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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 19971998

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

COMMISSION FILE NUMBER 1-9712

- --------------------------------------------------------------------------------
UNITED STATES CELLULAR CORPORATION
(Exact name of Registrant as specified in its charter)
- --------------------------------------------------------------------------------

DELAWARE 62-1147325
- -------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)

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

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

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

Name of each exchange on
Title of each class which registered
- ----------------------------- -----------------------------
Common Shares, $1 par value American Stock Exchange
Liquid Yield Option American Stock Exchange
Notes Due 2015

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

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

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

As of February 27, 1998,26, 1999, the aggregate market value of registrant's Common
Shares held by nonaffiliates was approximately $487.6$688.1 million (based upon the
closing price of the Common Shares on February 27, 1998,26, 1999, of $30.13,$42.13, as reported
by the American Stock Exchange).

The number of shares outstanding of each of the registrant's classes of
common stock, as of February 27, 1998,26, 1999, is 54,232,30554,420,664 Common Shares, $1 par
value, and 33,005,877 Series A Common Shares, $1 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Those sections or portions of the registrant's 19971998 Annual Report to
Shareholders and of the registrant's Notice of Annual Meeting of Shareholders
and Proxy Statement for its Annual Meeting of Shareholders to be held May 13,
1998,11,
1999, described in the cross reference sheet and table of contents attached
hereto are incorporated by reference into Parts II and III of this report.

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

CROSS REFERENCE SHEET
AND
TABLE OF CONTENTS

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

PAGE NUMBER
OR REFERENCE(1)
---------------

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

- ---------

(1) Parenthetical references are to information incorporated by reference from
Exhibit 13, which includes portions of the registrant's Annual Report to
Shareholders for the year ended December 31, 19971998 ("Annual Report") and from
the registrant's Notice of Annual Meeting of Shareholders and Proxy
Statement for its Annual Meeting of Shareholders to be held on May 13, 199811, 1999
(the "Proxy Statement").

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

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

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

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

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

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

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

(9) Proxy Statement section entitled "Certain Relationships and Related
Transactions."

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

UNITED STATES CELLULAR CORPORATION

8410 WEST BRYN MAWR - CHICAGO, ILLINOIS 60631
TELEPHONE (773) 399-8900

- --------------------------------------------------------------------------------
PART I
- --------------------------------------------------------------------------------

ITEM 1. BUSINESS

THE COMPANY

United States Cellular Corporation (the "Company") provides cellular
telephone service to 1,710,0002,183,000 customers through 134138 majority-owned and managed
("consolidated") cellular systems serving approximately 16%17% of the geography and
approximately 9% of the population of the United States. Since 1985, when the
Company began providing cellular service in Knoxville, Tennessee, the Company
has expanded its cellular networks and customer service operations to cover 143145
markets in 26 states as of December 31, 1997.1998. In total, the Company now operates
eight market clusters, of which four have a total population of more than two
million, and each of which has a total population of more than one million.
Overall, 86%90% of the Company's 26.2 million population equivalents are in markets
which are consolidated, 2% are in managed but not consolidated markets and 12%8%
are in markets in which the Company holds an investment interest.

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

3
The following table summarizes the status of the Company's interests in
cellular markets at December 31, 1997.1998.

Owns Majority Interest and Manages.................................... 134138
Owns Minority Interest and Manages.................................... 97
---
Total Markets Managed by the Company.................................. 143145
Markets Managed by Others (1)......................................... 4938
---
Total Markets......................................................... 192183
---
---

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

(1) Represents markets in which the Company owns a minority or other
noncontrolling interest and which are managed by third parties; as of
December 31, 1997,1998, the Company accounted for its interests in 4231 of these
markets using the equity method and accounted for the remaining seven
markets using the cost method.

3
Cellular systems in the Company's 134138 majority-owned and managed markets
served 1,710,0002,183,000 customers at December 31, 1997,1998, and contained 1,7482,065 cell sites.
The average penetration rate in the Company's consolidated markets was 7.11%8.84% at
December 31, 1997,1998, and the churn rate in all consolidated markets averaged 1.9%
per month for the twelve months ended December 31, 1997.1998.

