UNITED STATES CELLULAR CORP, 10-K405, 1997-03-21

UNITED STATES CELLULAR CORP
10-K405, 1997-03-21
RADIOTELEPHONE COMMUNICATIONS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

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

COMMISSION FILE NUMBER 1-9712

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UNITED STATES CELLULAR CORPORATION

(Exact name of Registrant as specified in its charter)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
DELAWARE 62-1147325
- ------------------------------ ------------------------------
(State or other jurisdiction (IRS Employer Identification
of incorporation or No.)
organization)
</TABLE>

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

REGISTRANT'S TELEPHONE NUMBER: (773) 399-8900

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

<TABLE>
<S> <C>
Name of each exchange
Title of each class on which registered
- --------------------------------- --------------------------
Common Shares, $1 par value American Stock Exchange
Liquid Yield Option Notes due
2015 American Stock Exchange
</TABLE>

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

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

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

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

As of February 28, 1997, the aggregate market value of registrant's Common
Shares held by nonaffiliates was approximately $429.6 million (based upon the
closing price of the Common Shares on February 28, 1997, of $26.25, as reported
by the American Stock Exchange).

The number of shares outstanding of each of the registrant's classes of
common stock, as of February 28, 1997, is 53,160,367 Common Shares, $1 par
value, and 33,005,877 Series A Common Shares, $1 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Those sections or portions of the registrant's 1996 Annual Report to
Shareholders and of the registrant's Notice of Annual Meeting of Shareholders
and Proxy Statement for its Annual Meeting of Shareholders to be held May 14,
1997, described in the cross reference sheet and table of contents attached
hereto are incorporated by reference into Parts II and III of this report.

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<PAGE>
CROSS REFERENCE SHEET
AND
TABLE OF CONTENTS
- ----------------------------------------------------------------------------

<TABLE>
<CAPTION>
PAGE NUMBER OR
REFERENCE (1)
------------

<S> <C> <C>
Item 1. Business................................................................................................. 3
Item 2. Properties............................................................................................... 23
Item 3. Legal Proceedings........................................................................................ 23
Item 4. Submission of Matters to a Vote of Security Holders...................................................... 23
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................................... 24(2)
Item 6. Selected Financial Data.................................................................................. 24(3)
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 24(4)
Item 8. Financial Statements and Supplementary Data.............................................................. 24(5)
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................... 24
Item 10. Directors and Executive Officers of the Registrant....................................................... 25(6)
Item 11. Executive Compensation................................................................................... 25(7)
Item 12. Security Ownership of Certain Beneficial Owners and Management........................................... 25(8)
Item 13. Certain Relationships and Related Transactions........................................................... 25(9)
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................................... 26
</TABLE>

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(1) Parenthetical references are to information incorporated by reference from
Exhibit 13, which includes portions of the registrant's Annual Report to
Shareholders for the year ended December 31, 1996 ("Annual Report") and from
the registrant's Notice of Annual Meeting of Shareholders and Proxy
Statement for its Annual Meeting of Shareholders to be held on May 14, 1997
(the "Proxy Statement").

(2) Annual Report section entitled "United States Cellular Stock and Dividend
Information."

(3) Annual Report section entitled "Selected Consolidated Financial Data."

(4) Annual Report section entitled "Management's Discussion and Analysis of
Results of Operations and Financial Condition."

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

(6) Proxy Statement sections entitled "Election of Directors" and "Executive
Officers."

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

(8) Proxy Statement section entitled "Security Ownership of Certain Beneficial
Owners and Management."

(9) Proxy Statement section entitled "Certain Relationships and Related
Transactions."
<PAGE>
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[LOGO]

UNITED STATES CELLULAR CORPORATION
8410 WEST BRYN MAWR - CHICAGO, ILLINOIS 60631
TELEPHONE (773) 399-8900

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PART I

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ITEM 1. BUSINESS

THE COMPANY

United States Cellular Corporation (the "Company") provides cellular
telephone service to 1,073,000 customers through 131 majority-owned and managed
("consolidated") cellular systems serving approximately 16% of the geography and
approximately 8% of the population of the 48 contiguous United States. Since
1985, when the Company began providing cellular service in Knoxville, Tennessee,
the Company has expanded its cellular networks and customer service operations
to cover 140 markets in 27 states as of December 31, 1996. In total, the Company
now operates nine market clusters, of which five have a total population of more
than two million, and each of which has a total population of more than one
million. Overall, 81% of the Company's 25.1 million population equivalents are
in markets which are consolidated, 1% are in managed but not consolidated
markets and 18% are in markets in which the Company holds an investment
interest.

The Company is the eighth largest cellular telephone company in the United
States, based on the aggregate number of population equivalents it owns. The
Company's corporate development strategy is to operate controlling interests in
cellular market licensees in areas adjacent to or in proximity to its other
markets, thereby building clusters of operating markets. Customers benefit from
larger service areas such as these, which provide longer uninterrupted service
and the ability to make outgoing calls and receive incoming calls within the
designated area without special roaming arrangements. In addition, the Company
anticipates that clustering will continue to provide the Company certain
economies in its capital and operating costs. As the number of opportunities for
outright acquisitions has decreased in recent years, and as the Company's
clusters have grown, the Company's focus has shifted toward exchanges and toward
divestitures of managed and investment interests which are considered less
essential to the Company's clustering strategy.

The following table summarizes the status of the Company's interests in
cellular markets at December 31, 1996.

<TABLE>
<S> <C>
Owns Majority Interest and Manages.................................... 131
Owns Minority Interest and Manages.................................... 9
---
Total Markets Managed or to be Managed by the Company................. 140
Markets Managed by Others (1)......................................... 64
---
Total Markets......................................................... 204
---
---
</TABLE>

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(1) Represents markets in which the Company owns a minority or other
noncontrolling interest and which are managed by third parties; as of
December 31, 1996, the Company accounted for its interests in 35 of these
markets using the equity method and accounted for the remaining 29 markets
using the cost method.

Cellular systems in the Company's 131 majority-owned and managed markets
served 1,073,000 customers at December 31, 1996, and contained 1,328 cell sites.
The average penetration rate in the Company's consolidated markets was 4.94% at
December 31, 1996, and the churn rate in all consolidated markets averaged 1.9%
per month for the twelve months ended December 31, 1996.

3
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The Company was incorporated in Delaware in 1983. The Company's executive
offices are located at 8410 West Bryn Mawr, Chicago, Illinois 60631. Its
telephone number is 773-399-8900. The Common Shares of the Company are listed on
the American Stock Exchange under the symbol "USM." The Company's Liquid Yield
Option Notes ("LYONs") are also listed on the American Stock Exchange.

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 1996 Donnelley Marketing Service Estimates, multiplied by the
percentage interests that the Company owns or has the right to acquire in an
entity licensed, designated to receive a license or expected to receive a
construction permit ("licensee") from the FCC to construct or operate a cellular
system in such market.

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR CAUTIONARY
STATEMENT
This Annual Report on Form 10-K, including exhibits, contains
"forward-looking" statements, as defined in the Private Securities Litigation
Reform Act of 1995, that are based on current expectations, estimates and
projections. Statements that are not historical facts, including statements
about the Company's beliefs and expectations, are forward-looking statements.
These statements contain potential risks and uncertainties; 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 ("PCS") operations; and unanticipated changes in growth
in cellular customers, penetration rates, churn rates and the mix of products
and services offered in the Company's markets. Readers should evaluate any
statements in light of these important factors.

CELLULAR TELEPHONE OPERATIONS

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

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

The FCC currently grants only two licenses to provide cellular telephone
service in each market. However, competition for customers includes competing
communications technologies such as conventional landline and mobile telephone,
Specialized Mobile Radio ("SMR") systems and radio paging. PCS has become
available in certain areas of the United States, including the Company's
markets, and the Company expects PCS competitors to initiate service in
substantially all of the Company's markets in

4
<PAGE>
the next one or two years. Additionally, emerging technologies such as Enhanced
Specialized Mobile Radio ("ESMR") and mobile satellite communication systems may
prove to be competitive with cellular service in the future in some or all of
the Company's markets.

The services available to cellular customers and the sources of revenue
available to cellular system operators are similar to those provided by
conventional landline telephone companies. Customers are charged a separate fee
for system access, airtime, long-distance calls and ancillary services. Cellular
system operators often provide service to customers of other operators' cellular
systems while the customers are temporarily located within the operators'
service areas. Customers using service away from their home system are called
"roamers." Roaming is available because technical standards require that analog
cellular telephones be compatible in all market areas in the United States. The
system that provides the service to these roamers will generate usage revenue.
Many operators, including the Company, charge premium rates for this roaming
service.

There are a number of recent technical developments in the cellular
industry. Currently, while most of the MTSOs process information digitally, most
of the radio transmission is done on an analog basis. During 1992, a new
transmission technique was approved for implementation by the cellular industry.
Time Division Multiple Access ("TDMA") technology was selected as one industry
standard by the cellular industry and has been deployed in several markets,
including the Company's operations in Tulsa, Oklahoma and in its Florida/Georgia
market cluster. Another digital technology, Code Division Multiple Access
("CDMA"), is expected to be deployed by the Company in a commercial trial during
1997. The Company may also deploy some CDMA digital radio channels in other
markets on a trial basis in the near future. Digital radio technology offers
several advantages including greater privacy, less transmission noise, greater
system capacity and potentially lower incremental costs for additional
customers. The conversion from analog to digital radio technology has begun on
an industry-wide basis; however, this process is expected to take a number of
years.

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

THE COMPANY'S OPERATIONS. From its inception in 1983 until 1993, the
Company was principally in a start-up phase. Until that time, the Company's
activities had been concentrated significantly on the acquisition of interests
in cellular licensees and on the construction and initial operation of cellular
systems. The development of a cellular system is capital-intensive and requires
substantial investment prior to and subsequent to initial operation. The Company
experienced operating losses and net losses from its inception until 1993.
During the past three years, the Company generated operations-driven net income
and has significantly increased its operating cash flows during that time.
Management anticipates increasing growth in cellular units in service and
revenues as the Company continues to expand through internal growth. Marketing
and system operations expenses associated with this expansion may reduce the
rate of growth in operating cash flows and operating income during the period of
accelerated growth. In addition, the Company anticipates that the seasonality of
revenue streams and operating expenses may cause the Company's operating income
to vary from quarter to quarter.

While the Company produced operating income and net income during 1994, 1995
and 1996, changes in any of several factors may reduce the Company's growth in
operating income and net income over the next few years. These factors include:
(i) the growth rate in the Company's customer base; (ii) the usage and pricing
of cellular services; (iii) the churn rate; (iv) the cost of providing cellular
services, including the cost of attracting new customers; (v) the introduction
of competition from PCS and other emerging technologies; and (vi) continuing
technological advances which may provide additional competitive alternatives to
cellular service.

The Company is building a substantial presence in selected geographic areas
throughout the United States where it can efficiently integrate and manage
cellular telephone systems. Its cellular interests include regional market
clusters in the following areas: Iowa, Wisconsin/Illinois, Missouri,

5
<PAGE>
Eastern North Carolina/South Carolina, Virginia, West
Virginia/Maryland/Pennsylvania, Oregon/California, Washington/Oregon/Idaho,
Indiana/Kentucky/Ohio, Maine/New Hampshire/Vermont, Eastern Tennessee/Western
North Carolina, Oklahoma/Missouri/Kansas, Texas/Oklahoma, Florida/Georgia and
Southwestern Texas. See "The Company's Cellular Interests." The Company has
acquired its cellular interests through the wireline application process (21%),
including settlements and exchanges with other applicants, and through
acquisitions (79%), including acquisitions from TDS and third parties.

CELLULAR SYSTEMS DEVELOPMENT

ACQUISITIONS. During the last five years, the Company has expanded its
size, particularly in contiguous or adjacent markets, through acquisitions which
have been aimed at strengthening the Company's position in the cellular
industry. This growth has resulted primarily from acquisitions of interests in
mid-sized and rural markets and has been based on obtaining interests with
rights to manage the underlying market.

Including transfers of RSA interests from TDS, the Company has increased its
population equivalents by 31%, from approximately 19.1 million at December 31,
1991, to approximately 25.1 million at December 31, 1996. Markets managed by the
Company have increased from 91 markets at December 31, 1991 to 140 markets at
December 31, 1996. As of December 31, 1996, 82% of the Company's population
equivalents represented interests in markets the Company manages compared to 66%
at December 31, 1991.

Recently, the pace of acquisitions has slowed as industry-wide consolidation
has reduced the number of markets available for acquisition. The Company's
population equivalents grew at a compound annual rate of just 5% over the last
five years due to the increased number of exchange and divestiture transactions
in the last few years.

The Company may continue to make opportunistic acquisitions or exchanges in
markets that further strengthen its market clusters and in other attractive
markets. The Company also seeks to acquire minority interests in markets where
it already owns the majority interest. There can be no assurance that the
Company, or TDS for the benefit of the Company, will be able to negotiate
additional acquisitions or exchanges on terms acceptable to it or that
regulatory approvals, where required, will be received. The Company plans to
retain minority interests in certain cellular markets which it believes will
earn a favorable return on investment. Other minority interests may be exchanged
for interests in markets which enhance the Company's market clusters or may be
sold for cash or other consideration. The Company also continues to evaluate the
disposition of certain managed interests which are not essential to its
corporate development strategy.

The Company, or TDS for the benefit of the Company, has historically
negotiated acquisitions of cellular interests from third parties primarily in
consideration for the Company's Common Shares or TDS's equity securities.
Cellular interests acquired by TDS in these transactions have been assigned to
the Company. At that time, the Company reimbursed TDS for the value of TDS
securities issued in such transactions, generally by issuing Common Shares to
TDS or by increasing the balance due TDS under the Company's Revolving Credit
Agreement in amounts equal to the value of TDS securities delivered at the time
the acquisitions were completed. The fair market value of the Company's
securities issued to TDS in connection with these transactions was equal to the
fair market value of the TDS securities delivered in the transactions and was
determined at the time the transactions were completed.

In the past three years, the Company has also negotiated substantial
divestitures and exchanges of cellular interests with third parties. The
consideration received from these divestitures of non-strategic markets has
primarily been cash, which has been used to reduce debt or for general corporate
purposes. The exchanges have included the divestiture of controlling interests
in non-strategic markets in exchange for controlling interests in markets which
further enhance the Company's clusters.

COMPLETED ACQUISITIONS. During 1996, the Company completed the acquisition
of controlling interests in two markets and several additional minority
interests representing approximately 1.0 million population equivalents for an
aggregate consideration of $158.9 million. The consideration consisted of $116.4
million in cash and 1.3 million of the Company's Common Shares. Substantially
all of the Company's Common Shares issued were delivered to TDS and $102.8
million of the cash consideration was paid to TDS. The Company's Common Shares
were issued to TDS to reimburse TDS for TDS

6
<PAGE>
Common Shares issued and cash paid to third parties in connection with these
acquisitions. The cash paid to TDS was pursuant to an agreement entered into
during 1996 under which the Company acquired certain minority interests from
TDS.

COMPLETED DIVESTITURES AND EXCHANGES. During 1996, the Company completed
the divestiture of controlling interests in eight markets plus one market
partition and minority interests in two other markets representing approximately
1.2 million population equivalents for an aggregate consideration of $176.5
million in cash. Also during 1996, the Company completed an exchange transaction
which resulted in the acquisition of a controlling interest in one market,
representing 116,000 population equivalents, and the divestiture of one market,
representing 97,000 population equivalents. The Company also received $11.3
million in cash pursuant to this exchange.

PENDING ACQUISITIONS, DIVESTITURES AND EXCHANGES. At December 31, 1996, the
Company had entered into an agreement to purchase a controlling interest in one
market representing approximately 213,000 population equivalents. Also at that
date, pursuant to the agreement with TDS entered into earlier in 1996, the
Company expects to acquire minority interests in two markets from TDS
representing 104,000 population equivalents. Each of these pending transactions
is expected to be completed during 1997.

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

The Company is a majority-owned subsidiary of TDS. TDS owns 80.6% of the
combined total of the outstanding Common Shares and Series A Common Shares of
the Company and controls 95.6% of the combined voting power of both classes of
common stock. The Company benefits from the extensive telecommunications
industry experience of TDS, which also operates telephone and paging businesses
and is developing its PCS business.

CELLULAR INTERESTS AND CLUSTERS

The Company operates clusters of adjacent cellular systems in nearly all of
its markets, enabling its customers to benefit from larger service areas than
otherwise possible. Where the Company offers wide-area coverage, its customers
enjoy uninterrupted service within the designated area. Customers may also make
outgoing calls and receive incoming calls within this area without special
roaming arrangements. In addition to benefits to customers, clustering also has
provided to the Company certain economies in its capital and operating costs.
These economies are made possible through increased sharing of facilities,
personnel and other costs and have resulted in a reduction of the Company's per
customer cost of service. The extent to which the Company benefits from these
revenue enhancements and economies of operation is dependent on market
conditions, population size of each cluster and engineering considerations.

The Company may continue to make opportunistic acquisitions and exchanges
which will complement its established market clusters. From time to time, the
Company may also consider exchanging or selling its interests in markets which
are not essential to its long-term strategies.

The Company owned interests in cellular telephone systems in 204 markets at
December 31, 1996, representing 25.1 million population equivalents. Including
the controlling interest to be acquired from a third party and the two minority
interests to be acquired from TDS, the Company owned or had the right

7
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to acquire 207 markets, representing 25.4 million pops, at December 31, 1996.
The following table summarizes the growth in the Company's population
equivalents in recent years and the development status of these population
equivalents.

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(THOUSANDS OF POPULATION EQUIVALENTS)(1)
<S> <C> <C> <C> <C> <C>
Operational Markets:
Majority-Owned and Managed.................................. 20,276 19,958 18,556 18,807 14,749
Minority-Owned and Managed (2).............................. 401 513 1,206 1,179 2,069
Markets to be Managed, Net of Markets to be Divested: (3)
Majority-Owned.............................................. 213 272 2,212 1,026 1,859
Minority-Owned (2).......................................... -- -- -- 8 5
--------- --------- --------- --------- ---------
Total Markets Managed and to be Managed..................... 20,890 20,743 21,974 21,020 18,682
Minority Interests in Markets Managed by Others............... 4,501 3,990 3,745 3,547 3,642
--------- --------- --------- --------- ---------
Total....................................................... 25,391 24,733 25,719 24,567 22,324
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

- ----------
(1) Based on 1996 Donnelley Marketing Services estimates for all years.

(2) Includes markets where the Company has the right to acquire an interest but
does not currently own an interest.

(3) Includes markets which are operational but which are currently managed by
third parties.

The following section details the Company's cellular interests, including
those it owned or had the right to acquire as of December 31, 1996. The table
presented therein lists clusters of markets that the Company manages or
anticipates managing. The Company's market clusters show the areas in which the
Company is currently focusing its development efforts. These clusters have been
devised with a long-term goal of allowing delivery of cellular service to areas
of economic interest and along corridors of economic activity. The number of
population equivalents represented by the Company's cellular interests may have
no direct relationship to the number of potential cellular customers or the
revenues that may be realized from the operation of the related cellular
systems.

THE COMPANY'S CELLULAR INTERESTS

The table below sets forth certain information with respect to the interests
in cellular markets which the Company owned or had the right to acquire pursuant
to definitive agreements as of December 31, 1996.

<TABLE>
<CAPTION>
PERCENTAGE TOTAL
CHANGE CURRENT AND
CURRENT PURSUANT TO ACQUIRABLE
1996 PERCENTAGE DEFINITIVE POPULATION
CLUSTER/MARKET POPULATION INTEREST AGREEMENTS(1) TOTAL EQUIVALENTS
- -------------------------------------------- ----------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
MARKETS MANAGED BY THE COMPANY:
MIDWEST REGIONAL MARKET CLUSTER:
IOWA:
Des Moines, IA.......................... 426,000 100.00% 100.00% 426,000
Davenport, IA-IL........................ 360,000 97.37 97.37 350,000
Humboldt (IA 10)........................ 181,000 100.00 100.00 181,000
Cedar Rapids, IA........................ 180,000 96.00 96.00 173,000
Muscatine (IA 4)........................ 155,000 100.00 100.00 155,000
Iowa (IA 6)............................. 155,000 100.00 100.00 155,000
Waterloo-Cedar Falls, IA................ 147,000 91.04 91.04 134,000
Hardin (IA 11).......................... 112,000 100.00 100.00 112,000
Jackson (IA 5).......................... 109,000 100.00 100.00 109,000
Kossuth (IA 14)......................... 108,000 100.00 100.00 108,000
Lyon (IA 16)............................ 104,000 100.00 100.00 104,000
Iowa City, IA........................... 102,000 100.00 100.00 102,000
Dubuque, IA............................. 89,000 95.90 95.90 85,000
Mitchell (IA 13)........................ 67,000 100.00 100.00 67,000
Mills (IA 1)............................ 62,000 100.00 100.00 62,000
Audubon (IA 7).......................... 55,000 100.00 100.00 55,000
</TABLE>

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<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE TOTAL
CHANGE CURRENT AND
CURRENT PURSUANT TO ACQUIRABLE
1996 PERCENTAGE DEFINITIVE POPULATION
CLUSTER/MARKET POPULATION INTEREST AGREEMENTS(1) TOTAL EQUIVALENTS
- -------------------------------------------- ----------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Union (IA 2)............................ 50,000 100.00% 100.00% 50,000
Monroe (IA 3)........................... 91,000 49.00 49.00 45,000
Winneshiek (IA 12)...................... 116,000 24.50 24.50 28,000
Ida (IA 9) *............................ 63,000 16.67 16.67 11,000
----------- -----------
2,732,000 2,512,000
----------- -----------
WISCONSIN/ILLINOIS:
Peoria, IL.............................. 347,000 100.00 100.00 347,000
Jo Daviess (IL 1)....................... 319,000 100.00 100.00 319,000
Wood (WI 7)............................. 289,000 100.00 100.00 289,000
Adams (IL 4) * (2)...................... 214,000 100.00 100.00 214,000
Mercer (IL 3)........................... 204,000 100.00 100.00 204,000
Vernon (WI 8) *......................... 236,000 74.00 74.00 174,000
La Crosse, WI........................... 102,000 95.11 95.11 97,000
Pierce (WI 5)........................... 95,000 100.00 100.00 95,000
Wausau, WI *............................ 122,000 71.76 71.76 87,000
Trempealeau (WI 6) (2).................. 83,000 100.00 100.00 83,000
Alton, IL............................... 21,000 100.00 100.00 21,000
----------- -----------
2,032,000 1,930,000
----------- -----------
MISSOURI:
Columbia, MO *.......................... 126,000 100.00 100.00 126,000
Stone (MO 15)........................... 117,000 100.00 100.00 117,000
Laclede (MO 16)......................... 98,000 100.00 100.00 98,000
Washington (MO 13)...................... 92,000 100.00 100.00 92,000
Callaway (MO 6) *....................... 86,000 100.00 100.00 86,000
Schuyler (MO 3)......................... 56,000 100.00 100.00 56,000
Shannon (MO 17) *....................... 56,000 100.00 100.00 56,000
Linn (MO 5) (2)......................... 55,000 100.00 100.00 55,000
----------- -----------
686,000 686,000
----------- -----------
TOTAL MIDWEST REGIONAL MARKET
CLUSTER.............................. 5,450,000 5,128,000
----------- -----------
MID-ATLANTIC REGIONAL MARKET CLUSTER:
EASTERN NORTH CAROLINA/SOUTH CAROLINA:
Northampton (NC 8)...................... 289,000 100.00 100.00 289,000
Rockingham (NC 7)....................... 286,000 100.00 100.00 286,000
Harnett (NC 10)......................... 286,000 100.00 100.00 286,000
Greene (NC 13).......................... 244,000 100.00 100.00 244,000
Greenville (NC 14)...................... 241,000 100.00 100.00 241,000
Hoke (NC 11)............................ 224,000 100.00 100.00 224,000
Chesterfield (SC 4)..................... 212,000 100.00 100.00 212,000
Ashe (NC 3)............................. 160,000 100.00 100.00 160,000
Chatham (NC 6).......................... 159,000 81.16 81.16 129,000
Sampson (NC 12)......................... 128,000 100.00 100.00 128,000
Camden (NC 9)........................... 120,000 100.00 100.00 120,000
----------- -----------
2,349,000 2,319,000
----------- -----------
VIRGINIA:
Roanoke, VA............................. 234,000 100.00 100.00 234,000
Bedford (VA 4).......................... 177,000 100.00 100.00 177,000
Lynchburg, VA........................... 160,000 100.00 100.00 160,000
Charlottesville, VA..................... 143,000 94.44 94.44 135,000
Buckingham (VA 7)....................... 90,000 100.00 100.00 90,000
Tazewell (VA 2) (2)..................... 83,000 100.00 100.00 83,000
Bath (VA 5)............................. 62,000 100.00 100.00 62,000
----------- -----------
949,000 941,000
----------- -----------
</TABLE>

9
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE TOTAL
CHANGE CURRENT AND
CURRENT PURSUANT TO ACQUIRABLE
1996 PERCENTAGE DEFINITIVE POPULATION
CLUSTER/MARKET POPULATION INTEREST AGREEMENTS(1) TOTAL EQUIVALENTS
- -------------------------------------------- ----------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
WEST VIRGINIA/MARYLAND/PENNSYLVANIA:
Monongalia (WV 3) *..................... 270,000 100.00% 100.00% 270,000
Raleigh (WV 7) *........................ 256,000 100.00 100.00 256,000
Grant (WV 4) *.......................... 172,000 100.00 100.00 172,000
Tucker (WV 5) *......................... 132,000 100.00 100.00 132,000
Hagerstown, MD *........................ 127,000 100.00 100.00 127,000
Cumberland, MD *........................ 102,000 100.00 100.00 102,000
Bedford (PA 10) * (2)................... 49,000 100.00 100.00 49,000
Garrett (MD 1) *........................ 30,000 100.00 100.00 30,000
----------- -----------
1,138,000 1,138,000
----------- -----------
TOTAL MID-ATLANTIC REGIONAL
MARKET CLUSTER....................... 4,436,000 4,398,000
----------- -----------
NORTHWEST REGIONAL MARKET CLUSTER:
OREGON/CALIFORNIA:
Coos (OR 5)............................. 259,000 100.00 100.00 259,000
Del Norte (CA 1)........................ 209,000 100.00 100.00 209,000
Medford, OR *........................... 170,000 100.00 100.00 170,000
Mendocino (CA 9)........................ 140,000 100.00 100.00 140,000
Crook (OR 6) *.......................... 192,000 62.50 62.50 120,000
Modoc (CA 2)............................ 59,000 100.00 100.00 59,000
----------- -----------
1,029,000 957,000
----------- -----------
WASHINGTON/OREGON/IDAHO:
Clark (ID 6)............................ 293,000 100.00 100.00 293,000
Pacific (WA 6) *........................ 183,000 100.00 100.00 183,000
Richland-Kennewick-Pasco, WA *.......... 182,000 100.00 100.00 182,000
Butte (ID 5)............................ 159,000 100.00 100.00 159,000
Yakima, WA *............................ 216,000 54.55 54.55 118,000
Okanogan (WA 4)......................... 116,000 100.00 100.00 116,000
Umatilla (OR 3) *....................... 150,000 60.42 60.42 91,000
Kittitas (WA 5) * (2)................... 71,000 83.50 83.50 59,000
Hood River (OR 2) *..................... 73,000 45.10 45.10 33,000
Skamania (WA 7) *....................... 28,000 45.10 45.10 13,000
----------- -----------
1,471,000 1,247,000
----------- -----------
TOTAL NORTHWEST REGIONAL
MARKET CLUSTER....................... 2,500,000 2,204,000
----------- -----------
INDIANA/KENTUCKY/OHIO MARKET CLUSTER:
Meade (KY 3)............................ 317,000 100.00 100.00 317,000
Evansville, IN.......................... 322,000 87.50 87.50 282,000
Owen (IN 7)............................. 224,000 100.00 100.00 224,000
Elliott (KY 9).......................... 204,000 100.00 100.00 204,000
Fulton (KY 1)........................... 189,000 100.00 100.00 189,000
Clay (KY 11)............................ 171,000 100.00 100.00 171,000
Powell (KY 10).......................... 154,000 100.00 100.00 154,000
Union (KY 2)............................ 129,000 100.00 100.00 129,000
Ross (OH 9) *........................... 249,000 49.00 49.00 122,000
Owensboro, KY........................... 91,000 96.07 96.07 88,000
Miami (IN 4) *.......................... 179,000 28.57 28.57 51,000
Warren (IN 5) *......................... 123,000 33.33 33.33 41,000
----------- -----------
TOTAL INDIANA/KENTUCKY/OHIO
MARKET CLUSTER....................... 2,352,000 1,972,000
----------- -----------
</TABLE>

10
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE TOTAL
CHANGE CURRENT AND
CURRENT PURSUANT TO ACQUIRABLE
1996 PERCENTAGE DEFINITIVE POPULATION
CLUSTER/MARKET POPULATION INTEREST AGREEMENTS(1) TOTAL EQUIVALENTS
- -------------------------------------------- ----------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
MAINE/NEW HAMPSHIRE/VERMONT MARKET CLUSTER:
Manchester-Nashua, NH................... 353,000 92.13% 92.13% 325,000
Kennebec (ME 3)......................... 223,000 100.00 100.00 223,000
Coos (NH 1) *........................... 223,000 100.00 100.00 223,000
Carroll (NH 2) #........................ 213,000 0.00 100.00% 100.00 213,000
Somerset (ME 2)......................... 150,000 100.00 100.00 150,000
Bangor, ME.............................. 147,000 91.47 91.47 135,000
Addison (VT 2) * (2).................... 107,000 100.00 100.00 107,000
Lewiston-Auburn, ME..................... 104,000 82.67 82.67 86,000
Washington (ME 4) *..................... 86,000 100.00 100.00 86,000
Oxford (ME 1)........................... 83,000 100.00 100.00 83,000
----------- -----------
TOTAL MAINE/NEW HAMPSHIRE/
VERMONT MARKET CLUSTER............... 1,689,000 1,631,000
----------- -----------
EASTERN TENNESSEE/WESTERN NORTH
CAROLINA MARKET CLUSTER:
Knoxville, TN *......................... 555,000 96.03 96.03 533,000
Asheville, NC *......................... 210,000 100.00 100.00 210,000
Henderson (NC 4) * (2).................. 192,000 100.00 100.00 192,000
Giles (TN 6) *.......................... 159,000 100.00 100.00 159,000
Bledsoe (TN 7) * (2).................... 149,000 96.03 96.03 143,000
Hamblen (TN 4) * (2).................... 133,000 100.00 100.00 133,000
Macon (TN 3) *.......................... 340,000 16.67 16.67 57,000
Yancey (NC 2) * (2)..................... 31,000 100.00 100.00 31,000
----------- -----------
TOTAL EASTERN TENNESSEE/
WESTERN NORTH CAROLINA
MARKET CLUSTER....................... 1,769,000 1,458,000
----------- -----------
TEXAS/OKLAHOMA/MISSOURI/KANSAS
REGIONAL MARKET CLUSTER:
OKLAHOMA/MISSOURI/KANSAS:
Tulsa, OK *............................. 790,000 55.06 55.06 435,000
Joplin, MO *............................ 146,000 100.00 100.00 146,000
Seminole (OK 6)......................... 218,000 55.06 55.06 120,000
Elk (KS 15) *........................... 155,000 75.00 75.00 116,000
Nowata (OK 4) * (2)..................... 103,000 55.06 55.06 57,000
----------- -----------
1,412,000 874,000
----------- -----------
TEXAS/OKLAHOMA:
Garvin (OK 9)........................... 203,000 100.00 100.00 203,000
Haskell (OK 10)......................... 83,000 100.00 100.00 83,000
Wichita Falls, TX *..................... 137,000 51.65 51.65 71,000
Lawton, OK *............................ 115,000 51.65 51.65 60,000
Jackson (OK 8) *........................ 97,000 51.65 51.65 50,000
Hardeman (TX 5) * (2)................... 38,000 51.65 51.65 20,000
Briscoe (TX 4) * (2).................... 11,000 51.65 51.65 6,000
Beckham (OK 7) * (2).................... 10,000 51.65 51.65 5,000
----------- -----------
694,000 498,000
----------- -----------
TOTAL TEXAS/OKLAHOMA/
MISSOURI/KANSAS REGIONAL
MARKET CLUSTER....................... 2,106,000 1,372,000
----------- -----------
</TABLE>

11
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE TOTAL
CHANGE CURRENT AND
CURRENT PURSUANT TO ACQUIRABLE
1996 PERCENTAGE DEFINITIVE POPULATION
CLUSTER/MARKET POPULATION INTEREST AGREEMENTS(1) TOTAL EQUIVALENTS
- -------------------------------------------- ----------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
FLORIDA/GEORGIA MARKET CLUSTER:
Tallahassee, FL......................... 279,000 100.00% 100.00% 279,000
Worth (GA 14)........................... 249,000 100.00 100.00 249,000
Gainesville, FL......................... 222,000 100.00 100.00 222,000
Toombs (GA 11).......................... 154,000 100.00 100.00 154,000
Fort Pierce, FL * (3)................... 289,000 49.00 49.00 142,000
Walton (FL 10).......................... 114,000 100.00 100.00 114,000
Putnam (FL 5) (2)....................... 70,000 100.00 100.00 70,000
Dixie (FL 6)............................ 55,000 100.00 100.00 55,000
Jefferson (FL 8) (2).................... 47,000 100.00 100.00 47,000
Calhoun (FL 9).......................... 41,000 100.00 100.00 41,000
----------- -----------
TOTAL FLORIDA/GEORGIA MARKET
CLUSTER.............................. 1,520,000 1,373,000
----------- -----------
SOUTHWESTERN TEXAS MARKET CLUSTER:
Corpus Christi, TX...................... 382,000 100.00 100.00 382,000
Atascosa (TX 19)........................ 228,000 100.00 100.00 228,000
Edwards (TX 18)......................... 216,000 100.00 100.00 216,000
Laredo, TX.............................. 176,000 93.74 93.74 165,000
Wilson (TX 20).......................... 141,000 100.00 100.00 141,000
Victoria, TX............................ 81,000 100.00 100.00 81,000
----------- -----------
TOTAL SOUTHWESTERN TEXAS
MARKET CLUSTER....................... 1,224,000 1,213,000
----------- -----------
OTHER OPERATIONS:
Hawaii (HI 3)........................... 141,000 100.00 100.00 141,000
----------- -----------
TOTAL MANAGED MARKETS................. 23,187,000 20,890,000
----------- -----------
MARKETS MANAGED BY OTHERS:
Los Angeles/Oxnard, CA *................ 15,488,000 5.50 5.50 852,000
Nashville/Clarksville-Hopkinsville,
TN-KY/
Lake (TN 1) (2)/Fayette (TN 5)
(2)/Maury (TN 9) *..................... 1,550,000 49.00 49.00 760,000
Baton Rouge, LA *....................... 570,000 49.99 49.99 285,000
Tucson, AZ *............................ 772,000 29.36 29.36 227,000
Seattle-Everett/Tacoma/Bremerton, WA
*...................................... 3,051,000 7.01 7.01 214,000
Biloxi/Pascagoula, MS *................. 361,000 49.00 49.00 177,000
Oklahoma City, OK *..................... 992,000 14.60 14.60 145,000
Portland, ME *.......................... 284,000 49.00 49.00 139,000
McAllen, TX............................. 494,000 26.20 26.20 129,000
Portsmouth-Dover-Rochester, NH-ME *..... 279,000 40.00 40.00 112,000
Garfield (CO 3) *....................... 284,000 36.50 36.50 104,000
Others (Fewer than 100,000 population
equivalents each)...................... 1,357,000
-----------
Total Population Equivalents of
Markets Managed by Others............ 4,501,000
-----------
Total Population Equivalents.......... 25,391,000
-----------
-----------
</TABLE>

12
<PAGE>
Upon completion of the exchange transaction with BellSouth, the Company will
acquire and divest interests in certain markets. The percentage interest
acquired and divested for each market is listed below, along with a summary of
cellular interests the Company will own or have a right to acquire after the
transaction with BellSouth is completed.

