U.S. Securities and Exchange Commission
Washington, D.C.
1. Name of Registrant: Telephone & Data Systems, Inc.
2. Name of person relying on exemption: Strong Capital
Management, Inc.
3. Address of person relying on exemption: One Heritage
Reserve, P.O. Box 2936, Milwaukee, Wisconsin 53201
4. Written Materials: Attached are written materials
submitted pursuant to Rule 14a-6(g)(1) [Section 240.14a-6(g)(1)]
<PAGE>
[STRONG LOGO]
Strong Capital Management, Inc.
One Hundred Heritage Reserve - P.O. Box 2936 -
Milwaukee, Wisconsin 53201 - (414) 359-3400
April 9, 1998
Dear Telephone and Data Systems Common Stockholder:
We are writing to ask you to VOTE AGAINST ALL
PROPOSALS at Telephone and Data Systems, Inc.'s ("TDS")
April 27, 1998 Special Meeting. TDS called this
Special Meeting to seek stockholder approval to
reincorporate from Iowa to Delaware and also change the
capital structure by creating three new classes of
"Tracking Stock". We are Strong Capital Management,
Inc. ("Strong"), an independent investment management
firm with over $32 billion under management. On the
record date, March 16, 1998, we had discretionary
authority over 602,450 shares of TDS Common Stock. On
that date we also had discretionary authority over
2,125,000 shares of Aerial Communications and 1,471,366
shares of United States Cellular Corp., the two
publicly-held subsidiary corporations of TDS. We have
never before sought to influence a shareholder vote of
a company, and do not view this effort as signaling a
new activist mandate. We simply believe this matter so
adversely affects the rights of our clients and other
Common Stockholders that our fiduciary duties lead us
to pursue this course of action and share our concerns
with you.
WE MUST PRESERVE OUR FEW EXISTING STOCKHOLDER RIGHTS!
We believe management carefully crafted their
reincorporation proposal to maintain and enhance
certain rights for the super-voting (10 votes per
share) Series A Shares controlled by the Carlson family
and the voting trust at the expense of the rights of
holders of Common Stock. The Carlson family's and the
voting trust's Series A Shares currently reflect an
economic stake equal to about 10.8% of TDS and yet, due
to the super-voting rights of the Series A Shares,
control about 53% of the total voting power. This
provides the Carlson family and the voting trust with
effective control of the TDS board of directors. As a
substantial stockholder in a company with a class of
super-voting stock controlled by a management with a
poor record of enhancing stockholder value, we are
concerned about any loss or reduction of minority
stockholder rights. We believe the determination by
management to eliminate the class voting rights of the
minority class of Common Stockholders is unacceptable.
COMMON STOCK WILL LOSE CRITICAL CLASS VOTING RIGHTS!
Class voting rights are the Common Stockholders
only procedural control over extra-ordinary matters
such as mergers. Currently, Common Stockholders have a
right, voting as a class separate from the Series A
Shares, to approve or reject a merger (or share
exchange) and the authorization of additional shares of
stock which would vote together with the Common Stock
on extraordinary matters. Under management's proposal,
the Common Stockholders will no longer
<PAGE>
vote as a
separate class on these matters but, rather, would vote
together with the Series A Shares as a single class.
Because the Series A Shares would control over 50% of
the total voting power of TDS, the Carlson family and
the voting trust would have the ability to approve a
merger, consolidation or dilutive stock issuance
without the approval of a single holder of Common
Stock.
WHY THE ELIMINATION OF CLASS VOTING RIGHTS IS
UNACCEPTABLE!
If the proposal were to be approved, the Carlson
family and voting trust Series A Shares could cause TDS
to engage in the following transactions without the
approval of a single holder Common Stock:
Sale of TDS. The Carlson family and voting
trust could cause TDS to be sold to a third party
or to an affiliated party controlled by the
family. The terms of such sale could be decided
by the Series A Shares and could provide for
different types of consideration (e.g., stock vs.
cash) between Series A Shares and Common Shares.
It is noteworthy that in their proposal,
management has opted out of Delaware's control
share statute which would provide protections to
shareholders in the event of a sale of TDS to an
affiliated entity. Management refused our request
to reverse this "opt out".
Reorganizations. Many corporate
reorganizations (including TDS's proposed Delaware
reincorporation) are accomplished through a
merger. By eliminating class voting, the Series A
Shares could propose a subsequent reorganization
or reincorporation that could further erode rights
of Common Shares. For example, TDS could
subsequently be reincorporated by merger in a
different state and the new articles could
eliminate rights such as (i) director
representatives of Common Shareholders, and (ii)
procedural protections to prevent abusive actions,
such as actions without a shareholder meetings or
the ability to call such meetings. (Please note
that without the existing class voting rights, TDS
could have effected the proposed Delaware
reincorporation without the approval of any Common
Stockholders.)
The elimination of a class vote transfers
increased control over TDS to the Carlson family and
voting trust Series A Shares. Does the elimination of
class voting on these matters transfer a "control"
premium or some "value" from the Common Shares to the
Series A Shares? We believe it does.
Prior to the mailing of management's proxy
statement, Strong held discussions with TDS
representatives regarding numerous concerns we
identified in management's proposal. As a result of
these discussions, some changes were made to preserve
certain existing rights. However, despite our efforts,
management rejected our request to preserve the
existing rights of Common Stockholders to vote as a
separate class on mergers and other extraordinary
transactions.
