TELEPHONE & DATA SYSTEMS INC, S-4, 1994-04-26

TELEPHONE & DATA SYSTEMS INC
S-4, 1994-04-26
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 1994
Registration No. 33-__________

Securities and Exchange Commission
Washington, D.C. 20549
_______________
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_______________
Telephone and Data Systems, Inc.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
Iowa 6749 36-2669023
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
30 North LaSalle Street, Suite 4000
Chicago, Illinois 60602
(312) 630-1900

(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
____________________
with copies to:
LeRoy T. Carlson, Chairman Michael G. Hron
Telephone and Data Systems, Inc. Sidley & Austin
30 North LaSalle Street, Suite 4000 One First National Plaza
Chicago, Illinois 60602 Chicago, Illinois 60603
(312) 630-1900 (312) 853-7000
(Names, Addresses, Including Zip Codes, and Telephone Numbers,
Including Area Codes, of Agents for Service)
____________________

Approximate date of commencement of proposed sale to the public:
Upon the Effective Time of the Merger of Arvig Acquisition Corporation
with and into Arvig Telcom, Inc., as set forth in Section 1.1 of the
Agreement and Plan of Merger included as Annex A to the Proxy Statement-
Prospectus forming a part of this Registration Statement.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box:
_______________________________

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
______________________________________________________________________________________________
Proposed maximum Proposed maximum
Title of each class of Amount to offering price aggregate Amount of
securities to be registered be registered per unit offering price registration fee
______________________________________________________________________________________________
<S> <C> <C> <C> <C>
Common Shares, par value $1.00 1,443,326 Shares(1) N/A $17,834,712(2) $6,150
______________________________________________________________________________________________
</TABLE>
[FN]
(1) Estimated maximum number of shares which may be issued in the
Merger assuming a price per share of approximately $35.00 in
exchange for 100% of the outstanding shares of Class A Voting
Common Stock, par value $1.00 per share and 100% of the outstanding
shares of Class B Nonvoting Common Stock, par value $1.00 per
share, of Arvig Telcom, Inc.
(2) Because there is no market for the shares of Arvig Telcom, Inc.
which are to be received by the Registrant in the Merger, pursuant
to Rule 457(f)(2), the fee is to be calculated based on the
aggregate book value of such shares which is $17,834,712 as of
December 31, 1993.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.

<PAGE>
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.

Cross-Reference Sheet
----------------------

Item Number and Caption Location in Prospectus
----------------------- ----------------------

A. Information About the Transaction
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus . . . . . Cover Page
2. Inside Front and Outside
Back Cover Pages of Prospectus . . Available Information;
Documents Incorporated by
Reference; Table of
Contents
3. Risk Factors, Ratio of
Earnings to Fixed Charges and
Other Information . . . . . . . . Summary; General
Information
4. Terms of the Transaction . . . . . Summary; General
Information; The Merger;
Description of Arvig
Shares; Description of TDS
Securities; Comparative
Rights of TDS Shareholders
and Arvig Shareholders
5. Pro Forma Financial Information . *
6. Material Contacts with the
Company Being Acquired . . . . . . The Merger
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be Underwriters *
8. Interests of Named Experts and
Counsel . . . . . . . . . . . . . Legal Matters; Experts
9. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities . . . . . . . . . *

B. Information About the Registrant
10. Information with Respect to
S-3 Registrants . . . . . . . . . Business of TDS
11. Incorporation of Certain Information
by Reference . . . . . . . . . . . Documents Incorporated by
Reference
12. Information with Respect to S-2
or S-3 Registrants . . . . . . . . *
13. Incorporation of Certain
Information by Reference . . . . . *
14. Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants . . . . . . . . . *

C. Information About the Company Being Acquired
15. Information with Respect to
S-3 Companies . . . . . . . . . . *
16. Information with Respect to S-2 or
S-3 Companies . . . . . . . . . . *
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies . Summary -Selected Financial
Information; Information
with Respect to Arvig;
Arvig Management's
Discussion and Analysis of
Financial Condition and
Results of Operations;
Financial Statements of
Arvig

D. Voting and Management Information
18. Information If Proxies, Consents
or Authorizations Are to be
Solicited . . . . . . . . . . . . General Information; The
Merger -Rights of
Dissenting Arvig
Shareholders; The Merger -
Interests of Certain
Persons in the Merger;
Information with Respect to
Arvig -Principal
Shareholders of Arvig, -
Beneficial Ownership of
Directors and Executive
Officers, Directors and
Executive Officers, -
Compensation of Officers,
and -Compensation of
Directors
19. Information If Proxies, Consents
or Authorizations Are Not to be
Solicited or in an Exchange Offer *

---------------------
* Not applicable or answer negative
<PAGE>
<PAGE>

Arvig Telcom, Inc.
Main & 2nd Street
P.O. Box 395
Pequot Lakes, Minnesota 56472

Dear Shareholder:

You are cordially invited to attend a Special Meeting of Shareholders
of Arvig Telcom, Inc. ("Arvig"), to be held at 10:00 a.m. on Saturday,
June 4, 1994, at Breezy Point Resort, Breezy Point, Minnesota 56472.

At the Special Meeting, holders of Class A Voting Common Stock, par
value $1.00, of Arvig ("Arvig Voting Stock") will be asked to consider and
approve an Agreement and Plan of Merger by and among Telephone and Data
Systems, Inc. ("TDS"), Arvig Acquisition Corporation ("Sub"), Arvig and
certain owners of outstanding shares of capital stock of Arvig (the
"Merger Agreement"), and the merger of Sub with and into Arvig (the
"Merger"). If approved, the Merger is expected to occur on or about
Wednesday, August 3, 1994, if all regulatory approvals have been received
by such date, or as soon as practicable thereafter following the receipt
of all required regulatory approvals. In the Merger, Arvig will become a
wholly-owned subsidiary of TDS and Arvig shares held by its shareholders
will be converted into Common Shares of TDS as described in the
accompanying Proxy Statement-Prospectus.

Your Board of Directors believes that the Merger is in the best
interests of all Arvig shareholders and recommends that you
vote your Arvig Voting Stock for the Merger. The terms of the Merger, as
well as other important information, are contained in the enclosed Proxy
Statement-Prospectus. Also being delivered herewith in connection with
the offer by TDS is TDS's Annual Report to the Securities and Exchange
Commission (the "Commission") on Form 10-K for the period ended December
31, 1993 and TDS's Annual Report to its shareholders for the year ended
December 31, 1993. You are urged to read the Proxy Statement-Prospectus
and the accompanying documents carefully.

Approval of the Merger requires an affirmative vote of the holders of
a majority (51%) of the outstanding Arvig Voting Stock entitled to vote on
the proposal.

WHETHER OR NOT YOU PLAN TO ATTEND OUR SPECIAL SHAREHOLDERS' MEETING,
WE REQUEST THAT YOU PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY AS SOON AS POSSIBLE IN THE ENCLOSED PREPAID ENVELOPE TO ARVIG, MAIN
& 2nd STREET, P.O. BOX 395, PEQUOT LAKES, MINNESOTA 56472. PLEASE DO NOT
SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME. If, after voting
your shares through the mail, you decide you would rather vote them in
person, you may do so at the Special Meeting. We thank you for your
prompt attention to this matter and appreciate your support.

Very truly yours,

/s/ Gary Brunes

Gary Brunes
Chairman of the Board

April 26, 1994
<PAGE>
<PAGE>
ARVIG TELCOM, INC.

Notice of Special Meeting of Shareholders to be Held on June 4, 1994

To the Shareholders of
Arvig Telcom, Inc.:

A Special Meeting of the shareholders of Arvig Telcom, Inc., a
Minnesota corporation ("Arvig"), will be held on Saturday, June 4, 1994 at
10:00 a.m. at Breezy Point Resort, Breezy Point, Minnesota 56472, for the
following purposes:

1. To consider and vote upon the approval of (i) an Agreement and
Plan of Merger by and among Telephone and Data Systems, Inc. ("TDS"),
Arvig Acquisition Corporation ("Sub"), Arvig and certain owners of
outstanding shares of capital stock of Arvig (the "Merger Agreement")
providing for the merger (the "Merger") of Sub with and into Arvig,
pursuant to which Arvig will become a wholly-owned subsidiary of TDS, and
(ii) the consummation of the transactions contemplated thereby. In the
Merger, all of the issued and outstanding shares of Arvig common stock
will be converted into Common Shares of TDS, as further described in the
accompanying Proxy Statement-Prospectus.

2. To consider and vote upon a proposal to issue (i) 389 shares of
Class B Nonvoting Common Stock, $1.00 par value, of Arvig ("Arvig
Nonvoting Stock") to certain shareholders of Arvig who were the holders of
Arvig Nonvoting Stock previously redeemed by Arvig, and (ii) 651 shares of
Arvig Nonvoting Stock to Gilroy Arvig, as additional compensation in
recognition of the valuable service that he has rendered to Arvig for more
than forty years.

3. To transact such other business as may properly come before the
Special Meeting and any adjournment thereof.

The Board of Directors of Arvig has fixed the close of business on
April 22, 1994, as the record date for the Special Meeting. All
shareholders of record at such date will be entitled to notice of the
Special Meeting and any adjournment thereof. Only holders of record of
Class A Voting Common Stock, par value $1.00, of Arvig ("Arvig Voting
Stock") at such date will be entitled to vote at the Special Meeting and
any adjournment thereof.

Approval of the Merger Agreement will require the affirmative vote of
the holders of a majority (51%) of the outstanding Arvig Voting Stock
entitled to vote at the Special Meeting. Approval of the proposal to
issue additional shares of Arvig Nonvoting Stock will require the
affirmative vote of the holders of three-fourths (75%) of the outstanding
Arvig Voting Stock. On April 22, 1994, there were 4,370 shares of Arvig
Voting Stock outstanding.

A copy of the provisions of Minnesota law that establish the right of
shareholders to dissent from approval of the Merger Agreement, and the
procedures required to exercise such rights, and to obtain court
determined appraised value for their shares is also enclosed.

PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY BUT NOT LATER THAN MAY 20, 1994, IN THE ENCLOSED PREPAID ENVELOPE
TO ARVIG, MAIN & 2ND STREET, P.O. BOX 395, PEQUOT LAKES, MINNESOTA 56472,
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. IF, AFTER VOTING
YOUR SHARES THROUGH THE MAIL, YOU DECIDE YOU WOULD RATHER VOTE THEM IN
PERSON, YOU MAY DO SO AT THE MEETING.

By order of the Board of Directors

/s/ Marlene A. Moser

Marlene A. Moser
Secretary

April 26, 1994
<PAGE>
<PAGE>
ARVIG TELCOM, INC. TELEPHONE AND DATA SYSTEMS, INC.
Main & 2nd street 30 North LaSalle, 40th Floor
P.O. Box 395 Chicago, Illinois 60602
Pequot Lakes, Minnesota 56472

PROXY STATEMENT-PROSPECTUS

For the Special Meeting to be held June 4, 1994

_______________

Telephone and Data Systems, Inc. ("TDS"), has filed a Registration
Statement on Form S-4 under the Securities Act of 1933, as amended (the
"Securities Act"), covering its Common Shares, par value $1.00 per share
("TDS Common Shares"), to be issued in connection with the proposed
acquisition described in this Prospectus. Also being delivered herewith
are TDS's Annual Report to the Securities and Exchange Commission (the
"Commission") on Form 10-K for the year ended December 31, 1993, and TDS's
Annual Report to its shareholders for the year ended December 31, 1993.
This Prospectus also constitutes the Proxy Statement of Arvig Telcom, Inc.
("Arvig"), to be used in soliciting proxies from Arvig shareholders for a
Special Meeting of Shareholders to be held on June 4, 1994, including any
adjournment thereof, to consider and vote upon the merger of a wholly-
owned subsidiary of TDS with and into Arvig, pursuant to which Arvig would
become a wholly-owned subsidiary of TDS.

This Proxy Statement-Prospectus is first being sent to shareholders of
Arvig on or about April 29, 1994.

THE TELEPHONE AND DATA SYSTEMS, INC. COMMON SHARES TO BE ISSUED IN THE
MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

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

No person has been authorized to give any information or to make any
representations, other than those contained in this Proxy Statement-
Prospectus in connection with the offer contained herein, and if given or
made, such information or representations must not be relied upon as
having been authorized by TDS or Arvig. This Proxy Statement-Prospectus
does not constitute an offer of any securities, other than the securities
to which it relates, to any person to whom it is unlawful to make such
offer or solicitation in any state or other jurisdiction. Neither the
delivery of this Proxy Statement-Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that the
information contained herein is correct as of any time subsequent to the
date hereof.

The date of this Proxy Statement-Prospectus is April 29, 1994.
<PAGE>
<PAGE>
TABLE OF CONTENTS

Page
------

Available Information . . . . . . . . . . . . . . . . . . . . . . . 4
Documents Incorporated by Reference . . . . . . . . . . . . . . . . 4
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Summary Selected Financial Information . . . . . . . . . . . . . . 10
General Information . . . . . . . . . . . . . . . . . . . . . . . . 12
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exchange Consideration . . . . . . . . . . . . . . . . . . . . . 13
Background of the Merger . . . . . . . . . . . . . . . . . . . . 15
Arvig's Reasons for the Merger; Recommendation of Arvig's
Board of Directors . . . . . . . . . . . . . . . . . . . . . . 16
TDS's Reasons for the Merger . . . . . . . . . . . . . . . . . . 18
Opinion of Piper Jaffray, Inc. . . . . . . . . . . . . . . . . . 18
Effective Time of the Merger . . . . . . . . . . . . . . . . . . 19
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . 19
Conversion of Shares in the Merger . . . . . . . . . . . . . . . 20
Exchange of Certificates . . . . . . . . . . . . . . . . . . . . 20
Additional Issuances and Effects of Changes in Arvig Capitalization 20
Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . 20
Representations and Warranties . . . . . . . . . . . . . . . . . 21
Business of Arvig Pending Completion of the Merger . . . . . . . 21
Business of TDS Pending Completion of the Merger . . . . . . . . 22
Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Resale of TDS Common Shares . . . . . . . . . . . . . . . . . . 22
Employees of Arvig and its Subsidiaries . . . . . . . . . . . . 22
Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . 22
Split-off . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Agreements to Vote in Favor of the Merger . . . . . . . . . . . 23
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 23
Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Amendment; Termination . . . . . . . . . . . . . . . . . . . . . 24
Agent for Service of Process; Sellers' Representative . . . . . 25
Interests of Certain Persons in the Merger . . . . . . . . . . . 25
Registration and Listing . . . . . . . . . . . . . . . . . . . . 26
Certain Federal Income Tax Consequences . . . . . . . . . . . . 27
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 28
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 28
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . 28
Business of TDS . . . . . . . . . . . . . . . . . . . . . . . . 29
Information with Respect to Arvig . . . . . . . . . . . . . . . 30
Business of Arvig . . . . . . . . . . . . . . . . . . . . . . . 30
Property of Arvig . . . . . . . . . . . . . . . . . . . . . . . 32
Legal Proceedings of Arvig . . . . . . . . . . . . . . . . . . . 32
Changes in and Disagreements with Accountants of Arvig . . . . . 33
Authorized and Outstanding Securities of Arvig . . . . . . . . . 33
Market for Shares and Dividends . . . . . . . . . . . . . . . . 33
Principal Shareholders of Arvig . . . . . . . . . . . . . . . . 33
Beneficial Ownership of Directors and Executive Officers . . . . 34
Directors and Executive Officers . . . . . . . . . . . . . . . . 36
Compensation of Officers . . . . . . . . . . . . . . . . . . . . 38
Arvig Benefit Plans . . . . . . . . . . . . . . . . . . . . . . 38
Compensation of Directors . . . . . . . . . . . . . . . . . . . 40
Certain Relationships and Related Transactions . . . . . . . . . 40
<PAGE>
<PAGE>
Page
-----
Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . 41
Description of Arvig Shares . . . . . . . . . . . . . . . . . . . . 44
Description of TDS Securities . . . . . . . . . . . . . . . . . . . 44
Comparative Rights of TDS Shareholders and Arvig Shareholders . . . 46
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Index to Arvig Financial Statements . . . . . . . . . . . . . . . . F-1

Annex A - Agreement and Plan of Merger
Annex B - Opinion of Piper Jaffray, Inc.
Annex C - The Minnesota Business Corporation Act - Sections 302A.471 and
302A.473
<PAGE>
<PAGE>

AVAILABLE INFORMATION

TDS is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; New York
Regional Office, Public Reference Room, Seven World Trade Center, 13th
Floor, New York, New York 10048; and Chicago Regional Office, Suite 1400,
500 West Madison Street, Chicago, Illinois 60661. Copies of such material
can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. TDS's
Common Shares are listed on the American Stock Exchange, and reports,
proxy statements and other information concerning TDS may be inspected at
the office of the American Stock Exchange, Inc., 86 Trinity Place, New
York, New York 10006. This Proxy Statement-Prospectus does not contain
all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of
the Commission. The Registration Statement and any amendments thereto,
including exhibits filed as a part thereof, are available for inspection
and copying as set forth above.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents heretofore filed by TDS with the Commission
under the Exchange Act are incorporated herein by reference: (a) Annual
Report on Form 10-K for the year ended December 31, 1993; (b) Current
Reports on Form 8-K dated January 19, 1994, February 7, 1994, March 30,
1994, and April 22, 1994; and (c) Form 8-A filed November 2, 1981, as
amended by Form 8, dated February 5, 1992, which includes a description of
TDS's Common Shares, as amended.

All documents filed by TDS pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement-
Prospectus and prior to the date of the Special Meeting of Shareholders of
Arvig, and any and all adjournments thereof, shall be deemed to be
incorporated by reference in this Proxy Statement-Prospectus and to be a
part hereof from the date of filing of such documents. Any statements
contained in a document incorporated by reference herein shall be deemed
to be modified or superseded for purposes hereof to the extent that a
statement contained herein (or in any other subsequently filed document
which also is incorporated by reference herein) modifies or supersedes
such statement. Any statement so modified or superseded shall not be
deemed to constitute a part hereof except as so modified or superseded.
All information appearing in this Proxy Statement-Prospectus is qualified
in its entirety by the information and financial statements (including
notes thereto) appearing in the documents incorporated herein by
reference.

THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
(OTHER THAN EXHIBITS THERETO) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN
OR ORAL REQUEST BY ANY PERSON TO WHOM THIS PROXY STATEMENT-PROSPECTUS HAS
BEEN DELIVERED, FROM INVESTOR RELATIONS, TELEPHONE AND DATA SYSTEMS,
INC., 30 NORTH LASALLE STREET, 40TH FLOOR, CHICAGO, ILLINOIS 60602
(TELEPHONE 312-630-1900). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BEFORE MAY 27, 1994.

-4-
<PAGE>
<PAGE>
SUMMARY

The following is a summary of certain information contained elsewhere in
this Proxy Statement-Prospectus or in documents delivered herewith.
Certain capitalized terms are defined elsewhere in this Proxy Statement-
Prospectus. Reference is made to, and this Summary is qualified in its
entirety by, the more detailed information contained in this Proxy
Statement-Prospectus, the Annexes hereto and the documents delivered
herewith.

Telephone and Data Systems, Inc.

Telephone and Data Systems, Inc., an Iowa corporation ("TDS"), is a
diversified telecommunications service company with established local
telephone, cellular telephone and radio paging operations. The principal
executive office of TDS is located at 30 North LaSalle Street, 40th Floor,
Chicago, Illinois 60602, and its telephone number is: (312) 630-1900. See
"Business of TDS."

Arvig Telcom, Inc.

Arvig Telcom, Inc., a Minnesota corporation ("Arvig"), is a holding
company which owns various subsidiaries. Two subsidiaries, Arvig
Telephone Company and Bridge Water Telephone Co., are engaged in the
business of providing local exchange telephone service to customers in
Minnesota. Other subsidiaries include an interexchange long-distance
telephone service provider, a cable television company, a billing and data
processing company, a fiber optic network operator, and a company which
owns interests in cellular franchises in Minnesota. The principal
executive office of Arvig is located at Main & 2nd Street, Pequot Lakes,
Minnesota 56472, and its telephone number is: (218) 568-4115. See
"Information with Respect to Arvig-Business of Arvig."

Arvig Acquisition Corporation

Arvig Acquisition Corporation, a Minnesota corporation and wholly-owned
subsidiary of TDS ("Sub"), is a corporation recently organized by TDS for
the purpose of effecting the acquisition of Arvig. Sub has no material
assets and has not engaged in any activities except in connection with the
proposed acquisition. Sub's executive offices are located at 30 North
LaSalle Street, 40th Floor, Chicago, Illinois 60602, and its telephone
number is: (312) 630-1900.

Merger Agreement

On December 14, 1993, TDS, Sub, Arvig, and certain owners of outstanding
shares of capital stock of Arvig (the "Sellers") entered into an Agreement
and Plan of Merger (the "Merger Agreement") providing for the merger of
Sub with and into Arvig, pursuant to which Arvig would become a wholly-
owned subsidiary of TDS (the "Merger").

Date, Time and Place of Arvig Shareholders' Meeting

Arvig's Special Meeting of Shareholders to consider and vote on approval
of the Merger Agreement (the "Arvig Meeting") is to be held on Saturday,
June 4 at 10:00 a.m., 1994, at Breezy Point Resort, Breezy Point,
Minnesota 56472.

Record Date

Only holders of record of shares of Class A Voting Common Stock, $1.00
par value, of Arvig ("Arvig Voting Stock") at the close of business on
April 22, 1994 (the "Arvig Record Date"), are entitled to vote at the
Arvig Meeting. At the close of business on the Arvig Record Date, there
were 4,370 shares of Arvig Voting Stock and 39,330 shares of Class B
Nonvoting Stock, $1.00 par value, of Arvig ("Arvig Nonvoting Stock")
outstanding. The Arvig Voting Stock and the Arvig Nonvoting Stock are
sometimes referred to herein collectively as the "Arvig Shares."

-5-
<PAGE>
<PAGE>
Purpose of the Arvig Meeting

1. To consider and vote upon a proposal to approve the Merger Agreement
and the transactions contemplated thereby;

2. To consider and vote upon a proposal to issue (i) 389 shares of
Arvig Nonvoting Stock, to certain shareholders of Arvig who were the
holders of Arvig Nonvoting Stock previously redeemed by Arvig, and (ii)
651 shares of Arvig Nonvoting Stock to Gilroy Arvig, as additional
compensation in recognition of the valuable service that he has rendered
to Arvig for more than forty years (collectively, the "New Arvig Shares");
and

3. To transact any other business that may properly come before the
Arvig Meeting.

Vote Required

The affirmative vote of the holders of a majority of the outstanding
Arvig Voting Stock entitled to vote at the Arvig Meeting is required to
approve the Merger Agreement. The Sellers, who collectively own 68% of
the outstanding shares of Arvig Voting Stock, have agreed that, so long as
the Merger Agreement has not been terminated, they will vote their shares
in favor of approval of the Merger Agreement. Therefore, assuming that
such shareholders vote as agreed, the Merger will be approved at the
Special Meeting. Directors and officers of Arvig and their spouses and
relatives residing with such directors and officers are the beneficial
owners of 2,833 shares of Arvig Voting Stock (approximately 64.8% of the
shares of Arvig Voting Stock outstanding). See "General Information" and
"The Merger -Vote Required; Agreements to Vote in Favor of the Merger."

Approval of the proposal to issue additional shares of Arvig Nonvoting
Stock will require the affirmative vote of the holders of three-fourths
(75%) of the outstanding Arvig Voting Stock. See "The Merger - Additional
Issuances and Effects of Changes in Arvig Capitalization."

PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY USING THE ENCLOSED
ENVELOPE TO MAKE SURE YOUR VOTE IS REPRESENTED AT THE ARVIG MEETING.

The Merger

Upon consummation of the Merger, Sub will be merged with and into Arvig
and Arvig will become a wholly-owned subsidiary of TDS. As a result of
the Merger, each Arvig Share issued and outstanding immediately prior to
the Merger (other than any such shares owned by Arvig shareholders who
have perfected their right to dissent from the Merger) will be converted
into the right to receive fully paid and nonassessable Common Shares, par
value $1.00 per share, of TDS ("TDS Common Shares"). The TDS Common
Shares to be delivered in exchange for the Arvig Shares are sometimes
referred to in this Proxy Statement-Prospectus as the "Exchange
Consideration."

The number of TDS Common Shares to be exchanged for each Arvig Share
(the "Per Share Consideration") will depend on, among other things, the
number of Arvig Shares outstanding immediately prior to the Merger.
Except where otherwise expressly indicated, for all purposes of this Proxy
Statement -Prospectus, it is assumed that the proposal to issue the New
Arvig Shares will be approved at the Arvig Meeting, so that there will be
an aggregate of 44,740 Arvig Shares outstanding.

The value of the Exchange Consideration and the Per Share Consideration
will also depend on the Average Closing Price (as defined below) of TDS
Common Shares. The aggregate value of the Exchange Consideration is
expected to be not less than $50,516,389 and not more than $55,992,155.
The value of the Per Share Consideration is expected to be not less than
$1,129.11 and not more than $1,251.50. The table set forth in "The
Merger-Exchange Consideration" indicates the value of the Exchange
Consideration and the value of the Per Share Consideration at different
Average Closing Prices for TDS Common Shares between $42.00 and $64.25.

-6-
<PAGE>
<PAGE>
The term Average Closing Price means the arithmetical average of the
closing price for TDS Common Shares as reported in the American Stock
Exchange Composite Transactions section of "The Wall Street Journal" for
the five trading days ending on the third trading day prior to the Closing
Date.

If the Average Closing Price were computed as of the date of this Proxy
Statement-Prospectus, it would be less than $42.00. In the event that the
Average Closing Price of TDS Common Shares, computed at the time of
Closing, is less than $42.00, the Sellers will have the option (the
"Sellers' Out"), exercisable in their sole discretion, to terminate the
Merger Agreement upon notice to TDS sent by telecopy and received by TDS
prior to 10:00 a.m. Chicago time, on the day immediately preceding the
Closing Date. If the Sellers' Out is exercised, TDS will have the right
to require the Sellers to close by notifying the Sellers, at any time
prior to the Closing Date, that TDS will deliver at the closing Exchange
Consideration having an aggregate value of $50,516,389 and a Per Share
Consideration having a value of $1,129.1102 ($50,207,699 and $1,148.9176,
respectively, if the New Arvig Shares are not issued).

If the Average Closing Price of TDS Common Shares is less than $42.00
and the Sellers' Out is not exercised, the parties will be obligated to
close. In that event, TDS will deliver 26.8836 TDS Common Shares per
Arvig Share (27.3552 TDS Common Shares if the New Arvig Shares are not
issued), resulting in the value of the Exchange Consideration and Per
Share Consideration being less than the amounts set forth in the preceding
paragraph.

If the Average Closing Price of TDS Common Shares is more than $64.25,
TDS will have the Option (the "Buyer's Out"), exercisable in its sole
discretion, to terminate the Merger Agreement upon notice to the Sellers
sent by telecopy and received by the Sellers prior to 10:00 a.m. Chicago
time, on the day immediately preceding the Closing Date. If the Buyer's
Out is exercised, the Sellers will have the right to require TDS to close
by notifying TDS, at any time prior to the Closing Date, that the Sellers
will accept at the Closing Exchange Consideration having an aggregate
value of $55,992,155 and a Per Share Consideration having a value of
$1,251.5010 ($55,650,000 and $1,273.4553, respectively, if the New Arvig
Shares are not issued).

If the Average Closing Price of TDS Common Shares is more than $64.25
and the Buyer's Out is not exercised, the parties will be obligated to
close. In that event, TDS will deliver 19.4786 TDS Common Shares per
Arvig Share (19.8203 TDS Common Shares if the New Arvig Shares are not
issued) resulting in the Exchange Consideration and Per Share
Consideration being more than the amounts set forth in the preceding
paragraph.

The Exchange Consideration will be further adjusted to reflect the
effects of any other changes to, or adjustments in, the number of issued
and outstanding Arvig Shares. See "The Merger - Additional Issuances and
Effects of Changes in Arvig Capitalization."

Each holder of Arvig Shares who otherwise would be entitled to receive a
fractional TDS Common Share will receive in lieu thereof an amount of cash
(without interest) equal to the product obtained by multiplying such
fraction by the Average Closing Price.

Recommendation of Arvig's Board of Directors

The Board of Directors of Arvig believes that the Merger is in the best
interests of Arvig and its shareholders. The Board of Arvig
recommends that the shareholders of Arvig approve the Merger Agreement.
The Board's recommendation is based upon factors discussed in this Proxy
Statement-Prospectus. See "The Merger - Arvig Reasons for the Merger;
Recommendation of Arvig's Board of Directors."

Opinion of Piper Jaffray, Inc.

On April 20, 1994, Piper Jaffray, Inc. ("Piper Jaffray"), Arvig's
exclusive agent in connection with the sale of Arvig, delivered a written
opinion to the Board of Directors of Arvig to the effect that the Exchange
Consideration is fair to the Arvig shareholders from a financial point of
view. The full text of the opinion of Piper Jaffray, which sets forth,
among other things, the assumptions made, matters considered and
limitations of

-7-
<PAGE>
<PAGE>
review undertaken in connection with such opinion is set forth as Annex B
to this Proxy Statement-Prospectus and should be read in its entirety by
Arvig shareholders. See "The Merger - Opinion of Piper Jaffray, Inc."

Effective Time of the Merger

If the Merger Agreement is approved, the Merger is expected to become
effective on or about August 3, 1994, or as soon as practicable thereafter
following the receipt of all required regulatory approvals (such time
being the "Effective Time" and such date being the "Closing Date").

Exchange of Certificates

At or before the Arvig Meeting, Arvig shareholders will receive
instructions for exchanging certificates representing Arvig Shares for
certificates representing TDS Common Shares. Arvig shareholders should
not surrender their certificates prior to approval of the Merger Agreement
at the Arvig Meeting.

Additional Issuances and Effects of Changes in Arvig Capitalization

Subject to the approval by shareholders owning three-fourths (75%) of
the combined voting power of all outstanding Arvig Shares, Arvig will
issue, prior to the Effective Time, (i) 389 shares of Arvig Nonvoting
Stock to certain shareholders of Arvig who were the holders of Arvig
Nonvoting Stock previously redeemed by Arvig, and (ii) 651 shares of Arvig
Nonvoting Stock to Gilroy Arvig as additional compensation in recognition
of the valuable service that he has rendered to Arvig for more than forty
years. The number of TDS Common Shares into which each Arvig Share is to
be converted in the Merger will be adjusted proportionately to reflect the
effect of the issuance of any New Arvig Shares or any other changes in the
number of issued and outstanding Arvig Shares from that number set forth
in the representations and warranties of Arvig in the Merger Agreement.

Split-off

Certain shareholders of Arvig (the "Shareholder Group") are interested
in acquiring the long-distance operations of certain subsidiaries of
Arvig. TDS is currently negotiating with the Shareholder Group regarding
the possibility of distributing the equity of certain subsidiaries of
Arvig to the Shareholder Group in exchange for and in redemption of all or
a portion of the Arvig Shares owned by members of the Shareholder Group
(the "Split-off"). If the Split-off occurs, (i) the aggregate Exchange
Consideration to be delivered to the shareholders of Arvig will be
reduced, (ii) the Exchange Consideration to be delivered to members of the
Shareholder Group will be reduced, and (iii) the Exchange Consideration to
be delivered to shareholders who are not members of the Shareholder Group
will not change. See "The Merger - Split-off."

Conditions to the Merger; Termination

The consummation of the Merger is conditioned upon the fulfillment of
certain conditions set forth in the Merger Agreement, including the
regulatory approvals discussed below. See "The Merger - Conditions." The
Merger Agreement may be terminated by mutual consent of the Boards of
Directors of TDS and Arvig or by either TDS or Arvig if certain conditions
have not been satisfied. See "The Merger - Conditions" and "- Amendment;
Termination."

Regulatory Approvals

The Merger is subject to the approval of the Minnesota Public Utilities
Commission. Also, notification of either the Merger, or other disposition
of the long-distance operations of Arvig is required to be provided to the
North Dakota Public Service Commission and the Wisconsin Public Service
Commission. The transfer of certain licenses pursuant to the Merger is
subject to the approval of the Federal Communications Commission. The
transfer of certain cable TV franchises will require the approval of the
Heartland Cable Commission, the City of Pine River, the City of Nisswa,
the City of Lakeshore, Lake Edwards Township and Ideal Township. The
Merger is also subject to review by the Department of Justice and the
Federal Trade Commission under

-8-
<PAGE>
<PAGE>
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. See
"The Merger - Regulatory Approvals."

Federal Income Tax Consequences

The Merger is intended to qualify as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended. Whether the transaction does qualify for tax-free treatment by
Arvig shareholders will depend in part on circumstances occurring after
the Merger. For a discussion of the possible federal income tax
consequences of the Merger, see "The Merger - Certain Federal Income Tax
Consequences." Arvig shareholders are urged to consult their own tax
advisors.

Dissenters' Rights of Appraisal

Under the Minnesota Business Corporation Act, Arvig shareholders will be
entitled to dissent from the Merger and obtain cash in an amount equal to
the fair value of their Arvig Shares, which may be more or less than the
amount to be received under the Merger. Specific procedures are required
to be followed in order to exercise dissenters' rights and failure to
follow such procedures may result in the termination or waiver of such
rights. See "The Merger - Appraisal Rights."

-9-
<PAGE>
<PAGE>
SUMMARY SELECTED FINANCIAL INFORMATION

The following tables present summary historical financial information
for TDS and Arvig. This information is based upon the consolidated
financial statements of TDS and the consolidated financial statements of
Arvig incorporated by reference or appearing elsewhere in this Proxy
Statement-Prospectus and should be read in conjunction therewith and the
notes thereto.

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ---- ---- ----
(Numbers represent thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
TDS Historical:
Operating Revenues . . . . . . $ 590,744 $ 456,896 $ 354,681 $294,574 $239,803
Net income from continuing
operations . . . . . . . . 33,896 38,520 21,113 27,208 11,051
Extraordinary Item . . . . . . - (769) - - -
Cumulative effect of accounting
changes (1) . . . . . . . . - (6,866) (5,035) - -
Net income . . . . . . . . . . 33,896 30,885 16,078 27,208 11,051
Net income available to
TDS Common Shares . . . . . 31,510 28,648 14,390 26,047 9,768

Earnings per TDS Common Share:
From continuing operations . . .67 .91 .59 .86 .35
Extraordinary Item . . . . . . - (.02) - - -
Cumulative effect of accounting
changes . . . . . . . . . - (.17) (.15) - -
Net Income . . . . . . . . . . .67 .72 .44 .86 .35
Cash dividends per TDS Common Share .34 .32 .30 .28 .26
Total assets . . . . . . . . . 2,259,182 1,696,486 1,368,145 940,289 771,181
Long-term debt and redeemable
preferred stock
(including current portion) 564,933 454,852 424,739 277,030 281,020
Book value per TDS Common Share $ 24.15 $ 21.27 $ 18.42 $ 14.17 $ 12.22

Year Ended December 31,
------------------------------------------------------------
1989
1993 1992 1991 1990 (Unaudited)
---- ---- ---- ---- -----------
(Numbers represent thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Arvig Historical:
Operating Revenues . . . . . $35,435 $32,753 $25,138 $19,567 $18,282
Net income . . . . . . . . . 2,453 1,226 1,052 1,885 3,164
Net income per Arvig Share . 56.12 28.07 24.07 43.03 71.54
Cash dividends declared
per Arvig Share . . . . . . 22.50 10.00 10.00 10.00 6.00
Total assets . . . . . . . . 49,400 46,459 41,666 37,543 34,988
Long-term debt (including
current portion) . . . . . 21,931 22,037 16,567 12,544 11,315
Book value per Arvig Share . $408.12 $374.49 $356.43 $342.35 $310.33

Year Ended
TDS and Arvig December 31,
PRO FORMA COMBINED(2): 1993 (Unaudited)(3)
---------------------- -------------------
<S> <C>
Net income per TDS Common Share:
Pro Forma . . . . . . . . . . . . . . . . . . . . . $ .68
Arvig Share equivalent . . . . . . . . . . . . . . 18.28
Cash dividends per TDS Common Share:
Pro Forma . . . . . . . . . . . . . . . . . . . . . .34
Arvig Share equivalent . . . . . . . . . . . . . . 9.14
Book value per TDS Common Share:
Pro Forma . . . . . . . . . . . . . . . . . . . . . 24.55
Arvig Share equivalent . . . . . . . . . . . . . . $660.01
</TABLE>
_______________
(1) Effective January 1, 1993, TDS adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). The cumulative effect of the change on years prior to 1993
is estimated to have no material effect on net income or earnings
per share. Income tax expense for 1993 reflects the new accounting
principle; prior years' financial information has not been
restated.

Effective January 1, 1992, TDS adopted SFAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The
cumulative effect of the change on years prior to 1992 has been
reflected in 1992 net income. Prior years' financial information
has not been restated.

Effective January 1, 1991, TDS changed its method of accounting for
sales commission from capitalizing and amortizing these costs to
expensing as incurred. In addition, two of TDS's equity-method
investees made a similar change. The cumulative effect of TDS's
and the Investees' change on all prior years has been reflected in
1991 results of operations. Prior years' financial information has
not been restated.
-10-
<PAGE>
<PAGE>

(2) The pro forma combined financial information for TDS and Arvig has
been prepared based on the purchase method of accounting assuming
26.8836 TDS Common Shares are issued for each Arvig Share (based on
an Average Closing Price of TDS Common Shares of $42.00.) "Average
Closing Price" means the arithmetical average of the closing price
for TDS Common Shares for the five trading days ending on the third
trading day prior to the Closing Date. The pro forma combined
information reflects TDS's acquisition of 100% of Arvig shares, the
elimination of Arvig equity based on the purchase method of
accounting and the allocation of the purchase price to excess cost
over the book value. Excess cost is assumed to be amortized over
40 years.

(3) Pro forma financial information for the year ended December 31,
1993 represents the combined results of TDS and Arvig for the
twelve months ended December 31, 1993.

-11-
<PAGE>
<PAGE>
GENERAL INFORMATION

This Proxy Statement-Prospectus is furnished in connection with the
solicitation by the Board of Directors of Arvig Telcom, Inc., a Minnesota
corporation ("Arvig"), of proxies to be voted at a special meeting of the
shareholders of Arvig (the "Arvig Meeting") which will be held on June 4,
1994.

The purpose of the Arvig Meeting is to consider and vote upon a proposal
to approve the Agreement and Plan of Merger dated as of December 14, 1993
(the "Merger Agreement"), by and among Telephone and Data Systems, Inc.,
an Iowa corporation ("TDS"), Arvig Acquisition Corporation, a Minnesota
corporation and a wholly-owned subsidiary of TDS ("Sub"), Arvig, and
certain owners of outstanding shares of capital stock of Arvig (the
"Sellers"). The Merger Agreement provides for the merger (the "Merger")
of Sub with and into Arvig, pursuant to which Arvig will become a wholly-
owned subsidiary of TDS.

The Board of Directors of Arvig has approved the Merger
Agreement. The Board of Directors of TDS has approved the Merger
Agreement and the issuance of Common Shares, $1.00 par value per share, of
TDS ("TDS Common Shares") in the Merger, and TDS, the sole shareholder of
Sub, has approved the Merger and the Merger Agreement. A copy of the
Merger Agreement is attached as Annex A to this Proxy Statement-Prospectus
and is incorporated herein by reference.

The close of business on April 22, 1994 (the "Arvig Record Date"), has
been fixed as the record date for the Arvig Meeting. All shareholders of
Arvig at such date will be entitled to notice of the Arvig Meeting. Only
holders of record of Class A Voting Stock, par value $1.00, of Arvig
("Arvig Voting Stock") will be entitled to vote at the Arvig Meeting. As
of the Arvig Record Date, there were 4,370 shares of Arvig Voting Stock
outstanding. Each holder of record on the Arvig Record Date of shares of
Arvig Voting Stock is entitled to one vote per share held by such holder
on each matter submitted to a vote at the Arvig Meeting. The affirmative
vote of the holders of a majority (51%) of the outstanding Arvig Voting
Stock is required for approval of the Merger Agreement.

All properly executed proxies not revoked will be voted at the Arvig
Meeting in accordance with the instructions contained therein. Proxies
containing no instructions regarding proposals specified in the form of
proxy will be voted in favor of the proposal. If any other matters are
brought before the Arvig Meeting and submitted to a vote, all proxies will
be voted in accordance with the judgment of the persons voting the
proxies. A shareholder who has executed and returned a proxy may revoke
it at any time before it is voted, but only by executing and returning a
proxy bearing a later date, by giving written notice of revocation to the
Secretary of Arvig or by attending the Arvig Meeting and voting in person.

Representatives of Olsen, Thielen & Co., Ltd., and Larson, Allen and
Weishair, Arvig's independent certified public accountants, are expected
to be present at the Arvig Meeting, will have the opportunity to make a
statement if they desire to do so, and will be available to respond to
appropriate questions.

This solicitation is being made on behalf of the Board of Directors of
Arvig. The cost of solicitation of proxies from shareholders of Arvig
will be paid by Arvig. In addition to the solicitation of proxies by use
of mail, the directors, officers or other agents of Arvig may solicit
proxies personally or by telephone or other telecommunications media.

TDS's principal executive office is located at 30 North LaSalle Street,
40th Floor, Chicago, Illinois 60602, and its telephone number is: (312)
630-1900. Arvig's principal executive office is located at Main & 2nd
Street, Pequot Lakes, Minnesota 56472, and its telephone number is: (218)
568-4115.

All information contained herein relating to TDS and to Arvig has been
furnished by their respective managements. TDS has no present affiliation
with Arvig.

The mailing of this Proxy Statement-Prospectus to shareholders of Arvig
is expected to commence on or about April 29, 1994.

-12-
<PAGE>
<PAGE>
THE MERGER

Set forth below is a brief description of the material features of the
Merger. Such description does not purport to be complete and is qualified
in its entirety by reference to the Merger Agreement which is attached as
Annex A to this Proxy Statement-Prospectus and is incorporated by
reference herein.

Exchange Consideration

TDS, Sub, Arvig and the Sellers have entered into the Merger Agreement,
which contemplates that Sub will be merged with and into Arvig, with Arvig
surviving the Merger as a Minnesota corporation and becoming a wholly-
owned subsidiary of TDS. As a result of the Merger, each outstanding
share of Arvig Voting Stock and Arvig Class B Nonvoting Common Stock,
$1.00 par value ("Arvig Nonvoting Stock", and together with the Arvig
Voting Stock, the "Arvig Shares") (other than dissenting shares as
described herein) will be converted at the time the Merger becomes
effective (such time being called the "Effective Time" and such date being
called the "Closing Date") into the right to receive fully paid and
nonassessable Common Shares, par value $1.00 per share, of TDS ("TDS
Common Shares"). The TDS Common Shares to be delivered in exchange for
the Arvig Shares are sometimes referred to in this Proxy Statement-
Prospectus as the "Exchange Consideration".