<TABLE>
<CAPTION>
TOTAL
PERCENTAGE POPULATION
OWNERSHIP EQUIVALENTS
TO BE TO BE
1996 ACQUIRED ACQUIRED
MARKET POPULATION (DIVESTED) (DIVESTED)
- -------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
MARKETS TO BE ACQUIRED FROM BELLSOUTH:
Milwaukee, WI........................... 1,462,000 100.00% 1,462,000
Columbia (WI 9)......................... 382,000 100.00 382,000
Madison, WI............................. 398,000 92.50 368,000
Appleton, WI............................ 340,000 100.00 340,000
Rockford, IL............................ 304,000 98.99 301,000
Vernon (WI 8)........................... 236,000 100.00 236,000
Green Bay, WI........................... 213,000 99.01 211,000
Racine, WI.............................. 184,000 89.37 164,000
Kenosha, WI............................. 150,000 100.00 150,000
Door (WI 10)............................ 130,000 100.00 130,000
Janesville-Beloit, WI................... 142,000 80.54 114,000
Sheboygan, WI........................... 109,000 86.66 94,000
----------- -----------
TOTAL MARKETS TO BE ACQUIRED FROM
BELLSOUTH............................ 4,050,000 3,952,000
----------- -----------
MARKETS TO BE TRADED TO BELLSOUTH:
MARKETS MANAGED BY THE COMPANY:
Meade (KY 3)............................ 317,000 (100.00) (317,000 )
Evansville, IN (4)...................... 322,000 (87.50) (282,000 )
Owen (IN 7)............................. 224,000 (100.00) (224,000 )
Elliott (KY 9).......................... 204,000 (100.00) (204,000 )
Fulton (KY 1)........................... 189,000 (100.00) (189,000 )
Clay (KY 11)............................ 171,000 (100.00) (171,000 )
Giles (TN 6)*........................... 159,000 (100.00) (159,000 )
Powell (KY 10).......................... 154,000 (100.00) (154,000 )
Union (KY 2)............................ 129,000 (100.00) (129,000 )
Owensboro, KY (4)....................... 91,000 (96.07) (87,000 )
----------- -----------
TOTAL MARKETS MANAGED BY THE COMPANY...... 1,960,000 (1,916,000 )
----------- -----------
MARKETS MANAGED BY OTHERS:
Nashville/Clarksville-Hopkinsville,
TN-KY/ Lake (TN 1) (2)/
Fayette (TN 5) (2)/Maury (TN 9) *...... 1,550,000 (49.00) (760,000 )
Baton Rouge, LA *....................... 570,000 (49.99) (285,000 )
Biloxi/Pascagoula, MS *................. 361,000 (49.00) (177,000 )
Others (Fewer than 100,000 population
equivalents each) (5).................. (183,000 )
-----------
Total Markets Managed by Others....... (1,405,000 )
-----------
Total Markets to be Traded to
BellSouth.......................... (3,321,000 )
-----------
MARKETS TO BE DIVESTED (6):
Vernon (WI 8) *......................... 236,000 (74.00) (174,000 )
Markets Managed by Others (Fewer than
100,000 population equivalents each)... (110,000 )
-----------
Total Markets to be Divested.......... (284,000 )
-----------
Net Population Equivalents to be
Acquired Related to BellSouth
Transaction........................ 347,000
-----------
-----------
SUMMARY OF THE COMPANY'S CELLULAR INTERESTS
AFTER THE COMPLETION OF THE TRANSACTION
WITH BELLSOUTH:
Total Managed Markets................... 25,041,000 22,752,000
Total Population Equivalents of Markets
Managed by Others...................... 2,986,000
-----------
Total Population Equivalents.......... 25,738,000
-----------
-----------
</TABLE>

- ------------
* Designates wireline market.
# Designates operational market managed by a third party until the Company
acquires a controlling interest.
(1) The interest under this agreement is expected to be acquired at the time
specified therein, following the satisfaction of customary closing
conditions.
(2) These markets have been partitioned into more than one licensed area. The
1996 population, percentage ownership and number of population equivalents
shown are for the licensed areas within the markets in which the Company
owns an interest.
(3) The Company owns 80% of the entity which owns and operates this market but
has only a 49% interest in the earnings and profits.
(4) Pursuant to the agreement with BellSouth, the Company has agreed to transfer
to BellSouth a 100% interest in these markets. If the Company owns less than
100% of these markets at the time of the completion of the transaction, the
Company will pay cash to BellSouth in lieu of any interests the Company does
not own at that time.

13
<PAGE>
(5) In addition to these interests, the Company will deliver to BellSouth
interests in two markets, representing approximately 93,000 population
equivalents, which are currently owned by TDS and not the Company.
(6) As a result of the transaction with BellSouth, the Company expects to divest
its interests in these markets.

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

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

The Company has continued to expand its internal network in 1996 to
encompass all of its managed markets. This network provides automatic call
delivery for the Company's customers and handoff between adjacent markets. The
network has also been extended through links with certain systems operated by
several other carriers, including GTE, US West, Ameritech, BellSouth, Centennial
Cellular Corp., Southwestern Bell, AT&T Wireless Communications, Vanguard
Cellular Systems and others. Additionally, the Company has implemented four
Signal Transfer Points which have allowed it to interconnect efficiently with
network providers such as Illuminet and the North American Cellular Network.

During 1997, the Company intends to extend the network for its customers
through interconnection with additional system operators for call delivery and
hand-off. This expanded network will increase the area in which customers can
automatically receive incoming calls, and should further reduce the incidence of
"tumbling" electronic serial number fraud due to the pre-call validation feature
of networked systems. In addition, the extension of these networks will allow
for the termination of wireless-to-wireless traffic without the inherent costs
that are otherwise incurred if this traffic is routed through the landline
network.

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

COSTS OF SYSTEM CONSTRUCTION AND FINANCING

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

The costs (exclusive of license costs) of the systems in which the Company
owns an interest have historically been financed through capital contributions
or intercompany loans from the Company to the entities owning the systems, and
through certain vendor financing. In recent years, these funding requirements
have been met with cash generated from operations and proceeds from the sales of
cellular interests.

MARKETING

The Company's marketing plan is centered around rapid penetration of its
market clusters, increasing customer awareness of cellular service and reducing
churn through both the building of brand awareness and the implementation of
marketing programs. The marketing plan stresses the value of the

14
<PAGE>
Company's service offerings and incorporates combinations of rate plans and
cellular telephone equipment which are designed to meet the needs of a variety
of customer segments and their usage patterns. The Company's distribution
channels include direct sales personnel, agents and retail service centers in
the vast majority of its markets. In late 1996, the Company implemented its new
site on the WorldWideWeb to support its marketing efforts and to be a future
distribution channel. These Company-owned and managed locations are designed to
market cellular service to the consumer segment in a familiar setting.

The Company manages each cluster of markets from an administrative office
with a local staff, which typically includes sales, customer service,
engineering and in some cases installation personnel. Direct sales consultants
market cellular service to business customers throughout each cluster. Retail
associates work out of the retail locations and market cellular service
primarily to the consumer and small business segment. The Company maintains an
ongoing training program to improve the effectiveness of sales consultants and
retail associates by focusing their efforts on obtaining customers and
maximizing the sale of high-user packages. These packages provide for customers
to obtain a minimum amount of usage at discounted rates per minute, at fixed
prices which are charged even if usage falls below a defined monthly minimum
amount.

The Company continues to expand its relationships with agents, dealers and
non-Company retailers to obtain customers. Agents and dealers are independent
business people who obtain customers for the Company on a commission basis. The
Company's agents are generally in the business of selling cellular telephones,
cellular service packages and other related products. The Company's dealers
include car stereo companies and other companies whose customers are also
potential cellular customers. The non-Company retailers include car dealers,
major appliance dealers, office supply dealers and mass merchants.

The Company opened its first retail locations in late 1993, expanding to 220
stand-alone retail stores by the end of 1996. These Company-owned and operated
businesses utilize rental facilities in high-traffic areas. The Company has
implemented a uniform appearance in these stores, with all having similar
displays and layouts. The retail centers' hours of business match those of the
retail trade in the local marketplace, often staying open on weekends and later
in the evening than a typical business supplier. To fully serve customer needs,
these stores sell accessories to complement the phones and services the Company
has traditionally provided. During 1996, the Company further expanded its retail
presence by opening smaller retail kiosks within other larger merchandisers and
grocery stores. At December 31, 1996, the Company had opened over 150 "stores
within a store" in Wal-Mart and Kroger locations.

In addition to its own retail centers, the Company actively pursues national
retail accounts, as agents of the Company, which yield new customer additions in
multiple markets. Agreements have been entered into with such national
distributors as Chrysler Corporation, Ford Motor Company, General Motors, MCI,
Radio Shack, Best Buy and Sears, Roebuck & Co. in certain of the Company's
markets. Upon the sale of a cellular telephone by one of these national
distributors, the Company receives, often exclusively within the territories
served, the resulting cellular customer.

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

15
<PAGE>
The following table summarizes, by operating cluster, the total population,
the Company's customer units and penetration for the Company's consolidated
markets as of December 31, 1996.

<TABLE>
<CAPTION>
OPERATING CLUSTERS POPULATION CUSTOMERS PENETRATION
- ------------------------------------------------------------------------ ------------- ----------- -----------
<S> <C> <C> <C>
Iowa.................................................................... 2,462,000 145,000 5.89%
Wisconsin/Illinois...................................................... 2,032,000 71,000 3.49
Missouri................................................................ 686,000 32,000 4.66
Eastern North Carolina/South Carolina................................... 2,349,000 98,000 4.17
Virginia................................................................ 949,000 42,000 4.43
West Virginia/Maryland/Pennsylvania..................................... 1,138,000 46,000 4.04
Oregon/California....................................................... 1,029,000 47,000 4.57
Washington/Oregon/Idaho................................................. 1,370,000 74,000 5.40
Indiana/Kentucky/Ohio................................................... 1,801,000 88,000 4.89
Maine/New Hampshire/Vermont............................................. 1,476,000 73,000 4.95
Eastern Tennessee/Western North Carolina................................ 1,429,000 90,000 6.30
Oklahoma/Missouri/Kansas................................................ 1,412,000 93,000 6.59
Texas/Oklahoma.......................................................... 694,000 32,000 4.61
Florida/Georgia......................................................... 1,520,000 82,000 5.39
Southwestern Texas...................................................... 1,224,000 47,000 3.84
Other Operations........................................................ 141,000 13,000 9.22
------------- ----------- -----------
21,712,000 1,073,000 4.94%
------------- ----------- -----------
------------- ----------- -----------
</TABLE>

CUSTOMERS AND SYSTEM USAGE

Cellular customers come from a wide range of occupations. They typically
include a large proportion of individuals who work outside of their offices,
such as people in the construction, real estate, wholesale and retail
distribution businesses, and professionals. Increasingly, the Company is
providing cellular service to consumers and to customers who use their cellular
telephones for security purposes. Although some of the Company's customers still
use in-vehicle cellular telephones, most new customers are selecting portable
cellular telephones. These units have become more compact and fully featured as
well as more attractively priced, and they appeal to newer segments of the
customer population.

The Company's cellular systems are used most extensively during normal
business hours between 7:00 am and 6:00 pm. On average, the local retail
customers in the Company's consolidated systems used their cellular systems
approximately 107 minutes per unit each month and generated retail revenue of
approximately $43 per month during 1996, compared to 95 minutes and $44 per
month in 1995. Revenue generated by roamers, together with local retail, toll
and other revenues, brought the Company's total average monthly service revenue
per customer unit in consolidated markets to $66 during 1996. Average monthly
service revenue per customer unit decreased approximately 8% during 1996. This
decrease is related to the industry-wide trend of newer customers tending to use
fewer minutes during peak business hours, which has reduced the average local
retail revenue per minute, and to the declining contribution of inbound roaming
revenue per customer. The Company believes that its customer base is growing
faster than that of the cellular industry as a whole, which has a dilutive
effect on inbound roaming revenue per customer. The Company anticipates that
average monthly service revenue per customer unit will continue to decline as
its distribution channels provide additional customers who generate lower
revenue per local minute of use and as roaming revenues grow more slowly.
However, this effect is more than offset by the Company's increasing number of
customers; therefore, the Company expects total revenues to continue to grow for
the next several years.

In addition to revenue from local retail customers, the Company generates
revenue from roaming customers and other services. The Company's roaming service
allows a customer to place or receive a call in a cellular service area away
from the customer's home service area. The Company has entered into "roaming
agreements" with operators of other cellular systems covering virtually all
systems in the United States and Canada. These agreements offer customers the
opportunity to roam in these systems. These reciprocal agreements automatically
pre-register the customers of the Company's systems in the other carriers'
systems. Also, a customer of a participating system roaming (i.e., travelling)
in a Company market where this arrangement is in effect is able to make and
receive calls on the Company's system. The charge for this service is typically
at premium rates and is billed by the Company to the customer's

16
<PAGE>
home system, which then bills the customer. The Company has entered into
agreements with other cellular carriers to transfer roaming usage at agreed-upon
rates. In some instances, based on competitive factors, the Company may charge a
lower amount to its customers than the amount actually charged to the Company by
another cellular carrier for roaming.

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

<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Majority-owned and managed markets:
Cellular markets in operation (1).................... 131 137 130 116 92
Total population of markets in service (000s)...... 21,712 22,309 21,314 19,383 15,014
Customer Units:
at beginning of period (2)....................... 710,000 421,000 261,000 150,800 97,000
additions during period (2)...................... 561,000 426,000 250,000 165,300 88,600
disconnects during period (2).................... 198,000 137,000 90,000 55,100 34,800
at end of period (2)............................. 1,073,000 710,000 421,000 261,000 150,800
Market penetration at end of period (3)............ 4.94% 3.18% 1.98% 1.35% 1.00%
</TABLE>

- ----------
(1) Represents the number of markets in which the Company owned at least a 50%
interest and which it managed, including its reseller operation in 1992. The
revenues and expenses of these cellular markets are included in the
Company's consolidated revenues and expenses.

(2) Represents the approximate number of revenue-generating cellular telephones
served by the cellular markets referred to in footnote (1). The revenue
generated by such cellular telephones is included in consolidated revenues.

(3) Computed by dividing the number of customer units at the end of the period
by the total population of markets in service as estimated by Donnelley
Marketing Service for the respective years.

PRODUCTS AND SERVICES

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

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

The Company has established service and/or installation facilities in many
of its local markets to ensure quality installation and service of the cellular
telephones it sells. These facilities allow the Company to improve its service
by promptly assisting customers who experience equipment problems. Additionally,
the Company maintains a repair facility in Tulsa, Oklahoma, which handles more
complex service and repair issues.

CELLULAR SERVICES. The Company's customers are able to choose from a
variety of packaged pricing plans which are designed to fit different calling
patterns. In 1996, the Company developed and introduced its new consumer line of
products under the CarryPhone brand. These products include a) Express, a
pre-packaged phone plus price plan aimed at the convenience buyer; b)
TalkTracker, a cellular phone with usage prepaid; and c) Home and Away, a
combination cordless and cellular phone in a single package. The Company's
customer bills typically show separate charges for custom-calling features,
airtime in excess of the packaged amount, and toll calls. Custom-calling
features provided by the Company include wide-area call delivery, call
forwarding, call waiting, three-way calling and

17
<PAGE>
no-answer transfer. The Company also offers a voice message service in many of
its markets. This service, which functions like a sophisticated answering
machine, allows customers to receive messages from callers when they are not
available to take calls.

REGULATION

REGULATORY ENVIRONMENT. The operations of the Company are subject to FCC
and state regulation. The cellular telephone licenses held by USM are granted by
the FCC for the use of radio frequencies and are an important component of the
overall value of the assets of the Company. The construction, operation and
transfer of cellular systems in the United States are regulated to varying
degrees by the FCC pursuant to the Communications Act of 1934 (the
"Communications Act"). In 1996, Congress enacted the Telecommunications Act of
1996 (the "1996 Act"), which amended the Communications Act. The 1996 Act
mandates significant changes in existing telecommunications rules and policies
to promote competition, ensure the availability of telecommunications services
to all parts of the nation and to streamline regulation of the
telecommunications industry to remove regulatory burdens, as competition
develops and makes regulation unnecessary. The FCC has promulgated regulations
governing construction and operation of cellular systems, licensing (including
renewal of licenses) and technical standards for the provision of cellular
telephone service under the Communications Act, and is implementing the
legislative objectives of the 1996 Act, as discussed below.

LICENSING. For cellular telephone licensing purposes, the FCC has divided
the United States into separate geographic markets (MSAs and RSAs). In each
market, the allocated cellular frequencies are divided into two equal blocks.
During the application process, the FCC reserved one block of frequencies for
non-wireline applicants and another block for wireline applicants. Subject to
FCC approval, a cellular system may be sold to either a wireline or non-wireline
entity, but no entity which controls a cellular system may own an interest in
another cellular system in the same MSA or RSA.

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

The FCC must be notified each time an additional cell is constructed which
enlarges the service area of a given market. The FCC's rules also generally
require persons or entities holding cellular construction permits or licenses to
coordinate their proposed frequency usage with neighboring cellular licensees in
order to avoid electrical interference between adjacent systems. The height and
power of base stations in the cellular system are regulated by FCC rules, as are
the types of signals emitted by these stations. In addition to regulation by the
FCC, cellular systems are subject to certain Federal Aviation Administration
("FAA") regulations with respect to the siting and construction of cellular
transmitter towers and antennas.

Beginning in 1996, the FCC has also imposed a requirement that all licensees
register and obtain FCC registration numbers for all of their antenna towers
which require prior FAA clearance. USM is currently engaged in this registration
process. All new towers must be registered at the time of construction and
existing towers are being registered on a staggered state-by-state basis, to be
concluded in May 1998. The FCC is currently considering whether to take action
to pre-empt moratoria imposed by certain localities on the construction of
wireless towers. USM has supported such FCC action.

Initial cellular telephone licenses were granted for ten-year periods. The
FCC has established standards for conducting comparative renewal proceedings
between a cellular licensee seeking renewal of its license and challengers
filing competing applications. The FCC has: (i) established criteria for
comparing the renewal applicant to challengers, including the standards under
which a renewal expectancy will be granted to the applicant seeking license
renewal; (ii) established basic qualifications standards for challengers; and
(iii) provided procedures for preventing possible abuses in the comparative
renewal process. The FCC has concluded that it will award a renewal expectancy
if the licensee has (i) provided "substantial" performance, which is defined as
"sound, favorable and substantially above a level of mediocre service just
minimally justifying renewal," and (ii) complied with FCC rules, policies and
the Communications Act. If a renewal expectancy is awarded to an existing
licensee, its license is

18
<PAGE>
renewed and competing applications are not considered. USM's Tulsa and Knoxville
licenses were renewed in 1995, and USM's Des Moines, Iowa, Peoria, Illinois and
Roanoke, Virginia licenses were renewed in 1996. USM's next renewal applications
for several markets are due to be filed in 1997.

USM conducts and plans to conduct its operations in accordance with all
relevant FCC rules and regulations and anticipates being able to qualify for a
renewal expectancy in its upcoming renewal filings. Accordingly, USM believes
that current regulations will have no significant effect on its operations and
financial condition. However, changes in the regulation of cellular operators or
their activities and of other mobile service providers could have a material
adverse effect on USM's operations.

The FCC has also provided that five years after the initial licenses are
granted, unserved areas within markets previously granted to licensees may be
applied for by both wireline and non-wireline entities and by third parties.
Accordingly, many unserved area applications have been filed by USM and others.
USM's strategy with respect to system construction in its markets has been and
will be to build cells covering areas within such markets that USM considers
economically feasible to serve or might conceivably wish to serve and to do so
within the five-year period following issuance of the license. In cases where
applications for unserved areas are filed which are mutually exclusive and would
result in overlapping service areas, the FCC decides between the competing
applicants by an auction process.

Pursuant to 1993 amendments to the Communications Act, cellular service is
classified as a Commercial Mobile Radio Service ("CMRS"), in that it is service
offered to the public, for a fee, which is interconnected to the public switched
telephone network. The FCC has determined that it will forebear from requiring
CMRS carriers to comply with a number of statutory provisions otherwise
applicable to common carriers, such as the filing of tariffs.

RECENT EVENTS. There are certain regulatory proceedings currently pending
before the FCC which are of particular importance to the cellular industry. In
one proceeding, the FCC has imposed new "enhanced 911" regulations on cellular
carriers. Enhanced 911 capabilities would enable cellular systems to determine
the precise location of the person making the emergency call. The new rules will
require cellular carriers to work with local public safety officials to process
911 calls, including those made from mobile telephones not registered with the
cellular system, and will require cellular systems to improve their ability to
locate wireless 911 callers over a five-year period.

The FCC has adopted a limited expansion of the obligation of cellular
carriers to serve the subscribers of broadband PCS providers, among others, even
though the subscribers involved have no pre-existing service relationship with
that carrier. Under these new policies, broadband PCS providers may offer their
subscribers handsets which are capable of operating over broadband PCS and
cellular networks so that when their subscribers are out of range of broadband
PCS networks, they will be able to obtain non-automatic access to cellular
networks. The FCC expects that implementation of these roaming capabilities will
promote competition between broadband PCS and cellular service providers.

The FCC has adopted requirements which will make it possible for subscribers
to retain, at the same location, their existing telephone numbers when they
switch from one service provider to another. This numbering portability will
include switching between Local Exchange Carriers ("LECs") and other wireline
providers, between wireless service providers and between LEC/wireline and
wireless providers. LECs have implementation deadlines by the end of 1998.
Broadband PCS, cellular and certain other wireless providers have phased
implementation deadlines in 1998 and 1999.

In another proceeding, the FCC in 1996 adopted rules regarding the method by
which cellular carriers and LECs shall compensate each other for interconnecting
cellular and local exchange facilities. The FCC rules provided for symmetrical
and reciprocal compensation between LECs and cellular carriers, and also
prescribed interim interconnection proxy rates, which are much lower than the
rates formerly paid by cellular carriers to LECs. Symmetrical and reciprocal
compensation means they must pay each other at the same rate. The U.S. Court of
Appeals for the Eighth Circuit has stayed the effect of the rules prescribing
interim rates because it has held that the 1996 Act requires that rate issues
are to be decided by the states. However, the FCC's rules requiring reciprocal
and symmetrical compensation remain in effect. If the U.S. Court of Appeals
sustains its earlier ruling, interconnection rate issues will be

19
<PAGE>
decided by the states. Whether the issue is decided by the states or the federal
government, cellular carriers in the future can be expected to pay lower rates
to LECs than they previously paid. This result is expected to be favorable to
the wireless industry and somewhat unfavorable to LECs.

The FCC is also proceeding to implement the 1996 Act. The 1996 Act provides
that implementing its legislative objectives will be the task of the FCC, the
state public utilities commissions and a Federal-state Joint Board. Much of this
implementation is proceeding in numerous, concurrent proceedings with aggressive
deadlines. The Company cannot predict the full extent, nature and
interrelationships among state and federal implementation and other responses to
the 1996 Act.

The primary purpose and effect of the new law is to open all
telecommunications markets to competition. The 1996 Act makes most direct or
indirect state and local barriers to competition unlawful. It directs the FCC to
preempt all inconsistent state and local laws and regulations, after notice and
comment proceedings. It also enables electric and other utilities to engage in
telecommunications service through qualifying subsidiaries.

Only narrow powers over competitive entry are left to state and local
authorities. Each state retains the power to impose competitively neutral
requirements that are consistent with the 1996 Act's universal service provision
and necessary for universal services, public safety and welfare, continued
service quality and consumer rights. While a state may not impose requirements
that effectively function as barriers to entry, it retains limited authority to
regulate certain competitive practices in rural telephone company service areas.

The 1996 Act establishes principles and a process for implementing a
modified "universal service" policy. This policy seeks nationwide, affordable
service and access to advanced telecommunications and information services. It
calls for reasonably comparable urban and rural rates and services. The 1996 Act
also requires universal service to schools, libraries and rural health
facilities at discounted rates. The FCC is now considering how to implement the
mandate of the 1996 Act to create a new universal service support mechanism "to
ensure that all Americans have access to telecommunications services." The 1996
Act requires all interstate telecommunications providers, including wireless
service providers, to "make an equitable and non-discriminatory contribution,"
to support the cost of providing universal service, unless their contribution
would be DE MINIMIS. At present, the provision of landline telephone service in
high cost areas is subsidized by access charges and other payments by
interexchange carriers to LECs. It is expected that the obligation to make some
kind of payments to support universal service will be expanded to include other
telecommunications service providers, including cellular carriers. It is not
known how those payments may be calculated or what revenue base may be used.
However, it is also possible that cellular carriers may become eligible to
receive universal service support payments in certain circumstances under the
new system.

The FCC has also allocated a total of 140 megahertz ("MHz") to broadband
PCS, 20 MHz to unlicensed operations and 120 MHz to licensed operations,
consisting of two 30 MHz blocks in each of the 51 Major Trading Areas ("MTAs")
and one 30 MHz block and three 10 MHz blocks in each of 493 Basic Trading Areas
("BTAs"). Cellular operators and those entities under common ownership with them
are permitted to participate in the ownership of PCS licensees, except for those
PCS licenses reserved for small businesses, and licenses for PCS service areas
in which the cellular operator owns a 20% or greater interest in a cellular
licensee, the service area of which covers 10% or more of the population of the
PCS service area. In the latter case, the cellular license is limited to two 10
MHz PCS channel blocks.

The FCC licensed the first two 30 MHz MTA frequency blocks in 1995 and the
30 MHz block which is reserved for small business entities in 1996, and has
announced the winning bidders in the D, E and F Block auctions in 1997. TDS's
subsidiary, Aerial Communications, Inc. ("Aerial"), was licensed in eight MTAs
for 30 MHz blocks but has sold its license for the Guam and Alaska MTAs. It is
now constructing PCS systems in the other six MTAs. See "Broadband PCS
Operations."

In compliance with FCC restrictions on common ownership of cellular and
broadband PCS interests in overlapping market areas, USM entered into a series
of arrangements for the divestiture or restructuring of certain of its cellular
interests in market areas where Aerial was awarded broadband PCS licenses. A
number of these proposed arrangements required FCC approval of assignment or
transfer of control

20
<PAGE>
applications before they could be consummated. All of these applications have
been approved by the FCC and have been consummated. USM believes that it has
taken reasonable steps to comply with the FCC's cross-interest policies.

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

Media reports have suggested that certain radio frequency ("RF") emissions
from portable cellular telephones might be linked to cancer. USM has reviewed
relevant scientific information and, based on such information, is not aware of
any credible evidence linking the usage of portable cellular telephones with
cancer. In 1996 the FCC announced rules, now scheduled to go into effect in
September 1997, dealing, INTER ALIA, with RF emissions from cellular towers of
less than 10 meters in height and cellular telephones. It is anticipated that
USM will be able to comply with RF tower emission standards and USM believes
that the cellular telephones currently being sold by USM comply with the
standards.

STATE AND LOCAL REGULATION. USM is also subject to state and local
regulation in some instances. In 1981, the FCC preempted the states from
exercising jurisdiction in the areas of licensing, technical standards and
market structure. In 1993, Congress preempted states from regulating the entry
of cellular systems into service and the rates charged by cellular systems to
customers. The siting and construction of the cellular facilities, including
transmitter towers, antennas and equipment shelters are still subject to state
or local zoning and land use regulations. In addition, states may still regulate
other terms and conditions of cellular service.

The FCC is required to forbear from applying any statutory or regulatory
provision that is not necessary to keep telecommunications rates and terms
reasonable or to protect consumers. A state may not apply a statutory or
regulatory provision that the FCC decides to forbear from applying. In addition,
the FCC must review its telecommunications regulations every two years and
change any that are no longer necessary.

USM and its subsidiaries have been and intend to remain active participants
in proceedings before the FCC and, through its membership in state associations
of wireless providers, before state regulatory authorities. Proceedings with
respect to the foregoing policy issues before the FCC and state regulatory
authorities could have a significant impact on the competitive market structure
among wireless providers and the relationships between wireless providers and
other carriers. USM is unable to predict the scope, pace or financial impact of
policy changes which could be adopted in these proceedings.

COMPETITION

The Company's principal competitor for cellular telephone service in each
market is the licensee of the second cellular system in that market. Since each
competitor operates its cellular system on a 25 MHz frequency block licensed by
the FCC using comparable technology and facilities, competition for customers
between the two systems in each market is principally on the basis of quality of
service, price, size of area covered, services offered, and responsiveness of
customer service. The competing entities in many of the markets in which the
Company has an interest have financial resources which are substantially greater
than those of the Company and its partners in such markets.

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

In addition to competition from the other cellular licensee in each market,
there is also competition from, among other technologies, conventional mobile
telephone and SMR systems, both of which are able to connect with the landline
telephone network. The Company believes that conventional mobile

21
<PAGE>
telephone systems and conventional SMR systems are competitively disadvantaged
because of technological limitations on the capacity of such systems. The FCC
has recently given approval, through waivers of its rules, to ESMR, an enhanced
SMR system. ESMR systems may have cells and frequency reuse like cellular,
thereby potentially eliminating any current technological limitation. The first
ESMR systems were implemented in 1993 in Los Angeles and are being implemented
in many other cities across the United States. ESMR providers have initiated
service in several areas where the Company operates cellular systems. Although
less directly a substitute for cellular service, wireless data services and
one-way paging service (and in the future, two-way paging services) may be
adequate for those who do not need full two-way voice service.

PCS providers have initiated service in several markets across the United
States, including markets where the Company has operations. PCS providers offer
digital, wireless communications services to their customers. Similar
technological advances or regulatory changes in the future may make available
other alternatives to cellular service, thereby creating additional sources of
competition. The Company expects PCS operators to continue deployment of PCS
across all of the Company's markets over the next one or two years. The Company
anticipates that PCS competitors will build out the larger metropolitan areas
before the mid-sized metropolitan and rural areas where the Company operates. As
a result, the effects of PCS competition may not reach the Company's markets as
quickly as they may in other cellular operators' markets.

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

EMPLOYEES

The Company had 3,800 employees as of December 31, 1996. Of these, 3,400
were based at the various cellular markets operated or managed by the Company
with only 400 based at its corporate office in Chicago, Illinois. None of the
Company's employees is represented by a labor organization. The Company
considers its relationship with its employees to be good.

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

ITEM 2. PROPERTIES

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

The Company leases approximately 89,000 square feet of office space for its
headquarters in Chicago, Illinois.

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

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

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in a number of legal proceedings before the FCC and
various state and federal courts. In some cases, the litigation involves
disputes regarding rights to certain cellular telephone systems and other
interests. The Company does not believe that any such proceeding should have a
material adverse impact on the Company.

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

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

No matter was submitted to a vote of securities holders during the fourth
quarter of 1996.

