<PAGE>
Filed pursuant to Rule 424(b)(2)
File No. 333-32521
PROSPECTUS SUPPLEMENT
(To Prospectus dated August 6, 1997)
$250,000,000
[LOGO]
UNITED STATES CELLULAR CORPORATION
7 1/4% NOTES DUE AUGUST 15, 2007
----------------
The 7 1/4% Notes due August 15, 2007 (the "Notes") of United States Cellular
Corporation, a Delaware corporation (the "Company"), mature on August 15, 2007.
Interest on the Notes is payable semi-annually on February 15 and August 15 of
each year, commencing February 15, 1998. The Notes will be redeemable, in whole
or in part, at the option of the Company at any time on or after August 15,
2004, at a redemption price equal to 100% of the principal amount of the Notes
to be redeemed, plus accrued interest thereon, if any, to the date of
redemption. See "Certain Terms of the Notes."
The Notes will be represented by Global Notes registered in the name of the
nominee of The Depository Trust Company, which will act as the Depositary (the
"Depositary"). Interests in the Global Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary and
its participants. Except as described herein, Notes in definitive form will not
be issued.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) COMPANY (1)(3)
<S> <C> <C> <C>
Per Note.................................. 99.444% .65% 98.794%
Total..................................... $248,610,000 $1,625,000 $246,985,000
</TABLE>
(1) Plus accrued interest, if any, from August 26, 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $375,000.
------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and
reject any orders in whole or in part. It is expected that delivery of the Notes
will be made through the book-entry facilities of the Depositary on or about
August 26, 1997.
------------------------
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
SALOMON BROTHERS INC
------------------------
The date of this Prospectus Supplement is August 21, 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NOTES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
UNLESS THE CONTEXT INDICATES OTHERWISE: (I) REFERENCES TO THE "COMPANY"
REFER TO UNITED STATES CELLULAR CORPORATION AND ITS SUBSIDIARIES; (II)
REFERENCES TO "TDS" REFER TO TELEPHONE AND DATA SYSTEMS, INC. AND ITS
SUBSIDIARIES; (III) 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; (IV) REFERENCES TO "RSA" REFER
TO THE RURAL SERVICE AREA, AS USED BY THE FCC IN DESIGNATING NON-MSA CELLULAR
MARKET AREAS; (V) REFERENCES TO CELLULAR "MARKETS" OR "SYSTEMS" REFER TO MSAS,
RSAS OR BOTH; (VI) REFERENCES TO "POPULATION EQUIVALENTS" MEAN THE POPULATION OF
A MARKET, BASED ON DONNELLEY MARKETING SERVICE ESTIMATES FOR 1996 OR FOR SUCH
OTHER YEAR AS INDICATED HEREIN, 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") FROM
THE FCC TO CONSTRUCT OR OPERATE A CELLULAR SYSTEM IN SUCH MARKET.
THE COMPANY
United States Cellular Corporation and its subsidiaries own, operate and
invest in cellular telephone systems throughout the United States. The Company
is the eighth largest cellular telephone company in the United States, based on
the aggregate number of population equivalents it owns, which totaled 25.2
million as of June 30, 1997. Since beginning operations in 1985, the Company has
expanded its cellular networks and customer service operations to include 132
majority-owned and managed ("consolidated") markets as of June 30, 1997. The
Company's consolidated markets served 1,263,000 customers at that date, which
represents a penetration rate of 5.78% of the total consolidated markets'
population of 21.8 million. The Company's 141 managed markets, which include the
132 consolidated markets, are operated as nine market clusters. Each of these
clusters has a total population of more than one million, and five of the
clusters each have a population of more than two million.
The Company has developed its clusters of operations over a period of
several years, primarily through acquisitions and exchanges for controlling
interests in cellular markets. During the first quarter of 1997, the Company
announced an exchange of markets with BellSouth Corporation ("BellSouth"), which
will significantly increase the size of the Company's operations in Wisconsin
and Illinois. The Company expects the transaction, which is subject to certain
conditions and various regulatory and other approvals, to be completed by the
end of 1997.
The Company's objective is to position itself as the first choice of
consumers for wireless communications in the mid-sized and rural markets it
serves. In order to achieve this goal, the Company:
- positions itself as a local company, focusing on building strong
relationships with its customers;
- utilizes a multi-channel distribution system that allows access to many
market segments;
- has built its retail channel of distribution to nearly 400 access points,
primarily stores and kiosks, to make the Company more accessible to
consumers;
- plans to continue investing in infrastructure and technology in order to
provide larger areas of portable coverage for its customer base and
deliver new features and functionality; and
- strives to continuously improve customer satisfaction by enhancing service
offerings and delivery systems.
These strategies are designed to increase the Company's revenues and
maximize long-term profitability by increasing market penetration and
capitalizing on the benefits of the Company's clustered markets.
S-2
<PAGE>
These benefits include (i) economies in the construction and operation of the
Company's wireless telephone network; (ii) increased brand awareness and
improved efficiency of the Company's sales and marketing efforts; and (iii)
increased customer satisfaction resulting from the larger local service area
offered to customers.
Over the past few years, the Company has increased its rate of market
penetration by expanding its clusters and building out its wireless telephone
network. This increase in penetration, along with the increase in the number of
cell sites serving the Company's markets and industry-wide growth in the number
of wireless customers, has led to significant increases in the Company's
revenues.
As a result of growth in revenues and improved operating efficiencies, the
Company has significantly increased its operating cash flows and has generated
operations-driven net income since 1993. The Company anticipates that it will
continue to increase its customer base and revenues through internal growth over
the next few years. Additionally, it may, from time to time, be able to further
expand its clusters through strategic trades or acquisitions.
The Company believes that its strategies employed to meet existing
competition will also be effective against new wireless service providers.
Companies with Personal Communications Services ("PCS") licenses have begun to
offer their products and services in several of the Company's service areas. The
Company has prepared for this new competitive environment by improving and
expanding its wireless coverage, offering new features, products and services to
its customers and enhancing its training of associates. The Company intends to
further capitalize on its incumbent position as a leading wireless provider in
its markets by increasing revenues through aggressive customer acquisition and
improving the retention rate of new and existing customers. Because of the
limited amount of PCS competition to date, the Company has experienced little
effect on its operations as a whole. The Company expects PCS operators to
complete initial deployment of PCS across all of the Company's markets by the
end of 1998.
The Company is a majority owned subsidiary of TDS. The Company benefits from
the extensive telecommunications industry experience of TDS. TDS owns in excess
of 80% of the outstanding equity and in excess of 95% of the voting power of the
Company, Aerial Communications, Inc., its PCS operation, and American Paging,
Inc., its radio paging operation, and 100% of TDS Telecommunications
Corporation, its landline telephone operation.
PROPOSED CREDIT FACILITY
The Company is currently engaged in negotiations regarding a proposed
$500,000,000 unsecured revolving credit facility. This proposed revolving credit
facility would replace the Company's current revolving credit agreement with
TDS, if and when this new facility has been established. The Company, however,
has no immediate plans to borrow funds under the proposed credit facility.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Notes for
the repayment of certain long-term indebtedness and for general corporate
purposes, which may include working capital, capital expenditures and
acquisitions. Pending application of the net proceeds for specific purposes,
such proceeds may be invested in short-term or marketable securities. The
long-term debt intended to be repaid consisted, as of June 30, 1997, of $92.1
million of vendor financing borrowed at a rate of 1.40% over the 90-day
Commercial Paper Rate of high-grade, unsecured notes with various maturities due
through 2003 and $60.3 million borrowed on an unsecured basis under the
Company's current revolving credit agreement with TDS. Amounts borrowed under
such revolving credit agreement bear interest at a floating rate of prime plus
.75% and become due on January 2, 1999. See "Capitalization."
S-3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following summary consolidated financial information for each fiscal
year in the five-year period ended December 31, 1996 and for the six-month
periods ended June 30, 1997 and 1996, respectively, is derived from, and should
be read in conjunction with, the audited consolidated financial statements and
notes thereto and the unaudited condensed consolidated financial statements and
notes thereto incorporated by reference in this Prospectus Supplement. See
"Incorporation of Certain Documents by Reference" in the accompanying
Prospectus. The results for the six-month period ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the full fiscal
year.