The number of TDS Common Shares to be exchanged for each Arvig Share
(the "Per Share Consideration") will depend on, among other things, the
number of Arvig Shares outstanding immediately prior to the Effective
Time. Except where otherwise expressly indicated, for all purposes of
this Proxy Statement-Prospectus, it is assumed that the proposal to issue
the New Arvig Shares will be approved at the Arvig Meeting, so that there
will be an aggregate of 44,740 Arvig Shares outstanding. See "The
Merger - Additional Issuances and Effects of Change in Arvig
Capitalization."

The value of the Exchange Consideration and the Per Share Consideration
will also depend on the Average Closing Price (as defined below) of TDS
Common Shares. The aggregate value of the Exchange Consideration is
expected to be not less than $50,516,389 and not more than $55,992,155.
The value of the Per Share Consideration is expected to be not less than
$1,129.11 and not more than $1,251.50. The table set forth below
indicates (i) the Per Share Consideration and (ii) the aggregate Exchange
Consideration to be paid by TDS in TDS Common Shares, each at various
Average Closing Prices for TDS Common Shares between $42.00 and $64.25.
The information in columns A and B assumes that no additional Arvig Shares
(including the New Arvig Shares) are issued prior to the Effective Time.
The information in columns C and D assumes that the New Arvig Shares are
issued prior to the Effective Time.

<TABLE>
<CAPTION>
Assuming 43,700 Assuming 44,740
Outstanding Outstanding
Arvig Shares Arvig Shares
--------------- --------------
(A) (B) (C) (D)
Average Total Price Per Total Price Per
Closing Purchase Arvig Purchase Arvig
Price(1) Price Price Price Share
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
FIXED $64.25
PRICE 61.35 $55,650,000 $1,273.46 $55,992,155 $1,251.50
RANGE(2) 58.45

58.44 55,527,408 1,270.65 55,868,840 1,248.74
ADJUSTABLE 57.775 54,895,575 1,256.19 55,233,097 1,234.54
PRICE 57.11 54,263,658 1,241.73 54,597,355 1,220.33
RANGE(3) 56.445 53,631,802 1,227.27 53,961,613 1,206.12
55.79 53,009,482 1,231.03 53,335,431 1,192.12

FIXED 55.78
PRICE 53.125 53,000,000 1,212.81 53,325,862 1,191.91
RANGE(2) 50.47
</TABLE>
-13-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Assuming 43,700 Assuming 44,740
Outstanding Outstanding
Arvig Shares Arvig Shares
------------------- -------------------
(A) (B) (C) (D)
Average Total Price Per Total Price Per
Closing Purchase Arvig Purchase Arvig
Price(1) Price Price Price Share
-------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$50.46 $52,989,505 $1,212.57 $53,315,289 $1,191.67
ADJUSTABLE 49.795 52,291,169 1,196.59 52,612,660 1,175.97
PRICE 49.13 51,592,833 1,180.61 51,910,043 1,160.26
RANGE(3) 48.465 50,894,498 1,164.63 51,207,402 1,144.56
47.81 50,206,663 1,148.89 50,515,339 1,129.09

FIXED 47.80
PRICE 44.90 50,207,699 1,148.92 50,516,389 1,129.11
RANGE(2) 42.00
---------------------------
(1) The term "Average Closing Price" means the arithmetical average of
the closing price for TDS Common Shares as reported in the American
Stock Exchange Composite Transactions section of "The Wall Street
Journal" for the five trading days ending on the third trading day
prior to the Closing Date.

(2) The Exchange Consideration per Arvig Share and the total Exchange
Consideration do not fluctuate within this range. In other words,
within this range of Average Closing Prices, TDS must deliver that
number of TDS Common Shares which is equal to the amount indicated
in the table.

(3) The Exchange Consideration per Arvig Share and the total Exchange
Consideration fluctuate within this range. In other words, within
this range of Average Closing Prices, TDS will deliver a fixed
number of TDS Common Shares and the value of the Exchange
Consideration will change proportionately.

If the Average Closing Price of TDS Common Shares is less than $42.00
and the Sellers' Out is not exercised, the parties will be obligated to
close. In that event, TDS will deliver 26.8836 TDS Common Shares per
Arvig Share (27.3552 if the New Arvig Shares are not issued), resulting in
the value of the Exchange Consideration and Per Share Consideration being
less than the amounts set forth in the preceding paragraph.

If the Average Closing Price of TDS Common Shares is more than $64.25,
TDS will have the Option (the "Buyer's Out"), exercisable in its sole
discretion, to terminate the Merger Agreement upon notice to the Sellers
sent by telecopy and received by the Sellers prior to 10:00 a.m. Chicago
time, on the day immediately preceding the Closing Date. If the Buyer's
Out is exercised, the Sellers will have the right to require TDS to close
by notifying TDS, at any time prior to the Closing Date, that the Sellers
will accept at the Closing Exchange Consideration having an aggregate
value of $55,992,155 and a Per Share Consideration having a value Share of
$1,251.5010 ($55,650,000 and $1,273.4553, respectively, if the New Arvig
Shares are not issued).

-14-
<PAGE>
<PAGE>
per Arvig Share (19.8203 if the New Arvig Shares are not issued) resulting
in the value of the Exchange Consideration and Per Share Consideration
being more than the amounts set forth in the preceding paragraph.

The Exchange Consideration will be further adjusted to reflect the
effect of any other changes in the number of issued and outstanding Arvig
Shares, as more fully described in "The Merger - Additional Issuances and
Effects of Changes in Arvig Capitalization."

Background of the Merger

In February 1991, the holders of a majority of the Arvig Voting Stock
(the "SVC Agreement Shareholders") entered into a Shareholder Voting and
Cross-Purchase Agreement (the "SVC Agreement"). The SVC Agreement was
executed to solicit proposals from potential purchasers for substantially
all of the assets of Arvig in an effort to obtain the maximum value for
the shareholders and to maintain the operations of Arvig pending such a
sale. To further such efforts, in May 1991, the Board of Directors (the
"Arvig Board") established an Executive Committee which was charged with
leading the efforts on behalf of the Arvig Board regarding a possible sale
of the company.

In October 1991, the Arvig Board granted Gilroy Arvig, the
President and Chief Executive Officer of Arvig, and certain other existing
shareholders of Arvig (collectively, "the Interested Shareholders") the
exclusive right to negotiate for the purchase of Arvig for a period of 90
days. Two plans of reorganization were submitted by the Interested
Shareholders during that time period. In May 1992, an additional plan was
submitted which could have allowed the selling shareholders to receive
approximately $1,200 per Arvig Share in cash and notes. No agreement was
reached.

In October 1992, Arvig submitted an offer to the Interested Shareholders
which could have allowed the Interested Shareholders to receive
approximately $1,200 per Arvig Share. No agreement was reached.

Also in October 1992, the Arvig Board engaged Piper Jaffray, Inc. ("Piper
Jaffray"), to assist in the sale of Arvig. Following its engagement,
Piper Jaffray worked with the Executive Committee to identify potential
purchasers of Arvig and to solicit proposals from such parties. As a
result of the efforts of Piper Jaffray, Arvig received nonbinding
proposals from six potential purchasers, including TDS. Of the six
proposals received, the proposals submitted by North Central Utilities,
Inc. ("North Central"), Brighton Communications Corporation ("Brighton"),
Pacific Telecom, Inc. ("PTI"), and TDS were determined by the Arvig Board
to be the best proposals.

After analyzing the proposals, and based upon an evaluation of the North
Central, Brighton, PTI and TDS proposals by Piper Jaffray, Arvig entered
into an exclusivity and nondisclosure agreement with North Central dated
April 7, 1993 (the "North Central Agreement"). Under the North Central
Agreement Arvig granted North Central the exclusive right to negotiate the
purchase of Arvig and to perform due diligence for a period of 60 days.
During this exclusivity period, North Central elected to terminate
negotiations with Arvig. The proposal submitted by PTI was subsequently
withdrawn prior to the execution of a letter of intent or other
preliminary agreement and Brighton elected not to pursue further
negotiations with Arvig.

On or about September 27, 1993, Arvig received a revised proposal from
TDS which called for an exchange of TDS Common Shares for all of the
issued and outstanding Arvig Shares. Subsequent to receiving the TDS
proposal, the Executive Committee met with representatives of TDS and
negotiated a letter of intent (the "TDS Letter") which was approved by the
holders of a majority of the Arvig Voting Stock on or about October 15,
1993.

Following the execution of the TDS Letter, TDS was provided access to
all of Arvig's assets, books and records. The Merger Agreement was
negotiated by representatives of Arvig and TDS between October 15, 1993,
and December 14, 1993. The Merger Agreement was executed by all of the
parties thereto on December 14, 1993.

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By a resolution of the Arvig Board dated December 14, 1993, the Board of
Directors approved and adopted the Merger Agreement and agreed to
recommend to the shareholders of Arvig that the transactions contemplated
by the Merger Agreement be approved.

Arvig's Reasons for the Merger; Recommendation of Arvig's Board of
Directors

THE BOARD OF DIRECTORS OF ARVIG BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF ARVIG AND ITS SHAREHOLDERS AND RECOMMENDS TO ITS
SHAREHOLDERS THAT THEY VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY.

In reaching such determination, the Arvig Board considered, among other
things, the following factors:

Price. The price offered by TDS is comparable to any other offers
previously received by Arvig, including any offers which have been
withdrawn. The Arvig Board determined that it was in the best
interests of shareholders to obtain the maximum price for the sale
of Arvig and believes the price being paid by TDS represents such a
price.

Experience in Telecommunications and Commitment to the Industry.
TDS owns 94 rural telephone companies across the United States. In
addition, TDS owns over 80% of United States Cellular Corporation.
After reviewing financial and operational information concerning
TDS, the Arvig Board believes that the best interests of Arvig
shareholders would be served by a company with substantial
experience in the industry and that TDS has such experience.

Commitment to Local Operations and Economy. In investigating TDS,
the Board determined that TDS has historically continued to operate
rural telephone companies as local enterprises, retaining the local
identity and, in some cases, management of such businesses. The
Board believes that this manner of expansion is in the best
interests of the shareholders of Arvig, as many shareholders of
Arvig are also subscribers of Arvig's local telephone company
subsidiaries and reside in the exchange areas served by such
subsidiaries.

Financial Strength. The Arvig Board considered the financial
condition and prospects of TDS, based on publicly available
information concerning TDS. The Arvig Board determined that TDS
has the requisite financial capabilities to consummate the
transaction. The Arvig Board also concluded that the Merger will
provide Arvig shareholders, as holders of TDS Common Shares, the
opportunity to participate in a larger, more diversified company.

Liquidity. One of the Arvig Board's primary objectives to be
achieved from the sale of Arvig is to obtain liquidity for the
Arvig shareholders with respect to their Arvig Shares. The Arvig
Board believes that the TDS Common Shares to be delivered in
exchange for Arvig Shares are marketable securities. Such TDS
Common Shares will be registered under the Securities Act and
listed for trading on the American Stock Exchange. Thus, the Arvig
Board views the Merger to be a means by which Arvig shareholders
will be able to obtain liquidity for their Arvig Shares.

Tax Structure. The transactions contemplated by the Merger
Agreement are intended to qualify as a tax-free exchange of stock
under the provisions of the Internal Revenue Code. While the Arvig
Board recognizes that such result cannot be guaranteed, it believes
that such a tax-free exchange, if possible, is in the best
interests of the Arvig shareholders.

At the time the Arvig Board approved the Merger Agreement, it had
knowledge of a June 1992 decision by the Federal Communications Commission
(the "FCC") involving a subsidiary of TDS which related to the application
by La Star Cellular Telephone Company, Inc. ("La Star"), for a cellular
license in Louisiana (the "La Star Decision"). In a footnote to the La
Star Decision, the FCC noted that questions had been raised concerning the
candor exhibited by the TDS subsidiary in the La Star proceeding. These
questions were not addressed by the FCC at the time because it was not
necessary to do so in order to reach its decision in that case. However,
the FCC reserved the right to address these questions in the future.
Since the La Star Decision, and as a result of the footnote in the La Star
Decision, the FCC has conditioned authorizations to TDS and its
subsidiaries upon the outcome of any subsequent actions that the FCC might
take concerning the matters raised in the La Star footnote.

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On February 1, 1994, the FCC issued a Memorandum Opinion and Order and
Hearing Designation Order (the "Wisconsin Order") in connection with a
license granted to TDS for a rural service area number 8 in Wisconsin. In
the Wisconsin Order, the FCC set for hearing issues concerning whether the
TDS subsidiary involved in the La Star proceeding had misrepresented facts
to, lacked candor in its dealings with or attempted to mislead the FCC
and, if so, whether TDS possesses the requisite character qualifications
to hold the Wisconsin license. By a subsequent order, an Administrative
Law Judge set October 18, 1994, as the first day of the hearing on these
issues.

TDS had appealed the La Star Decision to the Court of Appeals for the
District of Columbia. On March 29, 1994, that Court vacated the La Star
Decision and remanded the case to the FCC for further proceedings. It is
unclear at this time what the result of those further proceedings will be
and what effect the Court's action will have on the Wisconsin Order.

Since the issuance of the Wisconsin Order, the Arvig Board has consulted
with FCC counsel and its investment banker, Piper Jaffray, Inc.,
concerning the possible ramifications of the outcome of the hearings based
upon the Wisconsin Order.

The Arvig Board understands that the FCC's designation of a hearing to
determine character qualifications of an applicant for a license is a rare
occurrence which arises only where the FCC is of the view that substantial
and material questions of fact are present as to the applicant's fitness
to be a licensee. The Arvig Board also understands that it is the opinion
of TDS that it did not have an adequate opportunity to address the
questions presented in the Wisconsin Order and that, if TDS had been
afforded such an opportunity, it would have been able to show the FCC that
the conduct of the TDS subsidiary in the La Star proceeding did not raise
either a substantial or a material candor question.

An adverse finding in the Wisconsin proceeding could result in a variety
of possible sanctions against TDS, ranging from a fine to loss of the
Wisconsin license. Moreover, a determination by the FCC that TDS lacks
the requisite character qualifications to hold the Wisconsin license could
raise questions concerning other licenses controlled by TDS. Accordingly,
while only the Wisconsin license is directly involved in the Wisconsin
proceeding, an adverse decision could ultimately place in jeopardy all of
TDS's licenses and those of its affiliates in which TDS holds the
controlling interest.

The Arvig Board does not believe it is likely that the pending FCC
proceedings involving La Star and the Wisconsin license will be resolved
prior to the Closing Date. In addition, in the event of an adverse
decision, any sanctions beyond the loss of the Wisconsin license would
require additional administrative proceedings against TDS, which would
likely take several years. As a result, the value of TDS Common Shares
may be adversely affected by these proceedings for a period of time
substantially beyond the Closing Date. Accordingly, the Arvig Board
believes that the Arvig shareholders should take the pending FCC matters
involving TDS into account in determining whether to vote in favor of the
Merger.

The Merger is subject to FCC approval because certain Arvig subsidiaries
hold FCC authorizations which may be transferred only with such approval.
The Arvig Board recognizes that, pursuant to the Wisconsin Order, any FCC
approval of the transfer of control of the FCC licenses from Arvig and its
subsidiaries to TDS will likely be conditioned on the outcome of the
Wisconsin proceeding. It is not clear at this time how this condition
would be implemented in the event of a finding by the FCC in the Wisconsin
proceeding that TDS does not possess the requisite character
qualifications.

Since February 1, 1994, the price of TDS Common Shares in the stock
market has declined significantly. Moreover, although the stock market
has generally declined, the decline in TDS's stock price has been
significantly greater than the decline in an index of the stock prices of
seven representative companies in the cellular industry. In its fairness
opinion, Piper Jaffray assumes that the market price for TDS Common Shares
fully reflects the possible adverse consequences that might arise from any
proceedings pending against TDS, including the La Star and Wisconsin
proceedings.

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The Merger Agreement contains provisions requiring that the number of
TDS Common Shares delivered to the Arvig shareholders at the closing
increase as the average price of TDS Common Shares in the stock market
declines. In addition, if at the time of the Merger, the Average Closing
Price of TDS Common Shares is less than $42.00, the Sellers will have the
option to terminate the Merger Agreement. In that event, if TDS decides
to require the Sellers to complete the Merger, TDS would be obligated to
deliver still more TDS Common Shares, so that the aggregate value of the
Exchange Consideration would be approximately $50,516,389. See "The
Merger-Exchange Consideration."

For additional discussion of the La Star Application, see TDS' Annual
Report on Form 10-K for the year ended December 31, 1993 which is being
delivered with this Proxy Statement-Prospectus and is incorporated herein
by reference.

Notwithstanding the pendency of the La Star and Wisconsin proceedings
and based upon the factors set forth above, the Arvig Board believes that
the Merger is in the best interest of the Arvig shareholders and
recommends that the shareholders approve the Merger.

The minutes of the December 14, 1993 meeting of the Arvig Board reflect
that the recommendation of the Arvig Board to vote for approval of the
Merger was unanimous. However, since that time, one director of Arvig,
Gilroy Arvig, has indicated to the full Arvig Board that he has certain
reservations regarding the Merger. Gilroy Arvig has not specified the
nature of his reservations, nor has he formally withdrawn his vote or
moved to reconsider the approval and recommendation of the Arvig Board.
Nevertheless, in view of Gilroy Arvig's statements, the Arvig shareholders
may want to consider the recommendation of the Arvig Board to be less
than unanimous.

The directors of Arvig beneficially own 16,954 Arvig Shares. See
"Information with Respect to Arvig -Beneficial Ownership of Directors and
Executive Officers." For a discussion of the interests of certain members
of the Arvig Board in the Merger, see "The Merger - Interests of Certain
Persons in the Merger."

TDS's Reasons for the Merger

TDS is acquiring Arvig as part of its overall strategy of acquiring
independent telephone companies. TDS believes that the Merger will enable
TDS to expand its capabilities, provide it with the opportunity to serve a
larger base of customers in Minnesota, and position it to better meet
emerging trends within the telephone industry.

Opinion of Piper Jaffray, Inc.

On April 20, 1994, Piper Jaffray, Arvig's exclusive agent in connection
with the sale of Arvig, delivered a written opinion to the Board of
Directors of Arvig to the effect that the Exchange Consideration is fair,
from a financial point of view, to the holders of Arvig Shares. The full
text of the opinion of Piper Jaffray is attached as Annex B to this Proxy
Statement-Prospectus.

Piper Jaffray's opinion does not constitute a recommendation to any
shareholder of Arvig as to how such shareholder should vote at the Arvig
Meeting and is subject to certain assumptions made, matters considered and
limits of review undertaken, as set forth therein. The description of the
opinion of Piper Jaffray contained herein is qualified in its entirety by
reference to the full text of such opinion. Shareholders of Arvig are
urged to read the opinion in its entirety.

In arriving at its opinion, Piper Jaffray reviewed, among other things,
(i) the Merger Agreement, (ii) audited financial statements of the
subsidiaries of Arvig for the years ended December 31, 1989-1993, (iii)
unaudited Consolidating Financials of Arvig for the years ended December
31, 1989-1992, (iv) the audited Consolidating Financials of Arvig for the
year ended December 31, 1993, (v) certain projected financial results for
the Arvig subsidiaries for the year ended December 31, 1994, (vi) certain
financial and securities data of companies deemed similar to Arvig or
representative of the business sectors in which Arvig operates, (vii) the
financial terms, to the extent publicly available, of certain acquisition
transactions, and (viii) certain financial and securities data of TDS and
companies deemed similar to TDS or representative of the business sectors
in which TDS operates. In addition, Piper Jaffray visited the
headquarters and principal facilities of Arvig in Pequot Lakes, Minnesota,
and had discussions with members of management concerning Arvig's
financial condition, current operating results and business outlook.
Piper Jaffray also had discussions with certain members of TDS senior
management concerning TDS's financial condition, current operating results
and business outlook.

Piper Jaffray relied upon and assumed the accuracy, completeness and
fairness of the financial statements and other information provided by
Arvig or otherwise made available to Piper Jaffray and did not attempt to
independently verify such information. Piper Jaffray also relied upon the
assurances of Arvig management that

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the information provided was prepared on a reasonable basis and, with
respect to projections, reflects the best currently available estimates,
and that Arvig management was not aware of any information or facts that
would make the information provided incomplete or misleading. In
performing its analyses, Piper Jaffray made numerous assumptions with
respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Arvig or TDS.
In addition, Piper Jaffray assumed for purposes of their opinion that on
the date of such opinion, the market price of TDS Common Shares fully
reflects the possible adverse consequences that might arise from any
pending or threatened litigation or governmental proceedings or
investigations to which TDS or any of its affiliates is a party or may be
subject and expresses no opinion as to the probable outcome, or the
consequences of any unfavorable outcome, of any such litigation,
proceedings or investigations.

In arriving at its opinion, Piper Jaffray did not perform any appraisals
or valuations of specific assets of Arvig or TDS and expresses no opinion
therein regarding the liquidation value of Arvig. The opinion is based
upon conditions as they existed and were subject to evaluation on the date
thereof. Additionally, Piper Jaffray expresses no opinion therein as to
the prices at which TDS Common Shares may trade at any future time.

Piper Jaffray is a nationally recognized brokerage, financial advisory
and investment banking firm. As part of its business, Piper Jaffray is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions. The Board of Directors of Arvig
selected Piper Jaffray because of its expertise and familiarity with the
telephone industry in general, including specifically the region in which
Arvig and its subsidiaries conduct their business.

Pursuant to the terms of an engagement letter dated October 19, 1992,
Arvig has paid Piper Jaffray $50,000 for acting as Arvig's exclusive agent
to find a purchaser for Arvig. In addition, in the event of the sale of
Arvig either (i) prior to the termination of the engagement letter or (ii)
within one year of such termination to certain potential purchasers, Arvig
has agreed to pay Piper Jaffray a fee equal to $350,000 plus 3.25% of the
incremental total sales price in excess of $53.0 million up to $58.0
million; plus 5.0% of the incremental total sales price in excess of $58.0
million. The $50,000 retainer will be credited against any fee payable in
connection with the sale of Arvig. Arvig has also agreed to indemnify and
hold Piper Jaffray and certain related parties harmless against certain
liabilities, actions, claims, proceedings and investigations arising out
of or in connection with Piper Jaffray's services rendered in connection
with the engagement letter, and to reimburse Piper Jaffray for all
reasonable legal fees and other out-of-pocket expenses incurred in
connection with investigating, preparing or defending against any such
actions, claims, proceedings or investigations. The terms of the fee
arrangement with Piper Jaffray were negotiated at arm's length between
members of Arvig's Board of Directors and representatives of Piper
Jaffray. The Arvig Board was aware that a significant portion of the
aggregate fee payable to Piper Jaffray is contingent upon consummation of
a transaction involving the sale, exchange or other disposition of 51% or
more of (i) the ownership or Arvig, or (ii) its assets.

Effective Time of the Merger

If the Merger Agreement is approved by the requisite vote of shares of
Arvig Voting Stock, and the other conditions to the Merger are satisfied
or waived, the Merger will become effective upon the filing of articles of
merger with the Secretary of State of the State of Minnesota. If the
Merger Agreement is approved, it is presently contemplated that the
Closing Date will occur on Wednesday, August 3, 1994, or as soon as
practicable thereafter following the receipt of all required regulatory
approvals.

Vote Required

Approval of the Merger Agreement requires the affirmative vote of the
holders of a majority (51%) of the outstanding shares of Arvig Voting
Stock entitled to vote at the Arvig Meeting (i.e. 2,229 shares of Arvig
Voting Stock). Each holder of shares of Arvig Voting Stock as of the
Arvig Record Date is entitled to one vote per share held by such
shareholder. On the Arvig Record Date, there were 4,370 shares of Arvig
Voting Stock outstanding. The Sellers have agreed to vote their shares in
favor of approval of the Merger Agreement. See "The Merger-Agreements to
Vote in Favor of the Merger." Assuming that such shareholders vote as
agreed, the Merger will be approved at the Arvig Meeting.

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Approval of the Merger Agreement by TDS's shareholders is not required.
The Board of Directors of Sub and TDS, and TDS as the sole shareholder of
Sub, have approved the Merger and the Merger Agreement.

Approval of the proposal to issue additional shares of Arvig Nonvoting
Stock requires the affirmative vote of the holders of at least three-
fourths (75%) of the outstanding Arvig Voting Stock (i.e. 3,278 shares of
Arvig Voting Stock). See "The Merger - Additional Issuances and Effects
of Change in Arvig Capitalization."

Conversion of Shares in the Merger

At the Effective Time, each Arvig Share issued and outstanding
immediately prior thereto (other than Arvig Shares held by any shareholder
who shall have perfected his or her right to dissent under the Minnesota
Business Corporation Act) will be automatically converted into the right
to receive the Exchange Consideration, as further described in "The
Merger."

Exchange of Certificates

Harris Trust and Savings Bank, Chicago, Illinois, as exchange agent (the
"Exchange Agent"), will provide transmittal forms to Arvig shareholders to
be used in forwarding their certificates for Arvig Shares for surrender
and exchange for certificates representing the number of TDS Common Shares
into which their Arvig Shares were converted in the Merger and/or cash, if
applicable, to which such holders otherwise would be entitled. Until such
surrender, certificates representing Arvig Shares will be deemed to
represent the right to the number of TDS Common Shares and/or cash, if
applicable, into which such Arvig Shares were converted in the Merger,
except that the holders of Arvig certificates will not be entitled to
receive dividends or any other distributions from TDS until such
certificates are so surrendered. When such certificates are surrendered,
the holders of TDS certificates issued in the Merger will be paid, without
interest, any dividends or other distributions which may have become
payable with respect to such TDS Common Shares since the Effective Time.

Additional Issuances and Effects of Changes in Arvig Capitalization

Subject to the approval by shareholders owning three-fourths (75%) of
the combined voting power of all outstanding Arvig Shares, Arvig will
issue prior to the Effective Time an additional (i) 389 shares of Arvig
Nonvoting Stock to certain shareholders of Arvig who were the holders of
Arvig Nonvoting Stock previously redeemed by Arvig, and (ii) 651 shares of
Arvig Nonvoting Stock to Gilroy Arvig as additional compensation in
recognition of the valuable service that he has rendered to Arvig for more
than forty years. Except as otherwise expressly indicated, for all
purposes of this Proxy Statement-Prospectus, it is assumed that the
proposal to issue the New Arvig Shares will be approved at the Arvig
Meeting.

The number of TDS Common Shares into which each Arvig Share is to be
converted in the Merger will also be adjusted proportionately, to reflect
the effects of any other changes in the number of issued and outstanding
Arvig Shares from that number set forth in the representations and
warranties of Arvig in the Merger Agreement, so that the aggregate
purchase price paid by TDS for all of the issued and outstanding Arvig
Shares (including the New Arvig Shares), on a fully diluted basis, does
not change from that otherwise payable without regard to such event(s).

Fractional Shares

No certificates representing fractional TDS Common Shares will be issued
by TDS and no TDS dividend, stock split or interest will relate to any
such fractional share. No fractional share interests will entitle the
owner thereof to vote or to any rights of a shareholder of TDS. In lieu
of any such fractional shares, each holder of Arvig Shares who otherwise
would be entitled to receive fractional TDS Common Shares in the Merger
will receive an amount of cash (without interest) determined by
multiplying (i) the fractional share interest to which such holder would
otherwise be entitled by, (ii) the Average Closing Price for TDS Common
Shares.

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Representations and Warranties

The Merger Agreement contains various representations and warranties of
the parties thereto. These include representations and warranties: (A) by
the Sellers as to (i) the binding effect of the Merger Agreement and lack
of conflicts with any other obligation of each of the Sellers, (ii) the
status of the Arvig Shares to be delivered by each of the Sellers, and
(iii) the lack of litigation; (B) by Arvig as to (i) its subsidiaries,
organization, good standing and power to operate its business, (ii) its
capital structure, (iii) its authority to execute and perform the Merger
Agreement, (iv) the lack of conflicts with any other obligation of Arvig,
(v) no consents being required, except as disclosed, (vi) its financial
statements, (vii) its compliance with applicable laws, (viii) the
availability of its assets and the legality of their use, (ix) title to
its property, (x) patents, tradenames, trademarks and other rights, (xi)
real estate, (xii) insurance, (xiii) environmental conditions, (xiv) bank
accounts and powers of attorney, (xv) customers and suppliers, (xvi)
accounts receivable, (xvii) the lack of litigation, except as disclosed,
(xviii) tax liabilities, (xix) benefit plans, (xx) the absence of certain
changes or events since December 31, 1992, (xxi) there being no
undisclosed liabilities, (xxii) the accuracy of information provided by
Arvig for this Proxy Statement-Prospectus, (xxiii) the vote required to
approve the Merger Agreement, and (xxiv) the beneficial ownership of TDS
Common Shares; and (C) by TDS and Sub as to (i) their organization, good
standing and power to operate their businesses, (ii) their capital
structure, (iii) their authority to execute and perform the Merger
Agreement, (iv) the lack of conflicts with any other obligation of TDS or
Sub, (v) no consents being required, except as disclosed, (vi) certain
documents filed with the Commission, (vii) their compliance with
applicable laws, (viii) the lack of litigation, except as disclosed, (ix)
the absence of certain changes or events since December 31, 1992, (x) no
undisclosed material liabilities, (x) the interim operations of Sub, (xii)
authorization for the TDS Common Shares and stock exchange listing, and
(xiii) the accuracy of information supplied by TDS and Sub for this Proxy
Statement-Prospectus.

Business of Arvig Pending Completion of the Merger

Arvig has agreed that, among other things, prior to consummation of the
Merger, except as permitted by the Merger Agreement or unless TDS agrees
otherwise, (i) it and each of its subsidiaries will carry on its business
in the usual, regular and ordinary course in substantially the same manner
as previously conducted and use all reasonable efforts to preserve intact
its present business organization, keep available the services of its
current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it such that
the goodwill and ongoing businesses will not be impaired in any material
respect at the Effective Time, (ii) it will not declare or pay any
dividends on or make other distributions with respect to any of its
capital stock with the exception of a regular cash dividend not in excess
of an aggregate of $327,750 per calendar quarter payable on the first day
of the second month in such quarter, (iii) it will not effect any stock
split or reclassification of any shares of its capital stock or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or repurchase or otherwise
acquire any of the capital stock of Arvig, (iv) it will not, nor will it
permit any of its subsidiaries to, issue, deliver or sell, or authorize or
propose to issue, deliver or sell any shares of its capital stock of any
class, any voting debt, or any securities convertible into, or any rights,
warrants or options to acquire any such shares, voting debt or convertible
securities other than the New Arvig Shares, (v) it will not amend or
propose to amend its Articles of Incorporation or Bylaws, (vi) neither it,
nor the Sellers will, nor will they authorize or permit any other
representative of Arvig or the Sellers to, solicit or encourage any
acquisition proposals or agree to or endorse any acquisition proposal
unless, in the reasonable good faith judgment of the Board of Directors of
Arvig, after consultation with its outside counsel, the failure to do so
would violate the Board of Directors' fiduciary duties to the holders of
Arvig Shares, (vii) it will not, and will not permit any of its
subsidiaries to (x) make any acquisitions, (y) dispositions or (z) incur
any indebtedness having an aggregate value in excess of $500,000.

With respect to the employees of Arvig and its subsidiaries, Arvig has
agreed, unless permitted by the Merger Agreement, not to (i) grant any
increase in the compensation of any of its directors, officers,
shareholders or key employees, except for regularly scheduled bonuses paid
in December 1993, (ii) pay or agree to pay any pension, retirement
allowance or other employee benefit not required or contemplated by
existing benefit plans, (iii) enter into or amend any existing employment
or severance or termination agreement, or (iv) become obligated under any
new benefit plan or amend any benefit plan if such amendment would have
the effect of materially enhancing any benefit thereunder.

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Business of TDS Pending Completion of the Merger

TDS has agreed that prior to consummation of the Merger, except as
permitted by the Merger Agreement, or unless Arvig agrees otherwise (i)
TDS and each of its Significant Subsidiaries (as defined in the Merger
Agreement) will carry on its business in the usual, regular and ordinary
course in substantially the same manner previously conducted and use all
reasonable efforts to keep available the services of its current officers
and employees and preserve its relationships with its current customers,
suppliers and others having business dealings with TDS such that the
goodwill and ongoing business will not be impaired in any material respect
at the Effective Time, (ii) TDS will not merge with any other corporation
or consolidate its operations with any other corporation or business
entity, if such consolidation would, under its Articles of Incorporation
or Bylaws, require the prior approval of the TDS shareholders, and (iii)
TDS will provide to the Sellers, Arvig and its counsel a copy of all
filings made with the Commission.

Access

Arvig has also agreed (and has agreed to cause each of its subsidiaries)
to afford to the officers, employees and authorized representatives of TDS
access during normal business hours to all its properties, books,
contracts, commitments and records to the extent TDS shall deem necessary
or desirable, and to furnish to TDS or its authorized representatives such
additional information concerning the business, properties and personnel
of Arvig and its subsidiaries as shall be reasonably requested, including
all such information as shall be necessary to enable TDS to determine
whether the conditions set forth in the Merger Agreement have been
satisfied.

Resale of TDS Common Shares

The TDS Common Shares to be issued in connection with the Merger will be
registered under the Securities Act and will be freely tradable, except
for shares received by persons deemed to be "affiliates" of Arvig at the
time of the Arvig Meeting. Affiliates of Arvig may not sell their TDS
Common Shares acquired in connection with the Merger except pursuant to an
effective registration statement under the Securities Act covering such
shares, or in compliance with Rule 145 promulgated under the Securities
Act or other applicable exemption from the registration requirements of
the Securities Act. Arvig is required by the Merger Agreement to identify
to TDS all persons who at the time of the Arvig Meeting may be considered
affiliates of Arvig for purposes of Rule 145 and is required to use its
best efforts to cause each person who is identified as an affiliate of
Arvig to deliver to TDS on or prior to the Effective Time an agreement
satisfactory to TDS that such persons will not offer to sell or otherwise
dispose of any TDS Common Shares received in the Merger in violation of
the Securities Act.

Employees of Arvig and its Subsidiaries

TDS has agreed that it will (i) invite all full-time employees (other
than directors and officers of Arvig and its subsidiaries) of Arvig's
local exchange telephone operations to remain in the employ of Arvig after
the Effective Time, subject to the reasonable performance of their duties
and the needs of Arvig, and (ii) extend to all such employees the full
complement of benefits provided by TDS, including medical, life and dental
insurance, participation in the TDS pension plan, tax-deferred savings
(401(k)) and employee stock purchase plans and continuing education
opportunities.

The foregoing agreement by TDS does not apply to the employees of
Arvig's long-distance inter-exchange operations. However, such employees
are covered by a severance plan if their employment is terminated under
certain circumstances following the Merger, as more fully described in
"Information with Respect to Arvig-Arvig Benefit Plans."

Fees and Expenses

All costs and expenses incurred in connection with the Merger will be
paid by the party incurring such expenses, with the exception of certain
fees and expenses of the Sellers relating to the Merger which will be paid
by Arvig in an amount not to exceed $550,000.

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Split-off

Certain shareholders of Arvig (the "Shareholder Group") are interested
in acquiring the long-distance operations of Arvig by means of
distributing to such shareholders all of the equity of U.S. Link, Inc.,
ABT Long-Distance Services, Inc., and Velstar Systems, Inc., each a
wholly-owned subsidiary of Arvig, and the equity in Northern Fiber, Inc.
in which Arvig holds a minority interest (collectively, the "Long-Distance
Subsidiaries"). See "Information with Respect to Arvig - Business of
Arvig." TDS is currently negotiating with the Shareholder Group regarding
the possibility of distributing the equity of the Long-Distance
Subsidiaries to the Shareholder Group in exchange for and in redemption of
all or a portion of the Arvig Shares owned by members of the Shareholder
Group (the "Split-off"). In the event TDS is able to reach mutually
acceptable terms regarding a Split-off, Arvig has agreed to use its best
efforts to consummate the transaction prior to the Effective Time. If the
Split-Off occurs, (i) the aggregate Exchange Consideration to be delivered
to the shareholders of Arvig will be reduced, (ii) the Exchange
Consideration to be delivered to members of the Shareholder Group will be
reduced, and (iii) the Exchange Consideration to be delivered to
shareholders who are not members of the Shareholder Group will not change.

Agreements to Vote in Favor of the Merger

Each Seller has agreed, among other things, that so long as the Merger
Agreement has not been terminated, such Seller will vote all of his or her
Arvig Voting Stock in favor of the approval of the Merger Agreement. The
Sellers collectively own 68% of the outstanding shares of Arvig Voting
Stock. Therefore, assuming that such shareholders vote as agreed, the
Merger will be approved.

Indemnification

The Merger Agreement provides for indemnification obligations of the
Sellers and TDS in certain circumstances. These obligations expire, with
certain exceptions, on the third anniversary of the Effective Time of the
Merger.

The Sellers, jointly and severally, have agreed to indemnify, hold
harmless and defend TDS and each of its officers, directors, employees,
affiliates, subsidiaries, successors and assigns (the "TDS Indemnitees"),
against any claim, demand, loss, expense, obligation or liability,
including interest, penalties and reasonable attorneys' fees
(collectively, "Losses") incurred by any TDS Indemnitee relating to,
resulting from or arising out of (a) any breach by Arvig or the Sellers in
the performance of their respective obligations under the Merger
Agreement, (b) the inaccuracy of any of the representations or warranties
made by Arvig or the Sellers in the Merger Agreement, in any exhibit or
schedule thereto, or in any other instrument delivered in accordance with
the provisions thereof, or (c) any action, suit, proceeding, assessment or
judgment incident to any of the foregoing. However, the Sellers shall not
be required to indemnify the TDS Indemnitees with respect to any Losses
incurred by any such TDS Indemnitees until, and then only insofar as, the
Losses shall exceed in the aggregate $2,500,000.

TDS has agreed to indemnify, hold harmless and defend the Sellers,
Arvig, and each of Arvig's officers, directors, employees, affiliates,
subsidiaries, successors and assigns (the "Arvig Indemnitees"), against
all Losses incurred by any of them relating to, resulting from or arising
out of (a) any breach by TDS or Sub in the performance of their respective
obligations under the Merger Agreement, (b) the inaccuracy of any of the
representations made by TDS or Sub in the Merger Agreement, in any
schedule or exhibit thereto, or in any instrument executed or delivered in
accordance with the provisions thereof, or (c) any action, suit,
proceeding, assessment or judgment incident to any of the foregoing.
However, TDS shall not be required to indemnify the Arvig Indemnitees
hereunder with respect to any Losses incurred by any such Arvig Indemnitee
until, and then only insofar as, the Losses exceed in the aggregate
$2,500,000.

Conditions

The respective obligations of TDS, Sub, Arvig and the Sellers to effect
the Merger are subject to the satisfaction of certain conditions,
including, among others, (i) the approval of the Merger by holders of
shares of Arvig Voting Stock entitling them to exercise the vote of a
majority of the outstanding shares of Arvig Voting Stock, (ii) the TDS
Common Shares to be issued pursuant to the Merger Agreement shall have
been approved

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for listing upon notice of issuance by the American Stock Exchange, (iii)
the parties shall have received all governmental and regulatory approvals
and actions necessary to consummate the transactions contemplated by the
Merger Agreement, which are either required to be obtained prior to the
Effective Time by applicable law or regulation or are necessary to prevent
a material adverse effect on TDS and its subsidiaries, or Arvig and its
subsidiaries, in each case, taken as a whole, (iv) the Registration
Statement shall have become effective, and no stop order suspending the
effectiveness of the Registration Statement of which this Proxy Statement-
Prospectus is a part shall have been entered by the Commission, and (v) no
temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall
be in effect.

In addition, the obligations of TDS and Sub to effect the Merger are
subject to the conditions that, (i) each of the representations and
warranties of Arvig and the Sellers contained in the Merger Agreement
shall be true and correct in all material respects at the Effective Time
as though made at the Effective Time, except as affected by transactions
contemplated by the Merger Agreement, and there shall have been delivered
to TDS and Sub a certificate to such effect signed on behalf of Arvig and
a representative of the Sellers, (ii) Arvig and the Sellers shall have
performed in all material respects all obligations required to be
performed by them under the Merger Agreement at or prior to the Effective
Time, and there shall have been delivered to TDS and Sub a certificate to
such effect signed on behalf of Arvig and a representative of the Sellers,
(iii) TDS shall have received an executed copy of an agreement, in a form
reasonably satisfactory to TDS, from each "affiliate" of Arvig for
purposes of Rule 145 under the Securities Act, and (iv) TDS and Sub shall
have received from counsel for Arvig, and from counsel for the Sellers, an
opinion in form and substance reasonably acceptable to TDS and its
counsel.

The obligations of Arvig and the Sellers to effect the Merger are
subject to the conditions that: (i) each of the representations and
warranties of TDS and Sub contained in the Merger Agreement shall be true
and correct in all material respects at the Effective Time as though made
at the Effective Time, except as affected by transactions contemplated by
the Merger Agreement, and there shall have been delivered to Arvig and the
Sellers a certificate or certificates to such effect signed on behalf of
TDS and Sub, (ii) TDS and Sub shall have performed in all material
respects all obligations required to be performed by them under the Merger
Agreement at or prior to the Effective Time, and there shall have been
delivered to Arvig and the Sellers a certificate to such effect signed on
behalf of TDS and Sub, (iii) Arvig and the Sellers shall have received
from counsel for TDS and Sub an opinion in form and substance reasonably
acceptable to Arvig, Sellers and their counsel, (iv) prior to mailing the
Proxy Statement, Arvig shall have received a written opinion from Piper
Jaffray to the effect that the consideration to be delivered in the Merger
is fair from a financial point of view to the shareholders of Arvig, and
such opinion shall not have been withdrawn or materially modified in any
adverse manner prior to the Effective Time, and (v) since the date of the
Merger Agreement, there shall have been no material adverse change in the
condition, properties, business, or results of operations of TDS.

Amendment; Termination

Any of the provisions of the Merger Agreement may be amended at any time
before or after the approval of the Merger Agreement by the shareholders
of Arvig, except that no amendment subsequent to shareholder approval
shall be made which by law requires further approval by such shareholders
without such further approval and any amendment must be in writing signed
on behalf of all of the parties to the Merger Agreement.

