<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TELEPHONE AND DATA SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
TELEPHONE AND DATA SYSTEMS, INC.
--------------------------------
Value Creation and
Performance
May 1997
<PAGE>
TDS GOALS
- ---------
X Focus on Fast Growing Local
Telecommunications Markets in the United
States
X Extend from Wireline into Wireless
Technologies
X Rapidly Grow Customers, Revenues, Cash
Flow and Earnings
X Deliver Excellent Quality and Value Services
X Grow Intrinsic Value 15+% Per Year over Long
Term
X Maintain Financial Strength and Flexibility
2
<PAGE>
POSITIONED IN FAST GROWING TELECOM MARKETS
- ------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
A = Local
B = Long-Distance
C = Wireless
1985 1995 2005
PROJECTED
A = $54 A = $85 A = $140
B = $57 B = $80 B = $120
C = $ 2 C = $25 C = $ 90
$110 Billion $190 Billion $350 Billion
X Over 50% of new access lines are wireless
Source: Industry Data
3
<PAGE>
WIRELESS GROWTH (PERCENT PENETRATION)
- -------------------------------------
CELLULAR HAS EXPERIENCED DRAMATIC GROWTH SINCE 1986. PCS IS EXPECTED TO
PROVIDE 60% OF WIRELESS ADDITIONS BY 2006.
EDGAR REPRESENTATION OF DATA POINTS
USED IN PRINTED GRAPHIC
- -----------------------------------
Cellular PCS
- -----------------------------------
1986 0% -
- -----------------------------------
1987 0% -
- -----------------------------------
1988 1% -
- -----------------------------------
1989 1% -
- -----------------------------------
1990 2% -
- -----------------------------------
1991 3% -
- -----------------------------------
1992 4% -
- -----------------------------------
1993 6% -
- -----------------------------------
1994 9% -
- -----------------------------------
1995 13% -
- -----------------------------------
1996 16% 0%
- -----------------------------------
1997E 19% 1%
- -----------------------------------
1998E 22% 3%
- -----------------------------------
1999E 24% 4%
- -----------------------------------
2000E 25% 6%
- -----------------------------------
2001E 27% 8%
- -----------------------------------
2002E 28% 10%
- -----------------------------------
2003E 30% 11%
- -----------------------------------
2004E 31% 13%
- -----------------------------------
2005E 32% 15%
- -----------------------------------
2006E 33% 17%
- -----------------------------------
Source: DLJ
4
<PAGE>
TDS REVENUE MIX
- ---------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
A = Wireline
B = Cellular
C = Paging
D = PCS
1986 1996 2001
PROJECTED
A = 83% A = 33% A = 22%
B = 5% B = 58% B = 55%
C = 12% C = 9% C = 6%
D = 17%
$155 Million $1.2 Billion
5
<PAGE>
THE "VALUE GAP"--STRATEGIES AND TACTICS
- ---------------------------------------
INVESTOR CONCERN TDS STRATEGIES AND TACTICS
Empire building: X TDS has increased value creation potential by
management wants to growing its wireless pops per 1,000 Shares at a
grow company size using CAGR of 11.9%
Common Shares to
acquire assets, diluting
shareholders.
6
<PAGE>
TDS--POPS/ACCESS LINES/PAGERS PER 1,000 SHARES
- ----------------------------------------------
December 31,
1989 1996 CAGR
---- ---- ----
Cellular Pops 323 335 0.5%
PCS Pops 0 374
--------------------
Total Wireless 323 709 11.9%
--------------------
--------------------
Wireline Access Lines 9 8 -1.7%
--------------------
--------------------
Pagers 5 10 10.4%
--------------------
--------------------
7
<PAGE>
THE "VALUE GAP"--STRATEGIES AND TACTICS
INVESTOR CONCERN TDS STRATEGIES AND TACTICS
Capital structure: TDS's complex TDS capital structure facilitates and
capital structure imposes encourages a strong balance sheet and
liquidity and other limitations. financial flexibility
X Net long-term assets per share have
grown at a CAGR of 20.2% since 1989.
X TDS's operating cash flow per share
has grown at a CAGR of 14.5% since
1991 and is projected to grow at a
CAGR of 20.3% from 1994 to 1997.