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING FINANCIAL DATA
Service revenues(1)(2)................... $ 391,979 $ 304,647 $ 662,681 $ 464,555 $ 313,875 $ 199,834 $ 130,666
Equipment sales revenues................. 10,184 8,465 17,386 15,761 13,755 10,510 9,263
Operating income before depreciation and
amortization and minority share........ 127,191 93,594 196,205 132,213 82,839 36,371 16,934
Depreciation and amortization expense
(3).................................... 61,592 51,751 108,839 89,458 65,454 45,027 29,639
Operating income (loss) before minority
share.................................. 65,599 41,843 87,366 42,755 17,385 (8,656) (12,705)
Minority share of operating income....... (7,248) (5,421) (13,743) (7,902) (5,152) (3,496) (2,615)
Operating income (loss).................. 58,351 36,422 73,623 34,853 12,233 (12,152) (15,320)
Investment income, net of related
amortization expense................... 35,355 21,754 50,127 38,744 25,627 16,005 11,859
Gain on sale of cellular and other
investments(4)......................... 8,237 124,996 132,718 83,494 3,321 4,851 31,396
Interest expense......................... 12,181 11,755 23,111 27,287 21,883 33,190 20,095
Income (loss) before income taxes........ 89,563 174,420 241,569 132,234 21,310 (22,749) 8,181
Net income (loss)........................ $ 50,160 $ 92,442 $ 129,929 $ 99,742 $ 16,393 $ (25,441) $ 6,194
Weighted Average Common and Series A
Common Shares (000s)................... 86,211 85,926 86,041 84,023 79,514 57,152 57,778
Earnings (loss) per Common and Series A
Common Share........................... $ .58 $ 1.08 $ 1.51 $ 1.19 $ .21 $ (.45) $ .11
Additions to property, plant and
equipment.............................. $ 144,097 $ 98,187 $ 219,370 $ 200,554 $ 158,208 $ 84,889 $ 53,325
Ratio of earnings to fixed charges(5).... 6.15x 13.11x 8.81x 4.30x 1.49x .17x 1.24x
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
----------- -----------------------------------------------------
1997 1996 1995 1994 1993 1992
----------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital.......................... $ (31,261) $ (17,835) $ (25,323) $ (33,813) $ (28,386) $ (17,827)
Property, plant and equipment, net....... 745,671 650,754 530,027 368,181 246,414 158,948
Investments:
Cellular entities...................... 204,030 186,791 134,421 99,495 90,104 86,406
Licenses, net of amortization.......... 1,064,328 1,044,141 1,035,846 947,399 824,491 547,171
Marketable equity securities........... -- -- -- 20,145 17,584 18,210
Total assets............................. 2,235,642 2,085,899 1,880,144 1,534,787 1,245,396 855,579
Revolving Credit Agreement- TDS.......... 60,303 -- -- 232,954 141,524 265,766
Long-term debt, excluding current
portion:
Vendor financing....................... 68,553 80,589 98,656 53,381 45,632 55,960
Subordinated convertible
debentures........................... 257,610 250,107 235,750 -- -- --
Other.................................. -- -- -- 4,310 5,498 685
Common shareholders' equity.............. 1,530,116 1,476,202 1,329,454 1,093,967 940,128 450,984
</TABLE>
- ------------------------------
(1) Beginning on January 1, 1997, the Company changed its financial reporting
presentation for certain credits given to customers on their monthly bills.
As of that date, the Company reported the foregone revenues resulting from
these credits as a reduction of local retail revenue. Prior to that date,
these foregone revenues were reported as marketing and selling expense (for
new customers) and general and administrative expense (for current
customers). 1993-1996 amounts have been reclassified to conform to 1997
presentation.
S-4
<PAGE>
(2) Beginning on January 1, 1994, the Company changed its financial reporting
presentation for outbound, or pass-through, roaming revenue. Pass-through
roaming revenue is now treated as an offset to the expense charged by other
cellular carriers, with the net amount included in system operations
expense. 1992-1993 amounts have been reclassified to conform to 1994
presentation.
(3) Represents depreciation and amortization expense included in Operating
Expenses in the Consolidated Statements of Operations.
(4) Gain of $8.2 million for six months ended June 30, 1997 reflects the sales
of one majority-owned market partition and one minority interest. Gain of
$125.0 million for six months ended June 30, 1996 reflects the sales of
eight majority-owned markets, one market partition and one minority
interest; an exchange of markets; and the settlement of two separate legal
matters. Gain of $132.7 million in 1996 reflects the sales of eight
majority-owned markets, one market partition and two minority interests; an
exchange of markets; and the settlement of two separate legal matters. Gain
of $83.5 million in 1995 reflects the sales of six majority-owned markets
and six minority interests, an exchange of markets and the sale of certain
marketable equity securities. Gain of $3.3 million in 1994 reflects an
exchange of minority interests. Gain of $4.9 million in 1993 reflects the
sales of two minority interests. Gain of $31.4 million in 1992 reflects the
sales of one majority-owned market and one minority interest and an exchange
of cellular interests.
(5) For the computation of the earnings ratio: (i) earnings consist of net
income from continuing operations before income taxes, distributions from
minority subsidiaries, minority share in income of subsidiaries that have
fixed charges and amortization of capitalized interest, less equity in
undistributed earnings of unconsolidated investments and minority share of
losses; and (ii) fixed charges consist of interest expense and estimated
interest portion of rentals.
SUMMARY OPERATING DATA
The following table is a summary of the Company's markets and consolidated
operations.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
OR AT JUNE 30, YEAR ENDED OR AT DECEMBER 31,
----------------- -----------------------------------------------------
1997 1996 1995 1994 1993 1992
----------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
MAJORITY-OWNED AND MANAGED
(CONSOLIDATED) MARKETS:(1)
Total population (in thousands)(2)............ 21,844 21,712 22,309 21,314 19,383 15,014
Customers (in thousands)...................... 1,263 1,073 710 421 261 151
Market penetration at end of period........... 5.78% 4.94% 3.18% 1.98% 1.35% 1.00%
Markets in operation.......................... 132 131 137 130 116 92
Cell sites in service......................... 1,485 1,328 1,116 790 522 320
Average monthly revenue per customer(3)....... $56 $64 $71 $79 $83 $88
Churn rate per month.......................... 1.9% 1.9% 2.1% 2.3% 2.3% 2.4%
Marketing cost per net customer addition(3)... $540 $505 $515 $634 $632 $765
TOTAL MARKETS MANAGED AND TO BE MANAGED BY THE
COMPANY:......................................
Population equivalents (in thousands)(4)...... 22,701 20,890 20,743 21,974 21,020 18,682
Markets....................................... 142 141 140 150 144 129
MARKETS MANAGED BY OTHERS:(5)
Population equivalents (in thousands)(4)...... 2,953 4,501 3,990 3,745 3,547 3,642
Markets in operation.......................... 49 66 61 57 61 64
TOTAL MARKETS:
Population equivalents (in thousands)(4)...... 25,654 25,391 24,733 25,719 24,567 22,324
Markets....................................... 191 207 201 207 205 193
</TABLE>
- ------------------------------
(1) Includes two markets managed by third parties in 1994 and one in 1993 and
1992, and one wholly owned reseller operation in 1992.
(2) Based on the Donnelley Marketing Service estimates for the respective years
(1996 estimates used at June 30, 1997).
(3) 1996-1993 average monthly revenue per customer and marketing cost per net
customer addition have been reclassified to conform to 1997 presentation.
See Footnote 1 under "Summary Consolidated Financial Information."
(4) 1996 Donnelley Marketing Services estimates are used for all years. Includes
population equivalents relating to interests which are acquirable or to be
divested in the future.
(5) Represents markets in which the Company owns or has the right to acquire or
divest a minority interest and which are managed by others.
S-5
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at June 30,
1997 on an actual basis and on a pro forma basis after giving effect to the sale
of the Notes and the repayment of indebtedness with certain of the proceeds
therefrom as described in "Use of Proceeds" in this Prospectus Supplement.
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------
ACTUAL PRO FORMA
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt(1).................................................. $ 23,532 $ --
------------ ------------
------------ ------------
Long-term debt:
Revolving credit agreement--TDS(2).................................................. $ 60,303 $ --
Vendor financing, excluding current portion(1)...................................... 68,553 --
LYONs(3)............................................................................ 257,610 257,610
7 1/4% Notes due 2007............................................................... -- 250,000
------------ ------------
Total long-term debt.............................................................. 386,466 507,610
------------ ------------
Minority interest..................................................................... 55,839 55,839
Common shareholders' equity(4):
Common Shares, $1.00 par value, authorized 140,000,000 shares; issued and
outstanding 53,176,502 shares(5).................................................. 53,177 53,177
Series A Common Shares, $1.00 par value, authorized 50,000,000 shares; issued and
outstanding 33,005,877 shares(5).................................................. 33,006 33,006
Additional paid-in capital.......................................................... 1,248,760 1,248,760
Retained earnings................................................................... 195,173 195,173
------------ ------------
Total common shareholders' equity................................................. 1,530,116 1,530,116
------------ ------------
Total capitalization.............................................................. $ 1,972,421 $ 2,093,565
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(1) Reflects the actual amount outstanding at June 30, 1997 under an Amended and
Restated Term Loan Agreement, dated December 22, 1994 (the "Vendor Financing
Agreement"), between the Company and NTFC Capital Corporation. Loans under
the Vendor Financing Agreement bear interest at a rate equal to a 90-day
commercial paper rate plus 1.40%. At June 30, 1997, a total of $92.1 million
of borrowings were outstanding under the Vendor Financing Agreement. This
entire amount is intended to be repaid with a portion of the net proceeds
from the offering of the Notes.
(2) Reflects the actual amount outstanding at June 30, 1997 under the Company's
current revolving credit agreement with TDS. Loans under such revolving
credit agreement bear interest at a floating rate of prime plus
three-fourths of one percent and any amounts outstanding are due and payable
on January 2, 1999. This entire amount is intended to be repaid with a
portion of the net proceeds from the offering of the Notes.
(3) The LYONs are zero coupon subordinated convertible debentures, due 2015,
which accrete interest at 6% annually, but do not require current cash
payments of interest. The amount of LYONs outstanding is net of unamortized
discount of $487.4 million.
(4) The LYONs are convertible into 6,158,750 Common Shares of the Company. Pro
Forma Common Shareholders' Equity does not reflect any such conversion of
LYONs into Common Shares of the Company.
(5) TDS owned an aggregate of 69,747,348 shares of common stock of the Company
(including all of the Series A Common Shares outstanding) at June 30, 1997,
representing 80.9% of the combined total of the Company's outstanding common
stock and 95.7% of their combined voting power.