The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger Agreement,
(i) by mutual consent of TDS and Arvig, (ii) by TDS or Arvig upon any
material breach by the other party of any representation, warranty,
covenant or agreement in the Merger Agreement if such breach is not cured
within 15 business days of the breaching party's receipt of notice of such
breach, or if any permanent injunction or other order of a court or other
competent authority preventing the consummation of the Merger has become
final and non-appealable, (iii) by TDS or Arvig, so long as such party has
not materially breached its obligations hereunder, if the Merger shall not
have been consummated before December 31, 1994, (iv) by TDS or Arvig if
the shareholders of Arvig do not approve the Merger at the Arvig Meeting,
(v) by TDS or Arvig in connection with an acquisition proposal from a
third party and the Board of Directors of Arvig, in its reasonable good
faith judgment determines, after consultation with outside counsel,

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that the failure to terminate the Merger Agreement would violate its
fiduciary duties to the holders of Arvig Shares, (vi) by TDS or Arvig if
any conditions upon either party's obligation to consummate the Merger set
fort in the Merger Agreement cannot be met, (vii) by Arvig upon exercise
of the Sellers' Out, in the event TDS does not require Arvig to consummate
the Merger in accordance with its rights to do so under the Merger
Agreement as described in "The Merger - Exchange Consideration", or (viii)
by TDS upon exercise of the Buyer's Out in the event Arvig does not
require TDS to consummate the Merger in accordance with its rights to do
so under the Merger Agreement as described in "The Merger - Exchange
Consideration."

In the event of such termination, all further obligations of the parties
under the Merger Agreement shall terminate without any liability on the
part of any party, except with respect to the treatment of all
confidential information furnished by each party and the payment of
certain expenses and except that nothing in the Merger Agreement shall
relieve any party from liability for its breach of the Merger Agreement.

Agent for Service of Process; Sellers' Representative

Pursuant to the Merger Agreement, each of the Sellers has irrevocably
appointed Hall, Byers, Hanson, Steil & Weinberger, P.A. as such Sellers
agent (the "Agent") to receive notice, service or summons or any other
legal process or pleading in any action, suit or proceeding against such
Seller arising out of or in connection with any matter relating to the
Merger Agreement. The Merger Agreement contemplates that the Sellers will
enter into a Power-of-Attorney and Custody Agreement (the "Custody
Agreement") with the Agent which will govern the relationship between the
Sellers and the Agent.

The Custody Agreement will also provide for the appointment of the
Executive Committee of the Board of Directors of Arvig as Attorneys-in-
Fact to each of the Sellers (the "Sellers' Representative"). The Sellers'
Representative will have the authority, among other things, to:

(i) deliver each Seller's Arvig Shares to the Exchange Agent;

(ii) perform each of the Seller's obligations under the Merger
Agreement in order to effectuate the closing of the Merger,
including the receiving or giving of consents and waivers;

(iii) to retain legal counsel to advise and represent the Sellers'
Representative; and

(iv) to make, exchange, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions,
certificates, letters and other writings, and in general do
all things and to take all actions which the Sellers'
Representative may consider necessary or appropriate in
connection with or to carry out the Merger.

Each of the Sellers will be bound by all agreements and determinations
made by and documents executed and delivered by the Sellers'
Representative. The Sellers will jointly and severally indemnify the
Sellers' Representative for any and all liability, loss, cost, damage or
expense (including attorneys' fees) incurred or suffered as a result of
the performance of their duties under the Custody Agreement, except for
gross negligence or willful misconduct.

Interests of Certain Persons in the Merger

The directors of Arvig and their respective spouses and family members
residing with such directors own an aggregate of 16,954 Arvig Shares. The
directors will receive no extra or special benefit from the Merger not
shared on a pro-rata basis with all other holders of Arvig Shares, except
as set forth below.

Release of Liability of Certain Persons. The Merger Agreement provides
that, upon consummation of the Merger, all present and former officers,
directors, and employees of Arvig and its subsidiaries ("Released
Persons") will be deemed to be released and forever discharged from all
claims, demands, causes of action by, or liability to Arvig and its
subsidiaries which Arvig or its subsidiaries may have had arising prior to
the Effective Time out of (i) any transactions or relationships with such
Released Persons, (ii) the operation of Arvig and its subsidiaries, and
(iii) any transactions or relationships between Arvig or its subsidiaries
and the shareholders of Arvig; provided, however, that the foregoing
releases will not be deemed effective upon the

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consummation of the Merger unless prior to such time (i) each of Gilroy
Arvig, Gregory Arvig, Michael Arvig,Gary Brunes, Bruce Brunes, Galeen
Royce, Larry Coulter, Marlene Moser, Conrad Johnson and Lowell
Johnson have executed and delivered a full and complete release of any and
all claims that such person may have against Arvig, its directors, officers
or affiliates (the "Mutual Release"), and (ii) Arvig shall have received
from Arvig's directors and officers liability insurance carrier (A)
written approval for such release, and (B) confirmation that such a release
will not affect the insurance coverage currently provided to Arvig by
such carrier. The Mutual Release has been executed and became effective on
December 14, 1993.

Indemnification. TDS has also agreed that it will not cause or permit
Arvig or any of its subsidiaries to amend, modify or change any provisions
of any By-laws of Arvig or any of its subsidiaries as they existed on the
date of the Merger Agreement if the operative effect of such amendment
would be to modify in any respect the respective rights and
responsibilities, including the right to appropriate indemnification of
any officer, director or employee. TDS has further agreed to cause or
permit Arvig and its subsidiaries to maintain directors' and officers'
insurance, or to extend coverage under TDS's existing policies, for a
period of one year following the Effective Time, and may, at its option,
provide such insurance for an additional two years from such date.

Issuance of Arvig Shares. Gilroy Arvig, the president and a member of
the Board of Directors of Arvig, will receive, subject to the approval
thereof by holders of Arvig Voting Stock owing at least three-fourths
(75%) of the combined voting power of all outstanding shares of Arvig
Voting Stock, 651 shares of Arvig Nonvoting Stock, as compensation, in
recognition of more than forty years of service to Arvig. The shares
issued to Gilroy Arvig will be convertible into TDS Common Shares in the
Merger on the same basis as all other Arvig Shares. Any such issuance,
however, would result in an adjustment in the computation of the exchange
ratio for Arvig Shares so that the aggregate purchase price paid by TDS
for all of the issued and outstanding Arvig Shares, on a fully diluted
basis, does not change from that otherwise payable without regard to such
event, except to the extent of the tax benefits resulting from such
issuance. Accordingly, as a result of the issuance of New Arvig Shares to
Gilroy Arvig, the value of the Exchange Consideration received by each
other Arvig shareholder will be reduced.

Employment Agreements. TDS is currently negotiating with Gilroy Arvig
and Greg Arvig, the president of U.S. Link, Inc. and a member of the
Boards of Directors of U.S. Link, Inc. and Velstar Systems, Inc. and a
member of the Arvig Executive Committee, regarding the possibility of
employment following the Effective Time. In the event TDS is able to
reach mutually acceptable terms regarding employment with either or both
Gilroy or Greg Arvig, each of them would be required to enter into an
employment agreement. The terms of any such arrangements, including,
among other things, the term of employment, compensation and benefits have
not been determined.

Split-off. Gilroy Arvig, Greg Arvig, Mike Arvig, the Vice President of
Arvig and a member of the Boards of Directors of Arvig, Arvig Telephone
Company, Bridge Water Telephone Co., U.S. Link, Inc. and Velstar Systems,
Inc., and Lowell Johnson, a member of the Boards of Directors of Arvig,
Arvig Telephone Company and Bridge Water Telephone Co. may become members
of the Shareholder Group interested in acquiring the Long-Distance
Subsidiaries. See "The Merger - Split-off." In the event that the Split-
off occurs, members of the Shareholder Group would receive 100% of the
equity of the Long-Distance Subsidiaries in lieu of all or a portion of
the TDS Common Shares they would have otherwise received in the Merger.

Registration and Listing

TDS has registered the TDS Common Shares issuable upon conversion of the
Arvig Shares in the Merger pursuant to a filing with the Commission of a
Registration Statement on Form S-4 with respect to, and will take any
actions necessary under the state blue sky or securities laws in
connection with, the issuance of such shares. TDS will use its best
efforts to cause such shares to be approved for listing on the American
Stock Exchange, upon official notice of issuance, at or prior to the
Effective Time.

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Certain Federal Income Tax Consequences

The following discussion summarizes certain federal income tax
considerations involved in the exchange of Arvig Shares for TDS Common
Shares in the Merger. Sidley & Austin, counsel to TDS, will render an
opinion to the effect that, among other things, the Merger will constitute
a tax-free reorganization, within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). Such opinion will
be based on certain assumptions regarding future events and subject to
certain qualifications and the opinion of counsel is not binding upon
either the Internal Revenue Service (the "IRS") or the courts. In
addition, the parties are not seeking an advance ruling from the IRS with
respect to these matters. As a result, there is no assurance that, upon
review of the transaction, the IRS will not reject the conclusions
contained in counsel's opinion and assert that the Merger does not qualify
as a tax-free reorganization. Accordingly, this discussion addresses the
tax consequences of the Merger in both circumstances.

Tax-Free Reorganization. If the Merger qualifies as a tax-free
reorganization within the meaning of section 368(a) of the Code, no gain
or loss will be recognized by a holder of Arvig Shares upon the exchange
of Arvig Shares solely for TDS Common Shares. The aggregate basis of the
TDS Common Shares received in the Merger by a holder of Arvig Shares
(including any fractional TDS Common Share for which cash is received)
will be the same as the aggregate basis of Arvig Shares surrendered in
exchange therefor. The holding period of the TDS Common Shares received
in the Merger by a holder of Arvig Shares (including any fractional TDS
Common Share for which cash is received) will include the holding period
of Arvig Shares surrendered in exchange therefor, provided that the holder
held Arvig Shares as capital assets as of the Effective Time. A holder of
Arvig Shares who receives cash in lieu of a fractional TDS Common Share
will be treated as if the holder received the fractional TDS Common Share
and then received cash from TDS in redemption thereof. The holder will
recognize gain or loss equal to the difference between the amount of cash
received and the tax basis allocable to the fractional TDS Common Share.
This gain or loss will be capital gain or loss provided that the holder
held his TDS Common Shares as capital assets as of the Effective Time of
the Merger, and will be long-term capital gain or loss if the holding
period of the TDS Common Shares, as of the Effective Time, is more than
one year.

Taxable Exchange of Shares. If the Merger constitutes a taxable
exchange of shares, each holder of Arvig Shares will recognize gain or
loss equal to the difference between the fair market value of the TDS
Common Shares and/or cash, if applicable, received in the Merger and the
holder's basis in the Arvig Shares surrendered in exchange therefor. This
gain or loss will be capital gain or loss provided that the holder held
his Arvig Shares as capital assets as of the Effective Time of the Merger,
and will be long-term capital gain or loss if the holding period of Arvig
Shares, as of the Effective Time, is more than one year.

Continuity of Interest Test. Although there are a number of
requirements that must be satisfied in order for the Merger to qualify as
a tax-free reorganization, one significant issue regarding whether the
Merger qualifies as tax-free relates to the continuity of interest test.
In order for this test to be satisfied, the holders of Arvig Shares must
retain after the Merger a sufficient continuing interest in Arvig through
ownership of TDS Common Shares. Under the interpretation of the
continuity of interest test used by the IRS for the purpose of issuing
advance rulings, the test will not be satisfied unless the holders of
Arvig Shares prior to the Effective Time retain, in the aggregate, TDS
Common Shares with a value, as of the Effective Time, equal to at least 50
percent of the value of all of the Arvig Shares as of the same date.
Sales or other dispositions of TDS Common Shares that are part of a plan
of reorganization will be considered in determining whether the continuity
of interest test is met. If the sales or other dispositions of TDS Common
Shares are sufficient to prevent the continuity of interest test from
being satisfied, the Merger will constitute a taxable transaction, with
the results described above.

THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR
INFORMATIONAL PURPOSES ONLY AND IS BASED UPON CURRENT LAW AND
INTERPRETATIONS THEREOF. BECAUSE THE TAX CIRCUMSTANCES OF EACH HOLDER OF
ARVIG SHARES MAY DIFFER, EACH HOLDER OF ARVIG SHARES IS URGED TO CONSULT
HIS OR HER OWN TAX ADVISOR
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CONCERNING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THE HOLDER,
INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.

Accounting Treatment

The Merger will be accounted for under the purchase method for
accounting and financial reporting purposes.

Regulatory Approvals

The Merger must be approved by the Minnesota Public Utilities Commission
("MPUC") which regulates providers of telephone service within the state
of Minnesota. An application seeking such approval was jointly filed by
Arvig and TDS on February 16, 1994. Notification of either the Merger, or
other disposition of the long-distance operations of Arvig is required to
be provided, to the North Dakota Public Service Commission and the
Wisconsin Public Service Commission which regulate providers of telephone
services within their respective jurisdictions. Joint filings of Arvig
and TDS providing notice to such Commissions will be made.

The transfer of certain licenses pursuant to the Merger is subject to
the approval of the FCC. Applications seeking such approval were jointly
filed by Arvig and TDS with the FCC in March, 1994.

Transactions such as the Merger are reviewed by the Department of
Justice ("DOJ") and the Federal Trade Commission ("FTC") to determine
whether they comply with applicable antitrust laws under the provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). The Merger may not be consummated until such time as certain
information has been furnished to the DOJ and the FTC and the specified
waiting period requirements of the HSR Act have been satisfied. Premerger
Notification and Report Forms are being prepared and will be filed with
the DOJ and the FTC under the HSR Act.

The transfer of certain Cable TV franchises will require the approve of
the Heartland Cable Commission, the City of Pine River, the City of
Nisswa, the City of Lakeshore, Lake Edwards Township, and Ideal Township.
Applications for such approvals are in process.

TDS and Arvig are aware of no other governmental or regulatory approvals
required for consummation of the Merger, other than compliance with
applicable securities and "blue sky" laws of various states.

Appraisal Rights

Any holder of record of Arvig Shares who follows the procedures
specified in Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act (the "Appraisal Provisions") is entitled to have such
shareholder's Arvig Shares appraised by the court in Crow Wing County,
Minnesota (the "Court") and to receive the "fair value" of such shares as
determined by the Court in lieu of the Exchange Consideration that such
shareholder would otherwise be entitled to receive pursuant to the Merger
Agreement. Reference is made to the Appraisal Provisions, copies of which
are attached to this Proxy Statement-Prospectus as Annex C, for a complete
statement of the appraisal rights of dissenting shareholders. The
following information is qualified in its entirety by reference to the
Appraisal Provisions.

If a holder of record of Arvig Shares elects to exercise such
shareholder's right to an appraisal under the Appraisal Provisions, such
shareholder must satisfy ALL of the following conditions:

(i) such shareholder must deliver a written notice of intent to
demand the fair value of such shareholder's Arvig Shares to Arvig prior
to the vote with respect to the Merger Agreement;

(ii) such shareholder must not vote in favor of or consent in
writing to the proposal to approve the Merger Agreement. A failure to
vote will satisfy this condition, but voting in favor of or delivering a
proxy in favor of the proposal to approve the Merger Agreement or an
unmarked proxy will
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constitute a waiver of such shareholder's right to appraisal and will
nullify any written demand for appraisal; and

(iii) Within 30 days after receipt of the notice of procedure for
dissenting shareholders from Arvig (which Arvig must send to all
dissenting shareholders who properly file notice of intent to assert
dissenters' rights) such shareholder must demand payment (the "Initial
Demand") and deposit their Arvig Shares with Arvig.

Under the Appraisal Provisions, record holders of Arvig Shares are
entitled to appraisal rights as described above, and the procedures to
perfect such rights must be carried out by and in the name of such holders
of record. Persons who are beneficial but not record owners of Arvig
Shares and who wish to exercise appraisal rights with respect to the
Merger must submit to Arvig, at the time of or before the assertion of the
right, a written consent of the record holders of their shares.

After the corporate action takes effect, or after Arvig receives an
Initial Demand for payment, whichever is later, Arvig shall remit to each
dissenting shareholder who has complied with the conditions set forth
above an amount which Arvig estimates to be the fair value of the Arvig
Shares (plus interest commencing five days after the Effective Time) held
by each dissenting shareholder. Along with the remittance, Arvig shall
also send: (i) a year end balance sheet and statement of income for any
fiscal year of Arvig ending 16 months or less before the Effective Time,
together with the latest available interim financial statements; (ii) an
estimate by Arvig of the fair value of Arvig Shares and a brief
description of the method used to calculate the estimate, and (iii) a copy
of the Appraisal Provisions together with a brief description of the
procedures to be followed in demanding supplemental payment, as described
below. If a dissenting shareholder believes that the fair value of Arvig
Shares is greater than the amount remitted by Arvig, then, within 30 days
after Arvig mails the remittance, the dissenting shareholder may give
written notice to Arvig of such shareholder's own estimate of the fair
value of Arvig Shares, and demand payment of the difference (the
"Supplemental Demand"). Within 60 days after receiving the Supplemental
Demand, Arvig shall either: (i) pay the dissenting shareholder the amount
demanded (or such other amount agreed to by such shareholder), or (ii)
file a petition requesting that the Court determine the fair value of the
Arvig Shares.

If a petition is filed, the Court shall determine whether each
dissenting shareholder has complied with the conditions in the Appraisal
Provisions, and shall determine the fair value of the Arvig Shares. The
Court's determination of fair value is binding on all dissenting
shareholders. Each dissenting shareholder is entitled to judgment for the
amount, if any, by which the Court's valuation exceeds Arvig's prior
remittance. Such shareholder, however, shall not be liable to Arvig for
the amount, if any, by which Arvig's remittance exceeds the court's
valuation. The costs of the appraisal proceeding shall be determined by
the Court and assessed against Arvig, unless the dissenting shareholder's
demand is found to be arbitrary, vexatious, or not in good faith.

BUSINESS OF TDS

TDS is a diversified telecommunications service company with established
local telephone, cellular telephone and radio paging operations. At
December 31, 1993, TDS operated 94 telephone subsidiaries ranging in size
from less than 500 to more than 40,000 access lines, serving approximately
356,200 access lines in 29 states; owned or had the right to acquire
cellular interests representing approximately 23.7 million population
equivalents; and offered paging service through 17 customer operations
centers with approximately 460,900 pagers in service. "Population
equivalents" means the population of a market, based on 1993 Donnelley
Marketing Service Estimates, multiplied by the percentage interests that
TDS owns or has the right to acquire in an entity licensed or designated
to receive a license by the FCC to construct or operate a cellular system
in such market. TDS's business development strategy is to expand its
existing operations through internal growth and acquisitions and to
explore and develop other telecommunications businesses that management
believes utilize TDS's expertise in customer-based telecommunications
services. Detailed information with respect to TDS is set forth in its
Annual Report to Shareholders and on Form 10-K for the year

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<PAGE>
<PAGE>
ended December 31, 1993 and the other documents which are being delivered
with this Proxy Statement-Prospectus.

INFORMATION WITH RESPECT TO ARVIG

Business of Arvig

Arvig is a Minnesota corporation organized in 1983 to act as a holding
company for various entities, including, among others: two local exchange
telephone companies, Arvig Telephone Company and Bridge Water Telephone
Co.; two interexchange long-distance companies, U.S. Link, Inc. and ABT
Long-Distance Services, Inc.; a cable television company, Interlake
CableVision, Inc.; a data processing company, North Country Data, Ltd.; a
fiber optic network services company, Velstar Systems, Inc.; and a company
which owns interests in some of Arvig's cellular telephone investments,
Arvig Cellular, Inc. Arvig and its subsidiaries currently have
approximately 160 full-time employees. The principal office of Arvig is
located at 2nd and Main Street, Pequot Lakes, Minnesota 56472, and its
telephone number is (218) 568-4115.

Arvig Telephone Company and Bridge Water Telephone Co. Arvig Telephone
Company ("ATC") is a Minnesota corporation which was organized under the
name Pine River Rural Telephone Company in 1909. In 1954, ATC amended its
Articles of Incorporation to its present name. ATC provides telephone
service to residential and commercial customers. ATC serves approximately
9,950 access lines representing approximately 9,000 customers. ATC's
service area is located in the north central region of Minnesota, in all
or portions of Cass, Crow Wing and Hubbard counties with the exception of
the Ash River exchange which is located in the northern portion of
Minnesota along the Canadian boarder, in St. Louis and Koochiching
counties. The combined areas cover approximately 1,364 square miles.
Approximately 84% of ATC's access lines are residential and approximately
16% are business lines. ATC's service area is restricted to those areas
in which the MPUC has granted the right to provide service. ATC also owns
a 16.33% interest as limited partner in the Duluth MSA Limited
Partnership, which operates the wireline cellular radio telephone system
for the Duluth Metropolitan Service Area (the "Duluth MSA").

Bridge Water Telephone Co. ("BWTC") is a Minnesota corporation which was
organized in 1961 and acquired by ATC in 1976. In 1989, BWTC was made a
first tier subsidiary of Arvig. BWTC provides telephone service to
residential and commercial customers. BWTC serves approximately 5,300
access lines representing approximately 3,500 customers in a 82 square
mile area in Wright County, Minnesota. Approximately 74% of BWTC's access
lines are residential and approximately 26% are business lines. BWTC's
service area is restricted to those areas in which the MPUC has granted
the right to provide service. BWTC also has a division, PageLink, that
provides paging services, primarily in St. Cloud, Minnesota, with
approximately 1,200 pagers in service. PageLink is the market share
leader in the St. Cloud area.

ATC and BWTC currently have contracts with long-distance telephone
carriers for the transmission of long-distance service by ATC and BWTC to
their customers. ATC and BWTC charge the subscriber a toll set by the
long-distance carrier and remit all of the payment to the carrier. ATC
and BWTC are compensated for the toll services they provide through access
charges to the carriers based on rates established by the FCC for
interstate calls and by the MPUC for ATC and BWTC's intrastate calls. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."

ATC and BWTC's contracts with their long-distance carriers remain in
effect unless cancelled by either party. If any of these contracts are
cancelled, other long-distance carriers are available to provide long-
distance service. In the unlikely event of a cancellation of any long-
distance contract, no adverse impact upon either ATC or BWTC is
anticipated.

Future growth and attendant increased revenues of ATC and BWTC depend
principally on the future development of the area which they serve and the
additional telecommunications needs of existing subscribers. Future
growth and increased indebtedness may also result from upgrades in service
and additional services
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<PAGE>
<PAGE>
made possible by advances in technology. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

ATC and BWTC's policy is to upgrade their plant and equipment as
required and to furnish to their customers technological advancements
which are economical. In the past five years, ATC and BWTC have invested,
or have committed to invest, approximately $13,195,000 in software and
hardware upgrades and improvements.

Arvig's management believes that the current plant and equipment in use
at ATC and BWTC are considered adequate by accepted telephone industry
standards. With the current plant and equipment capacity, ATC and BWTC
can reasonably expect to meet its needs for future customer growth.

U.S. Link, Inc. and ABT Long-Distance Services Inc. U.S. Link, Inc.
("Link") is a Minnesota corporation organized in 1985. Link acquired the
assets of Advanced Business Telephone, Inc. in 1991. Link operates as a
long-distance carrier in Minnesota, North Dakota and part of Wisconsin.
Link serves approximately 27,000 customers, including 6,800 business
customers. Link also provides private line services to a number of major
entities, including the State of Minnesota, and leases additional
facilities to other interexchange carriers and large businesses.

Approximately 78 employees of Arvig and its subsidiaries are dedicated
to Link, of which approximately 24 of such employees are primarily
dedicated to sales and marketing. Link's current strategy for growth is
focused on marketing and promotion.

Link has recently installed a new switch, which will increase Link's
capacity for trunks from 5,760 to approximately 7,680, or an increase of
approximately 33%. With additional upgrades, the new switch has the
capacity to serve a substantial number of additional trunks. Link leases
a digital fiber optic facility from Velstar Systems, Inc.

Interlake CableVision, Inc. Interlake CableVision, Inc. ("Interlake")
is a Minnesota corporation organized in 1983. Interlake operates a
thirty-five channel cable television system serving the region around
Pequot Lakes. Interlake serves approximately 3,700 basic service
customers in addition to approximately 750 commercial units.
Approximately 6,750 homes are passed by cable with approximately 300 miles
of cable in place. All ancillary services, such as accounting, billing
and system maintenance, are contracted through Arvig and ATC.

North Country Data, Ltd. North Country Data, Ltd. ("NCD") is a
Minnesota corporation organized in 1987. NCD provides data processing and
billing services exclusively for Arvig and its subsidiaries. The NCD
system has the capability for 90 to 155 work stations, which has provided
sufficient capacity for the needs of Arvig and all of its subsidiaries.

Velstar Systems, Inc. Velstar Systems, Inc. ("Velstar") is a Minnesota
corporation organized in 1987. Velstar operates a fiber optic network
facility utilized by Link. Velstar's entire network is leased by Link,
which uses the network to provide long-distance service to its own
customers and also leases private line services to commercial customers.

Arvig Cellular, Inc. Arvig Cellular, Inc. ("Cellular") is a Minnesota
corporation organized in 1987. Cellular owns (i) a 14.29% interest as
general partner in the Cellular Mobile Systems of St. Cloud Partnership
which holds the license granted by the FCC to operate the wireline
cellular mobile radio system for the St. Cloud, Minnesota Metropolitan
Statistical Area (the "St. Cloud MSA"), and (ii) 4.01% of the Class A
Voting Common Stock and 3.78% of the Class B Voting Common Stock of Rural
Cellular Corporation, which owns the licenses to operate the wireline
cellular mobile radio systems for Minnesota Rural Service Area numbers
one, two, three, five and six.

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<PAGE>
<PAGE>
Property of Arvig

Arvig owns most of its property through its operating company
subsidiaries. Each of the Arvig subsidiaries owns and/or leases the
property necessary to meet its business needs.

The property of ATC and BWTC consists principally of tangible property,
including telephone lines, central office equipment, telephone
instruments, land and buildings related to telephone operations, and motor
vehicles and equipment. Telephone lines include buried cable, aerial
cable, poles and wire. Central office equipment consists of switching
equipment, carrier equipment and related facilities. Telephone
instruments and related equipment are located on the subscribers' premises
and include private branch exchanges. ATC owns an approximately 34,000
square foot office building located on Main and 2nd Street, Pequot Lakes,
Minnesota which it maintains as its headquarters. BWTC owns an
approximately 9,000 square foot building located on 316 Pine Street,
Monticello, Minnesota which it maintains as its headquarters.

Interlake operates a thirty-five channel cable television system from
head ends in Pequot Lakes and Hackensack, Minnesota. All physical plant
for Interlake is less than twelve years old.

Link leases the majority of its transmission facility needs from
Velstar. Link owns a Northern Telcom DMS-250 switch, which is housed at
the BWTC facility in Monticello, Minnesota. Link also leases space at the
Pequot Lakes office, where its administrative offices are located and from
which Link provides operator services and customer services for its
customers.

Velstar operates a fiber optic network which it leases to Link. Parts
of the network are owned by Velstar, and other parts are leased from other
local telephone companies.

NCD owns and leases computer hardware and software necessary to provide
data processing services to Arvig and the Arvig Subsidiaries. The
majority of the processing is performed on a leased IBM AS/400 model F60
and an owned IBM AS/400 model D35.

The plant and equipment of the Arvig subsidiaries are maintained in good
operating condition and are suitable and adequate for the Arvig
subsidiaries' operations.

In addition to its tangible property, Arvig owns indirectly, through ATC
and Cellular, (i) a 16.33% interest as limited partner in the Duluth MSA;
(ii) a 14.29% interest as general partner in the St. Cloud MSA; and (iii)
4.01% of the Class A Voting Common Stock and 3.78% of the Class B Voting
Stock of Rural Cellular Corporation, which owns the licenses to operate
the wireline cellular mobile radio systems for Minnesota Rural Service
Area numbers one, two, three, five and six.

Legal Proceedings of Arvig

During 1991, the Minnesota Department of Public Service (the "MDPS")
commenced an investigation of affiliated transactions involving Arvig and
certain of its subsidiaries. While the MDPS has asserted that adjustments
for these transactions should be made reducing the annual revenues for
BWTC and ATC by $141,052 and $136,966, respectively, as of the date of
this Proxy Statement-Prospectus, no complaint against either company has
been filed with the MPUC. Accordingly, as of the date of this Proxy
Statement-Prospectus, it is not possible to determine the outcome of this
investigation or its potential impact on Arvig.

During 1992, the MDPS commenced an investigation of the earnings of
independent local exchange companies ("ILECs") in the State of Minnesota,
including BWTC. As of the date of this Proxy Statement-Prospectus, no
complaint against BWTC has been filed with the MPUC. While the MDPS has
not sent any written notice, it appears that the matter may be closed.

BWTC is also involved in a proceeding before the MPUC commenced in 1992
concerning, among other matters, the possible provision of Extended Area
Services to the Minneapolis/St. Paul metropolitan area. This matter has
not been closed by the MDPS.

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<PAGE>
<PAGE>
In 1992, the MPUC ordered all entities providing alternative operator
services ("AOS") to transient locations (e.g., hotels, pay telephones) to
include their name on any bill sent to a customer. Currently, two
interexchange ("IXC") carriers can fully satisfy this requirement. In
November 1992, the MPUC granted Link a one year waiver from compliance
with this requirement. Link, along with other IXC carriers, filed
petitions in October 1993 requesting either an exemption from the
subcarrier identification requirement or another waiver. The MPUC is not
expected to rule on these requests until a further investigation is
concluded.

In a statewide 1993 MPUC investigation the MDPS claims, among other
things, that: (1) transport facilities leased by Link to BWTC are actually
local exchange facilities; and (2) ATC should have obtained approval to
establish transport facilities from ATC's Pequot Lakes office to an AT&T
point of presence in Brainerd. The MDPS recommended to the MPUC that it
grant necessary approvals for these facilities. However, the MPUC could
deny approval, in which case Link, BWTC, and ATC would need to cease using
their respective facilities for these purposes. As of the date of this
Proxy Statement-Prospectus, it is not possible to determine the outcome of
this investigation or its potential impact on Arvig.

In an Order dated February 16, 1993, the MPUC opened an investigation to
determine whether a further proceeding to adjust access charges of ILECs
is appropriate. As of the date of this Proxy Statement-Prospectus, it is
not possible to determine what process the MPUC will follow in considering
these comments or the outcome or potential impact of this matter on Arvig.

In January 1991, DialNet filed a compliant against Link alleging that
Link was offering improper discounts and had discriminatory rates. In
December 1993, the MDPS announced its position that, except for requiring
Link to file all future promotional offerings with the MDPS, the complaint
should be dismissed. It is not possible at this time to determine the
outcome of this matter or its potential impact on Arvig.

Changes in and Disagreements with Accountants of Arvig

There have been no changes in or disagreements with the independent
accountants of Arvig during the two most recent fiscal years or any
subsequent interim period.

Authorized and Outstanding Securities of Arvig

The authorized stock of Arvig consists of 1,000,000 shares of Common
Stock, par value $1.00 per share, divided between 500,000 shares of Arvig
Voting Stock and 500,000 shares of Arvig Nonvoting Stock. Arvig
shareholders do not have cumulative voting rights or preemptive rights to
purchase additional securities. On the record date set for the Arvig
Meeting, there were outstanding 4,370 shares of Arvig Voting Stock and
39,330 shares of Arvig Nonvoting Stock.

Market for Shares and Dividends

There is no established public trading market for Arvig Shares. As of
the Arvig Record Date there were 25 record holders of Arvig Voting Stock,
58 record holders of Arvig Nonvoting Stock, and a total of 59 record
holders of Arvig Shares. Arvig paid a dividend of $7.50 per Arvig Share
in January 1994, which was declared in 1993. Arvig paid dividends of
$5.00 per Arvig Share in August 1993; 10.00 per Arvig Share in February
1993; and $10.00 per Arvig Share in March, 1992. Recently, the Board of
Directors of Arvig has stated its intention to pay and declare dividends
four times per calendar year in an amount of $7.50 per Arvig Share in each
quarter. However, future dividends will be subject to the discretion of
the Board of Directors of Arvig and will depend on, among other things,
future earnings, operating and financial conditions, capital requirements,
general business conditions and certain loan covenants restricting the
payment of dividends and requiring the maintenance of certain net worth
levels.

Principal Shareholders of Arvig

The following table sets forth as of the Arvig Record Date for the Arvig
Meeting information regarding the persons who beneficially own more than
5% of any class of voting securities of Arvig, except for certain

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<PAGE>
directors or executive officers, such information being set forth under
"The Merger-Beneficial Ownership of Directors and Executive Officers."
The nature of beneficial ownership in the table is sole voting and
investment power except as otherwise set forth in the footnotes.

</TABLE>
<TABLE>
<CAPTION>
Number of Shares Percent
Name and Address Title of Class Beneficially Owned of Class
----------------- -------------- ------------------ --------
<S> <C> <C> <C>
Dorris Coulter, Marlene Moser Class A 1,215 27.8%
and Larry Coulter (1) Voting Stock
P.O. Box 325
Pine River, Minnesota 56474

Allison Brunes (2) Class A 674 15.4%
Pequot Lakes, MN 56472 Voting Stock

SVC Agreement (3)(4)
c/o Larry Coulter Class A 2,296 52.5%
P.O. Box 444 Voting Stock
Pequot Lakes, MN 56472
</TABLE>
--------------------------------
(1) The shares listed are held by the persons named as trustees under a
voting trust agreement which expires January 30, 2006, created to
facilitate the stability and continuity of the management and control
of Arvig. Under the terms of the voting trust, the trustees hold and
vote the shares of Arvig Voting Stock held in the trust. If the
voting trust were terminated, the following persons would each be
deemed to own beneficially more than 5% of the outstanding Arvig
Voting Stock: Larry A. Coulter, Marlene A. Moser, Rosella Johnson and
Donovan Coulter.
(2) Includes 158 shares held by her husband.
(3) The following persons are all of the parties to the SVC Agreement:
Lowell Johnson, Donabelle Gunderson, Conrad Johnson, Dwayne Johnson,
Scott B. Johnson, Troy R. Johnson, Robert Coulter, Dorris Coulter,
Marlene Moser, Rosella Johnson, Larry Coulter, Donovan Coulter, Misty
Coulter, Gary Johnson, Bruce Brunes, Diane Brunes, Galeen Royce,
Patricia Bartholomew, Eric Brunes, Gary Brunes and the trust
identified in footnote (1). The trust identified in footnote (1) is
the only party to the SVC Agreement that would be deemed to
beneficially own more than 5% of Arvig Voting Stock. However, the
parties to the SVC Agreement have agreed to act as a group with
respect to the disposition of Arvig Shares. The SVC Agreement
prohibits the disposition of Arvig Shares by the parties thereto
unless first offering such shares to the other parties to the SVC
Agreement. Additionally, the SVC Agreement prohibits the parties from
voting in favor of any business combination unless the consideration
to be received is equal to at least $1,200.00 per Arvig Share. All of
the parties to the SVC Agreement have entered into and agreed to the
terms of the Merger Agreement, pursuant to which the SVC Agreement
will be terminated at the Effective Time of the Merger.
(4) Includes the 1,215 shares held in the voting trust described in
footnote (1).

Beneficial Ownership of Directors and Executive Officers

The following table sets forth as of the Arvig Record Date for the
Arvig Meeting the beneficial ownership of the directors and executive
officers of Arvig.

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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
of Class Percentage
Name Title of Class Beneficially Owned of Class
---- -------------------- ------------------- ------------
<S> <C> <C> <C>
Gilroy Arvig Class A Voting Stock 751(1) 17.2%
Class B Nonvoting Stock 2,664(2) 6.8%

Greg Arvig Class A Voting Stock 118 2.7%
Class B Nonvoting Stock 1,665(3) 4.2%

Michael Arvig Class A Voting Stock 118 2.7%
Class B Nonvoting Stock 1,665(4) 4.2%

Gary Brunes Class A Voting Stock 130 3.0%
Class B Nonvoting Stock 1,404(5) 3.6%

Bruce Brunes Class A Voting Stock 140 3.2%
Class B Nonvoting Stock 1,320 3.4%

Larry Coulter Class A Voting Stock 1,215(6) 27.8%
Class B Nonvoting Stock 2,285(7) 5.8%

Conrad Johnson Class A Voting Stock 159 3.6%
Class B Nonvoting Stock 1,192 3.0%

Lowell Johnson Class A Voting Stock 132(8) 3.0%
Class B Nonvoting Stock 1,926(9) 4.9%

Marlene Moser Class A Voting Stock 1,215(10) 27.8%
Class B Nonvoting Stock 1,699 4.3%

Galeen Royce Class A Voting Stock 82 1.9%
Class B Nonvoting Stock 1,532(11) 3.9%

All directors and Class A Voting Stock 2,845 64.8%
officers as a group Class B Nonvoting Stock 17,352 44.1%
(a total of 10)
</TABLE>
-------------------------
(1) Includes 48 shares held by his wife.
(2) Includes 1,412 shares held by his wife.
(3) Includes 40 shares held by a son.
(4) Includes 40 shares held by a son.
(5) Includes 88 shares held by a son.
(6) All 1,215 shares are held in the voting trust described in footnote
(1) under "Information with Respect to Arvig - Principal
Shareholders of Arvig," of which 258 (5.9% of class) are held for
the benefit of Larry Coulter.
(7) Includes 861 shares held by his children.
(8) Includes 32 shares held under an irrevocable trust agreement among
Mildred Johnson, Ronald Johnson, Lowell Johnson, Donnabelle
Gunderson, Conrad Johnson and Dwayne Johnson. The Trust was
created to provide for the proper health, support and maintenance
of Mildred Johnson. Under the terms of the trust, the trustees
have shared voting and investment power with respect to the Arvig
Shares held in the trust. Upon the death of Mildred Johnson, the
Arvig Shares are to be distributed to the other parties to the
trust agreement in equal shares.
(9) Includes 826 shares held under the irrevocable trust agreement
described in footnote 8.

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<PAGE>
<PAGE>
(10) All 1,215 shares are held in the voting trust described in footnote
(1) under "Information with respect to Arvig - Principal
Shareholders of Arvig," of which 240 (5.5% of class) are held for
the benefit of Marlene Moser.
(11) Includes 168 shares held by her children.

Directors and Executive Officers

The Merger Agreement provides that the sole director of Sub will serve
as the director of Arvig following the Merger. TDS anticipates that
following the Merger a full board consisting of an undetermined number of
members will be elected. It has not been determined what number, if any,
of the present directors of Arvig will be elected to serve. The
identities of the directors and executive officers of Arvig, their ages
and terms of office as of the Arvig Record Date for the Arvig Meeting are
set forth below:
<TABLE>
<CAPTION>
Date First Date Date First
Elected Current Appointed
as Term as
Name Position(s)(1) Age Director Expires Officer
----- -------------------- --- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Gilroy Arvig Director, President 60 1954(2) 1994 1954(2)
and Chief Executive
Officer

Greg Arvig Vice President- 32 -- -- 1986
Engineering and Network
Operations of Arvig and
Director, President and
Chief Executive Officer
of Link

Mike Arvig Director and Vice 31 1984 1995 1986
President of Arvig

Gary Brunes Chairman of the Board 51 1984 1995 --
of Directors

Bruce Brunes Vice President-Plant 50 -- -- 1992
Operations of Arvig
and President and Chief
Executive Officer of
Interlake

Larry Coulter Director of Arvig 45 1984 1995 1989
and Secretary of Link

Conrad Johnson Director and 45 1988 1996 1993
Treasurer of Arvig

Lowell Johnson Director 52 1984 1994 --

Marlene Moser Director and 51 1980(2) 1994 1992
Secretary of Arvig
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Date First Date Date First
Elected Current Appointed
as Term as
Name Position(s)(1) Age Director Expires Officer
----- ----------------- ---- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Galeen Royce Director and 43 1993 1996 --
Consultant to
Arvig
</TABLE>
__________________________________
(1) Each person listed as a director or executive officer of Arvig holds
the same position with ATC and BWTC.
(2) Such dates refer to the first election as a Director or an Officer of
Arvig Telephone Company prior to the formation of Arvig.

Gilroy Arvig. Gilroy Arvig is the President and Chief Executive Officer
of Arvig. For 40 years he has served as President of the Arvig family of
companies having guided the Company's growth since 1954. He is an active
participant in the telecommunications industry, including current
involvement with the Minnesota Independent Coalition. He served with the
Minnesota Telephone Association as President, Director, as member of the
Compensation, Contracts and Tariffs Committee, and most recently, on the
Industry Planning Committee. Gilroy Arvig has also been a director for
several telecommunications corporations. Gilroy Arvig is actively
involved in the Pequot Lakes community and currently serves as Director
and Chairman of the Board of Pequot Lakes State Bank and the Pequot Lakes
Medical Association.

Greg Arvig. Greg Arvig is the Vice President of Engineering and Network
Operations for Arvig and the President and Chief Executive Officer of
Link. He is responsible for developing the internal engineering for all
the Arvig companies. Greg also developed and is responsible for the Link
long distance business. He has been employed by Arvig since 1978 and
commenced full time employment with Arvig in 1982. Greg is actively
involved on several telecommunications industry committees and is
currently serving on the Board of Directors of Comptel, Inc. He is a
graduate of Texas A&M University. Greg Arvig is the son of Gilroy Arvig.

Mike Arvig. Mike Arvig is Vice President of Arvig. He has been
employed by Arvig since 1978, with full-time employment commencing in
1986. He is a graduate of the University of Minnesota. Mike Arvig is the
son of Gilroy Arvig.

Bruce J. Brunes. Bruce Brunes is Vice President of Plant Operations for
Arvig and President and Chief Executive Officer of Interlake. He has been
employed with the Arvig companies for 27 years in various areas of
operations. Mr. Brunes is Gilroy Arvig's nephew.

Gary Brunes. Gary Brunes is Chairman of the Board of Directors of
Arvig. He has been employed by Arvig since 1983. He is also a Director
and Secretary of Rural Cellular Corporation, Switch 2000, Inc., Switch
2000 LLC. and a Director of Cellular 2,000, Inc. He attended the
University of Minnesota. Mr. Brunes is Gilroy Arvig's nephew.

Larry Coulter. Larry Coulter is a Director and a member of the
Executive Committee of the Board of Directors of Arvig and is the
Secretary of Link. He was employed by the Arvig companies from April 1977
to March 1992, most recently as Vice President of Information Systems.
Prior to joining Arvig, Mr. Coulter was a programmer with Univac from 1973
to 1977. Mr. Coulter is a graduate of St. Cloud State University and has
degrees in electronics and engineering from Wadena Technical College and
Brainerd State Jr. College, respectively. Mr. Coulter is Gilroy Arvig's
nephew.

Conrad Johnson. Conrad Johnson is an owner and MIS Director of Johnson
Telephone Co. in Remer, Minnesota. He is also a Director and Corporate
Treasurer of Arvig. He has also been a Director of Arvig since April 1988
and elected as Corporate Treasurer in October 1992. Mr. Johnson is Gilroy
Arvig's nephew.
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<PAGE>
<PAGE>
Lowell Johnson. Lowell Johnson is an owner of Johnson Telephone Co. in
Remer, Minnesota and is President of the non-regulated side of the
company. He has also served on the Johnson Telephone Co. Board of
Directors since 1985. Mr. Johnson has also served on the Arvig Board of
Directors since January 1984 and on the Link Board since May 1989. Mr.
Johnson is Gilroy Arvig's nephew.