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

PART II

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

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

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

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

ITEM 6. SELECTED FINANCIAL DATA

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

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

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

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

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

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

None.

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

PART III

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

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

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

ITEM 11. EXECUTIVE COMPENSATION

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

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

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

25
<PAGE>
- --------------------------------------------------------------------------------

PART IV

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

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

The following documents are filed as a part of this report:

(a)(1) Financial Statements

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

- ------------------------
* Incorporated by reference from Exhibit 13.

<TABLE>
<CAPTION>
LOCATION
--------
<S> <C> <C>
(2) Schedules
Report of Independent Public Accountants on Financial Statement Schedule................................................ page 28
II. Valuation and Qualifying Accounts for each of the Three Years in the Period Ended December 31, 1996................ page 29

Los Angeles SMSA, Nashville/Clarksville MSA and Baton Rouge MSA Limited Partnership Combined Financial
Statements....................................................................................................... page 30
Compilation Report of Independent Public Accountants on Combined Financial Statements.............................. page 31
Report of Independent Accountants.................................................................................. page 32
Reports of Other Independent Accountants........................................................................... page 33
Combined Statements of Operations (Unaudited)...................................................................... page 38
Combined Balance Sheets (Unaudited)................................................................................ page 39
Combined Statements of Cash Flows (Unaudited)...................................................................... page 40
Combined Statements of Changes in Partners' Capital (Unaudited).................................................... page 41
Notes to Unaudited Combined Financial Statements................................................................... page 42
</TABLE>

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

26
<PAGE>
(3) Exhibits

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

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <S>
10.1 Supplemental Benefit Agreement between the Company and H. Donald Nelson is hereby incorporated by reference to an exhibit
to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).
10.10 Stock Option and Stock Appreciation Rights Plan is hereby incorporated by reference to Exhibit B to the Company's
definitive Notice of Annual Meeting and Proxy Statement dated April 15, 1991, as filed with the Commission on April 16,
1991.
10.11 Summary of 1996 Bonus Program for Senior Corporate Staff of the Company.
10.12(a) United States Cellular Corporation 1994 Long-Term Incentive Plan is hereby incorporated by reference to exhibit 99.1 to
the Company's Registration Statement on Form S-8 (Registration No. 33-57255).
10.12(b) Form of 1994 Long-Term Stock Option Agreement (Transferable Form) is hereby incorporated by reference to Exhibit 99.2 to
the Company's Registration Statement on Form S-8 (Registration No. 33-57255).
10.12(c) Form of 1994 Long-Term Stock Option Agreement (Nontransferable Form) is hereby incorporated by reference to Exhibit 99.3
to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).
10.12(d) Form of 1995 Performance Stock Option Agreement (Transferable Form) is hereby incorporated by reference to Exhibit 99.4 to
the Company's Registration Statement on Form S-8 (Registration No. 33-57255).
10.12(e) Form of 1995 Performance Stock Option Agreement (Nontransferable Form) is hereby incorporated by reference to Exhibit 99.5
to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).
10.13 Supplemental Executive Retirement Plan of TDS is hereby incorporated by reference to Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
10.18 Deferred Compensation Agreement for H. Donald Nelson dated July 15, 1996, is hereby incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996.
10.19 Deferred Compensation Agreement for Richard Goehring dated July 15, 1996, is hereby incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996.
</TABLE>

(b) Reports on Form 8-K filed during the quarter ended December 31, 1996.

No reports on Form 8-K were filed during the quarter ended December 31,
1996.

27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE

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

We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in United States Cellular
Corporation and Subsidiaries Annual Report to Shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated January
29, 1997 (except with respect to the matter discussed in Note 16, as to which
the date is February 4, 1997). Our audits were made for the purpose of forming
an opinion on the basic consolidated financial statements taken as a whole. The
financial statement schedule listed in Item 14(a)(2) is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This financial statement schedule has been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Chicago, Illinois
January 29, 1997
(except with respect to the matter discussed in Note 16,
as to which the date is February 4, 1997)

28
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C1 COLUMN C2 COLUMN D COLUMN E
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, 1996
Deducted from deferred federal tax asset:
For unrealized net operating losses............................ $ (8,141) $ 5,795 $ 199 $ -- $ (2,147)
Deducted from deferred state tax asset:
For unrealized net operating losses............................ (11,969) 2,305 (1,339) -- (11,003)
Deducted from accounts receivable:
For doubtful accounts.......................................... (3,820) (17,534) -- 17,155 (4,199)
FOR THE YEAR ENDED DECEMBER 31, 1995
Deducted from deferred federal tax asset:
For unrealized net operating losses............................ $ (23,761) $16,730 $(1,110) $ -- $ (8,141)
Deducted from deferred state tax asset:
For unrealized net operating losses............................ (14,203) 8,257 (6,023) -- (11,969)
Deducted from accounts receivable:
For doubtful accounts.......................................... (2,073) (12,532) -- 10,785 (3,820)
FOR THE YEAR ENDED DECEMBER 31, 1994
Deducted from deferred federal tax asset:
For unrealized net operating losses............................ $ (21,876) $ -- $(1,885) $ -- $ (23,761)
Deducted from deferred state tax asset:
For unrealized net operating losses............................ (8,441) 1,202 (6,964) -- (14,203)
Deducted from accounts receivable:
For doubtful accounts.......................................... (1,413) (7,314) -- 6,654 (2,073)
Deducted from marketable equity securities:
For unrealized loss............................................ (626) -- 626 -- --
</TABLE>

29
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
COMBINED FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
THE
PERIODS COMPANY'S
INCLUDED LIMITED
IN COMBINED PARTNERSHIP
CELLULAR SYSTEM PARTNERSHIP STATEMENTS INTEREST
- --------------------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Los Angeles SMSA Limited Partnership................................................... 1994-96 5.5 %
Nashville/Clarksville MSA Limited Partnership.......................................... 1994-96 49.0 %
Baton Rouge MSA Limited Partnership.................................................... 1994-95 52.0 %
Baton Rouge MSA Limited Partnership.................................................... 1996 49.99 %
</TABLE>

30
<PAGE>
COMPILATION REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

The accompanying combined balance sheets of the Los Angeles SMSA Limited
Partnership, the Nashville/Clarksville MSA Limited Partnership and the Baton
Rouge MSA Limited Partnership as of December 31, 1996 and 1995 and the related
combined statements of operations, changes in partners' capital, and cash flows
for each of the three years in the period ended December 31, 1996, have been
prepared from the separate financial statements, which are not presented
separately herein, of the Los Angeles SMSA, Nashville/Clarksville MSA and Baton
Rouge MSA limited partnerships, as described in Note 1. We have reviewed for
compilation only the accompanying combined financial statements, and, in our
opinion, those statements have been properly compiled from the amounts and notes
of the underlying separate financial statements of the Los Angeles SMSA,
Nashville/Clarksville MSA and Baton Rouge MSA limited partnerships, on the basis
described in Note 1.

The separate financial statements of the Los Angeles SMSA,
Nashville/Clarksville MSA and Baton Rouge MSA limited partnerships were audited
by other auditors as set forth in their reports included on pages 32 through 37.
We have not been engaged to audit either the separate financial statements of
the aforementioned limited partnerships or the related combined financial
statements in accordance with generally accepted auditing standards and to
render an opinion as to the fair presentation of such financial statements in
accordance with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Chicago, Illinois
February 25, 1997

31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To The Partners of
LOS ANGELES SMSA LIMITED PARTNERSHIP:

In our opinion, the balance sheets and the related statements of income,
partners' capital and of cash flows and the financial statement schedule
II -- valuation and qualifying accounts present fairly, in all material
respects, the financial position of Los Angeles SMSA Limited Partnership at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles. These financial statements, which are not presented separately
herein, are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICE WATERHOUSE LLP

San Francisco, California
February 25, 1997

32
<PAGE>
REPORTS OF OTHER INDEPENDENT ACCOUNTANTS

To The Partners of
LOS ANGELES SMSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Los Angeles SMSA Limited Partnership as
of December 31, 1994, and the related statements of operations, partners'
capital and cash flows for the year then ended; such financial statements are
not included separately herein. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Los Angeles SMSA Limited
Partnership as of December 31, 1994, and results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Newport Beach, California
February 17, 1995

33
<PAGE>
REPORTS OF OTHER INDEPENDENT ACCOUNTANTS

To The Partners of
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Nashville/Clarksville MSA Limited
Partnership as of December 31, 1996, and the related statements of income,
changes in partners' capital and cash flows for the year then ended; such
financial statements are not included separately herein. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nashville/Clarksville MSA
Limited Partnership as of December 31, 1996, and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.

COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
February 7, 1997

To The Partners of
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Nashville/Clarksville MSA Limited
Partnership as of December 31, 1995, and the related statements of income,
changes in partners' capital and cash flows for the year then ended; such
financial statements are not included separately herein. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nashville/Clarksville MSA
Limited Partnership as of December 31, 1995, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
February 9, 1996

34
<PAGE>
REPORTS OF OTHER INDEPENDENT ACCOUNTANTS

To The Partners of
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Nashville/Clarksville MSA Limited
Partnership as of December 31, 1994, and the related statements of income,
changes in partners' capital and cash flows for the year then ended; such
financial statements are not included separately herein. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nashville/Clarksville MSA
Limited Partnership as of December 31, 1994, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
February 10, 1995

35
<PAGE>
REPORTS OF OTHER INDEPENDENT ACCOUNTANTS

To The Partners of
BATON ROUGE MSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Baton Rouge MSA Limited Partnership as
of December 31, 1996, and the related statements of income, changes in partners'
capital and cash flows for the year then ended; such financial statements are
not included separately herein. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Baton Rouge MSA Limited
Partnership as of December 31, 1996, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
February 7, 1997

To The Partners of
BATON ROUGE MSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Baton Rouge MSA Limited Partnership as
of December 31, 1995, and the related statements of income, changes in partners'
capital and cash flows for the year then ended; such financial statements are
not included separately herein. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Baton Rouge MSA Limited
Partnership as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
February 9, 1996

36
<PAGE>
REPORTS OF OTHER INDEPENDENT ACCOUNTANTS

To The Partners of
BATON ROUGE MSA LIMITED PARTNERSHIP:

We have audited the balance sheet of Baton Rouge MSA Limited Partnership as
of December 31, 1994, and the related statements of income, changes in partners'
capital and cash flows for the year then ended; such financial statements are
not included separately herein. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Baton Rouge MSA Limited
Partnership as of December 31, 1994, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
February 10, 1995

37
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues................................................................... $ 953,110 $ 811,933 $ 648,896
Expenses
Selling, general and administrative...................................... 537,897 460,048 370,938
Depreciation and amortization............................................ 101,633 71,748 66,234
----------- ----------- -----------
Total expenses........................................................... 639,530 531,796 437,172
Operating income........................................................... 313,580 280,137 211,724
Other income............................................................... 1,324 985 573
----------- ----------- -----------
Net Income................................................................. $ 314,904 $ 281,122 $ 212,297
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

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

38
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
COMBINED BALANCE SHEETS
(UNAUDITED)

ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current Assets
Cash.................................................................................. $ 118 $ 214
Accounts receivable--customers, net................................................... 118,033 116,966
Accounts receivable--affiliates....................................................... 73,029 14,830
Notes receivable--affiliates.......................................................... 3,617 8,860
Other current assets.................................................................. 16,694 11,801
----------- -----------
211,491 152,671
Notes Receivable--Other................................................................. -- 3,184
Property, Plant and Equipment, net...................................................... 672,565 564,564
Other................................................................................... 3,558 23,715
----------- -----------
Total Assets............................................................................ $ 887,614 $ 744,134
----------- -----------
----------- -----------

LIABILITIES AND PARTNERS' CAPITAL

DECEMBER 31,
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current Liabilities
Accounts payable--other............................................................... $ 77,682 $ 53,526
Notes payable......................................................................... 10,772 5,084
Customer deposits..................................................................... 3,738 3,311
Other current liabilities............................................................. 51,839 50,191
----------- -----------
144,031 112,112
Other Liabilities....................................................................... 5,341 5,788
Partners' Capital....................................................................... 738,242 626,234
----------- -----------
Total Liabilities and Partners' Capital................................................. $ 887,614 $ 744,134
----------- -----------
----------- -----------
</TABLE>

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

39
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income............................................................ $ 314,904 $ 281,122 $ 212,297
Add (Deduct) adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization....................................... 101,633 71,748 66,234
Deferred revenue and other credits.................................. 378 (966) 1,387
Loss on asset dispositions.......................................... 6,157 3,021 3,542
Change in accounts receivable....................................... (1,067) (20,709) (13,974)
Change in accounts payable and accrued expenses..................... (3,775) (1,438) 28,772
Change in other assets and liabilities.............................. 288 13,036 (5,314)
------------ ------------ ------------
418,518 345,814 292,944
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in notes payable............................................. 6,063 4,392 692
Change in notes receivable.......................................... 8,427 (7,355) 3,354
Capital contribution................................................ 26,255 5,096 -
Capital distribution................................................ (229,151) (72,017) (166,300)
------------ ------------ ------------
(188,406) (69,884) (162,254)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment, net of retirements...... (169,753) (254,629) (143,807)
(Increases) decreases in other assets............................... (937) (21,573) (44)
Change in deferred charges.......................................... (1,319) (738) (827)
Proceeds from sale of assets........................................ - - 34
Change in due from general partner.................................. (58,199) 1,186 13,965
------------ ------------ ------------
(230,208) (275,754) (130,679)
------------ ------------ ------------
NET INCREASE IN CASH.................................................... (96) 176 11
CASH
Beginning of period................................................. 214 38 27
------------ ------------ ------------
End of period......................................................... $ 118 $ 214 $ 38
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

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

40
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(UNAUDITED)

<TABLE>
<S> <C>
(DOLLARS IN THOUSANDS)
Balance at December 31, 1993.................................................... $ 357,470
Distributions................................................................. (166,300)
Net Income for the year ended December 31, 1994............................... 212,297
---------
Balance at December 31, 1994.................................................... 403,467
Contributions................................................................. 13,662
Distributions................................................................. (72,017)
Net Income for year ended December 31, 1995................................... 281,122
---------
Balance at December 31, 1995.................................................... 626,234
Contributions................................................................. 26,255
Distributions................................................................. (229,151)
Net Income for the year ended December 31, 1996............................... 314,904
---------
Balance at December 31, 1996.................................................... $ 738,242
---------
---------
</TABLE>

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

41
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS

1. BASIS OF COMBINATION:

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

<TABLE>
<CAPTION>
PERIOD INCLUDED LIMITED
IN COMBINED PARTNERSHIP
STATEMENTS INTEREST
--------------- -------------
<S> <C> <C>
Los Angeles SMSA Limited Partnership................................................ 1994-96 5.5 %
Nashville/Clarksville MSA Limited Partnership....................................... 1994-96 49.0 %
Baton Rouge MSA Limited Partnership................................................. 1994-95 52.0 %
Baton Rouge MSA Limited Partnership................................................. 1996 49.99%
</TABLE>

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

Of the partnerships included in the combined financial statements, the Los
Angeles SMSA Limited Partnership is the most significant, accounting for
approximately 80.8% of the combined total assets at December 31, 1996, and
substantially all of the combined net income for the year then ended.

USM's investment in and advances to Los Angeles SMSA Limited Partnership
totaled $28,353,000 as of December 31, 1996, of which $32,207,000 represents its
proportionate share of net assets of the Partnership. USM's investment in and
advances to the Nashville/Clarksville MSA Limited Partnership totaled
$48,777,000 as of December 31, 1996, of which $51,566,000 represents its
proportionate share of net assets. USM's investment in and advances to the Baton
Rouge MSA Limited Partnership totaled $26,541,000 as of December 31, 1996,
$23,702,000 of which represents its proportionate share of net assets.

Effective May 1, 1996, a partner in one of the Partnerships purchased a
2.01% interest in the Partnership from an affiliate of USM.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR COMBINED ENTITIES:

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

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

Effective January 1, 1995, one of the Partnerships changed its estimate of
the useful lives of certain telecommunications equipment from 7 to 10 years. The
change in estimate had the effect of reducing depreciation expense and
increasing net income by approximately $14,844,000 for 1995.

42
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Property, Plant and Equipment consists of:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land.................................................................................. $ 4,650 $ 3,974
Buildings and Leasehold Improvements.................................................. 174,890 149,644
Equipment............................................................................. 738,275 580,810
Furniture and Fixtures................................................................ 74,373 58,580
Under Construction.................................................................... 67,058 80,665
------------- -----------
1,059,246 873,673
Less Accumulated Depreciation......................................................... 386,681 309,109
------------- -----------
$ 672,565 $ 564,564
------------- -----------
------------- -----------
</TABLE>

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

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

OTHER CURRENT ASSETS

Other current assets includes inventory consisting primarily of cellular
phones and accessories held for resale. Two of the Partnerships state inventory
at average cost. One of the Partnerships states inventory at the lower of cost
or market. Costs are valued based upon the first-in, first-out method.
Consistent with industry practice, losses on sales of cellular phones are
recognized in the period in which sales are made as a cost of acquiring
subscribers.

REVENUE RECOGNITION

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

INCOME TAXES

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

ADVERTISING

Advertising costs are expensed as incurred. The advertising expense for
1996, 1995 and 1994 was $50,664,000, $42,046,000 and $38,691,000, respectively.

ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.

43
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

IMPAIRMENT OF LONG-LIVED ASSETS

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121").
Under SFAS 121, the Partnerships are required to review long-lived assets and
certain identifiable intangible assets, for impairment whenever events or
changes in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.

Effective January 1, 1996, one of the Partnerships adopted SFAS No. 121. The
implementation did not materially impact the financial condition or operating
results of the Partnership.

RECLASSIFICATIONS

Certain reclassifications of the 1995 and 1994 financial statements of one
of the Partnerships have been made to conform to the 1996 presentation. The
reclassifications have not affected previously reported net income or partners'
capital.

3. LEASE COMMITMENTS:

Future minimum rental payments required under operating leases that have
initial or remaining noncancellable lease terms in excess of one year as of
December 31, 1996, are as follows:

<TABLE>
<S> <C>
(DOLLARS IN THOUSANDS)
1997............................................................. $ 22,351
1998............................................................. 22,093
1999............................................................. 20,666
2000............................................................. 17,299
2001............................................................. 6,151
Thereafter....................................................... 16,527
---------
$ 105,087
---------
---------
</TABLE>

The initial lease terms generally range from 5 to 25 years with the majority
of them having initial terms of 10 years and providing for one renewal option of
5 years and for rental escalation. Included in selling, general and
administrative expense are rental costs of $20,713,000, $17,455,000 and
$17,750,000 for the years ended December 31, 1996, 1995, and 1994, respectively.
The Partnership recognizes rent expense on a straight-line basis and recorded
the related deferred rent as a noncurrent liability to be amortized as an
adjustment to rental costs over the life of the lease.

4. SUPPLEMENTAL CASH FLOW INFORMATION:

During 1996, one of the Partnerships replaced and upgraded certain of its
cellular equipment with new cellular technology which supports both analog and
digital voice transmissions. In connection with this equipment upgrade, the
Partnership traded-in cellular equipment with a net book value of $10,331,000
for new cellular equipment with a cost of $51,967,000. The remaining balance was
funded through the credit facility with its General Partner.

5. RELATED PARTY TRANSACTIONS:

Certain affiliates of these cellular limited partnerships provide services
for the system operations, legal, financial, management and administration of
these entities. These affiliates are reimbursed for both direct and allocated
costs (totaling $79.6 million in 1996, $63.1 million in 1995 and $60.3 million
in 1994) related to providing these services. In addition, certain affiliates
have established a credit facility with certain partnerships to provide working
capital to the Partnership. One of the Partnerships participates in a
centralized cash management arrangement with its General Partner. At December
31, 1996

44
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)
and 1995, the interest-bearing balance amounted to $73,029,000 and $14,830,000,
respectively. Effective January 1, 1989, the General Partner pays or charges the
Partnership monthly interest, computed using the General Partner's average
borrowing rate, on the amounts due to or from the Partnership. Interest earned
in 1996, 1995 and 1994 was $3,088,000, $785,000 and $1,480,000, respectively.

One of the Partnerships has a note receivable from its General Partner with
a balance of $3,152,000 and accrued interest of $465,000 at December 31, 1996.
The note bears interest at 12% per annum, compounded quarterly with all
principal and interest due at maturity on May 10, 1997.

6. ACCOUNTS RECEIVABLE

Accounts receivable of one of the Partnerships consists of:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Retail.............................................................. $ 83,424 $ 83,682
Wholesale........................................................... 13,492 17,660
Intercarrier and other.............................................. 12,865 9,437
----------- -----------
109,781 110,779
Allowance for doubtful accounts..................................... (7,775) (8,719)
----------- -----------
$ 102,006 $ 102,060
----------- -----------
----------- -----------
</TABLE>

Due to the large volume and diversity of the customer base of one of the
Partnerships within the Los Angeles metropolitan market, concentrations of
credit risk with respect to trade receivables are limited. The Partnership
performs ongoing credit evaluations of its customers and in certain
circumstances obtains refundable deposits. The Partnership maintains reserves
for potential credit losses and, historically, such losses have been within
management's expectations.

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

7. REGULATORY MATTERS:

In the normal course of business, one of the Partnerships is subject to
state regulation of the "terms and conditions" of cellular service excluding
cellular rates. Additionally, the Partnership is subject to Federal
Communication Commission regulation of cellular rates and market entry.
Management does not expect such regulations to have a material adverse effect on
the results of operations or financial position of the Partnership.

8. CONTINGENCIES AND COMMITMENTS:

In November 1993, a class action complaint was filed on behalf of cellular
customers of one of the Partnerships in Orange County Superior Court naming,
among others, that Partnership. These complaints allege certain facts, including
a similarity in the pricing structures of the two defendant cellular carriers,
which plaintiffs contend are circumstantial evidence that the Partnership and
Los Angeles Cellular Telephone Company conspired to fix the prices of retail and
wholesale cellular radio services in the Los Angeles market. The complaint seeks
damages for the class "in a sum in excess of $100 million." A similar agent case
was settled for an immaterial amount. Trial has been set for July 7, 1997. The
Partnership does not believe that this proceeding will have a material adverse
effect on the Partnership's financial position or results of operations.

45
<PAGE>
LOS ANGELES SMSA LIMITED PARTNERSHIP
NASHVILLE/CLARKSVILLE MSA LIMITED PARTNERSHIP
BATON ROUGE MSA LIMITED PARTNERSHIP
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The Partnership is also party to various other legal proceedings in the
ordinary course of business. Although the ultimate resolution of these
proceedings cannot be ascertained, management does not believe they will have a
materially adverse effect on the results of operations or financial position of
the Partnership.

Two of the Partnerships are engaged in various legal actions arising in the
ordinary course of business. Management does not anticipate any judgements
against the Partnerships in excess of liabilities established which would have a
material impact, individually or in the aggregate, on the financial position of
the Partnerships.

46
<PAGE>
SIGNATURES

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

UNITED STATES CELLULAR CORPORATION

By: /S/ H. DONALD NELSON

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

By: /S/ KENNETH R. MEYERS

-----------------------------------
Kenneth R. Meyers
SENIOR VICE PRESIDENT--FINANCE AND
TREASURER
(CHIEF FINANCIAL OFFICER)

By: /S/ PHILLIP A. LORENZINI

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

Dated March 20, 1997

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

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------- ------------------

<S> <C> <C>
/S/ H. DONALD NELSON DIRECTOR March 20, 1997
------------------------------------------
H. Donald Nelson

/S/ LEROY T. CARLSON, JR. DIRECTOR March 20, 1997
------------------------------------------
LeRoy T. Carlson, Jr.

/S/ LEROY T. CARLSON DIRECTOR March 20, 1997
------------------------------------------
LeRoy T. Carlson

/S/ WALTER C.D. CARLSON DIRECTOR March 20, 1997
------------------------------------------
Walter C. D. Carlson

/S/ MURRAY L. SWANSON DIRECTOR March 20, 1997
------------------------------------------
Murray L. Swanson

/S/ PAUL-HENRI DENUIT DIRECTOR March 20, 1997
------------------------------------------
Paul-Henri Denuit

/S/ ALLAN Z. LOREN DIRECTOR March 20, 1997
------------------------------------------
Allan Z. Loren
</TABLE>

<PAGE>
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- -------- --------------------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Restated Certificate of Incorporation, as amended, is hereby incorporated by reference to an exhibit to the
Company's Amendment No. 2 on Form 8 dated December 28, 1992, to the Company's Report on Form 8-A.
3.2 Restated Bylaws, as amended, are hereby incorporated by reference to an exhibit to the Company's Amendment No. 2 on
Form 8 dated December 28, 1992, to the Company's Report on Form 8-A.
4.1 Restated Certificate of Incorporation, as amended, is hereby incorporated by reference to an exhibit to the
Company's Amendment No. 2 on Form 8 dated December 28, 1992 to the Company's Report on Form 8-A.
4.2 Restated by-laws, as amended, are hereby incorporated by reference to an exhibit to the Company's Amendment No. 2 on
Form 8 dated December 28, 1992 to the Company's Report on Form 8-A.
4.3(a) Amended and restated Term Loan Agreement between NTFC Capital Corporation and the Company dated December 22, 1994 is
hereby incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
4.3(b) First Amendment to Amended and Restated Term Loan Agreement between NTFC Capital Corporation and the Company dated
September 29, 1995 is hereby incorporated by reference to Exhibit 4.3(b) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
4.4 Indenture dated June 1, 1995 between registrant and Harris Trust and Savings Bank, as Trustee, relating to the LYONs
is hereby incorporated by reference to the Company's Form 8-K dated June 16, 1995.
4.5 Form of Certificate for Liquid Yield Option Note (included in Exhibit 4.4).
9.1 Voting Trust Agreement, dated as of June 30, 1989, with respect to Series A Common Shares of TDS, is hereby
incorporated by reference to an exhibit to the Company's Registration Statement on Form S-1 (Registration No.
33-38644).
9.2 Amendment dated as of May 9, 1991, to the Voting Trust Agreement dated as of June 30, 1989, is hereby incorporated
by reference to Exhibit 9.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.
9.3 Amendment dated as of November 20, 1992, to the Voting Trust Agreement dated as of June 30, 1989, as amended is
hereby incorporated by reference to Exhibit 9.3 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10.1 Supplemental Benefit Agreement between the Company and H. Donald Nelson is hereby incorporated by reference to an
exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).
10.2(a) Revolving Credit Agreement, between the Company and TDS, as amended, is hereby incorporated by reference to an
exhibit to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No.
33-23492).
10.2(b) Amendment dated as of June 29, 1995, to Revolving Credit Agreement between the Company and TDS is hereby
incorporated by reference to Exhibit 10.2(b) to the Company's Annual Report on Form 10-K for the year ended December
31, 1995.
10.3 Tax Allocation Agreement, between the Company and TDS, is hereby incorporated by reference to an exhibit to the
Company's Registration Statement on Form S-1 (Registration No. 33-16975).
10.4 Cash Management Agreement, between the Company and TDS, is hereby incorporated by reference to an exhibit to the
Company's Registration Statement on Form S-1 (Registration No. 33-16975).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- -------- --------------------------------------------------------------------------------------------------------------------
<C> <S>
10.5 Registration Rights Agreement, between the Company and TDS, is hereby incorporated by reference to an exhibit to the
Company's Registration Statement on Form S-1 (Registration No. 33-16975).
10.6 Exchange Agreement, between the Company and TDS, as amended, is hereby incorporated by reference to an exhibit to
the Company's Registration Statement on Form S-1 (Registration No. 33-16975).
10.7 Intercompany Agreement, between the Company and TDS, is hereby incorporated by reference to an exhibit to the
Company's Registration Statement on Form S-1 (Registration No. 33-16975).
10.8 Employee Benefit Plans Agreement, between the Company and TDS, is hereby incorporated by reference to an exhibit to
the Company's Registration Statement on Form S-1 (Registration No. 33-16975).
10.9 Insurance Cost Sharing Agreement, between the Company and TDS, is hereby incorporated by reference to an exhibit to
the Company's Registration Statement on Form S-1 (Registration No. 33-16975).
10.10 Stock Option and Stock Appreciation Rights Plan, is hereby incorporated by reference to Exhibit B to the Company's
definitive Notice of Annual Meeting and Proxy Statement dated April 15, 1991, as filed with the Commission on April
16, 1991.
10.11 Summary of 1996 Bonus Program for the Senior Corporate Staff of the Company.
10.12(a) United States Cellular Corporation 1994 Long-Term Incentive Plan is hereby incorporated by reference to exhibit 99.1
to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).
10.12(b) Form of 1994 Long-Term Stock Option Agreement (Transferable Form) is hereby incorporated by reference to Exhibit
99.2 to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).
10.12(c) Form of 1994 Long-Term Stock Option Agreement (Nontransferable Form) is hereby incorporated by reference to Exhibit
99.3 to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).
10.12(d) Form of 1995 Performance Stock Option Agreement (Transferable Form) is hereby incorporated by reference to Exhibit
99.4 to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).
10.12(e) Form of 1995 Performance Stock Option Agreement (Nontransferable Form) is hereby incorporated by reference to
Exhibit 99.5 to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).
10.13 Supplemental Executive Retirement Plan of TDS is hereby incorporated by reference to Exhibit 10.13 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
10.14 Securities Loan Agreement, dated June 31, 1995, between TDS and Merrill Lynch & Co. is hereby incorporated by
reference to Exhibit 99.1 to the Company's Form 8-K dated June 16, 1995.
10.15 Registration Rights Agreement among TDS, Merrill Lynch & Co. and United States Cellular Corporation is hereby
incorporated by reference to Exhibit 99.2 to the Company's Form 8-K dated June 16, 1995.
10.16 Common Share Delivery Arrangement Agreement among TDS, Merrill Lynch & Co. and United States Cellular Corporation is
hereby incorporated by reference to Exhibit 99.3 to the Company's Form 8-K dated June 16, 1995.
10.17 LYONs Offering Agreement between TDS and United States Cellular Corporation is hereby incorporated by reference to
Exhibit 99.4 to the Company's Form 8-K dated June 16, 1995.
10.18 Deferred Compensation Agreement for H. Donald Nelson dated July 15, 1996 is hereby incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- -------- --------------------------------------------------------------------------------------------------------------------
<C> <S>
10.19 Deferred Compensation Agreement for Richard Goehring dated July 15, 1996 is hereby incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996.
10.20 Cellular Interest Transfer Agreement by and between TDS and the Company dated June 20, 1996.
11 Statement regarding computation of per share earnings.
12 Statement regarding computation of ratios.
13 Incorporated portions of 1996 Annual Report to Security Holders.
21 Subsidiaries of the Registrant.
23.1 Consent of independent public accountants.
23.2 Consents of independent accountants.
27 Financial Data Schedules.
</TABLE>
<PAGE>
[LOGO]
8410 West Bryn Mawr
Suite 700
Chicago, Illinois, 60631
(773) 399-8900

<PAGE>

EXHIBIT 10.11

SUMMARY OF 1996 BONUS PROGRAM FOR
SENIOR CORPORATE STAFF OF
UNITED STATES CELLULAR CORPORATION

The objectives of the 1996 Bonus Program for Senior Corporate Staff (the
"1996 Bonus Plan") of United States Cellular Corporation ("USM") are: (i) to
provide suitable incentives for the senior corporate management of USM to
extend their best efforts to achieve superior results in relation to key
performance targets, (ii) to suitably reward USM's senior corporate
management team in relation to their success in meeting and exceeding these
performance targets, and (iii) to help USM attract and retain talented
management personnel in positions of critical importance to the success of
USM. A team performance award and an individual performance award are
available under the 1996 Bonus Plan.

For target performance on the team and individual categories, the 1996
Bonus Plan was designed to generate a targeted 1996 bonus pool equal to the
total of 25% of the aggregate of the base salaries of the Company's executive
officers other than the President. Under the 1996 Bonus Plan, the size of
the target bonus pool is increased or decreased depending on USM's 1995
achievements with respect to the performance categories. No bonus pool is
paid under such plan if minimum performance levels are not achieved in these
categories. The maximum bonus pool that could be generated, which would
require exceptional performance in all areas, would equal the total of 40% of
the aggregate base salaries of the Company's executive officers. At target
performance, the bonus pool would be equal to 25% of the aggregate salaries
of the Company's executive officers other than the President. Of this
percentage, 7.5% represents a targeted individual performance award and a
total of 17.5% represents a targeted team bonus award. The targeted team
award includes a discretionary team award of 3.5% and an objective award of
14% for a total targeted team bonus award of 17.5%. The objective
performance categories include (i) cash flow (6.125% of the targeted award),
(ii) service revenue (5.25% of the targeted award) and (iii) quality
improvement (2.625% of the targeted award).

The discretionary team performance category, representing 3.5% of the
targeted award of 25%, permits the participants to earn bonus dollars through
USM's performance and their individual performance in areas not measured or
not adequately measured by objective team performance categories. The
President of USM determines a bonus percentage to award for discretionary
team performance and presents his recommendation to the Chairman for his
approval. This decision is based primarily on an assessment of the team
performance in general, considering all facts and circumstances. This award
may range from 40% of the targeted award for adequate performance on a team
level to 160% of the targeted award for outstanding performance on a team
level.

