
if earlier. During 1993 and 1992, 1,800 and 600 Common Share SARs were
exercised, respectively. Compensation expense, measured on the difference
between the option prices and the year-end market price of the Common Shares,
aggregated $598,000 in 1993, $67,000 in 1992 and $101,000 in 1991.

RIGHTS OFFERING
In the fourth quarter of 1993, USM completed a rights offering to holders of its
common stock. Pursuant to the rights offering, common shareholders received one
right for every five shares owned on October 22, 1993. Each right enabled the
holder to purchase one additional share of common stock at the exercise price of
$33.00 per share, which was a 10% discount from the closing market price of
USM's Common Shares on October 22, 1993. USM issued approximately 5.9 million
Common Shares and 5.5 million Series A Common Shares in connection with the
rights offering. Approximately 4.8 million Common Shares and all of the
Series A Common Shares were purchased by TDS.

SERIES A COMMON SHARES
Series A Common Shares are convertible on a share-for-share basis into Common
Shares. As of December 31, 1993, all of USM's outstanding Series A Common Shares
were held by TDS.

9. REDEEMABLE PREFERRED STOCK

Redeemable Preferred Stock, authorized 5,000,000 shares, has a stated
liquidation value of $100 per share, is not entitled to any dividends and is
redeemable in 1994 through 1996. The Redeemable Preferred Stock is issuable in
series by the Board of Directors, who esatablish the terms of the issue. At
December 31, 1993, all shares of Redeemable Preferred Stock were held by TDS as
reimbursement for shares of TDS Preferred Stock issued in connection with
acquisitions. The fair value of Redeemable Preferred Stock is estimated to be
approximately $36.1 million using the net present value of the Common Shares to
be issued upon conversion, valued at the December 31, 1993, quoted market price.
At December 31, 1993, all of the Redeemable Preferred Stock is redeemable by USM
by the delivery of Common Shares as shown in the following table.

Number of Amount
Common Shares Outstanding Outstanding
Deliverable Upon Year of Preferred December 31,
Series Redemption Redemption Shares 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
A 55,213 1994 8,618 $ 862 $ 862
B 55,213 1995 8,282 828 828
C 354,565 1996 51,107 5,111 5,111
D 267,339 1996 44,865 4,486 4,486
E 416,011 1995 84,030 8,403 8,403
- --------------------------------------------------------------------------------
1,148,341 196,902 19,690 19,690
Less current portion 862 --
--------------------
$ 18,828 $ 19,690
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

</TABLE>

All of the preferred shares outstanding at December 31, 1993 were issued in
1991, and no shares have yet been redeemed.

10. INCOME TAXES

USM is included in a consolidated federal income tax return with other members
of the TDS consolidated group.

TDS and USM entered into a Tax Allocation Agreement (the "Agreement") effective
July 1, 1987. The Agreement provides that USM and its subsidiaries be included
in a consolidated federal income tax return with the TDS affiliated group unless
TDS requests otherwise. USM and its subsidiaries calculate their losses and
credits as if they comprised a separate affiliated group. Under the Agreement,
USM is able to carry forward its losses and credits and use them to offset any
future income tax liabilities to TDS. The amount of federal net operating loss
carryforward available to offset future taxable income aggregated approximately
$148.2 million at December 31, 1993, and expires between 2002 and 2008.

Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
companies to record all deferred tax liabilities or assets for the deferred tax
consequences of all temporary differences. Additionally, the statement requires
that deferred tax balances be adjusted to reflect new tax rates when they are
enacted into law. The cumulative effect of the implementation of SFAS 109 on
years prior to 1993

<PAGE>

had an immaterial effect on the Consolidated Statement of Operations. Income tax
expense for 1993 reflects the new method of accounting; income tax expense for
prior years has not been restated.

In August of 1993, the Revenue Reconciliation Act of 1993 increased the
statutory federal corporate income tax rate from 34 percent to 35 percent. 1993
federal income tax expense was not affected as a result of this change.

Federal income tax expense in 1993 and 1992 primarily relates to a consolidated
subsidiary not included in the TDS consolidated federal income tax return. State
income tax expense in 1993 was primarily related to subsidiaries generating
taxable income after utilization of state net operating losses. State income tax
expense in 1992 was primarily generated by the gains on the sale and exchange of
celular interests completed in 1992. The amount of state net operating loss
carryforward available to offset future taxable income aggregated approximately
$197.1 million at December 31, 1993, and expires between 1998 and 2008. Income
tax provisions charged to expense are summarized below:

Year Ended December 31,
-------------------------------------
1993 1992 1991
-------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal income taxes
Current $ 1,491 $ 805 $ --
Deferred (109) 6 --
State income taxes
Current 840 1,130 16
Deferred 470 46 --
-------------------------------------
Income tax expense $ 2,692 $ 1,987 $ 16
-------------------------------------

</TABLE>

The components of the Company's deferred tax assets and liabilities at December
31, 1993 were as follows:

Deferred Income Tax
-----------------------
Assets Liabilities
-----------------------
(Dollars in thousands)
<S> <C> <C>
Net operating loss carryforwards $ 62,272 $ --
Property, plant and equipment -- 9,914
Marketable equity securities -- 6,797
Partnership investments -- 9,398
Licenses -- 9,204
Other 968 --
-----------------------
63,240 35,313
Less: valuation allowance 30,317 --
-----------------------
$ 32,923 $ 35,313
-----------------------
-----------------------

</TABLE>

A valuation allowance has been provided when it is more likely than not that
some portion of the deferred tax asset will not be realized. USM has established
a valuation allowance primarily for operating loss carryforwards that may expire
before they can be utilized. During 1993, the valuation allowance increased
$10.5 million primarily due to USM's 1993 net operating loss. USM had current
deferred tax assets totaling $595,000 at December 31, 1993, resulting primarily
from the allowance for customer receivables.

The statutory federal income tax rate is reconciled to the Company's effective
income tax rate below.

Year Ended December 31,
-------------------------
1993 1992 1991
-------------------------
<S> <C> <C> <C>
Statutory federal income
tax rate 35.0% 34.0% 34.0%
State income taxes,
net of federal benefit (3.1) 8.4 --
Amortization of license costs (6.8) 17.3 (6.7)
Effects of corporations not
included in consolidated
federal income tax return (6.2) 11.5 --
Effects of the Tax
Allocation Agreement (30.7) (46.9) (27.3)
-------------------------
Effective income
tax rate (11.8)% 24.3% --%
-------------------------

</TABLE>

11. RELATED PARTIES

USM is billed for all services it receives from TDS, consisting primarily of
information processing and general management services. Such billings are based
on expenses specifically identified to USM and upon allocations of common
expenses. Such allocations are based upon the relationship of USM's assets and
revenues to the total assets and revenues of TDS. Management believes the
method used to allocate common expenses is reasonable. Billings to USM from TDS
amounted to $22.9 million in 1993, $13.8 million in 1992 and $9.9 million in
1991. Management believes that all expenses and costs applicable to USM are
reflected in the accompanying financial statements on a basis which is
representative of what they would have been if USM operated on a stand-alone
basis.