Marlene Moser. Marlene Moser has worked for Arvig or its predecessor
corporations in several different capacities over the past 30 years. She
was elected to the Board of Directors of Arvig Telephone Company prior to
the formation of Arvig in 1980 and to the position of Corporate Secretary
in 1992. She has also served on the Interlake Board of Directors since
its formation in May 1989. Ms. Moser is Gilroy Arvig's niece.

Galeen Royce. Galeen Royce has served as Executive Director of the
Waconia, Minnesota Chamber of Commerce since 1989. She has served on the
Link Board of Directors since its formation in May 1989. She was elected
to the Arvig Board on May 1, 1993, and is currently working as a
consultant to the board. Ms. Royce is Gilroy Arvig's niece.

Compensation of Officers

The following table summarizes the compensation paid by Arvig to its
chief executive officer and each other executive officer whose annual
salary and bonus exceeds $100,000.

Other
Name and Principal Position Year Salary Bonus Compensation
---------------------------- ----- ------- ----- ------------

Gilroy Arvig, President and 1993 $190,962 $18,580 $2,312(1)
Chief Executive officer of Arvig

Greg Arvig, President and 1993 $111,501 $ 8,500 $3,391(2)
Chief Executive Officer of Link

--------------------------
(1) The amount shown represents $1,329.00 for insurance premiums paid
during the covered fiscal year with respect to term life insurance for
the benefit of the named executive and reimbursement of $983.00 for
medical expenses pursuant to the Arvig Telephone Company Hospital,
Surgical and Medical Reimbursement Plan.
(2) The amount shown represents $914.00 for insurance premiums paid during
the covered fiscal year with respect to term life insurance for the
benefit of the named executive and reimbursement of $2,477.00 for
medical expenses pursuant to the Arvig Telephone Company Hospital,
Surgical and Medical Reimbursement Plan.

Arvig Benefit Plans

Arvig maintains a non-contributory, qualified pension plan for all full-
time employees of Arvig and its subsidiaries known as the Arvig Telcom,
Inc. Pension Plan (the "Arvig Plan"). The benefits are based upon years
of service and the employee's average compensation during the five
consecutive years of the last ten years of employment that the employee's
compensation was the highest. The compensation used for plan purposes
includes any basic salary or wages and excludes overtime, bonuses,
commissions, and any other taxable compensation. The plan has a maximum
limit on compensation, which for the Arvig Plan year beginning December
31, 1993 was $235,840. As a result of an amendment in 1993 to applicable
tax laws, the maximum limit on compensation which may be recognized by the
Arvig Plan will be reduced to $150,000 for the Arvig Plan year beginning
December 31, 1994. Retirees having less than 30 years of service at the
normal retirement date (after reaching age 65), will have their monthly
pension reduced by 1/30th for each year of service less than 30.
Employees electing early retirement receive a reduced pension based upon
the amount of time between their early retirement date and their normal
retirement date.
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The following table shows the estimated annual benefits that would be
received by an Arvig employee retiring today at age 65 under the plan,
assuming a life annuity or the payment of ten years annual benefits,
whichever period is shorter. It assumes various specified levels of total
years of service and of average annual compensation:

Credited Years of Service

--------------------------------------------------------
Average
Compensation 15 20 25 30 35
-------------
$ 25,000 $ 4,550 $ 6,067 $ 7,583 $ 9,100 $ 9,100
50,000 9,550 12,733 15,917 19,100 19,100
75,000 14,550 19,400 24,250 29,100 29,100
100,000 19,550 26,067 32,583 39,100 39,100
125,000 24,550 32,733 40,917 49,100 49,100
150,000 29,550 39,400 49,250 59,100 59,100
175,000 34,550 46,067 57,583 69,100 69,100
200,000 39,550 52,733 65,917 79,100 79,100
225,000 44,550 59,400 74,250 89,100 89,100
250,000 46,718 62,291 77,863 93,436 93,436
300,000 46,718 62,291 77,863 93,436 93,436

The 1993 compensation of Messrs. Gilroy Arvig and Greg Arvig covered by
the pension plan was $190,962 and $111,501, respectively. The approximate
credited years of service that will be used (at normal retirement) in
calculating a pension benefit for Messrs. Gilroy Arvig and Greg Arvig are
48 and 44, respectively.

Arvig also maintains a noncontributory medical plan known as the Arvig
Telcom Employee Benefit Plan. All full-time employees are covered as of
their first day of employment. The medical plan is self-insured and
administered through Blue Cross/Blue Shield of Minnesota. Arvig provides
additional medical benefits through the Arvig Telephone Company Hospital,
Surgical and Medical Reimbursement Plan ("ATC Reimbursement Plan") and the
Bridge Water Telephone Co. Hospital, Surgical and Medical Reimbursement
Plan ("BWTC Reimbursement Plan"). The BWTC Reimbursement Plan covers
employees of Arvig's Bridge Water Telephone Co. subsidiary; all other
employees are eligible for the ATC Reimbursement Plan. These two plans
cover all full-time employees with one year of service and provide
benefits for procedures not covered by the Arvig Telcom Employee Benefit
Plan, as well as reimbursement for deductibles and co-payments required
thereunder. The maximum annual benefit under the ATC Reimbursement Plan
is $1,500 per year and $5,000 under the BWTC Reimbursement Plan. Each of
these plans allows the participants to carry any unused benefit forward
for up to three years.

Full-time employees are also provided life insurance in an amount equal
to two times annual salary and long-term disability insurance.

Directors, officers and employees are reimbursed for normal expenses
incurred in the ordinary course of their duties for Arvig, including
convention expenses.

Finally, in connection with the Merger, TDS has consented to the
adoption by Arvig of a severance plan (the "Severance Plan") which
provides for the payment of certain benefits to employees dedicated to the
long-distance operations of Arvig who are not covered by TDS's agreement
regarding continued employment, as described in "The Merger-Employees of
Arvig and its Subsidiaries." The benefits payable under the Severance
Plan are based primarily on years of service and are payable by Arvig only
upon the occurrence of the following events:

(i) TDS acquires Arvig pursuant to the Merger;

(ii) Link is sold to a third party (other than the Shareholder
Group) within two years of TDS's acquisition of Arvig;

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(iii) within 15 months of the closing of the sale of Link to such
third party, the employment of any employee seeking severance
benefits thereunder is terminated (other than for cause); and

(iv) Arvig does not offer an equivalent position in pay, status and
location.

Compensation of Directors

During 1993 directors received $250.00 for each regular meeting and
special meeting attended, plus reimbursement for out-of-pocket expenses
incurred in connection with such meetings. In addition to compensation
for meetings, directors received $20 per hour for other services provided
to the Board of Directors.

Gary Brunes, Larry Coulter and Conrad Johnson received $250.00 for each
Executive Committee meeting attended, plus reimbursement for out-of pocket
expenses incurred in connection with such meetings.

Larry Coulter, Conrad Johnson and Marlene Moser received $200.00 for
each finance Committee meeting attended, plus reimbursement for out-of-
pocket expenses incurred in connection with such meeting.

Galeen Royce provided consulting services to the Board of Directors
during the year 1993 at $20 per hour. Additionally, Larry Coulter
received $7,500.00 for Electronic Data Processing consulting.

The following table sets forth the identity of each director and the
amounts paid to such directors for such services during the year 1993:

BOARD COMMITTEE OTHER
FEES FEES SERVICES TOTAL
---- --------- --------- -------

GILROY ARVIG $ 6,250 $ 6,250
MIKE ARVIG 6,500 6,500
LARRY COULTER 7,350 $22,970 $ 7,500 37,820
GARY BRUNES 6,750 11,500 18,250
MARLENE MOSER 6,750 2,940 9,690
GALEEN ROYCE 5,000 2,770 7,770
LOWELL JOHNSON 5,350 5,350
CONRAD JOHNSON 4,850 13,700 18,550
-------- -------- -------- ---------
$48,800 $51,110 $ 10,270 $110,180
-------- -------- -------- ---------

Certain Relationships and Related Transactions

Transactions with Management and Others. From time to time over the
last three years, Gilroy Arvig has engaged the services of Henson & Efron,
P.A. to provide legal services in connection with his interest in
acquiring Arvig, certain litigation between Gilroy Arvig and the Board of
Directors of Arvig and other matters related to the process undertaken by
the Executive Committee of the Board of Directors of Arvig in connection
with the sale of Arvig. Since the beginning of the last fiscal year,
Gilroy Arvig incurred $210,000 in legal fees related to such matters. In
the course of negotiating the transactions contemplated by the Merger
Agreement, Gilroy Arvig asserted that the legal services rendered since
the beginning of the last fiscal year benefited Arvig and requested that
the board pay for such services. Gilroy Arvig indicated that if such
legal fees were not paid he would consider further litigation. In
settlement of these matters and as part of the process of obtaining the
Mutual Release, the Board of Directors of Arvig agreed to cause Arvig to
pay the legal fees.

Arvig leases and maintains certain real property owned by Virginia
Arvig, the spouse of Gilroy Arvig. During 1993, Arvig paid $4,200.00 for
the use of such real property.

Indebtedness of Management. The books and records of Arvig disclose an
account receivable from Gilroy Arvig, a director and the President and
Chief Executive Officer of Arvig, in the amount of approximately $62,000.
Such account receivable arises from payments by Arvig from June 1992 to
November 1992 of certain (i) legal fees in the amount of approximately
$36,000 which were subsequently determined to be obligations of Gilroy
Arvig and not of Arvig and (ii) life insurance premiums in the amount of
approximately $26,000 paid

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for by Arvig for a split-dollar life insurance policy insuring the lives
of Gilroy Arvig and his wife and specifying Gilroy Arvig's children as
beneficiaries. While such premiums would have been paid back to Arvig out
of the proceeds of the policy following the death of the insured parties,
Arvig has stopped paying the premiums and has requested repayment of the
premiums already paid upon the closing of the Merger. There is no
interest charged on such amounts.

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

The following discussion is presented to assist in assessing the changes
in financial condition and performance of Arvig Telcom, Inc. and
Subsidiaries ("Arvig") over the three most recent years. The following
information should be read in conjunction with the financial statements
and related notes and other detailed information regarding Arvig included
elsewhere in this registration statement.

Arvig is a supplier of local exchange telephone services through its
Arvig Telephone Company and Bridge Water Telephone Co. subsidiaries.
Local exchange services are provided to subscribers within prescribed
service areas and income is derived from subscriber fees charged to
customers and access charges imposed pursuant to tariffs with long
distance ("interexchange") telephone carriers. Both the fees charged to
Arvig's local exchange customers for services and the access charges to
interexchange carriers are based upon tariffed rates approved by the
Minnesota Public Utilities Commission ("MPUC") for intrastate services and
by the Federal Communications Commission ("FCC") for interstate services.
Generally these rates are a function of a prescribed return on Arvig's
investment in local exchange plant and equipment and its cost of services
provided to its subscribers.

Additionally, through its U.S. Link, Inc. subsidiary ("Link"), Arvig is
a supplier of interexchange services to subscribers within Minnesota,
North Dakota and Wisconsin. Interexchange income is derived through
charges to subscribers based primarily upon the subscriber's minutes of
long distance usage. Interexchange rates are determined by Arvig based
upon market conditions and are subject to approval by the FCC, MPUC,
Public Service Commission of North Dakota, and the Public Service
Commission of Wisconsin.

Arvig, through its Interlake CableVision, Inc. ("Interlake") subsidiary,
provides cable television ("CATV") services to subscribers within its
prescribed service areas. CATV income is derived through subscriber fees
charged for basic service, cable programming, and premium tiers of
service. The local franchising authority approves rates for the basic
service tier. Maximum CATV rates for the cable programming tier are
established by the FCC and are generally based upon the number of
subscribers and the number of channels offered to subscribers. Premium
tier rates are determined by Arvig based upon market conditions. On
February 22, 1994 the Federal Communications Commission ("FCC") adopted
revised regulations (which become effective on May 15, 1994) pursuant to
the Cable Television, Consumer Protection and Competition Act of 1992.
Such regulations require the reduction of CATV rates of certain companies
by up to an additional seven percent (7%) following the previous
requirement to reduce such rates by up to ten percent (10%) pursuant to
regulations adopted by the FCC in April of 1993. The FCC has currently
frozen cable TV rates pending completion of an FCC survey. Interlake,
which is the only Arvig subsidiary that could potentially be impacted by
the new regulations, accounted for approximately eight percent (8%) of
Arvig's consolidated net income for the fiscal year ended December 31,
1993 and is a non-core business of Arvig. While Arvig's management does
not believe that such regulations will have a material adverse affect on
Arvig's consolidated net income, the future effect of such regulations
cannot be determined at this time and depends on the actual amount by
which Interlake will have to reduce CATV rates to comply with such
regulations.

Net income totaled $2,452,627, $1,226,485, and $1,051,992 for the three
fiscal years ended 1993, 1992, and 1991 respectively, reflecting an
increase of 100.0% in 1993 and 16.6% in 1992. Earnings per share were
$56.12, $28.07, and $24.07 for the years ended December 31, 1993, 1992,
and 1991, respectively. In general, the large increase in net income in
1993 was a result of an increase of $2,681,710 in operating revenues,
while the increase in operating expenses was only $681,576. For a
detailed discussion of the changes in net income for the three years ended
December 31, 1993, 1992, and 1991, see the analysis set forth in
"Operating Revenues", "Operating Expenses", and "Other Items" listed
below.

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OPERATING REVENUES
In the years ended December 31, 1993, 1992 ,and 1991, total operating
revenues totaled $35,434,878, $32,753,168, and $25,137,595, respectively.
This represents an increase of 8.2% in 1993 and 30.3% in 1992.

Long distance carrier service (interexchange) revenue comprised most of
the above increases. Interexchange revenue totaled $23,353,552,
$21,911,853, and $13,815,597 for the years ended December 31, 1993, 1992,
and 1991, respectively, an increase of 6.6% in 1993 and 58.6% in 1992.
Increases in 1993 are due primarily to an increase in "800" service that
has occurred as "800" number portability among interexchange carriers was
mandated by the FCC. The increase of $8,096,256 in 1992 was caused by
several factors. In mid 1991, a significant interexchange business
expansion into the North Dakota marketplace was initiated through the
acquisition of the assets of Advanced Business Telephone, Inc. ("ABT").
Interexchange revenues from ABT were $4,770,266 and $2,536,062 in 1992 and
1991, respectively, accounting for $2,234,204 of the increase in 1992.
Additionally, approximately $3,000,000 of the 1992 increase resulted from
an increase in customers obtained in equal access balloting and $1,000,000
of the increase is from increased "800" service. The remaining increase
in 1992 is due to an increase in customers obtained through the efforts of
a new telemarketing department.

Local exchange revenues were $10,448,818, $9,350,512, and $9,981,322 for
the years ended December 31, 1993, 1992, and 1991, respectively, an
increase of 11.7% in 1993 and a decrease of 6.3% in 1992. The increase of
$1,098,306 in 1993 is due primarily to an increase in access revenues of
approximately $900,000 and local exchange revenues of approximately
$166,000. The access revenue increase is a result of an increase in access
minutes billed; the local exchange revenue increase is due to an increase
in access lines served ($61,000) and a rate increase ($105,000). The
decrease of $630,810 between 1992 and 1991 is due to lower net access
revenue ($275,000) and lower billing and collection (B&C) revenue
($442,000). During 1992, Link rerouted a portion of its interexchange
traffic, bypassing Arvig's local exchange switch in Monticello, MN,
causing a large decrease in the amount of access minutes billed. This
decrease was partially offset by additional traffic created by a gain of
approximately 640 access lines. The B&C revenue decrease was caused by
the decrease in Link messages billed due to the rerouting discussed above
and the implementation of a less favorable B&C agreement with AT&T.

CATV revenues were $ 949,252, $890,010, and $769,054 for the years ended
December 31, 1993, 1992, and 1991, respectively, an increase of 6.7% in
1993 and 15.7% in 1992. The increase in 1993 is primarily from growth in
subscribers. The increase of $120,956 from 1991 to 1992 is due to a rate
increase ($86,000) and an increase in subscribers.

Operating revenues will not be impacted if the pending merger with Sub
is not consummated.

OPERATING EXPENSES
Operating expenses totaled $30,703,055, $30,021,479, and $22,792,465 for
the years 1993, 1992, and 1991, respectively, an increase of 2.3% in 1993
and 31.7% in 1992.

The costs of long distance carrier service ("interexchange expenses")
comprised most of the above increase in 1992. Interexchange expense
increased $1,146,750 (7.7%) and $6,904,774 (87.4%) in 1993 and 1992,
respectively. Interexchange expenses are directly related to the level of
interexchange revenue. See the discussion of interexchange revenue set
forth in "Operating Revenues", above. The margins (interexchange revenue
less interexchange costs) on long distance carrier service were 31.7%,
32.4%, and 42.8% of interexchange revenues for the years ended December
31, 1993, 1992, and 1991, respectively. The decrease in the margin from
1991 to 1992 was a result of increased competitive pressure and increased
access costs.

Depreciation and amortization expense decreased $280,261 (6.0%) in 1993
and increased $220,346 (5.0%) in 1992. The decrease in 1993 is a result of
several intangibles related to Link's acquisition of ABT becoming fully
amortized in early 1993. The increase in 1992 is due to accelerated
depreciation expensed in connection with the early retirement of certain
data processing equipment.

Sales, marketing and customer service ("SM&C") expenses increased $3,160
in 1993 and decreased $292,534 (9.7%) in 1992. During 1992, expenses
decreased approximately $445,000 as Link reduced its advertising campaign.
The decrease was offset by increased expenses related to the start-up of a
telemarketing department.

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General and administrative expenses decreased $62,841 (1.3%) and
increased $259,894 (5.7%) in 1993 and 1992, respectively. The increase
in 1992 was caused by an increase in legal and consulting fees related to
the sale of Arvig.

Operating expenses will not be impacted if the pending merger with Sub
is not consummated.

OTHER ITEMS
Other income totaled $487,948, $288,899, and $250,594 for the years
1993, 1992, and 1991, respectively, an increase of 68.9% and 15.3% in 1993
and 1992, respectively. Other income includes Arvig's net income and/or
loss from its investment in cellular partnerships. During 1993, net
income from cellular investments increased approximately $134,000. The
remainder of 1993's increase is due to an increase in interest income from
the relatively larger cash balances maintained by Arvig during 1993.

Interest expense totaled $1,215,549, $1,147,482, and $1,121,709 for the
years 1993, 1992, and 1991, respectively, an increase of 5.9% in 1993 and
2.3% in 1992. Although total long-term debt decreased in 1993, interest
expense increased as new borrowings had somewhat higher interest rates
than the retired borrowings.

Changes in income taxes generally reflect the changes in the level of
pretax income and in deferred taxes.

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
SFAS 109 requires companies to record all deferred tax liabilities or
assets for the deferred tax consequences of all temporary differences.
Additionally, the statement requires that deferred tax balances be
adjusted to reflect new tax rates when they are enacted into law. The
cumulative effect of the implementation of SFAS 109 on years prior to 1993
did not have a material effect on net income. Income tax expense for 1993
reflects the new method of accounting; income tax expense for 1992 has not
been restated.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $6,072,534, $4,080,262, and $2,375,026 at
December 31, 1993, 1992, and 1991, respectively. This represents an
increase of 48.8% in 1993 and 71.8% in 1992.

Cash flows from operating activities were $7,794,236, $6,479,304, and
$4,829,939 in the years ended December 31, 1993, 1992 and 1991,
respectively. Cash flows from operating activities increased 20.3% in
1993 over 1992 primarily due to an increase in net income. Additionally,
increases in other current liabilities and deferred income taxes and a
decrease in income taxes receivable contributed to the increase in
operating cash flows in 1993. Cash flows from operating activities
increased 34.1% in 1992 over 1991 primarily due to an increase in the
level of accounts payable, as well as an increase in net income and non
cash expenses, such as depreciation.

Cash flows used in investing activities were $5,040,782 in 1993,
$7,747,123 in 1992, and $10,028,462 in 1991. The 34.9% decrease for 1993
compared with 1992 reflects a $2,031,856 decrease in the amount of fixed
asset additions and a decrease in the amount of investments and marketable
securities which were purchased. The 22.7% decrease for 1992 compared
with 1991 was attributable to a decrease in the level of marketable
securities and investments purchased and a decrease in acquisition of
intangibles and noncompete agreements (from the ABT acquisition), offset
by an increase in the amount of property, plant and equipment purchases.

Cash flows used by financing activities was $761,182 in 1993. Cash
flows provided by financing activities were $2,973,055 in 1992 and
$3,371,480 in 1991. During 1993, principal payments on long-term debt
exceeded the amount of new borrowings by $105,682, as compared to 1992
when new borrowings exceeded principal payments by $3,469,429.
Additionally, the amount of dividends paid increased $218,500. The
decrease in cash provided by financing operations in 1992 as compared to
1991 was due to an increase in the level of principal payments made on
long-term debt.

In 1994, capital expenditures are expected to be approximately
$6,753,000. The money is to be used primarily for fiber/copper cable and
associated equipment . It is expected that internally generated funds as
well as additional bank borrowing will be used to finance these
improvements.

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It is expected that internally generated funds will be adequate to meet
current and future operating needs of Arvig. However, while cash flows
generated from operations are expected to be sufficient to meet the future
operating needs of Arvig, future capital expenditures will require
additional borrowing. The specific means of obtaining the financing and
its resulting impact on the financial position and earnings capacity of
Arvig have not been finalized. Currently, Arvig Telephone Company has
applied for an Rural Electrification Administration ("REA") loan in the
amount of $13,126,000 to cover anticipated plant upgrades from 1994
through 2000. The application is currently being reviewed by the REA.

Management of Arvig believes that its liquidity and capital operating
resources are presently adequate for its anticipated needs and will not be
materially impacted if the pending merger with Sub is not consummated.

Inflation and changing prices did not have a material effect on Arvig's
financial position or earnings during the three years ended December 31,
1993.

DESCRIPTION OF ARVIG SHARES

The Articles of Incorporation of Arvig authorize 1,000,000 shares of
common stock, par value $1.00 per share, divided between 500,000 shares of
Arvig Voting Stock and 500,000 shares of Arvig Nonvoting Stock. Arvig
shareholders do not have cumulative voting rights or preemptive rights to
purchase additional securities. On the record date set for the Arvig
Meeting, there were outstanding 4,370 shares of Arvig Voting Stock and
39,330 shares of Arvig Nonvoting Stock.

Each holder of a share of Arvig Voting Stock is entitled to one vote per
share held by such holder on all matters submitted to a vote of
shareholders. All issued and outstanding Arvig Shares are fully paid and
non-assessable.

Pursuant to the Minnesota Business Corporation Act, the Board of
Directors of a corporation may declare and cause the corporation to pay
dividends in cash, property, or the corporation's own shares so long as:
(1) the corporation is not insolvent or would not be rendered insolvent by
the payment of such dividends, (2) payment is not contrary to the Articles
of Incorporation or Bylaws, and (3) the payment of dividends does not
reduce the corporation's net assets below the aggregate preferential
amount payable in the event of liquidation to the holders of shares having
preferential rights.

In the instance of Arvig there are no special dividend rights of the
shareholders other than as provided by the Minnesota Business Corporation
Act and there are no provisions in the Articles of Incorporation of Arvig
restricting the payment of dividends.

Upon liquidation of Arvig, the holders of Arvig Shares are entitled to
share ratably in the distribution of all assets remaining after provision
for the creditors of Arvig.

DESCRIPTION OF TDS SECURITIES

The authorized capital stock of TDS consists of 100,000,000 TDS Common
Shares, $1.00 par value, 25,000,000 Series A Common Shares, $1.00 par
value, and 5,000,000 Preferred Shares, without par value. As of December
31, 1993, 43,503,584 TDS Common Shares (excluding 484,012 Common Shares
held by a subsidiary of TDS), 6,881,001 TDS Series A Common Shares and
441,851 TDS Preferred Shares were outstanding and 304,328 TDS Common
Shares were issuable in connection with acquisitions.

Voting Trust

Over 90% of TDS's outstanding Series A Common Shares are held in a
voting trust which expires on June 30, 2009. The voting trust was created
to facilitate the long-standing relationships among the trustees'
certificate holders. By virtue of the number of shares held by them, the
voting trustees have the power to elect 75% of the Directors. The
trustees of the voting trust are LeRoy T. Carlson, Jr., a director and the
President and Chief Executive Officer of TDS, Walter C.D. Carlson, a
director of TDS, Letitia G. Carlson, Donald C. Nebergall, a director of
TDS, and Melanie J. Heald.

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Preferred Shares

The Board of Directors of TDS is authorized by the Articles of
Incorporation of TDS to issue Preferred Shares from time to time in series
and to establish as to each series the designation and number of shares to
be issued, the dividend rate, the redemption price and terms, if any, the
amount payable upon voluntary or involuntary dissolution of TDS, sinking
fund provisions, if any, voting rights, if any, and the terms of
conversion into TDS Common Shares, if provided for. As of December
31, 1993, an aggregate of 441,851 Preferred Shares of TDS were
outstanding, all of which were issued in connection with acquisitions.

Voting Rights

With respect to the election of directors, the holders of TDS Common
Shares, and the holders of Preferred Shares issued before October 31, 1981
(an aggregate of 12,453 shares), voting as a class, are entitled to elect
25% of the Board of Directors of TDS, rounded up to the nearest whole
number. The holders of Series A Common Shares, and the holders of
Preferred Shares issued after October 31, 1981 (an aggregate of 429,398
shares), voting as a class, are entitled to elect the remaining members of
the Board of Directors of TDS. Furthermore, the Articles of Incorporation
provide for the Board of Directors to be divided into three classes. Each
class is elected for a three-year term. The Board of Directors currently
consists of eleven directors. Accordingly, the holders of TDS Common
Shares, and the holders of Preferred Shares issued before October 31,
1981, are entitled to elect three directors.

The holders of TDS Common Shares and Preferred Shares are entitled to
one vote per share and the holders of Series A Common Shares are entitled
to ten votes per share. The holders of TDS Common Shares, Series A Common
Shares and Preferred Shares vote as a single class, except with respect to
the election of directors as discussed above and with respect to certain
amendments to the Articles of Incorporation (e.g., amendments prejudicial
to the holders of a class), as to which the Iowa Business Corporation Act
grants class voting rights.

If the number of Series A Common Shares issued and outstanding at any
time falls below 500,000 (because of the conversion of Series A Common
Shares or otherwise), the holders of Series A Common Shares would lose the
right to vote as a separate class (with the holders of Preferred Shares
issued after October 31, 1981) in the election of approximately 75% of the
directors, and thereafter the holders of Series A Common Shares (with ten
votes per share) would vote with the holders of TDS Common Shares and
Preferred Shares as a single class in the election of directors.
Management of TDS believes it is unlikely that the number of outstanding
Series A Common Shares will fall below 500,000, because more than
6,000,000 Series A Common Shares are held in the voting trust described
above, and the trustees of the voting trust have indicated that they have
no present intention of converting Series A Common Shares into TDS Common
Shares. However, if the number of outstanding Series A Common Shares
falls below 500,000 with the consequences described above, then the TDS
Common Shares listed on the American Stock Exchange may be delisted
because the holders of such shares would not have the right, voting as a
separate class, to elect approximately 25% of the Board of Directors.

Dividend Rights and Restrictions

Subject to the satisfaction of all Preferred Shares dividend preference
and redemption provisions, holders of TDS Common Shares are entitled to
receive such dividends as may be declared from time to time by the Board
of Directors. Unless the same, or greater, dividends, on a per share
basis, are declared and paid at the same time on the TDS Common Shares, no
dividends may be declared or paid on the Series A Common Shares. As of
December 31, 1993, the annual preferred dividend requirements on all
outstanding Preferred Shares aggregated $2,378,000 ($856,000 of which is
payable in additional Preferred Shares).

In the case of stock dividends, the Board of Directors is authorized to
permit both the holders of TDS Common Shares and Series A Common Shares to
elect to receive cash in lieu of stock.

Under TDS's loan agreements, at December 31, 1993, all of TDS's
consolidated retained earnings ($89,689,000) were available for the
payment of dividends on TDS Common Shares and Series A Common Shares.

-45-
<PAGE>
<PAGE>
Conversion Rights

The TDS Common Shares have no conversion rights. The Series A Common
Shares are convertible, on a share-for-share basis, into TDS Common
Shares. An aggregate of 182,855 shares of Preferred Shares were
convertible into 836,369 TDS Common Shares as of December 31, 1993. An
aggregate of 213,952 Preferred Shares are required to be redeemed at the
option of the holder into (at TDS's option) a specified number of Common
Shares of United States Cellular Corporation ("USM Common Shares"), a
number of TDS Common Shares having a market value equal to the specified
number of USM Common Shares, or a combination of USM Common Shares and TDS
Common Shares.

Other Rights

The TDS Common Shares and Series A Common Shares have no redemption or
sinking fund provisions. As of December 31, 1993, an aggregate of 273,523
Preferred Shares had mandatory redemption features or were redeemable at
the option of the holder and an aggregate of 167,119 Preferred Shares were
redeemable at the option of TDS.

Upon liquidation, holders of TDS Common Shares and Series A Common
Shares are entitled to receive a pro rata share of all assets available to
shareholders after payment to holders of the Preferred Shares of $100 per
share (or, in the aggregate, $44,185,200 as of December 31, 1993), plus a
sum equal to the amount of all accumulated and unpaid dividends thereon at
the dividend rate fixed for each series of Cumulative Preferred Shares by
the Board of Directors. At January 31, 1994 there were no unpaid or
accumulated dividends payable on the Preferred Shares.

The holders of Series A Common Shares have a preemptive right to
purchase any additional Series A Common Shares sold for cash, including
treasury shares. Holders of TDS Common Shares and Preferred Shares have
no preemptive rights.

General

All issued and outstanding TDS Common Shares and Series A Common Shares
and Preferred Shares are fully paid and nonassessable, and all TDS Common
Shares offered hereby will be fully paid and nonassessable when issued.

The Transfer Agent and Registrar for the TDS Common Shares, Series A
Common Shares and Preferred Shares is Harris Trust and Savings Bank,
Chicago, Illinois.

TDS has and will continue to distribute annual reports to its
shareholders which will contain its audited financial statements.

COMPARATIVE RIGHTS OF TDS SHAREHOLDERS AND ARVIG SHAREHOLDERS

If the Merger is consummated, shareholders of Arvig, a Minnesota
corporation, will become shareholders of TDS, an Iowa corporation, and
their rights will be governed by the Iowa Business Corporation Act instead
of the Minnesota Business Corporation Act, and by the Articles of
Incorporation of TDS instead of the Articles of Incorporation of Arvig,
which differ in many respects. In addition to the matters described above
under "Description of Arvig Shares" and "Description of TDS Securities,"
there are other differences between the rights of shareholders in TDS, and
those of shareholders in Arvig, certain of which are described in the
following:

Preferred Shares

No dividends may be paid on the TDS Common Shares until all dividends
due on Preferred Shares have been paid. In addition, the rights of
holders of TDS Common Shares upon liquidation of TDS are subordinate to
the rights of preferred shareholders. Arvig has no shares of capital
stock with any dividend, liquidation or other preference.

-46-
<PAGE>
<PAGE>
Limitation of Director Liability

As permitted by Iowa law, the Articles of Incorporation of TDS includes
a provision limiting or eliminating under certain circumstances directors'
liability for monetary damages for breach of the duty of care. There is
no similar provision in the Articles of Incorporation of Arvig.

The above does not present an exhaustive listing of all such differences
and certain differences may exist which may be of significance to
particular shareholders. Any such shareholder should refer to the
respective Articles of Incorporation and state corporation statutes, which
are available in the offices of Arvig.

LEGAL MATTERS

The validity of the TDS Common Shares offered hereby will be passed upon
for TDS by Sidley & Austin, Chicago, Illinois. Walter C.D. Carlson and
Michael G. Hron, a Director and Secretary, respectively, of TDS, are
members of that law firm. Mr. Carlson is also a trustee and beneficiary
of the voting trust which controls TDS.

-47-
<PAGE>
<PAGE>
EXPERTS

TDS

The audited consolidated financial statements and schedules of TDS
incorporated by reference in this Proxy Statement-Prospectus have been
audited by Arthur Andersen & Co., independent public accountants, as
indicated in their reports incorporated by reference herein. Reference is
made to the above said reports which include explanatory paragraphs with
respect to the changes in the methods of accounting for cellular sales
commissions, post retirement benefits other than pensions, and income
taxes, and with respect to uncertainties related to certain legal
proceedings, in which TDS is a defendant. The combined financial
statements of the Los Angeles SMSA Limited Partnership, the
Nashville/Clarksville MSA Limited Partnership and the Baton Rouge MSA
Limited Partnership incorporated by reference in this Proxy Statement-
Prospectus have been reviewed for compilation by Arthur Andersen & Co., as
indicated in their report incorporated by reference herein. Reference is
made to the above said report which includes explanatory paragraphs with
respect to a contingency and a change in accounting method. The reports
of other independent accountants, one of which includes explanatory
paragraphs relating to contingencies, on the underlying financial
statements which have been combined are incorporated by reference herein.
The financial statements and schedules referred to above have been
incorporated by reference in reliance upon the authority of such firms as
experts in accounting and auditing in giving said reports.

Arvig

The consolidated balance sheets of Arvig and subsidiaries, as of
December 31, 1993 and 1992 and the related consolidated statements of
income, changes in stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1993 which included reliance
on opinions by another auditor have been audited by Olsen, Thielen & Co.,
Ltd., independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of
such firm as experts in accounting and auditing in giving said report.

The balance sheets of U.S. Link, Inc. and Subsidiary, Velstar Systems,
Inc., and Interlake CableVision, Inc. (all wholly-owned subsidiaries of
Arvig Telcom, Inc.) as of December 31, 1993 and 1992 and the statements of
income, changes in stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1993 have been audited by
Larson, Allen, Weishair & Co., independent public accountants, as
indicated in their reports with respect thereto. These financial
statements were relied upon by Olsen, Thielen & Co., Ltd., in giving their
opinion on the financial statements of Arvig Telcom, Inc. and subsidiaries
and the auditors reports are included herein in reliance upon the
authority of such firm as experts in accounting and auditing in giving
said reports.

-48-
<PAGE>
<PAGE>
INDEX TO ARVIG FINANCIAL STATEMENTS

Fiscal 1993, 1992 and 1991 Annual Audited Statements:

Independent Auditors' Report . . . . . . . . . . . . . . . . . F-2

Reports of other Independent Auditors . . . . . . . . . . . . . F-3

Consolidated Balance Sheet as of December 31, 1993 and 1992 . . F-6

Consolidated Statement of Income for
the years ended December 31, 1993, 1992 and 1991 . . . . . . . F-8

Consolidated Statement of Stockholders' Equity for
the years ended December 31, 1993, 1992 and 1991 . . . . . . . F-9

Consolidated Statement of Cash Flows for
the years ended December 31, 1993, 1992 and 1991 . . . . . . . F-10

Notes to Financial Statements . . . . . . . . . . . . . . . . . F-12

F-1
<PAGE>
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Arvig Telcom, Inc.
Pequot Lakes, Minnesota

We have audited the accompanying consolidated balance sheet of Arvig
Telcom, Inc. and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of income, stockholders' equity, and cash
flows for the three years in the period ended December 31 1993. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits. We did not audit the financial statements of certain
consolidated subsidiaries which statements reflect total assets of
$16,813,756 and $14,331,140 as of December 31, 1993 and 1992,
respectively, and total revenues of $24,405,522 for 1993, $22,928,399 for
1992, and $14,703,611 for 1991. Those statements were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar
as it relates to the amounts included for those consolidated subsidiaries,
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 the other auditors provide a reasonable basis for our
opinion.

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

OLSEN, THIELEN & CO., LTD.

St. Paul, Minnesota
February 25, 1994

F-2
<PAGE>
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
U.S. Link, Inc.
(A Wholly Owned Subsidiary of
Arvig Telcom, Inc.)
Pequot Lakes, Minnesota

We have audited the accompanying consolidated balance sheets of U.S. LINK,
INC. and Subsidiary (A Wholly Owned Subsidiary of Arvig Telcom, Inc.) as
of December 31, 1993 and 1992, and the related consolidated statements of
income and retained earnings, and cash flows for the years then ended.
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 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 consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of U.S.
LINK, INC. and Subsidiary (A Wholly Owned Subsidiary of Arvig Telcom,
Inc.) as of December 31, 1993 and 1992, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.

As discussed in Note 1, the Company changed its method of accounting for
deferred income taxes.

LARSON, ALLEN, WEISHAIR & CO.

St. Cloud, Minnesota
February 18, 1994

F-3
<PAGE>
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Velstar Systems, Inc.
(A Wholly Owned Subsidiary of
Arvig Telcom, Inc.)
Pequot Lakes, Minnesota

We have audited the accompanying balance sheets of VELSTAR SYSTEMS, INC.
(A Wholly Owned Subsidiary of Arvig Telcom, Inc.) as of December 31, 1993
and 1992, and the related consolidated statements of income and retained
earnings, and cash flows for the years then ended. 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 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 consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VELSTAR SYSTEMS, INC.
(A Wholly Owned Subsidiary of Arvig Telcom, Inc.) as of December 31, 1993
and 1992, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting
principles.

As discussed in Note 1, the Company changed its method of accounting for
deferred income taxes.

LARSON, ALLEN, WEISHAIR & CO.

St. Cloud, Minnesota
February 18, 1994

F-4
<PAGE>
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Interlake Cablevision, Inc.
(A Wholly Owned Subsidiary of
Arvig Telcom, Inc.)
Pequot Lakes, Minnesota

We have audited the accompanying balance sheets of INTERLAKE CABLEVISION,
INC. (A Wholly Owned Subsidiary of Arvig Telcom, Inc.) as of December 31,
1993 and 1992, and the related consolidated statements of income and
retained earnings, and cash flows for the years then ended. 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 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 consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of INTERLAKE CABLEVISION,
INC. (A Wholly Owned Subsidiary of Arvig Telcom, Inc.) as of December 31,
1993 and 1992, and the results of its operations and its cash flows for
the years then ended, in conformity with generally accepted accounting
principles.

As discussed in Note 1, the Company changed its method of accounting for
deferred income taxes.

LARSON, ALLEN, WEISHAIR & CO.