The 1996 Bonus Plan also provides a discretionary individual performance
category, representing 7.5% of the targeted percentage of 25%, to permit the
participants to earn bonus dollars through USM's performance and their
individual performance in areas not measured or not adequately measured by
team performance categories. The President of USM determines a bonus
percentage to award for discretionary individual performance and presents his
recommendation to the Chairman for his approval. This decision is based
primarily on an assessment of the executive's personal performance. This
award may range from 40% of the targeted award for adequate performance on an
individual basis to 160% of the targeted award for outstanding performance on
an individual basis.

<PAGE>

CELLULAR INTEREST TRANSFER AGREEMENT

BY AND BETWEEN

TELEPHONE AND DATA SYSTEMS, INC.

AND

UNITED STATES CELLULAR CORPORATION

DATED AS OF JUNE 20, 1996

<PAGE>

TABLE OF CONTENTS
PAGE

ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .2

ARTICLE II TRANSFER
2.1 Transfer of Cellular Interests. . . . . . . . . . . . . . . . . . .6
2.2 Payment of Assigned Values. . . . . . . . . . . . . . . . . . . . .6
2.3 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . .7

ARTICLE III CLOSING
3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.2 Partial Closings . . . . . . . . . . . . . . . . . . . . . . . . .7
3.3 Delivery of Assigned Values . . . . . . . . . . . . . . . . . . . .8

ARTICLE IV CONDITIONAL PAYMENT BY TDS
4.1 Determination of Aggregate Realized Value . . . . . . . . . . . . .8
4.2 Conditional Payment . . . . . . . . . . . . . . . . . . . . . . . .9

ARTICLE V REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of TDS . . . . . . . . . . . . . . .9
5.2 Representations and Warranties of USCC. . . . . . . . . . . . . . 15

ARTICLE VI COVENANTS AND AGREEMENTS
6.1 Covenants of TDS. . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Covenants of USCC . . . . . . . . . . . . . . . . . . . . . . . . 19
6.3 Mutual Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 19
6.4 Assumption of Liabilities and Obligations . . . . . . . . . . . . 20

ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF TDS
7.1 Representations and Warranties True . . . . . . . . . . . . . . . 21
7.2 Performance of Obligations and Agreements;
No Breach of Covenants. . . . . . . . . . . . . . . . . . . . . . 21
7.3 Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE VIII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USCC
8.1 Representations and Warranties True . . . . . . . . . . . . . . . 22
8.2 Performance of Obligations and Agreements . . . . . . . . . . . . 22
8.3 Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.4 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . 22
8.5 Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . 23

ARTICLE IX RECIPROCAL CONDITIONS PRECEDENT
9.1 Governmental and Other Approvals. . . . . . . . . . . . . . . . . 23
9.2 No Injunctions or Restraints. . . . . . . . . . . . . . . . . . . 23

ARTICLE X TERMINATION AND INDEMNIFICATION
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 Written Notice. . . . . . . . . . . . . . . . . . . . . . . . . . 25

-i-
<PAGE>

10.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . 25
10.4 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.5 Termination Ineffective as to Prior Transfers . . . . . . . . . . 25
10.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 25

ARTICLE XI MISCELLANEOUS
11.1 Non-survival of Representations, Warranties and Covenants;
Liability of the Parties. . . . . . . . . . . . . . . . . . . . . 27
11.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.4 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . 29
11.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.7 Brokers; Investment Banking Fees. . . . . . . . . . . . . . . . . 30
11.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.9 Modifications, Amendments and Waivers . . . . . . . . . . . . . . 30
11.10 Prior Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.11 Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . 31

The Exhibit and Schedules to this Agreement, listed below, are not being
filed herewith. The Registrant agrees to furnish supplementally a copy of
any omitted exhibit or schedule to the Commission upon request.

Exhibit A - Description of Cellular Interests

Schedule 2.2 - Category A Markets
Schedule 4.2 - Assigned Values of Cellular Interests in
Category B Markets
Schedule 5.1(g) - Contigent Liabilities
Schedule 5.1(h) - Investigation and Litigation
Schedule 5.1(j) - Identification of Financial Statements of
Each Licensee
Schedule 6.4 - Liability of TDS
Schedule 8.5(a-1) - Form of Opinion of Sidley & Austin
Schedule 8.5(a-2) - Form of Opinion of Iowa Counsel
Schedule 8.5(b) - Form of Opinion of FCC Counsel

-ii-
<PAGE>

CELLULAR INTEREST TRANSFER AGREEMENT

THIS CELLULAR INTEREST TRANSFER AGREEMENT (the "Agreement"), dated
as of June 20, 1996, is between TELEPHONE AND DATA SYSTEMS, INC., an Iowa
corporation ("TDS"), and UNITED STATES CELLULAR CORPORATION, a Delaware
corporation ("USCC").

RECITALS:

WHEREAS, TDS and USCC are parties to the Exchange Agreement;

WHEREAS, pursuant to Article V of the Exchange Agreement, USCC has
the first right to negotiate for the purchase of TDS's right, title and
interest to cellular interests in certain MSAs and RSAs;

WHEREAS, TDS is the owner, directly or indirectly, of certain
Cellular Interests in Licensees which hold Licenses awarded by the FCC to
construct and operate Cellular Systems in certain MSAs and RSAs,
specifically, (i) the General Partnership Interests, (ii) the Limited
Partnership Interests and (iii) the Cellular Subsidiary Stock as described in
EXHIBIT A attached hereto ("EXHIBIT A");

WHEREAS, USCC is the owner of 85.714% of the issued and outstanding
shares of WCC, which owns a 51% general partnership interest in WCCCLP, which
owns a 36.500% limited partnership interest in the CO3 Partnership;

WHEREAS, Delta, a second-tier subsidiary of TDS, is the owner of
14.286% of the issued and outstanding shares of WCC;

WHEREAS, TDS has offered USCC the opportunity to negotiate the
purchase of all of TDS's Cellular Interests described in Exhibit A in a
single transaction;

WHEREAS, the Board of Directors of USCC appointed the USCC Special
Committee to, among other things, consider TDS's offer and report to the
Board of Directors as a whole;

WHEREAS, the USCC Special Committee has recommended that the Board
of Directors of USCC approve this Agreement, and the Board of Directors of
USCC deems it advisable and for the benefit of the shareholders of USCC that
USCC acquire all of such Cellular Interests under the terms and conditions
set forth herein; and

WHEREAS, the Board of Directors of TDS has approved this Agreement
and deems it advisable and for the benefit of the

<PAGE>

shareholders of TDS that TDS transfer all of such Cellular Interests to USCC
under the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the respective representations,
warranties and covenants herein set forth, the parties hereto agree as
follows:

ARTICLE I
DEFINITIONS

When used in this Agreement, the following terms shall have the
meanings set forth below:

"ACCRETED VALUE" means the Assigned Value of a Cellular Interest
adjusted, in the case of a Sold Category B Interest, from its Transfer Date
to the Date of Sale of such Interest or, in the case of a Retained Category
B Interest, from its Transfer Date to the Fifth Anniversary, (i) to reflect
changes in the Consumer Price Index determined in accordance with Section
4.2 hereof, (ii) by adding the amount of any capital contribution made,
directly or indirectly, by USCC with respect to such Interest from its
Transfer Date to its Date of Sale or the Fifth Anniversary, as applicable,
and (iii) by subtracting the amount of any distribution received, directly
or indirectly, by USCC with respect to such Interest from its Transfer Date
to its Date of Sale or the Fifth Anniversary, as applicable.

"ADDITIONAL CELLULAR INTEREST" shall have the meaning specified in
Section 6.1(d)(ii) hereof.

"AGGREGATE ACCRETED VALUE" means the sum of the Accreted Values of all
Sold Category B Interests and all Retained Category B Interests.

"AGGREGATE REALIZED VALUE" means the sum of the Realized Values of all
Sold Category B Interests and all Retained Category B Interests.

"AMEX" means the American Stock Exchange.

"ASSIGNED VALUE" means the value of each Cellular Interest as set
forth in Schedule 4.2.

"CATEGORY A INTEREST" means a Cellular Interest listed in Exhibit A as
a "Category A Interest."

"CATEGORY B INTEREST" means a Cellular Interest listed in Exhibit A as
a "Category B Interest."

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"CELLULAR COMPANY" means a corporation listed in Exhibit A that owns a
General Partnership Interest and/or a Limited Partnership Interest in a
Licensee.

"CELLULAR INTEREST" means a General Partnership Interest, a Limited
Partnership Interest or Cellular Subsidiary Stock that is to be transferred
directly by TDS to USCC or its designee pursuant to the terms of this
Agreement.

"CELLULAR PARTNERSHIP" means a General Partnership or Limited
Partnership listed in Exhibit A that is a Licensee or that owns a General
Partnership Interest or a Limited Partnership Interest in another
partnership that is a Licensee.

"CELLULAR SUBSIDIARY STOCK" means shares of stock in a Cellular
Company.

"CELLULAR SYSTEM" means the cellular telephone service operations
conducted by a Cellular Partnership.

"CLOSING" and "CLOSING DATE" have the meanings specified in Section
3.1 hereof.

"CLOSING CONDITIONS" has the meaning specified in Section 3.1 hereof.

"CO3 PARTNERSHIP" means Colorado RSA No. 3 Limited Partnership, a
Colorado limited partnership.

"CONSUMER PRICE INDEX" means the index compiled by the
United States Department of Labor's Bureau of Labor Statistics, Consumer
Price Index for All Urban consumers having a base of 100 in 1982-84, using
that portion of the index which appears under the caption "Other Goods and
Services."

"CONTROLLED RSA ENTITY" means an entity listed in
Exhibit A as a "Controlled RSA Entity."

"DATE OF SALE" means the date upon which USCC closes
the sale of a Sold Category B Interest.

"DELTA" means Delta County Tele-Comm., Inc., a Colorado corporation.

"EXCHANGE" means a transaction intended to qualify in whole or in part
as an exchange of like-kind property under Section 1031 of the Internal
Revenue Code of 1986, as amended,

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<PAGE>

in which cellular interests owned, directly or indirectly, by USCC will
be transferred, separately or in conjunction with other consideration,
including the transfer of other cellular interests owned by TDS, to a
third party, in exchange for cellular interests of such third party,
separately or in conjunction with other consideration from such third
party, and in which the number of population equivalents represented by
the cellular interests to be transferred by such third party to USCC
and/or TDS, directly or indirectly, is not less than fifty percent
(50%) of the number of population equivalents represented by the
cellular interests to be transferred to such third party by USCC and/or
TDS, directly or indirectly.

"EXCHANGE AGREEMENT" means the Exchange Agreement by and between TDS
and USCC dated as of July 1, 1987, and as amended as of April 7, 1988.

"FIFTH ANNIVERSARY" means the earlier of the fifth
anniversary of the Final Closing Date or September 30, 2001.

"FINAL CLOSING" has the meaning specified in Section 3.2 hereof.

"FINAL CLOSING DATE" means the date as of which all of
the Cellular Interests have been transferred by TDS to USCC pursuant to
this Agreement.

"GENERAL PARTNERSHIP" means a general partnership listed in Exhibit A.

"GENERAL PARTNERSHIP INTEREST" means an interest of a general partner
in a General Partnership or a Limited Partnership.

"LICENSE" means, with respect to a Cellular System, the license,
certificate, consent, authorization and approval from the FCC, public
utility commissions, public service commissions and any other governmental
or regulatory agencies, if any, issued to the owner of such System solely
in connection with such System or employed by such System on or before the
Closing Date.

"LICENSEE" means an entity which holds a License or Licenses to own,
construct and operate a Cellular System.

"LIMITED PARTNERSHIP" means a limited partnership listed in Exhibit A.

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<PAGE>

"LIMITED PARTNERSHIP INTEREST" means an interest of a limited partner
in a Limited Partnership.

"MSA" means Metropolitan Statistical Area.

"MINORITY MSA ENTITY" means an entity listed in Exhibit A as a
"Minority MSA Entity."

"MINORITY RSA ENTITY" means an entity listed in Exhibit A as "Minority
RSA Entity."

"OTHER TDS CONSIDERATION" has the meaning specified in Section 6.1(d)
hereof.

"PARTNERSHIP" means a General Partnership or a Limited Partnership.

"PARTNERSHIP INTEREST" means a General Partnership Interest or a
Limited Partnership Interest.

"RSA" means Rural Service Area.

"REALIZED VALUE" means (A) in the case of a Sold Category B Interest,
the aggregate amount of cash or other consideration (other than ownership
interests in other cellular markets received in an Exchange) received by
USCC and/or a subsidiary of USCC for such interest, reduced by one-half of
any out-of-pocket expenses incurred by TDS and USCC in connection with any
third-party transaction involving the sale of such interest (of which TDS
shall be responsible for payment of the remaining one-half of such
expenses), or (B) in the case of a Retained Category B Interest, the fair
market value thereof on the Fifth Anniversary determined in accordance with
Sections 4.1 and 4.2.

"RETAINED CATEGORY B INTEREST" means a Category B Interest that is
owned by USCC, directly or indirectly, on the Fifth Anniversary.

"SEC" means the Securities and Exchange Commission.

"SEVENTY-FIVE PERCENT CLOSING" has the meaning specified in Section
3.2 hereof.

"SOLD CATEGORY B INTEREST" means a Category B Interest that is sold by
USCC or a subsidiary of USCC prior to the Fifth Anniversary in a
transaction other than an Exchange.

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<PAGE>

"TERMINATION DATE" has the meaning specified in Section 6.1 hereof.

"THIRD PARTY CONSIDERATION" has the meaning specified in Section
6.1(d) hereof.

"THIRD PARTY NEGOTIATIONS" has the meaning specified in Section 6.1(d)
hereof.

"THIRD PARTY TRANSACTION" has the meaning specified in Section 6.1(d)
hereof.

"TRANSFER" means the assignment by TDS of a Cellular Interest to USCC
or its designated subsidiary in accordance with the terms and conditions of
this Agreement.

"TRANSFER DATE" means the Closing Date upon which a Cellular Interest
is transferred by TDS to USCC or its designated subsidiary.

"TRANSFERABLE INTEREST" has the meaning specified in Section 6.1(d)
hereof.

"USCC SPECIAL COMMITTEE" means the special committee appointed by the
Board of Directors of USCC with respect to the transactions described in
this Agreement.

"WCC" means Western Colorado Cellular, Inc., a Colorado corporation.

"WCCCLP" means Western Colorado Cellular of Colorado Limited
Partnership, a Colorado limited partnership.

ARTICLE II
TRANSFER

2.1 TRANSFER OF CELLULAR INTERESTS. Upon the satisfaction or
waiver of the conditions set forth herein to the obligations of the parties
hereto, TDS agrees to sell, assign, transfer and deliver all of its right,
title and interest in and to each Cellular Interest listed in Exhibit A, and
all of the tangible and intangible assets owned by TDS relating to such
interest, to USCC, or to such subsidiary of USCC as shall be designated by
USCC.

2.2 PAYMENT OF ASSIGNED VALUE. Upon the satisfaction or waiver of
the conditions set forth herein to the obligations of the parties hereto and
the transfer of each Cellular Interest to USCC or its designated subsidiary,
USCC agrees to pay to TDS, or

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<PAGE>

its designee, the assigned value for such Cellular Interest set forth in
Schedule 2.2 hereof, and to assume all of TDS's rights, liabilities and
obligations in and to each Cellular Interest in the manner and to the extent
provided for herein.

2.3 FURTHER ASSURANCES. From time to time, as and when requested
by USCC, or by its successors or assigns, the officers and directors of TDS
then in office shall execute and deliver such assignments and other
instruments of transfer and shall take or cause to be taken any such further
or other actions as shall be necessary or advisable in order to vest or
perfect in USCC, or its successors or assigns, or to confirm of record or
otherwise to USCC, or its successors or assigns, title to and possession of
all of the Cellular Interests.

ARTICLE III
CLOSING

3.1 CLOSING. The closing of the transactions contemplated hereby
shall take place as promptly as practicable following the date on which the
last of all of the conditions set forth in ARTICLES VII , VIII and IX hereof
(the "Closing Conditions") is satisfied or waived. The Closing may be
consummated by a single closing or by two partial closings, as provided for
in Section 3.2 hereof. Unless otherwise agreed by TDS and USCC, each such
closing shall take place at the offices of Sidley & Austin, One First
National Plaza, Chicago, Illinois. The date on which each such closing takes
place is herein referred to as a "Closing Date."

3.2 PARTIAL CLOSINGS.

(a) SEVENTY-FIVE PERCENT CLOSING. At such time as all of the
Closing Conditions have been satisfied or waived with respect to those
Cellular Interests to which USCC is obligated hereunder to deliver at least
seventy-five percent (75%) of the aggregate assigned values to be paid for
all Cellular Interests, TDS shall notify USCC that TDS is prepared to
consummate the Transfer with respect to all of the Cellular Interests as to
which all of the Closing Conditions have been satisfied as of the date of
such notice. The parties shall conduct a partial closing with respect to
such Cellular Interests not less than 30 days after the date of such notice
(the "Seventy-five Percent Closing").

(b) FINAL CLOSING. At such time as all of the Closing Conditions
have been satisfied or waived with respect to the remaining Cellular
Interests not closed in accordance with Section 3.2(a) hereof, TDS shall
notify USCC that TDS is prepared to consummate the Transfer with respect to
such remaining Cellular

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<PAGE>

Interests. The parties shall conduct a final closing with respect to such
Cellular Interests not less than 30 days after the date of such notice (the
"Final Closing").

3.3 DELIVERY OF ASSIGNED VALUES. On each Closing Date, USCC shall
deliver to TDS or its designee the agreed upon assigned value as reflected in
Schedule 2.2 hereof in consideration for each Cellular Interest transferred
on such Closing Date.

ARTICLE IV
CONDITIONAL PAYMENT BY TDS

4.1 DETERMINATION OF AGGREGATE REALIZED VALUE.

(a) SELECTION OF APPRAISER. Promptly after the Fifth Anniversary,
TDS and the independent directors of USCC shall choose an independent
appraiser to determine the Realized Value of the Retained Category B
Interests. If TDS and USCC are unable to reach agreement as to the identity
of an appraiser within thirty (30) days of the Fifth Anniversary, each party
shall designate an appraiser within ten (10) days thereafter. The
agreed-upon appraiser, or each of the two appraisers, as the case may be,
shall submit its determination of the Realized Value of the Retained Category
B Interests to TDS and USCC within sixty (60) days of the date of its
selection (or the selection of the second appraiser to be designated, as the
case may be).

(b) FINAL DETERMINATION. If there are two appraisers and their
respective determinations of the Realized Value of the Retained Category B
Interests vary by an amount equal to ten percent (10%) of the higher
determination or less, then the Realized Value of the Retained Category B
Interests shall be the average of the two determinations. If such
determinations vary by an amount equal to more than ten percent (10%) of the
higher determination, then the two appraisers shall promptly designate a
third, independent appraiser. Neither party shall provide, and the two
appraisers first designated shall be instructed not to provide, any
information to the third appraiser as to the determinations of the first two
appraisers, or otherwise to influence such third appraiser's determination in
any way. The third appraiser shall submit its determination of the Realized
Value of the Retained Category B Interests to TDS and USCC within sixty (60)
days of the date of its selection. The Realized Value of the Retained
Category B Interests shall be equal to the average of the two closest of the
three determinations, provided that, if the difference between the highest
and middle determinations is no more than one hundred and five percent (105%)
and no less than ninety-five percent (95%) of the difference between the
middle and lowest determinations, then the Realized Value of the Retained
Category B Interests shall be

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<PAGE>

equal to the middle determination. The determination of the Realized Value
of the Retained Category B Interests in accordance with this Section 4.1
shall be final and binding on each of the parties hereto. If any appraiser
is only able to provide a range in which the Realized Value of the Retained
Category B Interests would exist, the average of the highest and lowest value
in such range shall be deemed to be such appraiser's determination of such
Realized Value. Each appraiser selected pursuant to the provisions of this
Section 4.1 shall be an investment banking firm or other qualified person or
entity with prior experience in appraising assets comparable to the Retained
Category B Interests and unaffiliated with any party to this Agreement.

4.2 CONDITIONAL PAYMENT. Promptly after the final determination of
the Realized Value of the Retained Category B Interests pursuant to Section
4.1 hereof, USCC shall certify by written notice to TDS the amount of the
excess, if any, of (a) the Aggregate Accreted Value over (b) the Aggregate
Realized Value. For purposes of calculating adjustments to the Aggregate
Accreted Value of a Cellular Interest based on changes in the Consumer Price
Index, such adjustment shall be computed by applying to the Assigned Value an
adjustment amount, expressed as a percentage, which shall be equal to the
percentage by which the Consumer Price Index for the most recent calendar
month ending at least 90 days prior to the Fifth Anniversary exceeds the
Consumer Price Index for the most recent calendar month ending at least 90
days prior to the Final Closing Date. Within five (5) business days of its
receipt of such notice, TDS shall (i) pay to USCC the amount of such excess
in cash, by wire transfer or by certified check, or (ii) deliver to USCC that
number of Common Shares, par value $1.00 per share, of USCC having an
aggregate fair market value (as hereinafter defined) equal to the amount of
such excess, or (iii) pay a portion of such amount in cash and a portion by
delivering Common Shares of USCC. The fair market value of any USCC Common
Shares delivered by TDS in accordance with the preceding sentence shall be
the average of the closing prices for such shares on the AMEX (or the
principal exchange on which such shares trade) for the twenty (20) trading
days preceding the date on which such shares are delivered.

ARTICLE V
REPRESENTATIONS AND WARRANTIES

5.1 REPRESENTATIONS AND WARRANTIES OF TDS. TDS represents and
warrants to USCC as follows:

(a) DUE ORGANIZATION. TDS is a corporation duly organized, validly
existing and in good standing under the laws of the State of Iowa, has full
corporate power and authority to own its properties and to carry on its
business as it is now being

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<PAGE>

conducted, is duly qualified to do business and is in good standing in all
jurisdictions in which it is required to be so qualified, except where the
failure to so qualify would not be material, and has received all necessary
authorizations, consents and approvals of governmental authorities material
to the ownership of its properties and to the conduct of its business other
than such which, if not received, would not be material.

(b) POWER AND AUTHORITY; CONFLICT. TDS has full corporate power
and authority to enter into and carry out the terms of this Agreement. The
execution and delivery of this Agreement do not and, subject to any requisite
governmental or other consents or approvals, the consummation of the
transactions contemplated hereby will not, violate any provision of the
articles of incorporation or by-laws of TDS, in each case as amended, and
will not violate any provision of, result in the breach or acceleration of or
default under, or require any consent or approval of a third party under any
material mortgage, indenture, security agreement, lease, contract,
instrument, order, arbitration award, judgment or decree to which TDS is a
party or by which TDS is bound. Except as provided in Exhibit A, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will conflict with or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation, or to the loss of a material benefit under (i) any
provision of any organizational or governing agreement of any Licensee, (ii)
any mortgage, indenture, lease or other agreement or instrument to which TDS,
a Controlled RSA Entity or a Cellular Company is a party, (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to TDS,
a Controlled RSA Entity or a Cellular Company or its property other than any
such conflict, violation, default, right of termination, cancellation,
acceleration or loss that would not have a material adverse effect on such
entity, (iv) to the best of TDS's knowledge, having made no inquiry, (A) any
mortgage, indenture, lease, or other agreement or instrument to which any of
the Minority MSA Entities or the Minority RSA Entities is a party, or (B) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to any of the Minority MSA Entities and the Minority RSA Entities
or its property, other than any such conflict, violation, default, right of
termination, cancellation, acceleration or loss that would not have a
material adverse effect on the Minority MSA Entities and the Minority RSA
Entities taken as a whole.

(c) COMPLETE AND CORRECT DOCUMENTATION. TDS has made and will make
available to USCC and its counsel, accountants and other representatives,
complete and correct copies of all documentation in TDS' possession relating to
the Cellular

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<PAGE>

Interests, including, but not limited to, complete and correct copies of any
books, records, contracts, organizational or governing agreements and other
documents of each Controlled RSA Entity, Cellular Company, Minority MSA
Entity and Minority RSA Entity.

(d) REQUIRED CONSENTS; FAIRNESS OPINION. There have been or will
be timely filed, given, obtained or taken, all applications, notices,
consents, approvals, orders, registrations, qualifications, waivers or other
actions of any kind required by virtue of the execution and delivery of this
Agreement by TDS or by virtue of the consummation by TDS of any of the
transactions contemplated hereby to enable USCC or its designated subsidiary
to continue in all material respects to hold the Cellular Interests and, as
applicable to each of the respective Cellular Interests, to operate the
businesses of the Cellular Partnerships and the Cellular Companies as
conducted prior to and as of the Closing Date that each such Cellular
Interest is transferred in accordance with this Agreement. TDS has received
from Duff & Phelps Capital Markets Co., an opinion stating that the assigned
values to be paid to TDS in the Transfer is fair to TDS.

(e) CELLULAR INTERESTS. Exhibit A contains complete and correct
descriptions which set forth the name and jurisdiction of each entity in
which TDS, directly or indirectly, owns a General Partnership Interest, a
Limited Partnership Interest or Cellular Subsidiary Stock and the ownership
interests of TDS (expressed as percentages) in each entity. Except as
otherwise set forth therein: (i) TDS owns each Partnership Interest and the
Cellular Subsidiary Stock free and clear of any lien, security interest,
charge, option or encumbrance; (ii) each Controlled RSA Entity and Cellular
Company and, to the best of TDS's knowledge, having made no inquiry, each
Partnership that is a Minority MSA Entity or a Minority RSA Entity, is duly
established under the laws of the jurisdiction of its establishment and is
duly qualified to do business in all jurisdictions in which the failure to so
qualify would be material, has full partnership power and authority to own
its properties and carry on its business as it is now being conducted, and
has received all necessary authorizations, consents and approvals of
governmental authorities to own its properties and to conduct the business
which it now owns and conducts other than any such authorization, consent or
approval which, if not received, would not have a material adverse effect on
such Controlled RSA Entity or Cellular Company, or such Minority MSA Entities
and Minority RSA Entities taken as a whole; and (iii) there is no outstanding
option, convertible security or other right providing for the issuance or
delivery of any Partnership Interest or other security in any Controlled RSA
Entity, Cellular Company or, to the best of TDS's knowledge, having made no
inquiry, in any Minority MSA Entity or Minority RSA Entity.

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<PAGE>

(f) DUE AUTHORIZATION. The Board of Directors of TDS has duly
authorized this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by TDS and constitutes the
valid and binding obligation of TDS, enforceable against TDS in accordance
with its terms, except to the extent that its enforceability may be limited
by applicable bankruptcy, insolvency, reorganization or other laws affecting
the enforcement of creditors' rights generally or by general equitable
principles.

(g) CONTINGENT LIABILITIES. Except as disclosed on Schedule 5.1(g)
hereto and in the most recent financial statements of each Licensee as
referred to in Section 5.1(j) hereof, (i) TDS has no contingent liabilities
(A) arising out of its ownership in any Controlled RSA Entity or Cellular
Company that would be material to that entity, or (B) to the best of TDS's
knowledge, having made no inquiry, arising out of its ownership in any
Minority MSA Entities or Minority RSA Entities that would be material to such
entities taken as a whole, (ii) no Controlled RSA Entity or Cellular Company
has any indebtedness or contingent liabilities that would be material to it;
and (iii) to the best of TDS's knowledge, having made no inquiry, no Minority
MSA Entity or Minority RSA Entity has any indebtedness or contingent
liabilities that would be material to such entity, except in each case for
liabilities incurred in connection with the development, construction and
operation of a Cellular System related to such entity.

(h) INVESTIGATION OR LITIGATION. Except as disclosed on Schedule
5.1(h) hereto, (i) there is no material investigation or review by any
governmental entity pending or, to the best of TDS's knowledge, threatened,
with respect to any Controlled RSA Entity or Cellular Company or, to the best
of TDS's knowledge, having made no inquiry, with respect to any Minority MSA
Entity or Minority RSA Entity, including without limitation, any
investigation or review relating to hazardous substances, pollution or the
environment, nor, with respect to any Controlled RSA Entity or Cellular
Company or, to the best of TDS's knowledge having made no inquiry, with
respect to any Minority MSA Entity or Minority RSA Entity, has any
governmental entity indicated in writing to TDS or any such entity an
intention to conduct any such investigation or review; and (ii) there is no
action, suit or proceeding pending or, to the best of TDS's knowledge,
threatened against or affecting any Controlled RSA Entity or Cellular Company
or, to the best of TDS's knowledge, having made no inquiry, with respect to
or affecting any Minority MSA Entity or Minority RSA Entity, at law or in
equity, or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, including
without limitation, actions, suits or proceedings relating to hazardous
substances, pollution or the environment

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<PAGE>

which, if adversely determined, would have a material adverse effect on any
Controlled RSA Entity or Cellular Company, or on the Minority MSA Entities
and Minority RSA Entities taken as a whole.

(i) TAX MATTERS. Each Controlled RSA Entity and Cellular Company
and, to the best of TDS's knowledge, having made no inquiry, each Minority
MSA Entity and Minority RSA Entity, has duly filed all federal tax returns,
and has duly filed all state, county, local and foreign income, excise,
sales, customs, property, withholding, social security and other tax and
information returns and reports reasonably believed to be required to have
been filed by it on or prior to the date hereof, or, in the alternative, has
obtained extensions for filing in accordance with established procedures, and
has paid or made provision for payment of all taxes (including interest and
penalties) shown as due on the returns and reports, with respect to all
periods ending on or prior to December 31, 1995. No Controlled RSA Entity or
Cellular Company and, to the best of TDS's knowledge, having made no inquiry,
no Minority MSA Entity or Minority RSA Entity, has any material liability for
any taxes of any nature whatsoever for the period ended December 31, 1995, or
any year or period prior thereto.

(j) ABSENCE OF CERTAIN CHANGES. Since the date of the most recent
financial statements of each Licensee, copies of which have been provided by
TDS to USCC and are identified in Schedule 5.1(j), (i) with respect to each
Controlled RSA Entity and Cellular Company, TDS has conducted its business
only in, and has not engaged in any material transaction other than according
to, the ordinary and usual course of such business, and there has not been
any material adverse change in the financial condition, earnings or business
of any such entity, or any development or combination of developments of
which management of TDS has knowledge that is reasonably likely to result in
any such change, other than any such change resulting from changes in general
economic or business conditions; and (ii) to the best of TDS's knowledge,
having made no inquiry, each Minority MSA Entity and Minority RSA Entity has
conducted its business only in the ordinary and usual course of such
business, and there has not been any change in the financial condition,
earnings or business of any such entity that is materially adverse to such
entities taken as a whole, or any development or combination of developments
that is reasonably likely to result in any such change, other than any such
change resulting from changes in general economic or business conditions.

(k) ABSENCE OF MATERIAL CHANGE IN BUSINESS. Except as disclosed to
USCC in writing, and other than in the ordinary course of business and in a
manner consistent with past practices, no Controlled RSA Entity or Cellular
Company and, to the best of TDS's knowledge, having made no inquiry, no
Minority MSA Entity or Minority RSA Entity, has: (i) authorized the creation
or issuance

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of or issued, sold or disposed of or created any obligation to issue, sell or
dispose of any capital stock, equity interest, note, bond or other security,
or obligation convertible into or exchangeable for any stock, equity
interest, note, bond or other security, or any option to purchase any of the
foregoing; (ii) declared, set aside or made any dividend payment or other
distribution on its capital stock or equity interests, or directly or
indirectly redeemed, purchased or otherwise acquired any shares or portion
thereof or entered into any agreement in respect of the foregoing or effected
any stock split or other reclassification; (iii) amended its articles or
certificate of incorporation, by-laws or partnership agreement; (iv) merged
or consolidated with or into any entity or enterprise or sold, leased,
abandoned or otherwise disposed of all or substantially all of its assets or
acquired the stock, equity interest or assets of any entity or enterprise; or
(v) entered into any commitment, written or oral, to do any of the things
described in this subsection (k).

(l) LEGAL COMPLIANCE. Each Controlled RSA Entity and Cellular
Company and, to the best of TDS's knowledge, having made no inquiry, each
Minority MSA Entity and Minority RSA Entity, has complied in all respects
with all applicable laws, rules, regulations and ordinances, including,
without limitation, the rules and regulations of the FCC, commissions or
agencies of applicable states and municipalities and any government or
governmental agency having jurisdiction, other than such which, if not
complied with, would not have a material adverse effect on any Controlled RSA
Entity or Cellular Company, or on the Minority MSA Entities and Minority RSA
Entities taken as a whole. No Controlled RSA Entity or Cellular Company and,
to the best of TDS's knowledge, having made no inquiry, no Minority MSA
Entity or Minority RSA Entity, is in violation of, or in default under, any
term or provision of any mortgage, indenture, security agreement, lease,
license, contract, agreement, instrument, order, arbitration award, judgment
or decree other than such violations or defaults which are not material to
any Controlled RSA Entity or Cellular Company, or to the Minority MSA
Entities and Minority RSA Entities taken as a whole.

(m) REPRESENTATIONS AND WARRANTIES TRUE AS OF THE FINAL CLOSING
DATE. All the representations and warranties of TDS contained herein with
respect to any Cellular Interest will be true in all material respects on and
as of the Final Closing Date.

(n) SUFFICIENCY OF CONVEYANCES. On each Closing Date, TDS will
execute and deliver to USCC instruments of assignment, transfer and
conveyance that will be sufficient to transfer all of TDS's right, title and
interest in and to the Cellular Interests transferred on such date to USCC or
its designee, all free and

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<PAGE>

clear of any lien, security interest, charge, option or encumbrance not
described in Exhibit A.