8
<PAGE>
TDS BALANCE SHEET DATA
- ----------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
DECEMBER 31,
1989 1996 CAGR
---- ---- ----
Investments $221,988 $1,942,604 36.3%
Fixed Assets, net 415,354 1,828,889 23.6%
----------------------------------
Total Long-term Assets 637,342 3,771,493 28.9%
Less: Long-Term Debt 269,762 1,018,851 20.9%
----------------------------------
Net Long-term Assets $367,580 $2,752,642 33.3%
----------------------------------
----------------------------------
Common and Series A
Shares Outstanding 29,566 61,154 10.9%
Net Long-term Assets
Per Share $ 12.43 $ 45.01 20.2%
9
<PAGE>
TDS CASH FLOW
- -------------
(EXCLUDES AERIAL COMMUNICATIONS START-UP COSTS. DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS.)
YEAR ENDED DEC. 31,
1991 1996 CAGR
---- ---- ----
Operating Cash Flow*
US Cellular $ 2,438 $196,205 140.5%
TDS Telecom 108,667 192,325 12.1%
American Paging 1,297 (2,849)
---------------------------
$112,402 $385,681 28.0%
---------------------------
---------------------------
Common and Series A
Shares Outstanding 34,964 61,154 11.8%
Operating Cash Flow
per share $ 3.21 $ 6.31 14.5%
*Operating Income plus Depreciation and Amortization
10
<PAGE>
TDS CASH FLOW
- -------------
(EXCLUDES AERIAL COMMUNICATIONS START-UP COSTS. DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS.)
YEAR ENDED DEC. 31,
1994 1997E CAGR
---- ---- ----
Operating Cash Flow*
US Cellular $ 82,839 $300,000 53.6%
TDS Telecom 160,484 200,000 7.6%
American Paging 17,009 4,000 -38.3%
---------------------------
$260,332 $504,000 24.6%
---------------------------
---------------------------
Common and Series A
Shares Outstanding 54,825 61,000 3.6%
Operating Cash Flow
per share $ 4.75 $ 8.26 20.3%
*Operating Income plus Depreciation and Amortization
11
<PAGE>
THE "VALUE GAP"--STRATEGIES AND TACTICS
---------------------------------------
INVESTOR CONCERN TDS STRATEGIES AND TACTICS
Conservative financing: TDS' conservative approach to financing:
there is no benefit to X Protects against recent financial
maintaining a strong risks in the wireless industry.
balance sheet. X Preserves financial flexibility.
X Enables TDS to maintain an investment
grade debt rating.
12
<PAGE>
RECENT EVENTS IN THE WIRELESS INDUSTRY
--------------------------------------
X Pocket Communications Files Chapter 11
X Nextwave Requests Financial Relief from FCC
13
<PAGE>
FINANCING STRATEGY
- ------------------
X Preserve Appropriate Financial Flexibility
X Maintain Investment Grade Rating
X Keep Business Units' Financing Separate
X Retain Income Tax Consolidation
X Enhance Stock Price
- Grow intrinsic value 15+% per share per year
- Avoid actions damaging to stock price
14
<PAGE>
THE "VALUE GAP"--STRATEGIES AND TACTICS
---------------------------------------
INVESTOR CONCERN TDS STRATEGIES AND TACTICS
Management is not concerned Recent TDS Actions:
about stock price: shareholder X Numerous meetings with major shareholders.
concerns have not been X Added another independent director to
addressed. board of directors.