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

Unless the context indicates otherwise: (i) references to the "Company"
refer to United States Cellular Corporation and its subsidiaries; (ii)
references to "TDS" refer to Telephone and Data Systems, Inc. and its
subsidiaries; (iii) references to "MSA" or to a particular city refer to the
Metropolitan Statistical Area, as designated by the U.S. Office of Management
and Budget and used by the Federal Communications Commission ("FCC") in
designating metropolitan cellular market areas; (iv) references to "RSA" refer
to the Rural Service Area, as used by the FCC in designating non-MSA cellular
market areas; (v) references to cellular "markets" or "systems" refer to MSAs,
RSAs or both; (vi) references to "population equivalents" mean the population of
a market, based on 19971998 Claritas estimates, multiplied by the percentage
interests that the Company owns or has the right to acquire in an entity
licensed, designated to receive a license or expected to receive a construction
permit ("licensee") from the FCC to construct or operate a cellular system in
such market.

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR CAUTIONARY
STATEMENT

This Annual Report on Form 10-K, including exhibits, contains
"forward-looking" statements, as defined in the Private Securities Litigation
Reform Act of 1995, that are based on current expectations, estimates and
projections. Statements that are not historical facts, including statements
about the Company's beliefs and expectations, are forward-looking statements.
These statements contain potential risks and uncertainties; therefore, actual
results may differ materially. The Company undertakes no obligation to update
publicly any forward-looking statements whether as a result of new information,
future events or otherwise.

Important factors that may affect these projections or expectations include,
but are not limited to: changes in the overall economy; changes in competition
in markets in which the Company operates; advances in telecommunications
technology; changes in the telecommunications regulatory environment; pending
and future litigation; availability of future financing; continued start-up of
Personal Communications Services ("PCS" or "broadband PCS") operations; andoperations in the
Company's service areas; unanticipated changes in growth in cellular customers,
penetration rates, churn rates and the mix of products and services offered in
the Company's markets.markets; and unanticipated problems with the Year 2000 Issue.
Readers should evaluate any statements in light of these important factors.

PROPOSED4

TDS CORPORATE RESTRUCTURING

InTRACKING STOCK PROPOSAL

On December 1997, the Company received a proposal from18, 1998, TDS announced that it had withdrawn its offer to
acquire all of the issued and outstanding Common Shares of the Company not already owned by TDS
(the "Merger"). The offer was made in connection with, and is subject to TDS
shareholder approval of and the effectiveness of, TDS's proposed corporate
restructuring. The Board of Directors of TDS (the "TDS Board") has adopted a
proposal which, if approved by TDS shareholders and implemented by the TDS
Board, would authorize the TDS Board to issue three new classes of common stock
and change the state of incorporation of TDS from Iowa to Delaware (the
"Tracking Stock Proposal"). The three new classes of stock are intended to
separately reflect the performance of TDS's cellular telephone, landline
telephone and personal communications services businesses ("Tracking Stocks").

Under the Tracking Stock Proposal, one of the three new classes of common
stock created by TDS would be designated as United States Cellular Group Common
Shares (the "Cellular Group Shares"). The Cellular Group Shares, when issued,
are intended to reflect the separate performance of the United States Cellular
Group (the "Cellular Group"), which consists of TDS's interest in United States
Cellular Corporation.

Subject to the approval of the Tracking Stock Proposal by shareholders, TDS
intends to, among other things, issue Cellular Group Shares in exchange for all
of the Common Shares of the Company which areTDS did not currently owned byown,
pursuant to a merger, in exchange for a TDS subject to approval bytracking stock which follows the
Company's Boardperformance of Directors and shareholders.

In Januarythe Company. Earlier in 1998, the Company's Board of Directors
createdhad appointed Mr. Paul-Henri Denuit, an independent Director of the Company, to
a special committee of the Board (the "Special Committee") to review the proposal from
TDS. The Special Committee, consisting of one independent director of the Company, has engaged a financial advisor and legal advisor to assist in
reviewing the proposal. The Special Committee will consider how the Company
should respond to the TDS proposal, take the steps it deems appropriate to
respond to the TDS proposal and, at such time as it considers it appropriate,
report its recommendations to the Company's Board of Directors.