S-6
<PAGE>
CERTAIN TERMS OF THE NOTES
The Notes will be issued under an Indenture dated as of July 31, 1997 (the
"Indenture") between the Company and The First National Bank of Chicago, as
Trustee. The Indenture constitutes the Indenture described in the accompanying
Prospectus and the Notes constitute Debt Securities described in the
accompanying Prospectus. The following description of the particular terms of
the Notes offered hereby supplements the description of the general terms and
provisions set forth in the Prospectus, to which description reference is hereby
made. References to "the Company" in this section, unless the context indicates
otherwise, are to United States Cellular Corporation and not its subsidiaries or
any other entities in which it holds an interest.
GENERAL
The Notes will mature on August 15, 2007, and will be limited to
$250,000,000 aggregate principal amount. Each Note will bear interest at the
rate per annum stated on the cover page hereof from August 26, 1997 or from the
most recent interest payment date to which interest has been paid, payable
semi-annually on February 15 and August 15 of each year (each such date being
referred to herein as an "Interest Payment Date"), commencing February 15, 1998,
to the person in whose name a Note is registered at the close of business on
February 1 or August 1, as the case may be, preceding such Interest Payment
Dates. Interest on the Notes will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Notes will be unsecured and will be PARI PASSU with all other unsecured
and unsubordinated indebtedness of the Company. However, because the Company is
a holding company which conducts substantially all of its operations through
subsidiaries, the right of the Company, and hence the right of creditors of the
Company (including the holders of the Notes), to participate in any distribution
of the assets of any subsidiary upon its liquidation or reorganization or
otherwise is necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent that claims of the Company itself as a creditor
of the subsidiary may be recognized.
The Indenture provision described under "Description of Debt Securities--
Defeasance and Discharge" in the accompanying Prospectus will be applicable to
the Notes. The Indenture does not contain any covenants or other provisions
applicable to the Notes which might afford beneficial owners of Notes protection
in the event of a highly leveraged transaction, change in credit rating of the
Notes or other similar occurrence.
The Notes will not be entitled to any sinking fund.
OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at the option of the
Company at any time on or after August 15, 2004, at a redemption price equal to
100% of the principal amount of the Notes to be redeemed, plus accrued interest
thereon, if any, to the date of redemption.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Notes to be redeemed.
In case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in principal amount at maturity or less shall be
redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount at maturity equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note.
S-7
<PAGE>
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest will be made by the
Company in immediately available funds. The Notes will trade in the Depositary's
Same-Day Funds Settlement System until maturity, and secondary market trading
activity in the Notes will therefore be required by the Depositary to settle in
immediately available funds.
GLOBAL NOTES
The Company has established a depositary arrangement with The Depository
Trust Company (the "Depositary") with respect to the Notes, the terms of which
are summarized below.
Upon issuance, all Notes will be represented by Global Notes. The Global
Notes representing the Notes will be deposited with, or on behalf of, the
Depositary and will be registered in the name of the Depositary or a nominee of
the Depositary. No Global Notes may be transferred except as a whole by a
nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or such nominee to a successor of the
Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a Global
Note, the Depositary or its nominee, as the case may be, will be the sole Holder
of the Notes represented thereby for all purposes under the Indenture. Except as
otherwise provided in this section, the Beneficial Owners (as defined below) of
the Global Notes representing the Notes will not be entitled to receive physical
delivery of certificated Notes and will not be considered the holders thereof
for any purpose under the Indenture, and no Global Note representing the Notes
shall be exchangeable or transferable. Accordingly, each Beneficial Owner must
rely on the procedures of the Depositary and, if such Beneficial Owner is not a
Participant, on the procedures of the Participant through which such Beneficial
Owner owns its interest in order to exercise any rights of a Holder under such
Global Note or the Indenture. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
certificated form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Note representing the Notes.
The Global Notes representing the Notes will be exchangeable for
certificated Notes of like tenor and terms and of differing authorized
denominations aggregating a like principal amount, only if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the Global Notes, (ii) the Depositary ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (iii) the Company in its sole discretion determines that the Global Notes
shall be exchangeable for certificated Notes or (iv) there shall have occurred
and be continuing an Event of Default under the Indenture with respect to the
Notes. Upon any such exchange, the certificated Notes shall be registered in the
names of the Beneficial Owners of the Global Notes representing the Notes, which
names shall be provided by the Depositary's relevant Participants (as identified
by the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Notes. The
Notes will be issued as fully registered securities registered in the name
of Cede & Co. (the Depositary's partnership nominee). Fully registered
Global Notes will be issued for the Notes, in the aggregate principal amount
of such issue, and will be deposited with the Depositary.
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and
a "clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act. The Depositary holds securities that its participants
("Participants") deposit with the Depositary.
S-8
<PAGE>
The Depositary also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes to
Participants' accounts, thereby eliminating the need for physical movement
of securities certificates. Direct Participants of the Depositary ("Direct
Participants") include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain
other organizations. The Depositary is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the Depositary's system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through
or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to
the Depositary and its Participants are on file with the Securities and
Exchange Commission (the "Commission").
Purchases of Notes under the Depositary's system must be made by or
through Direct Participants, which will receive a credit for such Notes on
the Depositary's records. The ownership interest of each actual purchaser of
each Note represented by a Global Note ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from the Depositary of their purchase,
but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of
their holdings, from the Direct or Indirect Participants through which such
Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Global Notes representing the Notes are to be accomplished
by entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners of the Global Notes representing the Notes will
not receive certificated Notes representing their ownership interests
therein, except in the event that use of the book-entry system for such
Notes is discontinued.
To facilitate subsequent transfers, all Global Notes representing the
Notes which are deposited with, or on behalf of, the Depositary are
registered in the name of the Depositary's nominee, Cede & Co. The deposit
of Global Notes with, or on behalf of, the Depositary and their registration
in the name of Cede & Co. effect no change in beneficial ownership. The
Depositary has no knowledge of the actual Beneficial Owners of the Global
Notes representing the Notes; the Depositary's records reflect only the
identity of the Direct Participants to whose accounts such Notes are
credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and by
Direct and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Global Notes representing the Notes. Under its usual procedure, the
Depositary mails an Omnibus Proxy to the Company as soon as possible after
the applicable record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts
the Notes are credited on the applicable record date (identified in a
listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments on the
Global Notes representing the Notes will be made to the Depositary. The
Depositary's practice is to credit Direct Participants' accounts on the
applicable payment date in accordance with their respective holdings shown
on the Depositary's records unless the Depositary has reason to believe that
it will not receive payment on such date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of the
S-9
<PAGE>
Depositary, the Trustee or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal, premium, if any, and/or interest, if any, to the Depositary is
the responsibility of the Company or the Trustee, disbursement of such
payments to Direct Participants shall be the responsibility of the
Depositary, and disbursement of such payments to the Beneficial Owners shall
be the responsibility of Direct and Indirect Participants.
The Depositary may discontinue providing its services as securities
depository with respect to the Notes at any time by giving reasonable notice
to the Company or the Trustee. Under such circumstances, in the event that a
successor securities depositary is not obtained, certificated Notes are
required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depositary). In
that event, certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but the Company assumes no responsibility for the accuracy thereof.
A further description of the Depositary's procedures with respect to the
Global Notes representing the Notes is set forth in the accompanying Prospectus
under "Description of Debt Securities--Registered Global Securities."
THE TRUSTEE
The First National Bank of Chicago is the Trustee under the Indenture. The
Company maintains normal banking relations with The First National Bank of
Chicago.
S-10
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among the Company and each of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation and
Salomon Brothers Inc (collectively, the "Underwriters"), the Company has agreed
to sell to each of the Underwriters and each of the Underwriters severally has
agreed to purchase from the Company the aggregate principal amount of the Notes
set forth opposite its name below. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters will be obligated to purchase all of the Notes if any are
purchased.
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT
- -------------------------------------------------------------------------------------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................................ $ 125,000,000
Credit Suisse First Boston Corporation................................................ 62,500,000
Salomon Brothers Inc.................................................................. 62,500,000
----------------
Total....................................................................... $ 250,000,000
----------------
----------------
</TABLE>
The Underwriters have advised the Company that they propose to offer the
Notes to the public at the public offering price set forth on the cover page of
this Prospectus Supplement and to certain dealers at such price less a
concession not in excess of .4% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of .25% of the principal amount of the Notes to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
There is no public trading market for the Notes and the Company does not
intend to apply for listing of the Notes on any national securities exchange or
for quotation of the Notes on any automated dealer quotation system. The Company
has been advised by the Underwriters that they presently intend to make a market
in the Notes after the consummation of the offering contemplated hereby,
although they are under no obligation to do so and may discontinue any
market-making activities at any time without any notice. No assurance can be
given as to the liquidity of the trading market for the Notes or that an active
public market for the Notes will develop. If an active public trading market for
the Notes does not develop, the market price and liquidity of the Notes may be
adversely affected. If the Notes are traded, they may trade at a discount from
their initial offering price, depending on prevailing interest rates, the market
for similar securities, the performance of the Company and certain other
factors.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments that the Underwriters may be required to make in
respect thereof.
Until the distribution of the Notes is completed, rules of the Commission
may limit the ability of the Underwriters and certain selling group members to
bid for and purchase the Notes. As an exception to these rules, the Underwriters
are permitted to engage in certain transactions that stabilize the price of the
Notes. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
the offering, i.e., if they sell more Notes than are set forth on the cover page
of this Prospectus Supplement, the Underwriters may reduce that short position
by purchasing Notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the
S-11
<PAGE>
Notes. In addition, neither the Company nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
From time to time the Underwriters and certain of their affiliates have
engaged, and may in the future engage, in transactions with, and perform
services for, the Company and its affiliates in the ordinary course of business.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by Sidley & Austin, Chicago, Illinois, and certain legal matters will be passed
upon for the Underwriters by Mayer, Brown & Platt, Chicago, Illinois. Stephen P.