<PAGE>
THIS PROPOSAL ONLY GUARANTEES THE ABILITY
OF THE SERIES A SHARES TO RETAIN PERPETUAL CONTROL OF
TDS!
Under its present capital structure, many
acquisitions have occurred through the issuance of
additional shares of Common Stock. Even though the
Series A Shares controlled by the Carlson family and
voting trust presently control approximately 53% of the
total outstanding votes, additional stock issuances
would dilute such control and could have eventually
eliminated it. Creation of the non-voting Tracking
Stock would enable TDS to finance acquisitions with non-
voting shares thereby preventing any reduction in
control by the Series A Shares. Accordingly, the
Carlson family's and voting trust's relative economic
stake in TDS could be further reduced without a loss of
voting control and their interests further separated
from those of the Common Shareholders.
THE PROPOSAL DOES NOT ENHANCE SHAREHOLDER VALUE!
Management asserts that the reason for the
proposal is to enhance shareholder value. TDS
shareholder value has suffered at the hands of existing
management as the price of TDS Common Stock has lagged
behind the stock of comparable companies. Such under-
valuation will not be remedied by the proposed changes
to TDS's capital structure. We believe the primary
cause of the under-valuation of TDS is related to what
has been referred to as the "Carlson control discount".
As noted, this transaction enhances that control and
its associated risks. In addition, the bulk of the
value of TDS resides within the United States Cellular
and Aerial Communications subsidiaries. Subject to,
among other things, the approval of the proposed
reincorporation, TDS states that it intends to exchange
shares of Tracking Stock for the outstanding common
stock of United States Cellular and Aerial
Communications. Since tracking stocks do not convey
ownership, they tend to trade at a discount from their
peer group. We believe these discounts will prevent
the transaction from enhancing shareholder value.
The following chart compares the performance of
the TDS Common Stock against a Peer Group Composite, a
Management Composite and the S&P 500, since December
17, 1997, the day before the announcement of
management's proposal. The "Peer Group Composite"
consists of those companies we believe are most
comparable to TDS and which we believe should be used
as its peer group (Airtouch Communications, Inc.,
Centennial Cellular Corp. Class A, Western Wireless
Corporation, Vanguard Cellular Systems Class A, 360
Communications Company and Powertel, Inc.). The
"Management Composite" is comprised of the companies
identified by TDS as its peer group in its April 18,
1997 proxy statement (Aliant Communications Inc.,
Alltel Corp, Cincinnati Bell Inc., Century Telephone
Enterprise, Citizens Utilities Series B, Frontier
Corp., Southern New England Telephone. We did not
include C-TEC Corp. since it was subsequently split
into Commonwealth Telephone Enterprises Inc., Cable
Michigan Inc. and RCN Corp. However, in lieu of C-TEC,
these entities were included with 1/3 weightings.) We
believe the Management Composite is not an appropriate
peer group for TDS because it largely consists of
smaller telephone companies. The Management Composite
essentially ignores TDS's Ariel Communications and
United States Cellular subsidiaries which account for
approximately 80-85% of its market value and largely
determines the direction of TDS's stock price.
<PAGE>
S&P 500 TDS Stock Peer Group Mgmt.Comp.
17-Dec-97 $100 $100 $100 $100
24-Dec-97 $96.611 $101.2346 $98.145 $100.8116
02-Jan-98 $101.0468 $100.6859 $102.4111 $101.8443
09-Jan-98 $96.1737 $99.5885 $102.0596 $104.8208
16-Jan-98 $99.6913 $99.3141 $107.2666 $108.4527
26-Jan-98 $99.2273 $99.5885 $107.6881 $109.4304
02-Feb-98 $103.8555 $99.0398 $110.8864 $112.308
09-Feb-98 $104.8959 $96.9822 $107.4226 $110.7486
17-Feb-98 $106.1861 $96.5706 $109.9075 $111.7218
24-Feb-98 $107.0286 $95.4733 $112.7728 $111.9905
03-Mar-98 $109.2929 $98.4911 $114.0325 $114.7197
10-Mar-98 $110.6162 $99.8628 $123.5702 $116.8126
17-Mar-98 $112.3418 $107.2702 $137.2149 $118.1205
24-Mar-98 $114.9749 $109.0535 $139.1454 $122.4859
31-Mar-98 $114.5938 $104.2524 $135.5985 $123.8156
07-Apr-98 $115.4551 $104.9383 $133.0775 $121.6551
As you can see, the TDS stock initially surged on
December 18th following management's announcement, but
quickly returned to prior levels once the details of
the proposal were disseminated and analyzed. We
believe the graph demonstrates that the proposal will
NOT enhance the value of TDS Common Stock.
VOTE NO ON ALL PROPOSALS!
Far from providing economic benefit to TDS Common
Stockholders, we believe this reincorporation will
significantly hurt both the TDS Common Stockholders and
ultimately investors in the subsidiary companies United
Stated Cellular Corp. and Aerial Communications Inc.
We therefore urge all Common Stockholders to JUST VOTE
NO! on the reincorporation proposals.
Thank you for your time and consideration on this
matter.
Very truly yours,
/s/ Richard T. Weiss
Richard T. Weiss
Portfolio Manager
For more information contact: Ann Miletti or Richard
Weiss at (414) 359-3400.