SubsequentDirectors to
shareholder approval ofconsider this offer. Because the Tracking Stock Proposal, TDS
intendsoffer to terminate certain intercompany agreements between TDS and the
Company. Thereafter, some or all of the policies between TDS and the Company
would be determined solely by methods that management believes to be reasonable.
Many of such policies would continue the arrangements which presently exist
between TDS and the Company pursuant to the intercompany agreements, but TDS
would have no contractual obligation to continue such policies after the
intercompany agreements have been terminated. The TDS Board currently intends to
retain future earnings, if any, for the development of the business of the
Cellular Group and does not anticipate paying dividends on the Cellular Group
Shares in the foreseeable future.

On December 29, 1997, an individual who claims to be a holder ofacquire the Company's Common Shares
filed a putative class action complaint on behalf of
common stockholders ofwas withdrawn, the Company in the Court of Chancery of the State of
Delaware in New Castle County. The complaint names as defendants TDS, the
Company and the directors of the Company. The complaint alleges a breach of
fiduciary duties by the defendants and seeks to have the Merger enjoined or, if
it is consummated, to have it rescinded and to recover unspecified damages, fees
and expenses. A virtually identical complaint has been filed by a second
individual. None of the defendants have been served with this complaint. The
Company intends to vigorously defend against these lawsuits.Special Committee was dissolved.

CELLULAR TELEPHONE OPERATIONS

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

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

The FCC currently grants only two licenses to provide cellular telephone
service in each market. However, competition for customers includes competing
communications technologies such as conventional landline and mobile telephone,
Specialized Mobile Radio ("SMR") systems, radio paging and radio paging.PCS. PCS has become
available in many areas of the United States, including the Company's markets,
and the Company expects PCS operators to complete initialcontinue deployment of PCS in portions
of all of the Company's clusters by the end of 1998.through 1999. Additionally,
emerging technologies such
as Enhanced

5
Specialized Mobile Radio ("ESMR") and mobile satellite communication
systems may prove to be competitive with cellular service in the future in some
or all of the Company's markets.

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

There arehave been a number of recent technical developments in the cellular industry.industry
since its inception. Currently, while most of thecompanies' MTSOs process information
digitally, on certain cellular systems the radio transmission is done on an
analog basis. During 1992, a new transmission technique was approved for
implementation by the cellular industry. Time Division Multiple Access ("TDMA")
technology was selected as one industry standard by the cellular industry and
has been deployed in several markets, including the Company's operations in
portions of several clusters. Another digital technology, Code Division Multiple
Access ("CDMA"), is also being deployed by the Company in portions of certainseveral
clusters. Digital radio technology offers several advantages, including greater
privacy, less transmission noise, greater system capacity and potentially lower

5
incremental costs forto accomodate additional customers.system usage. The conversion from
analog to digital radio technology is continuing on an industry-wide basis;
however, this process is expected to take a number of years. PCS operators have
deployed systems based on
versions of TDMA, and CDMA technology and a third digital technology, Global SystemsSystem for Mobile
CommunicationsCommunication ("GSM"), in the markets where they have begun operations.

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

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

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

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

Missouri, Eastern North Carolina/South Carolina, West
Virginia/Maryland/Pennsylvania/Ohio, Virginia,Virginia/North Carolina,
Washington/Oregon/Idaho, Oregon/California, Maine/New Hampshire/Vermont,
Florida/Georgia, Oklahoma/Missouri/Kansas, Texas/Oklahoma, Eastern
Tennessee/Western North Carolina and SouthwesternSouthern Texas. See "The Company's Cellular
Interests." The Company has acquired its cellular interests through the wireline
application process (17%(16%), including settlements and exchanges with other
applicants, and through acquisitions (83%(84%), including acquisitions from TDS and
third parties.