All markets managed by USM are billed for services they receive from USM
consisting primarily of accounting, billing and engineering services. Such
billings are based on expenses specifically identified to each market and upon
allocations of common expenses. Such allocations are based upon the
relationships of each market's assets and revenues to the total assets and
revenues of all the markets managed by USM. Billings to nonconsolidated, managed
markets amounted to $7.6 million in 1993, $7.5 million in 1992 and $6.4 million
in 1991. Management believes that all expenses and costs applicable to each
market are representative of what

<PAGE>

they would have been if each managed market operated on a stand-alone basis.

Interest income includes interest on loans to managed unconsolidated markets
used to fund ongoing construction and operating expenses. Interest income from
these markets amounted to $1.9 million in 1993, $2.1 million in 1992 and $1.4
million in 1991.

USM has a Cash Management Agreement with TDS under which USM may from time to
time deposit its excess cash with TDS for investment under TDS's cash management
program. Deposits made under the agreement are available to USM on demand and
bear interest each month at the 30-day Commercial Paper Rate as reported in THE
WALL STREET JOURNAL, plus 1/4%, or such higher rate as TDS may at its discretion
offer on such deposits.

12. GAIN ON SALE OF CELLULAR INTERESTS

Gains in 1993 reflect primarily the sale of two cellular minority interests. USM
received $6.8 million cash consideration on the sales.

Gains in 1992 reflect the sales and exchange of minority- and majority-owned
cellular interests as follows: (a) USM transferred its controlling interests in
two RSAs, its minority interests in two MSAs and approximately $2.9 million in
cash in exchange for controlling interests in two other MSAs and a minority
interest in a combined MSA/RSA system. The exchange of the controlling interests
in the RSAs has been recorded using book values, with no gain or loss recognized
on the exchange. The exchange of the minority interests in the two MSAs has been
recorded at the fair market value of approximately $15.7 million. A gain of
$11.4 million, representing the excess of the fair market value of the MSA
interests traded over the book value of such interests, was included in income
for 1992. (b) USM sold a majority interest in an MSA in exchange for certain
marketable equity securities then valued at $18.2 million. A gain of $17.1
million was recognized on the sale. (c) USM sold a minority interest in an MSA
for $3.8 million in cash. A gain of $2.9 million was recognized on the sale.

Gains in 1991 reflect primarily the sale of two cellular minority interests. USM
received $752,000 cash consideration on the sales.

13. LEASE COMMITMENTS

USM and certain of its majority-owned partnerships and subsidiaries lease
certain office and cell site locations under operating leases. Future minimum
rental payments required under operating leases that have noncancelable lease
terms in excess of one year as of December 31, 1993 are as follows:

Minimum
Future Rentals
--------------
(DOLLARS IN THOUSANDS)
<S> <C>
1994 $ 4,889
1995 4,186
1996 3,578
1997 3,009
1998 2,982
--------------
$ 18,644
--------------

</TABLE>

Rent expense totaled $4.7 million in 1993, $3.2 million in 1992 and $3.1 million
in 1991.

14. COMMITMENTS AND
CONTINGENCIES

The partnerships and corporations in which USM is a partner or shareholder are
in various stages of development. USM expects to spend approximately $160
million during 1994 for both enhancements to existing systems and construction
of new systems. Planned expenditures for enhancements of existing majority-owned
cellular systems, including additional radio channel capacity as well as new
cell sites, total about $140 million. Anticipated expenditures for construction
of switching offices and digital expansion total $7 million. Under the terms of
certain partnership and shareholder agreements, USM may be committed to funding
other partners' or shareholders' portion of construction and other costs, if
sufficient financing is not available to the individual entities. USM does not
expect such individual financing shortfalls to be material. Investments in
cellular partnerships, primarily minority-owned and managed partnerships, are
expected to total $5 million in 1994.

USM has an ongoing acquisition program to maximize its growth. For a
discussion of pending acquisitions see Note 2 Acquisitions.

Under USM's financing arrangement with an equipment vendor, amounts borrowed
which relate to goods or services not provided by that vendor are guaranteed by
USM. As of December 31, 1993, long-term debt in the amount of $2.5 million was
guaranteed by USM under this arrangement.

<PAGE>

15. LEGAL PROCEEDINGS

The Company is involved in a number of legal proceedings before the FCC and
various state and federal courts. In some cases, the litigation involves
disputes regarding rights to certain cellular telephone systems. The more
significant proceedings involving the Company are described in the following
paragraphs.

LA STAR APPLICATION. Star Cellular Telephone Company, Inc. ("Star Cellular"), an
indirect, wholly owned subsidiary of USM, is a 49% owner of La Star Cellular
Telephone Company ("La Star"), an applicant for a construction permit for a
cellular system in St. Tammany Parish in the New Orleans MSA. In June 1992, the
FCC affirmed an Administrative Law Judge's order which had granted the mutually
exclusive application of New Orleans CGSA, Inc. ("NOCGSA") and dismissed La
Star's application. The ground for the FCC's action was its finding that Star
Cellular, and not the 51% owner, SJI Cellular Inc. ("SJI"), in fact controlled
La Star. La Star, TDS and USM have appealed that order to the United States
Court of Appeals of the District of Columbia Circuit and those appeals are
pending.

In a footnote to its decision, the FCC stated, in part, that "Questions
regarding the conduct of SJI and [USM] in this case may be revisited in light of
the relevant findings and conclusions here in future proceedings where the other
interests of these parties have decisional significance. Certain adverse
parties have attempted to use the footnote in the La Star decision in a number
of unrelated, contested proceedings which TDS and USM have pending before the
FCC. In addition, since the La Star proceeding, FCC authorizations in
uncontested FCC proceedings have been granted subject to any subsequent action
the FCC may take concerning the La Star footnote.

On February 1, 1994, in a proceeding involving a license originally issued to
TDS for a rural service area in Wisconsin, the FCC instituted a hearing to
determine whether in the La Star case USM had misrepresented facts to, lacked
candor in its dealings with or attempted to mislead the FCC and, if so, whether
TDS possesses the requisite character qualifications to hold that Wisconsin
license. The FCC stated that, pending resolution of the issues in the Wisconsin
proceeding, further grants to TDS and its subsidiaries will be conditioned on
the outcome of that proceeding. TDS was granted interim authority to continue to
operate the Wisconsin system pending completion of the hearing.

An adverse finding in the Wisconsin hearing could result in a variety of
possible sanctions, ranging from a fine to loss of the Wisconsin license, and
could, as stated in the FCC order, be raised and considered in other
proceedings involving TDS and its subsidiaries. TDS and USM believe they acted
properly in connection with the La Star application and that the findings and
record in the La Star proceeding are not relevant in any other proceeding
involving their FCC license qualifications.