5.2 REPRESENTATIONS AND WARRANTIES OF USCC. USCC represents and
warrants to TDS as follows:

(a) DUE ORGANIZATION. USCC is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, has full corporate power and authority to own its properties and
carry on its business as it is now being conducted, is duly qualified to do
business and is in good standing in all jurisdictions in which it is required
to be so qualified, except where the failure to so qualify would not be
material, and has received all necessary authorizations, consents and
approvals of governmental authorities material to the ownership of its
properties and to the conduct of its business other than such which, if not
received, would not be material.

(b) POWER AND AUTHORITY; CONFLICT. USCC has full corporate power
and authority to enter into and carry out the terms of this Agreement. The
execution and delivery of this Agreement do not and, subject to obtaining any
requisite governmental or other consents, the consummation of the
transactions contemplated hereby will not, violate any provision of the
certificate of incorporation or the by-laws of USCC, in each case as amended,
and will not violate any provision of, result in the breach or acceleration
of or default under, or require any consent or approval of a third party,
under any material mortgage, indenture, security agreement, lease, contract,
instrument, order, arbitration award, judgment or decree to which USCC is a
party or by which USCC is bound.

(c) REQUIRED CONSENTS; FAIRNESS OPINION. There have been or will
be timely filed, given, obtained or taken, all applications, notices,
consents, approvals, orders, registrations, qualifications, waivers or other
actions of any kind required to be obtained by USCC by virtue of the
execution and delivery of this Agreement by USCC or by virtue of the
consummation by USCC of any transactions contemplated hereby to enable USCC
or its designated subsidiary to continue in all material respects to hold the
Cellular Interests and to operate the businesses of each Controlled RSA
Entity and Cellular Company as conducted prior to and as of the Closing Date
each such Cellular Interest is transferred in accordance with this Agreement.
The Board of Directors of USCC has received from Lazard Freres & Co., LLC,
an opinion dated as of the date hereof stating that the assigned values to be
paid to TDS by USCC in connection with the Transfer is fair from a financial
point of view to USCC.

(d) DUE AUTHORIZATION. The Board of Directors of USCC has duly
authorized this Agreement and the transactions

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contemplated hereby. This Agreement has been duly executed and delivered by
USCC and constitutes the valid and binding obligation of USCC, enforceable
against USCC in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles.

ARTICLE VI
COVENANTS AND AGREEMENTS

6.1 COVENANTS OF TDS. From the date of this Agreement until the
Final Closing Date or the date on which this Agreement is terminated in
accordance with Section 10.1 or 10.2 hereof (the "Termination Date"), except
with the prior written consent of USCC (which shall not be unreasonably
withheld), TDS agrees that:

(a) ACCESS. Subject to Section 6.3 hereof, USCC and its counsel,
accountants and other representatives shall have full access during normal
business hours to all information in TDS's possession relating to the
Cellular Interests, including, but not limited to, complete and correct
copies of any books, records, contracts, organizational or governing
agreements and other documents of each Controlled RSA Entity, Cellular
Company, Minority MSA Entity and Minority RSA Entity.

(b) CONDUCT OF BUSINESS. TDS will conduct its business, insofar as
it relates to or involves the Cellular Interests, in the ordinary course and
consistent with past practices, use its reasonable best efforts to preserve
the Cellular Interests, and use its reasonable best efforts to cause each
Controlled RSA Entity and Cellular Company to perform all of its obligations
under its License and all contracts relating to or affecting the Cellular
Interest owned by such entity.

(c) NEGATIVE COVENANTS. Without limiting the generality of the
foregoing and to the extent that TDS has the power and/or authority, TDS will
not take any action to sell or otherwise dispose of any Cellular Interest and
will not take any action to:

(i) cause or permit any Controlled RSA Entity, Cellular Company,
Minority MSA Entity or Minority RSA Entity (A) to sell or otherwise dispose
or transfer control of its License, (B) except as provided for herein, to
issue, redeem, sell or dispose of, dilute, or create any obligation to
issue, redeem, dilute, sell or dispose of, any Partnership Interests,
(C) except as provided for herein, to effect any merger or other
combination or (D) to withdraw from any Partnership or

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other entity, or create an obligation to withdraw from any Partnership
or other entity; or

(ii) cause or permit any Controlled RSA Entity, Cellular Company,
Minority MSA Entity or Minority RSA Entity, (A) to incur, assume, guarantee
or otherwise become obligated or liable for any indebtedness other than in
the ordinary course of business to finance the operations and capital
expenditures of its cellular system in a manner consistent with past
practices, or to pledge, hypothecate or otherwise encumber any of its
assets or, except as provided for herein, enter into any material
transaction or contract, or make any material commitment relating to its
assets or business, other than in the ordinary course of business and in a
manner consistent with past practices, or (B) to take or omit any action
that, in TDS's reasonable business judgment, could be anticipated to have a
material adverse effect upon the business, operations, financial condition,
operating results or assets of such entity.

(d) THIRD PARTY TRANSACTIONS.

(i) Notwithstanding subsection (c), USCC acknowledges that certain
negotiations with third parties (the "Third Party Negotiations") are being
carried on in its behalf by representatives of TDS and USCC, which
contemplate that certain of TDS's other cellular interests will be
transferred to such third parties, separately or in conjunction with the
transfer of other cellular interests owned by TDS or USCC, in settlement of
pending litigation or in exchange for interests in other MSAs and/or RSAs
(which may include interests in MSAs and/or RSAs in which TDS or USCC
already owns an interest) or other consideration. TDS and USCC hereby
agree that, in the event they agree to enter into any transaction (a "Third
Party Transaction") pursuant to which any Cellular Interest (a
"Transferable Interest") is to be transferred to a third party in exchange
for the transfer by such third party of any consideration ("Third Party
Consideration"):

(A) TDS shall assign the Transferable Interest to USCC subject to the
terms of this Agreement;

(B) if any Third Party Transaction contemplates that TDS would
transfer to any third party any other property (collectively
"Other TDS Consideration"), TDS shall transfer such Other TDS
Consideration to USCC and shall be entitled to receive additional
consideration from USCC in return therefor, in an amount equal to
the fair market value of such Other TDS Consideration (plus
reasonable carrying

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costs from the date such Other TDS Consideration is
transferred by TDS to USCC in furtherance of such Third Party
Transaction until TDS receives payment therefor), such amount
to be determined by agreement of the parties;

(C) USCC shall transfer the Transferable Interest and any Other TDS
Consideration to such third party, together with any cash or
other consideration which may be required of USCC; and

(D) all consideration, including any Third Party Consideration,
delivered in connection with such Third Party Transaction shall
be transferred directly to and retained by USCC.

TDS agrees that any Third Party Transaction shall be subject to the
consent of the Special Committee consistent with its fiduciary duty, which
consent shall not be unreasonably withheld.

(ii) In the event that an opportunity arises before a particular
Cellular Interest is transferred pursuant to this Agreement for TDS,
directly or through one of its subsidiaries, to acquire an additional
partnership or other ownership interest in the Controlled RSA Entity,
Minority MSA Entity or Minority RSA Entity with respect to such Cellular
Interest and TDS does acquire such additional partnership or other
ownership interest (an "Additional Cellular Interest"), USCC agrees to
acquire such Additional Cellular Interest from TDS, and TDS agrees to sell
such Additional Cellular Interest to USCC, pursuant to this Agreement
provided the purchase price of any such Additional Cellular Interest shall
be the lesser of (i) the Assigned Value (consistently applied on a unit of
population basis) for such Cellular Interest as set forth in Schedule 2.2
hereto, and (ii) such price paid by TDS for such Additional Cellular
Interest, it being understood that (x) TDS shall not be obligated to sell
to USCC any such Additional Cellular Interest, and USCC shall not be
obligated to purchase any such Additional Cellular Interest, if the
purchase price for such Additional Cellular Interest is greater than the
Assigned Value (consistently applied on a unit of population basis) for
such Cellular Interest as set forth in Schedule 2.2 hereto and (y) such
Additional Cellular Interest which neither party is obligated to purchase
shall be subject to the right of first negotiation under the terms of the
Exchange Agreement. In the event of any such acquisition by TDS, the term
"Cellular Interest" with respect to such Controlled RSA Entity, Minority
MSA Entity or Minority RSA

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Entity shall be deemed to refer to such Additional Cellular Interest.

(e) SECTION 754 UNDERTAKING. TDS agrees to cause each Controlled
RSA Entity to make an election pursuant to Section 754 of the Internal
Revenue Code of 1986, as amended, with respect to the adjustment of the tax
bases in the respective assets of such Controlled RSA Entity, and to request
of, and to use its reasonable best efforts to cause, each Minority MSA Entity
and Minority RSA Entity and each intermediary Partnership to make a similar
election, if advantageous to USCC.

6.2 COVENANTS OF USCC. From the date of this Agreement until the
earlier of the Final Closing Date or the Termination Date, except with the
prior written consent of TDS (which shall not be unreasonably withheld), USCC
agrees that:

(a) CONDUCT OF BUSINESS. USCC will conduct its business in the
ordinary course and consistent with past practices, use its reasonable best
efforts to preserve intact its business organization and goodwill, keep
available the services of its present officers and perform all of its
obligations under all contracts relating to or affecting its assets or its
business where the failure to comply with this provision would have a
material adverse effect on its ability to consummate the transactions
hereunder.

(b) RECEIPT OF DISTRIBUTIONS. If the CO3 Partnership declares and
makes a distribution to its partners prior to the Transfer of the shares of
WCC by TDS to USCC pursuant to this Agreement, then USCC agrees, on behalf of
itself and any of its affiliates, to cause WCCCLP to declare and make a
distribution to its partners in the full amount of the distribution received
from the CO3 Partnership, and, thereafter to cause WCC to declare and pay a
dividend to its shareholders in the full amount of the distribution received
from WCCCLP.

6.3 MUTUAL COVENANTS. From the date of this Agreement until the
earlier of the Final Closing Date or the Termination Date:

(a) CONFIDENTIALITY. TDS and USCC each shall provide the other
with such information as the other may from time to time reasonably request;
PROVIDED, HOWEVER, that all such information shall be treated as and kept
confidential unless it is available from public sources or required by law to
be disclosed. If the transactions contemplated by this Agreement are not
consummated, all documents received by TDS and USCC shall be returned to the
party furnishing them upon the written request of the furnishing party.

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<PAGE>

(b) BEST EFFORTS. TDS and USCC each shall take all necessary
corporate and other actions and each shall use its reasonable best efforts to
obtain all necessary consents, authorizations and approvals and to make all
necessary filings required to carry out the transactions contemplated by this
Agreement, to satisfy the conditions specified in Articles VII, VIII and IX
hereof at the earliest practicable date and otherwise to perform its
obligations under this Agreement.

(c) PAYMENT OF CERTAIN OUT-OF-POCKET EXPENSES. TDS and USCC each
will pay one-half of any out-of-pocket expenses incurred collectively by TDS
and USCC in connection with any third party transaction involving the sale of
a Category B Interest.

(d) PUBLICITY. TDS and USCC shall consult with each other prior to
issuing any press releases or otherwise making public statements with respect
to the transactions contemplated hereby and prior to making any filings with
any federal or state governmental or regulatory agency or with any securities
exchange with respect thereto.

(e) USCC COMMON SHARES. TDS and USCC agree not to take any action
the principal purpose of which is to affect a change in the price of such
USCC Common Shares during the period described in the last sentence of
Section 4.2.

6.4 ASSUMPTION OF LIABILITIES AND OBLIGATIONS. To the extent
disclosed to USCC on Schedule 6.4, USCC agrees to assume any and all of TDS's
liabilities and obligations with regard to the Cellular Interests to the
extent that such liabilities and obligations were incurred in connection with
the development, construction and operation of the respective Cellular
Systems and would not be discharged by TDS prior to the respective Transfer
Date in the ordinary course of business consistent with past practices, such
assumption to be effective with respect to each Cellular Interest as of its
respective Transfer Date. In the event any such liability or obligation
cannot be assumed, USCC further agrees (a) to assume such commitment to the
extent legally possible, (b) to indemnify, hold harmless and defend TDS from
and against any and all costs, including, without limitation, TDS's
reasonable carrying costs and attorney's fees, if any, incurred in connection
therewith from and after the Closing Date on which the Cellular Interest
relating to any such liability or obligation is transferred in accordance
with this Agreement, and (c) to continue to use its reasonable best efforts
to effectuate such assumption as promptly as practicable after the date of
such transfer.

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ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF TDS

The obligations of TDS under this Agreement are subject to and shall
be conditioned upon the satisfaction or waiver (in whole or in part in
writing by TDS), of each of the following conditions:

7.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of USCC contained in Section 5.2 hereof shall have been true and
correct in all material respects on and as of the date of this Agreement, and
shall be true and correct in all material respects on and as of each Closing
Date as though those representations and warranties were made on and as of
such date, except for changes permitted by the terms of this Agreement or to
the extent affected by the transactions contemplated hereby and except
insofar as any of those representations and warranties related solely to a
particular date or period. In the latter case, the representations and
warranties of USCC shall be true and correct in all material respects on and
as of each Closing Date with respect to such date or period.

7.2 PERFORMANCE OF OBLIGATIONS AND AGREEMENTS; NO BREACH OF
COVENANTS. USCC shall have performed in all material respects all of its
obligations and agreements and fulfilled in all material respects all
conditions contained in this Agreement to be performed or complied with by it
on or before each Closing Date. USCC shall not be in breach in any material
respect of any covenant contained in this Agreement.

7.3 RESOLUTIONS. USCC shall have delivered to TDS copies of the
resolutions of its Board of Directors authorizing and approving the execution
of this Agreement and the consummation of the transactions contemplated
hereby, certified as true and correct on each Closing Date by its Secretary
or an Assistant Secretary.

7.4 OFFICERS' CERTIFICATE. USCC shall have delivered to TDS a
certificate dated on and as of each Closing Date and signed by its Chief
Executive Officer to the effect that (a) USCC has performed, in all material
respects, all of its obligations and agreements and fulfilled, in all
material respects, all of the conditions to TDS's obligations contained in
this Agreement to be performed or complied with on or before such Closing
Date; (b) USCC is not in breach, in any material respect, of any covenant
contained in this Agreement; and (c) the representations and warranties of
USCC contained in this Agreement were true and correct in all material
respects on and as of the date of this Agreement and are true and correct in
all material respects on and as of such Closing Date, with the same force and
effect as though made on and as of such Closing Date.

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ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USCC

The obligations of USCC under this Agreement are subject to and
shall be conditioned upon the satisfaction or waiver (in whole or in part in
writing by USCC), of each of the following conditions:

8.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of TDS contained in Section 5.1 hereof shall have been true and
correct in all material respects on and as of the date of this Agreement, and
shall be true and correct in all material respects on and as of each Closing
Date as though those representations and warranties were made on and as of
such date, except for changes permitted by the terms of this Agreement or to
the extent affected by the transactions contemplated hereby and except
insofar as any of those representations and warranties relate solely to a
particular date or period. In the latter case, the representations and
warranties of TDS shall be true and correct in all material respects on and
as of each Closing Date with respect to such date or period.

8.2 PERFORMANCE OF OBLIGATIONS AND AGREEMENTS; NO BREACH OF
COVENANTS. TDS shall have performed in all material respects all of its
obligations and agreements and fulfilled in all material respects all
conditions contained in this Agreement to be performed or complied with by it
on or before each Closing Date, to the extent that the performance of such
obligations and agreements and the fulfillment of such conditions relate to a
Cellular Interest to be transferred on such Closing Date. TDS shall not be
in breach, in any material respect, of any of its covenants contained in this
Agreement, to the extent that the compliance with such covenants relate to a
Cellular Interest to be transferred on such Closing Date.

8.3 RESOLUTIONS. TDS shall have delivered to USCC copies of the
resolutions of its Board of Directors, authorizing and approving the
execution of this Agreement and the consummation of the transactions
contemplated hereby, certified as true and correct on each Closing Date by
its Secretary or an Assistant Secretary.

8.4 OFFICERS' CERTIFICATE. TDS shall have delivered to USCC a
certificate dated on and as of each Closing Date and signed by its Chief
Executive Officer to the effect that (a) TDS has performed, in all material
respects, all of its obligations and agreements and fulfilled in all material
respects all of the conditions to USCC's obligations contained in this
Agreement to be performed or complied with on or before such Closing Date, to
the

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extent that the performance of such obligations and agreements and the
fulfillment of such conditions relate to the Cellular Interests to be
transferred on such Closing Date; (b) TDS is not in breach, in any material
respect, of any of its covenants contained in this Agreement, to the extent
that the compliance with such covenants relate to the Cellular Interests to
be transferred on such Closing Date; and (c) the representations and
warranties of TDS contained in this Agreement were true and correct in all
material respects on and as of the date of this Agreement and are true and
correct in all material respects as of such Closing Date, with the same force
and effect as though made on and as of such Closing Date.

8.5 LEGAL OPINIONS. TDS shall have delivered to USCC an opinion of
its counsel dated on and as of each Closing Date substantially in the form
attached hereto as Schedule 8.5(a-1), with the related opinion from
Nyemaster, Goode, McLaughlin, Voigts, West, Hansell & O'Brien, in the form
attached hereto as Schedule 8.5 (a-2). Koteen & Naftalin, FCC counsel to TDS
and USCC, shall have delivered to TDS and USCC an opinion dated on and as of
each Closing Date substantially in the form attached hereto as Schedule
8.5(b).

ARTICLE IX
RECIPROCAL CONDITIONS PRECEDENT

The obligations of each of TDS and USCC under this Agreement are
subject to and shall be conditioned upon the satisfaction, or waiver (in
whole or in part) in writing by each, of each of the following conditions
prior to each Closing Date.

9.1 GOVERNMENTAL AND OTHER APPROVALS. TDS, each Controlled RSA
Entity, each Cellular Company, each TDS subsidiary which owns an interest in
any Minority MSA Entity or Minority RSA Entity, and USCC and its subsidiaries
shall have made all filings with, given all notices to and obtained all
necessary consents, authorizations and approvals from all governmental and
regulatory bodies and agencies and from its partners which are required to
consummate the portion of the Transfer to be consummated on such Closing Date
and all time for appeal, rehearing or reconsideration thereof shall have
expired.

9.2 NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order of any court of competent
jurisdiction preventing the consummation of the portion of the Transfer to be
consummated on such Closing Date shall have been entered and not set aside or
lifted (each party agreeing to use its reasonable best efforts, including
appeals to higher courts, to have any such order or injunction set aside or
lifted), and no action shall have been

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taken and no statute, rule or regulation shall have been enacted, by any
state or federal government or governmental agency or regulatory body that
would prevent the consummation of the portion of the Transfer to be
consummated on such Closing Date.

ARTICLE X
TERMINATION AND INDEMNIFICATION

10.1 TERMINATION. Notwithstanding anything herein to the contrary,
this Agreement may be terminated and the Transfer abandoned with respect to
any Cellular Interest as to which no Closing has occurred:

(a) by mutual consent of the Board of Directors of TDS and of the
Board of Directors of USCC upon the direction of the Special Committee;

(b) (i) on or after June 30, 1997, by the Board of Directors of
USCC upon the direction of the Special Committee with respect to any Cellular
Interest not previously transferred in accordance with this Agreement, (ii)
on or after June 30, 1997, by the Board of Directors of TDS with respect to
any Cellular Interest not previously transferred in accordance with this
Agreement, or (iii) by the Board of Directors of USCC upon the direction of
the Special Committee or by the Board of Directors of TDS with respect to any
Cellular Interest not previously transferred in accordance with this
Agreement, if any court of competent jurisdiction in the United States or
other United States governmental body shall have issued an order, decree or
ruling, or taken any other action restraining, enjoining or otherwise
prohibiting the Transfer, but only with respect to that portion of the
Transfer restrained, enjoined or prohibited, and such order, decree, ruling
or other action shall have become final and nonappealable; PROVIDED, that, in
each of (i) and (ii), the right to terminate this Agreement shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of the failure of any Cellular Interest to be
transferred in accordance with this Agreement on or before such date;

(i) a material condition to the performance of TDS under this
Agreement or a material covenant of USCC contained in this Agreement shall
not be fulfilled on or before June 30, 1997, or on such earlier date
specified for the fulfillment of such covenant or condition; or

(ii) a material default or breach of this Agreement shall be made by
USCC; PROVIDED, that TDS has not caused USCC

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to fail to fulfill such covenant or condition or to make such default or
breach; or

(d) by the Board of Directors of USCC upon the direction of the
Special Committee if:

(i) a material condition to the performance of USCC under this
Agreement or a material covenant of TDS contained in this Agreement shall
not be fulfilled on or before June 30, 1997, or on such earlier date
specified for the fulfillment of such covenant or condition; or

(ii) a material default or breach of this Agreement shall be made by
TDS.

10.2 WRITTEN NOTICE. In order to terminate this Agreement in
accordance with Section 10.1 hereof, the terminating party shall give written
notice thereof to the other party hereto, specifying the grounds therefor.

10.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement in accordance with Sections 10.1 and 10.2, this Agreement shall
become void and have no further force or effect, and there shall be no
liability on the part of either TDS or USCC (or their respective officers,
directors, shareholders, agents or representatives), except to the extent set
forth in Section 10.4.

10.4 DAMAGES. In the event this Agreement is terminated in
accordance with Subsection 10.1(c) or 10.1(d), then TDS or USCC, as the case
may be, shall be entitled to seek any and all legal and equitable rights and
remedies available to them as a result of such failure of performance,
default or breach without limitation by this Article X or otherwise.

10.5 TERMINATION INEFFECTIVE AS TO PRIOR TRANSFERS. Notwithstanding
anything in this Article X to the contrary, in the event the parties have
elected to effect the Transfer with respect to some but not all of the
Cellular Interests, then any termination of this Agreement pursuant to the
provisions of this Article X shall be effective only with respect to any
Cellular Interest that has not been transferred to USCC.

10.6 INDEMNIFICATION.

(a) Subject to the provisions of Section 11.1 hereof, TDS agrees to
indemnify and defend USCC, and any person who is or was an officer, director,
employee, or agent of USCC, from and against any loss, cost, liability, or
expense (including, but not limited to, costs and expenses of litigation and,
to the extent permitted by law, attorneys' fees) incurred by USCC or such
other

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person by reason of the incorrectness or breach of any of the
representations, warranties, covenants, or agreements of TDS contained in
this Agreement or given on any Closing Date.

(b) Subject to the provisions of Section 11.1 hereof, USCC agrees
to indemnify and defend TDS, and any person who is or was an officer,
director, employee, or agent of TDS, from and against any loss, cost,
liability, or expense (including but not limited to costs and expenses of
litigation and, to the extent permitted by law, attorneys' fees) incurred by
TDS or such other person by reason of the incorrectness or breach of any of
the representations, warranties, covenants, or agreements of USCC contained
in this Agreement or given on any Closing Date.

(c) Each party indemnified under Subsection (a) or (b) above shall,
promptly after receipt of notice of the commencement of any action against
such indemnified party in respect of which indemnity may be sought, notify
the indemnifying party in writing of the commencement thereof. The omission
of any indemnified party so to notify an indemnifying party of any such
action shall not relieve the indemnifying party from any liability in respect
of such action which it may have to such indemnified party on account of the
indemnity agreement contained in such subsections, unless the indemnifying
party was prejudiced by such omission, and in no event shall relieve the
indemnifying party from any other liability which it may have to such
indemnified party. In case any such action shall be brought against any
indemnified party and it shall notify an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it may wish, to assume the defense thereof.
If the indemnifying party so assumes the defense thereof, it may not agree to
any settlement of such action as the result of which any remedy or relief,
other than monetary damages for which the indemnifying party shall be
responsible hereunder, shall be applied to or against the indemnified party,
without the prior written consent of the indemnified party. If the
indemnifying party does not assume the defense thereof, it shall be bound by
any settlement to which the indemnified party agrees, irrespective of whether
the indemnifying party consents thereto. If any settlement of any claim is
effected by the indemnified party prior to the commencement of any action
relating thereto, the indemnifying party shall be bound thereby only if it
has consented in writing thereto. In any action hereunder, the indemnified
party shall continue to be entitled to participate in the defense thereof
even if the indemnifying party has assumed the defense thereof, but the
indemnifying party shall not be required to reimburse the indemnified party
for the costs of such participation.

(d) Subject to the provisions of Section 11.1, TDS shall indemnify
USCC for and against any tax liability incurred by

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USCC in connection with the disposition of the partnership interests owned by
Metroplex Olympia Cellular Corp., in the Olympia Cellular Limited
Partnership, and the 14.286% partnership interest owned by WCC in the CO3
Partnership.

ARTICLE XI
MISCELLANEOUS

11.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

(a) The representations and warranties of the parties, insofar as
they apply to each Cellular Interest transferred pursuant to the provisions
of this Agreement, shall survive for a period of two years from the Closing
Date on which such interest is transferred, and the parties hereto shall
thereafter have no continuing obligations or liabilities with respect
thereto, except that TDS's representations contained in Subsections 5.1(b),
5.1(e)(i) and 5.1(n) and USCC's representations contained in Subsection
5.2(b) shall survive and shall not terminate. The provisions of this
Subsection shall apply notwithstanding any investigation made by either party
with respect to this Agreement or the Transfer.

(b) Upon termination of this Agreement pursuant to the provisions
of Subsection 10.1(a) or 10.1(b), the representations, warranties, covenants
and agreements of the parties shall terminate as to the portion of the
Transfer not closed prior to such termination (except for the agreement as to
confidentiality contained in Section 6.3, and the agreement as to expenses
contained in Section 11.2, both of which shall survive), and the parties
hereto shall have no continuing obligations or liabilities with respect
thereto as to that portion of the Transfer not closed prior to such
termination.

(c) If either TDS or USCC shall have the right to terminate this
Agreement pursuant to the provisions of Subsection 10.1(c) or 10.1(d), then
the party which does not have the right to terminate this Agreement will use
its reasonable best efforts to cure the condition giving rise to such right.
If such party is unable to cure within 30 days after written notice of the
condition giving rise to such right was given by the other party, the party
giving such notice (i) may exercise its right under Subsection 10.1(c) or
10.1(d) to terminate this Agreement, (ii) may waive such right and proceed to
consummate this Agreement and the transactions contemplated hereby, or (iii)
may terminate this Agreement and take such action as is otherwise permitted
by law. In the event this Agreement is so terminated and abandoned, in whole
or in part, the representations, warranties, covenants and agreements of the
parties shall terminate with respect to that portion of the

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Agreement not yet closed (except for the agreement as to confidentiality
described in Section 6.3, the agreement as to damages described in Section
10.4 and the agreement as to expenses described in Section 11.2, all of which
shall survive), and the parties hereto shall have no continuing obligations
or liabilities with respect thereto, except as set forth in this Subsection
11.1(c) and except to the extent that such termination results from the
willful breach by any party hereto of any of its representations, warranties,
covenants or agreements set forth in this Agreement.

11.2 EXPENSES. Each party shall be responsible for the payment of
all of the expenses incurred by it in connection with the negotiation of this
Agreement and the consummation of the transactions contemplated hereby.

11.3 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly delivered when delivered personally or mailed by certified or registered
mail, postage prepaid, addressed as follows:

If to USCC, to:

United States Cellular Corporation
8410 West Bryn Mawr Avenue
Suite 700
Chicago, Illinois 60631-3486
Attention: Mr. H. Donald Nelson
President

with copies to:

Mr. Paul-Henri Denuit
Special Committee of Board of Directors of
United States Cellular Corporation
Coditel Brabant S.A.
Rue des Deux Eglises 26
1040 Brussels, Belgium

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and

Mr. Allan Z. Loren
Special Committee of Board of Directors of
United States Cellular Corporation
c/o American Express Travel Related
Service Company, Inc.
World Wide Communications
American Express Tower
Three World Financial Center
200 Vesey Street
New York, New York 10285-3130

and

Squire, Sanders & Dempsey
520 Madison Avenue
32nd Floor
New York, New York 10022
Attention: Alan N. Waxman, Esq.

If to TDS, to:

Telephone and Data Systems, Inc.
30 North LaSalle Street
Suite 4000
Chicago, Illinois 60602-3415
Attention: Mr. LeRoy T. Carlson, Jr.
President

with a copy to:

Sidley & Austin
One First National Plaza
Suite 4200
Chicago, Illinois 60603
Attention: Michael G. Hron, Esq.

11.4 PARTIES IN INTEREST. This Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their respective successors.
Nothing in this Agreement is intended to confer any right or remedy, expressly
or by implication, upon any person who is not a party hereto.

11.5 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Illinois.

-29-
<PAGE>

11.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one document.

11.7 BROKERS; INVESTMENT BANKING FEES. Each of TDS and USCC hereby
represents that no broker or finder is entitled to any commission or finder's
fee in connection with any transaction contemplated hereby. USCC has agreed
to pay a fee to Lazard Freres & Co., LLC, and TDS has agreed to pay a fee to
Duff & Phelps Capital Markets Co., for services rendered in connection with
the negotiation of this Agreement and the transactions contemplated hereby.

11.8 HEADINGS. Each of the Article and Section headings herein are
provided for convenience of reference only and do not constitute a part of
this Agreement.

11.9 MODIFICATIONS, AMENDMENTS AND WAIVERS. At any time prior to
each Closing Date, the parties hereto may, by written agreement, (a) extend
the time for the performance of any of the obligations of the parties hereto,
(b) waive any inaccuracies in the representations and warranties contained in
this Agreement or in any document delivered pursuant hereto, or (c) waive
compliance with any of the covenants or agreements contained in this
Agreement; PROVIDED, HOWEVER, that any such action may be taken by USCC only
at the direction of the Special Committee. At any time prior to each Closing
Date, if authorized by their respective boards of directors, the parties
hereto may, by written agreement, amend or supplement any of the provisions
of this Agreement; PROVIDED, HOWEVER, that any such action may be taken by
USCC only at the direction of the Special Committee. Any written instrument
or agreement referred to in this Section shall be validly and sufficiently
authorized for the purposes of this Agreement if signed on behalf of each of
the parties hereto by a person authorized to sign this Agreement.

11.10 PRIOR AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to the Cellular Interests, and
supersedes all prior negotiations with respect thereto. In the event this
Agreement is terminated, pursuant to Section 10.1, other than by TDS pursuant
to Subsection 10.1(c), USCC's right of first negotiation with respect to any
Cellular Interests not transferred pursuant to the provisions hereof shall
continue to be subject to all applicable provisions of the Exchange
Agreement. Any cellular interest which TDS proposed to transfer to USCC in
its letter dated January 9, 1996, but which is not included in this Agreement
is intended to be and shall remain subject to USCC's right of first
negotiation under the terms of the Exchange Agreement.

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<PAGE>

11.11 ASSIGNABILITY. This Agreement shall not be assignable by
either of the parties hereto without the prior written consent of the other
party.

* * * * *

-31-
<PAGE>

IN WITNESS WHEREOF, TDS and USCC have caused this Agreement to be
executed by their duly authorized officers, respectively, as of the date
first above written.

TELEPHONE AND DATA SYSTEMS, INC.

By: /S/ LEROY T. CARLSON
--------------------------------------
LeRoy T. Carlson
Chairman

UNITED STATES CELLULAR CORPORATION

By: /S/ H. DONALD NELSON
--------------------------------------
H. Donald Nelson
President

Signature Page of Cellular Interest Transfer Agreement
dated as of June 20, 1996.

-32-

<PAGE>
EXHIBIT 11

UNITED STATES CELLULAR CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<S> <C>
PRIMARY EARNINGS
Net Income Available to Common................................................. $ 129,929
---------
---------
PRIMARY SHARES
Weighted average number of Common and Series A Common Shares Outstanding....... 85,797
Additional shares assuming issuance of:
Options and Stock Appreciation Rights........................................ 78
Convertible Preferred Shares................................................. 51
Common Shares Issuable....................................................... 115
---------
Primary Shares................................................................. 86,041
---------
---------
PRIMARY EARNINGS PER COMMON SHARE
Net Income..................................................................... $ 1.51
---------
---------
FULLY DILUTED EARNINGS*
Net Income Available to Common, as reported.................................... $ 129,929
Interest Expense eliminated as a result of the pro forma conversion of
Convertible Debentures........................................................ 7,753
---------
Net Income Available to Common, as adjusted.................................... $ 137,682
---------
---------
FULLY DILUTED SHARES
Weighted average number of Common and Series A Common Shares Outstanding....... 85,797
Additional shares assuming issuance of:
Options and Stock Appreciation Rights........................................ 86
Convertible Preferred Shares................................................. 51
Common Shares Issuable....................................................... 115
Conversion of Convertible Debentures......................................... 7,059
---------
Fully Diluted Shares........................................................... 93,108
---------
---------
FULLY DILUTED EARNINGS PER COMMON SHARE
Net Income..................................................................... $ 1.48
---------
---------
</TABLE>

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

<PAGE>
EXHIBIT 12

UNITED STATES CELLULAR CORPORATION
RATIOS OF EARNINGS TO FIXED CHARGES
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT RATIO AMOUNTS)

<TABLE>
<S> <C>
EARNINGS:
Income from Continuing Operations before income taxes.................... $ 241,569
Add (Deduct):
Minority Share of Cellular Losses...................................... (267)
Earnings on Equity Method.............................................. (51,518)
Distributions from Minority Subsidiaries............................... 23,057
---------------
$ 212,841
Add fixed charges:
Consolidated interest expense.......................................... 23,111
Interest Portion (1/3) of Consolidated Rent Expense.................... 4,125
---------------
$ 240,077
FIXED CHARGES:
Consolidated interest expense............................................ $ 23,111
Interest Portion (1/3) of Consolidated Rent Expense...................... 4,125
---------------
$ 27,236

RATIO OF EARNINGS TO FIXED CHARGES......................................... 8.81
---------------
---------------
</TABLE>

<PAGE>

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

RESULTS OF OPERATIONS

United States Cellular Corporation (the "Company" or "USM") owns, operates and
invests in cellular markets throughout the United States. USM owned both
majority and minority interests in 204 cellular markets at December 31, 1996,
representing 25,074,000 population equivalents ("pops"). USM included the
operations of 131 majority-owned and managed cellular markets in consolidated
operations ("consolidated markets") at December 31, 1996. Noncontrolling
interests in 44 markets, representing 4.3 million pops, were accounted for using
the equity method and were included in investment income at that date.
Noncontrolling interests in 29 other markets, representing 489,000 pops, were
accounted for using the cost method. Following is a table of summarized
operating data for USM's consolidated operations.