St. Cloud, Minnesota
February 16, 1994

F-5
<PAGE>
<PAGE>
<TABLE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993 AND 1992

==========================================================================
<CAPTION>
ASSETS

1993 1992
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 6,072,534 $ 4,080,262
Marketable Securities 1,936,504 1,962,359
Due from Customers, Net of Allowance for
Doubtful Accounts of $166,700
and $145,000 2,775,412 2,786,467
Income Taxes Receivable 11,127 338,191
Other Accounts Receivable 1,457,146 1,260,512
Inventories 256,815 345,272
Prepaid Expenses 209,244 162,965
Deferred Income Taxes 398,149 --
---------- ----------
Total Current Assets 13,116,931 10,936,028
---------- ----------

INVESTMENTS AND OTHER ASSETS:
Notes Receivable 441,314 344,202
Investments 3,089,151 2,703,111
Noncompete Covenants, Net of Amortization
of $1,440,100 and $882,720 1,050,000 1,607,360
Excess of Cost Over Net Assets of
Consolidated Subsidiaries, Net of
Amortization of $498,445 and $470,624 614,377 642,198
Other Intangibles, Net of Amortization of
$267,100 and $166,956 514,483 603,898
Other Assets 537,842 294,486
--------- ---------
Total Investments and Other Assets 6,247,167 6,195,255
--------- ---------

PROPERTY, PLANT AND EQUIPMENT:
Telecommunications Plant in Service 46,842,001 42,619,407
Cable Television Plant in Service 3,398,057 3,278,931
Other Property 2,968,809 3,511,706
Plant Under Construction 135,265 376,990
Accumulated Depreciation (23,307,881) (20,459,171)
---------- ----------
Net Property, Plant and Equipment 30,036,251 29,327,863
---------- ----------

TOTAL ASSETS $ 49,400,349 $ 46,459,146
============ ==========

<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-6
<PAGE>
<PAGE>
<TABLE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993 AND 1992

==========================================================================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY

1993 1992
-------------- --------------
<S> <C> <C>
CURRENT LIABILITIES:
Current Portion of Long-Term Debt $ 2,026,075 $ 1,330,000
Accounts Payable 3,073,055 3,003,707
Dividends Payable 327,750 -
Accrued Taxes 305,701 240,866
Accrued Pension 423,907 278,344
Other Current Liabilities 1,097,030 795,653
---------- ----------
Total Current Liabilities 7,253,518 5,648,570
---------- ----------

LONG-TERM DEBT 19,904,753 20,706,510
---------- ----------

DEFERRED CREDITS AND LIABILITIES:
Investment Tax Credits 587,151 730,805
Income Taxes 3,770,301 2,988,153
Other Liabilities 49,914 19,773
--------- ---------
Total Deferred Credits and Liabilities 4,407,366 3,738,731
--------- ---------

STOCKHOLDERS' EQUITY:
Common Stock - Class A Voting, $1 Par Value,
500,000 Shares Authorized, 4,370 Shares
Issued and Outstanding 4,370 4,370
Common Stock - Class B Nonvoting, $1 Par Value,
500,000 Shares Authorized, 39,330 Shares
Issued and Outstanding 39,330 39,330
Retained Earnings 17,791,012 16,321,635
---------- ----------
Total Stockholders' Equity 17,834,712 16,365,335
---------- ----------

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 49,400,349 $ 46,459,146
=============== ============
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-7
<PAGE>
<PAGE>
<TABLE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

==========================================================================
<CAPTION>
1993 1992 1991
------------ ----------- ------------
<S> <C> <C> <C>
REVENUES:
Long-Distance Carrier Services $ 23,353,552 $21,911,853 $ 13,815,597
Local Exchange Company Services 10,448,818 9,350,512 9,981,322
Cable Television Services 949,252 890,010 769,054
Other Services 683,256 600,793 571,622
----------- ------------ -----------
Total Revenues 35,434,878 32,753,168 25,137,595
----------- ------------ -----------

COSTS AND EXPENSES:
Cost of Long-Distance Carrier
Services 15,952,675 14,805,925 7,901,151
Maintenance and Rents 2,892,772 3,018,004 2,881,470
Depreciation and Amortization 4,377,665 4,657,926 4,437,580
Sales, Marketing and Customer
Services 2,718,366 2,715,206 3,007,740
General and Administrative 4,761,577 4,824,418 4,564,524
---------- ---------- ----------
Total Costs and Expenses 30,703,055 30,021,479 22,792,465
---------- ---------- ----------

OPERATING INCOME 4,731,823 2,731,689 2,345,130

OTHER INCOME 487,948 288,899 250,594

INTEREST EXPENSE (1,215,549) (1,147,482) (1,121,709)
----------- ---------- -----------

INCOME BEFORE INCOME TAXES 4,004,222 1,873,106 1,474,015

INCOME TAXES 1,551,595 646,621 422,023
----------- ---------- -----------

NET INCOME $ 2,452,627 $ 1,226,485 $ 1,051,992
=========== ============ ===========

EARNINGS PER SHARE $ 56.12 $ 28.07 $ 24.07
=========== ============ ===========

DIVIDENDS PER SHARE $ 22.50 $ 10.00 $ 10.00
=========== ============ ===========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-8
<PAGE>
<PAGE>
<TABLE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

==============================================================================================
<CAPTION>
Class A Class B Total
Common Stock Common Stock Retained Stockholders'
Shares Amount Shares Amount Earnings Equity
---------------- ------------------ -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE on
December 31, 1990 4,370 $ 4,370 39,330 $ 39,330 $14,917,158 $14,960,858

Net Income 1,051,992 1,051,992
Dividends (437,000) (437,000)
------- -------- -------- -------- ----------- ------------

BALANCE on
December 31, 1991 4,370 4,370 39,330 39,330 $15,532,150 15,575,850

Net Income 1,226,485 1,226,485
Dividends (437,000) (437,000)
------- -------- -------- -------- ----------- ------------

BALANCE on
December 31, 1992 4,370 4,370 39,330 39,330 16,321,635 16,365,335

Net Income 2,452,627 2,452,627
Dividends (983,250) (983,250)
------- -------- -------- -------- ----------- ------------

BALANCE on
December 31, 1993 4,370 $ 4,370 39,330 $ 39,330 $17,791,012 $17,834,712
======= ======== ======== ======== =========== ============

<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-9
<PAGE>
<PAGE>
<TABLE>
ARVIG TELCOM, INC. AND SUBSIDIAIRIES

CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

==============================================================================================
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,452,627 $ 1,226,485 $ 1,051,992
Adjustments to Reconcile Net Income to Net
Cash Provided By Operating Activities:
Depreciation and Amortization 4,377,665 4,657,926 4,437,580
Equity in (Earnings) Losses of
Investee Companies (90,007) 12,005 185,085
Loss on Sale of Property and Equipment 11,505 128,399
Loss (Gain) on Sale of Marketable Securities 7,174 (2,600) (27,278)
Changes in Assets and Liabilities:
(Increase) Decrease in:
Due from Customers 11,055 (168,544) (1,304,332)
Income Taxes Receivable 327,064 (21,622) (43,999)
Other Accounts Receivable (196,634) 26,830 643,709
Inventories 88,457 102,818 (72,401)
Prepaid Expenses (46,279) (76,006) 129,229
Increase (Decrease) in:
Accounts Payable 69,348 1,008,573 (348,550)
Accrued Taxes 64,835 (55,041) 97,258
Accrued Pension 145,563 (114,371) 142,442
Other Current Liabilities 301,377 20,512 390,787
Deferred Investment Tax Credits (143,654) (143,181) (145,367)
Deferred Income Taxes 383,999 (124,169) (299,456)
Other Liabilities 30,141 1,290 (6,760)
---------- ---------- ----------
Net Cash Provided By
Operating Activities 7,794,236 6,479,304 4,829,939
---------- ---------- ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant and
Equipment, Net (4,422,962) (6,454,818) (4,645,301)
Issuance of Notes Receivable (100,000) -- --
Collection of Notes Receivable 2,888 -- 85,000
Decrease in Equipment Contracts -- -- (255,192)
Purchase of Investments (296,033) (635,420) (713,291)
Sale of Investments -- -- 26,077
Purchase of Marketable Securities (199,305) (569,047) (1,086,774)
Sale of Marketable Securities 217,986 104,240 194,245
Increase in Other Assets (243,356) (164,597) (38,473)
Purchase of Noncompete Covenants -- -- (2,326,080)
Increase in Other Intangibles -- (27,481) (1,268,673)
---------- ----------- -----------
Net Cash Used in Investing Activities (5,040,782) (7,747,123) (10,028,462)
---------- ----------- -----------
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-10
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

==============================================================================================
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Long-Term Debt $ 1,618,320 $ 4,686,062 $ 4,710,301
Principal Payments of Long-Term Debt (1,724,002) (1,216,633) (687,195)
Dividends Paid (655,500) (437,000) (437,000)
Principal Payment of Note Payable -- (59,374) (214,626)
------------ ----------- -----------
Net Cash Provided By (Used In)
Financing Activities (761,182) 2,973,055 3,371,480
------------ ----------- -----------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,992,272 1,705,236 (1,827,043)

CASH AND CASH EQUIVALENTS
At Beginning of Year 4,080,262 2,375,026 4,202,069
------------ ----------- -----------

CASH AND CASH EQUIVALENTS
At End of Year $ 6,072,534 $ 4,080,262 $ 2,375,026
============ =========== ===========

NONCASH INVESTING ACTIVITY:
Sale of Property, Plant and Equipment $ -- $ 32,000 $ --
============ =========== ===========

NONCASH FINANCING ACTIVITY:
Acquisition of Long-Distance Carrier $ -- $ -- $ 124,000
============ =========== ===========

Refinancing of Note Payable by Issuance
of Long-Term Debt $ -- $ 2,000,000 $ --
============ =========== ===========

<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-11
<PAGE>
<PAGE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
==========================================================================

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Description of Business - Arvig Telcom, Inc. owns and operates two
independent telecommunications companies, Arvig Telephone Company and
Bridge Water Telephone Company; one inter-exchange telecommunications
carrier, U.S. Link, Inc; one cable television company, Interlakes Cable
Vision, Inc.; one cellular telephone investing company, Arvig Cellular,
Inc.; and two support service companies, North Country Data, Ltd. and
Velstar Systems, Inc. In addition, U.S. Link, Inc. owns another inter-
exchange telecommunications carrier, ABT Long Distance Service, Inc., and
Arvig Telephone Company owns a finance support company, Arvig Finance,
Inc.
B. Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All
significant intercompany transactions and accounts have been eliminated.
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles including certain accounting
practices prescribed by the Federal Communications Commission (FCC) and
the state regulatory commission in Minnesota.
C. Cash Equivalents - For purposes of the statement of cash flows, the
Company considers all temporary cash investments to be cash equivalents.
These temporary cash investments are highly liquid debt securities held
for cash management purposes that have insignificant risk of changes in
value. Temporary cash investments at December 31, 1993 and 1992 totaled
$4,026,227 and $1,175,674, respectively.

D. Property and Depreciation - Property and equipment are recorded at
original cost. Additions, improvements or major renewals are capitalized.
If telecommunication or cable television plant assets are sold, retired or
otherwise disposed of, the cost plus removal costs less salvage, is
charged to accumulated depreciation. Any gains or losses on other
property retirements are reflected in the current year operations.

Depreciation is computed using the straight-line method based on estimated
service or remaining useful lives. Depreciation expense was $3,703,069 in
1993, $3,663,936 in 1992, and $3,735,961 in 1991. Composite depreciation
rates are as follows:
1993 1992 1991
----- ----- -----
Telecommunications Plant 6.5% 7.0% 8.5%
Cable Television Plant 7.3 7.3 7.4
Other Property 15.3 17.5 13.1

E. Inventories - Materials and supplies are recorded at average cost.
Merchandise for resale inventories are recorded at the lower of average
first-in, first-out cost or market. Inventories consisted of the
following:
1993 1992
----- -----
Materials and Supplies $106,571 $ 91,752
Merchandise for Resale 150,244 253,520
-------- -------
Total $256,815 $345,272
======== ========

F-12
<PAGE>
<PAGE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

==========================================================================

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

F. Investments - Cellular partnerships and the investment in Northern
Fiber, Inc. are recorded on the equity method of accounting, which
reflects original cost and recognition of the Company's share of income or
losses from the investments. Other investments are recorded at cost which
approximates market value.

G. Revenue Recognition - Revenues are recognized when earned. Telephone
network access and long-distance services are furnished jointly with other
companies. Local exchange companies access charges are billed to long
distance toll carriers based on interstate tariffs filed with the FCC by
the National Exchange Carrier Association, and state tariffs filed with
the state regulatory body. Access charge revenues and settlements are
based on cost studies and on average schedules. Revenues based on cost
studies are estimated pending finalization of the studies.

H. Income Taxes and Investment Tax Credits - The provision for income
taxes consists of an amount for taxes currently payable and a provision
for tax consequences deferred to future periods. Effective January 1,
1993, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes." Deferred income taxes are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred income tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect of the adoption of SFAS
109 was not material to the financial statements. For financial statement
purposes, deferred investment tax credits and excess deferred income taxes
relating to depreciation of regulated assets are being amortized as a
reduction of the provision for income taxes over the estimated useful or
remaining lives of the related property, plant and equipment.

I. Intangible Assets - The Company is amortizing intangible assets using
the following periods:
Noncompete Covenants 3-5 Years
Excess of Cost Over Net Assets
of Consolidated Subsidiaries 40 Years
Other Intangible Assets 3-5 Years

J. Earnings Per Share - Earnings per share have been calculated by
dividing net income by the weighted average number of common shares
outstanding during each year. The weighted average shares outstanding
were 43,700 for all years.

NOTE 2 - MARKETABLE SECURITIES

Marketable securities are recorded at the lower of aggregate cost or
market value. Market values on December 31, 1993 and 1992 were
approximately $2,048,000 and $2,067,000. Other income includes losses on
sales of marketable securities of $7,174 in 1993 and gains on sales of
$2,600 in 1992 and $27,278 in 1991. At December 31, 1993, gross
unrealized gains pertaining to the marketable securities in the portfolio
were approximately $111,500.

F-13
<PAGE>
<PAGE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

==========================================================================

NOTE 2 - MARKETABLE SECURITIES (Continued)

Financial Accounting Standards Board Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," effective in 1994,
amends the rules to require debt and equity securities having readily
determinable fair market values to be reported at their fair market value.
The adoption of Statement No. 115 will not have a material effect on the
Company's financial position or results of operations.

NOTE 3 - NOTES RECEIVABLE

The Company has several unsecured notes receivable from Cellular Mobile
Systems of St. Cloud, a partnership which is partially owned by Arvig
Cellular, Inc. The notes are due at various times during 1998. Interest
rates fluctuate following the First Bank Minneapolis prime rate. On
December 31, 1993, the rate was 6%. Interest is due annually; however,
the partnership has elected to defer annual interest payments. The
principal balance was $203,000 at December 31, 1993 and 1992.

The Company has two unsecured notes receivable from Northern Fiber, Inc.,
which is 30% owned by the Company. The notes are due in 1995 and 1998.
The interest rates on these notes are 6.4% and 8.5% and the interest
payments are due annually. The principal balance was $109,202 at
December 31, 1993 and 1992.

The Company sold property on a contract for deed basis in 1992. The
contract requires monthly payments of principal and 8% interest through
January, 1998. The principal balance was $29,112 at December 31, 1993 and
$32,000 at December 31, 1992.

The Company has a $100,000 note receivable at December 31, 1993 with an
unrelated entity. The note is part of REA's Economic Development loan
program as disclosed in Note 6.

NOTE 4 - INVESTMENTS

Investments consist of the following:
1993 1992
---- ----
Cellular Partnerships $ 870,162 $ 629,092
Northern Fiber, Inc. 25,085 57,963
Rural Telephone Bank Stock 745,575 735,625
Independent Telecommunications
Network, Inc. Stock 257,040 257,040
U.S. Intelco Networks, Inc. Stock 39,497 39,497
Minnesota Equal Access Network System,
Inc. Stock 292,210 292,210
Rural Cellular Corporation Stock 261,919 261,919
RTFC Capital Term Certificates 391,567 324,900
St. Paul Bank for Cooperatives Stock 183,944 23,368
Other 22,152 81,497
---------- ----------
Total $3,089,151 $2,703,111
========== ==========

F-14
<PAGE>
<PAGE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

==========================================================================

NOTE 4 - INVESTMENTS (Continued)

Cellular Partnerships consist of the following:
<TABLE>
<CAPTION>
1993 1992
-------------------------------------- -------
Percent of Cumulative
Company Ownership Cost Income (Loss) Total Total
-------- ----------- ------ ------------- ---------- --------
<S> <C> <C> <C> <C> <C>
Duluth MSA Limited 16.33% $1,462,561 $(819,648) $642,913 $558,139
CMS of St. Cloud 14.29% 43,000 184,249 227,249 70,953
---------- ---------- ---------- --------
Total $1,505,561 $(635,399) $870,162 $629,092
========== ========== ========== ========
</TABLE>
For the above partnerships, the Company's share of income (losses), net
was $121,932 in 1993, $(12,005) in 1992, and $(181,012) in 1991. The
Partnerships may require future capital contributions from the limited
partners.

Prior to April 1, 1991, the Company had partnership interests in two
partnerships that operated rural cellular franchises. The Company's share
of operating losses was $4,073 in 1991.

On April 1, 1991, six partnerships (including the two referred to above)
formed the Rural Cellular Corporation. The Company's investment in the
partnerships was transferred to the new corporation. The Company has a
4.0% ownership, and the investment is accounted for using the cost method.

NOTE 5 - NONCOMPETE COVENANTS

As part of a 1991 acquisition, ABT Long Distance Services, Inc. entered
into an agreement with former key individuals of Advanced Business
Telephone, Inc. in which the Company agreed to make payments to these
individuals in exchange for their agreement not to compete with the
Company for periods of three to five years. The aggregate amount of these
payments was $2,300,000.

Additional noncompete covenants exist pertaining to the acquisition of
Alexandria Long Distance in 1991 and Brainerd Telecom, Ltd. in 1988.
These amounts are fully amortized at December 31, 1993.

F-15
<PAGE>
<PAGE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

==========================================================================

NOTE 6 - LONG-TERM DEBT

Long-term debt is as follows:
1993 1992
---- ----
REA:
2% $ 1,733,657 $ 1,869,217
5% 1,416,316 1,464,223
RTB:
6.05% 208,950 --
6.14% 2,731,050 2,731,050
6.5% 1,625,156 1,687,360
7.5% 5,005,991 5,101,646
8.0% 1,012,954 1,043,702
Deferred Interest -- 37
REA Rural Economic Development Loan 100,000 --
RTFC Notes 3,202,456 3,533,119
St. Paul Bank for Cooperatives:
Variable 4,600,919 3,673,500
Fixed -- 459,194
Contracts Payable 293,379 473,462
------------ ------------
Total 21,930,828 22,036,510
Less Amount Due Within One Year 2,026,075 1,330,000
------------ ------------
Long-Term Debt $ 19,904,753 $20,706,510
============ ============

The mortgage notes payable to the Rural Electrification Administration
(REA), and the Rural Telephone Bank (RTB) are secured by substantially all
assets of the Company's two telephone subsidiaries. The REA and RTB notes
are payable in equal monthly and quarterly installments of principal and
interest beginning two and three years after the date of the issue and
will be fully repaid at various times from 1994 to 2021. Advance payments
of $42,369 may be applied to these installments.

Unadvanced loan funds on an RTB loan commitment of $301,350 are available
to the Company at December 31, 1993. These funds are expected to be used
to pay the outstanding balance of contracts payable for plant additions.

The 0% Economic Development Loan is payable in monthly installments of
$1,042 starting in July, 1995, and continuing through July, 2003. The
proceeds from the loan were advanced to an unrelated entity from whom the
Company has a note receivable which is collectible in monthly installments
of $1,042 with 0% interest through the year 2003.

The mortgage notes to the Rural Telephone Finance Company (RTFC) are
payable in quarterly principal payments based on an amortization schedule.
The final payments on the notes will be in 2004 and 2008. The interest
rates are variable based on the cost of funds and are at 5.0% at
December 31, 1993. The notes are secured by the stock of Bridge Water
Telephone Company and substantially all assets of Arvig Telephone Company.

F-16
<PAGE>
<PAGE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

==========================================================================

NOTE 6 - LONG-TERM DEBT (Continued)

The notes payable to the St. Paul Bank for Cooperatives are payable in
quarterly principal installments of $319,401 plus interest. The interest
rates for the variable portion were 5.5% to 5.8% at December 31, 1993 and
5.8% at December 31, 1992. These notes are secured by equipment,
inventory and intangibles of ABT Long Distance Services, Inc., intangibles
of U.S. Link, Inc. and substantially all of the assets of Interlake
Cablevision, Inc.

Unadvanced loan funds on St. Paul Bank for Cooperatives loan commitments
of $3,458,082 are available to the Company as of December 31, 1993.

The RTB stock, RTFC certificates, and St. Paul Bank for Cooperatives stock
were purchased pursuant to loan agreements and have redemption
restrictions.

The terms of the various notes have restrictions on investments,
rerequisition of capital stock, and the payment of cash dividends.

Principal payments required during the next five years are:
1994 - $2,026,075; 1995 - $2,076,591; 1996 - $1,410,066; 1997 -
$1,414,271; and 1998 - $1,449,171.

NOTE 7 - NOTES PAYABLE

The Company has an approved revolving term loan with the St. Paul Bank for
Cooperatives effective through September 30, 1996. The Company must pay
an annual commitment fee of .5% of the average unadvanced commitment.
There was no balance outstanding at December 31, 1993.

The Company had a sixty-month revolving line of credit from the RTFC which
enabled the Company to borrow up to $3,500,000. The obligations on the
line were unsecured and required quarterly interest payments at the
prevailing bank prime rate plus 1.5%. The agreement also required that
the loan balances be reduced to zero for at least five consecutive
business days at least once a year. The Company had borrowed $2,000,000
against this line of credit, and in 1992 it refinanced the $2,000,000 with
the RTFC mortgage note discussed in Note 6. At that time, this line of
credit was terminated.

The Company had another line of credit with identical terms for $900,000.
This line expired in 1993 without the Company borrowing on it.

F-17
<PAGE>
<PAGE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

==========================================================================

NOTE 8 - EMPLOYEE RETIREMENT BENEFITS

The Company has a defined benefit pension plan covering employees who meet
certain age and service requirements. The benefits are based upon years
of service and the employee's compensation during the five consecutive
years of the last ten years of employment that the employee's compensation
was the highest.

The following table shows the plan's funded status and amounts recognized
in the Company's balance sheet:
<TABLE>
Actuarial present value of benefit obligations:
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Vested $1,564,491 $ 986,039
Nonvested 68,218 57,879
----------- ----------
Accumulated Benefit Obligation 1,632,709 1,043,918
Effect of Assumed Rate of Compensation Increases 1,541,864 1,234,721
----------- ----------
Projected Benefit Obligation for Service
Rendered to Date 3,174,573 2,278,639
Plan Assets at Fair Value Consisting of
Group Annuity Contracts (2,103,791) (1,825,492)
---------- ----------
Projected Benefit Obligation in Excess of (Less Than)
Plan Assets 1,070,782 453,147
Unrecognized Net Gain (Loss) From Past Experience
Different From That Assumed and Effects of Changes
in Assumptions (Being Recognized Over 10 Years) (635,083) (162,498)
Unrecognized Obligation at January 1, 1989
(Being Recognized Over 10 Years) (11,792) (12,305)
---------- ----------
Accrued Pension Expense $ 423,907 $ 278,344
=========== ==========

1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Pension expense included the following
components:
Service Cost - Benefits Earned During
the Period $ 348,416 $ 241,710 $ 164,706
Interest Cost on Projected Benefit
Obligation 157,477 143,050 120,066
Actual Return on Plan Assets (136,477) (115,685) (156,565)
Amortization and Deferral, Net 2,023 (4,600) 27,772
----------- ---------- ----------
Net Pension Expense $ 371,439 $ 264,475 $ 155,979
=========== ========== ==========

The following assumptions were used to determine the funded status of plan:
Discount Rate 7.0% 7.5% 8.0%
Rate of Increase in Compensation 5.5 5.5 5.5
Expected Long-Term Rate of Return on
Plan Assets 7.0 7.5 8.0
</TABLE>

F-18
<PAGE>
<PAGE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

==========================================================================

NOTE 9 - INCOME TAXES AND INVESTMENT TAX CREDITS
<TABLE>
The provision for income tax expense consists of the following:
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Current Income Taxes:
Federal $ 994,117 $ 718,117 $ 677,732
State 317,133 195,854 189,114
Deferred Income Taxes:
Federal 279,709 (91,757) (256,678)
State 104,290 (32,412) (42,778)
Investment Tax Credit:
Amortized (143,654) (143,181) (145,367)
---------- ---------- ----------
Total Income Tax Expense $1,551,595 $ 646,621 $ 422,023
========== ========== ==========
</TABLE>
Deferred tax expense results primarily from temporary differences between
depreciation expense for income tax purposes and depreciation expense
recorded in the financial statements, other temporary differences are
created by alternative minimum tax credits and certain expense accruals.

Deferred tax assets and liabilities are comprised of the following at
December 31, 1993:
Assets:
Accrued Liabilities $ 342,663
Alternative Minimum Tax Credit Carryforward 200,327
Other 73,604
-----------
Gross Assets 616,594
-----------
Liabilities:
Depreciation and Fixed Assets 3,639,120
Cellular Partnership Basis Difference 349,626
-----------
Gross Liabilities 3,988,746
-----------
Net Deferred Tax Liability 3,372,152
Net Current Deferred Tax Asset 398,149
-----------
Net Noncurrent Deferred Tax Liability $3,770,301
===========

The differences which cause the effective tax rate to vary from the
statutory federal income tax rate of 34 percent are as follows:
1993 1992 1991
---- ---- ----
Statutory Rate 34.0% 34.0% 34.0%
Effect of State Income Taxes, Net of
Federal Tax Benefit 6.9 5.8 6.6
Amortization of Investment Tax Credits (3.6) (7.6) (9.9)
Nondeductible Expenses 3.0 4.1
Other (1.6) (1.8) (2.1)
----- ----- ----
Effective Rate 38.7% 34.5% 28.6%
===== ===== ====

F-19
<PAGE>
<PAGE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

==========================================================================

NOTE 10 - LEASES

The Company has entered into various agreements to lease office space,
fiber optic cable, and conduit space from independent third parties. The
terms of the leases are from two to ten years. All leases will expire by
October 1, 1998, but renewal options are available.
Future minimum lease payments consist of the following:

Year Ending December 31, Amount
------------------------ ----------
1994 $ 355,364
1995 179,744
1996 143,834
1997 130,105
1998 108,421
-----------
Total $ 917,468
===========

Lease expense for 1993, 1992, and 1991 was $1,578,343, $1,533,933, and
$1,090,979.

The Company has entered into various agreements to lease fiber optic cable
and conduit space to independent third parties at a fixed cost for a
period of 4 to 10 years. All leases are operating leases. These leases
are accounted for on an as-earned basis and any prepayments are recorded
as deferred lease income.

Future minimum rentals to be received on non-cancelable leases are as
follows:

Year Ending December 31, Amount
------------------------ ----------
1994 $1,123,430
1995 576,033
1996 246,042
1997 139,294
1998 111,204
Later Years 184,976
-----------
Total $2,380,979
===========

NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION

1993 1992 1991
---- ---- ----
Cash Payments For:
Interest $1,249,652 $1,163,084 $1,036,379
Income Taxes 984,186 930,500 1,120,443

F-20
<PAGE>
<PAGE>
ARVIG TELCOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

==========================================================================

NOTE 12 - MERGER

On December 14, 1993, the Company's board of directors approved a plan of
merger with Telephone and Data Systems, Inc. (TDS). The merger calls for
an exchange of Arvig Telcom, Inc. stock for TDS stock in a ratio based
upon the market value of TDS stock at the date of closing and is intended
to qualify as a tax free reorganization under the Internal Revenue Code.
The merger will be accounted for under the purchase method of accounting
for financial reporting purposes. The merger is subject to the approval
of several governmental agencies, including the Minnesota Public Utilities
Commission and the Federal Communications Commission.

F-21
<PAGE>
<PAGE>
ANNEX A

AGREEMENT AND PLAN OF MERGER

Among

TELEPHONE AND DATA SYSTEMS, INC.

ARVIG ACQUISITION CORPORATION

ARVIG TELCOM, INC.

and

CERTAIN OWNERS OF OUTSTANDING
SHARES OF CAPITAL STOCK OF
ARVIG TELCOM, INC.
<PAGE>
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
THE MERGER

1.1 Effective Time of the Merger . . . . . . . . . . . . . . . . 6
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . 7

ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

2.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . 8
(a) Capital Stock of Sub . . . . . . . . . . . . . . . . . 8
(b) Arvig Common Stock . . . . . . . . . . . . . . . . . . 8
(c) Computation of Exchange Ratio
for Arvig Common Stock . . . . . . . . . . . . . . . . 8
(d) Shares of Dissenting Holders . . . . . . . . . . . . . 10
(e) Adjustment of Prices and Exchange Ratios . . . . . . . 10

2.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . 11
(a) Exchange Agent . . . . . . . . . . . . . . . . . . . . 11
(b) Exchange Procedures . . . . . . . . . . . . . . . . . . 11
(c) Distributions with Respect to Unexchanged
Shares . . . . . . . . . . . . . . . . . . . . . . . . 12
(d) No Further Ownership Rights in Arvig . . . . . . . . . 13
(e) No Fractional Shares . . . . . . . . . . . . . . . . . 13
(f) Termination of Exchange Fund . . . . . . . . . . . . . 13
(g) No Liability . . . . . . . . . . . . . . . . . . . . . 14

ARTICLE III
REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of Sellers
Concerning the Transaction . . . . . . . . . . . . . . . . . 14
(a) Binding Obligation; No Conflict . . . . . . . . . . . . 14
(b) Status and Effect of Delivery of the
Arvig Common Stock . . . . . . . . . . . . . . . . . . 15
(c) No Litigation . . . . . . . . . . . . . . . . . . . . . 15

3.2 Representations and Warranties of Arvig . . . . . . . . . . . 15
(a) Subsidiaries; Organization; Standing
and Power . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Capital Structure . . . . . . . . . . . . . . . . . . . 16
(c) Authority . . . . . . . . . . . . . . . . . . . . . . . 17
(d) No Violation . . . . . . . . . . . . . . . . . . . . . 17
(e) Consents . . . . . . . . . . . . . . . . . . . . . . . 18
(f) Financial Statements . . . . . . . . . . . . . . . . . 19
(g) Compliance with Applicable Law . . . . . . . . . . . . 19
(h) Availability of Assets and Legality of Use . . . . . . 20
(i) Title to Property . . . . . . . . . . . . . . . . . . . 20
<PAGE>
<PAGE>
(j) Patents, Trade Names, Trademarks and Other
Rights . . . . . . . . . . . . . . . . . . . . . . . . 20
(k) Real Estate . . . . . . . . . . . . . . . . . . . . . . 21
(l) Insurance . . . . . . . . . . . . . . . . . . . . . . . 21
(m) Environmental Conditions . . . . . . . . . . . . . . . 22
(n) Bank Accounts; Powers of Attorney . . . . . . . . . . . 22
(o) Customers and Suppliers . . . . . . . . . . . . . . . . 22
(p) Accounts Receivable . . . . . . . . . . . . . . . . . . 23
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . 23
(r) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 23
(s) Benefit Plans . . . . . . . . . . . . . . . . . . . . . 24
(t) Absence of Certain Changes or Events . . . . . . . . . 26
(u) No Undisclosed Liabilities . . . . . . . . . . . . . . 27
(v) Information in Proxy Statement . . . . . . . . . . . . 28
(w) Vote Required . . . . . . . . . . . . . . . . . . . . . 28
(x) Beneficial Ownership of TDS Common Stock . . . . . . . 28

3.3 Representations and Warranties of TDS and Sub
(a) Organization, Standing and Power . . . . . . . . . . . 28
(b) Capital Structure . . . . . . . . . . . . . . . . . . . 29
(c) Authority . . . . . . . . . . . . . . . . . . . . . . . 29
(d) No Violation . . . . . . . . . . . . . . . . . . . . . 29
(e) Consents . . . . . . . . . . . . . . . . . . . . . . . 30
(f) SEC Documents . . . . . . . . . . . . . . . . . . . . . 30
(g) Compliance with Applicable Laws . . . . . . . . . . . . 31
(h) Litigation . . . . . . . . . . . . . . . . . . . . . . 31
(i) Absence of Certain Changes or Events . . . . . . . . . 32
(j) No Disclosed Material Liabilities . . . . . . . . . . . 33
(k) Interim Operations of Sub . . . . . . . . . . . . . . . 33
(l) Authorization for TDS Common Shares
and Stock Exchange Listing . . . . . . . . . . . . . . 33
(m) Information Supplied . . . . . . . . . . . . . . . . . 33

ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS

4.1 Covenants of Arvig and TDS . . . . . . . . . . . . . . . . . 34
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . 34
(b) Dividends; Changes in Stock . . . . . . . . . . . . . . 34
(c) Issuance of Securities . . . . . . . . . . . . . . . . 35
(d) Governing Documents . . . . . . . . . . . . . . . . . . 35
(e) Acquisition Proposals . . . . . . . . . . . . . . . . . 35
(f) No Acquisitions . . . . . . . . . . . . . . . . . . . . 36
(g) No Dispositions . . . . . . . . . . . . . . . . . . . . 36
(h) Indebtedness; Leases . . . . . . . . . . . . . . . . . 36
(i) Employee Arrangements . . . . . . . . . . . . . . . . . 37

4.2 Covenants of TDS . . . . . . . . . . . . . . . . . . . . . . 37
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . 37
(b) Mergers . . . . . . . . . . . . . . . . . . . . . . . . 37
(c) SEC Information . . . . . . . . . . . . . . . . . . . . 38
<PAGE>
<PAGE>
ARTICLE V
ADDITIONAL AGREEMENTS

5.1 Preparation of S-4 and the Proxy Statement . . . . . . . . . 38
5.2 Letter of Arvig's Accountants . . . . . . . . . . . . . . . . 38
5.3 Access to Information . . . . . . . . . . . . . . . . . . . . 38
5.4 Shareholders Meeting . . . . . . . . . . . . . . . . . . . . 39
5.5 Legal Conditions to Merger . . . . . . . . . . . . . . . . . 39
5.6 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.7 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 40
5.8 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 40
5.9 Brokers of Finders . . . . . . . . . . . . . . . . . . . . . 40
5.10 Additional Agreements; Reasonable Efforts . . . . . . . . . . 40
5.11 Conduct of Business of Sub. . . . . . . . . . . . . . . . . . 41
5.12 No Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . 41
5.13 No Action . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.14 Distribution Agreement; Spin-off . . . . . . . . . . . . . . 41
5.15 Directors' and Officers' Liability . . . . . . . . . . . . . 42
5.16 Maintenance of Records . . . . . . . . . . . . . . . . . . . 42

ARTICLE VI
CONDITIONS PRECEDENT

6.1 Conditions to Each Party's Obligation to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 42
(a) Shareholder Approval . . . . . . . . . . . . . . . . . 43
(b) AMEX Listing . . . . . . . . . . . . . . . . . . . . . 43
(c) Other Approvals . . . . . . . . . . . . . . . . . . . . 43
(d) S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(e) No Injunctions or Restraints . . . . . . . . . . . . . 43

6.2 Conditions of Obligations of TDS and Sub . . . . . . . . . . 43
(a) Representations and Warranties . . . . . . . . . . . . 43
(b) Performance of Obligations . . . . . . . . . . . . . . 44
(c) Letters from Arvig Affiliates . . . . . . . . . . . . . 44
(d) Legal Opinion . . . . . . . . . . . . . . . . . . . . . 44

6.3 Conditions of Obligations of Arvig
and the Sellers . . . . . . . . . . . . . . . . . . . . . . . 44
(a) Representations and Warranties . . . . . . . . . . . . 44
(b) Performance of Obligations of TDS and Sub . . . . . . . 44
(c) Legal Opinion . . . . . . . . . . . . . . . . . . . . . 44
(d) Fairness Opinion . . . . . . . . . . . . . . . . . . . 45
(e) No Adverse Changes . . . . . . . . . . . . . . . . . . 45

ARTICLE VII
TERMINATION AND AMENDMENT

7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . 46
7.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . 46
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ARTICLE VIII

8.1 By the Sellers to TDS . . . . . . . . . . . . . . . . . . . . 46
8.2 By TDS to Arvig and the Sellers . . . . . . . . . . . . . . . 47

ARTICLE IX
GENERAL PROVISIONS

9.1 Survival of Representations, Warranties . . . . . . . . . . . 47
9.2 Agreement of Sellers, Designation of Sellers Agent . . . . . 47
9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . 49
9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 49
9.6 Entire Agreement; No Third Party Beneficiaries . . . . . . . 49
9.7 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 50
9.9 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . 50
9.10 Agent for Service . . . . . . . . . . . . . . . . . . . . . . 50
9.11 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.12 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.13 Obligation of TDS . . . . . . . . . . . . . . . . . . . . . . 51
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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER is made and entered into as
of the 14th day of December, 1993 (the "Agreement"), among TELEPHONE AND
DATA SYSTEMS, INC., an Iowa corporation ("TDS"), ARVIG ACQUISITION
CORPORATION, a Minnesota corporation and a wholly-owned subsidiary of TDS
("Sub"), and ARVIG TELCOM, INC., a Minnesota corporation ("Arvig"), and
those owners of capital stock of Arvig who execute this Agreement (the
"Sellers").

WHEREAS, by letter dated October 9, 1993, TDS made a proposal
for the acquisition of Arvig;

WHEREAS, on October 15, 1993, the holders of a majority of the
outstanding shares of Class A Voting Common Stock of Arvig executed a
counterpart of the proposal and delivered it to TDS (the "Letter of
Intent");

WHEREAS, the Sellers and the respective Boards of Directors of
TDS, Sub and Arvig deem it desirable to accomplish the acquisition of
Arvig by TDS by means of the merger of Sub with and into Arvig (the
"Merger"); and

WHEREAS, for federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code");

NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants and agreements herein contained,
the parties hereto agree as follows:

ARTICLE I

THE MERGER

1.1 Effective Time of the Merger. Subject to the provisions of
this Agreement, Articles of Merger (the " Articles of Merger") shall be
duly prepared, executed and acknowledged on behalf of Arvig and Sub and
thereafter delivered to the Secretary of State of the State of Minnesota,
for filing, as provided in the Minnesota Business Corporation Act (the
"MBCA"), as soon as practicable on or after the Closing Date (as defined
in Section 1.2). The Merger shall become effective upon the filing of the
Articles of Merger with the Secretary of State of State of Minnesota or at
such time thereafter as is provided in the Articles of Merger (the
"Effective Time").

1.2 Closing. The Closing of the Merger (the "Closing") will
take place at 10:00 a.m. on a date to be specified by the parties, which
shall be no later than the third business day after the latest to occur of
the conditions set forth in Article VI shall

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have been fulfilled or waived in accordance with this Agreement (the
"Closing Date"), at the offices of Hall, Byers, Hanson, Steil and
Weinberger, P.A., 1010 West St. Germain, Suite 600, St. Cloud, Minnesota,
unless another date, time or place is agreed to in writing by the parties
hereto.

1.3 Effects of the Merger. (a) At the Effective Time, (i) the
separate existence of Sub shall cease and Sub shall be merged with and
into Arvig and Arvig shall be the surviving corporation (Sub and Arvig are
sometimes referred to herein as the "Constituent Corporations" and Arvig
is sometimes referred to herein as the "Surviving corporation"), (ii) the
Articles of Incorporation of Sub as in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation, and (iii) the Bylaws of Sub as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation.

(b) The directors of Sub and the officers of Arvig at the
Effective Time shall, from and after the Effective Time, be the initial
directors and officers of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.

(c) At and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and
franchises, of a public as well as of a private nature, and be subject to
all the restrictions, disabilities and duties of each of the Constituent
Corporations; and all and singular rights, privileges, powers and
franchises of each of the Constituent corporations, and all property,
real, personal and mixed, and all debts due to either of the constituent
Corporations on whatever account, as well as for stock subscriptions and
all other things in action or belonging to each of the Constituent
Corporations, shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and every
other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the Constituent Corporations; and
the title to any real estate vested by deed or otherwise in either of the
Constituent Corporations shall not revert or be in any way impaired; but
all rights of creditors and all liens upon any property of either of the
constituent Corporations shall be preserved unimpaired; and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth
attach to the Surviving Corporation, and may be enforced against it to the
same extent as if said debts and liabilities had been incurred by it.

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ARTICLE II

EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

2.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of
any shares of Arvig Common Stock (as defined in Section 2.1(b)), or
capital stock of
sub:

(a) Capital Stock of Sub. Each issued and outstanding share
of the capital stock of Sub shall be converted into and become one
fully paid and nonassessable share of Common Stock, par value
$1.00 per share, of the Surviving Corporation.

(b) Arvig Common Stock. As used in this Agreement, the term
"Arvig Common Stock" means the Class A Voting Common Stock, par
value $1.00 per share, of Arvig (the "Arvig Voting Stock") and
Class B Nonvoting Common Stock, par value $1.00 per share, of
Arvig (the "Arvig Nonvoting Stock").

(c) Computation of Exchange Ratio for Arvig Common Stock.
Subject to Section 2.2(e), each issued and outstanding share of
Arvig Common Stock shall be converted into the right to receive
that number of fully paid and nonassessable Common Shares, par
value $1.00 per share, of TDS ("TDS Common Shares") determined by
dividing $1,212.8146 ("Basic Price Per Share") by the Average
Closing Price of TDS Common Shares; provided, however, that:

(i) if the Average Closing Price of TDS Common Shares is
more than $55.78 and not more than $58.44, then TDS
shall deliver 21.74282 TDS Common Shares for each
share of Arvig Common Stock; and

(ii) if the Average Closing Price of TDS Common Shares is
greater than $58.44 and not greater than $64.25, TDS
shall deliver, in exchange for each share of Arvig
Common Stock, that number of TDS Common Shares
determined by dividing $1,273.4553 by the Average
Closing Price of TDS Common Shares; and

(iii) if the Average Closing Price of TDS Common Shares is more
than $64.25, TDS shall have the option (the "Buyer's Out"),
exercisable in its sole discretion, (x) to deliver 19.8203
TDS Common Shares for each share of Arvig Common Stock or
(y) to terminate this Agreement upon notice to the Sellers
sent by telecopy and received by the Sellers prior to 10:00
a.m., Chicago time, on the day immediately preceding the
Closing Date; provided, however that,

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in the event TDS exercises the Buyer's Out, the
Sellers shall have the right to require TDS to close,
upon notice sent by the Attorneys-in-Fact (as defined
in the Power of Attorney and Custody Agreement
identified in Section 9.2(d) hereof (the "Custody
Agreement")) to TDS at any time prior to the Closing
Date, that the Sellers will accept at the Closing that
number of TDS Common Shares obtained by dividing
$1,273.4553 by the Average Closing Price; and

(iv) if the Average Closing Price of TDS Common Shares is
less than $50.47 and not less than $47.81, then TDS
shall deliver 24.03041 TDS Common Shares for each
share of Arvig Common Stock; and

(v) if the Average Closing Price of TDS Common Shares is
less than $47.81 and not less than $42.00 TDS shall
deliver for each share of Arvig Common Stock that
number of TDS Common Shares determined by dividing
$1,148.9176 by the Average Closing Price of TDS Common
Shares; and

(vi) if the Average Closing Price of TDS Common Shares is
less than $42.00, the Sellers shall have the option
(the "Sellers' Out"), exercisable in their sole
discretion, (x) to accept 27.3552 TDS Common Shares
for each share of Arvig Common Stock or (y) to
terminate this Agreement upon notice to TDS sent by
the Attorneys-in-Fact (as defined in the Custody
Agreement) by telecopy and received by TDS prior to
10:00 a.m. Chicago time, on the day immediately
preceding the Closing Date; provided,however, that, in
the event the Sellers exercise the Sellers' Out, TDS
shall have the right to require the Sellers to close,
upon notice to the Sellers at any time prior to the
Closing Date, that TDS will deliver at the Closing, in
exchange for each share of Arvig Common Stock, that
number of TDS Common Shares equal to the quotient
obtained by dividing $1,148.9176 by the Average
Closing Price.

For purposes of this Agreement, the term "Average Closing Price" means the
arithmetical average of the closing price for TDS Common Shares as
reported in the American Stock Exchange Composite Transactions section of
The Wall Street Journal for the five trading days ending on the third
trading day prior to the Closing Date. All such shares of Arvig Common
Stock shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the TDS Common Shares (and

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cash in lieu of fractional shares as contemplated by Section 2.2(e)) to be
issued or paid in consideration therefore upon the surrender of such
certificate in accordance with Section 2.2, without interest.

(d) Shares of Dissenting Holders. The provisions of Section
2.l(c) shall not apply to shares of Arvig Common Stock (the
"Dissenters' Shares") of holders who do not vote such shares in
favor of the approval and adoption of this Agreement and of the
Merger and who deliver a written notice to Arvig before the vote
on the approval and adoption of this Agreement and of the Merger
stating the intention to demand payment of fair value for such
shares if the Merger is effected, and if such holders take all
other action required in the manner provided in Sections 302A.471
and 302A.473 of the MBCA. Such holders shall be entitled to
payment for and an appraisal of such shares in accordance with the
provisions of Sections 302A.471 and 302A.473 of the MBCA if such
appraisal rights are available pursuant thereto.

(e) Adjustment of Prices and Exchange Ratios. In the event
of any of the following actions (a "Diluting Event"):

(i) any distribution or dividend on any class of capital
stock of TDS payable in TDS Common Shares;

(ii) any issuance to TDS shareholders of any rights,
warrants, or conversion privileges entitling them to
acquire TDS Common Shares at a price per share less
than the fair market value thereof immediately prior
to the earlier of such issuance or the announcement of
such issuance;

(iii) any issuance to any other persons (except pursuant to any
bona fide employment compensation agreement) of any rights
or warrants entitling them to acquire TDS Common Shares at a
price per share less than the fair market value thereof
immediately prior to the earlier of such issuance or the
announcement of such issuance;

(iv) any subdivision of TDS Common Shares;

(v) any distribution or dividend on TDS Common Shares of
evidences of indebtedness or assets (other than
pursuant to subparagraph (i) and (ii) above);

(vi) any reclassification of TDS Common Shares into
securities other than TDS Common Shares (except
pursuant to subparagraph (x) below);

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(vii) any cash distribution or dividend to holders of TDS Common
Shares (other than an ordinary quarterly dividend of $ .10
per share to holders of TDS Common Shares declared by the
Board of Directors of TDS);

(viii) any pro rata repurchase by TDS of TDS Common Shares;

(ix) any merger, consolidation or other reorganization
which results in any reclassification, conversion,
exchange or cancellation of outstanding TDS Common
Shares; or

(x) any successive Diluting Event;

(or if a record date for any of the foregoing should occur) prior
to the Effective Time, appropriate and proportionate adjustments
shall be made in the computation of the exchange ratio for shares
of Arvig Common Stock pursuant to Section 2.1(c) hereof, so that
the Arvig shareholders shall be entitled to receive in the Merger
TDS Common Shares and, if issued to other TDS shareholders, other
voting securities of TDS representing in the aggregate the net
economic equivalent of the value which the Arvig shareholders
would have received in the Merger had the Diluting Event not
occurred.