TOWNES TELECOMMUNICATIONS, INC., ET. AL. V. TDS, ET. AL. Plaintiffs Townes
Telecommunications, Inc. ("Townes"), Tatum Telephone Company ("Tatum Telephone")
and Tatum Cellular Telephone Company ("Tatum Cellular") filed a suit in the
District Court of Rusk County, Texas, against both TDS and USM as defendants.
Plaintiff Townes alleges that it entered into an oral agreement with defendants
which established a joint venture to develop cellular business in certain
markets. Townes alleges that defendents usurped a joint venture opportunity and
breached fiduciary duties to Townes by purchasing interests in nonwireline
markets in Texas RSA #11 and the Tyler (Texas) MSA on their own behalf rather
than on behalf of the alleged joint venture. In its Fifth Amended Original
Petition Townes seeks unspecified damages not to exceed $33 million for
usurpation, breach of fiduciary duty, civil conspiracy, breach of contract and
tortious interference. Townes also seeks imposition of a constructive trust on
defendants' profits from Texas RSA #11 and the Tyler (Texas) MSA and transfer of
those interests to the alleged joint venture. In addition Townes seeks
reasonable attorneys' fees equal to one-third of the judgement, along with
prejudgement interest. Plaintiffs Tatum Telephone and Tatum Cellular seek a
declaration that transfers by defendants of a 49% interest in Tatum Cellular
violated a five-year restriction on alienation of Tatum Cellular shares
contained in a written shareholders' agreement. Tatum Telephone and Tatum
Cellular seek to void the transfers. All plaintiffs together seek as much as
$200 million in punitive damages.

Defendants have asserted meritorious defenses to each of the plaintiffs' claims
and are vigorously defending this case. Discovery is ongoing. A jury trial in
this case is set to commence on April 25, 1994.

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF UNITED STATES CELLULAR
CORPORATION:

We have audited the accompanying consolidated balance sheets of United States
Cellular Corporation (a Delaware corporation and an 85.1%-owned subsidiary of
Telephone and Data Systems, Inc.) and Subsidiaries as of December 31, 1993 and
1992, and the related consolidated statements of operations, changes in common
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We did
not audit the financial statements of the Los Angeles SMSA, Baton Rouge MSA and
Nashville/Clarksville MSA limited partnerships. The Company's investment in
these partnerships is reflected in the accompanying financial statements using
the equity method of accounting. The investment in these limited partnerships
represented $38,447,000 and $33,209,000 (or 3.1% and 3.9%) of total consolidated
assets at December 31, 1993 and 1992, respectively, and the equity in their
income represents $15,364,000, $10,436,000 and $6,242,000 for the years ended
December 31, 1993, 1992 and 1991, respectively, and is included in the
consolidated net (loss) income. The summarized financial information contained
in Note 3 of the Notes to Consolidated Financial Statements includes financial
information for the aforementioned partnerships. The financial statements of
those limited partnerships were audited by other auditors whose reports have
been furnished to us and our opinion, insofar as it relates to the amounts
included for those limited partnerships, is based solely on the reports of the
other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of United States Cellular Corporation and Subsidiaries as
of December 31, 1993 and 1992, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.

As discussed in "Change in Accounting Principle" in Note 1 of the Notes to
Consolidated Financial Statements, the method of accounting for cellular sales
commissions was changed effective January 1, 1991. As discussed in Note 10 of
the Notes to Consolidated Financial Statements, the method of accounting for
income taxes was changed effective January 1, 1993.

The report of other auditors on the Los Angeles SMSA Limited Partnership
referred to above includes explanatory paragraphs relating to uncertainties
as discussed in Note 3 of the Notes to Consolidated Financial Statements. The
ultimate outcome of these actions are uncertain at this time. Accordingly, no
accrual for these matters has been made in the consolidated financial statments.

As discussed in Note 15 of the Notes to the Consolidated Financial Statements,
the Company is a defendant in a lawsuit involving a joint venture opportunity, a
shareholders' agreement and other related matters. The ultimate outcome from the
litigation cannot presently be determined. Accordingly, no provision for any
liability which may result has been made in the consolidated financial
statements.

/s/ Arthur Andersen & Co.

Chicago, Illinois
February 7, 1994

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

Year Ended or at December 31,
----------------------------------------------------------
1993 1992 1991 1990 1989
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Service Revenues $ 236,749 $ 154,822 $ 91,977 $ 54,930 $ 32,857
Equipment Sales 10,510 9,263 7,500 7,522 7,078
Operating (Loss) Before Minority
Share (8,656) (12,705) (16,831) (9,141) (15,636)
Minority share of operating (income)
loss (3,496) (2,615) (1,467) (155) 966
Operating (Loss) (12,152) (15,320) (18,298) (9,296) (14,670)
Investment income, net of related
amortization expense 16,005 11,859 6,871 6,153 1,937
Gain on sale of cellular interests 4,851 31,396 557 842 --
(Loss) Income Before Income
Taxes (22,749) 8,181 (24,357) (14,641) (18,254)
Net (Loss) Income Before Cumulative
Effect of a Change in Accounting
Principle (25,441) 6,194 (24,373) (14,723) (18,333)
Cumulative Effect of a Change
in Accounting Principle -- -- (10,269) -- --
Net (Loss) Income $ (25,441) $ 6,194 $ (34,642) $ (14,723) $ (18,333)
Weighted Average Common and
Series A Common Shares (000s) 57,152 57,778 38,715 28,644 28,311
(Loss) Income Per Common and
Series A Common Share:
Before Cumulative Effect of a
Change in Accounting Principle $ (.45) $ .11 $ (.63) $ (.51) $ (.65)
Cumulative Effect of a Change
in Accounting Principle -- -- (.26) -- --
Net (Loss) Income $ (.45) $ .11 $ (.89) $ (.51) $ (.65)

BALANCE SHEET DATA
Working Capital $ (28,386) $ (17,827) $ (614) $ (979) $ (9,195)
Property, Plant and Equipment,
net 246,414 158,948 109,305 44,334 32,940
Investments -
Cellular partnerships 90,104 86,406 75,089 56,489 41,727
Licenses, net of accumulated
amortization 824,491 547,171 386,489 141,107 72,966
Marketable equity securities 17,584 18,210 -- -- --
Total Assets 1,245,396 855,579 616,786 279,844 172,629
Long-Term Debt, excluding current
portion 51,130 56,645 26,959 10,703 9,276
Revolving Credit Agreement-TDS 141,524 265,766 166,501 129,005 56,708
Redeemable Preferred Stock,
excluding current portion 18,828 19,690 19,690 -- --
Common Shareholders' Equity $ 940,128 $ 450,984 $ 360,749 $ 112,380 $ 81,841

</TABLE>

<PAGE>

CONSOLIDATED QUARTERLY INCOME INFORMATION (UNAUDITED)

Quarter Ended
---------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
---------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1993
Service Revenues $ 45,434 $ 55,621 $ 67,102 $ 68,592
Equipment Sales 2,335 2,635 2,081 3,459
Operating (Loss) Income Before Minority Share (3,380) 560 228 (6,064)
Gain on Sale of Cellular Interests -- -- 4,851 --
Net (Loss) $ (9,208) $ (4,195) $ (843) $ (11,195)
Weighted Average Common and
Series A Common Shares (000s) 53,991 54,836 56,296 63,483
(Loss) Per Common and Series A Common Share $ (.17) $ (.08) $ (.01) $ (.18)

1992
Service Revenues $ 29,261 $ 38,308 $ 42,154 $ 45,099
Equipment Sales 1,495 2,428 2,360 2,980
Operating (Loss) Before Minority Share (2,680) (731) (2,687) (6,607)
Gain on Sale of Cellular Interests 14,875 -- (544) 17,065
Net Income (Loss) $ 8,284 $ (4,026) $ (5,999) $ 7,935
Weighted Average Common and
Series A Common Shares (000s) 55,478 50,287 50,724 59,557
Income (Loss) Per Common
and Series A Common Share $ .15 $ (.08) $ (.12) $ .13

</TABLE>

SHAREOWNERS' INFORMATION

UNITED STATES CELLULAR STOCK
AND DIVIDEND INFORMATION

The Company's Common Shares are listed on the American Stock Exchange under the
symbol "USM" and in the newspapers as "US Cellu." As of February 28, 1994, the
Company's Common Shares were held by 457 record owners. All of the Series A
Common Shares were held by TDS. No public trading market exists for the Series A
Common Shares. The Series A Common Shares are convertible on a share-for-share
basis into Common Shares.