CELLULAR SYSTEMS DEVELOPMENT

ACQUISITIONS. DuringACQUISITIONS, DIVESTITURES AND EXCHANGES. The Company assesses its cellular
holdings on an ongoing basis in order to maximize the last five years,benefits derived from
clustering its markets. As the Company's clusters have grown, its focus has
shifted toward exchanges and divestitures of managed and investment interests,
with outright acquisitions becoming a decreasing portion of the Company's
overall acquisition strategy. As a result, the Company has expandednot substantially
increased its size, particularly in contiguous or adjacent markets, through acquisitions which
have been aimed at strengtheningpopulation equivalents during the past five years, but has shifted
the balance of its holdings between investment and operating interests so that
currently over 90% of the Company's positioninterests are in markets where it is the
cellular
industry.operator. This growthshift has resulted primarily frombecause of the Company's

recent focus on exchanges and divestitures of investment interests and the
acquisitions of interests in mid-sized and rural markets and has been based on obtaining interests with
rights to managewhere it will become the underlying market.

Including acquisitions of cellular interests from TDS, theoperator.

The Company has only increased its population equivalents by 17%,5% in the last
five years, from approximately 22.524.8 million at December 31, 1992,1993, to
approximately 26.226.1 million at December 31, 1997. Markets
managed by1998. However, during that period the
Company havehas increased from 116the percentage of those population equivalents which are
in markets at December 31, 1992 to
143 markets at December 31, 1997.the Company operates. As of December 31, 1997, 88%1998, 92% of the Company's
population equivalents represented interests in markets the Company managesoperates
compared to 75%81% at December 31, 1992.1993. Also, the number of markets operated by
the Company have increased to 145 markets at December 31, 1998 from 136 markets
at December 31, 1993.

Recently, the pace of acquisitions, exchanges and divestitures has slowed as
industry-wide consolidation has reduced the number of markets available for
acquisition. The Company's
population equivalents grew at a compound annual rate of just 3% over the last
five years due to the increased number of exchange and divestiture transactions
in the past few years. The Company may continue to make opportunistic acquisitions or
exchanges in markets that further strengthen its market clusters and in other
attractive markets. The Company also seeks to acquire minority interests in
markets where it already owns the majority interest.interest and/or operates the market.
There can be no assurance that the Company, or TDS for the benefit of the
Company, will be able to negotiate additional acquisitions or exchanges on terms
acceptable to it or that regulatory approvals, where required, will be received.
The Company plans to retain minority interests in certain cellular markets which
it believes will earn a favorable return on investment. Other minority interests
may be exchanged for interests in markets which enhance the Company's market
clusters or may be sold for cash or other consideration. The Company also
continues to evaluate the disposition of certain managed interests which are not
essential to its corporate development strategy.

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

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

COMPLETED ACQUISITIONS. During 1997,1998, the Company, or TDS for the benefit of
the Company, purchased majority interests in twosix markets and several additional
minority interests, representing approximately 534,0001.3 million population
equivalents. The total consideration paid for these purchases, primarily in the
form of cash (including cash borrowed under the Revolving Credit Agreement with TDS)

7
and the Company'sUSM Common Shares issued to TDS to reimburse TDS for the value
of TDS Common Shares issued to third parties, totaled $81.4$168.3 million.

COMPLETED DIVESTITURES AND EXCHANGES.DIVESTITURES. During 1997,1998, the Company sold a majority interest
in one market and several minority interests, in two other markets,
representing approximately 358,0001.1
million population equivalents, for an aggregate
consideration of $54.5 million in cash and receivables. The two minority
interests involved interests the Company had previously acquired from TDS
pursuant to an agreement between the two companies signed in June 1996.

Also during 1997, the Company completed an exchange with BellSouth
Corporation ("BellSouth"). Pursuant to theequivalents. In exchange, the Company received majority interests representing approximately
4.04.1 million population equivalents
in exchange for majority interests representing approximately 2.0 million
population equivalents, minority interests representing approximately 1.2
million population equivalents and a net amountshares of $86.7 million in cash. The
majority interests the Company received are in 12 markets adjacent to its
Iowa/Missouri and Wisconsin/Illinois/Indiana clusters.

PENDING ACQUISITIONS. At December 31, 1997, the Company had entered into
agreements with third parties to acquire a majority interest in one market and a
minority interest in a market in which the Company owns a majority interest,
representing approximately 410,000 population equivalents, for $51.3 million in
cash. If the majority interest is acquired as expected, the Company will
subsequently sell that interest to BellSouth for cash.