2.2 Exchange of Certificates

(a) Exchange Agent. As of the Effective Time, TDS
shall deposit with Harris Trust and Savings Bank, or such other bank or
trust company designated by TDS and reasonably acceptable to Arvig (the
"Exchange Agent"), for the benefit of the holders of shares of Arvig
Common Stock, for exchange in accordance with this Article II, through the
Exchange Agent, certificates representing the TDS Common Shares (such
shares, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.1 in exchange for outstanding shares of Arvig Common Stock. The
Exchange Agent shall, pursuant to irrevocable instructions, deliver the
TDS Common Shares contemplated to be issued pursuant to Section 2.1 out of
the Exchange Fund. The Exchange Fund shall not be used for any other
purpose. TDS Common Shares into which shares of Arvig Common Stock shall
have been converted at the Effective Time shall be deemed to have been
issued at the Effective Time.

(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to
each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding shares of Arvig Common
Stock (the "Arvig Certificates") whose shares were converted into the
right to receive TDS Common Shares

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pursuant to Section 2.l(c), (i) a letter of transmittal in substantially
the form attached hereto as Exhibit A, and (ii) instructions for use in
effecting the surrender of the Arvig Common Stock in exchange for
certificates representing TDS Common Shares. Upon the surrender of an
Arvig Certificate to the Exchange Agent, or to such other agent or agents
as may be appointed by TDS and Sub, together with such letter of
transmittal, duly executed, and any other documents reasonably required,
the holder of such Arvig Certificate, shall be entitled to receive a
certificate representing that number of whole TDS Common Shares that such
holder or party has the right to receive pursuant to the provisions of
this Article II (and cash in lieu of fractional TDS Common Shares as
contemplated by Section 2.2(e)), and any Arvig Certificate so surrendered
shall forthwith be cancelled. In the event of a transfer of ownership of
Arvig Common Stock which is not registered in the transfer records of
Arvig, a certificate representing the proper number of TDS Common Shares
may be issued to a transferee if the Arvig Certificate representing such
Arvig Common Stock is presented to the Exchange Agent, accompanied by all
documents reasonably required by the Exchange Agent to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section 2.2,
each Arvig Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender a
certificate representing TDS Common Shares and cash in lieu of any
fractional TDS Common Shares as contemplated by this Section 2.2. The
Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to the TDS Common Shares held by it from time to
time hereunder, except that it shall receive and hold all dividends or
other distributions paid or distributed with respect thereto for the
account of persons entitled thereto.

(c) Distributions with Respect to Unexchanged Shares.
No dividends or other distributions declared or made after the Effective
Time with respect to TDS Common Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Arvig
Certificate and no cash payment in lieu of fractional shares shall be paid
to any such holder pursuant to Section 2.2(e) until the holder of record
thereof shall surrender such Arvig Certificate. Subject to the effect of
applicable laws, following surrender of any such Arvig Certificate, there
shall be paid to the record holder thereof (in addition to the whole
number of TDS Common Shares issuable in exchange therefor), without
interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional TDS Common Share to which such holder is
entitled pursuant to Section 2.2(e) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid
with respect to such whole TDS Common Shares, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record
date at or after the Effective Time and prior to surrender but with a
payment date

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subsequent to surrender payable with respect to such whole TDS Common
Shares.

(d) No Further Ownership Rights in Arvig. All TDS
Common Shares issued upon the surrender for exchange of shares of Arvig
Common Stock in accordance with the terms hereof (including any cash paid
pursuant to Sections 2.2(c) or 2.2(e)) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of
Arvig Common Stock, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a
record date at or prior to the Effective Time which may have been declared
or made by Arvig on such shares of Arvig Common stock in accordance with
the terms of this Agreement or prior to the date hereof and which remain
unpaid at the Effective Time, and after the Effective Time there shall be
no further registration of transfers on the stock transfer books of the
surviving Corporation of the shares of Arvig Common Stock which were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Arvig Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as
provided in this Article II. At the Effective Time, and without any
action on the part of the Sellers, the Shareholder Voting and Cross-
Purchase Agreement of Arvig Telcom, Inc. dated June 10, 1991, as amended
(the "Arvig Shareholder Agreement") shall terminate.

(e) No Fractional Shares. No fractional TDS Common
Shares shall be issued in the Merger. All fractional TDS Common Shares
that a holder of Arvig Common Stock would otherwise be entitled to receive
as a result of the Merger shall be aggregated with respect to each Arvig
shareholder, and if a fractional share results from such aggregation,
shall be paid in cash in an amount determined by multiplying the Average
Closing Price of TDS Common Shares by the fraction of a TDS Common Share
to which such holder would otherwise have been entitled and TDS and the
Surviving Corporation shall timely make available to the Exchange Agent
any cash necessary to make payments in lieu of fractional shares. No such
cash in lieu of fractional TDS Common Shares shall be paid to any holder
of Arvig Common Stock until Arvig Certificates representing such Arvig
Common Stock are surrendered and exchanged in accordance with Section
2.l(c). TDS has specifically required that no fractional shares shall be
issued in the Merger in accordance with its present and past practice to
reduce the costs and difficulties in dealing with such fractional shares.

(f) Termination of Exchange Fund. Any portion of the
Exchange Fund and any cash in lieu of fractional TDS Common Shares made
available to the Exchange Agent which remains undistributed to the former
shareholders of Arvig for one year after the Effective Time shall be
delivered to TDS upon demand, and any shareholders of Arvig who have not
theretofore complied with this Article II shall thereafter look only to
TDS for payment of their claim for TDS

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Common Shares, any cash in lieu of fractional TDS Common Shares and any
dividends or distributions with respect to TDS Common Shares.

(g) No Liability. Neither TDS nor Arvig shall be
liable to any holder of shares of Arvig Common Stock for such shares (or
dividends or distributions with respect thereto) or for TDS Common Shares
or cash in lieu of fractional TDS Common Shares delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law. Any amounts remaining unclaimed by holders of any such shares of
Arvig Common Stock two years after the Effective Time (or such earlier
date immediately prior to such time as such amounts would otherwise
escheat to or become property of any governmental entity) shall, to the
extent permitted by applicable law, become the property of TDS, free and
clear of any claims or interest of any such holders or their successors,
assigns or personal representatives previously entitled thereto.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of Sellers
Concerning the Transaction. As an inducement to TDS to enter into this
Agreement and to consummate the transactions contemplated hereby, each
Seller, severally and not jointly, represents and warrants to TDS, as
follows:

(a) Binding Obligation; No Conflict. This Agreement
has been duly executed and delivered by such Seller and is a valid and
binding obligation of such Seller, enforceable in accordance with its
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general equitable principles. Neither
the execution and delivery by such Seller of this Agreement, nor the
consummation by such Seller of the transactions contemplated hereby or
thereby, or the performance by such Seller of the covenants provided for
herein and therein, will: (i) conflict with or violate any provision of
any law, ordinance or regulation, or of any decree or order of any court
or administrative or other governmental body which is applicable to,
binding upon or enforceable against such Seller; or (ii) result in any
breach of or default under any mortgage, contract, indenture, will, trust
or other instrument and which is either binding upon or enforceable
against such Seller. Except as otherwise set forth in Section 5.5, and
except for security arrangements in connection with which such Seller may
have pledged shares of Arvig Common Stock, to the knowledge of such
Seller, no permit, consent, approval or authorization of, or declaration
to or filing with, any regulatory or other governmental authority is
required in connection with the execution and delivery by such Seller of
this Agreement, the consummation by such Seller of the transactions
contemplated hereby or the performance by such Seller of the

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covenants provided for herein ; provided, however, that each Seller who is
a party to the Arvig Shareholder Agreement makes the foregoing
representation subject to any applicable provisions thereof.

(b) Status and Effect of Delivery of the Arvig Common
Stock. Such Seller is the lawful owner of that number of shares of Arvig
Common Stock set forth opposite such Seller's name on the signature page
of this Agreement and has valid and marketable title thereto; there are no
outstanding options or rights of any kind to acquire from such Seller any
of the Arvig Common Stock owned by such Seller; provided, however, that
each Seller who is a party to the Arvig Shareholder Agreement makes the
foregoing representation subject to any applicable provisions thereof.

(c) No Litigation. There is no claim, action, suit or
other proceeding pending or, to the knowledge of such Seller, threatened
against such Seller which, if decided adversely, would prohibit the
consummation of the transactions contemplated hereby.

3.2 Representations and Warranties of Arvig. As an
inducement to TDS to enter into this Agreement and to consummate the
transactions contemplated hereby, Arvig represents and warrants to TDS as
follows:

(a) Subsidiaries; Organization; Standing; and Power.
Arvig is the owner, directly or indirectly, of all of the issued and
outstanding capital stock of Arvig Telephone Company ("ATC"), Bridge Water
Telephone Co. ("BWTC"), Interlake CableVision, Inc. ("Interlake"), U.S.
Link, Inc. ("Link"), A.B.T. Long Distance Services, Inc. ("ABT"), Velstar
Systems, Inc. ("Velstar"), North Country Data, Ltd., Arvig Finance, Inc.
("Finance"), and Arvig Cellular, Inc. ("Arvig Cellular" and together with
the foregoing, the "Arvig Subsidiaries"), and of approximately 3.5 percent
of the outstanding capital stock of Rural Cellular Corporation, Inc.
("RCC"). Arvig and the Arvig Subsidiaries own in the aggregate (i)
approximately a 16.33 percent interest as a limited partner in the Duluth
MSA Limited Partnership, which is the holder of the wireline license to
provide cellular service to the Duluth, Minnesota, Metropolitan
Statistical Area; (ii) approximately a 14.29 percent interest as a
general partner in Cellular Mobile Systems of St. Cloud, a Minnesota
general partnership that is the holder of the wireline license to provide
cellular service in the St. Cloud, Minnesota Metropolitan Statistical
Area; (iii) approximately a 30 percent interest in Northern Fiber, Inc.
("Fiber"); and (iv) approximately a 2.78 percent interest in Minnesota
Equal Access Network Services, Inc. ("MEANS"). RCC is the holder of the
wireline licenses to provide cellular service in Minnesota Rural Service
Areas Nos. 1, 2, 3, 5 and 6 (such cellular interests in Duluth, St. Cloud
and the RSAs being referred to herein collectively, as the "Cellular
Interests"). Arvig and each of the Arvig Subsidiaries is a corporation
duly organized, validly

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existing and in good standing under the laws of its state of
incorporation, has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the
failure so to qualify would not have a material adverse effect on Arvig
and the Arvig Subsidiaries taken as a whole. Arvig has heretofore made
available to TDS complete and correct copies of its Articles of
Incorporation and Bylaws and those of each Arvig Subsidiary. All Arvig
Subsidiaries and their respective jurisdictions of incorporation or
organization are identified on Schedule 3.2(a).

(b) Capital Structure. As of the date hereof, the
authorized capital stock of Arvig consists of 500,000 shares of Class A
Voting Common Stock and 500,000 shares of Class B Nonvoting Common Stock.
At the close of business on December 13, 1993, (i) 4,370 shares of Arvig
Voting Stock were issued and outstanding, (ii) 39,330 shares of Arvig
Nonvoting Stock were issued and outstanding, and (iii) no bonds,
debentures, notes or other indebtedness of Arvig having the right to vote
(or convertible into securities having the right to vote) on any matters
on which Arvig shareholders may vote ("Voting Debt") were issued or
outstanding. All outstanding shares of Arvig Common Stock are validly
issued, fully paid and nonassessable and are not subject to preemptive
rights. All outstanding shares of capital stock of the Arvig Subsidiaries
are owned by Arvig or a direct or indirect, wholly-owned subsidiary of
Arvig, free and clear of all liens, charges, encumbrances, claims and
options of any nature except as set forth in Schedule 3.2(b). Except as
set forth in this Section or as contemplated by this Agreement, there are
outstanding (i) no shares of capital stock, Voting Debt or other voting
securities of Arvig, (ii) no securities of Arvig or any Arvig Subsidiary
convertible into or exchangeable for shares of capital stock, Voting Debt
or other voting securities of Arvig or any Arvig Subsidiary, or (iii)
except for rights of first refusal and other similar rights of third
parties which may exist pursuant to the terms of cellular partnership or
other governing agreements relating to cellular properties, no options,
warrants, calls, rights (including preemptive rights), commitments or
agreements to which Arvig or any Arvig Subsidiary is a party or by which
it is bound obligating Arvig or any Arvig Subsidiary to issue, deliver,
sell, purchase, redeem or acquire, or cause to be issued, delivered, sold,
purchased, redeemed or acquired, additional shares of capital stock or any
Voting Debt or other voting securities of Arvig or any Arvig Subsidiary or
to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. Except for the Arvig Shareholder Agreement and
the CATS Voting Trust Agreement by and among various shareholders of
Arvig, Dorris L. Coulter, Larry A. Coulter, and Marlene A. Moser, as
Trustees, there are not as of the

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<PAGE>
date hereof and there will not be at the Effective Time any shareholders
agreement, voting trust or other arrangement or understanding to which
Arvig is a party or by which it is bound relating to the voting of any
shares of the capital stock of Arvig common Stock which will limit in any
way the solicitation of proxies by or on behalf of Arvig from, or the
casting of votes by, the shareholders of Arvig with respect to the Merger.
Except as set forth on Schedule 3.2(b) hereto, there are no restrictions
on Arvig to vote the stock of any Arvig Subsidiary.

(c) Authority. Arvig has all requisite corporate power and authority to
enter into this Agreement, subject to the applicable provisions of the
Arvig Shareholder Agreement and, with respect to consummation of the
Merger, to approval of this Agreement and the Merger by the shareholders
of Arvig in accordance with the MBCA and Arvig's Articles of
Incorporation, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Arvig, subject, with respect to
consummation of the Merger, to such approval of this Agreement and the
Merger by the shareholders of Arvig in accordance with the MBCA and
Arvig's Articles of Incorporation. This Agreement has been duly executed
and delivered by Arvig and, subject, with respect to consummation of the
Merger, to such approval of this Agreement and the Merger by the
shareholders of Arvig in accordance with the MBCA and Arvig's Articles of
Incorporation and, assuming this Agreement constitutes the valid and
binding agreement of TDS and Sub, constitutes a valid and binding
obligation of Arvig enforceable in accordance with its terms, except to
the extent that the enforcement hereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' right generally, and (ii)
general principles of equity regardless of whether enforceability is
considered in a proceeding in equity or at law.

(d) No Violation. The execution and delivery of this
Agreement by Arvig do not, and the consummation of the transaction
contemplated hereby will not, conflict with, or result in (i) 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 the loss of a material benefit under,
or the creation of a lien, pledge, security interest or other encumbrance
on assets or property, right of first refusal with respect to any asset
or property (any such conflict, violation, default, right of termination,
cancellation or acceleration, loss, creation or right of first refusal, a
"Violation"), pursuant to any provision of the Articles of Incorporation
or Bylaws of Arvig or of any Arvig Subsidiary or, (ii) except as set forth
on Schedule 3.2(d) hereto, and assuming the consents, approval,
authorizations or permits and filings or notifications referred to in
Section 3.2(e) are duly and timely

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obtained or made and the approval of this Agreement by the shareholders of
Arvig has been obtained, any Violation of any loan or credit agreement,
note, mortgage, indenture, lease, Benefit Plan (as defined in Section
3.2(j)) or other agreement, obligation, instrument, Arvig Permit (as
defined in Section 3.2(g)), concession, franchise, license, judgment,
order, or decree of which Arvig has actual knowledge, or any state law,
ordinance, rule or regulation applicable to Arvig or any Arvig Subsidiary
or their respective properties or assets which, individually or in the
aggregate, would have a material adverse effect on Arvig and the Arvig
Subsidiaries, taken as a whole.

(e) Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, or permit
from any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Governmental
Entity"), is required by or with respect to Arvig or any Arvig Subsidiary
in connection with the execution and delivery of this Agreement by Arvig
or the consummation by Arvig of the transactions contemplated hereby, the
failure to obtain or make which would, individually or in the aggregate,
have a material adverse effect on Arvig and the Arvig Subsidiaries, taken
as a whole, except for (i) the filing of a premerger notification report
by Arvig under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") and the expiration of the applicable waiting
period, (ii) compliance with any applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and applicable
state securities and "blue sky" laws, (iii) the filing of the Articles of
Merger with the Secretary of State of the State of Minnesota, (iv) such
filings, authorizations, orders and approvals (the "FCC Approvals") as may
be required under the Communications Act of 1934, as amended (the
"Communications Act"), (v) the necessary approvals, if any, of state
public utilities commissions or similar state regulatory bodies ("PUCs")
or local governmental units having jurisdiction over Arvig or any of the
Arvig Subsidiaries, in each case pursuant to applicable state or local
laws, ordinances, or regulations (together with any other similar state or
local laws or regulations relating to or regulating the local exchange or
long-distance telephone, cable, cellular, paging or other
telecommunications business, "Utilities Codes"), (vi) the necessary
approvals, consents, or waivers of any lender which has extended credit or
other financial accommodations to Arvig or to any of the Arvig
Subsidiaries, and whose consent may be required under any contract or
agreement between such lender and Arvig or any of its Subsidiaries,
including, but not limited to, the St. Paul Bank for Cooperatives, the
Rural Electrical Association, and the Rural Telephone Finance Cooperative,
and (vii) the necessary approvals, consents, or waivers of the cities
which have issued or granted franchises to Interlake.

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(f) Financial Statements. Each of (i) the audited
consolidated financial statements of Link and ATC at December 31, 1991
and 1992, (ii) the audited financial statements of BWTC, Interlake, and
Velstar at December 31, 1992 and 1991, (iii) the audited consolidated
financial statements of Arvig as of December 31, 1992 and 1991 (together
with (i) and (ii), the "1992 Financial Statements"), and (iv) the
unaudited consolidated balance sheet of Arvig at September 30, 1993, and
the related unaudited consolidated statement of income and retained
earnings for the nine month period then ended (the "Interim Financial
Statements" and, together with the 1992 Financial Statements, the "Arvig
Financial Statements"), has been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto) and fairly present in accordance with the applicable requirements
of GAAP (subject, in the case of the unaudited statements, to normal,
recurring adjustments, none of which have been material), the consolidated
financial position of Arvig and the Arvig Subsidiaries as of their
respective dates and the consolidated results of operations and the
consolidated cash flows of Arvig for the periods presented therein.

(g) Compliance with Applicable Laws. Arvig and the
Arvig Subsidiaries hold all permits, licenses, variances, exemptions,
orders, franchises and approvals of all Governmental Entities necessary to
own or lease and operate their properties as now owned, leased or operated
and to conduct their businesses as now being conducted, except where the
failure to so hold would not have a material adverse effect on Arvig and
the Arvig Subsidiaries, taken as a whole (the "Arvig Permits"). All Arvig
Permits are in full force and effect, have been legally and validly
issued, and will continue in full force and effect after the Effective
Time without the consent, approval or act of, or the making of any filing
with, any Governmental Entity, subject to the receipt of the consents
described in Section 3.2(e). Arvig and the Arvig Subsidiaries are in
compliance with the terms of the Arvig Permits, except where the failure
so to comply would not have a material adverse effect on Arvig and the
Arvig Subsidiaries taken as a whole. The businesses of Arvig and the Arvig
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible violations
which individually or in the aggregate would not have a material adverse
effect on Arvig and the Arvig Subsidiaries taken as a whole. Except as
set forth in Schedule 3.2(g) hereto, as of the date of this Agreement, no
investigation or review by any Governmental Entity with respect to Arvig
or any Arvig Subsidiary is pending or, to the knowledge of Arvig,
threatened, other than, in each case, those the outcome of which are not
reasonably likely to have a material adverse effect on Arvig and the
Arvig Subsidiaries, taken as a whole. Neither Arvig nor any Arvig
Subsidiary is subject to or required or committed to become subject

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to the price cap rules set forth in Sections 61.41-61.49 of the FCC's
regulations under the Communications Act.

(h) Availability of Assets and Legality of Use. The
assets owned or validly leased (other than the residence currently
occupied by certain plant personnel) by Arvig and the Arvig Subsidiaries
constitute all of the assets that are currently being used in the
business of Arvig and the Arvig Subsidiaries. Such assets (including such
residence) constitute all of the assets necessary to continue the
operations of Arvig and the Arvig Subsidiaries as currently conducted and
are in serviceable condition, normal wear and tear accepted, and suitable
for the uses for which they are currently used by Arvig. Such assets
(including such residence) and their use conform in all material respects
to all applicable building, zoning, fire, health, safety and other laws,
ordinances, regulations, or permits relating to their use or operation,
and no notice of any violation of any such law, ordinance, regulation or
permit has been received by Arvig or any Arvig Subsidiary.

(i) Title to Property. Arvig and the Arvig
Subsidiaries have good and marketable title to all of their respective
assets reflected as being owned thereby in the Arvig Financial Statements
(or which would be reflected if not fully depreciated or amortized) and to
all of the assets acquired by them since December 31, 1992, through the
Effective Time, except to the extent that any such assets have been
disposed of for fair value in the ordinary course of business consistent
with past practice, subject to no title defect, lien, mortgage, pledge,
charge, restriction, claim, security interest or other encumbrance of any
nature whatsoever ("Liens"), except (i) as set forth in Schedule 3.2(i)
hereto, or (ii) for any Liens for current taxes which are not yet due and
payable; (iii) for restrictions, covenants, easements, and limitations of
record which do not materially interfere with the use of the property; and
(iv) for applicable building, zoning, fire, health, safety and other laws,
ordinances, regulations, or permits relating to their use or operation.

(j) Patents, Trade Names, Trademarks and Other Rights.
To the best of its knowledge, Arvig does not own or control, or have any
right, license or interest in, any United States or foreign patent or
patent application or United States, state or foreign trade name,
trademark or service mark registration or application, or any United
States, foreign or state copyright registration, except in each instance
for those listed on Schedule 3.2(j) hereto. Neither Arvig nor any Arvig
Subsidiary has knowingly infringed upon or violated any patent, trademark,
servicemark, trade name, copyright, or application or registration
therefor, foreign or domestic, of any person or entity, nor received any
notice that its use of any confidential information, trade secret,
technology or know how of any person or entity is in violation of their
rights.

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(k) Real Estate. Schedule 3.2(k) hereto contains a
list of (i) each lease or agreement under which Arvig or any Arvig
Subsidiary is the lessee of, or holds or operates, any real estate owned
by any party other than Arvig or any Arvig Subsidiary (except easements),
and (ii) each parcel of real estate owned by Arvig or any Arvig Subsidiary
and each contract or agreement for the purchase, sale or lease of real
estate to which Arvig or any Arvig Subsidiary and any party other than
Arvig or any Arvig Subsidiary are parties (except easements). Except as
disclosed in such Schedule, each of the leases and agreements described
therein is in full force and effect and is the valid and binding
obligation of each party thereto in accordance with its terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general equitable principles and (B) will continue
in effect after the Effective Time without the consent, approval or act
of, or the making of any filing with, any other party, except as set forth
in Schedule 3.2 (d). Except as disclosed in Schedule 3.2(k), neither
Arvig nor any Arvig Subsidiary is in default in any material respect under
any such lease or agreement, and neither Arvig nor any Arvig Subsidiary
has received any written notice of default thereunder that has not been
cured. To the knowledge of Arvig, no other party to any such lease or
agreement is in material default thereunder. None of the buildings,
structures, improvements or appurtenances (or any equipment therein), or
the current operation or maintenance thereof, violates any zoning
regulation, restrictive covenant, historic preservation law or any other
federal, state or local law, ordinance, rule or regulation, or encroaches
on any property owned by others. Except as described in Schedule 3.2(k),
Arvig and the Arvig Subsidiaries have the right to quiet enjoyment of all
such real property described in such Schedule for so long as such property
is owned or for the full term of each such lease or similar agreement
relating thereto, and the leasehold or other interest of Arvig or any
Arvig Subsidiaries in such real property is not subject or subordinate to
any Lien, except for Liens for taxes not yet due and payable, mortgages
and encumbrances as set forth in Schedule 3.2(i), and, in the case of real
estate owned by Arvig and the Arvig Subsidiaries, except for such
easements, restrictions, defects in title, covenants and similar charges
as do not render title to the property unmarketable or uninsurable or
detract from or interfere in any material respect with the existing use of
the property. True and complete copies of all leases or agreement
identified in such Schedule have heretofore been delivered to TDS.

(l) Insurance. Schedule 3.2(1) sets forth a list of
all policies of insurance in effect and maintained, owned or held by Arvig
or any Arvig Subsidiary on the date hereof. Arvig and the Arvig
Subsidiaries have complied with each such insurance policy and have not
knowingly failed to give any notice or present any claim thereunder in a
due and timely manner. Such policies are in

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full force and effect. Neither Arvig nor any Arvig Subsidiary has received
any notice of cancellation or non-renewal of any policy listed or required
to be listed on such Schedule, or any refusal of coverage thereunder or
any notice or indication that any issuer of any such policy is no longer
willing or able to perform its obligations thereunder or to renew any such
policy in the future. Arvig has delivered to TDS correct and complete
copies of (i) all such policies, and (ii) the most recent inspection
reports, if any, received from insurance underwriters as to the condition
of its properties.

(m) Environmental Conditions. Arvig has no knowledge
of any liability under, or violation by Arvig or any Arvig Subsidiary of
any federal, state or local law, regulation, rule or ordinance relating to
protection of the environment that is applicable to the facilities and
operations of any Arvig Subsidiary, or of any condition with respect to
the environment that could or does result in any liability, loss, cost,
damages, fees or expenses to or against Arvig or any Arvig Subsidiary.
Except as disclosed in Schedule 3.2(m), neither Arvig nor any Arvig
Subsidiary has generated, manufactured, refined, transported, treated,
stored, handled, used, disposed of, transferred, produced or processed,
and Arvig has no knowledge of the actual or potential releasing,
spilling, leaking or discharging of, at, under or in the vicinity of the
properties currently owned or operated by Arvig or any Arvig Subsidiary,
any pollutant, toxic substance, hazardous waste, hazardous material,
hazardous substance, solid waste or oil as defined in or pursuant to the
Resource Conservation and Recovery Act, as amended, the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, the
Federal Clean Water Act, as amended, or any other federal, state or local
environmental law, regulation, ordinance or rule in violation of any such
law.

(n) Bank Accounts; Powers of Attorney. Schedule 3.2 (n)
contains a correct and complete list of all (i) accounts or deposits of
Arvig and the Arvig Subsidiaries with banks or other financial
institutions, (ii) safe deposit boxes of Arvig and the Arvig
Subsidiaries, (iii) persons authorized to sign or otherwise act with
respect thereto as of the date hereof, and (iv) powers of attorney
executed by Arvig or any Arvig Subsidiary.

(o) Customers and Suppliers. (i) As of September 30, 1993
and as of the Closing Date, (A) ATC and BWTC served and will serve, in the
aggregate, not less than 14,700 telephone access lines, (B) Link and ABT
served and will serve, in the aggregate, not less than 34,000 customers,
29,000 of which including 6,800 business customers have received service
from Link or ABT for at least 60 calendar days and are not delinquent in
the payment of any bill by more than 30 calendar days after the due date
of any invoice provided by Link or ABT, and (C) Interlake served and will
serve not less than 3,530 basic service and 740 commercial subscribers,

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counting in each case as "subscribers" only such parties as have received
service from Interlake for at least 60 calendar days and are not
delinquent in the payment of any bill by more than 30 calendar days.

(ii) There exists no actual or threatened termination,
cancellation or limitation of, or any modification or change in, any
business relationship between any Arvig Subsidiary and any customer,
subscriber, or group thereof whose payments to such subsidiary,
individually or in the aggregate, are material to such subsidiary's
operations, or with any supplier, agent, distributor, dealer,
representative, consultant, or group thereof, whose sales or services,
individually or in the aggregate, are material to the operations of the
business of such subsidiary.

(p) Accounts Receivable. Except as set forth in Schedule
3.2 (p), all accounts receivable reflected in the Arvig Financial
Statements have arisen from bona fide transactions in the ordinary course
of the business of Arvig and the Arvig Subsidiaries and represent valid
obligations owed Arvig and/or the Arvig Subsidiaries. All accounts
receivable reflected in the Interim Financial Statements are good and
collectible in the ordinary course of business including those receivables
identified on Schedule 3.2(p) at the aggregate recorded amounts thereof,
net of any applicable reserves for doubtful accounts reflected in the
Interim Financial Statements. Such reserves are, adequate and have been
calculated consistently with past practice.

(q) Litigation. Except as disclosed on Schedule 3.2(q)
hereto, there is no suit, action or proceeding pending, or, to the best
knowledge of Arvig, threatened in writing against or affecting Arvig or
any Arvig Subsidiary which is reasonably likely to have a material
adverse effect on Arvig and the Arvig Subsidiaries taken as a whole, nor
is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Arvig or any
subsidiary which is reasonably likely to have any such effect.

(r) Taxes. Arvig and each of the Arvig Subsidiaries has
filed all material tax returns required to be filed by any of them and has
paid (or Arvig has paid), or has set up an adequate reserve for the
payment of, all taxes required to be paid as shown on such returns, and
the Arvig Financial Statements reflect an adequate reserve for all taxes
payable by Arvig and the Arvig Subsidiaries accrued through the date of
such financial statements based upon existing law and circumstances as of
such date. The unpaid taxes of Arvig and the Arvig Subsidiaries which
have accrued as of the date of the 1992 Financial Statements do not
materially exceed the reserve for accrued tax liability (excluding any
reserve for deferred taxes established to reflect timing differences
between book and tax income) set forth or included in such financial
statements, after taking into account all other timing differences.

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All material deficiencies for any taxes which have been proposed, asserted
or assessed against Arvig or any of the Arvig Subsidiaries have been duly
paid, or are fully reflected as a liability in the 1992 Financial
Statements, or are being contested and an adequate reserve therefor has
been established and is fully reflected in such financial statements.
There are no liens for taxes (other than for current taxes not yet due and
payable) on the assets of Arvig or the Arvig Subsidiaries. Except with
respect to claims for refund, the federal income tax returns of Arvig and
each of the Arvig Subsidiaries in such returns have been examined by and
settled with the United States Internal Revenue Service (the "IRS"), or
the statute of limitations with respect to such years has expired, for all
years through 1988. Arvig has previously delivered or made available to
TDS complete and correct copies of its federal income tax returns for each
of the years 1989, 1990, 1991 and 1992. Neither Arvig nor any of the
Arvig Subsidiaries has ever been a member of any "affiliated group" (as
defined in Section 1504(a) of the Code) other than the consolidated group
of which Arvig is the parent. Except for taxes of Arvig or any of the
Arvig Subsidiaries, Arvig has no liability for the taxes of any entity (i)
under Treas. Reg. Section 1.502-6 (or any similar provision of state or
local law), (ii) as a transferee or successor, (iii) by contract, or (iv)
otherwise. Neither Arvig nor any Arvig Subsidiary is a party to or bound
by any agreement providing for the allocation or sharing of taxes with any
entity which is not, either directly or indirectly, an Arvig Subsidiary.
For the purpose of this Agreement, the term "tax" (including, with
correlative meaning, the terms "taxes" and "taxable") shall include all
federal, state, local and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise
and other taxes, duties or assessments of any nature whatsoever, together
with all interest, penalties and additions imposed with respect to such
amounts. The representations and warranties contained herein are subject
to those exceptions, disclosures and information contained in Schedule
3.2(r).

(s) Benefit Plans.

(i) Schedule 3.2(s) hereto contains a true and complete
list of each pension, retirement, savings, profit sharing, deferred
compensation, incentive compensation, stock option, severance or
termination pay, medical, dental, life or other insurance, disability plan
or other employee benefit plan or program, agreement or arrangement main-
tained, sponsored or contributed to by Arvig or any of the Arvig
Subsidiaries, whether covering employees of Arvig or any of the Arvig
Subsidiaries, former employees of Arvig or any of the Arvig Subsidiaries,
or directors or former directors of Arvig (including but not limited to,
any "employee benefit plan", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), all of the
foregoing being herein called "Benefit Plans". With respect

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to the Benefit Plans, individually and in the aggregate, Arvig has made
available to TDS a true and correct copy or description of: (a) the most
recent annual report (Form 5500) filed with the IRS, if any, (b) such
Benefit Plan, (c) any summary plan description relating to such Benefit
Plan, (d) each trust agreement and group annuity contract, if any,
relating to such Benefit Plan, and (e) the most recent actuarial report or
valuation relating to each Benefit Plan subject to Title IV of ERISA.

(ii) With respect to the Benefit Plans, individually and
in the aggregate, no event has occurred, and to Arvig's and the Arvig
Subsidiaries' knowledge, there currently exists no condition or set of
circumstances in connection with which Arvig or any of the Arvig
Subsidiaries could be subject to any liability which would have a material
adverse effect on Arvig and the Arvig Subsidiaries, taken as a whole
(except liability for benefits, claims and funding obligations payable in
the ordinary course) under ERISA, the Code, or any other applicable
statute, order or governmental rule or regulation.

(iii) Each of the Benefit Plans and related trusts that
is intended to be qualified under Section 401(a) and Section 501(a) of the
Code has been determined by the Internal Revenue Service to qualify under
the Code as it existed in 1985 (including the amendments effected by the
Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"), the Deficit
Reduction Act of 1984 ("DEFRA"), and the Retirement Equity Act of 1984
("REA")) and, to Arvig's knowledge, nothing has occurred since such
determination to cause any of such Benefit Plans not to qualify under
Section 401(a) and Section 501(a) of the Code.

(iv) With respect to the Benefit Plans, individually and
in the aggregate, all required reports and descriptions have been
appropriately filed and distributed.

(v) With respect to the Benefit Plans, individually and in
the aggregate, there has been no prohibited transaction within the meaning
of section 406 of ERISA of Section 4975 of the Code which would have a
material adverse effect on Arvig and the Arvig Subsidiaries taken as a
whole, and there has been no action, suit, grievance, arbitration or other
claim with respect to the administration or investment of assets of the
Benefit Plans (other than routine claims for benefits made in the ordinary
course of plan administration) pending, or to the best knowledge of the
Sellers threatened and neither Arvig nor any Arvig Subsidiary has
knowledge of any facts which are reasonably likely to give rise to any
such action, suit grievance, arbitration or other claim, which (in any
case) would not have a material adverse effect on Arvig and the Arvig
Subsidiaries.

(vi) No withdrawal liability has been incurred by or
asserted against Arvig or any of the Arvig Subsidiaries with

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respect to any "multiemployer plan" as defined in Section 3(37) of
ERISA which has not been satisfied and no withdrawal liability is expected
to occur prior to the Effective Time. Arvig has no liability for the
termination of any single employer plan under Section 4062 of ERISA or any
single employer plan under multiple controlled groups under Section 4063
of ERISA, and no proceeding to terminate any of the Benefit Plans has been
instituted or threatened by the Pension Benefit Guaranty Corporation
("PBGC"), and, except as set forth on Schedule 3.2(s), none of the Benefit
Plans has been the subject of a reportable event (as defined in Section
4043 of ERISA).

(vii) Neither Arvig nor any of the Arvig Subsidiaries has
incurred any liability to the PBGC with respect to any Benefit Plan (other
than premiums) Except as set forth in Schedule 3.l(i) hereto, with
respect to the Benefit Plans, individually and in the aggregate, there
are, no funded benefit obligations for which contributions are due and
have not been made or for which contributions have not been properly
accrued as required by GAAP, there are no accumulated funding deficiencies
within the meaning of Section 302 of ERISA and Section 412 of the Code,
and there are no unfunded benefit obligations which have not been (i)
accounted for by reserves (if required by GAAP), or (ii) if required (and
to the extent required, if any), properly disclosed in accordance with
GAAP, in the financial statements of Arvig, which obligations would have a
material adverse effect on Arvig and the Arvig Subsidiaries, taken as a
whole.

(viii) The representations and warranties contained herein
are subject to those exceptions, disclosures and information contained in
Schedule 3.2(s).

(t) Absence of Certain Changes or Events. Except as
disclosed in, or reflected in the Arvig Financial Statements, or except as
contemplated by this Agreement, since December 31, 1992 , Arvig and the
Arvig Subsidiaries have conducted their respective businesses only in the
ordinary and usual course, and there has not been (i) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to the Arvig Common Stock, except
for regular cash dividends of $ 15.00 per share, (ii) any material
repurchase, redemption or other acquisition by Arvig or any Arvig
Subsidiary of any outstanding shares of capital stock or other securities
of, or other ownership interests in, Arvig or any Arvig Subsidiary, except
as provided in or contemplated by the Arvig Shareholder Agreement; (iii)
any incurrence, assumption or guarantee by Arvig or any Arvig Subsidiary
of any indebtedness for borrowed money other than in the ordinary course
of business and in amounts and on terms consistent with past practices;
(iv) any creation or assumption by Arvig or any of the Arvig Subsidiaries
of any lien on any asset other than in the ordinary course of business
consistent with past practices which, individually or in the aggregate, is
not reasonably likely

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to have a material adverse effect on Arvig and the Arvig Subsidiaries,
taken as a whole; (v) any making of any material loan, advance or capital
contributions to or any material investment in any person other than
loans, advances or capital contributions to or any material investments in
the Arvig Subsidiaries, or Cellular Interests made in the ordinary course
of business consistent with past practices; (vi) any material change in
any method of accounting or accounting practice by Arvig or any Arvig
Subsidiary, except for any such change required by reason of a concurrent
change in applicable requirements of GAAP; (vii) except in the ordinary
course of business consistent with past practice, any (A) grant of any
severance or termination pay to any director, officer or employee of Arvig
or any Arvig Subsidiary, (B) execution of any employment, deferred
compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of Arvig or any
Arvig Subsidiary, (except for authorizing the payment by Arvig of
attorney's fees owed Henson & Efron incurred by Gilroy Arvig in an amount
not to exceed $210,000.00), (C) increase in benefits payable under any
existing severance or termination pay policies or employment agreements,
or (D) increase in compensation, bonus or other benefits payable to
directors, officers or employees of Arvig or any Arvig Subsidiary; (viii)
any material labor dispute, other than routine individual grievances, or
any material proceeding by a labor union or representative thereof to
organize any employees of Arvig or any Arvig Subsidiary, which employees
were not subject to a collective bargaining agreement at December 31,
1992, or any material lockouts, strikes, slowdowns, work stoppages or
threats thereof by or with respect to such employees; or (ix) any other
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of
business) individually or in the aggregate which is reasonably likely to
have a material adverse effect on Arvig and its subsidiaries, taken as a
whole. The representations and warranties contained herein are subject to
those exceptions, disclosures and information contained in Schedule
3.2(t).

(u) No Undisclosed Liabilities. Except as disclosed in
this Agreement (including the schedules attached hereto), the Arvig
Financial Statements, and Schedule 3.2(u), as of the date hereof, there
are no liabilities of Arvig or any Arvig Subsidiary of any kind
whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, that are reasonably likely to have a material
adverse effect on Arvig and the Arvig Subsidiaries, taken as a whole,
other than (i) liabilities provided for in the Arvig Financial
Statements; (ii) liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 1992, which in the
aggregate are not material to Arvig and the Arvig Subsidiaries, taken as a
whole; and (iii) liabilities under this Agreement.

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(v) Information in Proxy Statement. None of the
information to be supplied by Arvig for inclusion in the Proxy Statement
to be distributed to shareholders of Arvig in connection with the meeting
of shareholders of Arvig to vote upon the approval and adoption of this
Agreement and the Merger (the "Proxy Statement"), or any amendment or
supplement thereto, will, at the time of the mailing of the Proxy
Statement and of any amendment or supplement thereto, and at the time of
the meeting of shareholders of Arvig to vote upon this Agreement, the
Merger and related transactions, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading or necessary
to correct any material statement or any earlier communication (including
the Proxy Statement or any amendment or supplement thereto) to
shareholders of Arvig with respect to the Merger. If at any time prior to
the Effective Time any event with respect to Arvig, any of the Arvig
Subsidiaries, or its officers or directors should occur which is or should
be described in an amendment of, or a supplement to, the Proxy Statement,
such event shall be so described and disseminated to the shareholders of
Arvig. The information to be supplied by Arvig for inclusion in the Proxy
Statement will comply in all material respects with the requirements of
Items 17 and 18 of Form S-4 under the Securities Act.

(w) Vote Required. Other than as provided in the Arvig
Shareholder Agreement, the affirmative vote of the holders of a majority
of the outstanding shares of Arvig Voting Stock is the only vote of the
holders of any class or series of Arvig capital stock necessary to approve
this Agreement and the transactions contemplated hereby.

(x) Beneficial Ownership of TDS Common Stock. As of the
date hereof, assuming the accuracy of the representation set forth in
Section 3.3(b), neither Arvig and the Arvig Subsidiaries nor, any of
Arvig's affiliates or associates, "beneficially owns" (as defined in Rule
13d-3 under the Exchange Act) in the aggregate ten percent or more of the
outstanding TDS Common Shares or Series A Common Shares.

3.3 Representations and Warranties of TDS and Sub.

As an inducement to the Sellers and Arvig to enter into
this Agreement and to consummate the transactions contemplated herein, TDS
and Sub hereby jointly and severally represent and warrant to the Sellers
and Arvig as follows:

(a) Organization, Standing and Power. Each of TDS,
Sub and TDS's Significant Subsidiaries as identified on Schedule 3.3(a)
(i) is a corporation or partnership duly organized, validly existing and
in good standing under the laws of its state of

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incorporation or organization; (ii) has all requisite power and authority
to own, lease and operate its properties and to carry on its business as
now being conducted; and (iii) is duly qualified and in good standing to
do business in each jurisdiction in which the business it is conducting,
or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the
failure so to qualify would not have a material adverse effect on TDS and
its subsidiaries taken as a whole. The subsidiaries of TDS and their
respective jurisdictions of incorporation or organization are identified
in Schedule 3.3(a).

(b) Capital Structure. As of the date hereof, the
authorized capital stock of TDS consists of 100,000,000 Common Shares, par
value $1.00 per share; 25,000,000 Series A Common Shares, par value $1.00
per share; and 5,000,000 shares of Preferred Stock, no par value. At the
close of business on September 30, 1993, a total of approximately
42,265,000 Common Shares, 6,877,000 Series A Common Shares and 43,470
shares of Preferred Stock were issued and outstanding, none of which have
any preemptive rights except as disclosed in the TDS Registration
Statement (as hereinafter defined). The TDS Common Shares are listed and
traded on the American Stock Exchange (the "AMEX"). As of the date hereof,
the authorized capital stock of Sub consists of 100 shares of Common
Stock, par value $1.00 per share, all of which are validly issued, fully
paid and nonassessable and are owned by TDS.

(c) Authority. Each of TDS and Sub has all requisite
corporate power and authority to enter into this Agreement and-to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by-all necessary corporate
action on the part of TDS and Sub. This Agreement has been duly executed
and delivered by TDS and Sub and, assuming this Agreement constitutes the
valid and binding obligation of the Sellers and Arvig, constitutes a valid
and binding obligation of each of TDS and Sub enforceable in accordance
with its terms, except to the extent that the enforcement hereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or here-after in effect relating to creditors' rights
generally, and;(ii) general principles of equity regardless of whether
enforceability is considered in a proceeding in equity or at law.