Year Ended or at December 31,
-----------------------------------
1996 1995 1994
-----------------------------------
Total market population
(in thousands) (1) 21,712 22,309 21,314
Customers 1,073,000 710,000 421,000
Market penetration 4.94% 3.18% 1.98%
Markets in operation 131 137 130
Cell sites in service 1,328 1,116 790
Average monthly
revenue per
customer $ 66 $72 $80
Churn rate per month 1.9% 2.1% 2.3%
Marketing cost per net
customer addition $ 566 $ 555 $ 667
----------------------------------

(1) Calculated using the respective Donnelley Marketing Service estimates for
each year.

The Company's consolidated revenues and expenses include 100% of the revenues
and expenses of the systems serving majority-owned and managed markets plus its
corporate office operations. Investment income includes the Company's share of
the net income or loss of each of the markets for which the Company follows the
equity method of accounting.

Operating results for 1996 reflect improvement in the Company's overall
operations, primarily resulting from growth in its customer base and revenues
coupled with increasing economies of scale. Operating revenues, driven by
increases in customers served, rose $215.4 million, or 44%. Operating expenses
rose $170.8 million, or 38%. Operating cash flow (operating income before
minority share plus depreciation and amortization expense) increased $64.0
million, or 48%.

Investment and other income increased $66.4 million, or 53%, due primarily to a
59% increase in gains on the sales of cellular and other investments and a 29%
increase in investment income. Interest expense decreased $4.2 million, or 15%,
in 1996 primarily due to a decrease in effective interest rates. Net income
totaled $129.9 million in 1996 compared to $99.7 million in 1995, reflecting
increased gains on the sales of cellular and other investments, improved
operating results, increased investment income and decreased interest expense.
In 1996 and 1995, net income included significant gains on sales of cellular and
other investments. A summary of the after-tax effect of these gains on net
income is shown below.

Year Ended December 31,

-----------------------------------
1996 1995 1994
-----------------------------------
(Dollars in thousands, except per share amounts)
Net income before
after-tax effects
of gains $ 62,504 $ 43,918 $ 13,071
Add: After-tax
effects of gains 67,425 55,824 3,322
-----------------------------------
Net income as
reported $ 129,929 $ 99,742 $ 16,393
-----------------------------------
----------------------------------
Earnings per share
before after-tax
effects of gains $ .73 $ .52 $ .16
Add: After-tax
effects of gains .78 .67 .05
-----------------------------------
Earnings per share
as reported $ 1.51 $ 1.19 $ .21
-----------------------------------
----------------------------------

OPERATING REVENUES

Operating revenues totaled $707.8 million in 1996, an increase of $215.4
million, or 44%, over 1995. Operating revenues totaled $492.4 million in 1995,
an increase of $160.0 million, or 48%, over 1994. The net effect of acquisitions
and divestitures ("net acquisitions") increased operating revenues $10.8
million, or 2%, in 1996 and $44.2 million, or 13%, in 1995.

Service revenues primarily consist of: (i) charges for access, airtime and
value-added services provided to the Company's local retail customers who use
the local systems operated by

<PAGE>

the Company; (ii) charges to customers of other systems who use the Company's
cellular systems when roaming ("inbound roaming"); and (iii) charges for
long-distance calls made on the Company's systems. Service revenues totaled
$690.4 million in 1996, up $213.8 million, or 45%, over 1995. Service revenues
totaled $476.6 million in 1995, up $158.0 million, or 50%, over 1994. The
increase was primarily due to the growing number of local retail customers and
the growth in inbound roaming revenue. Average monthly revenue per customer
declined 8% to $66 in 1996 and 9% to $72 in 1995. Net acquisitions increased
service revenues $10.3 million, or 2%, in 1996 and $42.7 million, or 13%, in
1995.

The 8% decrease in average monthly service revenue per customer in 1996 was
primarily a result of a decrease in average revenue per minute of use from both
local retail customers and inbound roamers. Although average monthly local
minutes of use per retail customer totaled 107 in 1996 and 95 in both 1995 and
1994, the Company's use of incentive programs in 1996 and 1995 that encourage
weekend and off peak usage, in order to stimulate overall usage, resulted in a
decrease in average revenue per minute of use during those years. Inbound
roaming revenue has been growing at a slower rate than the Company's customer
base (31% compared to 51%). The Company believes that its customer base is
growing faster than that of the industry as a whole, which has a dilutive effect
on inbound roaming revenue per customer. Also, the Company's average inbound
roaming revenue per minute of use decreased in 1996 and 1995, in line with the
ongoing trend toward reduced per minute prices for roaming negotiated between
the Company and other cellular operators. The 9% decrease in average monthly
service revenue per customer in 1995 was for primarily the same reasons as in
1996.

Local retail revenue increased $153.0 million, or 53%, in 1996 and $101.5
million, or 54%, in 1995. Growth in the Company's customer base was the primary
reason for the increase in local revenue. The number of customers increased 51%
to 1,073,000 at December 31, 1996 from 710,000 at December 31, 1995. The number
of customers increased 69% in 1995, up from 421,000 at December 31, 1994.
Excluding the effect of acquisitions and dispositions, the Company added 365,000
customers in 1996 and 255,000 customers in 1995. While the percentage increase
in customer additions is expected to be lower in the future, management
anticipates that the number of customers served will continue to increase in the
next few years. Net acquisitions increased local revenue $13.7 million, or 5%,
in 1996 and $26.3 million, or 14%, in 1995.

Average monthly local retail revenue per customer declined to $43 in 1996 from
$44 in 1995 and $47 in 1994. Monthly local retail minutes of use per customer
increased 13% to 107 in 1996 from 95 in both 1995 and 1994. While there was an
increase in average local retail minutes of use from 1995 to 1996, average
revenue per minute of use decreased as a result of the incentive programs stated
previously. Average local retail revenue per minute totaled $.40 in 1996, $.46
in 1995 and $.50 in 1994. The decrease in average monthly local retail revenue
is part of an industry-wide trend and is believed to be related to the tendency
of the early customers in a market to be the heaviest users during peak business
hours. It also reflects the Company's and the industry's continued penetration
of the consumer market, which tends to include fewer peak business hour-usage
customers. Local retail revenues in 1996 increased 58%, or $168.5 million, due
to customer growth and declined 5%, or $15.5 million, due to decreases in
average monthly service revenue per customer.

Inbound roaming revenue increased $45.3 million, or 31%, in 1996 and $44.0
million, or 42%, in 1995. This increase was attributable to the rise in the
number of minutes used by customers from other systems when roaming in the
Company's systems. Also contributing were the increased number of cell sites
within the Company's systems. These effects were offset somewhat by the decrease
in average revenue per minute due to the downward trend in negotiated rates.
Average inbound roaming revenue per minute totaled $.94 in 1996, $.99 in 1995
and $1.11 in 1994. Monthly inbound roaming revenue per Company customer averaged
$19 in 1996, $22 in 1995 and $26 in 1994. This decrease is related to both the
decrease in roaming revenue per minute and the faster increase in the

<PAGE>

Company's customer base than in inbound roaming revenue. Net acquisitions
decreased inbound roaming revenue $2.9 million, or 2%, in 1996 compared to an
increase of $13.6 million, or 13%, in 1995.

Long-distance revenue increased $17.3 million, or 49%, in 1996 and $12.4
million, or 55%, in 1995 as the volume of long-distance calls billed by the
Company increased. Monthly long-distance revenue per customer averaged $5 in
both 1996 and 1995 and $6 in 1994. Net acquisitions increased long-
distance revenue $933,000, or 3%, in 1996 and $3.5 million, or 16%, in 1995.

Equipment sales revenues totaled $17.4 million in 1996, an increase of $1.6
million, or 10%, over 1995. Equipment sales revenues totaled $15.8 million in
1995, an increase of $2.0 million, or 15%, over 1994. Equipment sales reflect
the sale of 449,000, 296,000 and 153,000 cellular telephone units in 1996, 1995
and 1994, respectively, plus installation and accessories revenue. The average
revenue per unit was $39 in 1996 compared to $53 in 1995 and $90 in 1994. The
average revenue per unit decline partially reflects the Company's decision to
reduce sales prices on cellular telephones to stimulate growth in the number of
customers, to maintain its market position and to meet competitive prices as
well as to pass through reduced manufacturers' prices to customers. Also, the
Company uses promotions which are based on increased equipment discounting. The
success of these promotions led to both an increase in units sold and a decrease
in average equipment sales revenue per unit. Net acquisitions increased
equipment sales revenues $499,000, or 3%, in 1996 and $1.5 million, or 11%, in
1995.

OPERATING EXPENSES

Operating expenses totaled $620.5 million in 1996, up $170.8 million, or 38%,
over 1995. Operating expenses totaled $449.6 million in 1995, up $134.6 million,
or 43%, over 1994. Net acquisitions increased operating expenses $11.0 million,
or 2%, in 1996 and $40.7 million, or 13%, in 1995.

System operations expenses increased $46.9 million, or 67%, in 1996 and $23.6
million, or 50%, in 1995, as a result of increases in customer usage expenses
and costs associated with the Company's increased number of customers,
increased expenses related to roaming fraud and the growing number of cell
sites within the Company's systems. In total, system operations costs are
expected to continue to increase as the number of cell sites within and the
number of customers using the Company's systems grows. Net acquisitions
increased system operations expenses $944,000, or 1%, in 1996 and $7.6
million, or 16%, in 1995.

Customer usage expenses represent charges from other telecommunications service
providers for USM's customers' use of their facilities as well as for the
Company's inbound roaming traffic on these facilities. These expenses also
include local interconnection to the landline network, toll charges and roaming
expenses from the Company's customers' use of systems other than their local
systems, offset somewhat by pass-through roaming revenue. Customer usage
expenses were $75.3 million in 1996 compared to $34.9 million in 1995 and $21.6
million in 1994. Contributing to the increases in 1996 and 1995 were additional
costs related to fraudulent use of the Company's customers' cellular telephone
numbers. These fraud-related costs totaled $18.0 million in 1996, $4.1 million
in 1995 and an immaterial amount in 1994. The Company continues to implement
procedures in its markets to combat this fraud, which is primarily related to
roaming usage. Customer usage expenses represented 11% of service revenues in
1996 compared to 7% in 1995 and 1994. The percentage increase in 1996 is
primarily due to the increase in roaming fraud.

Maintenance, utility and cell site expenses totaled $42.0 million in 1996
compared to $35.5 million in 1995 and $25.3 million in 1994, primarily
reflecting an increase in the number of cell sites in the Company's systems to
1,328 in 1996 from 1,116 in 1995 and 790 in 1994. Monthly maintenance, utility
and cell site expenses totaled $2,866, $3,107 and $3,216 per average cell site
in 1996, 1995 and 1994, respectively.

<PAGE>

Marketing and selling expenses increased $47.6 million, or 47%, in 1996 and
$33.3 million, or 48%, in 1995. Marketing and selling expenses primarily consist
of salaries, commissions and expenses of field sales and retail personnel and
offices; agent expenses; promotional expenses; local advertising and public
relations expenses. The 1996 increase was primarily due to a 44% rise in the
number of gross customer activations (excluding acquisitions and divestitures),
from 392,000 in 1995 to 563,000 in 1996. The 1995 increase was primarily due to
a 69% rise in the number of gross customer activations (excluding acquisitions
and divestitures), from 232,000 in 1994 to 392,000 in 1995. Cost per gross
customer addition, including losses on equipment sales, totaled $367 in 1996,
$361 in 1995 and $408 in 1994. Net acquisitions increased marketing and selling
expenses $5.7 million, or 6%, in 1996 and $9.0 million, or 13%, in 1995.

Cost of equipment sold increased $19.1 million, or 35%, in 1996 and $15.5
million, or 39%, in 1995. The increases reflect the growth in unit sales related
to the rise in gross customer activations made through the Company's direct and
retail distribution channels, offset somewhat by falling manufacturer prices per
unit. The average cost to the Company of a telephone unit sold, including
accessories and installation, was $165 in 1996 compared to $186 in 1995 and $258
in 1994. Net acquisitions increased cost of goods sold $2.7 million, or 5%, in
1996 and $6.3 million, or 16%, in 1995.

General and administrative expenses increased $37.8 million, or 29%, in 1996 and
$38.2 million, or 41%, in 1995. These expenses include the costs of operating
the Company's local business offices and its corporate expenses. These increases
include the effects of an increase in expenses required to serve the growing
customer base and an expansion of both local administrative office and corporate
staff, necessitated by growth in the Company's business. The Company is using an
ongoing clustering strategy to combine local operations wherever feasible in
order to gain operational efficiencies and reduce its administrative expenses.
The increase also includes the effect of a higher amount of bad debt, primarily
related to the Company's increased rate of customer growth, and the increased
cost of retaining current customers, which includes providing user equipment and
service incentives to customers to help reduce the Company's churn rate. Net
acquisitions increased direct field-related general and administrative expenses
$2.0 million, or 2%, in 1996 and $11.1 million, or 12%, in 1995.

Operating cash flow increased $64.0 million, or 48%, to $196.2 million in 1996
and increased $49.4 million, or 60%, to $132.2 million in 1995. The improvements
in 1996 and 1995 were primarily due to substantial growth in customers and
service revenues and the effects of improved operational efficiencies on
operating expenses. Net acquisitions decreased operating cash flow $505,000, or
less than 1%, in 1996 and increased operating cash flow $10.3 million, or 12% in
1995.

Depreciation expense increased $17.3 million, or 30%, in 1996 and $17.8 million,
or 45%, in 1995. These increases reflect rising average fixed asset balances,
which increased 34% in 1996 and 48% in 1995. Increased fixed asset balances
primarily result from the increase in cell sites built to improve coverage and
capacity in the Company's markets. Net acquisitions increased depreciation
expense $104,000, or less than 1%, in 1996 and $4.6 million, or 12%, in 1995.

Amortization of intangibles increased $2.1 million, or 6%, in 1996 and $6.2
million, or 24%, in 1995. These increases are primarily due to increases in
deferred information system development costs, which are amortized over the
useful life of the related systems. Net acquisitions decreased amortization of
intangibles $472,000, or 2%, in 1996 compared to an increase of $2.2 million, or
9%, in 1995.

OPERATING INCOME BEFORE MINORITY SHARE

Operating income before minority share totaled $87.4 million in 1996, $42.8
million in 1995 and $17.4 million in 1994. The operating income margin (as a
percent of service revenues) improved to 13% in 1996 compared to 9% in 1995 and
5% in 1994. The 1996 and 1995 operating income improvements reflect increased
revenues resulting from growth in the number of customers served by the
Company's systems and the effect of improved operational efficiencies on
operating expenses. Net acquisitions decreased operating income before minority
share $137,000 in 1996 and increased operating income before minority share $3.5
million in 1995.

The Company expects service revenues to continue to grow significantly during
1997 as it adds customers to its existing systems and realizes a full year of
revenues from customers added in 1996. However, management anticipates that
average monthly revenue per customer will continue to decrease as local retail
and inbound roaming revenue per minute of use declines and as the growth rate of
the Company's customer base exceeds the growth rate of inbound roaming revenue,

23
<PAGE>

diluting the roaming contribution per customer. Additionally, the Company
expects expenses to increase significantly during 1997 as it incurs costs for
cell sites added in 1996 and 1997 and incurs costs associated with customer
growth.

Management believes there exists a seasonality in both service revenues, which
tend to increase more slowly in the first and fourth quarters, and operating
expenses, which tend to be higher in the fourth quarter due to increased
marketing activities and customer growth, which may cause operating income to
vary from quarter to quarter. Additionally, competitors licensed to provide
personal communications services ("PCS") have initiated service in certain of
the Company's markets in recent months. The Company anticipates that PCS
operators will initiate service in several other of the Company's markets in
1997 and 1998. The Company's management is monitoring these and other providers'
strategies to determine what effect this additional competition will have on the
Company's future strategies and results.

INVESTMENT AND OTHER INCOME

Investment and other income totaled $191.1 million in 1996, $124.7 million in
1995 and $31.0 million in 1994. Investment income was $51.5 million in 1996
compared to $39.8 million in 1995 and $26.5 million in 1994. Investment income
primarily represents the Company's share of net income from the markets managed
by others that are accounted for by the equity method.

Gain on sale of cellular interests totaled $132.7 million in 1996, $83.5 million
in 1995 and $3.3 million in 1994. The 1996 amount primarily reflects gains
totaling $88.5 million recorded on the sales of the Company's majority interests
in eight markets; gains totaling $2.6 million recorded on the sales of the
Company's investment interests in two markets; a gain totaling $11.3 million
recorded on cash received in an exchange of markets with another cellular
operator; and gains totaling $30.3 million recorded on cash received from the
settlement of two separate legal matters.

The 1995 amount primarily reflects gains totaling $64.6 million recorded on the
sales of the Company's majority interests in six markets; gains totaling $11.1
million recorded on the sales of the Company's investment interests in six
markets; a gain totaling $5.3 million resulting from cash proceeds received in
an exchange of markets with another cellular operator; and a gain totaling $2.5
million recorded on the sale of certain marketable equity securities.

The 1994 amount reflects gains recorded on an exchange in which five of the
Company's investment interests were traded to another cellular operator for
minority interests in seven markets in which the Company owns controlling
interests.

INTEREST AND INCOME TAXES

Total interest expense decreased $4.2 million, or 15%, in 1996, primarily due to
the repayment of debt under the Revolving Credit Agreement with TDS after the
issuance of Liquid Yield Option Notes ("LYONs") in June 1995. LYONs carry a
lower effective interest rate than the borrowings under the Revolving Credit
Agreement with TDS. Total interest expense increased $5.4 million, or 25%, in
1995, on a 26% increase in the average amount of debt outstanding. Interest
expense in 1996 is primarily related to LYONs ($14.4 million) and borrowings
under a vendor financing agreement ($8.0 million). Interest expense in 1995 is
primarily related to borrowings under the Revolving Credit Agreement with TDS
($10.4 million), borrowings under a vendor financing agreement ($9.2 million)
and LYONs ($7.4 million). Interest expense in 1994 is primarily related to
borrowings under the Revolving Credit Agreement with TDS ($17.8 million) and
borrowings under a vendor financing agreement ($3.9 million).

The average amount of debt outstanding under the Revolving Credit Agreement was
$100.0 million in 1995 and $204.7 million in 1994. The average interest rate on
such debt was 10.4% in 1995 and 8.6% in 1994. No borrowings have been
outstanding under the Revolving Credit Agreement since June 1995. In June 1995,
the Company issued $228.3 million of LYONs, using most of the net proceeds to
repay all borrowings

<PAGE>

under the Revolving Credit Agreement with TDS. The LYONs are zero coupon
convertible debentures which accrete interest at 6% annually, but do not require
current cash payments of interest. The average amount of debt under the vendor
financing agreements was $112.9 million in 1996, $112.1 million in 1995 and
$58.1 million in 1994. The average interest rate on such debt was 7.8% in 1996,
8.3% in 1995 and 7.1% in 1994.

Income tax expense was $111.6 million in 1996, $32.5 million in 1995 and $4.9
million in 1994. In 1996 and 1995, approximately $65.3 million and $27.7 million
of income tax expense, respectively, related to the gains on sales of cellular
and other investments. The effective tax rates were 46.2%, 24.6% and 23.1% in
1996, 1995 and 1994, respectively. In 1996, state income taxes and gains on
sales increased the effective rate above the statutory rate. In 1995 and 1994,
the effect of the valuation allowance on the deferred tax asset decreased the
effective rate below the statutory rate, partially offset by state income taxes
and amortization of license costs which increased the effective rate.

The Company is included in a consolidated federal income tax return with other
members of the TDS consolidated group. TDS and the Company are parties to a Tax
Allocation Agreement under which the Company is able to carry forward its losses
and credits and use them to offset any current or future income tax liabilities
to TDS. The amount of federal net operating loss carryforward available to
offset future taxable income aggregated approximately $6 million at December 31,
1996, and expires between 2003 and 2011. The amount of state net operating loss
carryforward available to offset future taxable income aggregated approximately
$203 million at December 31, 1996, and expires between 1997 and 2011. Both the
federal and state loss carryforwards have been significantly reduced by the
gains on the sales of cellular and other investments during 1996 and 1995.

NET INCOME

Net income totaled $129.9 million in 1996, $99.7 million in 1995 and $16.4
million in 1994. Net income per share was $1.51 in 1996, $1.19 in 1995 and $.21
in 1994. The improvements in 1996 and 1995 resulted from gains on the sales of
cellular and other investments, improved overall operating results and increased
investment income, partially offset by increased income tax expense. In 1996 and
1995, net income included
significant gains on sales of cellular and other
investments. See "Results of Operations" for a summary of the after-tax effect
of these gains on net income.

INFLATION

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

FINANCIAL RESOURCES AND LIQUIDITY

The Company operates a capital- and marketing-intensive business. In recent
years, the Company has generated operating cash flows and received cash proceeds
from divestitures to fund most of its construction and operating expenses. The
Company anticipates further substantial increases in cellular units in service,
revenues and cell sites as it continues its growth strategy. As the Company's
customer and revenue base grows, the percentage increases in operating cash flow
and operating income may be reduced.

Cash flows from operating activities provided $137.5 million in 1996, $115.9
million in 1995 and $84.3 million in 1994. Operating cash flow (operating
income before minority share plus depreciation and amortization expense)
provided cash totaling $196.2 million in 1996, $132.2 million in 1995 and
$82.8 million in 1994. Cash flows from other operating activities (investment
and other income, interest expense, changes in working capital and changes in
other assets and liabilities) required cash investments totaling $58.7
million in 1996 and $16.3 million in 1995 and provided cash totaling $1.5
million in 1994.

Cash flows from financing activities required cash totaling $11.2 million in
1996 and provided $19.3 million in 1995 and $95.6 million in 1994. Cash flows
from financing activities include cash flows from the sale of LYONs,
borrowings under the Revolving Credit Agreement with TDS and vendor financing
transactions. In 1996, the Company primarily used available cash to repay
amounts owed under the vendor financing agreements totaling $21.5 million. In
1995, the sale of LYONs provided cash totaling $221.5 million and borrowings
under one of the vendor financing agreements provided cash totaling $59.5
million. This cash was used to repay amounts owed under the Revolving Credit
Agreement with TDS totaling $251.2 million and amounts owed under the vendor
financing agreements totaling $13.4 million. Borrowings under the Revolving
Credit Agreement with TDS totaling $75.4 million and borrowings

25
<PAGE>

under one of the vendor financing agreements totaling $18.0 million provided
a majority of the Company's external financing requirements in 1994.

Cash flows from investing activities required cash investments totaling $150.3
million in 1996, $102.6 million in 1995 and $180.4 million in 1994. Such cash
requirements primarily consisted of cash additions to property, plant, and
equipment, and cash requirements for acquisitions, deferred system development
costs and investments in cellular markets. In 1996 and 1995, the Company
received cash proceeds totaling $213.0 million and $151.1 million, respectively,
relating to the sales of cellular and other investments. In 1996, the Company
required cash totaling $28.8 million for deferred system development costs,
primarily related to the development of its customer billing and information
system. Cash expenditures for property, plant and equipment totaled $219.4
million in 1996, $208.7 million in 1995 and $158.2 million in 1994, representing
the construction of 242, 292 and 225 cell sites, respectively, plus other plant
additions.

Anticipated capital requirements for 1997 primarily reflect the Company's
construction and system expansion program. The Company's construction and system
expansion budget for 1997 is approximately $300 million, primarily for new cell
sites to expand and enhance the Company's coverage and capacity in its service
areas and for the enhancement of the Company's office systems.

ACQUISITIONS AND DIVESTURES

The Company is continuing to assess its cellular holdings in order to maximize
the benefits derived from clustering its markets. As the number of opportunities
for outright acquisitions has decreased in recent years, and as the Company's
clusters have grown, the Company's focus has shifted toward exchanges and
divestitures of managed and investment interests. Recently, the Company has
completed certain exchanges of controlling interests in its less strategic
markets for controlling interests in markets which better complement its
clusters. The Company has also completed outright sales of other less strategic
markets. The proceeds from these sales have been used to further the Company's
growth. The Company is currently negotiating acquisitions, exchanges and
divestitures of cellular interests to further capitalize on the benefits of its
clustering strategy.

In 1996, the Company purchased controlling interests in two markets and several
minority interests, representing 1.0 million pops, and received a controlling
interest in another market through an exchange with another cellular operator.
The total consideration paid in these transactions, primarily in the form of
cash and USM Common Shares issued to TDS to reimburse TDS for the value of TDS
Common Shares issued to third parties, totaled $158.9 million. Included in these
acquisitions are minority interests representing 598,000 pops USM acquired from
TDS for $102.8 million in cash, pursuant to an agreement entered into in June
1996.

Pursuant to the above agreement with TDS, USM will acquire additional interests,
representing an additional 104,000 pops, for $17.2 million in cash.
Additionally, at December 31, 1996, the Company had an agreement pending with a
third party to acquire a majority interest in one market, representing 213,000
pops, for $31.5 million in cash. The pending acquisition agreements discussed
above are expected to be completed during 1997.

<PAGE>

In 1996, the Company sold controlling interests in eight markets and one market
partition, plus minority interests in two other markets, representing 1.2
million pops, and divested a controlling interest in another market through an
exchange with another cellular operator. The Company received cash consideration
totaling $187.8 million from these sales and from the exchange. The Company also
settled two separate legal matters during 1996, receiving $30.3 million in cash
from those transactions. In total, sales, exchanges and litigation
settlements provided the Company with cash totaling $218.1 million in 1996.

In 1995, the Company purchased controlling interests in eleven markets and
several minority interests, representing 1.7 million pops. The total
consideration paid for these purchases, primarily in the form of cash and USM
Common Shares issued or issuable to TDS to reimburse TDS for the value of TDS
Common Shares issued and issuable and cash paid to third parties, totaled $151.0
million. The Company also acquired controlling interests in twelve markets,
representing 2.0 million pops, as a result of six separate exchange transactions
completed during 1995.

In 1995, the Company sold controlling interests in six markets and minority
interests in six markets, representing 1.1 million pops. The Company received
consideration of cash and receivables totaling $128.2 million from these sales.
The Company also divested controlling interests in ten markets plus three market
partitions, representing 2.1 million pops, as a result of the exchange
transactions completed during 1995.

In 1994, the Company purchased controlling interests in nine markets and several
minority interests, representing 1.3 million pops. The total consideration paid
for these purchases, primarily in the form of cash and USM Common Shares issued
to TDS to reimburse TDS for the value of TDS Common Shares issued and issuable
and cash paid to third parties, totaled $140.3 million.

In 1994, the Company exchanged its minority interests in five markets with
another cellular operator for minority interests in seven markets in which the
Company already owned a majority interest.

In February 1997, the Company announced that it had entered into an exchange
agreement with BellSouth Corporation ("BellSouth"), pursuant to which the
Company will receive controlling interests in twelve contiguous markets adjacent
to its Iowa and Wisconsin/Illinois clusters. In exchange, the Company will
divest its controlling interests in ten markets and investment interests in 13
markets and pay cash, the amount of which is dependent upon certain factors. The
Company will receive controlling interests representing approximately
3.9 million pops in the transaction, and will divest controlling interests
representing approximately 1.9 million pops and investment interests
representing approximately 1.4 million pops. The transaction is subject to
various regulatory and other approvals.

The Company expects that the completion of this transaction will have a positive
effect on its consolidated operations after the transition of operators is
complete. The transaction is also expected to significantly reduce investment
income immediately after it is completed. Because of the regulatory approval
process, the Company is uncertain as to when the transaction will be completed.

LIQUIDITY

The Company anticipates that the aggregate resources required for 1997 will
include approximately: (i) $300 million for capital spending, (ii) $49 million
for acquisitions and (iii) $23 million of scheduled debt repayments. The Company
may have additional funding obligations in 1997 related to the exchange
transaction with BellSouth if the transaction is completed during the year. The
Company had $14 million of cash and cash equivalents at December 31, 1996 and
anticipates generating an increasing amount of cash flows from operating
activities during 1997. The Company also has $100 million available under the
Revolving Credit Agreement with TDS.

Management believes that the Company's operating cash flows and sources of
external financing provide substantial financial flexibility. The Company has a
line of credit with TDS to help meet its short-term financing needs. The Company
also has access to public and private capital markets to help meet its long-term
financing needs, although there are currently no material agreements or
commitments pending to issue additional debt or equity securities. The Company
anticipates issuing debt and equity securities only when capital requirements
(including acquisitions), financial market conditions and other factors warrant.

27
<PAGE>
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR CAUTIONARY
STATEMENT

This Management's Discussion and Analysis of Results of Operations and Financial
Condition and other sections of this Annual Report to Shareholders contain
"forward-looking" statements, as defined in the Private Securities Litigation
Reform Act of 1995, that are based on current expectations, estimates and
projections. Statements that are not historical facts, including statements
about the Company's beliefs and expectations, are forward-looking statements.
These statements contain potential risks and uncertainties, and therefore actual
results may differ materially. The Company undertakes no obligation to update
publicly any forward-looking statements whether as a result of new information,
future events or otherwise.

Important factors that may affect these projections or expectations include, but
are not limited to: changes in the overall economy; changes in competition in
our markets; new telecommunications technology advances; changes in the
telecommunications regulatory environment; pending and future litigation;
availability of future financing; and unanticipated changes in growth in
cellular customers, penetration rates, churn rates and the mix of products and
services offered in our markets. Readers should evaluate any statements in light
of these important factors.
<TABLE>
<CAPTION>

CONSOLIDATED QUARTERLY INCOME INFORMATION (UNAUDITED)
Quarter Ended
------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1996
Revenues $147,966 $174,720 $187,594 $197,540
Operating Income Before Minority Share 11,822 30,021 33,094 12,429
Gain on Sale of Cellular and Other Investments 38,691 86,305 7,797 (75)
Net Income 29,387 63,055 26,140 11,347
Net Income-Operations 8,547 19,694 23,899 10,364
Net Income-Gains $20,840 $43,361 $ 2,241 $ 983
Weighted Average Common and Series A Common Shares (000s) 85,686 86,166 86,158 86,157
Earnings Per Common and Series A Common Share $ .34 $ .73 $ .30 $ .13
Earnings Per Common Share-Operations .10 .23 .28 .12
Earnings Per Common Share-Gains $ .24 $ .50 $ .02 $ .01

1995
Revenues $ 99,748 $117,124 $138,567 $136,956
Operating Income Before Minority Share 8,064 10,852 17,967 5,872
Gain on Sale of Cellular and Other Investments 18,517 16,842 42,301 5,834
Net Income 23,598 24,089 32,263 19,792
Net Income-Operations 6,386 8,853 15,531 13,147
Net Income-Gains $ 17,212 $ 15,236 $ 16,732 $ 6,645
Weighted Average Common and Series A Common Shares (000s) 82,131 83,937 84,561 84,576
Earnings Per Common and Series A Common Share $ .29 $ .29 $ .38 $ .23
Earnings Per Common Share-Operations .08 .11 .18 .16
Earnings Per Common Shares-Gains $ .21 $ .18 $ .20 $ .07

</TABLE>

NET INCOME FOR 1996 AND 1995 INCLUDED SIGNIFICANT GAINS FROM THE SALES OF
CELLULAR AND OTHER INVESTMENTS. THE TABLE ABOVE SUMMARIZES THE EFFECT OF THE
GAINS ON NET INCOME AND EARNINGS PER COMMON SHARE.

MANAGEMENT BELIEVES THERE EXISTS A SEASONALITY AT THE COMPANY IN BOTH SERVICE
REVENUES, WHICH TEND TO INCREASE MORE SLOWLY IN THE FIRST AND FOURTH QUARTERS,
AND OPERATING EXPENSES, WHICH TEND TO BE HIGHER IN THE FOURTH QUARTER DUE TO
INCREASED MARKETING ACTIVITIES AND CUSTOMER GROWTH. THIS SEASONALITY MAY CAUSE
OPERATING INCOME TO VARY FROM QUARTER TO QUARTER.