PENDING DIVESTITURES. At December 31, 1997, the Company had entered into
agreements with AirTouch Communications, Inc. ("AirTouch") to divest minority
interests in nine markets, representing 759,000 population equivalents. In
exchange, the agreements provided that the Company will receive approximately
4.0 million shares of AirTouch stock and cash
totaling $54.2$148.4 million. In
addition,Approximately $28.7 million of the Company will receive approximately $27.0 million intotal cash from TDSreceived
was pursuant to a contract right termination agreement entered into between the
Company and TDS. This agreement iswas related to two interests which are to bewere sold
directly by TDS to AirTouch and which were to be acquired by the Company as part
of thea June 1996 agreement between the Company and TDS. The contract right
termination agreement will enableenabled the Company to receive cash equal to the value of
the gain the Company would have realized had it purchased the interestsinterest from TDS
and sold them to AirTouch under terms similar to those in the agreement between
TDS and AirTouch.

Additionally,PENDING ACQUISITIONS AND DIVESTITURE. As of December 31, 1998, the Company
has entered into an agreementhad agreements pending to sell itsacquire minority interests in two other markets in which it
currently owns majority interests, representing approximately 176,00074,000 population equivalents,
for $37.6$8.1 million in cash. Also at December 31, 1998, the Company had an
agreement pending to divest a majority interest in one market, representing
264,000 population equivalents, for $35.2 million in cash. The Company will not
record a gain or loss on the sale transaction. The Company expects theseall of the
pending transactions to be completed duringin the first half of 1998. The Company
anticipates that it will record significant book gains on these divestitures
when the transactions are completed.1999.

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

The Company is a majority-owned subsidiary of TDS. TDS owns 81.1%81.0% of the
combined total of the outstanding Common Shares and Series A Common Shares of
the Company and controls 95.6%95.7% of the combined voting power of both classes of
common stock.

The Company benefits from the extensive telecommunications
industry experience of TDS, which also operates a telephone business and is
developing its PCS business.7

CELLULAR INTERESTS AND CLUSTERS

The Company operates clusters of adjacent cellular systems in nearly all of
its markets, enabling its customers to benefit from larger service areas than
otherwise possible. Where the Company offers wide-area coverage, its customers
enjoy uninterrupted service within the designated area. Customers may also make
outgoing calls and receive incoming calls within this area without special
roaming arrangements. In addition to benefits to customers, clustering also has
provided to the Company certain economies in its capital and operating costs.
These economies are made possible through increased sharing of facilities,
personnel and other costs and have resulted in a reduction of the Company's per
customer cost of service. The extent to which the Company benefits from these
revenue enhancements 8
and economies of operation is dependent on market
conditions, population size of each cluster and engineering considerations.

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

The Company owned interests in cellular telephone systems in 192183 markets at
December 31, 1997,1998, representing 26.226.4 million population equivalents. Including
the effect of the 11 minority interests to be purchased and the majority interest to be sold
during 1998,1999, the Company owned or had the right to acquire 181182 markets,
representing 25.326.2 million pops,population equivalents, at December 31, 1997.1998. The
following table summarizes the growth in the Company's population equivalents in
recent years and the development status of these population equivalents.

DECEMBER 31,
-----------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(THOUSANDS OF POPULATION EQUIVALENTS)(1)

Operational Markets:
Majority-Owned and Managed........................................... 22,778 20,389 20,104 18,829 19,08623,661 22,929 20,539 20,230 18,812
Minority-Owned and Managed (2)....................................... 354 401 401 514 1,234 1,263512 1,213
Majority-Owned Markets to be Managed, Net of Markets to be Divested:
(2)(3)
Majority-Owned....................................................... -- 216 273 2,220 1,035
Minority-Owned (2)................................................................................................................ -- -- -- -- 6218 274 2,228
--------- --------- --------- --------- ---------
Total Markets Managed and to be Managed.............................. 23,179 21,006 20,891 22,283 21,39024,015 23,330 21,158 21,016 22,253
Minority Interests in Markets Managed by Others........................ 2,121 4,511 4,026 3,779 3,5772,150 2,143 4,569 4,070 3,821
--------- --------- --------- --------- ---------
Total................................................................ 25,300 25,517 24,917 26,062 24,96726,165 25,473 25,727 25,086 26,074
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

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

(1) Based on 19971998 Claritas estimates for all years.