The high and low sales prices of the Common Shares as reported by the American
Stock Exchange were as follows:

Calendar Period Common Shares
-----------------------
High Low
-----------------------
<S> <C> <C>
1993
First Quarter $ 24.63 $ 20.75
Second Quarter 28.50 23.00
Third Quarter 34.88 27.50
Fourth Quarter 39.25 30.13
-----------------------
1992
First Quarter $ 24.25 $ 20.63
Second Quarter 23.13 18.25
Third Quarter 20.50 18.38
Fourth Quarter 22.88 17.50
-----------------------
</TABLE>

The Company has not paid any cash dividends and currently intends to retain all
earnings for use in the Company's business. In addition, the Revolving Credit
Agreement with TDS prohibits the payment of dividends on the Company's Common
Shares and Series A Common Shares, except to the extent of one-half of the
cumulative consolidated net income, if any, of the Company for the period after
July 1, 1989.

<PAGE>

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1993 1992 1991
-----------------------------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
OPERATING REVENUES
Service $ 236,749 $ 154,822 $ 91,977
Equipment sales 10,510 9,263 7,500
-----------------------------------
Total Operating Revenues 247,259 164,085 99,477
-----------------------------------

OPERATING EXPENSES
System operations 67,251 48,373 30,746
Marketing and selling 43,478 30,643 18,053
Cost of equipment sold 25,688 17,311 13,575
General and administrative 74,471 50,824 34,665
Depreciation 25,665 16,606 8,814
Amortization of intangibles 19,362 13,033 10,455
-----------------------------------
Total Operating Expenses 255,915 176,790 116,308
-----------------------------------

OPERATING (LOSS) BEFORE MINORITY SHARE (8,656) (12,705) (16,831)
Minority share of operating (income) (3,496) (2,615) (1,467)
-----------------------------------
OPERATING (LOSS) (12,152) (15,320) (18,298)
-----------------------------------
INVESTMENT AND OTHER INCOME
Investment income 16,922 12,456 8,008
Amortization of license and deferred
costs related to investments (917) (597) (1,137)
Interest income 2,652 3,181 3,158
Other (expense), net (915) (2,840) (224)
Gain on sale of cellular interests 4,851 31,396 557
-----------------------------------
Total Investment and Other Income 22,593 43,596 10,362
-----------------------------------
INCOME (LOSS) BEFORE INTEREST
AND INCOME TAXES 10,441 28,276 (7,936)
Interest expense - affiliate 29,068 16,793 14,569
Interest expense - other 4,122 3,302 1,852
-----------------------------------
(LOSS) INCOME BEFORE INCOME TAXES (22,749) 8,181 (24,357)
Income tax expense 2,692 1,987 16
-----------------------------------

NET (LOSS) INCOME BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE (25,441) 6,194 (24,373)
Cumulative effect of a change in
accounting principle (Note 1) -- -- (10,269)
-----------------------------------
NET (LOSS) INCOME $ (25,441) $ 6,194 $ (34,642)
-----------------------------------
-----------------------------------
WEIGHTED AVERAGE COMMON AND
SERIES A COMMON SHARES (000s) 57,152 57,778 38,715
(LOSS) INCOME PER COMMON AND
SERIES A COMMON SHARE:
Before cumulative effect of a change in
accounting principle $ (.45) $ .11 $ (.63)
Cumulative effect of a change
in accounting principle (Note 1) -- -- (.26)
-----------------------------------
Net (Loss) Income $ (.45) $ .11 $ (.89)
-----------------------------------
-----------------------------------

</TABLE>

THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.

<PAGE>

CONSOLIDATED BALANCE SHEETS
ASSETS

<TABLE>
<CAPTION>
December 31,
-------------------------
1993 1992
-------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 5,971 $ 4,130
Affiliated cash investments 303 --
Accounts receivable
Customers, less allowance of
$1,413 and $1,276, respectively 14,555 9,688
Roaming 13,484 8,748
Affiliates 2,880 2,297
Other 3,714 4,043
Inventory 2,529 1,149
Prepaid and other current assets 2,597 1,953
-------------------------
46,033 32,008
-------------------------

PROPERTY, PLANT AND EQUIPMENT
In service 306,118 193,681
Less accumulated depreciation 59,704 34,733
-------------------------
246,414 158,948
-------------------------

INVESTMENTS
Cellular partnerships - equity 77,178 71,001
Cellular partnerships - cost 12,926 15,405
Licenses, net of accumulated amortization of
$46,458 and $28,170, respectively 824,491 547,171
Marketable equity securities 17,584 18,210
Notes and interest receivable 7,701 4,895
------------------------
939,880 656,682
------------------------

DEFERRED CHARGES
Deferred start-up costs, net of accumulated
amortization of $6,034 and $4,917, respectively 5,000 5,384
Other deferred charges, net of accumulated
amortization of $1,018 and $606, respectively 8,069 2,557
------------------------
13,069 7,941
------------------------
TOTAL ASSETS $ 1,245,396 $ 855,579
------------------------
------------------------
</TABLE>

THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.

<PAGE>

CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY

December 31,
--------------------------
1993 1992
--------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt and
preferred stock $ 12,663 $ 8,906
Accounts payable
Affiliates 4,454 3,559
Other 39,126 24,476
Accrued interest, primarily to affiliates 5,785 4,923
Customer deposits and deferred revenues 3,909 2,690
Other current liabilities 8,482 5,281
--------------------------
74,419 49,835
--------------------------

--------------------------
REVOLVING CREDIT AGREEMENT - TDS 141,524 265,766
--------------------------

--------------------------
LONG-TERM DEBT, EXCLUDING CURRENT PORTION 51,130 56,645
--------------------------

DEFERRED LIABILITIES AND CREDITS
Income taxes 2,390 1,446
Other 1,378 785
--------------------------
3,768 2,231
--------------------------

--------------------------
REDEEMABLE PREFERRED STOCK, EXCLUDING CURRENT PORTION 18,828 19,690
--------------------------

--------------------------
MINORITY INTEREST 15,599 10,428
--------------------------

COMMON SHAREHOLDERS' EQUITY
Common Shares, par value $1 per share;
authorized 140,000,000 shares; issued
and outstanding 36,960,450 and
25,218,681 shares, respectively 36,960 25,219
Series A Common Shares, par value $1 per share;
authorized 50,000,000 shares; issued and
outstanding 33,005,877 shares and 27,429,895
shares, respectively 33,006 27,430
Additional paid in capital 867,947 342,204
Common Shares issuable, 4,966,719 and
6,480,955 shares, respectively 103,266 131,741
Retained (deficit) (101,051) (75,610)
--------------------------
940,128 450,984
--------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,245,396 $ 855,579
--------------------------
--------------------------

</TABLE>

THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.