<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31,
1996 1995 1994
----------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
OPERATING REVENUES
Service $690,434 $476,634 $318,649
Equipment sales 17,386 15,761 13,755
----------------------------------------
Total Operating Revenues 707,820 492,395 332,404
----------------------------------------

OPERATING EXPENSES
System operations 117,368 70,442 46,869
Marketing and selling 150,000 102,361 69,072
Cost of equipment sold 74,023 54,948 39,431
General and administrative 170,224 132,431 94,193
Depreciation 74,631 57,302 39,520
Amortization of intangibles 34,208 32,156 25,934
----------------------------------------
Total Operating Expenses 620,454 449,640 315,019
----------------------------------------

OPERATING INCOME BEFORE MINORITY SHARE 87,366 42,755 17,385
Minority share of operating income (13,743) (7,902) (5,152)
----------------------------------------
OPERATING INCOME 73,623 34,853 12,233
----------------------------------------
INVESTMENT AND OTHER INCOME
Investment income 51,518 39,833 26,540
Amortization of licenses related to investments (1,391) (1,089) (913)
Interest income 10,093 5,008 3,380
Other (expense), net (1,881) (2,578) (1,368)
Gain on sale of cellular and other investments 132,718 83,494 3,321
----------------------------------------
Total Investment and Other Income 191,057 124,668 30,960
----------------------------------------
INCOME BEFORE INTEREST AND INCOME TAXES 264,680 159,521 43,193
----------------------------------------
INTEREST EXPENSE
Interest expense - affiliate -- 10,406 17,812
Interest expense - other 23,111 16,881 4,071
----------------------------------------
Total Interest Expense 23,111 27,287 21,883
----------------------------------------

INCOME BEFORE INCOME TAXES 241,569 132,234 21,310
Income tax expense 111,640 32,492 4,917
----------------------------------------
NET INCOME $129,929 $ 99,742 $ 16,393
----------------------------------------
WEIGHTED AVERAGE COMMON AND
SERIES A COMMON SHARES (000S) 86,041 84,023 79,514
EARNINGS PER COMMON AND
SERIES A COMMON SHARE $ 1.51 $ 1.19 $ .21
----------------------------------------

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

</TABLE>

<PAGE>

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS - ASSETS

December 31,
1996 1995
------------------------
(DOLLARS IN THOUSANDS)

CURRENT ASSETS
Cash and cash equivalents
General funds $ 802 $ 8,462
Affiliated cash equivalents 13,575 29,942
------------------------
14,377 38,404
Accounts receivable
Customers, less allowance of
$4,199 and $3,820, respectively 58,034 42,934
Roaming 29,742 26,316
Affiliates 607 2,166
Other 7,568 5,761
Inventory 11,893 9,198
Prepaid and other current assets 6,398 5,007
------------------------
128,619 129,786
------------------------

PROPERTY, PLANT AND EQUIPMENT
In service and under construction 846,005 674,450
Less accumulated depreciation 195,251 144,423
------------------------
650,754 530,027
------------------------

INVESTMENTS
Licenses, net of accumulated amortization of
$110,727 and $88,403, respectively 1,044,141 1,035,846
Cellular entities 186,791 134,421
Notes and interest receivable 14,943 16,376
------------------------
1,245,875 1,186,643
------------------------

DEFERRED CHARGES
System development costs, net of accumulated
amortization of $11,089 and $4,951, respectively 44,319 21,704
Other, net of accumulated amortization
of $5,276 and $9,289, respectively 16,332 11,984
------------------------
60,651 33,688
------------------------
TOTAL ASSETS $2,085,899 $1,880,144
------------------------
------------------------

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

<PAGE>

CONSOLIDATED BALANCE SHEETS - LIABILITIES AND SHAREHOLDERS' EQUITY

December 31,
1996 1995
----------------------------
(Dollars in Thousands)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt and redeemable preferred stock $ 23,065 $ 30,939
Notes payable 1,375 1,375
Accounts payable
Affiliates 2,729 11,636
Other 66,638 53,155
Accrued taxes 18,781 29,644
Customer deposits and deferred revenues 16,410 11,332
Other current liabilities 17,456 17,028
----------------------------
146,454 155,109
----------------------------
LONG-TERM DEBT
6% zero coupon convertible debentures 250,107 235,750
Vendor financing, excluding current portion 80,589 98,656
----------------------------
330,696 334,406
----------------------------

DEFERRED LIABILITIES AND CREDITS
Net deferred income tax liability 78,833 14,331
Other 2,444 1,541
----------------------------
81,277 15,872
----------------------------

MINORITY INTEREST 51,270 45,303
----------------------------
COMMON SHAREHOLDERS' EQUITY
Common Shares, par value $1 per share;
authorized 140,000,000 shares; issued and outstanding
53,117,313 and 49,965,718 shares, respectively 53,117 49,966
Series A Common Shares, par value $1 per share;
authorized 50,000,000 shares; issued and outstanding
33,005,877 shares 33,006 33,006
Additional paid-in capital 1,245,066 1,206,614
Common Shares issuable, 928,009 shares in 1995 -- 24,784
Retained earnings 145,013 15,084
----------------------------
1,476,202 1,329,454
----------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,085,899 $1,880,144
----------------------------
----------------------------
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1996 1995 1994
------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 129,929 $ 99,742 $ 16,393
Add (Deduct) adjustments to reconcile net
income to net cash provided by operating activities
Depreciation and amortization 108,839 89,458 65,454
Investment income (51,518) (39,833) (26,540)
Gain on sale of cellular and other investments (132,718) (83,494) (3,321)
Minority share of operating income 13,743 7,902 5,152
Other noncash expense 19,260 30,597 19,019
Change in accounts receivable (16,706) (27,878) (12,538)
Change in accounts payable 12,709 (1,819) 13,882
Change in accrued taxes (10,185) 27,127 1,575
Change in deferred taxes 63,137 8,660 1,611
Change in other assets and liabilities 1,019 5,472 3,621
------------------------------------------
137,509 115,934 84,308
------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Vendor financing borrowings 3,922 59,460 18,611
Change in convertible debentures -- 221,466 --
Repayment of vendor financing (21,519) (13,353) (12,091)
Change in Revolving Credit Agreement -- (251,230) 75,414
Common Shares issued 10,483 1,563 1,135
Capital (distributions) contributions
(to)/from minority partners (4,099) 1,411 12,504
------------------------------------------
(11,213) 19,317 95,573
------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (219,370) (208,713) (158,208)
System development costs (28,753) (5,628) (10,111)
Investments in and advances to nonconsolidated entities (22,256) (18,807) (21,553)
Distributions from nonconsolidated entities 23,464 8,679 16,395
Proceeds from sales of cellular and other investments 212,979 151,137 --
Acquisitions, excluding cash acquired (116,387) (29,315) (6,878)
------------------------------------------
(150,323) (102,647) (180,355)
------------------------------------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (24,027) 32,604 (474)

CASH AND CASH EQUIVALENTS -
Beginning of period 38,404 5,800 6,274
------------------------------------------
End of period $ 14,377 $ 38,404 $ 5,800
------------------------------------------
------------------------------------------
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS.

</TABLE>

<PAGE>

CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS' EQUITY
Year Ended December 31,
1996 1995 1994
-------------------------------------------
(Dollars in Thousands)

<S> <C> <C> <C>
COMMON SHARES
Balance at beginning of period $ 49,966 $ 45,584 $ 36,960
Add
Acquisitions of cellular interests 2,194 3,455 8,493
Employee benefit plans 62 62 55
Redemption of USM and TDS Preferred Stock 895 865 76
-------------------------------------------
Balance at end of period $ 53,117 $ 49,966 $ 45,584
-------------------------------------------

SERIES A COMMON SHARES
Balance at beginning of period $ 33,006 $ 33,006 $ 33,006
Issued during year -- -- --
-------------------------------------------
Balance at end of period $ 33,006 $ 33,006 $ 33,006
-------------------------------------------

ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period $1,206,614 $1,083,698 $ 867,947
Add (Deduct)
Acquisitions of cellular interests 65,089 101,302 211,367
Transfer of interests from TDS (45,761) -- --
Employee benefit plans 1,575 1,614 1,131
Redemption of USM and TDS Preferred Stock 17,555 21,371 1,420
Net unrealized (loss) gain on available-
for-sale marketable equity securities -- (1,258) 1,884
Capital stock expense (6) (113) (51)
-------------------------------------------
Balance at end of period $1,245,066 $1,206,614 $1,083,698
-------------------------------------------

COMMON AND SERIES A COMMON SHARES ISSUABLE
Balance at beginning of period $24,784 $16,337 $ 103,266
Add (Deduct)
Acquisitions of cellular interests -- 14,530 --
Shares issued pursuant to acquisition agreements (24,784) (6,083) (86,929)
-------------------------------------------
Balance at end of period $ -- $ 24,784 $ 16,337
-------------------------------------------

RETAINED EARNINGS (DEFICIT)
Balance at beginning of period $ 15,084 $ (84,658) $ (101,051)
Add net income 129,929 99,742 16,393
-------------------------------------------
Balance at end of period $ 145,013 $ 15,084 $ (84,658)
-------------------------------------------
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS.

</TABLE>

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

United States Cellular Corporation (the "Company" or "USM"), is an 80.6%-owned
subsidiary of Telephone and Data Systems, Inc. ("TDS").

NATURE OF OPERATIONS

USM owns, manages and invests in cellular systems throughout the United States
and is the nation's eighth largest cellular telephone company in terms of
population equivalents ("pops"). The Company owns interests in 204 cellular
markets, representing approximately 25.1 million pops as of December 31, 1996.
USM's 131 majority-owned and managed markets, primarily mid-sized and rural
markets, cover 26 states and served 1,073,000 customers as of December 31, 1996.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of USM, its
majority-owned subsidiaries and partnerships in which USM has a controlling
majority partnership interest. All material intercompany accounts and
transactions have been eliminated. Certain amounts reported in prior years have
been reclassified to conform to current period presentation.

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates, but management
believes they will not be material.

REVENUES

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

ADVERTISING COSTS

The Company expenses advertising costs as incurred. Advertising costs totaled
$24.4 million, $14.1 million and $11.1 million for the years ended December 31,
1996, 1995 and 1994, respectively.

PENSION PLAN

Telephone and Data Systems, Inc. Wireless Companies' Pension Plan (the "Pension
Plan"), a qualified noncontributory defined contribution pension plan, was
adopted effective January 1, 1994. It provides pension benefits for the
employees of USM or its subsidiaries. Under this plan, pension benefits and
costs are calculated separately for each participant and are funded currently.
Pension costs were $1.5 million in 1996, $1.2 million in 1995 and $1.0 million
in 1994.

EARNINGS PER SHARE

Earnings per Common and Series A Common Share for the years ended December 31,
1996, 1995 and 1994 was computed by dividing Net Income by the weighted average
number of Common Shares, Series A Common Shares and dilutive common equivalent
shares outstanding during the year. Dilutive common stock equivalents consist of
Common Shares issuable upon conversion of USM and TDS preferred stock, Common
Shares issuable in the future to TDS and third parties in connection with
completed acquisitions and Common Share options and stock appreciation rights.

Earnings per Common and Series A Common Share for the years ended December 31,
1996, 1995 and 1994 contain significant income amounts related to gains on the
sale of cellular and other investments. Excluding the after-tax effect of these
gains, earnings per share was $.73, $.52 and $.16 for the years ended December
31, 1996, 1995 and 1994, respectively.

<PAGE>

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the plant assets.
The provision for depreciation as a percentage of average depreciable property,
plant and equipment was 10.4% in 1996, 10.0% in 1995 and 10.5% in 1994.

Property, plant and equipment in service and under construction consists of:

December 31,
---------------------------------
1996 1995
---------------------------------
(Dollars in thousands)
Operating plant and equipment $641,600 $505,242
Land 46,198 38,161
Office furniture, equipment
and vehicles 71,674 54,904
Buildings and leasehold improvements 86,533 76,143
---------------------------------
$846,005 $674,450
---------------------------------

See Note 12 - Lease Commitments for a discussion of property leased by USM.

NOTES AND INTEREST RECEIVABLE

Notes and interest receivable primarily consist of loans to other partners for
capital calls paid on their behalf. The interest charged on these loans is at
varying annual rates. USM also has an outstanding loan to the operators of
another cellular company in which USM has no equity. The interest charged on
this loan is at an annual rate of prime plus 1 1/2 %. The carrying amount
reported in the balance sheet for notes and interest receivable approximates
their fair value.

CASH AND CASH EQUIVALENTS

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

ACCOUNTS RECEIVABLE

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

INVENTORY

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

DEFERRED CHARGES

Deferred system development costs primarily represent costs incurred for the
development of new information systems. Capitalized costs of information systems
development are amortized over a five-year period, starting when each new system
is placed in service. Certain of the capitalized costs are for systems which are
still being developed and are not yet in service; these costs are not being
amortized.

Other deferred charges primarily represent legal and other charges incurred
relating to the preparation of vendor financing agreements and the 6% zero
coupon convertible debentures, and also deferred market start-up costs. The
deferred charges related to vendor financing are amortized over the related
financing period, the charges related to the convertible debentures are
amortized over the twenty-year financing period and deferred market start-up
costs are amortized over five years beginning with the commencement of
operations in each market. During 1996 and 1995, USM retired $5.5 million and
$1.1 million, respectively, of deferred start-up costs which had been fully
amortized.

SUPPLEMENTAL CASH FLOW DISCLOSURES

USM acquired certain cellular licenses and other cellular interests during 1996,
1995 and 1994. In conjunction with these acquisitions, the following assets were
acquired, liabilities assumed and Common Shares issued:

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31,
----------------------------------------
1996 1995 1994
----------------------------------------
(Dollars in thousands)
Property, plant and
equipment, net $ 7,069 $ 29,622 $ 13,638
Cellular licenses 90,341 138,600 139,332
Increase (Decrease)
in equity-method
investments in
cellular interests 13,971 (5,921) (12,706)
Accounts receivable 1,332 1,760 1,910
Long-term debt -- -- (212)
Revolving Credit
Agreement-TDS -- (15,493) (309)
Accounts payable (1,081) (5,051) (1,375)
Other assets and
liabilities, excluding
cash acquired 1,493 (998) (1,518)
Common Shares
issued and issuable 3,262 (113,204) (131,882)
----------------------------------------
Decrease in cash due
to acquisitions $ 116,387 $ 29,315 $ 6,878
----------------------------------------

Following are supplemental cash flow disclosures regarding interest and income
taxes paid and certain noncash transactions:

Year Ended December 31,
----------------------------------------
1996 1995 1994
----------------------------------------
(Dollars in thousands)
Interest paid $ 7,001 $ 4,112 $ 4,021
Income taxes paid 64,402 3,035 1,968
Noncash interest
expense 16,110 23,175 17,862
Accrued interest
converted into debt
under the Revolving
Credit Agreement -- 14,432 17,579
Additions to Property,
Plant and Equipment
financed through
Accounts Payable-Other (4,679) 1,929 (9,761)
Common Shares issued
by USM for redemption
of USM Preferred Stock
and TDS Preferred
Shares $ 18,450 $ 22,236 $ 1,496
----------------------------------------

2. ACQUISITIONS AND DIVESTITURES

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

INFORMATION WITH RESPECT TO ACQUISITIONS AND DIVESTITURES

COMPLETED ACQUISITIONS. During 1996, USM completed the acquisition of
controlling interests in two markets and several minority interests representing
approximately 1.0 million population equivalents for a total consideration of
$158.9 million as shown in the following table:

Consideration
-------------
(millions)
1.3 million Common Shares to TDS (1) $ 42.4
1,000 Common Shares issued to third parties .1
Cash 116.4
-------------
Total $158.9
-------------

(1) Issued to reimburse TDS for TDS securities and cash paid to third parties in
connection with the acquisitions.

TRANSFER OF MINORITY INTERESTS TO THE COMPANY FROM TDS. Included in the
interests USM acquired in 1996 were investment interests in 13 markets,
representing 598,000 population equivalents, acquired in September 1996 for
$102.8 million in cash. These interests were acquired pursuant to an agreement
entered into in June 1996 between USM and TDS. Due to the intercompany nature of
the transaction, these transfers were recorded at TDS's book value of the
interests. Also pursuant to the agreement, USM expects to acquire investment
interests in two additional markets, representing 104,000 population
equivalents, for $17.2 million in cash. The pending acquisitions are awaiting
regulatory approvals.

During 1995, USM completed the acquisition of controlling interests in eleven
markets and several minority interests representing approximately 1.7 million
population equivalents for a total consideration of $151.0 million as shown in
the following table:

Consideration
-------------
(millions)
2.7 million Common Shares to TDS (1) $ 85.9
422,000 Common Shares issued to third parties 12.8
Increase in Revolving Credit Agreement (1) 14.6
456,000 Common Shares issuable in 1996 14.5
Cash 23.2
-------------
Total $151.0
-------------

(1) To reimburse TDS for TDS securities and cash paid to third parties in
connection with the acquisitions.

<PAGE>

Assuming that the 1996 and 1995 acquisitions discussed above, which were
accounted for as purchases, had taken place on January 1, 1995, unaudited pro
forma results of operations would have been as follows:

Year Ended December 31,
1996 1995
--------------------------
(Dollars in thousands,
except per share amounts)
Service Revenues $ 691,038 $ 492,127
Equipment Sales 17,393 16,930
Interest Expense
(including cost to
finance acquisitions) 23,111 27,446
Net Income 133,062 94,197
Earnings per Common Share $ 1.54 $ 1.10
--------------------------

During 1996, the Company completed the divestiture of controlling interests in
eight markets and investment interests in two markets. See Note 11 - Gain on
Sale of Cellular and Other Investments for a discussion of these divestitures.

PENDING ACQUISITIONS AND DIVESTITURES. At December 31, 1996, USM had entered
into an agreement with a third party to acquire a controlling interest in one
market for $31.5 million in cash. This transaction is expected to be completed
during 1997. Additionally, in February, 1997, USM entered into an agreement with
another cellular operator for an exchange of markets. See Note 16 - Subsequent
Event for a discussion of this pending exchange transaction.

3. INVESTMENT IN LICENSES

Investment in licenses consists of the costs incurred in acquiring Federal
Communications Commission ("FCC") licenses or interests in entities which have
filed for or have been awarded FCC licenses to provide cellular service. These
costs include amounts paid to license applicants and owners of interests in
cellular entities awarded licenses; amounts paid for legal, engineering and
consulting services; amounts incurred by USM and TDS in acquiring these
interests; and goodwill. These costs are being amortized over 40 years, upon
commencement of operations, or at the date of acquisition when USM acquires an
interest in an operating system. Costs applicable to unsuccessful license
applications and acquisitions are charged to expense. Included in cellular
license costs is approximately $322 million and $363 million at December 31,
1996 and 1995, respectively, of goodwill which resulted from various
acquisitions structured to be tax-free.

4. REVOLVING CREDIT AGREEMENT

USM has the right to borrow funds on an unsecured basis from TDS and
Telecommunications Technologies Fund, Inc. ("TTF"), a wholly-owned subsidiary of
TDS, pursuant to a Revolving Credit Agreement. USM repaid approximately $206.5
million of debt under the Revolving Credit Agreement with the proceeds of its
1995 offering of 6% Zero Coupon Convertible Debentures. See Note 6 - 6% Zero
Coupon Convertible Debentures for a discussion of these debentures. As of
December 31, 1996, no borrowings were outstanding under the Revolving Credit
Agreement.

The terms of the Revolving Credit Agreement provide for borrowings with
interest, at the prime rate plus .75% (for a rate of 9.0% at December 31, 1996),
due quarterly. The facility was amended effective June 29, 1995, to provide for
borrowings up to a maximum of $100 million. No principal under the Revolving
Credit Agreement is due until January 2, 1998, on which date the Revolving
Credit Agreement terminates and all unpaid principal and accrued interest
thereon are due and payable.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. VENDOR FINANCING

USM has two arrangements for the financing of cellular system equipment and
construction costs with an equipment vendor.

During 1994, USM consolidated the terms of its borrowings under previously
negotiated long-term financing agreements into one agreement (the "1994
Agreement"). As provided for in the 1994 Agreement, USM consolidated borrowings
under certain other previously negotiated agreements, those which were arranged
through the individual entities which USM manages, during 1995. All borrowings
are collateralized by a secured interest in the tangible assets (excluding
customer accounts receivable) and certain intangible assets of certain of USM's
operating subsidiaries, excluding any interest in such operating subsidiaries'
FCC licenses. Terms of the borrowings are for a total of seven years at an
interest rate of 1.40% over the 90-day Commercial Paper Rate of high-grade,
unsecured notes (for a rate of 7.03%). Borrowings totaling $101.1 million were
outstanding under the 1994 Agreement at December 31, 1996 and there was no
remaining availability at that date for future borrowings.

USM has another agreement which was assumed pursuant to a 1993 acquisition and
which is arranged through the individual entity acquired. Terms of the
borrowings under this agreement are similar to those of the 1994 Agreement.
Borrowings totaling $2.6 million were outstanding under this agreement as of
December 31, 1996 and there was no remaining availability at that date for
future borrowings.

The carrying value of USM's current and long-term vendor financing, $103.7
million and $120.0 million, is approximately equal to its estimated fair value
at December 31, 1996 and 1995, respectively.

Vendor financing is as follows:

December 31,
1996 1995
--------------------------
(Dollars in thousands)
Vendor financing arrangement
(including deferred interest)
due through 2003 $101,119 $116,448
Other long-term notes
issued in connection with
acquisitions, due through 1998 2,535 3,550
--------------------------
103,654 119,998
Less current portion 23,065 21,342
--------------------------
$ 80,589 $ 98,656
--------------------------

Vendor financing principal payment requirements are $23.1 million, $24.3
million, $22.2 million, $16.9 million and $14.0 million for the years 1997
through 2001, respectively.

6. 6% ZERO COUPON CONVERTIBLE DEBENTURES

During 1995, the Company sold $745 million principal amount at maturity of zero
coupon 6% yield to maturity convertible debt with proceeds to the Company of
$221.5 million. This 20-year fixed rate debt, in the form of Liquid Yield Option
Notes ("LYONs") is subordinated to all senior indebtedness of the Company. At
December 31, 1996, the Company's senior indebtedness totaled $113.7 million.
Each LYON is convertible at the option of the holder at any time at a conversion
rate of 9.475 Common Shares per LYON. Upon conversion, USM may elect to deliver
its Common Shares or cash equal to the market value of the Common Shares.
Beginning June 15, 2000, the LYONs may be redeemed at any time for cash at the
option of USM at the issue price plus accrued original issue discount through
the date of redemption. USM will purchase LYONs, at the option of the holder, as
of June 15, 2000, at the issue price plus accrued original issue discount
through that date. USM will have the option of purchasing such LYONs with cash,
USM Common Shares or TDS common equity securities, or any combination thereof.
No LYONs have been converted as of December 31, 1996.

The carrying value at December 31, 1996 of USM's 6% Zero Coupon Convertible
Debentures, $250.1 million, is greater than its fair value, estimated to be
$248.4 million. The carrying value at December 31, 1995 of USM's 6% Zero Coupon
Convertible Debentures, $235.7 million, is less than its fair value, estimated
to be $265.5 million. The fair values were estimated using discounted cash flow
analysis. The decrease in estimated fair value in 1996 was due to a change in
the incremental borrowing rate.

7. COMMON STOCK

COMMON SHARES ISSUABLE

Certain of the cellular acquisition agreements completed in previous years
required USM to deliver Common Shares in the future. USM issued 928,009 Common
Shares to TDS and third parties in 1996 pursuant to these agreements.

<PAGE>

EMPLOYEE BENEFIT PLANS

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

Year Ended December 31,
--------------------------------------
1996 1995 1994
--------------------------------------

Tax-Deferred
Savings Plan 23,302 26,357 25,934
Employee stock
options and stock
appreciation rights 16,380 10,713 8,365
Employee Stock
Purchase Plan 22,366 25,000 20,244
--------------------------------------
62,048 62,070 54,543
--------------------------------------

TAX-DEFERRED SAVINGS PLAN. USM has reserved 176,411 Common Shares for issuance
under the TDS Tax-Deferred Savings Plan, a qualified profit-sharing plan
pursuant to Sections 401(a) and 401(k) of the Internal Revenue Code.
Participating employees have the option of investing their contributions in USM
Common Shares, TDS Common Shares, American Paging, Inc. (an 82.3%-owned
subsidiary of TDS) Common Shares, Aerial Communications, Inc. (an 82.8%-owned
subsidiary of TDS) Common Shares or five other non-affiliated funds.

STOCK-BASED COMPENSATION PLANS

USM accounts for stock options, stock appreciation rights and employee stock
purchase plans under Accounting Principles Board ("APB") Opinion No. 25. No
compensation costs have been recognized for the stock option and employee stock
purchase plans. Compensation expense for SARs, measured by the difference
between the SAR prices and the year-end market price of the Common Shares,
aggregated $407,000 in 1996, $168,000 in 1995 and $71,000 in 1994. Had
compensation costs for all plans been determined consistent with Financial
Accounting Standards Board Statement of Accounting Standards ("SFAS") No. 123,
the Company's net income and earnings per share would have been reduced to the
following pro forma amounts:

Year Ended December 31,
1996 1995
--------------------------
(Dollars in thousands,
except per share amounts)
Net Income: As Reported $129,929 $99,742
Pro Forma 129,166 98,960
Earnings per
Common Share: As Reported 1.51 1.19
Pro Forma $ 1.50 $ 1.18

Because the SFAS No. 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years. A summary of the
status of the Company's stock option plans at December 31, 1996, 1995 and 1994
and changes during the years then ended is presented in the table and narrative
below:

Weighted Weighted
Number Average Average
of Shares Option Prices Fair Values
---------------------------------------------
Stock Options:
Outstanding
January 1, 1994
(33,300 exercisable) 56,659 $16.07
Granted 178,398 30.65
Exercised (8,365) 15.67
Cancelled (2,433) $20.63
Outstanding
December 31, 1994
(80,164 exercisable) 224,259 $27.63
Granted 106,406 27.76 $14.02
Exercised (10,713) $15.67
Outstanding
December 31, 1995
(177,675 exercisable) 319,952 $28.07
Granted 103,326 25.12 $16.59
Exercised (16,380) 16.98
Cancelled (15,851) $30.05
Outstanding
December 31, 1996
(271,866 exercisable) 391,047 $29.47

STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN. USM has reserved 967,192 Common
Shares and 55,000 Series A Common Shares for options granted to key employees.
USM has established two Stock Option plans as of February 1, 1991 and November
9, 1994 that provide for the grant of stock options and stock appreciation
rights to officers and employees. The options under the 1991 plan are
exercisable from the date of vesting through November 1, 1997, or thirty days
following the date of the employee's termination of employment, if earlier.
Under the 1991 Stock Option Plan at December 31, 1996, 66,889 stock options were
outstanding at a price of $15.67 per share. The options under the 1994 plan are
exercisable from the date of vesting through November 9, 2004, or thirty days
following the date of the employee's termination of employment, if earlier.
Under the 1994 Stock Option Plan at December 31, 1996, 215,071 stock options
were outstanding at a weighted average price of $32.10 per share. The fair value

<PAGE>

of each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions used for
grants in 1996 and 1995, respectively: risk-free interest rates of 5.9% and
6.9%; expected dividend yields of zero for both years; expected lives of 4.0
years and 5.2 years and expected volatility of 22.7% and 25.3%.

Stock Appreciation Rights ("SARs") (as amended on February 1, 1991) allow the
grantee to receive an amount in Common Shares or cash, or a combination thereof,
equivalent to the difference between the exercise price and the fair market
value of the Common Shares on the exercise date. At December 31, 1996, 42,000
Common Share SARs and 36,000 Series A Common Share SARs were outstanding at $15
per share. These rights expire from 1998 to 2003 or the date of the person's
termination of employment, if earlier. During 1996 and 1994, 300 and 1,200
Common Share SARs were exercised, respectively. No SARs were exercised in 1995.
There were no SARs granted in 1996 or 1995.

EMPLOYEE STOCK PURCHASE PLAN. USM sold 22,366 and 25,000 Common Shares to its
employees at $26.94 per share in 1996 and 1995, respectively, in connection with
the 1994 Employee Stock Purchase Plan and has 42,634 Common Shares reserved
under the plan. During 1996, the 1997 Employee Stock Purchase Plan ("1997 ESPP")
was approved which became effective January 1, 1997. The Company reserved
130,000 Common shares for sale to employees of United States Cellular and its
subsidiaries under the 1997 ESPP. The fair value of the employees' purchase
rights is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions used for grants rights in
1996: risk-free interest rates of 5.8% and 5.4%; expected dividend yield of zero
for both years; expected lives of 2.3 years and 1.2 years; and expected
volatility of 15.4% and 15.7%.

1996 SENIOR EXECUTIVE STOCK BONUS AND RESTRICTED STOCK AWARD PLAN. USM has
reserved 10,300 shares for issuance under the 1996 Senior Executive Stock Bonus
and Restricted Stock Award Plan. Eligible senior executives may qualify for
stock awards under this plan when USM's customer base reaches certain levels. No
shares had been issued under this plan as of December 31, 1996.

COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS. USM has reserved 10,000 shares for
issuance under the Compensation Plan for Non-Employee Directors. Effective
November 1, 1996, members of USM's Board of Directors who are not employed by
USM or another TDS affiliate may elect to receive a number of USM Common Shares
equal to the current fair market value of up to 50% of their directors' fee and
up to 33% of each committee meeting fee. No shares had been issued under this
plan as of December 31, 1996.

SERIES A COMMON SHARES

Series A Common Shares are convertible on a share-for-share basis into Common
Shares and each share is entitled to ten votes per share, compared to one vote
for each Common Share. As of December 31, 1996, all of USM's outstanding Series
A Common Shares were held by TDS.

8. REDEEMABLE PREFERRED STOCK

Redeemable Preferred Stock, authorized 5,000,000 shares, has a stated
liquidation value of $100 per share and is not entitled to any dividends. The
Redeemable Preferred Stock is issuable in series by the Board of Directors, who
establish the terms of the issue. At December 31, 1995, all shares of Redeemable
Preferred Stock were held by TDS as reimbursement for TDS Preferred Shares
issued in connection with acquisitions. The fair value of Redeemable Preferred
Stock at December 31, 1995 was estimated to be approximately $17.6 million using
the net present value of the Common Shares to be issued upon conversion, valued
at quoted market price. At December 31, 1996 all of the Redeemable Preferred
Stock had been redeemed. At December 31, 1995, 95,972 redeemable preferred
shares were outstanding, valued at $9.6 million.

During 1996, 51,107 Series C and 44,865 Series D Redeemable Preferred Shares
were redeemed for a total of 621,904 USM Common Shares. During 1995, 8,282
Series B and 84,030 Series E Redeemable Preferred Shares were redeemed for a
total of 471,224 USM Common Shares.

<PAGE>

9. INCOME TAXES

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

TDS and USM entered into a Tax Allocation Agreement (the "Agreement") effective
July 1, 1987. The Agreement provides that USM and its subsidiaries be included
in a consolidated federal income tax return and in state income or franchise tax
returns in certain situations with the TDS affiliated group. USM and its
subsidiaries calculate their losses and credits as if they comprised a separate
affiliated group. Under the Agreement, USM is able to carry forward its losses
and credits and use them to offset any future income tax liabilities to TDS.

Income tax provisions charged to net income are summarized below:

Year Ended December 31,
--------------------------------------------
1996 1995 1994
--------------------------------------------
(Dollars in thousands)
Federal income taxes
Current $ 35,613 $14,882 $1,054
Deferred 54,509 8,468 26
State income taxes
Current 12,890 8,306 2,252
Deferred 8,628 836 1,585
--------------------------------------------
Total income
tax expense $ 111,640 $32,492 $4,917
--------------------------------------------

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

Year Ended December 31,
--------------------------------------------
1996 1995 1994
--------------------------------------------
Statutory federal income
tax rate 35.0% 35.0% 35.0%
State income taxes,
net of federal benefit 6.9 4.6 11.1
Amortization of license costs 1.1 2.2 11.9
Effects of corporations not
included in consolidated
federal income tax return .8 1.1 3.7
Effects of valuation allowance
on deferred tax asset (2.4) (18.3) (38.6)
Gains on sales 4.8 -- --
--------------------------------------------
Effective income tax rate 46.2% 24.6% 23.1%
--------------------------------------------

The increase in the 1996 effective rate reflects additional income tax expense
due to tax gains in excess of book gains associated with the sale of certain
cellular interests.

Deferred income taxes are provided for the temporary differences between the
amount of the Company's assets and liabilities for financial reporting purposes
and their tax basis.

USM had current deferred tax assets totaling $2.4 million at December 31, 1996,
and $1.0 million at December 31, 1995, resulting primarily from the allowance
for customer receivables.

The temporary differences that gave rise to the noncurrent deferred tax assets
and liabilities as of December 31, 1996 and 1995, are as follows:

December 31,
----------------------------------
1996 1995
----------------------------------
(Dollars in thousands)
Deferred Tax Asset
Net operating loss carryforward $ 14,121 $ 37,718
Stock appreciation rights 299 67
Alternative minimum
tax credit carryforward 24,545 12,464
Other -- 188
----------------------------------
38,965 50,437
Less valuation allowance 13,150 20,110
----------------------------------
Total Deferred Tax Asset 25,815 30,327
----------------------------------

Deferred Tax Liability
Property, plant and equipment 23,402 17,654
Equity investments 41,482 998
Partnership investments 15,005 11,010
Licenses 24,759 14,996
----------------------------------
Total Deferred Tax Liability 104,648 44,658
----------------------------------
Net Deferred Tax Liability $ 78,833 $ 14,331
----------------------------------

The amount of federal net operating loss carryforward available to offset future
taxable income aggregated approximately $5.6 million at December 31, 1996 and
expires between 2003 and 2011. The amount of state net operating loss
carryforward available to offset future taxable income aggregated approximately
$203 million at December 31, 1996 and expires between 1997 and 2011. At December
31, 1996, USM had $24.5 million of federal alternative minimum tax credit
carryforward available to offset regular income tax payable in future years.