(d) No Violation. The execution and delivery of this
Agreement by TDS and Sub do not, and the consummation of the transactions
contemplated hereby by TDS and Sub will not, conflict with, or result in
any violation pursuant to any provision of the Articles of Incorporation
or Bylaws of TDS or of any of its subsidiaries or, except as set forth on
Schedule 3.3(d) hereto or as to which requisite waivers or consents have
been obtained, and assuming the consents, approvals, authorizations or
permits and

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filings or notifications referred to in Section 3.3(e) are duly and timely
obtained or made, result in any Violation of any loan or credit agreement,
note, mortgage, indenture, lease, benefit plan or other agreement,
obligation, instrument, TDS Permit (as hereinafter defined), concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to TDS or any of its subsidiaries or their
respective properties or assets which Violation, individually or in the
aggregate, would have a material adverse effect on TDS and its
subsidiaries taken as a whole.

(e) Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with, or permit from any
Governmental Entity is required by or with respect to TDS or any of its
subsidiaries in connection with the execution and delivery of this
Agreement by TDS and Sub or the consummation by TDS and Sub of the
transactions contemplated hereby, the failure to obtain or make which
would, individually or in the aggregate, have a material adverse effect on
TDS and its subsidiaries, taken as a whole, except for (i) the filing of a
premerger notification report by TDS under the HSR Act and the expiration
of the applicable waiting period, (ii) the filing with the SEC of the TDS
Registration Statement, the Proxy Statement, such reports under Section
13(a) of the Exchange Act and such other compliance with the Securities
Act and the Exchange Act and the rules and regulations thereunder as may
be required in connection with this Agreement and the transactions
contemplated hereby, and the obtaining from the SEC of such orders as may
be so required, (iii) the filing of the Articles of Merger with the
Secretary of State of the State of Minnesota, (iv) the FCC Approvals, (v)
filings with, and approval of, the AMEX relating to the listing of the TDS
Shares, (vi) such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws, and (vii) the
necessary approvals, if any, of Arvig PUCs pursuant to applicable
Utilities Codes.

(f) SEC Documents. TDS has made available to the Sellers
and Arvig a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by TDS with the SEC since
January 1, 1993, which are all the documents (other than preliminary
material) that TDS was required to file with the SEC since such date
(collectively, the "TDS SEC Documents"). As of their respective dates, the
TDS SEC Documents described above and all similar documents which TDS is
required to file with the SEC subsequent to the execution hereof and prior
to the Closing Date complied and will comply when filed in all material
respects with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such TDS SEC Documents, and none of the TDS SEC Documents
contained or will contain when filed any untrue statement of a material
fact or omitted or will omit when filed to state a material fact required
to be stated therein

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or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
TDS included in the TDS SEC Documents complied or will comply when filed
as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, have been and will be when
filed prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Rule
10-01 of Regulation S-X of the SEC) and fairly presented and will present
when filed in accordance with applicable requirements of GAAP (subject, in
the case of the unaudited statements, to normal, recurring adjustments,
none of which have been material) the consolidated financial position of
TDS and its consolidated subsidiaries as of their respective dates and the
consolidated results of operations and the consolidated cash flows of TDS
for the periods presented therein. No TDS SEC Documents are currently
subject to any request by the SEC to amend such documents or to provide
additional information with respect thereto.

(g) Compliance with Applicable Laws. TDS and its
subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary to own or
lease and operate their properties and to conduct their businesses as now
being conducted, except where the failure to so hold would not have a
material adverse effect on TDS and its subsidiaries, taken as a whole (the
"TDS Permits"). All TDS Permits are in full force and effect and have been
legally and validly issued. TDS and its subsidiaries are in compliance
with the terms of the TDS Permits, except where the failure so to comply
would not have a material adverse effect on TDS and its subsidiaries,
taken as a whole. Except as disclosed in the TDS SEC Documents filed prior
to the date of this Agreement, the businesses of TDS and its subsidiaries
are not being conducted in violation of any law, ordinance or regulation
of any Governmental Entity, except for possible violations that
individually or in the aggregate, would not have a material adverse effect
on TDS and its subsidiaries, taken as a whole. Except as described in the
TDS SEC Documents, as of the date of this Agreement no investigation or
review by any Governmental Entity with respect to TDS or any of its
subsidiaries is pending or, to the knowledge of TDS, threatened, other
than, in each case, those the outcome of which are not reasonably likely
to have a material adverse effect on TDS and its subsidiaries, taken as a
whole and there will be no such investigation or review pending or
threatened on the Closing Date.

(h) Litigation. Except as disclosed in the TDS SEC
Documents filed prior to the date of this Agreement , there is no suit,
action or proceeding pending, or, to the best knowledge of TDS, threatened
against or affecting TDS or any subsidiary of TDS, which is reasonably
likely to have a material adverse effect on TDS and its subsidiaries,
taken as a whole, nor is there any judgment,

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decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against TDS or any subsidiary of TDS that is reasonably likely
to have any such effect.

(i) Absence of Certain Changes or Events. Except as (i)
disclosed in, or reflected in the financial statements included in, the
TDS SEC Documents filed prior to the date of this Agreement and , (ii) as
a result of the proposed distribution by United States Cellular
Corporation ("USCC") of rights to purchase additional shares of its
capital stock and the proposed conversion of debt owed by uscc to TDS into
additional equity of uscc in connection therewith, or (iii) as
contemplated by this Agreement, since December 31, 1992, TDS and its
Subsidiaries have conducted their respective businesses only in the
ordinary and usual course, and there has not been (A) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any of TDS's capital stock,
except for regular quarterly cash dividends of $.085 per share on TDS
Common Shares and Series A Common Shares and regular quarterly dividends
on TDS Preferred Stock, in each case with usual record and payment dates
for such dividends; (B) any amendment of any material term of any
outstanding security of TDS or any subsidiary; (c) any incurrence,
assumption or guarantee by TDS or any subsidiary of any indebtedness for
borrowed money other than in the ordinary course of business and in
amounts and on terms consistent with past practices; (D) any creation or
assumption by TDS or any of its subsidiaries of any lien on any asset
other than in the ordinary course of business consistent with past
practices which, individually or in the aggregate, is not reasonably
likely to have a material adverse effect on TDS and its subsidiaries taken
as a whole; (E) any making of any material loan, advance or capital
contributions to or any material investment in any person other than
loans, advances or capital contributions to or investments in
subsidiaries, all the common stock or partnership interests of which are
owned by TDS, made in the ordinary course of business consistent with past
practices; (F) any material change in any method of accounting or
accounting practice by TDS or any subsidiary except for any such change
required by reason of a concurrent change in applicable requirements of
GAAP or with respect to the adoption of FASB No. 106; (G) any material
labor dispute, other than routine individual grievances, or any material
proceeding by a labor union or representative thereof to organize any
employees of TDS or any TDS subsidiary, which employees were not subject
to a collective bargaining agreement at December 31, 1992, or any material
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees; or (H) any other transaction, commitment,
dispute or other event or condition (financial or otherwise) of any
character(whether or not in-the ordinary course of business) individually
or in the aggregate which is reasonably likely to have a material adverse
effect on TDS and its subsidiaries, taken as a whole.

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(j) No Undisclosed Material Liabilities. Except as
disclosed in the TDS SEC Documents filed prior to the date hereof, as of
the date hereof, there are no liabilities of TDS or any subsidiary of any
kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, that are reasonably likely to have a material
adverse effect on TDS and its subsidiaries, taken as a whole, other than
(i) liabilities provided for in the audited balance sheet of TDS dated as
of December 31, 1992 (or disclosed in the notes thereto), included in
TDS's Annual Report on Form 10-K for 1992 (TDS's "1992 Balance Sheet");
(ii) liabilities incurred in the ordinary course of business consistent
with past practice since December 31, 1992, which in the aggregate are not
material to TDS and its subsidiaries, taken as a whole; and (iii)
liabilities under this Agreement.

(k) Interim Operations of Sub. Sub was formed solely for
the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations
only as contemplated hereby.

(l) Authorization for TDS Common Shares and Stock Exchange
Listing. Prior to the Effective Time, TDS will have taken all necessary
action to permit it to issue the number of TDS Common Shares required to
be issued pursuant to the terms of this Agreement. The TDS Common Shares
issued pursuant to the terms of this Agreement will, when issued, (i) be
validly issued, fully paid and nonassessable and not subject to any
preemptive rights, (ii) be registered under the Securities Act and the
Exchange Act and be registered or exempt from registration under any
applicable state securities laws, and (iii) be listed for trading on the
AMEX, subject to notice of official issuance.

(m) Information Supplied. None of the information
supplied or to be supplied by TDS or Sub for inclusion or incorporation by
reference in (i) the TDS Registration Statement will , at the time it
becomes effective under the Securities Act or at the Effective Time,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Proxy Statement will, at
the date mailed to the shareholders of Arvig or at the time of the meeting
of the Arvig shareholders to be held in connection with the Merger or at
the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in" light of the circumstances
under which they are made, not misleading. If at any time prior to the
Effective Time any event with respect to TDS , or with respect to other
information supplied by or on behalf of TDS or Sub for inclusion in the
Proxy Statement or the TDS Registration Statement, shall occur that is
required to be described in an amendment of, or a supplement to, the Proxy
Statement or any event of any nature shall occur that is required to be
described in an amendment of, or

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a supplement to, the TDS Registration Statement, such event shall be so
described, and such amendment or supplement shall be promptly filed with the
SEC and, as required by law, disseminated to the shareholders of Arvig. The
Proxy Statement, insofar as it relates to TDS or Sub or other information
supplied by TDS or Sub for inclusion therein, will comply as to form in
all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder, and the TDS Registration Statement,
insofar as it relates to TDS or Sub or other information supplied by TDS
or Sub for inclusion therein, will comply as to form in all material
respects with the provisions of the Securities Act and the rules and
regulations thereunder.

ARTICLE IV

COVENANTS RELATING TO CONDUCT OF BUSINESS

4.1 Covenants of Arvig. During the period from the date
of this Agreement and continuing until the earlier of the Effective Time
or the termination of this Agreement in accordance with Article VII
hereof, Arvig agrees with respect to Arvig and the Arvig Subsidiaries
that (except as expressly contemplated or permitted by this Agreement, or
to the extent that TDS shall otherwise consent in writing):

(a) Ordinary Course. Arvig and each of the Arvig
Subsidiaries shall carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted
and use all reasonable efforts to preserve intact its present business
organization, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers and
others having business dealings with it to the end that goodwill and
ongoing businesses shall not be impaired in any material respect at the
Effective Time. No change in the accounts or deposits, safe deposit boxes
or persons authorized to sign, each as identified on Schedule 3.2(n), will
be made prior to the Effective Time other than changes in the ordinary
course of business consistent with past practice.

(b) Dividends; Changes in Stock. Arvig shall not (a)
declare or pay any dividends on or make other distributions in respect of
any of its capital stock, except for the declaration and payment of a
regular cash dividend not in excess of an aggregate of $327,750.00 per
calendar quarter, payable to shareholders of record as of each calendar
quarter during 1994 on the first day of the second month in each such
quarter, (b) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
or (c) repurchase or otherwise acquire any shares of its capital stock,
except as required by the terms of the securities outstanding on the date
hereof, or as contemplated by this Agreement.

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(c) Issuance of Securities. Arvig shall not and shall not
permit any of the Arvig Subsidiaries to, issue, deliver or sell, or
authorize or propose to issue, deliver or sell, any shares of its capital
stock of any class, any Voting Debt or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, Voting Debt,
or convertible securities; provided, however, that, subject to the
approval thereof by shareholders owning capital stock of Arvig
representing at least three-fourths (75%) of the combined voting power of
all outstanding shares of Arvig's capital stock, Arvig shall be entitled
(i) to issue 389 shares of Arvig Common Stock to those parties of the
Arvig Shareholder Agreement who were the holders of Arvig Common Stock
heretofore redeemed by Arvig; and (ii) to issue 651 shares of Arvig Common
Stock to Gilroy Arvig, as additional compensation and in exchange for a
full and complete release of any and all claims he may have against Arvig,
its directors, officers or affiliates. In the event of either (i) or (ii)
above, adjustments shall be made in the computation of the exchange ratio
for shares of Arvig Common Stock pursuant to Section 2.1(c) hereof to
reflect pro rata dilution of the Basic Price Per Share with respect to the
shares of Arvig Common Stock issued pursuant to (i) above and dilution
(net of tax benefits) of $450,000.00 with respect to shares of Arvig
Common Stock issued pursuant to (ii) above, so that the aggregate purchase
price paid by TDS for all of the issued and outstanding shares of Arvig
Common Stock, on a fully diluted basis, does not change from that
otherwise payable without regard to such event(s), except to the extent of
the tax benefits resulting from the issuance of Arvig Common Stock as
compensation.

(d) Governing Documents. Arvig shall not amend or propose
to amend its Articles of Incorporation or Bylaws.

(e) Acquisition Proposals. Neither the Sellers nor
Arvig will nor will they authorize or permit any of the officers
directors or employees of Arvig or any of the Arvig Subsidiaries, or any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Sellers, Arvig, or any of the Arvig
Subsidiaries, to (a) solicit or otherwise encourage any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal, or agree to or endorse any Acquisition
Proposal, or (b) except to the extent permitted by the last sentence of
this section 4.1(e), engage in negotiations concerning, provide any
nonpublic information to, or have any discussions with, any person
relating to any Acquisition Proposal. The Sellers and Arvig will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing. Except to the extent permitted by the
last sentence of this Section 4.1(e), Arvig will not grant its consent to
any party other than TDS to take any of the actions described in Section
5.4 hereof. As used in this Agreement, "Acquisition Proposal" means any
proposal or offer for

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a merger or other business combination involving Arvig or any of the Arvig
Subsidiaries, or any proposal or offer to acquire any equity interest in,
or any of the assets of, Arvig or any of the Arvig Subsidiaries, other
than the transactions contemplated by this Agreement Notwithstanding the
foregoing, nothing contained in this section 4.1(e) shall prohibit Arvig
or its Board of Directors from withdrawing, modifying or changing its
recommendation to Arvig's shareholders with respect to the Merger, or (ii)
from taking, authorizing or permitting the action or actions contemplated
by the third sentence, or by clause (b) of the first sentence, of this
Section 4.1(e) if, in any such case, in the reasonable, good faith
judgment of the Board of Directors, after consultation with its outside
counsel, the failure to do so would violate its fiduciary duties to the
holders of Arvig Common Stock under applicable law.

(f) No Acquisitions. Arvig shall not, and shall not
permit any of the Arvig Subsidiaries to, acquire, or agree to acquire by
merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree
to acquire any assets having an aggregate value in excess of $500,000
other than in the ordinary course of business. Notwithstanding the
preceding sentence, Arvig shall cause Arvig Cellular to make all future
capital contributions required to maintain its present percentage
ownership of each Cellular Interest, and to exercise any right it may have
in the future to increase its percentage interest in any cellular entity
pursuant to any provision dealing with the transfer of equity in such
cellular entity that Arvig Cellular has the opportunity to exercise.

(g) No Dispositions. Other than (a) dispositions or
proposed dispositions listed on Schedule 4.1(g), or (b) dispositions in
the ordinary course of business consistent with prior practice which are
not material, individually or in the aggregate, to Arvig and the Arvig
Subsidiaries, taken as a whole. Arvig shall not, and shall not permit any
of the Arvig Subsidiaries to, sell, lease, encumber or otherwise dispose
of, or agree to sell, lease (whether such lease is an operating or capital
lease), encumber or otherwise dispose of, any assets having an aggregate
value in excess of $500,000.

(h) Indebtedness; Leases. Arvig shall not, and shall not
permit any of the Arvig Subsidiaries to incur (which shall not be deemed
to include entering into credit agreements, lines of credit or similar
arrangements until borrowings are made under such arrangements) any
indebtedness for borrowed money in an amount in excess of $500,000, or
guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities, or guarantee any debt
securities of others or enter

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into any lease (whether such lease is an operating or capital lease) other
than in each case in the ordinary course of business, except as may be
necessary to pay the dividend set forth in section 4.1(b) of this
Agreement.

(i) Employee Arrangements. Arvig and the Arvig
Subsidiaries shall not:

(i) grant any increases in the compensation of any of its
directors, officers, shareholders, or key employees, except for
regularly scheduled bonuses payable in December 1993, in an amount
not to exceed $300,000;

(ii) except as required by the collective bargaining
process, pay or agree to pay any pension, retirement allowance or
other employee benefit not required or contemplated by any of the
existing Benefit Plans as in effect on the date hereof to any such
director, officer or key employee, whether past or present;

(iii) except as required pursuant to the collective
bargaining process, enter into any new, or materially amend, any
existing employment or severance or termination agreement with any
such director, officer or key employee; or

(iv) except as may be required to comply with applicable
law, or except as required pursuant to the collective bargaining
process, become obligated under any new Benefit Plan, which was
not in existence on the date hereof, or amend any Benefit Plan in
existence on the date hereof if such amendment would have the
effect of materially enhancing any benefits thereunder.

4.2 Covenants of TDS. During the period from the date of
this Agreement and continuing until the earlier of the Effective Time or
the termination of this Agreement in accordance with Article VII hereof,
TDS agrees that (except as expressly contemplated or permitted by this
Agreement, or to the extent that Arvig shall otherwise consent in
writing):

(a) Ordinary Course. TDS and each of its Significant
Subsidiaries shall carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted
and use all reasonable efforts to keep available the services of its
current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the
end that goodwill and ongoing businesses shall not be impaired in any
material respect at the Effective Time.

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(b) Mergers. TDS agrees that from the date hereof until
the Closing Date it shall not merge with any other corporation or
consolidate its operations with any other corporation, partnership or
other business entity if such consolidation would, under its Articles of
Incorporation or Bylaws, require the prior approval of the TDS
shareholders.

(c) SEC Information. TDS shall provide to each of the
parties identified on Section 9.3(b) hereof a copy of all filings made
with the SEC between the date hereof and the Closing Date promptly, but in
no event later than five business days, after the filing of any such
documents.

ARTICLE V

ADDITIONAL AGREEMENTS

5.1 Preparation of S-4 and the Proxy Statement. As promptly as
practicable after the date of this Agreement, TDS and Arvig shall prepare
and TDS shall file with the SEC the TDS Registration Statement on Form
S-4, in which the Proxy Statement will be included as a prospectus. TDS
shall be responsible for all costs and expenses associated with the
preparation of and filing of the Proxy Statement and the TDS Registration
Statement. TDS shall use all reasonable efforts to have the TDS
Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing. Each of Arvig and TDS shall use
all reasonable efforts to cause the Proxy Statement to be mailed to
shareholders of Arvig at the earliest practicable date. TDS shall use its
best efforts to obtain all necessary state securities laws or "blue sky"
permits, approvals and registrations in connection with the issuance of
TDS Common Shares in the Merger and Arvig shall furnish all information
concerning Arvig and the holders of Arvig Common Stock as may be
reasonably requested in connection with obtaining such permits, approvals
and registrations. TDS will provide Arvig with copies of all written
communications with the SEC with respect to the TDS Registration
Statement.

5.2 Letter of Arvig's Accountants. Arvig shall use
all reasonable efforts to cause to be delivered to TDS (i) a letter of
Olsen Thielen & Co., and Larson Allen Weishair & Co., Arvig's independent
auditors, dated a date within two business days before the date on which
the TDS Registration Statement shall become effective and addressed to
TDS, in form and substance reasonably satisfactory to TDS and customary in
scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the TDS
Registration Statement and (ii) the consent of such accountants to the
inclusion of such letters in the registration statement.

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5.3 Access to Information. Upon reasonable notice,
Arvig shall (and shall cause each of the Arvig Subsidiaries to) afford to
the officers, employees, accountants, counsel and other representatives of
TDS, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, Arvig shall (and shall cause each of the
Arvig Subsidiaries to) furnish promptly to TDS all information in its
possession concerning its business, properties and personnel as TDS may
reasonably request. TDS agrees that it will not, and will cause its
representatives not to, use any information obtained pursuant to this
Section 5.3 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement, including negotiations with
certain members of Arvig's management regarding the possible disposition
to such managers of certain assets of Arvig. TDS and Sub shall comply
with all of the terms and conditions of that certain Confidentiality
Agreement between itself and Piper Jaffray, Inc. dated February 2, 1993
and the terms and conditions of paragraph F of the Letter of Intent with
respect to such information.

5.4 Shareholders Meeting. Arvig shall call a meeting of
its shareholders to be held as promptly as practicable after the date
hereof for the purpose of voting upon this Agreement and the Merger.
Subject to the last sentence of Section 4.1(e) Arvig will, through its
Board of Directors, recommend its shareholders approval of such matters
and shall use its reasonable best efforts to obtain approval and adoption
of this Agreement and the Merger by its shareholders. Arvig and TDS shall
cooperate with respect to the timing of such meeting and shall use all
reasonable efforts to hold such meeting as soon as practicable after the
date hereof. TDS shall (i) cause Sub promptly to submit this Agreement
and the transactions contemplated hereby for approval and adoption by TDS
as its sole shareholder by written consent, (ii) authorize and cause an
officer of TDS to vote TDS's shares of Sub for adoption and approval of
this Agreement and the transactions contemplated hereby, and (iii) take
all additional actions as the sole shareholder of Sub necessary to adopt
and approve this Agreement and the transactions contemplated hereby.

5.5 Legal Conditions to Merger. Each of Arvig, TDS and Sub
will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on itself with respect to the
Merger (including furnishing all information required under the HSR Act,
in connection with the FCC Approvals and PUC Approvals and in connection
with approvals of or filings with any other Governmental Entity) and will
promptly cooperate with and furnish information to each other in
connection with any such requirements imposed upon any of them or any of
their subsidiaries in connection with the Merger.

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5.6 Affiliate. Prior to the Closing Date, Arvig shall
deliver to TDS a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the shareholders
of Arvig, "affiliates" of Arvig for purposes of Rule 145 under the
Securities Act. Arvig shall use its best efforts to cause each such
person to deliver to TDS on or prior to the Closing Date a written
agreement in a form reasonably satisfactory to TDS.

5.7 Employee Benefit Plans. Except as otherwise provided
in this Agreement, Arvig and TDS agree that the Benefit Plans of Arvig and
the Arvig Subsidiaries in effect at the date of this Agreement shall, to
the extent practicable, remain in effect until otherwise determined after
the Effective Time. TDS agrees that it will (a) invite all full-time
employees (other than directors and officers of Arvig and the Arvig
Subsidiaries) of Arvig's local exchange operations to remain in the employ
of the Surviving Corporation, subject to reasonable performance of their
duties and the needs of Arvig, and (b) extend to all such employees the
full complement of benefits provided by TDS, including medical, life and
dental insurance, participation in the TDS pension plan, tax-deferred
savings (401(k)) and employee stock purchase plans and continuing
education opportunities.

5.8 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expense, except that Arvig shall
pay all of the costs and expenses of itself and the Sellers incident to
the negotiation and preparation of this Agreement, the holding of the
meeting of its shareholders, and the consummation of the transactions
contemplated hereby, including the fees, expenses and disbursements of
Piper Jaffray Inc. and counsel to Arvig and the Sellers, provided,
however, that the aggregate amount of such fees, expenses and
disbursements paid or reimbursed by Arvig or the Arvig Subsidiaries shall
not exceed $550,000.

5.9 Brokers or Finders. Each of TDS, the Sellers and
Arvig represent, as to itself, its subsidiaries and its affiliates, that
no agent, broker, investment banker, financial advisor or other firm or
person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except Piper Jaffray Inc., whose fees and
expenses will be paid (subject to Section 5.8 by Arvig in accordance with
Arvig's agreement with such firm (a copy of which has been delivered by
Arvig to TDS prior to the date of this Agreement) in the event the Merger
is consummated, and each of TDS and Arvig respectively agree to indemnify
and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any other fees, commissions or
expenses asserted by any person on the basis of any act or statement
alleged to have been made by such party or its affiliate.

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5.10 Additional Agreements; Reasonable Efforts. Subject
to the terms and conditions of this Agreement, including Section 4.1(c)
hereof, each of the parties hereto agrees to use all reasonable efforts to
take or cause to be taken, all action and to do or cause to be done, all
things necessary, proper or advisable under applicable laws and
regulations to satisfy the conditions set forth in Article IV (provided
that except as expressly set forth in this Agreement, none of the parties
shall be required to make any payment or other financial accommodations to
obtain any consents to the consummation of the Merger) and to consummate
and make effective the transactions contemplated by this Agreement,
subject to the appropriate vote of shareholders of Arvig described in
Section 6.l(a), including cooperating fully with each other party,
including the provision of information and making of all necessary
filings in connection with, among other things, the FCC Approvals and PUC
Approvals and under the HSR Act. Except as otherwise contemplated herein,
in case at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement or to
vest the Surviving Corporation with full title to all properties, assets,
rights, approvals, immunities and franchises of either of the constituent
Corporations, the proper officers and directors of each party to this
Agreement shall take all such necessary action.

5.11 Conduct of Business of Sub. During the period of time
from the date of this Agreement to the Effective Time, Sub shall not
engage in any activities of any nature except as provided in or
contemplated by this Agreement.

5.12 No Dissolution, Etc. Except as otherwise permitted or
contemplated by this Agreement, no corporate party shall authorize,
recommend, propose or announce an intention to adopt a plan of complete or
partial liquidation or dissolution of itself or of any of its
subsidiaries.

5.13 No Action. Except as contemplated by this Agreement,
no party hereto will, nor will any such party permit any of its
subsidiaries or affiliates to, take or agree to commit to take any action
that is reasonably likely to make any of such party's representations or
warranties hereunder inaccurate in any material respect at the date made
(to the extent so limited) or as of the Closing Date.

5.14 Distribution Agreement; Spin-off. Notwithstanding
any other provision of this Agreement to the contrary, Arvig and TDS agree
that, in the event TDS enters into an agreement (the "Distribution
Agreement") with certain shareholders of Arvig (the "Gilroy Arvig Group")
interested in acquiring all of the equity of Link, ABT, Velstar and
Norther Fiber (the "Long Distance Subsidiaries"), providing for the
distribution of all of the shares of the capital stock of the Long
Distance Subsidiaries to the Gilroy Arvig Group in exchange for and in
redemption of all or a

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portion of the shares of Arvig Common Stock owned by members of the Gilroy
Arvig Group, Arvig shall use its best efforts to consummate the
transactions provided for in the Distribution Agreement as promptly as
practicable and prior to the Closing Date; provided, however, any such
Distribution Agreement shall contain a provision requiring that each
shareholder of Arvig who is a party to the Distribution Agreement shall
promptly execute and become a party to this Agreement by executing a
Joinder in the form of Exhibit B attached hereto.

5.15 Directors' and Officer's Liability. Upon closing of
the Merger, all present and former officers, directors, and employees of
Arvig and the Arvig Subsidiaries ("Released Persons") shall be deemed to
be released and forever discharged from all claims, demands, causes of
action by, or liability to Arvig and the Arvig Subsidiaries which Arvig or
the Arvig Subsidiaries may have had arising prior to the Effective Time
out of (i) any transactions or relationships with such Released Persons,
(ii) the operation of Arvig and the Arvig Subsidiaries, and (iii) any
transactions or relationships between Arvig or the Arvig Subsidiaries and
the shareholders of Arvig; provided, however, that the foregoing releases
shall not be deemed effective upon the closing of the Merger unless prior
to such time (i) each of Gilroy Arvig, Gregory Arvig, Michael Arvig, Gary
Brunes, Bruce Brunes, Galeen Royce, Larry Coulter, Marlene Moser, Conrad
Johnson and Lowell Johnson, shall have executed and delivered a full and
complete release of any and all claims that such person may have against
Arvig, its directors, officers or affiliates and (ii) Arvig shall have
received from Arvig's directors and officers liability insurance carrier
(A) written approval for such release, and (B) confirmation that such a
release will not affect the insurance coverage currently provided to Arvig
by such carrier. TDS agrees that it will not cause or permit Arvig,
Surviving Corporation or any of the Arvig Subsidiaries to amend, modify or
change an provisions of any By-laws of Arvig or any of the Arvig
Subsidiaries as they exist on the date hereof if the operative effect of
such amendment would be to modify in any respect the respective rights and
responsibilities, including the right to appropriate indemnification of
any officer, director or employee. TDS shall cause or permit Arvig,
Surviving Corporation and the Arvig Subsidiaries to maintain directors'
and officers' insurance, or to extend coverage under TDS's existing
policies, for a period of one year following the Effective Time, and may,
at its option, provide such insurance for an additional two years from
such date.

5.16 Maintenance of Records. TDS and Sub shall keep and
maintain all books, records, and documents of Arvig and the Arvig
Subsidiaries relating to the conduct of the business of Arvig and the
Arvig Subsidiaries prior to the Effective Time and shall make such books,
records, and documents available to the Sellers upon reasonable request
for a period of five years following the Effective Time.

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ARTICLE VI

CONDITIONS PRECEDENT

6.1 Conditions to Each Party's Obligation to Effect the
Merger. The obligations of TDS, Sub, Arvig and the Sellers to effect the
Merger are subject to the satisfaction of the following conditions:

(a) Shareholder Approval. This Agreement and the Merger
shall have been approved and adopted by the affirmative vote of the
holders of a majority of the outstanding shares of Arvig Voting Stock
entitled to vote thereon.

(b) AMEX Listing. The TDS Common Shares issuable to Arvig
shareholders pursuant to this Agreement and any other TDS Common Shares
required to be reserved for issuance in connection with the Merger shall
have been authorized for listing on the AMEX upon official notice of
issuance.

(c) Other Approvals. Other than the filing provided for by
Section 1.1, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed
by, any Governmental Entity (including those described in Section 3.2(e)
and 3.3(e)) or any other person or entity the failure to obtain which
would have a material adverse effect on TDS and its subsidiaries, or Arvig
and the Arvig Subsidiaries, in each case, taken as a whole (including all
filings under the HSR Act and the expiration of all waiting periods
thereunder), shall have been filed, occurred or obtained. TDS shall have
received all state securities laws or "blue sky" permits and
authorizations necessary to issue TDS Common Shares pursuant to the terms
of the Merger and to permit the sale thereof by the Arvig shareholders
without limitation under any applicable state or federal securities laws.

(d) S-4. The TDS Registration Statement shall have become
effective under the Securities Act (and all post-effective amendments
filed shall have been declared effective and not withdrawn) and shall not
be the subject of any stop order or proceedings seeking a stop order.

(e) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
(an "Injunction") preventing the consummation of the Merger shall be in
effect; provided, however; that prior to invoking this condition, TDS and
Arvig shall use all reasonable efforts to have any such decree, ruling,
injunction or order vacated, except as otherwise contemplated by this
Agreement.

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6.2 Conditions to Obligations of TDS and Sub. The
obligations of TDS and Sub to effect the Merger are subject to the
satisfaction of the following conditions, any or all of which may be
waived in whole or in part by TDS or Sub, as the case may be:

(a) Representations and Warranties. The representations
and warranties of Arvig and the Sellers set forth in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date,
except as otherwise contemplated by this Agreement, and TDS shall
have received a certificate signed on behalf of Arvig and by a
representative of the Sellers to such effect.

(b) Performance of Obligations. Arvig and the Sellers
shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior
to the Closing Date, and TDS shall have received a certificate
signed on behalf of Arvig and by a representative of the Sellers
to such effect.

(c) Letters from Arvig Affiliates. TDS shall have received
from each person named in the letter referred to in Section 5.6 an
executed copy of an agreement in a form reasonably satisfactory to
TDS

(d) Legal Opinion. TDS shall have received from Hall,
Byers, Hanson, Steil and Weinberger, P.A., counsel to the Sellers
and Arvig, and Moss & Barnett, state regulatory counsel to Arvig,
an opinion of counsel in form and substance reasonably acceptable
to TDS and their counsel.

6.3 Conditions of Obligations of Arvig and the Sellers.
The obligation of Arvig and the Sellers to effect the Merger is subject to
the satisfaction of the following conditions, any or all of which may be
waived in whole or in part by Arvig and the Sellers:

(a) Representations and Warranties. The representations
and warranties of TDS and Sub set forth in this Agreement shall be
true and correct in all material respects as of the date of this
Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement, and Arvig and Sellers shall have
received a certificate signed on behalf of TDS and Sub to such
effect.

(b) Performance of Obligations of TDS and Sub. TDS and Sub
shall have performed in all material respects all

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obligations required to be performed by them under this Agreement
at or prior to the Closing Date, and Arvig and Sellers shall have
received a certificate signed on behalf of TDS and Sub to such
effect.

(c) Legal Opinion. Arvig and Sellers shall have received
from Sidley & Austin, counsel to TDS and Sub, an opinion of
counsel in form and substance reasonably acceptable to Arvig,
Sellers, and their counsel, which opinion shall include an opinion
as to the tax-free nature of the Merger.

(d) Fairness Opinion. Prior to mailing the Proxy
Statement, Arvig shall have received a written opinion from Piper
Jaffray, Inc. to the effect that the consideration to be delivered
in the Merger is fair from a financial point of view to the
stockholders of Arvig, and such opinion shall not have been
withdrawn or materially modified in any adverse manner prior to
the Effective Time.

(e) No Adverse Changes. Since the date of this Agreement,
there shall have ben no material adverse change in the condition
(financial or otherwise), properties, business, or results of
operations of TDS.

ARTICLE VII

TERMINATION AND AMENDMENT

7.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the shareholders of
Arvig:

(a) by mutual consent of Arvig and TDS;

(b) by either Arvig or TDS if there has been a material
breach of any representation, warranty, covenant or agreement made
by the other in this Agreement which breach has not been cured
within 15 business days following receipt by the breaching party
of notice of such breach, or if any permanent injunction or other
order of a court or other competent authority preventing the
consummation of the Merger shall have become final and
non-appealable;

(c) by either Arvig or TDS, so long as such party has not
materially breached its obligations hereunder, if the Merger shall
not have been consummated before December 31, 1994;

(d) by either TDS or Arvig if any required approval of the
shareholders of Arvig shall not have been obtained by reason of
the failure to obtain the required vote upon a

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vote held at a duly held meeting of shareholders or at any
adjournment thereof;

(e) by either TDS or Arvig if permitted or required in
accordance with the last sentence of Section 4.1(e) of this
Agreement;

(f) by either TDS or Arvig if any conditions upon either
party's obligation to consummate the Merger set forth in this
Agreement cannot be met;

(g) by Arvig upon exercise of the Sellers' Out, in the
event TDS does not require Arvig to perform in accordance with
Section 2.1(c) of this Agreement; or

(h) by TDS upon exercise of the Buyer's Out in the event
Arvig does not require TDS to perform in accordance with Section
2.1(c) of this Agreement.

7.2 Effect of Termination. In the event of termination of
this Agreement as provided in Section 7.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
the Sellers or on the part of TDS, Sub, Arvig, or their respective
officers or directors, except (a) with respect to this Section 7.2, the
second and third sentences of Section 5.3, and Sections 5.8 and 5.9 and
(b) to the extent that such termination results from the willful breach by
a party hereto of any of its covenants or agreements as set forth in this
Agreement.

7.3 Amendment. This Agreement may be amended by the
parties hereto any time before or after approval of the matters presented
in connection with the Merger by the shareholders of Arvig, but, after any
such approval, no amendment shall be made which by law requires further
approval by such shareholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of all of the parties hereto.

7.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto may, to the extent legally allowed, (a) extend
the time for the performance of any of the obligations or other acts of
the other parties thereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document
delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set
forth in a written instrument signed on behalf of such party.

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ARTICLE VIII

INDEMNIFICATION

8.1 By the Sellers to TDS. As an inducement to TDS to
enter into this Agreement and to consumate the transactions contemplated
hereby, the Sellers, jointly and severally, but subject to Section 9.1 and
to TDS providing the Sellers with prompt written notice, requisite
authority to defend, and full cooperation in the defense, agree to
indemnify, hold harmless and defend TDS and each of its officers,
directors, employees, affiliates, subsidiaries, successors and assigns
(the "TDS Indemnitees"), against any claim, demand, loss, expense,
obligation or liability, including interest, penalties and reasonable
attorneys' fees (collectively, "Losses") incurred by any TDS Indemnitee
relating to, resulting from or arising out of (a) any breach by Arvig or
the Sellers in the performance of their respective obligations under this
Agreement, (b) the inaccuracy of any of the representations or warranties
made by Arvig or the Sellers in this Agreement, in any exhibit or schedule
hereto, or in any other instrument delivered in accordance with the
provisions hereof, or (c) any action, suit proceeding, assessment or
judgment incident to any of the foregoing; provided however, that the
Sellers shall not be required to indemnify the TDS Indemnitees hereunder
with respect to any Losses incurred by any such TDS Indemnitees until, and
then only insofar as, the Losses shall exceed in the aggregate $2,500,000.

8.2 By TDS to Arvig and the Sellers. Subject to Section
9.1 and Arvig or the Sellers, as the case may be, providing TDS with
prompt written notice, requisite authority to defend, and full cooperation
in the defense, TDS agrees to indemnify, hold harmless and defend the
Sellers, Arvig, and each of Arvig's officers, directors, employees,
affiliates, subsidiaries, successors and assigns (the "Arvig
Indemnitees"), against all Losses incurred by any of them relating to,
resulting from or arising out of (a) any breach by TDS or Sub in the
performance of their respective obligations under this Agreement, (b) the
inaccuracy of any of the representations made by TDS or Sub in this
Agreement, in any schedule or exhibit hereto, or in any instrument
executed or delivered in accordance with the provisions hereof, or (c) any
action, suit, proceeding, assessment or judgment incident to any of the
foregoing; provided however, that TDS shall not be required to indemnify
the Arvig Indemnitees hereunder with respect to any Losses incurred by any
such Arvig Indemnitee until, and then only insofar as, the Losses shall
exceed in the aggregate $2,500,000.

ARTICLE IX

GENERAL PROVISIONS

9.1 Survival of Representations and Warranties. All of
the representations and warranties contained in this Agreement

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shall survive the consummation of the Merger. Except for the
representations and warranties contained in Sections 3.1(b), 3.2(a), (b),
(c), (i) and (r), and 3.3(a), (b) and (c) , which shall have no expiration
date, the representations and warranties contained in this Agreement shall
expire on the third anniversary of the closing Date (except to the extent
of any then pending claims).

9.2 Agreement of Sellers; Designation of Sellers
Agent. By their execution hereof, each Seller agrees:

(a) to vote all of such Seller's Arvig Voting Stock in
favor of the approval of this Agreement and the Merger;

(b) not to exercise any dissenters' rights with respect to
any of such Seller's Arvig common Stock in connection with the Merger;

(c) if the Merger is consummated, not to resell the
TDS Common Shares received in the Merger except on the AMEX through a
broker-dealer registered under the Exchange Act;

(d) to enter into, on or before the Closing Date, a Power
of Attorney and Custody Agreement with the Executive Committee of the
Board of Directors of Arvig, substantially in the form attached as Exhibit
C hereto, and shall have caused to be delivered to the Custodian either
(i) Arvig Certificates for the number of shares set forth opposite the
Seller's name on Schedule 2, duly endorsed in blank or accompanied by a
proper instrument of assignment duly executed in blank.

9.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):

(a) if to TDS or Sub, to

LeRoy T. Carlson
Chairman
Telephone and Data Systems, Inc.
30 North LaSalle Street
Suite 4000
Chicago, Illinois 60602
(312) 630-1900 (telephone)
(312) 630-9299 (telecopier)

and

Mr. Byron A. Wertz

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Telephone and Data Systems, Inc.
One Appletree Square, Suite 2344
8009 34th Avenue South
Minneapolis, Minnesota 55425
(612) 854-2757 (telephone)
(612) 854-2972 (telecopier)

with a copy to

Michael G. Hron, Esq.
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
(312) 853-2030 (telephone)
(312) 853-7036 (telecopier)

and

(b) if to the Sellers, to

Mr. Gary Brunes
Chairman of the Executive Committee
Arvig Telcom, Inc.
Main & 2nd Street
P.O. Box 395
Pequot Lakes, Minnesota 56472
(218) 568-4115 (telephone)
(218) 568-2125 (telecopier)

with a copy to

Lee W. Hanson, Esq.
Hall, Byers, Hanson, Steil & Weinberger
1010 West St. Germain, #600
St. Cloud, Minnesota 56301
(612) 252-4414 (telephone)
(612) 252-4482 (telecopier)

9.4 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.

9.5 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have
been signed by each of the parties and delivered to the other parties, it
being understood that all parties need not sign the same counterpart.

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9.6 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof, except that certain Confidentiality Agreement
between TDS and Piper Jaffray, Inc. dated February 2, 1993 and the terms
and conditions of paragraph F of the Letter of Intent which
Confidentiality Agreement and provision shall survive the execution and
delivery of this Agreement and (b) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.

9.7 Remedies. (a) The parties hereto acknowledge that
the consideration to be delivered in connection with the Merger is unique
and that no adequate remedy at law would be available to either party for
a breach by the other party of this Agreement. Accordingly, each party
agrees that the other party shall be entitled to an appropriate decree of
specific performance or other equitable remedy to enforce this Agreement
(without any bond or other security being required), and hereby waives the
defense in any action or proceeding brought to enforce this Agreement that
there exists an adequate remedy at law.

(b) Cumulative Remedies. The rights and remedies of the
parties to this Agreement are cumulative, and shall not be exclusive of
any other remedies provided herein or by law.

(c) Expenses. If any action at law or in equity,
including an action for declaratory relief, is brought in connection with
this Agreement or a breach hereof, the prevailing parties shall be
entitled to the full amount of all reasonable expenses, including all
court costs and actual attorneys' fees, incurred in connection with such
action.

9.8 Governing Law. The validity, construction and
enforceability of this Agreement shall be governed by the laws of the
State of Minnesota, without giving effect to conflict of laws principles
thereof.

9.9 Consent to Jurisdiction. This Agreement may be
enforced in any federal court or Minnesota state court sitting in the
State of Minnesota and the parties hereto consent to the jurisdiction and
venue of any such court and waive any argument that venue in such forums
is not convenient. In the event either party commences any action in
another jurisdiction or venue under any tort or contract theory arising
directly or indirectly from the relationship created by this Agreement,
the defendant and/or its shareholders shall be entitled to have the case
transferred to one of the jurisdictions and venues above described, or if
such transfer cannot be accomplished under applicable law, to have such
case dismissed without prejudice.

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9.10 Agent for Service. Each Seller hereby irrevocably
constitutes and appoints Hall, Byers, Hanson, Steil & Weinberger, P.A.;
1010 West St. Germain, Suite 600; St. Cloud, Minnesota 56301 pursuant to
the terms and conditions of the Custody Agreement, with full power of
substitution, the true and lawful attorney and agent ("Agent") of such
Seller with full power and authority to receive notice, service or summons
or any other legal process or pleading in any action, suit or proceeding
against such Seller arising out of or in connection with any matter
relating to this Agreement, (including, without limitation, any action,
suit or proceeding in which indemnification by any TDS Indemnitee is
sought pursuant to Section 8.1 hereof) it being agreed that service upon
such Agent shall constitute service upon each Seller.