<PAGE>

CONSOLIDATED STATEMENTS
OF CASH FLOWS

Year Ended December 31,
----------------------------------------------
1993 1992 1991
----------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (25,441) $ 6,194 $ (34,642)
Add (Deduct) adjustments to reconcile net (loss)
income to net cash provided (required) by
operating activities
Cumulative effect of a change in
accounting principle -- -- 10,269
Depreciation and amortization 45,944 30,236 20,406
Investment income (16,922) (12,456) (8,008)
Gain on sale of cellular interests (4,851) (31,396) (557)
Minority share of operating income 3,496 2,615 1,467
Other noncash expense 499 4,214 291
Change in accounts receivable (7,343) (3,213) (7,556)
Change in accounts payable 5,836 537 (5,924)
Change in accrued interest 29,009 4,604 3,657
Change in accrued taxes 177 416 --
Change in other assets and liabilities 4,899 1,746 1,731
----------------------------------------------
35,303 3,497 (18,866)
----------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt borrowings 64 36,619 17,790
Repayment of long-term debt (15,851) (3,202) (3,168)
Change in Revolving Credit Agreement 45,446 22,227 49,259
Capital contributions by TDS -- -- 300
Common Shares issued 36,813 407 40,397
Minority partner capital (distributions)
contributions (1,075) 1,443 1,640
----------------------------------------------
65,397 57,494 106,218
----------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant
and equipment (84,889) (53,325) (56,430)
Investments in and advances to
minority partnerships (16,279) (21,408) (25,386)
Distributions from partnerships 11,265 9,597 4,637
Proceeds from sale of investments 6,750 7,343 752
Acquisitions, excluding cash acquired (9,964) (11,130) (7,130)
Other investments (5,439) (701) (521)
----------------------------------------------
(98,556) (69,624) (84,078)
----------------------------------------------

NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,144 (8,633) 3,274

CASH AND CASH EQUIVALENTS-
Beginning of period 4,130 12,763 9,489
--------------------------------------------
End of period $ 6,274 $ 4,130 $ 12,763
--------------------------------------------
--------------------------------------------

</TABLE>

THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.

<PAGE>

CONSOLIDATED STATEMENTS OF CHANGES
IN COMMON SHAREHOLDERS' EQUITY

Year Ended December 31,
---------------------------------------------
1993 1992 1991
---------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
COMMON SHARES
Balance at beginning of period $ 25,219 $ 21,046 $ 8,530
Add
Acquisitions of cellular interests 5,718 3,751 1,465
Acquisition of RSA interests from TDS 31 385 2,544
Employee benefit plans 51 37 28
Sales of Common Shares 1,119 -- 2,368
Conversion of debt to TDS 4,822 -- 6,111
---------------------------------------------
Balance at end of period $ 36,960 $ 25,219 $ 21,046
---------------------------------------------
---------------------------------------------

SERIES A COMMON SHARES
Balance at beginning of period $ 27,430 $ 26,506 $ 20,407
Add
Acquisition of RSA interests from TDS 75 924 6,099
Conversion of debt to TDS 5,501 -- --
---------------------------------------------
Balance at end of period $ 33,006 $ 27,430 $ 26,506
---------------------------------------------
---------------------------------------------

ADDITIONAL PAID IN CAPITAL
Balance at beginning of period $ 342,204 $ 265,991 $ 98,280
Add (Deduct)
Acquisitions of cellular interests 150,630 69,229 25,672
Acquisition of RSA interests from TDS (49) (901) (856)
Employee benefit plans 1,089 587 418
Capital contributions by TDS 9,468 7,515 757
Sales of Common Shares 35,818 -- 40,256
Conversion of debt to TDS 330,328 -- 103,889
Net unrealized loss on noncurrent
marketable equity securities (626) -- --
Capital stock expense (915) (217) (2,425)
----------------------------------------------
Balance at end of period $ 867,947 $ 342,204 $ 265,991
----------------------------------------------
----------------------------------------------

COMMON AND SERIES A COMMON SHARES ISSUABLE
Balance at beginning of period $ 131,741 $ 129,010 $ 32,324
Add (Deduct)
Acquisitions of cellular interests 2,996 16,690 96,997
TDS Common Shares issued for acquisitions (30,649) -- --
Shares issued pursuant to acquisition agreements (822) (13,959) (311)
----------------------------------------------
Balance at end of period $ 103,266 $ 131,741 $ 129,010
----------------------------------------------
----------------------------------------------

RETAINED (DEFICIT)
Balance at beginning of period $ (75,610) $ (81,804) $ (47,162)
Add net (loss) income (25,441) 6,194 (34,642)
-----------------------------------------------
Balance at end of period $ (101,051) $ (75,610) $ (81,804)
-----------------------------------------------
-----------------------------------------------

</TABLE>

THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.

<PAGE>
EXHIBIT 21
UNITED STATES CELLULAR CORPORATION
List of Subsidiaries as of December 31, 1993
_________________________________________________________________

USCOC of Arkansas RSA #1, Inc
Arkansas RSA #9, Inc
Block B Cellular Corporation
California Rural Service Area #1, Inc.
California RSA #2, Inc.
California RSA #9, Inc.
Florida RSA #2, Inc.
Florida RSA #8, Inc.
USCOC of Georgia RSA #1, Inc.
Georgia RSA #11, Inc.
Georgia RSA #13, Inc.
USCOC of Georgia RSA #14, Inc.
USCOC of Hawaii-3, Inc.
USCOC of Idaho RSA #5, Inc.
USCOC of Idaho RSA #6, Inc.
USCOC of Illinois RSA #1, Inc.
Illinois RSA #3, Inc.
USCOC of Illinois RSA #4, Inc.
USCOC of Indiana RSA #2, Inc.
Indiana RSA #4, Inc.
Indiana RSA #5, Inc.
USCOC of Indiana RSA #7, Inc.
USCOC of Iowa RSA #1, Inc.
Iowa RSA #2, Inc.
Iowa RSA #3, Inc.
Iowa RSA #9, Inc.
Iowa RSA #12, Inc.
Iowa 13, Inc.
Kansas RSA #5, Inc.
Kentucky RSA #2, Inc.
Kentucky RSA #3, Inc.
Maine RSA #1, Inc.
Maine RSA #4, Inc.
Michigan RSA #4, Inc.
Mississippi RSA #9, Inc.
USCOC of Missouri RSA #1, Inc.
USCOC of Missouri RSA #3, Inc.
USCOC of Missouri RSA #4, Inc.
USCOC of Missouri RSA #5, Inc.
USCOC of Missouri RSA #13, Inc.
Missouri #15 Rural Cellular, Inc.
Missouri RSA #17, Inc.
NH #1 Rural Cellular, Inc.
USCOC of New York RSA #1, Inc.
North Carolina RSA #4, Inc.
North Carolina RSA #5, Inc.
North Carolina RSA No. 6, Inc.
USCOC of North Carolina RSA #7, Inc.
North Carolina RSA #9, Inc.
North Carolina RSA #12, Inc.