Fitzell and Sherry S. Treston; Secretary and Assistant Secretary, respectively,
of the Company are partners of Sidley & Austin. Walter C.D. Carlson, a director
of the Company and TDS, and a trustee and beneficiary of the voting trust which
controls TDS and the Company, is a partner of Sidley & Austin. Michael G. Hron
and William S. DeCarlo, the Secretary and Assistant Secretary of TDS,
respectively, are partners of Sidley & Austin. Mayer, Brown & Platt from time to
time acts as counsel in certain matters for the Company, TDS and members of the
Carlson family. Debora de Hoyos, the spouse of Walter C.D. Carlson and a
director of American Paging, Inc., a publicly traded subsidiary of TDS, is a
partner of Mayer, Brown & Platt.
S-12
<PAGE>
PROSPECTUS
[LOGO]
UNITED STATES CELLULAR CORPORATION
$400,000,000
DEBT SECURITIES
----------------
United States Cellular Corporation ("USM") may from time to time offer
debentures, notes and/or other unsecured evidences of indebtedness (the "Debt
Securities") at an aggregate initial offering price not to exceed U.S.
$400,000,000 or its equivalent in any other currency or units based on or
relating to foreign currencies. The Debt Securities may be offered in one or
more series in amounts, at prices and on terms to be determined at the time of
sale. The accompanying Prospectus Supplement sets forth with regard to the
series of Debt Securities in respect of which this Prospectus is being delivered
(the "Offered Securities") the specific designation, aggregate principal amount,
original issue discount, if any, denomination (which may be in United States
dollars, in any other currency or in units based on or relating to foreign
currencies), maturity, interest rate (which may be fixed or variable) and time
of payment of interest, if any, any terms for redemption at the option of USM or
the holder, any terms for sinking fund payments, any listing on a securities
exchange, the initial public offering price and any other terms in connection
with the offering and sale of the Offered Securities.
The Debt Securities may be issued in registered form, in bearer form with
coupons attached or both. In addition, all or a portion of the Debt Securities
of any series may be issuable in temporary or permanent registered global form
which will be exchangeable only under certain conditions for definitive Debt
Securities.
USM may sell Debt Securities to or through underwriters or dealers, and also
may sell Debt Securities to other purchasers directly or through agents. The
accompanying Prospectus Supplement sets forth the names of any underwriters,
dealers or agents involved in the sale of the Offered Securities, the principal
amounts, if any, to be purchased by underwriters and the compensation of such
underwriters, dealers or agents. See "Plan of Distribution."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement applicable to the Offered
Securities.
------------------------
The date of this Prospectus is August 6, 1997.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER
THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES TO ANY PERSON IN ANY JURISDICTION TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
USM is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; New
York Regional Office, Public Reference Room, 7 World Trade Center, 13th Floor,
New York, New York 10048; and Chicago Regional Office, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. USM's Common Shares are listed on
the American Stock Exchange, and reports, proxy statements and other information
concerning USM may be inspected at the office of the American Stock Exchange,
Inc., 86 Trinity Place, New York, New York 10006. The Company is subject to the
electronic filing requirements of the Commission. Accordingly, pursuant to the
rules and regulations of the Commission, certain documents, including annual and
quarterly reports and proxy statements, filed by the Company with the Commission
have been and will be filed electronically. The Commission maintains a Web site
at http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission.
This Prospectus constitutes a part of a Registration Statement filed by USM
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to USM and the Debt Securities.
The Registration Statement and any amendments thereto, including exhibits filed
as a part thereof, are available for inspection and copying as set forth above.
Statements contained herein concerning the provisions of any document are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by USM with the Commission under
the Exchange Act are incorporated herein by reference: (a) the Company's Annual
Report on Form 10-K for the year ended December 31, 1996; (b) the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and (c) the
Company's Current Report on Form 8-K dated February 4, 1997.
2
<PAGE>
All documents filed by USM pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the termination
of the offering made by this Prospectus shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes hereof to the
extent that a statement contained herein (or in any other subsequently filed
document which also is incorporated by reference herein) modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded. All information
appearing in this Prospectus is qualified in its entirety by the information and
financial statements (including notes thereto) appearing in the documents
incorporated herein by reference.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS THERETO) ARE
AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST BY ANY PERSON TO WHOM
THIS PROSPECTUS HAS BEEN DELIVERED, FROM EXTERNAL REPORTING, UNITED STATES
CELLULAR CORPORATION, 8410 WEST BRYN MAWR AVENUE, SUITE 700, CHICAGO, ILLINOIS
60631 (TELEPHONE 773-399-8900).
This Prospectus and the accompanying Prospectus Supplement contain
"forward-looking" statements as defined in the Private Securities Litigation
Reform Act of 1995, that are based on current expectations, estimates and
projections. Statements that are not historical facts, including statements
about the Company's beliefs and expectations, are forward-looking statements.
These statements contain potential risks and uncertainties; therefore, actual
results may differ materially. The Company undertakes no obligation to update
publicly any forward-looking statements whether as a result of new information,
future events or otherwise.
Important factors that may affect these projections or expectations include,
but are not limited to: changes in the overall economy; changes in competition
in markets in which the Company operates; advances in telecommunications
technology; changes in the telecommunications regulatory environment; pending
and future litigation; availability of future financing; start-up of Personal
Communications Services operations; and unanticipated changes in growth in
cellular customers, penetration rates, churn rates and the mix of products and
services offered in the Company's markets. Readers should evaluate any
statements in light of these important factors.
THE COMPANY
United States Cellular Corporation and its subsidiaries (the "Company") own,
operate and invest in cellular telephone systems throughout the United States.
The Company's managed markets are operated as market clusters, which have been
developed over a period of several years, primarily through acquisitions and
exchanges for controlling interests in cellular markets. The Company seeks to
position itself as the first choice of consumers for wireless communications in
the mid-sized and rural markets it serves. The Company's objectives are to grow
revenues and maximize long-term profitability by increasing market penetration
and by capitalizing on the benefits of its clustered markets.
The Company was incorporated in Delaware in 1983 and is a majority owned
subsidiary of Telephone and Data Systems, Inc. ("TDS"). Its executive offices
are located at 8410 West Bryn Mawr Avenue, Suite 700, Chicago, Illinois 60631.
Its telephone number is 773-399-8900.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Debt Securities for
general corporate purposes, including working capital, the repayment or
refinancing of indebtedness, future acquisitions and/or capital expenditures.
Pending application of the net proceeds for specific purposes, such proceeds may
be invested in short-term or marketable securities.
3
<PAGE>
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges for the Company for the three months ended March 31, 1997 and for each
of the years ended December 31, 1992 through 1996.
<TABLE>
<CAPTION>
(UNAUDITED) THREE YEAR ENDED DECEMBER 31,
MONTHS ENDED MARCH -----------------------------------------------------
31, 1997 1996 1995 1994 1993 1992
- ------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
3.84x 8.81x 4.30x 1.49x .17x 1.24x
</TABLE>
For purposes of calculating this ratio, earnings consist of net income from
continuing operations before income taxes, distributions from minority
subsidiaries, minority share in income of subsidiaries that have fixed charges
and amortization of capitalized interest, less equity in undistributed earnings
of unconsolidated investments, and minority share of losses. Fixed charges
consist of interest expense and estimated interest portion of rentals.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture dated as of July 31,
1997 (the "Indenture") between USM and The First National Bank of Chicago, as
Trustee (the "Trustee"), the form of which is incorporated by reference as an
exhibit to the Registration Statement of which this Prospectus is a part. The
following statements with respect to the Indenture and the Securities (as
hereinafter defined) are brief summaries of certain provisions of the Indenture
and do not purport to be complete; such statements are subject to the detailed
referenced provisions of the Indenture, including the definitions of capitalized
terms used under this caption. Wherever particular sections or defined terms of
the Indenture are referred to, such sections or defined terms are incorporated
herein by reference as part of the statement made, and the statement is
qualified in its entirety by such reference. The term "Securities", as used
under this caption, refers to all securities issued under the Indenture,
including the Debt Securities. References to "USM" in this section, unless the
context indicates otherwise, are to United States Cellular Corporation and not
its subsidiaries or any other entities in which it holds an interest.