X Initiated Share Repurchase Program
-> Purchased nearly 800,000 TDS Shares
in Q1'97
-> Purchased 350,000 USM Shares in Q1'97
X Engaged in Continuing Evaluation of TDS
Corporate Structure
X Changed Management Team at American Paging
X Completed $935 Million in Aerial Financing
X Reported Record Q1'97 Results
15
<PAGE>
Cellular Providers
January 2, 1996 - April 18, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
- -------------------------------------------------------------------------------
DOLLARS
- -------------------------------------------------------------------------------
DATE ATI PWIR VCELA USM S&P TDS
- -------------------------------------------------------------------------------
1/2/96 100.000 100.000 100.000 100.000 100.000 100.000
- -------------------------------------------------------------------------------
2/8/96 113.656 80.233 101.220 106.296 105.693 111.635
- -------------------------------------------------------------------------------
3/19/96 115.859 90.698 98.780 102.963 104.988 117.296
- -------------------------------------------------------------------------------
4/26/96 112.335 96.221 107.927 103.333 105.273 118.239
- -------------------------------------------------------------------------------
6/5/96 110.132 103.198 117.378 94.444 109.297 112.264
- -------------------------------------------------------------------------------
7/15/96 92.952 86.047 110.366 85.556 101.461 106.289
- -------------------------------------------------------------------------------
8/21/96 99.119 90.116 96.341 91.852 107.143 104.403
- -------------------------------------------------------------------------------
9/30/96 97.357 92.267 94.512 89.630 110.729 101.258
- -------------------------------------------------------------------------------
11/6/96 93.392 71.512 80.488 88.148 116.732 93.082
- -------------------------------------------------------------------------------
12/16/96 90.749 75.581 84.146 82.593 116.150 31.509
- -------------------------------------------------------------------------------
1/24/97 83.260 44.767 71.341 78.889 124.131 89.308
- -------------------------------------------------------------------------------
3/5/97 95.154 66.279 68.902 78.519 129.201 101.887
- -------------------------------------------------------------------------------
4/17/97 82.819 59.884 50.915 72.593 122.722 94.654
- -------------------------------------------------------------------------------
-16-
<PAGE>
PCS Providers
July 1, 1996 - April 18, 1997
EDGAR Representation of Data Points Used in Printed Graphic
- ------------------------------------------------------------------------------
DOLLARS
- ------------------------------------------------------------------------------
DATE AERL ICEL OMPT WWCA S&P TDS
- ------------------------------------------------------------------------------
7/1/96 100.00 100.00 100.00 100.00 100.00 100.00
- ------------------------------------------------------------------------------
8/6/96 88.04 79.75 112.15 84.39 98.00 88.46
- ------------------------------------------------------------------------------
9/11/96 83.70 79.14 93.93 76.59 98.73 91.76
- ------------------------------------------------------------------------------
10/16/96 77.17 88.96 129.91 83.24 104.22 84.62
- ------------------------------------------------------------------------------
11/20/96 59.78 77.30 99.07 67.05 110.07 81.69
- ------------------------------------------------------------------------------
12/27/96 68.48 60.74 75.23 62.43 111.97 80.22
- ------------------------------------------------------------------------------
2/3/97 59.78 61.35 85.05 67.05 116.40 83.24
- ------------------------------------------------------------------------------
3/11/97 50.00 56.44 57.94 58.96 120.04 88.19
- ------------------------------------------------------------------------------
4/17/97 46.74 55.21 27.34 54.34 112.71 82.69
- ------------------------------------------------------------------------------
-17-
<PAGE>
STRENGTHENING TDS BOARD OF DIRECTORS
------------------------------------
X Management's Criteria
- CEO or COO of a public company or major subsidiary
- Substantial marketing experience
- Good experience in consumer products
X Spencer Stuart Search Found George Off
- Co-Founded Catalina Marketing in 1983
- Five years as Catalina President, last 3 as CEO
- 30 years experience in marketing: consumer products, retail marketing
technology and data base marketing
- Completely independent director
- Joined TDS Board in January 1997
- Already a significant contributor to TDS Board.
# Member of Audit Committee
# Member of Stock Option Compensation Committee 18
<PAGE>
TDS GOALS
- ---------
X Focus on Fast Growing Local Telecommunications Markets in the United States
X Extend from Wireline into Wireless Technologies
X Rapidly Grow Customers, Revenues, Cash Flow and Earnings
X Deliver Excellent Quality and Value Services
X Grow Intrinsic Value 15+% Per Year over Long Term
X Maintain Financial Strength and Flexibility
19
<PAGE>
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE
HARBOR CAUTIONARY STATEMENT
-----------------------------
This presentation contains "forward-looking" statements, as defined in the
Private Securities Litigation Reform Act of 1995, that are based on current
expectations, estimates and projections. Statements that are not historical
facts, including statements about the Company's beliefs and expectations are
forward-looking statements. These statements contain potential risks and
uncertainties and, therefore, actual results may differ materially. TDS
undertakes no obligation to publicly update any forward-looking statements
whether as a result of new information, future events or otherwise.
Important factors that may affect these projections or expectations include,
but are not limited to: changes in the overall economy; changes in
competition in markets in which TDS operates; advances in telecommunications
technology; changes in the telecommunications regulatory environment; pending
and future litigation; availability of future financing; start-up of PCS
operations; and unanticipated changes in growth in cellular customers,
penetration rates, churn rates and the mix of products and services offered
in our markets. Readers should evaluate any statements in light of these
important factors.
20