<PAGE>

USCOC of North Carolina RSA #13, Inc.
USCOC of North Carolina RSA #14, Inc.
North Carolina RSA #14, Inc.
Ohio RSA #1, Inc.
USCOC of Ohio RSA #7, Inc.
Ohio RSA #9, Inc.
Oklahoma RSA #6, Inc.
Oklahoma Opco of RSA #8, Inc.
Oklahoma #9 Rural Cellular, Inc.
USCOC of Oklahoma RSA #10, Inc.
Oregon RSA #2, Inc.
Oregon RSA #3, Inc.
USCOC of Oregon RSA #5, Inc.
Oregon RSA #6, Inc.
USCOC of Pennsylvania RSA #9, Inc.
USCOC of South Carolina RSA #4, Inc.
Tennessee RSA #3, Inc.
Tennessee RSA #4 Sub 2, Inc.
Tennessee RSA #6 B, Inc.
Texas RSA #4, Inc.
Texas RSA #5, Inc.
Texas RSA #11, Inc.
USCOC of Texas RSA #18, Inc.
Texas #20 Rural Cellular, Inc.
USCOC of Virginia RSA #4, Inc.
Virginia RSA #4, Inc.
Virginia RSA #5, Inc.
Virginia RSA #7, Inc.
USCOC of Washington-4, Inc.
Washington RSA #5, Inc.
Washington RSA #6, Inc.
USCOC of West Virginia RSA #2, Inc.
West Virginia RSA #4, Inc.
West Virginia RSA #5, Inc.
USCOC of Wisconsin RSA #6, Inc.
Wisconsin RSA #8, Inc.

USCIC of Colorado RSA #3, Inc.
Western Colorado Cellular, Inc.
Idaho Invco of RSA #1, Inc.
Kentucky Invco of RSA #3, Inc.
MaryPennWest Invco of RSA #1, #10 and #3, Inc.
Minnesota Invco of RSA #5, Inc.
Minnesota Invco of RSA #7, Inc.
Minnesota Invco of RSA #8, Inc.
Minnesota Invco of RSA #9, Inc.
Minnesota Invco of RSA #10, Inc.
Minnesota Invco of RSA #11, Inc.
Oregon Invco of RSA #2 West, Inc.
Pennsylvania Invco of RSA #5, Inc.
Pennsylvania Invco of RSA #6, Inc.
Texas Invco of RSA #6, Inc.
Texas Invco of RSA #17, Inc.
TDS V2B Acquisition Corp.

-2-

<PAGE>

Virginia Invco of RSA #2, Inc.
Wisconsin Invco of RSA #7, Inc.

Camden Cellular Telephone Company, Inc.
Community Cellular Telephone Company
Farmers Cellular Telephone Company, Inc.
Farmers Mutual Cellular Telephone Company, Inc.
Hancock Cellular Telephone Company, Inc.
Hardy Cellular Telephone Company
Hill City Cellular Telephone Company
Humphreys County Cellular, Inc.
Jefferson Cellular Telephone Company
Lake Livingston Cellular Telephone Company
Laurel Highland Cellular Telephone Company
McDaniel Cellular Telephone Company
Minford Cellular Telephone Company
Peace Valley Cellular Telephone Company
Pine Island Cellular Telephone Company
Randolph Cellular Telephone Company
Scott County Cellular Telephone Company
South Canaan Cellular Telephone Company
Spruce Knob Cellular Telephone Company
Tri-County Cellular Telephone Company
Venus Cellular Telephone Company, Inc.
Walnut Hill Cellular Telephone Company
West Side Cellular Telephone Company

United States Cellular Investment Company
United States Cellular Investment Co. of Allentown
USCIC of Amarillo, Inc.
USCIC of Arecibo, Inc.
United States Cellular Investment Company of Baton Rouge
United States Cellular Investment Company of Binghamton, Inc.
USCIC of Brownsville, Inc.
United States Cellular Investment Company of Eau Claire, Inc.
Universal Cellular for Eau Claire MSA, Inc.
United States Cellular Investment Company of Fresno, Inc.
United States Cellular Investment Company of Ft. Smith
United States Cellular Investment Company of Galveston
United States Cellular Investment Company of Green Bay, Inc.
United States Cellular Investment Company of Huntsville
United States Cellular Investment Company of Iowa City
USCIC of Jackson, Inc.
United States Cellular Investment Company of Lafayette
United States Cellular Investment Corporation of Los Angeles
United States Cellular Investment Company of Madison, Inc.
USCIC of McAllen, Inc.
USCIC of Midland, Inc.
United States Cellular Investment Co. of Nashville
USCIC of New Orleans, Inc.
USCIC of Ocala, Inc.
United States Cellular Investment Co. of Oklahoma City, Inc.
United States Cellular Investment Company of Portsmouth, Inc.
United States Cellular Investment Company of Raleigh-Durham

-3-

<PAGE>

USCIC of Reno, Inc.
United States Cellular Investment Company of Rockford
United States Cellular Investment Company of Santa Cruz, Inc.
United States Cellular Investment Company of Sarasota
USCIC of Seattle, Inc.
United States Cellular Investment Company of St. Cloud
United States Cellular Investment Company of Wheeling

United States Cellular Operating Company
United States Cellular Operating Company of Atlantic City, Inc.
United States Cellular Operating Company of Bangor
United States Cellular Operating Company of Biloxi
United States Cellular Operating Company of Cedar Rapids
United States Cellular Operating Company of Columbia
USCOC of Cumberland, Inc.
United States Cellular Operating Company - Des Moines
United States Cellular Operating Company of Dubuque
United States Cellular Operating Company of Evansville, Inc.
United States Cellular Operating Company of Ft. Pierce
USCOC of Gainesville, Inc.
USCOC of Iowa City, Inc.
United States Cellular Operating Company of Joplin
United States Cellular Operating Company of Knoxville
United States Cellular Operating Company of LaCrosse, Inc.
United States Cellular Operating Company - Lawton, Inc.
United States Cellular Operating Company of Lewiston-Auburn
United States Cellular Operating Company of Manchester-Nashua,
Inc.
United States Cellular Operating Company of Medford
United States Cellular Operating Company of Montgomery, Inc.
United States Cellular Operating Company of Owensboro
United States Cellular Operating Company of Peoria
USCOC of Portland, Inc.
United States Cellular Operating Company of Poughkeepsie, Inc.
United States Cellular Operating Company - Quad Cities
United States Cellular Operating Company of Richland
United States Cellular Operating Company of Rochester
United States Cellular Operating Company of Tulsa, Inc.
USCOC of Victoria, Inc.
United States Cellular Operating Company of Vineland, Inc.
United States Cellular Operating Company of Waterloo
United States Cellular Operating Company of Wausau, Inc.
United States Cellular Operating Company of Wichita Falls, Inc.
United States Cellular Operating Company of Williamsport
United States Cellular Operating Company of Yakima

Canton Cellular Telephone Company
Capitol Cellular, Inc.
Carolina Cellular, Inc.
Cellular America Telephone Company
Central Cellular Telephones, Ltd.
Central Florida Cellular Telephone Company, Inc.
Chibardun Cellular Telephone Corporation
CR Communications, Inc.