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

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

The following section details the Company's cellular interests, including
those it owned or had the right to acquire as of December 31, 1997.1998. The table
presented therein lists clusters of markets that the Company manages. The
Company's market clusters show the areas in which the Company is currently
focusing its development efforts. These clusters have been devised with a
long-term goal of allowing delivery of cellular service to areas of economic
interest and along corridors of economic activity. The number of population
equivalents represented by the Company's cellular interests may have no direct
relationship to the number of potential cellular customers or the revenues that
may be realized from the operation of the related cellular systems.

THE COMPANY'S CELLULAR INTERESTS

The table below sets forth certain information with respect to the interests
in cellular markets which the Company owned or had the right to acquire pursuant
to definitive agreements as of December 31, 1997.1998.

PERCENTAGE TOTAL CURRENT
CURRENT
CHANGE AND
CURRENT PURSUANT ANDTO ACQUIRABLE
1998 PERCENTAGE TO DEFINITIVE POPULATION
CLUSTER/MARKET 1997 POPULATION INTEREST AGREEMENTS (1)AGREEMENTS(1) TOTAL EQUIVALENTS
- ----------------------------------------------------------------------------------------------------------- --------------- ----------- ----------------------------- --------- ---------------

MARKETS MANAGED BY THE COMPANY:

MIDWEST REGIONAL MARKET CLUSTER:
WISCONSIN/ILLINOIS/INDIANA:ILLINOIS:
Milwaukee, Wl...................................... 1,460,000WI........................................ 1,452,000 100.00% 100.00% 1,460,0001,452,000
Columbia (Wl(WI 9).................................... 386,000...................................... 387,000 100.00 100.00 386,000387,000
Madison, Wl........................................ 398,000WI.......................................... 399,000 92.50 92.50 368,000
Peoria, IL......................................... 347,000369,000
Appleton-Oshkosh, WI................................. 345,000 100.00 100.00 347,000
Appleton, Wl....................................... 344,000 100.00 100.00 344,000345,000
Jo Daviess (IL 1).................................. 318,000.................................... 320,000 100.00 100.00 318,000320,000
Rockford, IL....................................... 304,000IL......................................... 306,000 100.00 100.00 304,000306,000
Wood (Wl(WI 7)........................................ 290,000.......................................... 291,000 100.00 100.00 290,000291,000
Vernon (Wl(WI 8)...................................... 236,000........................................ 237,000 100.00 100.00 236,000
Adams (IL 4) * (2).................................237,000
Green Bay, WI........................................ 216,000 99.01 99.01 214,000
Racine, WI........................................... 185,000 89.82 89.82 167,000
Kenosha, WI.......................................... 144,000 99.32 99.32 143,000
Janesville-Beloit, WI................................ 152,000 92.43 92.43 141,000
Door (WI 10)......................................... 129,000 100.00 100.00 214,000
Green Bay, Wl...................................... 215,000 99.01 99.01 213,000
Mercer (IL 3)...................................... 202,000 100.00 100.00 202,000
Racine, Wl......................................... 186,000 89.64 89.64 167,000
Kenosha, Wl........................................ 143,000 99.09 99.09 142,000
Janesville-Beloit, Wl.............................. 152,000 80.54 12.00% 92.54 141,000
Door (Wl 10)....................................... 130,000 100.00 100.00 130,000129,000
La Crosse, Wl......................................WI........................................ 103,000 95.11 95.11 98,000
Sheboygan, Wl...................................... 110,000 86.66 86.66WI........................................ 111,000 86.76 86.76 96,000
Wausau, Wl *....................................... 122,000 71.76 71.76 88,000
Trempealeau (Wl(WI 6) (2)............................................................ 83,000 100.00 100.00 83,000
Miami (IN 4) *..................................... 179,000 28.57 28.57 51,000
Warren (INPierce (WI 5) *.................................... 123,000 33.33 33.33 41,000
Alton, IL.......................................... 21,000 100.00 100.00 21,000
Pierce (Wl 5) (2)...................................................................... 14,000 100.00 100.00 14,000
--------------- ---------------
6,080,000 5,754,0004,874,000 4,792,000
--------------- ---------------
IOWA/MISSOURI:MISSOURI/ILLINOIS/INDIANA:
Des Moines, IA..................................... 431,000IA....................................... 434,000 100.00 100.00 431,000434,000
Davenport, IA-IL................................... 358,000IA-IL..................................... 357,000 97.37 97.37 349,000348,000
Peoria, IL........................................... 347,000 100.00 100.00 347,000
Adams (IL 4) * (2)................................... 214,000 100.00 100.00 214,000
Mercer (IL 3)........................................ 202,000 100.00 100.00 202,000
Humboldt (IA 10)........................................................................ 180,000 100.00 100.00 180,000
Cedar Rapids, IA...................................IA..................................... 181,000 96.00 96.00 174,000
Iowa (IA 6).................................................................................. 156,000 100.00 100.00 156,000
Muscatine (IA 4)................................... 155,000..................................... 154,000 100.00 100.00 155,000154,000
Moniteau (MO 11)..................................... 151,000 100.00 100.00 151,000
Waterloo-Cedar Falls, IA........................... 146,000IA............................. 145,000 93.03 93.03 136,000135,000
Columbia, MO *..................................... 127,000*....................................... 130,000 100.00 100.00 127,000130,000
Stone (MO 15)...................................... 118,000........................................ 122,000 100.00 100.00 118,000122,000
Hardin (IA 11)............................................................................ 113,000 100.00 100.00 113,000
Jackson (IA 5)..................................... 109,000....................................... 108,000 100.00 100.00 109,000108,000
Kossuth (IA 14).......................................................................... 107,000 100.00 100.00 107,000
Lyon (IA 16)................................................................................ 103,000 100.00 100.00 103,000
Iowa City, IA......................................IA........................................ 102,000 100.00 100.00 102,000
Laclede (MO 16).................................... 100,000...................................... 102,000 100.00 100.00 100,000102,000
Washington (MO 13)................................. 94,000................................... 95,000 100.00 100.00 94,00095,000
Callaway (MO 6) *..................................*.................................... 85,000 100.00 100.00 85,000
Dubuque, IA........................................IA.......................................... 88,000 95.90 95.9095.51 95.51 84,000
Mitchell (IA 13)................................... 67,000..................................... 66,000 100.00 100.00 67,00066,000
Mills (IA 1)......................................... 62,000 100.00 100.00 62,000
Schuyler (MO 3)...................................... 56,000 100.00 100.00 56,000