GENERAL
The Indenture does not limit the aggregate principal amount of Securities
(which may include debentures, notes and other unsecured evidences of
indebtedness) which may be issued thereunder, and Securities may be issued
thereunder from time to time in one or more series and may be denominated and
payable in foreign currencies or units based on or relating to foreign
currencies, including European Currency Units. Special United States federal
income tax considerations applicable to any Securities so denominated will be
described in the Prospectus Supplement relating thereto. Unless otherwise
indicated in the applicable Prospectus Supplement, the Indenture also permits
USM to increase the principal amount of any series of Securities previously
issued and to issue such increased principal amount. (Section 2.3)
The Prospectus Supplement will set forth the following terms relating to the
Offered Securities: (1) the specific designation of the Offered Securities; (2)
any limit on the aggregate principal amount of the Offered Securities; (3) the
date or dates, if any, on which the Offered Securities will mature; (4) the rate
or rates per annum (which may be fixed or variable) at which the Offered
Securities will bear interest, if any, the date or dates on which any such
interest will be payable and the Record Dates for any interest payable on the
Offered Securities which are Registered Securities; (5) original issue discount,
if any; (6) any mandatory or optional redemption or sinking fund provisions,
including the period or periods within which, the price or prices at which and
the terms and conditions upon which the Offered Securities may be redeemed or
purchased at the option of USM or otherwise; (7) whether the Offered Securities
will be issuable in registered form or bearer form or both, and, if issuable in
bearer form, the restrictions as to the offer, sale and delivery of the Offered
Securities in bearer form and as to exchanges between registered
4
<PAGE>
and bearer form; (8) whether the Offered Securities will be issuable in the form
of one or more temporary or permanent Global Securities and, if so, the identity
of the Depositary for such Global Securities; (9) the denominations of $1,000
and any multiple thereof, and the denominations in which any of the Offered
Securities which are in bearer form will be issuable, if other than the
denominations of $1,000 and $5,000; (10) each office or agency where the
principal of and any premium and interest on the Offered Securities will be
payable, and each office or agency where the Offered Securities may be presented
for registration of transfer or exchange; (11) if other than United States
dollars, the foreign currency or the units based on or relating to foreign
currencies in which the Offered Securities are denominated and/or in which the
payment of the principal of and any premium and interest on the Offered
Securities will or may be payable; (12) certain United States federal income tax
consequences, if applicable; and (13) any other terms of the Offered Securities
(which terms shall not adversely affect the interests of any Holders of
Securities then Outstanding), including additions to or deletions from the
covenants and events of default with respect to the Offered Securities.
Securities may be issued under the Indenture bearing no interest or interest
at a rate below the prevailing market rate at the time of issuance, to be
offered and sold at a discount below their stated principal amount. United
States federal income tax consequences and other special considerations
applicable to any such discounted Securities or to other Securities offered and
sold at par which are treated as having been issued at a discount for United
States federal income tax purposes will be described in the Prospectus
Supplement relating thereto.
The Securities and any coupons appertaining thereto will be unsecured and
will rank PARI PASSU with all other unsecured and unsubordinated indebtedness of
USM. However, since USM is a holding company, the right of USM, and hence the
right of the creditors of USM (including the Holders of Securities), to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of such subsidiary, except to the extent that claims of USM
as a creditor of such subsidiary may be recognized. There is no restriction in
the Indenture against subsidiaries of USM incurring secured or unsecured
indebtedness or issuing secured or unsecured securities. The ability of USM to
make payments of principal and interest on the Debt Securities will be dependent
upon the payment to it by its subsidiaries of dividends, distributions, loans or
advances.
The Indenture does not contain covenants or other provisions designed to
afford Holders of Securities protection in the event of a highly leveraged
transaction, change in credit rating or other similar occurrence.
EXCHANGE AND TRANSFER
Securities may be presented for exchange and registered Securities may be
presented for registration of transfer at the offices, and subject to the
restrictions, set forth therein and in the applicable Prospectus Supplement
without service charge, but upon payment of any taxes or other governmental
charges due in connection therewith, subject to any applicable limitations
contained in the Indenture. USM has appointed the Trustee as Security Registrar.
Securities in bearer form and the coupons appertaining thereto, if any, will be
transferable by delivery. (Sections 2.8 and 3.2)
PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of the principal of and the premium and interest, if any, on all Securities
(other than a Registered Global Security) in registered form will be made at the
office or agency of the Trustee in the Borough of Manhattan, The City of New
York, except that, at the option of USM, payment of any interest may be made (i)
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register or (ii) by wire transfer to an account
maintained by the Person entitled thereto as specified in the Security Register.
(Sections 3.1 and 3.2) Unless otherwise indicated in the applicable Prospectus
Supplement, payment of any
5
<PAGE>
interest due on Securities in registered form will be made to the Persons in
whose name such Registered Securities are registered at the close of business on
the Record Date for such interest payments. (Section 2.7)
REGISTERED GLOBAL SECURITIES
The registered Securities of a particular series may be issued in the form
of one or more Registered Global Securities which will be deposited with a
Depositary, or its nominee, each of which will be identified in the Prospectus
Supplement relating to such series. Unless and until exchanged, in whole or in
part, for Securities in definitive registered form, a Registered Global Security
may not be transferred except as a whole by the Depositary for such Registered
Global Security to a nominee of such Depositary, by a nominee of such Depositary
to such Depositary or another nominee of such Depositary or by such Depositary
or any such nominee to a successor of such Depositary or a nominee of such
successor. (Section 2.8)
The specific terms of the depositary arrangement with respect to any portion
of a particular series of Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such series.
USM anticipates that the following provisions will apply to all depositary
arrangements:
Upon the issuance of a Registered Global Security, the Depositary therefor
or its nominee will credit, on its book entry and registration system, the
respective principal amounts of the Securities represented by such Registered
Global Security to the accounts of such persons having accounts with such
Depositary ("participants") as shall be designated by the underwriters or agents
participating in the distribution of such Securities or by USM if such
Securities are offered and sold directly by USM. Ownership of beneficial
interests in a Registered Global Security will be limited to participants or
persons that may hold beneficial interests through participants. Ownership of
beneficial interests in a Registered Global Security will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
the Depositary therefor or its nominee (with respect to beneficial interests of
participants) or by participants or persons that hold through participants (with
respect to interests of persons other than participants). The laws of some
states require certain purchasers of securities to take physical delivery
thereof in definitive form. Such depositary arrangements and such laws may
impair the ability to transfer beneficial interests in a Registered Global
Security.
So long as the Depositary for a Registered Global Security or its nominee is
the registered owner thereof, such Depositary or such nominee, as the case may
be, will be considered the sole owner or Holder of the Securities represented by
such Registered Global Security for all purposes under the Indenture. Except as
provided below, owners of beneficial interests in a Registered Global Security
will not be entitled to have Securities of the series represented by such
Registered Global Security registered in their names, will not receive or be
entitled to receive physical delivery of Securities of such series in definitive
form and will not be considered the owners or Holders thereof under the
Indenture.
Principal, premium, if any, and interest payments on a Registered Global
Security registered in the name of a Depositary or its nominee will be made to
such Depositary or nominee, as the case may be, as the registered owner of such
Registered Global Security. None of USM, the Trustee or any paying agent for
Securities of the series represented by such Registered Global Security will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial interests in such Registered Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial interests.
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USM expects that the Depositary for a Registered Global Security or its
nominee, upon receipt of any payment of principal, premium or interest, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amounts of such
Registered Global Security as shown on the records of such Depositary or its
nominee. USM also expects that payments by participants to owners of beneficial
interests in such Registered Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name",
and will be the responsibility of such participants.
If the Depositary for a Registered Global Security representing Securities
of a particular series is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by USM within 90 days,
USM will issue Securities of such series in definitive form in exchange for such
Registered Global Security. In addition, USM may at any time and in its sole
discretion determine not to have the Securities of a particular series
represented by one or more Registered Global Securities and, in such event, will
issue Securities of such series in definitive form in exchange for all of the
Registered Global Securities representing Securities of such series.
CERTAIN COVENANTS OF USM
Under the Indenture, USM has agreed that it will not engage in certain
transactions, as described below.
LIMITATION ON SECURED DEBT. USM will not create or incur any Secured Debt
without in either case effectively providing that Debt Securities (together
with, if USM shall so determine, any other Debt of or guaranteed by USM ranking
equally with the Debt Securities) shall be secured equally and ratably with (or,
at the option of USM, prior to) such Secured Debt, with certain stated
exceptions. These exceptions permit (a) Secured Debt (i) in respect of Liens on
property existing at the time such property is acquired by USM, (ii) in respect
of Liens created upon or within 270 days following the acquisition or
construction of property (including any improvements to existing property) to
secure the payment of all or part of the purchase price thereof, or (iii)
incurred by USM prior to, at the time of or within 270 days following the
acquisition of property which is subject to a related Lien, which Secured Debt
is incurred for the purpose of financing all or part of the purchase price
thereof, provided that no such Lien applies to any property theretofore owned by
USM (including property transferred by USM to any subsidiary of USM in
contemplation of or in connection with the creation of such Lien) or to any
property of USM other than the property so acquired (other than, in the case of
construction or improvement, any theretofore unimproved real property or portion
thereof on which the property so constructed, or the improvement, is located);
(b) Secured Debt in respect of Liens on property of a Person (i) existing at the
time such Person is merged into or consolidated with USM or at the time of a
sale, lease or other disposition of the properties of a Person as an entirety or
substantially as an entirety to USM, (ii) resulting from such merger,
consolidation, sale, lease or disposition by virtue of any Lien on property
granted by USM prior to such merger, consolidation, sale, lease or disposition
(and not in contemplation thereof or in connection therewith) which applies to
after-acquired property of USM or (iii) resulting from such merger,
consolidation, sale, lease or disposition pursuant to a Lien or contractual
provision granted or entered into by such Person prior to such merger,
consolidation, sale, lease or disposition (and not at the request of USM);
PROVIDED, HOWEVER, that any such Lien referred to in clause (i) shall not apply
to any property of USM other than the property subject thereto at the time such
Person or properties were acquired and any such Lien referred to in clause (ii)
or (iii) shall not apply to any property of USM other than the property so
acquired; (c) Liens existing at the date of the Indenture; (d) Liens in favor of
a government or governmental entity to secure partial progress, advance or other
payments, or other obligations, or to secure any Debt incurred for the purpose
of financing all or any part of the cost of acquiring, constructing or improving
the property subject thereto (including, without limitation, Liens incurred in
connection with industrial revenue, pollution control, private activity bond or
similar financing); (e) Liens arising by reason
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of deposits with, or the giving of any form of security to, any governmental
agency or any body created or approved by law or governmental regulation, which
Lien is required by law or governmental regulation as a condition to the
transaction of any business or the exercise of any privilege, franchise, license
or permit; (f) Liens for taxes, assessments or governmental charges or levies
not yet delinquent or governmental charges or levies already delinquent, the
validity of which charge or levy is being contested in good faith and for which
any reserves required in accordance with generally accepted accounting
principles have been established; (g) Liens (including judgment liens) arising
in connection with legal proceedings so long as such proceedings are being
contested in good faith and, in the case of judgment liens, execution thereon is
stayed and for which any reserves required in accordance with generally accepted
accounting principles have been established; and (h) Secured Debt secured by any
extension, renewal or replacement (or successive extensions, renewals or
replacements) of any Liens referred to in the foregoing clauses (a) to (g),
inclusive (provided that the principal amount of Secured Debt secured thereby
does not exceed the principal amount of such Debt immediately prior to such
extension, renewal or replacement, and that any Lien created in connection
therewith is limited to all or part of the property (plus improvements to such
property) which secured the Secured Debt so extended, renewed or replaced).