-4-

<PAGE>

CSII of Baton Rouge, Inc.
Davenport Cellular Telephone Company, Inc.
DRGP, Inc.
Dutchess County Cellular Telephone Company, Inc.
Four D Ltd.
Huntsville Cellular Telephone Corp., Inc.
ILP, Inc.
Joplin Cellular Telephone Company
LaCrosse Cellular Telephone Company, Inc.
Lar-Tex Cellular Telephone Company
Lavaca Cellular Telephone Company
Leaf River Valley Cellular Telephone Company
Mississippi Cellular Telephone Company
Star Cellular Telephone Company, Inc.
Star Cellular Communications, Inc.
Texahoma Cellular Telephone Corporation
Tri-States Cellular Communications Inc.
Tulsa General Partner, Inc.
USCC Real Estate Corporation
Vineland Cellular Telephone Company, Inc.

-5-

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of United States Cellular Corporation of our report
dated February 7, 1994, on the consolidated financial statements of United
States Cellular Corporation and Subsidiaries (the "Company") included in the
Company's 1993 Annual Report to Shareholders, to the inclusion in this Form 10-K
of our report dated February 7, 1994, on the financial statement schedules of
the Company, and to the inclusion of our compilation report dated February 11,
1994, on the combined financial statements of the Los Angeles SMSA Limited
Partnership, the Nashville/Clarksville MSA Limited Partnership and the Baton
Rouge MSA Limited Partnership, and to the incorporation of such reports into the
Company's previously filed S-4 Registration Statement, File No. 33-41826, and
into the Company's previously filed S-8 Registration Statements, File No.
33-30327, File No. 33-38129, File No. 33-42558, and File No. 33-53940.

ARTHUR ANDERSEN & CO.

Chicago, Illinois
March 24, 1994

<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the inclusion in this Form 10-K of United States
Cellular Corporation of our report, which includes explanatory paragraphs
relating to contingencies, dated February 4, 1994, on our audits of the
financial statements of the Los Angeles SMSA Limited Partnership as of December
31, 1993 and 1992, and for each of the three years in the period ended December
31, 1993; such financial statements are not included separately in this Form
10-K.

COOPERS & LYBRAND

Newport Beach, California
March 24, 1994

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the inclusion in this Form 10-K of United States
Cellular Corporation of our reports dated February 11, 1994, February 11, 1993
and February 10, 1992, on our audits of the financial statements of the
Nashville/Clarksville MSA Limited Partnership as of December 31, 1993, 1992 and
1991, and for the years ended December 31, 1993, 1992 and 1991; such financial
statements are not included separately in this Form 10-K.

COOPERS & LYBRAND

Atlanta, Georgia
March 22, 1994

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the inclusion in this Form 10-K of United States
Cellular Corporation of our reports dated February 11, 1994, February 11, 1993
and February 10, 1992, on our audits of the financial statements of the Baton
Rouge MSA Limited Partnership as of December 31, 1993, 1992 and 1991, and for
the years ended December 31, 1993, 1992 and 1991; such financial statements are
not included separately in this Form 10-K.

COOPERS & LYBRAND

Atlanta, Georgia
March 22, 1994

<PAGE> Exhibit 99

UNITED STATES CELLULAR CORPORATION
PRO FORMA FINANCIAL INFORMATION

United States Cellular Corporation (AMEX symbol "USM") is referred to in
this exhibit as the "Company." The Company is an 85.1%-owned subsidiary of
Telephone and Data Systems, Inc. ("TDS").

From January 1 through December 31, 1993, the Company acquired controlling
interests in 25 cellular markets and several additional minority cellular
interests representing a total of approximately 3.8 million population
equivalents. The total consideration paid for these acquisitions was
approximately $284.6 million, consisting of 5.7 million Common Shares, 75,000
Series A Common Shares, the obligation to issue 140,000 Common Shares in the
future, an increase in the Company's revolving credit agreement with TDS (the
"Revolving Credit Agreement") of $101.5 million, 29,000 shares of subsidiary
preferred stock, cash and Common Shares issued by TDS totaling $9.4 million
(treated as an equity contribution to the Company), and $12.7 million in cash
paid by the Company. Of this consideration, the debt under the Revolving Credit
Agreement, most of the Common Shares and all of the Series A Common Shares were
issued to TDS to reimburse TDS for TDS Common Shares issued and cash paid to
third parties.

As of December 31, 1993, the Company had pending agreements to acquire
controlling interests in nine cellular markets and a minority interest in one
additional market representing a total of approximately 1.2 million population
equivalents. The total consideration to be paid for the acquisitions described
in this paragraph, valued at the time such agreements were entered into, is
approximately $128.4 million. If these acquisitions are completed as planned,
the Company will issue approximately 3.7 million Common Shares, will increase
the balance outstanding under the Revolving Credit Agreement by $400,000, will
pay approximately $4.5 million in cash (expected to be funded by an additional
increase in the Revolving Credit Agreement) and TDS will pay $700,000 in cash
(to be treated as an equity contribution to the Company).

Pursuant to Rule 3-05 and Rule 11-01 of Regulation S-X, the completed and
pending acquisitions of businesses described in the foregoing paragraphs are not
individually significant. The following pro forma financial information is
included pursuant to Article 11 of Regulation S-X:

ITEM

United States Cellular Corporation Unaudited Condensed Pro Forma
Consolidated Financial Statements

Unaudited Condensed Pro Forma Consolidated Balance Sheet
as of December 31, 1993

Unaudited Condensed Pro Forma Consolidated Statement of
Operations for the Year Ended December 31, 1993

Notes to Unaudited Condensed Pro Forma Consolidated
Financial Statements
<PAGE>

UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
UNAUDITED
(IN THOUSANDS)

ASSETS
<TABLE>
<CAPTION>

COMBINED PRO FORMA
COMPLETED ADJUSTMENTS PRO FORMA
USM AND PENDING INCREASE USM
CONSOLIDATED (a) ACQUISITIONS (DECREASE) CONSOLIDATED
---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS $ 46,033 $1,829 $ (71)(1) $ 47,791
---------- ------ -------- ----------

PROPERTY, PLANT AND EQUIPMENT
In service 306,118 8,557 - 314,675
Less accumulated depreciation 59,704 2,122 - 61,826
---------- ------ -------- ----------

246,414 6,435 - 252,849
---------- ------ -------- ----------

INVESTMENTS
Cellular partnerships 90,104 - (1,466)(1) 88,638
Licenses, net of amortization 824,491 619 129,885 (1) 954,995
Marketable equity securities 17,584 - - 17,584
Other 7,701 - - 7,701
---------- ------ -------- ----------
939,880 619 128,419 1,068,918
---------- ------ -------- ----------

OTHER ASSETS AND DEFERRED CHARGES 13,069 652 - 13,721
---------- ------ -------- ----------

$1,245,396 $9,535 $128,348 $1,383,279
---------- ------ -------- ----------
---------- ------ -------- ----------