109

Mills (IA 1)....................................... 62,000 100.00% 100.00% 62,000
Schuyler (MO 3).................................... 56,000 100.00 100.00 56,000
Shannon (MO 17).......................................................................... 56,000 100.00 100.00100.00% 100.00% 56,000
Audubon (IA 7)............................................................................ 55,000 100.00 100.00 55,000
Linn (MO 5) (2).................................... 55,000...................................... 54,000 100.00 100.00 55,00054,000
Miami (IN 4) *....................................... 178,000 28.57 28.57 51,000
Union (IA 2)................................................................................ 50,000 100.00 100.00 50,000
Monroe (IA 3)...................................... 91,000........................................ 90,000 49.00 49.00 44,000
Warren (IN 5) *...................................... 124,000 33.33 33.33 41,000
Winneshiek (IA 12)................................. 116,000................................... 115,000 24.50 24.50 28,000
Alton, IL *.......................................... 21,000 100.00 100.00 21,000
Ida (IA 9) *.......................................*......................................... 63,000 16.67 16.67 11,00010,000
--------------- ---------------
3,424,000 3,207,0004,666,000 4,240,000
--------------- ---------------
TOTAL MIDWEST REGIONAL MARKET CLUSTER.............. 9,504,000 8,961,000CLUSTER................ 9,540,000 9,032,000
--------------- ---------------
--------------- ---------------