(Section 3.6)
The foregoing restrictions do not apply if, immediately after the incurrence
of such Secured Debt (giving effect to the application of the proceeds
therefrom), the aggregate principal amount of Secured Debt (other than Secured
Debt described in clauses (a) to (h), inclusive, of the immediately preceding
paragraph), plus the aggregate amount of Capitalized Rent in respect of Sale and
Leaseback Transactions (other than Sale and Leaseback Transactions the proceeds
of which are or will be applied as described in clauses (a) to (e) inclusive,
under "Limitation on Sale and Leaseback Transactions" below), would not exceed
10% of Consolidated Capitalization. (Sections 1.1 and 3.6)
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. USM will not enter into any
Sale and Leaseback Transaction unless immediately after the completion of such
Sale and Leaseback Transaction (giving effect to the application of the proceeds
therefrom), the aggregate amount of Capitalized Rent in respect of Sale and
Leaseback Transactions (other than Sale and Leaseback Transactions described in
clauses (a) to (e), inclusive, of the immediately succeeding paragraph), plus
the aggregate principal amount of Secured Debt (other than Secured Debt
described in clauses (a) to (h), inclusive, under "Limitation on Secured Debt"
above), would not exceed 10% of Consolidated Capitalization. (Section 3.7)
The foregoing restrictions do not apply to, and there shall be excluded in
computing the aggregate amount of Capitalized Rent for the purpose of such
restrictions, the following Sale and Leaseback Transactions: (a) any Sale and
Leaseback Transaction entered into to finance the payment of all or any part of
the purchase price of property acquired or constructed by USM (including any
improvements to existing property) or entered into prior to, at the time of or
within 270 days after the acquisition or construction of such property, which
Sale and Leaseback Transaction is entered into for the purpose of financing all
or part of the purchase or construction price thereof; PROVIDED, HOWEVER, that
in the case of any such acquisition, such Sale and Leaseback Transaction shall
not involve any property transferred by USM to a subsidiary thereof in
contemplation of or in connection with such Sale and Leaseback Transaction or
involve any property of USM other than the property so acquired (other than, in
the case of construction or improvement, any theretofore unimproved real
property or portion thereof on which the property so constructed, or the
improvement, is located); (b) any Sale and Leaseback Transaction involving
property of a Person existing at the time such Person is merged into or
consolidated with USM or at the time of a sale, lease or other disposition of
the properties of a Person as an entirety or substantially as an entirety to
USM; (c) any Sale and Leaseback Transaction in which the lessor is a government
or governmental entity and which Sale and Leaseback Transaction is entered into
to secure partial progress, advance or other payments, or other obligations,
pursuant to any contract or statute or to secure any Debt incurred for the
purpose of financing all or any part of the cost of constructing or improving
the property subject to such Sale and Leaseback Transaction (including, without
limitation, Sale and Leaseback Transactions incurred in connection with
pollution control, industrial revenue, private activity bond or similar
financing); (d) any
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Sale and Leaseback Transaction involving the extension, renewal or replacement
(or successive extensions, renewals or replacements) in whole or in part of a
lease pursuant to a Sale and Leaseback Transaction referred to in the foregoing
clauses (a) to (c), inclusive; PROVIDED, HOWEVER, that such lease extension,
renewal or replacement shall be limited to all or any part of the same property
leased under the lease so extended, renewed or replaced (plus improvements to
such property); and (e) any Sale and Leaseback Transaction the net proceeds of
which are at least equal to the fair value (as determined by the Board of
Directors of USM) of the property leased pursuant to such Sale and Leaseback
Transaction, so long as within 270 days of the effective date of such Sale and
Leaseback Transaction, USM applies (or irrevocably commits to an escrow account
for the purpose or purposes hereinafter mentioned) an amount equal to the net
proceeds of such Sale and Leaseback Transaction to either (x) the purchase of
other property having a fair value at least equal to the fair value of the
property leased in such Sale and Leaseback Transaction and having a similar
utility and function, or (y) the retirement or repayment (other than any
mandatory retirement or repayment at maturity) of (i) Securities, (ii) other
Funded Debt of USM which ranks prior to or on a parity with the Securities or
(iii) indebtedness of any subsidiary of USM maturing by its terms more than one
year from its date of issuance (notwithstanding that any portion of such
indebtedness is included in current liabilities) or preferred stock of any
subsidiary of USM (other than any such indebtedness owed to or preferred stock
owned by USM or any subsidiary of USM); PROVIDED, HOWEVER, that in lieu of
applying an amount equivalent to all or any part of such net proceeds to such
retirement or repayment (or committing such an amount to an escrow account for
such purpose), USM may deliver to the Trustee Outstanding Securities and thereby
reduce the amount to be applied pursuant to (y) of this clause (e) by an amount
equivalent to the aggregate principal amount of the Securities so delivered.
(Section 3.7)
CERTAIN DEFINITIONS
"CAPITAL STOCK" means and includes any and all shares, interests,
participations or other equivalents (however designated) of ownership in a
corporation or other Person.
"CAPITALIZATION" means with respect to a Person the total of (a) Funded
Debt, (b) the par value or, in the case of Capital Stock with no par value, a
value stated on the books, of all outstanding shares of Capital Stock, (c) the
paid-in surplus and retained earnings (or minus the net surplus deficit, as the
case may be), (d) deferred taxes and deferred investment tax credits, (e)
Capitalized Rent, and (f) minority interests in subsidiaries of such Person.
"CAPITALIZED RENT" means the present value (discounted semi-annually at a
discount rate equal to the weighted average rate of interest borne by the Debt
Securities then Outstanding) of the total net amount of rent payable for the
remaining term of any lease of property by USM (including any period for which
such lease has been extended); PROVIDED, HOWEVER, that no such rental obligation
shall be deemed to be Capitalized Rent unless the lease resulted from a Sale and
Leaseback Transaction. The total net amount of rent payable under any lease for
any period shall be the total amount of the rent payable by the lessee with
respect to such period but shall not include amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water rates,
sewer rates and similar charges.
"CONSOLIDATED CAPITALIZATION" means the Capitalization of USM and its
Subsidiaries determined on a consolidated basis at the end of USM's then most
recently reported fiscal year or quarter, as the case may be.
"DEBT" means with respect to a Person all obligations of such Person for
borrowed money and all such obligations of any other Person for borrowed money
guaranteed by such Person.
"FUNDED DEBT" means any Debt maturing by its terms more than one year from
its date of issuance (notwithstanding that any portion of such Debt is included
in current liabilities).
"LIEN" means any mortgage, pledge, security interest, lien, charge or other
encumbrance.
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"OUTSTANDING" means, subject to certain exceptions, all Debt Securities
issued under the Indenture, except those theretofore cancelled by the Trustee or
delivered to it for cancellation, defeased in accordance with the Indenture,
paid in full, or in respect of which substitute Debt Securities have been
authenticated and delivered by the Trustee.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"PROPERTY" means any directly-held interest of a Person in any kind of
property or asset, whether real, personal or mixed and whether tangible or
intangible, and includes Capital Stock of a subsidiary or other Person.
"SALE AND LEASEBACK TRANSACTION" means any arrangement with any Person other
than a Tax Consolidated Subsidiary providing for the leasing (as lessee) by USM
of any property (except for temporary leases for a term, including any renewal
thereof, of not more than three years (provided that any such temporary lease
may be for a term of up to five years if (a) the Board of Directors of USM
reasonably finds such term to be in the best interest of USM and (b) the primary
purpose of the transaction of which such lease is a part is not to provide funds
to or financing for USM)), which property has been or is to be sold or
transferred by USM (i) to any subsidiary of USM in contemplation of or in
connection with such arrangement or (ii) to such other Person.
"SECURED DEBT" means Debt of USM secured by any Lien on property (including
Capital Stock or indebtedness of subsidiaries of USM) owned by USM.
"SUBSIDIARY" means a Person which is consolidated with USM in accordance
with generally accepted accounting principles.
"TAX CONSOLIDATED SUBSIDIARY" means a subsidiary of USM with which, at the
time a Sale and Leaseback Transaction is entered into by USM, USM would be
entitled to file a consolidated federal income tax return.