</TABLE>

The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
UNAUDITED
(IN THOUSANDS)

STOCKHOLDERS' EQUITY AND LIABILITIES
<TABLE>
<CAPTION>

COMBINED PRO FORMA
COMPLETED ADJUSTMENTS PRO FORMA
USM AND PENDING INCREASE USM
CONSOLIDATED (a) ACQUISITIONS (DECREASE) CONSOLIDATED
---------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES $ 74,419 $ 2,124 $ (595)(1) $ 75,948
---------- ------- -------- ----------

NOTES PAYABLE - 3,800 - 3,800
---------- ------- -------- ----------

REVOLVING CREDIT AGREEMENT-TDS 141,524 - 4,889 (1) 146,413
---------- ------- -------- ----------

LONG-TERM DEBT, excluding current portion 51,130 2,517 - 53,647
---------- ------- -------- ----------

DEFERRED LIABILITIES AND CREDITS 3,768 1,593 - 5,361
---------- ------- -------- ----------

REDEEMABLE PREFERRED STOCK, excluding
current portion 18,828 - - 18,828
---------- ------- -------- ----------

MINORITY INTEREST 15,599 - - 15,599
---------- ------- -------- ----------

COMMON STOCKHOLDERS' EQUITY
Common Shares, par value $1 per share 36,960 10 3,696 (1) 40,666
Series A Common Shares, par value $1 per share 33,006 - - 33,006
Additional paid in capital 867,947 2,536 117,313 (1) 987,796
Common Shares issuable, 5,529,557 shares 103,266 - - 103,266
Retained (deficit) (101,051) (3,045) 3,045 (1) (101,051)
---------- ------- -------- ----------
Total common stockholders' equity 940,128 (499) 124,054 1,063,683
---------- ------- -------- ----------

$1,245,396 $ 9,535 $128,348 $1,383,279
---------- ------- -------- ----------
---------- ------- -------- ----------
</TABLE>

The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

COMBINED PRO FORMA
COMPLETED ADJUSTMENTS PRO FORMA
USM AND PENDING INCREASE USM
CONSOLIDATED ACQUISITIONS(b) (DECREASE) CONSOLIDATED
------------ --------------- ----------- ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Service $236,749 $17,528 $ - $254,277
Equipment sales 10,510 966 - 11,476
-------- ------- ------- --------
Total Operating Revenues 247,259 18,494 - 265,753
-------- ------- ------- --------

OPERATING EXPENSES
System operations 67,251 7,776 - 75,027
Marketing and selling 43,478 2,227 - 45,705
Cost of equipment sold 25,688 1,602 - 27,290
General and administrative 74,471 9,159 - 83,630
Depreciation and amortization 45,027 2,419 4,255 (3) 51,701
-------- ------- ------- --------
Total Operating Expenses 255,915 23,183 4,255 283,353
-------- ------- ------- --------

OPERATING (LOSS) BEFORE MINORITY SHARE (8,656) (4,689) (4,255) (17,600)
Minority share of operating (income) (3,496) - 76 (2) (3,420)
-------- ------- ------- --------

OPERATING (LOSS) (12,152) (4,689) (4,179) (21,020)
-------- ------- ------- --------

INVESTMENT AND OTHER INCOME
Investment income 16,922 - 896 (4) 17,818
Amortization of license and deferred costs
related to investments (917) - (28)(3) (945)
Interest income 2,652 119 (351)(5) 2,420
Other (expense), net (915) (79) - (994)
Gain on sale of cellular interests 4,851 - - 4,851
-------- ------- ------- --------
Total Investment and Other Income 22,593 40 517 23,150
-------- ------- ------- --------

INCOME (LOSS) BEFORE INTEREST AND
INCOME TAXES 10,441 (4,649) (3,662) 2,130
Interest expense 33,190 2,213 (351)(5) 36,332
1,280 (6)
-------- ------- ------- --------

(LOSS) BEFORE INCOME TAXES (22,749) (6,862) (4,591) (34,202)
Income tax expense 2,692 - - (7) 2,692
-------- ------- ------- --------

NET (LOSS) $(25,441) $(6,862) $(4,591) $(36,894)
-------- ------- ------- --------
-------- ------- ------- --------

WEIGHTED AVERAGE COMMON SHARES 57,152 6,448 63,600
-------- ------- --------
-------- ------- --------

(LOSS) PER COMMON SHARE $ (.45) $ (.58)
-------- --------
-------- --------
</TABLE>

The accompanying notes to condensed pro forma consolidated financial statements
are an integral part of this statement.
<PAGE>

UNITED STATES CELLULAR CORPORATION
NOTES TO CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(a) Includes the balance sheets of the entities discussed in the second
paragraph of this exhibit.

(b) Includes the income statements of the entities discussed in the second
paragraph of this exhibit prior to the date of acquisition by the Company, as
well as each of the income statements of the entities for which acquisition by
the Company is pending as of the date of this Form 10-K.

(1) Reflects the Company's acquisition of the cellular interests described
in the third paragraph of this exhibit. Also reflects the elimination of the
equity of these interests in purchase transactions and the allocation of the
purchase price to cellular license acquisition costs (in thousands).

<TABLE>

<S> <C>
Purchase price (aggregate) $128,445

Plus: acquired companies' negative equity at
December 31, 1993 1,440
--------

Purchase price to be allocated $129,885
--------
--------

Purchase price in excess of book value--

Cellular operations--consolidated $ 60,869
Cellular operations--equity method 69,016
--------

$129,885
--------
--------
</TABLE>

The pro forma allocations of the purchase prices to the acquired entities'
assets as set forth above are based upon preliminary estimates of the values of
those assets.

(2) Reflects the minority shareholders' portion of acquired companies' net
income and the elimination of the minority shareholders' portion of net income
of companies in which the Company acquired additional minority interests.

(3) Reflects the amortization of assumed costs in excess of book value.
All excess cost amounts are assumed to be amortized over 40 years.

(4) Reflects the elimination of the equity-method losses of acquired
entities which are consolidated in the Pro Forma Consolidated Statements of
Operations.

(5) Reflects the elimination of intercompany interest income and interest
expense between the Company and several acquired entities. The acquired
entities were previously accounted for by the equity method of accounting (see
Note 4).

(6) Reflects the estimated interest expense incurred as a result of
increases in the Revolving Credit Agreement in connection with the acquisitions
included in the Condensed Pro Forma Consolidated Statements of Operations.

(7) The Company is included in a consolidated federal income tax return
with other members of the TDS consolidated group. TDS and the Company entered
into a Tax Allocation Agreement (the "Agreement") effective July 1, 1987. The
Agreement provides, among other things, that the Company and its subsidiaries be
included in a consolidated federal income tax return with the TDS affiliated
group unless TDS requests otherwise. The Company and its subsidiaries calculate
their losses and credits as if they comprised a separate affiliated group.
Under the Agreement, the Company is able to carry forward its losses and credits
and use them to offset any future income tax liabilities to TDS. Accordingly,
no pro forma income tax benefits arising from the pro forma effects of
acquisitions have been recorded in the Condensed Pro Forma Consolidated
Statements of Operations.