9.11 Publicity. The parties will consult with each other
and will mutually agree upon any press release or public announcement
pertaining to the Merger and shall not issue any such press release or
make any such public announcement prior to such consultation and
agreement, except as may be required by applicable law or obligations
pursuant to any listing agreement with any national securities exchange,
in which case the party proposing to issue such press release or make such
public announcement shall use reasonable efforts to consult in good faith
with the other party before issuing any such press release or making any
such public announcement.

9.12 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and
be enforceable by the parties and their respective successors and assigns.

9.13 Obligation of TDS. Whenever this Agreement requires
Sub to take any action, such requirement shall be deemed to include an
undertaking on the part of TDS to cause Sub to take such action.

* * * * *

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[This page is intentionally left blank.]

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IN WITNESS WHEREOF, the Sellers, TDS, Sub and Arvig have
caused this Agreement to be signed by their respective representatives,
all as of the date first written above.

TELEPHONE AND DATA SYSTEMS, INC.

By: /s/ LeRoy T. Carlson
________________________________________
LeRoy T. Carlson
Chairman

ARVIG TELCOM, INC.

By: /s/ Gilroy G. Arvig, President
________________________________________

ARVIG ACQUISITION CORP.

By: /s/ LeRoy T. Carlson
________________________________________

SELLERS:
--------
/s/ Bruce Brunes
__________________ holding 140 shares of Arvig Voting Stock
Name and 1320 shares of Arvig Nonvoting Stock
Bruce Brunes

/s/ Allison K. Brunes
___________________ holding 516 shares of Arvig Voting Stock
Name and 1200 shares of Arvig Nonvoting Stock
Allison K. Brunes

/s/ James Brunes
___________________ holding 158 shares of Arvig Voting Stock
Name and 1422 shares of Arvig Nonvoting Stock
James Brunes

/s/ Patricia K. Bartholomew
________________________ holding 72 shares of Arvig Voting Stock
Name and 1274 shares of Arvig Nonvoting Stock
Patricia K. Bartholomew

Signature Page to Agreement and Plan of Merger
Among
Telephone and Data Systems, Inc.
Arvig Acquisition Corporation
Arvig Telcom, Inc.
and
Certain Owners of Outstanding Shares of Capital Stock
of Arvig Telcom, Inc.

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/s/ Diane Brunes
___________________ holding 72 shares of Arvig Voting Stock
Name and 1274 shares of Arvig Nonvoting Stock
Diane Brunes

/s/ Marlene A. Moser
___________________ holding 1212 shares of Arvig Voting Stock
Name and 0 shares of Arvig Nonvoting Stock
Marlene A. Moser,
individually and as
Trustee for the CATS
Trust

/s/ Larry Coulter
___________________
Name
Larry Coulter,
individually and as
Trustee for the CATS
Trust

/s/ Dorris Coulter
___________________
Name
Dorris Coulter,
individually and as
Trustee for the CATS
Trust

/s/ Larry Coulter
___________________ holding 3 shares of Arvig Voting Stock
Name and 1369 shares of Arvig Nonvoting Stock
Larry Coulter

/s/ Dorris Coulter
___________________ holding 0 shares of Arvig Voting Stock
Name and 938 shares of Arvig Nonvoting Stock
Dorris Coulter,
individually and as
Trustee to the Dorris L.
Coulter Revocable Trust
dated as of August 28, 1993

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/s/ Gary Brunes
___________________ holding 130 shares of Arvig Voting Stock
Name and 1316 shares of Arvig Nonvoting Stock
Gary Brunes

/s/ Eric A. Brunes
___________________ holding 38 shares of Arvig Voting Stock
Name and 1071 shares of Arvig Nonvoting Stock
Eric A. Brunes

/s/ Dwayne Johnson
___________________ holding 132 shares of Arvig Voting Stock
Name and 1192 shares of Arvig Nonvoting Stock
Dwayne Johnson

/s/ Lowell Johnson
___________________ holding 8 shares of Arvig Voting Stock
Name and 1120 shares of Arvig Nonvoting Stock
Lowell Johnson

/s/ Donnabelle J.
Gunderson
___________________ holding 132 shares of Arvig Voting Stock
Name and 1192 shares of Arvig Nonvoting Stock
Donnabelle J.
Gunderson

/s/ Conrad Johnson
___________________ holding 147 shares of Arvig Voting Stock
Name and 147 shares of Arvig Nonvoting Stock
Conrad Johnson

/s/ Galeen Royce
___________________ holding 82 shares of Arvig Voting Stock
Name and 1364 shares of Arvig Nonvoting Stock
Galeen Royce

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ANNEX B

Piper Jaffray Inc.
222 South 9th Street
Minneapolis, MN 55402-3804
612 542-6000

April 20, 1994

Executive Committee of the
Board of Directors
Arvig Telcom, Inc.
Main & 2nd Street
Pequot Lakes, MN 56422

Gentlemen:

In connection with the proposed merger transaction ("Merger")
whereby Arvig Acquisition Corporation, ("Subsidiary"), a
wholly-owned subsidiary of Telephone and Data Systems, Inc.,
("TDS"), will be merged with and into Arvig Telcom, Inc.
("Arvig") pursuant to an Agreement and Plan of Merger
("Agreement") dated December 14, 1993, by and among TDS,
Subsidiary, and Arvig, you have requested our opinion as to
the fairness, from a financial point of view, to the holders
of shares ("Common Shareholders") of Arvig Class A Voting
Common Stock, and Arvig Class B Nonvoting Common Stock
(collectively "Arvig Common Stock"), of the consideration to
be received by the Common Shareholders in the Merger for
shares of Arvig Common Stock. Pursuant to the Agreement, the
consideration to be received by the Common Shareholders will
consist of shares of common stock of TDS ("TDS Common Stock").
The number of shares of TDS Common Stock to be received by
Common Shareholders shall be determined in accordance with the
terms of the Agreement, but Arvig shall have the right to
terminate the Agreement if the implied value of the TDS Common
Stock to be received in the Merger is less than $1,129.1102
per share of Arvig Common Stock ($1,148.9176 if the New Arvig
Shares, as defined in the Agreement, are not issued), based
upon the Average Closing Price of TDS Common Stock (as such
term is defined in the Agreement).

Piper Jaffray Inc., as a customary part of its investment
banking business, is engaged in the valuation of businesses
and their securities in connection with mergers and
acquisitions, underwriting and secondary distributions of
securities, private placements, and valuations for estate,
corporate and other purposes. On behalf of Arvig, we made
contacts with several potential purchasers of Arvig and
assisted in the solicitation of proposals from and
negotiations with interested prospective purchasers. For our
services in connection with the Merger, including rendering
this opinion, Arvig will pay us a fee and indemnify us against
certain liabilities. With the exception of a retainer fee
which has previously been paid, our fee is contingent upon the
consummation of the Merger and will not be paid unless the
Merger is completed.

In arriving at our opinion, we have undertaken such reviews,
analyses and inquiries as we deemed necessary and appropriate
under the circumstances. Among other things, we have reviewed
the Agreement; audited financial statements of the
subsidiaries of Arvig for the years ended December 31, 1989-
1993, the unaudited Consolidating Financials of Arvig for
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Arvig Telcom, Inc.
April 20, 1994
Page Two

the years ended December 31, 1989-1992, the audited
Consolidating Financials of Arvig for the year ended December
31, 1993, certain projected financial results for the Arvig
subsidiaries for the year ended December 31, 1994; certain
financial and securities data of companies deemed similar to
Arvig or representative of the business sectors in which Arvig
operates, the financial terms, to the extent publicly
available, of certain acquisition transactions, and certain
financial and securities data of TDS and companies deemed
similar to TDS or representative of the business sectors in
which TDS operates. We have visited the headquarters and
principal facilities of Arvig in Pequot Lakes, Minnesota, and
have had discussions with members of management concerning
Arvig's financial condition, current operating results and
business outlook. We have also had discussions with certain
members of TDS senior management concerning TDS's financial
condition, current operating results and business outlook.

We have relied upon and assumed the accuracy, completeness and
fairness of the financial statements and other information
provided to us by Arvig or otherwise made available to us and
have not attempted independently to verify such information.
We have further relied upon the assurances of Arvig management
that the information provided has been prepared on a
reasonable basis and, with respect to projections, reflects
the best currently available estimates, and that they are not
aware of any information or facts that would make the
information provided to us incomplete or misleading. In
arriving at our opinion, we have not performed any appraisals
or valuations of specific assets of Arvig or TDS and express
no opinion regarding the liquidation value of Arvig. We have
assumed for purposes of our opinion that on the date hereof,
the market price of TDS Common Stock fully reflects the
possible adverse consequences that might arise from any
pending or threatened litigation or governmental proceedings
or investigations to which TDS or any of its affiliates is a
party or may be subject and express no opinion as to the
probable outcome, or the consequences of any unfavorable
outcome, of any such litigation, proceedings or
investigations. Our opinion is based upon conditions as they
exist and are subject to evaluation on the date hereof. We
are not expressing any opinion herein as to the prices at
which shares of TDS Common Stock may trade at any future time.

Based upon and subject to the foregoing and based upon such
other factors as we consider relevant, it is our opinion that
the consideration proposed to be paid to the Common
Shareholders for Arvig Common Stock pursuant to the Agreement
is fair, from a financial point of view, to such Common
Shareholders as of the date hereof.

Sincerely,

PIPER JAFFRAY INC.

/s/Piper Jaffray Inc.

<PAGE>
ANNEX C

SECTIONS 302A.471 and 302A.473 OF
THE MINNESOTA BUSINESS CORPORATION ACT

302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.

Subdivision 1. Actions creating rights. A shareholder of a
corporation may dissent from, and obtain payment for the fair
value of the shareholder's shares in the event of, any of the
following corporate actions:

(a) An amendment of the articles that materially and
adversely affects the rights or preferences of the shares of
the dissenting shareholder in that it:

(1) alters or abolishes a preferential right of the
shares;

(2) creates, alters, or abolishes a right in respect of
the redemption of the shares, including a provision respecting
a sinking fund for the redemption or repurchase of the shares;

(3) alters or abolishes a preemptive right of the holder
of the shares to acquire shares, securities other than shares,
or rights to purchase shares or securities other than shares;

(4) excludes or limits the right of a shareholder to
vote on a matter, or to cumulate votes, except as the right
may be excluded or limited through the authorization or
issuance of securities of an existing or new class or series
with similar or different voting rights; except that an
amendment to the articles of an issuing public corporation
that provides that section 302A.671 does not apply to a
control share acquisition does not give rise to the right to
obtain payment under this section;

(b) A sale, lease, transfer, or other disposition of all
or substantially all of the property and assets of the
corporation not made in the usual or regular course of its
business, but not including a disposition in dissolution
described in section 302A.725, subdivision 2, or a disposition
pursuant to an order of a court, or a disposition for cash on
terms requiring that all or substantially all of the net
proceeds of disposition be distributed to the shareholders in
accordance with their respective interests within one year
after the date of disposition;

(c) A plan of merger, whether under this chapter or under chapter 322B,
to which the corporation is a party, except as provided in subdivision 3;

(d) A plan of exchange, whether under this chapter or under
chapter 322B, to which the corporation is a party as the corporation whose
shares will be acquired by the acquiring corporation, if the shares of the
shareholder are entitled to be voted on the plan; or
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(e) Any other corporate action taken pursuant to a
shareholder vote with respect to which the articles, the
bylaws, or a resolution approved by the board directs that
dissenting shareholders may obtain payment for their shares.

Subd. 2. Beneficial owners. (a) A shareholder shall
not assert dissenters' rights as to less than all of the
shares registered in the name of the shareholder, unless the
shareholder dissents with respect to all the shares that are
beneficially owned by another person but registered in the
name of the shareholder and discloses the name and address of
each beneficial owner on whose behalf the shareholder
dissents. In that event, the rights of the dissenter shall be
determined as if the shares as to which the shareholder has
dissented and the other shares were registered in the names of
different shareholders.

(b) A beneficial owner of shares who is not the
shareholder may assert dissenters' rights with respect to
shares held on behalf of the beneficial owner, and shall be
treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits
to the corporation at the time of or before the assertion of
the rights a written consent of the shareholder.

Subd. 3. Rights not to apply. Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain
payment under this section does not apply to a shareholder of
the surviving corporation in a merger, if the shares of the
shareholder are not entitled to be voted on the merger.

Subd. 4. Other rights. The shareholders of a
corporation who have a right under this section to obtain
payment for their shares do not have a right at law or in
equity to have a corporate action described in subdivision 1
set aside or rescinded, except when the corporate action is
fraudulent with regard to the complaining shareholder or the
corporation.

302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.

Subdivision 1. Definitions. (a) For purposes of this
section, the terms defined in this subdivision have the
meanings given them.

(b) "Corporation" means the issuer of the shares held by
a dissenter before the corporate action referred to in section
302A.471, subdivision 1 or the successor by merger of that
issuer.

(c) "Fair value of the shares" means the value of the
shares of a corporation immediately before the effective date
of the corporate action referred to in section 302A.471,
subdivision 1.

(d) "Interest" means interest commencing five days after
the effective date of the corporate action referred to in
section
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302A.471, subdivision 1 up to and including the date of
payment, calculated at the rate provided in section 549.09 for
interest on verdicts and judgments.

Subd. 2 Notice of action. If a corporation calls a
shareholder meeting at which any action described in section
302A.471, subdivision 1 is to be voted upon, the notice of the
meeting shall inform each shareholder of the right to dissent
and shall include a copy of section 302A.471 and this section
and a brief description of the procedure to be followed under
these sections.

Subd. 3. Notice of dissent. If a proposed action must
be approved by the shareholders, a shareholder who wishes to
exercise dissenters' rights must file with the corporation
before the vote on the proposed action a written notice of
intent to demand the fair value of the shares owned by the
shareholder and must not vote the shares in favor of the
proposed action.

Subd. 4. Notice of procedure; deposit of shares. (a)
After the proposed action has been approved by the board and,
if necessary, the shareholders, the corporation shall send to
all shareholders who have complied with subdivision 3 and to
all shareholders entitled to dissent if no shareholder vote
was required, a notice that contains:

(1) The address to which a demand for payment and
certificates of certificated shares must be sent in order to
obtain payment and the date by which they must be received;

(2) Any restrictions on transfer of uncertificated
shares that will apply after the demand for payment is
received;

(3) A form to be used to certify the date on which the
shareholder, or the beneficial owner on whose behalf the
shareholder dissents, acquired the shares or an interest in
them and to demand payment; and

(4) A copy of section 302A.471 and this section and a
brief description of procedures to be followed under these
sections.

(b) In order to receive the fair value of the shares, a
dissenting shareholder must demand payment and deposit
certificated shares or comply with any restrictions on
transfer of uncertificated shares within 30 days after the
notice was given, but the dissenter retains all other rights
of a shareholder until the proposed action takes effect.

Subd. 5. Payment; return of shares. (a) After the
corporate action takes effect, or after the corporation
receives a valid demand for payment, whichever is later, the
corporation shall remit to each dissenting shareholder who has
complied with subdivisions 3 and 4 the amount the corporation
estimates to be the fair value of the shares, plus interest,
accompanied by:

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(1) The corporation's closing balance sheet and
statement of income for a fiscal year ending not more than 16
months before the effective date of the corporate action,
together with the latest available interim financial
statements;

(2) An estimate by the corporation of the fair value of
the shares and a brief description of the method used to reach
the estimate; and

(3) A copy of section 302A.471 and this section, and a
brief description of the procedure to be followed in demanding
supplemental payment.

(b) The corporation may withhold the remittance
described in paragraph (a) from a person who was not a
shareholder on the date the action dissented from was first
announced to the public or who is dissenting on behalf of a
person who was not a beneficial owner on that date. If the
dissenter has complied with subdivisions 3 and 4, the
corporation shall forward to the dissenter the materials
described in paragraph (a), a statement of the reason for
withholding the remittance, and an offer to pay to the
dissenter the amount listed in the materials if the dissenter
agrees to accept that amount in full satisfaction. The
dissenter may decline the offer and demand payment under
subdivision 6. Failure to do so entitles the dissenter only
to the amount offered. If the dissenter makes demand,
subdivisions 7 and 8 apply.

(c) If the corporation fails to remit payment within 60
days of the deposit of certificates or the imposition of
transfer restrictions on uncertificated shares, it shall
return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice
under subdivision 4 and require deposit or restrict transfer
at a later time.

Subd. 6. Supplemental payment; demand. If a dissenter
believes that the amount remitted under subdivision 5 is less
than the fair value of the shares plus interest the dissenter
may give written notice to the corporation of the dissenter's
own estimate of the fair value of the shares, plus interest
within 30 days after the corporation mails the remittance
under subdivision 5, and demand payment of the difference.
Otherwise, a dissenter is entitled only to the amount remitted
by the corporation.

Subd. 7 Petition; determination. If the corporation
receives a demand under subdivision 6, it shall, within 60
days after receiving the demand, either pay to the dissenter
the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition
requesting that the court determine the fair value of the
shares, plus interest. The petition shall be filed in the
county in which the registered office of the corporation is
located, except that a surviving foreign corporation that
receives a demand relating to the shares

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of a constituent domestic corporation shall file the petition
in the county in this state in which the last registered
office of the constituent corporation was located. The
petition shall name as parties all dissenters who have
demanded payment under subdivision 6 and who have not reached
agreement with the corporation. The corporation shall, after filing the
petition, serve all parties with a summons and copy of the petition under the
rules of civil procedure. Nonresidents of this state may be served by
registered or certified mail or by publication as provided by law. Except
as otherwise provided, the rules of civil procedure apply to this proceeding.
The jurisdiction of the court is plenary and exclusive. The court may
appoint appraisers, with powers and authorities the court deems proper, to
receive evidence on and recommend the amount of the fair value of the
shares. The court shall determine whether the shareholder or
shareholders in question have fully complied with the
requirements of this section and shall determine the fair
value of the shares, taking into account any and all factors
the court finds relevant, computed by any method or
combination of methods that the court, in its discretion, sees
fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the
court is binding on all shareholders, wherever located. A
dissenter is entitled to judgment in cash for the amount by which the
fair value of the shares as determined by the court, plus
interest, exceeds the amount, if any, remitted under
subdivision 5, but shall not be liable to the corporation for
the amount, if any, by which the amount, if any, remitted to
the dissenter under subdivision 5 exceeds the fair value of
the shares as determined by the court, plus interest.

Subd. 8. Costs; fees; expenses. (a) The court shall
determine the costs and expenses of a proceeding under
subdivision 7, including the reasonable expenses and
compensation of any appraisers appointed by the court, and
shall assess those costs and expenses against the corporation,
except that the court may assess part or all of those costs
and expenses against a dissenter whose action in demanding
payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.

(b) If the court finds that the corporation has failed
to comply substantially with this section, the court may
assess all fees and expenses of any experts or attorneys as
the court deems equitable. These fees and expenses may also
be assessed against a person who has acted arbitrarily,
vexatiously, or not in good faith in bringing the proceeding,
and may be awarded to a party injured by those actions.

(c) The court may award, in its discretion, fees and
expenses to an attorney for the dissenters out of the amount
awarded to the dissenters, if any.

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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers.

The Iowa Business Corporation Act, as amended, provides for
indemnification of directors and officers in a variety of circumstances,
which may include liabilities under the Securities Act of 1933. TDS's By-
laws provide for indemnification of TDS's directors and officers (and
those serving in such capacity with a consolidated subsidiary or other
entity at the request of the Board of Directors of TDS) in the
circumstances, and to the extent, permitted by the Iowa Business
Corporation Act, as amended.

TDS has directors' and officers' liability insurance which provides,
subject to certain policy limits, deductible amounts and exclusions,
coverage for all persons who have been, are or may in the future be,
directors or officers of TDS, against amounts which such persons must pay
resulting from claims against them by reason of their being such directors
or officers during the policy period for certain breaches of duty,
omissions or other acts done or wrongfully attempted or alleged.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has
been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Act and therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Item 21. Exhibits and Financial Statement Schedules

(a) Exhibits

Exhibit
No. Description of Document
-------- -----------------------

2 Agreement and Plan of Merger dated as of December 14, 1993 by and
among TDS, Arvig Acquisition Corporation, Arvig Telcom, Inc., and
certain shareholders of Arvig (included as Annex A to the Proxy
Statement-Prospectus, except for exhibits and schedules which
will be supplied supplementally to the Commission upon request).

4.1(a) Articles of incorporation, as amended.(1)

4.1(b) Articles of Amendment to Articles of Incorporation relating to
designation of Series RR Preferred Shares is hereby incorporated
by reference to Exhibit 4.4(b) to TDS's Annual Report on Form 10-
K for the Year Ended December 31, 1992.

4.2 By-laws, as amended.(1)

4.3 The Indenture and Supplemental Indentures for the Registrant's
Series A, B, C, D, E and F Subordinated Debentures are not being
filed as exhibits because the total authorized subordinated
debentures do not exceed 10% of the total assets of the
Registrant and its
<PAGE>
<PAGE>
Subsidiaries. Registrant agrees to furnish a copy of such
Indentures and Supplemental Indentures if so requested by the
Commission.

4.4 The Indenture between TDS and Harris Trust and Savings Bank,
Trustee, dated February 1, 1991, under which TDS's Medium-Term
Notes are issuable, is hereby incorporated by reference to
Exhibit 4.1 to TDS's Current Report on Form 8-K filed with the
SEC on February 19, 1991.

5 Opinion of Sidley & Austin.

8 Opinion of Sidley & Austin regarding tax consequences.

12 Statements regarding computation of ratios.(2)

23.1 Consent of independent public accountants.

23.2 Consent of independent accountants.

23.3 Consent of Olsen, Thielen & Co., Ltd.

23.4 Consent of Larson, Allen, Weishair & Co.

23.5 Consent of Sidley & Austin (included in Exhibit 5).

23.6 Consent of Piper Jaffray, Inc.

99 Form of Proxy
____________________________
(1) Incorporated herein by reference to TDS's amendment on Form 8,
dated February 5, 1992, to the TDS's Report on Form 8-A dated
November 2, 1981.

(2) Incorporated herein by reference to TDS's Annual Reports on Form
10-K for the Years Ended December 31, 1993, 1992, 1991, 1990 and
1989.

(b) Schedules

Report of Independent Public Accountants on Financial Statement Schedules*

Schedule II Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees Other than Related Parties for
each of the Three Years in the Period Ended December 31,
1993.*

Schedule III Condensed Financial Information of Registrant - Balance
Sheets as of December 31, 1993 and 1992, and Statements
of Income and Statements of Cash Flows for each of the
Three Years in the Period Ended December 31, 1993.*

Schedule V Property, Plant and Equipment for each of the Three Years
in the Period Ended December 31, 1993.*

Schedule VI Reserve for Depreciation for each of the Three Years in
the Period Ended December 31, 1993.*

Schedule VIII Valuation and Qualifying Accounts for each of the Three
Years in the Period Ended December 31, 1993.

II-2
<PAGE>
<PAGE>
Schedule X Supplemental Income Statement Information for each of the
Three Years in the Period Ended December 31, 1993.*

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

_____________________________
*Incorporated herein by reference to TDS's Annual Report on Form 10-K
for the Year Ended December 31, 1993

Item 22. Undertakings

(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

(c) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for by
the other Items of the applicable form.

(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to the immediately preceding paragraph, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act and is
used in connection with the offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement and
will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the bona fide offering
thereof.

(e) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This
includes information contained in documents filed

II-3
<PAGE>
<PAGE>
subsequent to the effective date of the registration statement through the
date of responding to the request.

(f) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.

II-4
<PAGE>
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement or
Amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois on the 26 day of
April, 1994.

TELEPHONE AND DATA SYSTEMS, INC.

By: /s/ LeRoy T. Carlson
_______________________________
LeRoy T. Carlson, Chairman

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement or Amendment has been signed below by
the following persons in the capacities and on the dates indicated.

Signature Title Date

/s/ LeRoy T. Carlson
------------------------------ Chairman and Director April 26, 1994
LeRoy T. Carlson

/s/ LeRoy T. Carlson, Jr.
------------------------------ President and Director April 26, 1994
LeRoy T. Carlson, Jr. chief executive officer)

/s/ Murray L. Swanson
------------------------------ Executive Vice President- April 26, 1994
Murray L. Swanson Finance and Director
(principal financial officer)

/s/ Rudolph E. Hornacek
------------------------------ Director April 26, 1994
Rudolph E. Hornacek

/s/ James Barr III
------------------------------ Director April 26, 1994
James Barr III

/s/ Lester O. Johnson
------------------------------ Director April 26, 1994
Lester O. Johnson

/s/ Donald C. Nebergall
------------------------------ Director April 26, 1994
Donald C. Nebergall

/s/ Herbert S. Wander
------------------------------ Director April 26, 1994
Herbert S. Wander

/s/ Walter C.D. Carlson
------------------------------ Director April 26, 1994
Walter C.D. Carlson

/s/ Donald R. Brown
------------------------------ Director April 26, 1994
Donald R. Brown

/s/ Robert J. Collins
------------------------------ Director April 26, 1994
Robert J. Collins

/s/ Gregory J. Wilkinson
------------------------------ Vice President and
Gregory J. Wilkinson Controller April 26, 1994
(principal accounting officer)

II-5
<PAGE>
<PAGE>
Exhibit
No. Description of Documents
---------- --------------------------------

2 Agreement and Plan of Merger (included as Annex A to
the Proxy Statement-Prospectus)

5 Opinion of Sidley & Austin

8 Opinion of Sidley & Austin regarding tax consequences

23.1 Consent of independent public accountants

23.2 Consent of independent accountants

23.3 Consent of Olsen, Thielen & Co., Ltd.

23.4 Consent of Larson, Allen, Weishair & Co.

23.5 Consent of Sidley & Austin (included in Exhibit 5)

23.6 Consent of Piper Jaffray, Inc.

99 Form of Proxy
<PAGE>

EXHIBIT 5
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
Telephone 312: 853-7000
April 26, 1994

Telephone and Data Systems, Inc.
30 North LaSalle Street
40th Floor
Chicago, Illinois 60602

Re: 1,443,326 Common Shares, $1.00 par value
----------------------------------------

Ladies and Gentlemen:

We are counsel to Telephone and Data Systems, Inc., an Iowa
corporation (the "Company"), and have represented the Company with respect
to the Registration Statement on Form S-4 (the "Registration Statement")
being filed by the Company with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the registration of 1,443,326 Common Shares, $1.00 par value
(the "Shares"), of the Company.

In rendering this opinion, we have examined and relied upon a
copy of the Registration Statement. We have also examined originals, or
copies of originals certified to our satisfaction, of such agreements,
documents, certificates and other statements of governmental officials and
other instruments, and have examined such questions of law and have
satisfied ourselves as to such matters of fact, as we have considered
relevant and necessary as a basis for this opinion. We have assumed the
authenticity of all documents submitted to us as originals, the
genuineness of all signatures, the legal capacity of all natural persons
and the conformity with the original documents of any copies thereof
submitted to us for our examination.

Based on the foregoing, we are of the opinion that:

1. The Company is duly incorporated and validly existing
under the laws of the State of Iowa.
<PAGE>
<PAGE>
2. The Shares will be legally issued, fully paid and non-
assessable when (i) the Registration Statement, as finally amended, shall
have become effective under the Securities Act, (ii) the Shares shall have
been duly issued and sold in the manner contemplated by the Registration
Statement and the resolutions of the Board of Directors authorizing the
issuance and sale of the Shares and (iii) certificates representing the
Shares shall have been duly executed, countersigned and registered and
duly delivered to the purchasers thereof against payment of the agreed
consideration therefor.

We do not find it necessary for the purposes of this opinion
to cover, and accordingly we express no opinion as to, the application of
the securities or blue sky laws of the various states to the sale of the
Shares.

Except as expressly stated in the next sentence, this opinion
is limited to the laws of the State of Illinois and the laws of the United
States of America (excluding the Federal Communications Act, as amended,
and the rules and regulations thereunder) to the extent applicable.
Insofar as the opinions expressed above relate to the laws of the State of
Iowa, we have not made an independent examination of such laws, but have
relied as to such laws upon the opinion of Nyemaster, Goode, McLaughlin,
Voigts, West, Hansell & O'Brien, P.C. of Des Moines, Iowa, which is
attached hereto.

TDS is controlled by a voting trust. Walter C.D. Carlson, a
trustee and beneficiary of the voting trust which controls TDS and a
director of TDS, and Michael G. Hron, the Secretary of TDS, are partners
of this Firm.

We hereby consent to the filing of this opinion as an Exhibit
to the Registration Statement and to all references to our firm included
in or made a part of the Registration Statement.

Very truly yours,
<PAGE>
<PAGE>
NYEMASTER, GOODE, McLAUGHLIN, VOIGTS,
WEST, HANSELL & O'BRIEN

April 19, 1994

Sidley & Austin
One First National Plaza
Chicago, Illinois 60603

Re: Telephone and Data Systems, Inc. Registration of 1,443,326
Common Shares, $1.00 par value

Ladies and Gentlemen:

We have acted as your Iowa counsel with respect to the Registration
Statement on Form S-4 (the "Registration Statement") being filed by
Telephone and Data Systems, Inc. (the "Company") with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the registration of 1,443,326 Common
Shares, $1.00 par value (the "Shares"), of the Company.

We have examined such records, documents and questions of law as we
have considered relevant and necessary as a basis for this opinion. As to
matters of fact material to our opinions, we have with your agreement
relied upon certificates of officers of the Company. We have assumed with
your agreement the authenticity of all documents submitted to us as
originals, the conformity with the original documents of any copies
submitted to us for our examination and the authenticity of the original
of any such copies.

Based on the foregoing, it is our opinion that:

1. The Company is duly incorporated and validly existing under
the laws of the State of Iowa.
<PAGE>
<PAGE>
Sidley & Austin
April 19, 1994
Page 2

2. The Shares will be legally issued, fully paid and non-
assessable when (i) the Registration Statement, as finally amended, shall
have become effective under the Securities Act; (ii) the Company's Board
of Directors shall have duly adopted final resolutions authorizing the
issuance and sale of the Shares and determining the adequacy of the
consideration to be received in exchange for the Shares; (iii) the Shares
shall have been duly issued and sold in the manner contemplated by such
resolutions and the Registration Statement, and (iv) certificates
representing the Shares shall have been duly executed, countersigned and
registered and duly delivered to the purchasers thereof against payment of
the agreed consideration therefor.

We are admitted to the Bar of the State of Iowa, and express no
opinion herein as to the laws of any other jurisdiction, including the
laws of the United States of America.

Except as expressly set forth herein, we express no opinion, and no
opinion is impled or may be inferred, in connection with the Registration
Statement or the issuance of the Shares. Without limiting the generality
of the foregoing, we express no opinion with respect to the securities or
blue sky laws of the various states.

This opinion is being delivered solely for the benefit of the
persons to whom it is addressed; accordingly, it may not be quoted, filed
with any governmental authority or other regulatory agency or otherwise
circulated or utilized for any other purpose without our prior written
consent. Sidley & Austin may refer to or quote from this opinion in its
discretion in connection with opinions it may be requested or required to
give in connection with the Registration Statement.

The undersigned law firm also hereby consents to the filing of this
opinion as an exhibit to the Registration Statement and to the use of its
name in the Registration Statement.

Very truly yours,

NYEMASTER, GOODE, McLAUGHLIN,
VOIGTS, WEST, HANSELL
& O'BRIEN, P.C.

By /s/ Bradford L. Austin
--------------------------
Bradford L. Austin
<PAGE>

EXHIBIT 8
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
Telephone 312 853-7000

[Closing Date]

Telephone and Data Systems, Inc.
30 North LaSalle Street
Suite 4000
Chicago, Illinois 60602

Ladies and Gentlemen:

We have been requested by you render this opinion in
connection with a proposed transaction (the "Merger") in which Arvig
Acquisition Corporation, a Minnesota corporation ("Merging Corp."), a
wholly-owned subsidiary of TDS, will be merged into Arvig Telcom, Inc., a
Minnesota corporation ("Arvig"), with the current holders of the
outstanding shares of Arvig becoming holders of TDS common stock.

TDS, Merging Corp., Arvig and certain holders of Arvig stock
have entered into an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of December 14, 1993, pursuant to which Merging
Corp., a newly organized corporation which is a wholly-owned subsidiary of
TDS, will be merged into Arvig. As a result of the Merger, each share of
Arvig Class A Voting Stock, $1.00 par value, and Arvig Class B Nonvoting
Stock, $1.00 par value, other than such shares held by an Arvig
shareholder who dissents from the merger, will be converted into ____
shares of TDS Common Shares, $1.00 par value, and Arvig will become a
subsidiary of TDS. The proposed transaction and the Merger Agreement are
more fully described in the Registration Statement on Form S-4 (File No.
33-_______) to be filed by TDS with the Securities and Exchange Commission
on ____________, 199_, pursuant to the Securities Act of 1933, as amended
(the "Registration Statement"). Defined terms not otherwise defined
herein have the meanings ascribed to them in the Registration Statement.

We have reviewed the Registration Statement, the Merger
Agreement and such other documents as we have deemed necessary in the
preparation of this opinion. In rendering this opinion we have relied
upon certain representations made by Arvig and TDS,
<PAGE>
<PAGE>
[Closing Date]
Page 2

and we have assumed that (i) the holders, as of December 13, 1993 or as of
the Closing Date of at least 80 percent of the outstanding shares of Arvig
Voting Stock and the holders, as of such date, of at least 80 percent of
the outstanding shares of Arvig Nonvoting Stock will exchange their shares
for TDS Common Shares as contemplated in the Registration Statement, (ii)
prior to the Closing Date, we will receive evidence satisfactory to us
from each non-dissenting Arvig shareholder who, as of the Closing Date,
held at least 3 percent of the outstanding Arvig Shares that they have no
plan or intention to (A) sell, exchange or otherwise dispose of a
significant portion of the TDS Common Shares they are to receive pursuant
to the Merger or (B) enter into any transaction whereby the equity risk
with respect to a significant portion of such stock is effectively
transferred to another party, (iii) the Merger and all other events (other
than the Split-off) occur as contemplated in the Registration Statement,
and (iv) the Split-off does not occur. Based on the foregoing, we are of
the opinion that under the Federal income tax law in effect on the date
hereof:

1) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended;

2) no gain or loss will be recognized by non-dissenting
holders of Arvig Shares as a result of the Merger;

3) no gain or loss will be recognized by non-dissenting
holders of Arvig Shares upon the conversion of Arvig Shares into TDS
Common Shares in the Merger, except with respect to any cash received in
lieu of fractional shares of TDS Common Shares;

4) the aggregate tax basis of the TDS Common Shares
received in the Merger by non-dissenting holders of Arvig Shares will be
the same as the basis of the Arvig Shares converted into such TDS Common
Shares in the Merger, decreased by the amount of cash received in lieu of
fractional shares of TDS Common Shares; and

5) the holding period of the TDS Common Shares received by
a non-dissenting holder of Arvig Shares in the Merger will include the
period that such holder held the Arvig Shares exchanged therefor, provided
such holder held the Arvig Shares as capital assets within the meaning of
Section 1221 of the Code on the Closing Date.

We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. In giving this consent, we do not thereby
admit that we are in the category of persons
<PAGE>
<PAGE>
[Closing Date]
Page 3

whose consent is required under Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission thereunder.

Very truly yours,
<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference in this Form S-4 Registration Statement of
Telephone and Data Systems, Inc. of our report dated February 8, 1994, on
the consolidated financial statements of Telephone and Data Systems, Inc.
and Subsidiaries, incorporated by reference in the Telephone and Data
Systems, Inc. Form 10-K for the year ended December 31, 1993, to the
incorporation by reference in this Form S-4 Registration Statement of our
report dated February 8, 1994, on the financial statement schedules of
Telephone and Data Systems, Inc., included in the Telephone and Data
Systems, Inc. Form 10-K for the year ended December 31, 1993, and to the
incorporation by reference in this Form S-4 Registration Statement of our
compilation report dated February 11, 1994, on the combined financial
statements of the Los Angeles SMSA Limited Partnership, the
Nashville/Clarksville MSA Limited Partnership and the Baton Rouge MSA
Limited Partnership, included in the Telephone and Data Systems, Inc.
Form 10-K for the year ended December 31, 1993. We also consent to all
references to our Firm included in this Form S-4 Registration Statement.

ARTHUR ANDERSEN & CO.
Chicago, Illinois
April 25, 1994
<PAGE>

EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this Registration
Statement of Telephone and Data Systems, Inc. on Form S-4 of our report
which includes explanatory paragraphs relating to contingencies, dated
February 4, 1994, on our audits of the financial statements of the Los
Angeles SMSA Limited Partnership as of December 31, 1993 and 1992 and for
each of the three years in the period ended December 31, 1993, included in
the Telephone and Data Systems, Inc. Annual Report on Form 10-K for the
year ended December 31, 1993; such financial statements were not included
separately in such Form 10-K. We also consent to the reference to our
Firm under the caption "Experts" only to the extent that it relates to our
report on our audits of the Los Angeles SMSA Limited Partnership financial
statements referred to above.

COOPERS & LYBRAND

Newport Beach, California
April 25, 1994

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this Registration
Statement of Telephone and Data Systems, Inc. on Form S-4 of our reports
dated February 11, 1994, February 11, 1993 and February 10, 1992 on our
audits of the financial statements of the Nashville/Clarksville MSA
Limited Partnership as of December 31, 1993, 1992 and 1991, and for the
years ended December 31, 1993, 1992 and 1991, included in the Telephone
and Data Systems, Inc. Annual Report on Form 10-K for the year ended
December 31, 1993; such financial statements were not included separately
in such Form 10-K. We also consent to the reference to our Firm under the
caption "Experts" only to the extent that it relates to our reports on our
audits of the Nashville/Clarksville MSA Limited Partnership financial
statements referred to above.

COOPERS & LYBRAND
Atlanta, Georgia
April 25, 1994

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this Registration
Statement of Telephone and Data Systems, Inc. on Form S-4 of our reports
dated February 11, 1994, February 11, 1993 and February 10, 1992, on our
audits of the financial statements of the Baton Rouge MSA Limited
Partnership as of December 31, 1993, 1992 and 1991 and for the years ended
December 31, 1993, 1992, and 1991, included in the Telephone and Data
Systems, Inc. Annual Report on Form 10-K for the year ended December 31,
1993; such financial statements were not included separately in such Form
10-K. We also consent to the reference to our Firm under the caption
"Experts" only to the extent that it relates to our reports on our audits
of the Baton Rouge MSA Limited Partnership financial statements referred
to above.

COOPERS & LYBRAND
Atlanta, Georgia
April 25, 1994
<PAGE>

EXHIBIT 23.3

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the inclusion in the Proxy Statement of Arvig
Telcom, Inc. and Prospectus of Telephone and Data Systems, Inc. included
in this Form S-4 Registration Statement of Telephone and Data Systems,
Inc. of our report dated February 25, 1994, on our audits which included
reliance on opinions by another auditor, of the financial statements of
Arvig Telcom, Inc. as of December 31, 1993 and 1992 and for the years
ended December 31, 1993, 1992 and 1991. We also consent to all references
to our Firm included in this Form S-4 Registration Statement.

OLSEN, THIELEN & CO., LTD.

St. Paul, Minnesota
April 25, 1994
<PAGE>

EXHIBIT 23.4

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the inclusion in the Proxy Statement of Arvig
Telcom, Inc. and Prospectus of Telephone and Data Systems, Inc. included
in this Form S-4 Registration Statement of Telephone and Data Systems,
Inc. of our reports dated February 18, 1994, on our audits of the
financial statements of U.S. Link, Inc. and Subsidiary and Velstar Systems,
Inc. and our report dated February 16, 1994, on our audit of the financial
statements of Interlake Cablevision, Inc. (all wholly-owned subsidiaries of
Arvig Telcom, Inc.) as of December 31, 1993 and 1992 and for the years
ended December 31, 1993, 1992 and 1991. We also consent to all references
to our Firm included in this Form S-4 Registration Statement.

LARSON, ALLEN, WEISHAIR & CO.

St. Cloud, Minnesota
April 25, 1994
<PAGE>

EXHIBIT 23.6

CONSENT OF PIPER JAFFRAY, INC.

We hereby consent to the use of our name in the Proxy
Statement of Arvig forming part of the Registration Statement on Form S-4
of Telephone and Data Systems, Inc. and to the inclusion of our opinion as
Annex B to such Proxy Statement.

In giving the foregoing consent we do not admit that we are
within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules or regulations of
the Securities and Exchange Commission thereunder.

PIPER JAFFRAY, INC.

Minneapolis, Minnesota
April 20, 1994
<PAGE>

EXHIBIT 99

PROXY

ARVIG TELCOM, INC.
Main & 2nd Street
P.O. Box 395
Pequot Lakes, Minnesota 56472

This Proxy is Solicited on Behalf of the Board of Directors.

PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE.

The undersigned hereby appoints Tom Farm and Steve Johnson, or either of
them, as Proxies, each with the power to appoint his or her substitute,
and hereby authorizes them or either of them to represent and to vote all
the shares of Class A Voting Common Stock, par value $1.00 per share, of
Arvig Telcom, Inc. held of record by the undersigned on April 22, 1994, at
the special meeting of shareholders to be held on June 4, 1994, and any
adjournment or adjournments thereof, as described below on the following
proposals and also, as such proxies may in their discretion determine,
upon all other matters of business as may properly come before such
special meeting and any adjournment or adjournments thereof.

PROPOSAL 1. The approval of (i) the Agreement and Plan of Merger
dated as of December 14, 1993 by and among Telephone and Data Systems,
Inc., Arvig Acquisition Corporation ("Sub"), Arvig Telcom, Inc. ("Arvig"),
and certain shareholders of Arvig, providing for the merger of Sub with
and into Arvig, and (ii) the consummation of the transactions contemplated
thereby, as set forth in the accompanying Proxy Statement-Prospectus.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

PROPOSAL 2. The approval of the issuance of (i) 389 shares of Class B
Nonvoting Common Stock, par value $1.00, of Arvig ("Arvig Nonvoting
Shares") to certain Shareholders of Arvig who were the holders of Arvig
Nonvoting Stock previously redeemed by Arvig and (ii) 651 Shares of Arvig
Nonvoting Stock to Gilroy Arvig as additional compensation in recognition
of the valuable service that he has rendered to Arvig for more than forty
years.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

PROPOSAL 3. The transaction of such other business as may properly
come before the special meeting of shareholders and any adjournment or
adjournments thereof.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned. If no direction is made, this proxy will be
voted FOR each of the foregoing proposals.

Please sign exactly as your name appears on your Arvig stock certificate.
When signing as attorney, as executor, administrator, trustee or guardian,
please give full title as such.

Date:____________________, 1994 ________________________________________
Signature of:
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