EVENTS OF DEFAULT
The occurrence of any of the following events with respect to the Securities
of any series will constitute an "Event of Default" with respect to the
Securities of such series: (a) default for 30 days in the payment of any
interest on any of the Securities of such series; (b) default in the payment of
any of the principal of or the premium, if any, on any of the Securities of such
series, whether at maturity, upon redemption, by declaration or otherwise; (c)
default in the deposit of any sinking fund payment in respect of any Securities
of such series; (d) default for 90 days by USM in the observance or performance
of any other covenant or agreement contained in the Indenture relating to the
Securities of such series after written notice thereof as provided in the
Indenture; (e) (i) an event of default occurs under any instrument under which
there is outstanding, or by which there may be secured or evidenced, any
indebtedness of USM for money borrowed (other than non-recourse indebtedness)
which results in acceleration of, or non-payment at maturity (after giving
effect to any applicable grace period) of such indebtedness in an aggregate
amount exceeding the greater of $30,000,000 or 2% of Consolidated
Capitalization, in which case USM shall immediately give notice to the Trustee
of such acceleration or non-payment, and (ii) there shall have been a failure to
cure such default or to discharge such indebtedness within ten days after notice
thereof to USM by the Trustee or to USM and the Trustee by the Holders of at
least 25% in aggregate principal amount of the Securities then Outstanding;
PROVIDED that no such Event of Default described in this clause (e) shall exist
as long as USM is contesting any such default or acceleration in good faith and
by appropriate proceedings; or (f) certain events of bankruptcy, insolvency or
reorganization relating to USM. (Section 5.1) Different Events of Default may be
prescribed for the benefit of the Holders of a particular series of Securities
and will be described in the Prospectus Supplement relating thereto.
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If an Event of Default due to a default in the payment of the principal of
or the premium or interest, if any, on, or in the deposit of any sinking fund
payment with respect to, any series of Securities shall have occurred and be
continuing, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Securities of such series then Outstanding may declare
the principal of all Securities of such series and the interest, if any, accrued
thereon to be due and payable immediately. If an Event of Default due to a
default in the observance or performance of any other covenant or agreement of
USM contained in the Indenture and applicable to the Securities of one or more
(but less than all) series then Outstanding shall have occurred and be
continuing, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Securities of the affected series then Outstanding
(voting as one class) may declare the principal of all Securities of each such
affected series and the interest, if any, accrued thereon to be due and payable
immediately. If an Event of Default due to a default in the observance or
performance of any other covenant or agreement of USM contained in the Indenture
applicable to all Securities then Outstanding or due to the acceleration or
non-payment at maturity of certain indebtedness of USM shall have occurred and
be continuing, either the Trustee or the Holders of not less than 25% in
aggregate principal amount of all Securities then Outstanding (voting as one
class) may declare the principal of all Securities and the interest, if any,
accrued thereon to be due and payable immediately. If an Event of Default due to
certain acts of bankruptcy, insolvency or reorganization of USM shall have
occurred and be continuing, the principal and interest on all the Securities
then Outstanding shall thereby become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Securityholders.
Upon certain conditions, any such declarations may be rescinded and annulled if
all Events of Default, other than the nonpayment of accelerated principal, with
respect to the Securities of all such affected series then Outstanding shall
have been cured or waived as provided in the Indenture by the Holders of a
majority in aggregate principal amount of the Securities of the affected series
then Outstanding (voting as one class, except in the case of Events of Default
described in clauses (a), (b) and (c) of the preceding paragraph, as to which
each series so affected will vote as a separate class). See "Modification of the
Indenture" below. Reference is made to the Prospectus Supplement relating to any
series of Original Issue Discount Securities for the particular provisions
relating to the acceleration of a portion of the principal amount thereof upon
the occurrence and continuance of an Event of Default with respect thereto.
(Section 5.1)
The Indenture provides that, subject to the duty of the Trustee to act with
the requisite standard of care, in case a default with respect to a series of
Securities shall have occurred and be continuing, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of the Holders of the Securities, unless such
Holders shall have offered to the Trustee reasonable indemnity. (Sections 5.6
and 6.2) Subject to such provisions for indemnity and certain other limitations
contained in the Indenture, the Holders of a majority in aggregate principal
amount of the Securities of each affected series then Outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, with respect to the Securities of such affected series. (Section
5.9)
The Indenture provides that no Holder of Securities may institute any action
against USM under the Indenture (except actions for payment of overdue
principal, premium or interest) unless such Holder previously shall have given
to the Trustee written notice of default and continuance thereof and unless the
Holders of not less than 25% in aggregate principal amount of the Securities of
the affected series then Outstanding (voting as one class) shall have requested
the Trustee to institute such action and shall have offered the Trustee
reasonable indemnity, the Trustee shall not have instituted such action within
60 days of such request and the Trustee shall not have received direction
inconsistent with such request by the Holders of a majority in aggregate
principal amount of the Securities of the affected series then Outstanding
(voting as one class). (Sections 5.6 and 5.9)
The Indenture requires USM to furnish to the Trustee annually a statement as
to the performance of USM's covenants under the Indenture. (Section 3.5) The
Indenture provides that the Trustee may withhold
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notice to the Holders of the Securities of any series of any default affecting
such series (except defaults as to payment of principal, premium or interest on
the Securities of such series or as to sinking fund payments) if it considers
such withholding to be in the interests of the Holders of the Securities of such
series. (Section 5.11)
CONSOLIDATION, MERGER OR SALE OF ASSETS
USM may consolidate with or merge into, or sell, lease or convey its
property as an entirety or substantially as an entirety to, any other entity if
(a) such entity assumes the obligations of USM under the Securities and the
Indenture; (b)(i) such entity is organized and existing under the laws of the
United States or any state thereof or the District of Columbia; or (ii) such
entity is organized and existing under the laws of Canada, Japan, Australia, New
Zealand, or certain specified European nations, or any political subdivision of
any thereof and such entity undertakes to pay to the Holders of Securities any
additional amounts as may be necessary in order that every net payment of
principal of and interest, if any, on the Securities, after withholding for or
on account of any present or future tax, assessment or governmental charge
imposed upon such Holder (except for a tax, assessment or charge imposed solely
as a result of a connection between the recipient and the jurisdiction imposing
such tax, assessment or charge) by reason of or as a result of such payment
being made by an entity which is not an entity existing under the laws of the
United States or any state thereof or the District of Columbia, will not be less
than the amount provided for in the Securities to be then due and payable; (c)
upon request by the Trustee, USM delivers to the Trustee certain certificates
and opinions specified in the Indenture; (d) immediately after giving effect to
such transaction (and treating any Secured Debt or Sale and Leaseback
Transaction which becomes an obligation of the resulting, surviving or
transferee Person as a result of such transaction as having been incurred or
entered into by such Person at the time of such transaction), no Event of
Default (or event which, after notice or lapse of time or both, would be an
Event of Default) shall exist and (e) upon such consolidation, merger, sale,
lease or conveyance any property owned by USM immediately prior thereto would
become subject to any Lien (unless such Lien would be permitted by the
provisions described above under "Limitation on Secured Debt"), the Securities
must be secured (together with, if USM shall so determine, any other Debt
ranking equally with or prior to the Securities incurred, assumed or guaranteed
by USM, whether then or thereafter existing) by a direct Lien on such property
prior to all Liens other than any theretofore existing thereon. (Sections 9.1
and 9.2). The covenant phrase "substantially as an entirety" is not defined in
the Indenture, and USM is unaware of an established meaning or quantification of
the phrase under Illinois law, which is the law governing construction of the
Indenture. A Holder may bear the burden of establishing the meaning of the
phrase "substantially as an entirety."
MODIFICATION OF THE INDENTURE
The Indenture permits USM and the Trustee to enter into supplemental
indentures without the consent of the Holders of the Securities to: (a) subject
to compliance with USM's covenants described above under "Certain Covenants of
USM--Limitation on Secured Debt", secure the Securities of one or more series,
(b) add guarantees with respect to the Securities of one or more series, (c)
evidence the assumption by a successor Person of the obligations of USM under
the Indenture and the Securities then Outstanding, (d) add covenants for the
protection of the Holders of the Securities, (e) cure any ambiguity or correct
any inconsistency in the Indenture, provided that no such action shall adversely
affect the interests of the Holders of the Securities of any series, (f)
establish the form and terms of the Securities of any series, (g) evidence the
acceptance of appointment by a successor Trustee, (h) subject to compliance with
certain requirements of the Indenture, provide for uncertificated Securities in
addition to or in place of certificated Securities and (i) comply with any
requirements of the Commission in connection with qualifying the Indenture under
the Trust Indenture Act of 1939, as amended. (Section 8.1)
The Indenture also permits USM and the Trustee, with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Securities of all series then Outstanding and affected (voting
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as one class), to add any provisions to, or change in any manner or eliminate
any of the provisions of, the Indenture or modify in any manner the rights of
the Holders of the Securities of each such affected series; PROVIDED, HOWEVER,
that USM and the Trustee may not, without the consent of the Holder of each
Security then Outstanding and affected thereby: (a) extend the time of payment
of the principal (or any installment) of any Security, or reduce the principal
amount thereof, or reduce the rate, alter the method of computation of the rate
or extend the time of payment of interest thereon, or reduce any amount payable
on the redemption thereof, or change the currency in which the principal thereof
or the interest thereon is payable, or reduce the amount payable on any Original
Issue Discount Security upon acceleration or provable in bankruptcy, or alter
certain provisions of the Indenture relating to Securities not denominated in
United States dollars, or impair the right to institute suit for the enforcement
of any payment on any Security when due; or (b) reduce the percentage in
principal amount of the Securities of the affected series, the consent of whose
Holders is required for any such modification or for any waiver provided for in
the Indenture. (Section 8.2)
Prior to the acceleration of the maturity of any Securities, the Holders of
a majority in aggregate principal amount of the Securities of all series at the
time Outstanding with respect to which a default or an Event of Default shall
have occurred and be continuing (voting as one class) may on behalf of the
Holders of all such affected Securities waive any past default or Event of
Default and its consequences, except a default or an Event of Default in respect
of a covenant or provision of the Indenture or of any Security which cannot be
modified or amended without the consent of the Holder of each Security affected.