<PAGE>

A valuation allowance has been provided when it is more likely than not that
some portion of the deferred tax asset will not be realized. During 1996, the
valuation allowance decreased $7.0 million primarily due to USM's 1996 net
taxable income.

10. RELATED PARTIES

USM is billed for all services it receives from TDS, consisting primarily of
information processing and general management services. Such billings are based
on expenses specifically identified to USM and on allocations of common
expenses. Such allocations are based on the relationship of USM's assets,
employees, investment in plant and expenses to the total assets, employees,
investment in plant and expenses of TDS. Management believes the method used to
allocate common expenses is reasonable. Billings to USM from TDS amounted to
$28.1 million in 1996, $26.1 million in 1995 and $22.1 million in 1994.
Management believes that all expenses and costs applicable to USM are reflected
in the accompanying financial statements on a basis which is representative of
what they would have been if USM operated on a stand-alone basis.

All markets managed by USM are billed for services they receive from USM. Such
billings are based on expenses specifically identified to each market and on
allocations of common expenses. Such allocations are primarily based on the
relationships of each market's assets and revenues to the total assets and
revenues of all the markets managed by USM. Management believes that all
expenses and costs applicable to each market are representative of what they
would have been if each managed market operated on a stand-alone basis.

Interest income primarily includes interest on loans to managed unconsolidated
markets used to fund these markets' ongoing construction and operating expenses.
Interest income from these markets amounted to $1.9 million in 1996 and 1994,
and $1.8 million in 1995.

USM has a Cash Management Agreement with TDS under which USM may from time to
time deposit its excess cash with TDS for investment under TDS's cash management
program. Deposits made under the agreement are available to USM on demand and
bear interest each month at the 30-day Commercial Paper Rate as reported in The
Wall Street Journal, plus 1/4%, or such higher rate as TDS may at its discretion
offer on such deposits. Interest income was $4.8 million and $701,000 in 1996
and 1995, respectively.

See Note 2 - Acquisitions and Divestitures, Transfer of Minority Interests to
the Company from TDS for a discussion of a transfer of investment interests
between the Company and TDS.

11. GAIN ON SALE OF CELLULAR AND OTHER INVESTMENTS

The gains in 1996 primarily reflect gains recorded on the sales of the Company's
majority interests in eight markets and a minority interest in two markets, on
cash received in an exchange of markets with another cellular operator and on
cash received from the settlement of two separate legal matters.

The gains recorded in 1995 reflect the sales and exchanges of minority- and
majority-owned cellular interests and the sale of certain marketable equity
securities as follows: (a) USM sold a majority interest in six markets for
$115.3 million in cash. A pretax gain of $64.6 million was recognized on the
sales; (b) USM sold its minority interests in six markets for $14.0 million in
cash and notes receivable. A pretax gain of $11.1 million was recognized on the
sales; (c) USM received cash proceeds totaling $5.5 million in an exchange of
cellular markets, recognizing a pretax gain of $5.3 million; and (d) the Company
sold all of its marketable equity securities for $20.7 million in cash. A pretax
gain of $2.5 million was recognized on the sale, representing the excess of the
fair market value over the cost basis of the securities.

The gains recorded in 1994 reflect the exchange of USM's cost-basis
investment interests in five markets in exchange for additional interests in
seven markets controlled by USM. The exchange of the investment interests in
the five markets has been recorded at their fair market value of
approximately $4.3 million. A gain of $3.3 million, representing the excess
of the fair market value of the market interests exchanged over the book
value of such interests, was included in income for 1994.

<PAGE>

12. LEASE COMMITMENTS

USM and certain of its majority-owned partnerships and subsidiaries lease
certain office and cell site locations under operating leases. Future minimum
rental payments required under operating leases that have noncancelable lease
terms in excess of one year as of December 31, 1996 are as follows:

Minimum
Future Rentals
------------------------
(Dollars in thousands)
1997 $ 9,917
1998 7,922
1999 6,280
2000 4,857
2001 3,836
Thereafter 23,223
------------------------
$56,035
------------------------

Rent expense totaled $12.4 million in 1996, $9.8 million in 1995 and $6.4
million in 1994.

13. COMMITMENTS AND CONTINGENCIES

The partnerships and corporations in which USM is a partner or shareholder are
in various stages of development. USM expects to spend approximately $300
million during 1997 primarily for new cell sites to expand and enhance the
Company's coverage in its service areas and for the enhancement of the Company's
office systems. Under the terms of certain partnership and shareholder
agreements, USM may be committed to funding other partners' or shareholders'
portions of construction and other costs, if sufficient financing is not
available to the individual entities. USM does not expect such individual
financing shortfalls to be material.

From time to time USM may acquire attractive markets to maximize its clustering
strategy. See Note 2 - Acquisitions and Divestitures for a discussion of pending
acquisitions and divestitures.

14. INVESTMENTS IN CELLULAR ENTITIES

Investments in cellular entities consist of amounts invested in cellular
entities in which USM holds a minority interest. These investments are accounted
for using either the equity or cost method, as shown in the following table:

December 31,
----------------------------
1996 1995
----------------------------
(Dollars in thousands)
Equity method investments:
Capital contributions,
loans and advances $ 93,209 $ 65,402
Cumulative share of income 172,974 121,456
Cumulative share of distributions (88,862) (63,017)
----------------------------
177,321 123,841
Cost method investments:
Capital contributions, net
of partnership distributions 9,470 10,580
----------------------------
Total investment in
nonconsolidated entities $ 186,791 $ 134,421
----------------------------

As of December 31, 1996, USM followed the equity method of accounting for
minority interests in markets managed by USM and for certain markets managed by
others. This method recognizes, on a current basis, USM's proportionate share of
the incomes and losses accruing to it under the terms of the respective
partnership and shareholder agreements.

As of December 31, 1996, USM follows the cost method of accounting for its
investments in certain markets managed by others. It is not practicable to
estimate the fair value of USM's investments accounted for using the cost method
due to the lack of quoted market prices and the inability to estimate fair
values without incurring excessive costs. The $9.5 million and $10.6 million
carrying amounts at December 31, 1996, and 1995, respectively, represent
primarily the original amounts invested, which management believes are not
impaired.

<PAGE>

The following summarizes the unaudited balance sheets and results of operations
of the cellular system partnerships in which USM's investments are accounted for
by the equity method:

December 31,
1996 1995
------------------------------
(Dollars in thousands)
Assets
Current $ 249,077 $ 206,548
Due from affiliates 6,165 24,459
Property and other 1,000,537 835,320
------------------------------
$1,255,779 $1,066,327
------------------------------
------------------------------
Liabilities and Partners' capital
Current liabilities $ 226,606 $ 204,512
Due to affiliates 20,614 29,687
Deferred credits 791 727
Long-term debt 16,144 15,072
Partners' capital 991,624 816,329
------------------------------
$1,255,779 $1,066,327
------------------------------
------------------------------

Year Ended December 31,
---------------------------------------------
1996 1995 1994
---------------------------------------------
(Dollars in thousands)
Results of Operations
Revenues $1,269,835 $1,078,413 $ 846,377
Costs and
expenses 859,026 730,873 613,235
Other income 832 1,418 1,654
---------------------------------------------
Net income $ 411,641 $ 348,958 $ 234,796
---------------------------------------------

USM owns a 5.5% interest in the Los Angeles SMSA Limited Partnership (the
"Partnership"). In November 1993, a class action complaint was filed on
behalf of cellular customers in Orange County Superior Court naming, among
others, the Partnership. These complaints allege certain facts, including a
similarity in the pricing structures of the two defendant cellular carriers,
which plaintiffs contend are circumstantial evidence that the Partnership and
Los Angeles Cellular Telephone Company conspired to fix the prices of retail
and wholesale cellular radio services in the Los Angeles market. The
complaint seeks damages for the class "in a sum in excess of $100,000,000." A
similar agent case was settled for an immaterial amount. Trial has been set
for July 7, 1997. The Partnership does not believe that this proceeding will
have a material adverse effect on the Partnership's financial position or
results of operations.

15. LEGAL PROCEEDINGS

The Company is involved in a number of legal proceedings before the FCC and
various state and federal courts. In some cases, the litigation involves
disputes regarding rights to certain cellular telephone systems and other
interests. Management does not believe that any of such proceedings should have
a material adverse impact on the financial position or results of operations of
the Company.

16. SUBSEQUENT EVENT

EXCHANGE OF MARKETS WITH ANOTHER CELLULAR OPERATOR. In February 1997, USM
entered into an exchange agreement with BellSouth Corporation, pursuant to which
USM will receive controlling interests in 12 contiguous markets adjacent to its
Iowa and Wisconsin/Illinois clusters. In exchange, USM will divest its
controlling interests in ten markets and investment interests in 13 markets and
cash. USM will receive controlling interests representing approximately 3.9
million pops in the transaction, and will divest controlling interests
representing 1.9 million pops and investment interests representing
approximately 1.4 million pops. The transaction is subject to various regulatory
and other approvals.

<PAGE>

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

We have audited the accompanying consolidated balance sheets of United States
Cellular Corporation (a Delaware corporation and an 80.6%-owned subsidiary of
Telephone and Data Systems, Inc.) and Subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, changes in common
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We did
not audit the financial statements of the Los Angeles SMSA, Baton Rouge MSA and
Nashville/Clarksville MSA limited partnerships. The Company's investment in
these partnerships is reflected in the accompanying consolidated financial
statements using the equity method of accounting. The investment in these
limited partnerships represented $103,671,000 and $73,396,000 (or 5.0% and 3.9%)
of total consolidated assets at December 31, 1996 and 1995, respectively, and
the equity in their income represents $34,145,000, $29,084,000 and $21,189,000
for the years ended December 31, 1996, 1995 and 1994, respectively, and is
included in the consolidated net income. The summarized financial information
contained in Note 14 of the Notes to Consolidated Financial Statements includes
financial information for the aforementioned partnerships. The financial
statements of those limited partnerships were audited by other auditors whose
reports have been furnished to us and our opinion, inso far as it relates to the
amounts included for those limited partnerships, is based solely on the reports
of the other auditors.

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

In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of United States Cellular Corporation
and Subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

/s/Arthur Andersen LLP

Chicago, Illinois
January 29, 1997
(EXCEPT WITH RESPECT TO THE MATTER DISCUSSED IN NOTE 16, AS TO WHICH THE DATE IS
FEBRUARY 4, 1997)

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

Year Ended or at December 31,
1996 1995 1994 1993 1992
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Service Revenues $ 690,434 $ 476,634 $ 318,649 $ 203,800 $ 130,666
Equipment Sales 17,386 15,761 13,755 10,510 9,263
Operating Income (Loss) Before Minority Share 87,366 42,755 17,385 (8,656) (12,705)
Minority share of operating income (13,743) (7,902) (5,152) (3,496) (2,615)
Operating Income (Loss) 73,623 34,853 12,233 (12,152) (15,320)
Investment income, net of related
amortization expense 50,127 38,744 25,627 16,005 11,859
Gain on sale of cellular and other investments 132,718 83,494 3,321 4,851 31,396
Income (Loss) Before Income Taxes 241,569 132,234 21,310 (22,749) 8,181
Net Income (Loss) $ 129,929 $ 99,742 $ 16,393 $ (25,441) $ 6,194
Pretax Profit (Loss) on Service Revenues 35.0% 27.7% 6.7% (11.2%) 6.3%
Weighted Average Common and
Series A Common Shares (000s) 86,041 84,023 79,514 57,152 57,778
Earnings Per Common and
Series A Common Share
Net Income (Loss) $ 1.51 $ 1.19 $ .21 $ (.45) $ .11
Effective Income Tax Rate 46.2% 24.6% 23.1% 11.8% 24.3%

BALANCE SHEET DATA
Working Capital $ (17,835) $ (25,323) $ (33,813) $ (28,386) $ (17,827)
Property, Plant and Equipment, net 650,754 530,027 368,181 246,414 158,948
Investments -
Cellular partnerships 186,791 134,421 99,495 90,104 86,406
Licenses, net of accumulated amortization 1,044,141 1,035,846 947,399 824,491 547,171
Marketable equity securities -- -- 20,145 17,584 18,210
Total Assets 2,085,899 1,880,144 1,534,787 1,245,396 855,579
Vendor Financing, excluding current portion 80,589 98,656 57,691 51,130 56,645
6% Zero Coupon Convertible Debentures 250,107 235,750 -- -- --
Revolving Credit Agreement-TDS -- -- 232,954 141,524 265,766
Redeemable Preferred Stock,
excluding current portion -- -- 9,597 18,828 19,690
Common Shareholders' Equity $1,476,202 $1,329,454 $1,093,967 $ 940,128 $ 450,984
Current Ratio .88 .84 .66 .62 .64
Return on Equity 9.26% 8.23% 1.61% (3.66%) 1.53%

</TABLE>

<PAGE>

SHAREOWNERS' INFORMATION

UNITED STATES CELLULAR STOCK AND DIVIDEND INFORMATION

The Company's Common Shares are listed on the American Stock Exchange under the
symbol "USM" and in the newspapers as "US Cellu." As of February 28, 1997, the
Company's Common Shares were held by 573 record owners. All of the Series A
Common Shares were held by TDS. No public trading market exists for the Series A
Common Shares. The Series A Common Shares are convertible on a share-for-share
basis into Common Shares.

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

Calendar Period Common Shares
----------------------------
High Low
----------------------------
1996
First Quarter $37.38 $31.63
Second Quarter 35.63 30.75
Third Quarter 31.63 28.13
Fourth Quarter 30.38 26.88

1995
First Quarter $33.38 $29.50
Second Quarter 30.50 27.75
Third Quarter 36.50 29.00
Fourth Quarter 36.38 32.88

The Company has not paid any cash dividends and currently intends to retain
all earnings for use in the Company's business. In addition, the Revolving
Credit Agreement with TDS prohibits the payment of dividends on the Company's
Common Shares and Series A Common Shares, except to the extent of one-half of
the cumulative consolidated net income, $84 million, of the Company for the
period after July 1, 1989.

<PAGE>

EXHIBIT 21

UNITED STATES CELLULAR CORPORATION
SUBSIDIARY AND AFFILIATED COMPANIES
DECEMBER 31, 1996

STATE OF
INCORPORATION
-------------
<S> <C>
UNITED STATES CELLULAR CORPORATION DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY DELAWARE
UNITED STATES CELLULAR INVESTMENT COMPANY DELAWARE
USCC REAL ESTATE CORPORATION DELAWARE
USCC PAYROLL CORPORATION DELAWARE
CARRY PHONE, INC. DELAWARE
CELLVEST, INC. DELAWARE
COMVEST, INC. DELAWARE
ILP, INC. DELAWARE
CALIFORNIA RURAL SERVICE AREA #1, INC. CALIFORNIA
CALIFORNIA RSA #2, INC. DELAWARE
CALIFORNIA RSA #9, INC. CALIFORNIA
FLORIDA RSA #8, INC. DELAWARE
USCOC OF FLORIDA RSA #9, INC. FLORIDA
FLORIDA RSA #10, INC. FLORIDA
USCOC OF GEORGIA RSA #1, INC. GEORGIA
GEORGIA RSA #11, INC. GEORGIA

<PAGE>

STATE OF
INCORPORATION
-------------
<S> <C>
USCOC OF HAWAII 3, INC. DELAWARE
USCOC OF IDAHO RSA #5, INC. DELAWARE
USCOC OF ILLINOIS RSA #1, INC. VIRGINIA
ILLINOIS RSA #3, INC. ILLINOIS
USCOC OF ILLINOIS RSA #4, INC. ILLINOIS
USCOC OF INDIANA RSA #2, INC. INDIANA
INDIANA RSA #4, INC. DELAWARE
INDIANA RSA #5, INC. INDIANA
USCOC OF IOWA RSA #1, INC. IOWA
IOWA RSA #3, INC. DELAWARE
OHIO STATE CELLULAR PHONE COMPANY, INC. DELAWARE
IOWA RSA #9, INC. DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY - DES MOINES IOWA
IOWA RSA #12, INC. DELAWARE
IOWA 13, INC. DELAWARE
USCOC OF IOWA RSA #16, INC. DELAWARE
MAINE RSA #1, INC. MAINE
MAINE RSA #4, INC. MAINE
MAINE RSA NO. 4 LIMITED PARTNERSHIP
USCOC OF CUMBERLAND, INC. MARYLAND
MICHIGAN RSA #4, INC. MICHIGAN
USCOC OF MISSOURI RSA #5, INC. ILLINOIS
UNITED STATES CELLULAR OPERATING COMPANY OF COLUMBIA MISSOURI
USCOC OF MISSOURI RSA #13, INC. DELAWARE
MISSOURI #15 RURAL CELLULAR, INC. MISSOURI
PEACE VALLEY CELLULAR TELEPHONE COMPANY DELAWARE
NH #1 RURAL CELLULAR, INC. NEW HAMPSHIRE
USCOC OF NEW YORK RSA #6, INC. DELAWARE
HUDSON CELLULAR LIMITED PARTNERSHIP
NORTH CAROLINA RSA #4, INC. DELAWARE
RANDOLPH CELLULAR TELEPHONE COMPANY NORTH CAROLINA
NORTH CAROLINA RSA NO. 6, INC. CALIFORNIA
USCOC OF NORTH CAROLINA RSA #7, INC. NORTH CAROLINA
OHIO RSA #1, INC. OHIO
USCOC OF OHIO RSA #7, INC. COLORADO
UNITED STATES CELLULAR OPERATING COMPANY OF TULSA, INC. OKLAHOMA
OKLAHOMA OPCO. OF RSA #8, INC. OKLAHOMA
USCOC OF TEXAHOMA, INC. TEXAS
TEXAHOMA CELLULAR TELEPHONE CORPORATION TEXAS
TEXAHOMA CELLULAR LIMITED PARTNERSHIP
OKLAHOMA #9 RURAL CELLULAR, INC. OKLAHOMA
USCOC OF OKLAHOMA RSA #10, INC. OKLAHOMA
OREGON RSA #2, INC. OREGON
OREGON RSA #3, INC. OREGON
OREGON RSA NO. 3 LIMITED PARTNERSHIP
USCOC OF OREGON RSA #5, INC. DELAWARE
OREGON RSA #6, INC. OREGON
UNITED STATES CELLULAR OPERATING COMPANY OF WILLIAMSPORT PENNSYLVANIA
CANTON CELLULAR TELEPHONE COMPANY PENNSYLVANIA
USCOC OF PENNSYLVANIA RSA #9, INC. DELAWARE
UNIONTOWN CELLULAR TELCO, INC. DELAWARE
FAYETTE - GREENE CELLULAR TELCO, INC. DELAWARE
PA RURAL SERVICE AREA NO. 9 LIMITED PARTNERSHIP
BLOCK B CELLULAR CORPORATION PENNSYLVANIA
LAUREL HIGHLAND CELLULAR TELEPHONE COMPANY DELAWARE
TRI - STATE CELLULAR PARTNERSHIP

<PAGE>

STATE OF
INCORPORATION
-------------
<S> <C>
PENNSYLVANIA RSA NO. 10B (II) LIMITED PARTNERSHIP
USCOC OF SOUTH CAROLINA RSA #4, INC. SOUTH CAROLINA
UNITED STATES CELLULAR INVESTMENT CO. OF NASHVILLE TENNESSEE
TENNESSEE RSA #3, INC. DELAWARE
TENNESSEE RSA #4 SUB 2, INC. TENNESSEE
TENNESSEE RSA #6 B, INC. TENNESSEE
UNITED STATES CELLULAR OPERATING COMPANY OF KNOXVILLE TENNESSEE
UNITED STATES CELLULAR TELEPHONE COMPANY (GREATER KNOXVILLE), L.P.
TEXAS #20 RURAL CELLULAR, INC. TEXAS
TDS V2B ACQUISITION CORP. DELAWARE
LAKE CHAMPLAIN CELLULAR PARTNERSHIP
VERMONT INDEPENDENT CELLULAR TELEPHONE GENERAL PARTNERSHIP
USCOC OF VIRGINIA RSA #2, INC. VIRGINIA
USCOC OF VIRGINIA RSA #4, INC. ILLINOIS
VIRGINIA RSA #4, INC. VIRGINIA
VIRGINIA RSA #7, INC. VIRGINIA
USCOC OF WASHINGTON - 4, INC. DELAWARE
WASHINGTON RSA #5, INC. WASHINGTON
WESTERN SUB - RSA LIMITED PARTNERSHIP
MCDANIEL CELLULAR TELEPHONE COMPANY DELAWARE
USCOC OF WEST VIRGINIA RSA #2, INC. WEST VIRGINIA
HARDY CELLULAR TELEPONE COMPANY DELAWARE
GEORGIA RSA #13, INC. GEORGIA
USCOC OF WISCONSIN RSA #6, INC. DELAWARE
WISCONSIN RSA #7, INC. DELAWARE
WISCONSIN RSA #8, INC. WISCONSIN
WISCONSIN RSA GENERAL PARTNER, INC. DELAWARE
WISCONSIN RSA NO. 8 LIMITED PARTNERSHIP
USCIC OF FRESNO, INC. CALIFORNIA
USCIC OF COLORADO RSA #3, INC. DELAWARE
WESTERN COLORADO CELLULAR, INC. COLORADO
WESTERN COLORADO CELLULAR OF COLORADO LIMITED PARTNERSHIP
IDAHO INVCO OF RSA #1, INC. DELAWARE
IDAHO RSA NO. 1 LIMITED PARTNERSHIP
MINNESOTA INVCO OF RSA #5, INC. DELAWARE
MINNESOTA INVCO OF RSA #7, INC. DELAWARE
MINNESOTA INVCO OF RSA #8, INC. DELAWARE
MINNESOTA INVCO OF RSA #9, INC. DELAWARE
MINNESOTA INVCO OF RSA #10, INC. DELAWARE
MINNESOTA INVCO OF RSA #11, INC. DELAWARE
USCIC OF NORTH CAROLINA RSA #1, INC. DELAWARE
NORTH CAROLINA RSA 1 PARTNERSHIP
TEXAS INVCO OF RSA #6, INC. DELAWARE
COMMUNITY CELLULAR TELEPHONE COMPANY TEXAS
TEXAS INVCO OF RSA #17, INC. DELAWARE
USCIC OF SEATTLE, INC. DELAWARE
WISCONSIN INVCO OF RSA #7, INC. DELAWARE
UNITED STATES CELLULAR INVESTMENT COMPANY OF ROCKFORD DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY OF ATLANTIC CITY, INC. NEW JERSEY
UNITED STATES CELLULAR OPERATING COMPANY OF BANGOR MAINE
BANGOR CELLULAR TELEPHONE, L.P. DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY OF BILOXI MISSISSIPPI
UNITED STATES CELLULAR OPERATING COMPANY OF CEDAR RAPIDS DELAWARE
CEDAR RAPIDS CELLULAR TELEPHONE, L.P.
USCOC OF CHARLOTTESVILLE, INC. VIRGINIA
CHARLOTTESVILLE CELLULAR PARTNERSHIP

<PAGE>

STATE OF
INCORPORATION
-------------
<S> <C>
USCOC OF CORPUS CHRISTI, INC. TEXAS
UNITED STATES CELLULAR OPERATING COMPANY - QUAD CITIES IOWA
DAVENPORT CELLULAR TELEPHONE COMPANY, INC. DELAWARE
DAVENPORT CELLULAR TELEPHONE COMPANY
UNITED STATES CELLULAR OPERATING COMPANY OF DUBUQUE IOWA
DUBUQUE CELLULAR TELEPHONE, L.P. DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY OF EVANSVILLE, INC. INDIANA
EVANSVILLE CELLULAR TELEPHONE COMPANY
UNITED STATES CELLULAR OPERATING COMPANY OF FT. PIERCE FLORIDA
CENTRAL FLORIDA CELLULAR TELEPHONE COMPANY, INC. FLORIDA
UNITED STATES CELLULAR OPERATING COMPANY OF JOPLIN MISSOURI
JOPLIN CELLULAR TELEPHONE COMPANY, INC. DELAWARE
TRI - STATES CELLULAR COMMUNICATIONS, INC. MISSOURI
JOPLIN CELLULAR TELEPHONE COMPANY, L.P.
UNITED STATES CELLULAR OPERATING COMPANY OF LACROSSE, INC. WISCONSIN
LACROSSE CELLULAR TELEPHONE COMPANY, INC. DELAWARE
LAR - TEX CELLULAR TELEPHONE COMPANY, INC. DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY OF LEWISTON - AUBURN MAINE
LEWISTON CELLTELCO PARTNERSHIP
UNITED STATES CELLULAR OPERATING COMPANY OF MANCHESTER - NASHUA, INC. NEW HAMPSHIRE
MANCHESTER - NASHUA CELLULAR TELEPHONE, L.P.
UNITED STATES CELLULAR OPERATING COMPANY OF MEDFORD OREGON
MEDFORD PAGING, INC. OREGON
UNITED STATES CELLULAR OPERATING COMPANY OF OWENSBORO DELAWARE
OWENSBORO CELLULAR TELEPHONE, L.P.
USCOC OF PORTLAND, INC. MAINE
UNITED STATES CELLULAR OPERATING COMPANY OF POUGHKEEPSIE, INC. NEW YORK
UNITED STATES CELLULAR OPERATING COMPANY OF RICHLAND WASHINGTON
TRI - CITIES PAGING, INC. WASHINGTON
UNITED STATES CELLULAR OPERATING COMPANY OF ROCHESTER MINNESOTA
DRGP, INC. DELAWARE
ROCHESTER CELLULAR TELEPHONE COMPANY, L.P.
USCOC OF TALLAHASSEE, INC. FLORIDA
TULSA GENERAL PARTNER, INC. DELAWARE
UNITED STATES CELLULAR TELEPHONE COMPANY (GREATER TULSA)
USCOC OF VICTORIA, INC. TEXAS
VICTORIA CELLULAR PARTNERSHIP
VICTORIA CELLULAR CORPORATION TEXAS
UNITED STATES CELLULAR OPERATING COMPANY OF WATERLOO IOWA
WATERLOO / CEDAR FALLS CELLTELCO PARTNERSHIP
UNITED STATES CELLULAR OPERATING COMPANY OF WAUSAU, INC. WISCONSIN
WAUSAU CELLULAR TELEPHONE COMPANY LIMITED PARTNERSHIP
UNITED STATES CELLULAR OPERATING COMPANY OF YAKIMA WASHINGTON
YAKIMA MSA LIMITED PARTNERSHIP
YAKIMA VALLEY PAGING LIMITED PARTNERSHIP
UNITED STATES CELLULAR INVESTMENT CO. OF ALLENTOWN PENNSYLVANIA
USCIC OF AMARILLO. INC. DELAWARE
UNITED STATES CELLULAR INVESTMENT COMPANY OF BATON ROUGE LOUISIANA
CAPITOL CELLULAR, INC. LOUISIANA
CSII OF BATON ROUGE, INC. DELAWARE
STAR CELLULAR COMMUNICATIONS, INC. LOUISIANA
STAR CELLULAR TELEPHONE COMPANY, INC. DELAWARE
BATON ROUGE MSA LIMITED PARTNERSHIP
UNITED STATES CELLULAR INVESTMENT COMPANY OF BINGHAMTON, INC. NEW YORK
CELLULAR AMERICA TELEPHONE COMPANY PENNSYLVANIA

<PAGE>

STATE OF
INCORPORATION
-------------
<S> <C>
USCIC OF BROWNSVILLE, INC. DELAWARE
UNITED STATES CELLULAR INVESTMENT COMPANY OF EAU CLAIRE, INC. WISCONSIN
UNIVERSAL CELLULAR FOR EAU CLAIRE MSA, INC. WISCONSIN
LAVACA CELLULAR TELEPHONE COMPANY OKLAHOMA
UNITED STATES CELLULAR INVESTMENT COMPANY OF GALVESTON TEXAS
UNITED STATES CELLULAR INVESTMENT COMPANY OF GREEN BAY, INC. WISCONSIN
UNITED STATES CELLULAR INVESTMENT COMPANY OF HUNTSVILLE, INC. ALABAMA
UNITED STATES CELLULAR INVESTMENT COMPANY OF IOWA CITY IOWA
USCIC OF JACKSON, INC. DELAWARE
UNITED STATES CELLULAR INVESTMENT COMPANY OF LAFAYETTE LOUISIANA
UNITED STATES CELLULAR INVESTMENT CORPORATION OF LOS ANGELES INDIANA
USCIC OF MCALLEN, INC. DELAWARE
USCIC OF OCALA, INC. FLORIDA
FOUR D, LTD. MICHIGAN
UNITED STATES CELLULAR INVESTMENT CO. OF OKLAHOMA CITY, INC. OKLAHOMA
UNITED STATES CELLULAR INVESTMENT COMPANY OF PORTSMOUTH, INC. NEW HAMPSHIRE
UNITED STATES CELLULAR INVESTMENT COMPANY OF RALEIGH - DURHAM DELAWARE
CAROLINA CELLULAR, INC. NORTH CAROLINA
UNITED STATES CELLULAR INVESTMENT COMPANY OF SANTA CRUZ, INC. CALIFORNIA
UNITED STATES CELLULAR INVESTMENT COMPANY OF SARASOTA FLORIDA
UNITED STATES CELLULAR INVESTMENT COMPANY OF ST. CLOUD, INC. MINNESOTA
UNITED STATES CELLULAR INVESTMENT COMPANY OF WHEELING WEST VIRGINIA

</TABLE>

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of United States Cellular Corporation, of our report
dated January 29, 1997 (except with respect to the matter discussed in Note 16,
as to which the date is February 4, 1997), on the consolidated financial
statements of United States Cellular Corporation and Subsidiaries (the
"Company") included in the Company's 1996 Annual Report to Shareholders, to the
inclusion in this Form 10-K of our report dated January 29, 1997 (except with
respect to the matter discussed in Note 16, as to which the date is February 4,
1997), on the financial statement schedule of the Company, and to the inclusion
of our compilation report dated February 25, 1997, on the combined financial
statements of the Los Angeles SMSA Limited Partnership, the
Nashville/Clarksville MSA Limited Partnership and the Baton Rouge MSA Limited
Partnership, and to the incorporation of such reports into the Company's
previously filed S-3 Registration Statement, File No. 33-58911, into the
Company's previously filed S-4 Registration Statement, File No. 33-41826, and
into the Company's previously filed S-8 Registration Statements, File No.
33-42558, File No. 33-56361, File No. 33-57255, File No. 33-59777, File No.
33-61291, File No. 333-16925, File No. 333-19403, and File No. 333-19405.

ARTHUR ANDERSEN LLP

Chicago, Illinois
March 20, 1997

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statement on Form S-3 (No. 33-58911) and
Form S-4 (No. 33-41826) and in the Registration Statements on Form S-8 (Nos.
33-42558, 33-56361, 33-57255, 33-59777, 33-61291, 333-16925, 333-19403 and
333-19405) of United States Cellular Corporation of our report dated February
25, 1997, relating to the financial statements of Los Angeles SMSA Limited
Partnership, appearing on page 32 of the United States Cellular Corporation
Annual Report on Form 10-K for the year ended December 31, 1996.

PRICE WATERHOUSE LLP

San Francisco, California
March 20, 1997

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the inclusion in this Form 10-K of United States
Cellular Corporation of our report dated February 17, 1995, on our audit of the
financial statements of the Los Angeles SMSA Limited Partnership as of December
31, 1994, and for the year then ended; such financial statements are not
included separately in this Form 10-K.

COOPERS & LYBRAND L.L.P.

Newport Beach, California
March 20, 1997

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Form 10-K of United States Cellular
Corporation of our reports dated February 7, 1997, February 9, 1996, and
February 10, 1995, respectively, on our audits of the financial statements of
the Nashville/Clarksville MSA Limited Partnership as of December 31, 1996, 1995
and 1994 and for the years ended December 31, 1996, 1995, and 1994; such
financial statements are not included separately in this Form 10-K.

COOPERS & LYBRAND L.L.P.

Atlanta, Georgia
March 20, 1997

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Form 10-K of United States Cellular
Corporation of our reports dated February 7, 1997, February 9, 1996, and
February 10, 1995, respectively, on our audits of the financial statements of
the Baton Rouge MSA Limited Partnership as of December 31, 1996, 1995 and 1994
and for the years ended December 31, 1996, 1995, and 1994; such financial
statements are not included separately in this Form 10-K.

COOPERS & LYBRAND L.L.P.

Atlanta, Georgia
March 20, 1997

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF UNITED STATES CELLULAR CORPORATION AS OF
DECEMBER 31, 1996, AND FOR THE YEAR ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 14,377
<SECURITIES> 0
<RECEIVABLES> 62,233
<ALLOWANCES> 4,199
<INVENTORY> 11,893
<CURRENT-ASSETS> 128,619
<PP&E> 846,005
<DEPRECIATION> 195,251
<TOTAL-ASSETS> 2,085,899
<CURRENT-LIABILITIES> 146,454
<BONDS> 330,696
0
0
<COMMON> 86,123
<OTHER-SE> 1,390,079
<TOTAL-LIABILITY-AND-EQUITY> 2,085,899
<SALES> 17,386
<TOTAL-REVENUES> 707,820
<CGS> 74,023
<TOTAL-COSTS> 620,454
<OTHER-EXPENSES> (191,057)
<LOSS-PROVISION> 17,534
<INTEREST-EXPENSE> 23,111
<INCOME-PRETAX> 241,569
<INCOME-TAX> 111,640
<INCOME-CONTINUING> 129,929
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129,929
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.48

</TABLE>