[STRONG CAPITAL MANAGEMENT, INC. LOGO]
AN IMPORTANT UPDATE
FOR OUR FELLOW COMMON STOCKHOLDERS OF
TELEPHONE AND DATA SYSTEMS, INC.
We are writing one last time to ask you to VOTE
AGAINST THE REINCORPORATION PROPOSAL at Telephone and
Data Systems, Inc.'s ("TDS") April 27, 1998 Special
Meeting and consider some important arguments.
ECONOMICALLY THIS DEAL DOESN'T MAKE SENSE!
As shareholders of TDS, we believe that this is a
bad deal. We believe it does nothing to address the
real reasons why the stock trades at a discount (the
Carlson Factor) and it may actually increase the
discount. The biggest thing going for the TDS proposal
is that it is less onerous to TDS Stockholders than the
subsidiaries' stockholders. However, since 85% of the
value of TDS is represented by U.S. Cellular and
Aerial, any proposal which harms those entities will be
negative for the TDS share price. There is not enough
value in the Telecom piece to offset declines at the
subsidiary level (as the poor performance of TDS stock,
since the proposal was made, demonstrates). As for
hints that is only the first step, the last ten years
lead us to believe that the Carlsons are not interested
in growing shareholder value.
PUBLIC MARKET DISCOUNT MAY WIDEN!
Tracking stocks normally trade at a discount. The
TDS Tracking Stocks would be unusual because they have
a redemption feature. Under the reincorporation
proposal, TDS has the ability to convert each share of
a class of Tracking Stock into another class of
Tracking Stock or Special Common Shares at a
predetermined premium relative to market values. The
conversion premium is 15% for the first five years and
thereafter declines 1% per year until it reaches 10%.
This situation is similar to the absence of class
voting on mergers - the Carlson family and voting trust
would be able to cause a holder of Tracking Shares to
convert such shares into an entirely different
investment without the consent of a single holder of
such shares. While liquidity may improve for USM and
Aerial, the public market discount will have to widen
given TDS' ability to call the stock away at a small
premium at any given time. How does TDS benefit when
private market valuation becomes irrelevant for 85% of
its value. As ISS as well as Goldman Sachs and Bear
Stearns have noted, the issuance of tracking stock on
top of the common will create a valuation nightmare.
How are the Carlsons creating value for the TDS
shareholders?
PERPETUATION OF CONTROL IS THE THEME OF THIS PROPOSAL!
This proposal is not shareholder friendly - (1)
the reincorporation tried to take away key voting
rights of Common Stockholders; (2) the threat to issue
Tracking Stock even if the roll-up mergers do not
occur; and (3) the likely negative revaluation of the
subsidiaries given the Tracking Stocks' redemption
feature. These proposals are designed to perpetuate
Carlson control at the expense of the public
shareholders. If the issue was to establish a value
for TDS Telecom, a clean IPO could have been done
without the baggage associated with the
reincorporation. Shareholders should insist on a
better deal now and not bet on the Carlsons delivering
unspecified sources of value in the future.
JUST VOTE NO!
We believe the reincorporation proposal will hurt
the TDS Common Stockholders. JUST VOTE AGAINST the
reincorporation proposal. For more information contact
Ann Miletti at (414) 359-3400.