DEFEASANCE AND DISCHARGE
The Indenture provides that, at the option of USM, (a) USM will be
discharged from any and all obligations in respect of the Securities of a
particular series then Outstanding (except for certain obligations to register
the transfer of or exchange the Securities of such series, to replace stolen,
lost or mutilated Securities of such series, to maintain paying agencies, in the
event that the Trustee is not the Security Registrar, to furnish the Trustee
with the names and addresses of the Holders of Registered Securities of each
series, to cause any successor Person substituted for USM in accordance with the
Indenture to assume USM's obligations thereunder and with respect to the
Securities, to comply with certain covenants described under "Consolidation,
Merger or Sale of Assets" and to maintain the trust described below), or (b) USM
need not comply with certain covenants of the Indenture (including certain of
those described under "Certain Covenants of USM" and "Consolidation, Merger or
Sale of Assets"), in each case if USM irrevocably deposits in trust with the
Trustee money, and/or securities of the government which issued the currency in
which the Securities of such series are payable or securities backed by the full
faith and credit of such government which, through the payment of the principal
thereof and the interest thereon in accordance with their terms, will provide
money in an amount sufficient to pay all the principal of (and premium, if any)
and interest on the Securities of such series on the stated maturity of such
Securities in accordance with the terms thereof. To exercise such option, USM is
required, among other things, to deliver to the Trustee an opinion of
independent counsel of nationally recognized standing in matters of federal
income tax law to the effect that the exercise of such option would not cause
the Holders of the Securities of such series to recognize income, gain or loss
for United States federal income tax purposes as a result of such defeasance,
and such Holders will be subject to United States federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance had not occurred, and, in the case of a discharge as described
in clause (a) of the preceding sentence, such opinion states that either (A)
there has been a change in the applicable federal income tax law to the
foregoing effect or (B) USM has received a private letter ruling from the
Internal Revenue Service or there has been published a revenue ruling to the
foregoing effect. (Section 10.1)
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In the event USM exercises its option to effect a covenant defeasance with
respect to the Securities of any series as described in the preceding paragraph
and the Securities of such series are thereafter declared due and payable
because of the occurrence of any Event of Default other than an Event of Default
caused by failing to comply with the covenants which are defeased, and the
amount of money and securities on deposit with the Trustee would be insufficient
to pay amounts due on the Securities of such series at the time of their
accelerated maturity, USM would remain liable for such amounts.
If the Trustee or paying agent is unable to apply any money or Government
Obligation in accordance with the foregoing provisions by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
USM's obligations under the Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to such provisions until
such time as the Trustee or paying agent is permitted to apply all such money or
Government Obligations in accordance therewith; PROVIDED, HOWEVER, that, if USM
has made any payment of interest on or principal of any Securities because of
the reinstatement of its obligations, USM shall be entitled, at its election,
(a) to receive from the Trustee or paying agent, as applicable, that portion of
such money or Government Obligations equal to the amount of such payment or (b)
to be subrogated to the rights of the Holders of such Securities to receive such
payment from the money or Government Obligations held by the Trustee or paying
agent.
GOVERNING LAW
The Indenture and the Securities issued thereunder will be governed by the
laws of the State of Illinois.
CONCERNING THE TRUSTEE
The First National Bank of Chicago, the trustee under the Indenture, is one
of a number of banks with which USM and its subsidiaries maintain ordinary
banking relationships.
PLAN OF DISTRIBUTION
USM may sell Debt Securities being offered hereby: (i) directly to
purchasers, (ii) through agents, (iii) through underwriters and (iv) through
dealers.
Offers to purchase Debt Securities may be solicited by agents designated by
USM from time to time. Any such agent, who may be deemed to be an underwriter as
that term is defined in the Securities Act, involved in the offer or sale of the
Debt Securities in respect of which this Prospectus is delivered will be named,
and any commissions payable by USM to such agent will be set forth, in the
Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement,
any such agent will be acting on a best efforts basis for the period of its
appointment.
If underwriters are utilized in the sale, USM will execute an underwriting
agreement with such underwriters at the time of sale to them and the names of
the underwriters and the terms of the transaction will be set forth in the
Prospectus Supplement, which will be used by the underwriters to make resales of
the Debt Securities in respect of which this Prospectus is delivered to the
public. Any underwriters will acquire Debt Securities for their own account and
may resell such Debt Securities from time to time in one or more transactions,
including negotiated transactions, at fixed public offering prices or at varying
prices determined at the time of sale. Debt Securities may be offered to the
public either through underwriting syndicates represented by managing
underwriters, or directly by the managing underwriters. Only underwriters named
in the Prospectus Supplement are deemed to be underwriters in connection with
the Debt Securities offered thereby. If any underwriters are utilized in the
sale of the Debt Securities, the underwriting agreement will provide that the
obligations of the underwriters are subject to certain conditions precedent and
that the underwriters with respect to a sale of Debt Securities will be
obligated to purchase all such Debt Securities, if any are purchased.
14
<PAGE>
If a dealer is utilized in the sale of the Debt Securities in respect of
which this Prospectus is delivered, USM will sell such Debt Securities to the
dealer, as principal. The dealer may then resell such Debt Securities to the
public at varying prices to be determined by such dealer at the time of resale.
Agents, underwriters and dealers may be entitled under agreements entered
into with USM to indemnification by USM against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the agents, underwriters or dealers may be required to make in
respect thereof. Agents, underwriters and dealers may be customers of, engage in
transactions with, or perform services for USM in the ordinary course of
business.
Offers to purchase Debt Securities may be solicited directly by USM and
sales thereof may be made by USM directly to institutional investors or others.
The terms of any such sales will be described in the Prospectus Supplement
relating thereto.
If so indicated in the Prospectus Supplement, USM will authorize agents and
underwriters to solicit offers by certain institutions to purchase Debt
Securities from USM at the public offering price set forth in the Prospectus
Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for
payment and delivery on the date stated in the Prospectus Supplement. Each
Contract will be for an amount not less than, and unless USM otherwise agrees
the aggregate principal amount of Debt Securities sold pursuant to Contracts
shall be not less nor more than, the respective amounts stated in the Prospectus
Supplement. Institutions with whom Contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other
institutions, but shall in all cases be subject to the approval of USM.
Contracts will not be subject to any conditions except that the purchase by an
institution of the Debt Securities covered by its Contract shall not at the time
of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject. A commission indicated in the
Prospectus Supplement will be paid to underwriters and agents soliciting
purchases of Debt Securities pursuant to Contracts accepted by USM.
The place and time of delivery for the Debt Securities in respect of which
this Prospectus is delivered are set forth in the accompanying Prospectus
Supplement.
LEGAL MATTERS
Certain legal matters with respect to the Securities of the Company offered
hereunder will be passed upon by Sidley & Austin, Chicago, Illinois. Stephen P.
Fitzell and Sherry S. Treston, Secretary and Assistant Secretary, respectively,
of the Company, are partners of Sidley & Austin. Walter C.D. Carlson, a director
of the Company and TDS, and a trustee and beneficiary of the voting trust which
controls TDS and the Company, is a partner of Sidley & Austin. Michael G. Hron,
and William S. DeCarlo, the Secretary and Assistant Secretary of TDS,
respectively, are partners of Sidley & Austin.
EXPERTS
The audited consolidated financial statements and schedule of United States
Cellular Corporation incorporated by reference in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports incorporated by reference herein. In their report, that firm
states that with respect to certain limited partnership interests, their opinion
is based on the reports of other independent accountants, namely Price
Waterhouse LLP and Coopers & Lybrand L.L.P. The text of these reports is
incorporated by reference in this Prospectus. The combined financial statements
incorporated by reference in this Prospectus have been reviewed for compilation
by Arthur Andersen LLP, as indicated in their report incorporated by reference
herein. The reports of other independent accountants on the underlying financial
statements which have been combined are incorporated by reference herein. The
financial statements referred to above have been incorporated by reference in
reliance on the reports of the various independent accountants given on the
authority of such firms as experts in auditing and accounting in giving said
reports.
15
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company............................................................... S-2
Use of Proceeds........................................................... S-3
Summary Consolidated Financial Information................................ S-4
Summary Operating Data.................................................... S-5
Capitalization............................................................ S-6
Certain Terms of the Notes................................................ S-7
Underwriting.............................................................. S-11
Legal Matters............................................................. S-12
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
Available Information..................................................... 2
Documents Incorporated by Reference....................................... 2
The Company............................................................... 3
Use of Proceeds........................................................... 3
Consolidated Ratios of Earnings to Fixed Charges.......................... 4
Description of Debt Securities............................................ 4
Plan of Distribution...................................................... 14
Legal Matters............................................................. 15
Experts................................................................... 15
</TABLE>
$250,000,000
[LOGO]
UNITED STATES CELLULAR
CORPORATION
7 1/4% NOTES
DUE AUGUST 15, 2007
-------------------
PROSPECTUS SUPPLEMENT
-------------------
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
SALOMON BROTHERS INC
AUGUST 21, 1997
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