MID-ATLANTIC REGIONAL MARKET CLUSTER:
EASTERN NORTH CAROLINA/SOUTH CAROLINA:
Harnett (NC 10).......................................................................... 299,000 100.00 100.00 299,000
Northampton (NC 8)................................... 294,000 100.00 100.00 294,000
NorthamptonRockingham (NC 8)................................. 292,0007).................................... 293,000 100.00 100.00 292,000
Rockingham293,000
Greene (NC 7).................................. 291,00013)....................................... 248,000 100.00 100.00 291,000
Greene248,000
Greenville (NC 13)..................................... 246,00014)................................... 244,000 100.00 100.00 246,000
Greenville244,000
Hoke (NC 14)................................. 242,00011)......................................... 228,000 100.00 100.00 242,000
Hoke (NC 11)....................................... 226,000228,000
Chesterfield (SC 4).................................. 215,000 100.00 100.00 226,000
Chesterfield (SC 4)................................ 213,000215,000
Wilmington, NC....................................... 217,000 96.51 96.51 209,000
Jacksonville, NC..................................... 145,000 96.48 96.48 139,000
Chatham (NC 6)....................................... 165,000 81.20 81.20 134,000
Sampson (NC 12)...................................... 134,000 100.00 100.00 213,000
Ashe134,000
Camden (NC 3)9)........................................ 162,000120,000 100.00 100.00 162,000
Chatham (NC 6)..................................... 162,000 61.16 61.16 132,000
Sampson (NC 12).................................... 132,000 100.00 100.00 132,000
Camden (NC 9)...................................... 119,000 100.00 100.00 119,000120,000
--------------- ---------------
2,379,000 2,349,0002,602,000 2,557,000
--------------- ---------------
WEST VIRGINIA/MARYLAND/PENNSYLVANIA/ OHIO:
Monongalia (WV 3) *................................ 269,000*.................................. 267,000 100.00 100.00 269,000267,000
Raleigh (WV 7) *................................... 256,000*..................................... 253,000 100.00 100.00 256,000253,000
Grant (WV 4) *..................................... 174,000*....................................... 172,000 100.00 100.00 174,000172,000
Tucker (WV 5) *.................................... 132,000*...................................... 131,000 100.00 100.00 132,000131,000
Hagerstown, MD *...................................*..................................... 128,000 100.00 100.00 128,000
Ross (OH 9) *...................................... 249,000 48.00 48.00*........................................ 250,000 49.00 49.00 122,000
Cumberland, MD *...................................MD-WV *.................................. 100,000 100.00 100.00 100,000
Bedford (PA 10) * (2).............................................................. 49,000 100.00 100.00 49,000
Garrett (MD 1) *................................... 30,000*..................................... 29,000 100.00 100.00 30,00029,000
--------------- ---------------
1,387,000 1,260,0001,379,000 1,251,000
--------------- ---------------
VIRGINIA:VIRGINIA/NORTH CAROLINA:
Roanoke, VA........................................VA.......................................... 234,000 100.00 100.00 234,000
Giles (VA 3)....................................... 201,000......................................... 202,000 100.00 100.00 201,000202,000
Bedford (VA 4)..................................... 176,000....................................... 177,000 100.00 100.00 176,000177,000
Ashe (NC 3).......................................... 163,000 100.00 100.00 163,000
Lynchburg, VA......................................VA........................................ 160,000 100.00 100.00 160,000
Charlottesville, VA................................ 146,000 94.44 94.44 138,000VA.................................. 148,000 95.37 95.37 141,000
Buckingham (VA 7).................................. 91,000.................................... 92,000 100.00 100.00 91,00092,000
Tazewell (VA 2) (2).................................................................. 83,000 100.00 100.00 83,000
Bath (VA 5)........................................ 61,000 100.00 100.00 61,000
--------------- ---------------
1,152,000 1,144,000
--------------- ---------------
TOTAL MID-ATLANTIC REGIONAL MARKET CLUSTER......... 4,918,000 4,753,000
--------------- ---------------
--------------- ---------------83,000

1110

Bath (VA 5).......................................... 61,000 100.00% 100.00% 61,000
--------------- ---------------
1,320,000 1,313,000
--------------- ---------------
TOTAL MID-ATLANTIC REGIONAL MARKET CLUSTER........... 5,301,000 5,121,000
--------------- ---------------
--------------- ---------------
NORTHWEST REGIONAL MARKET CLUSTER:
WASHINGTON/OREGON/IDAHO:
Clark (ID 6)....................................... 294,000 100.00% 100.00% 294,000......................................... 295,000 100.00 100.00 295,000
Yakima, WA *......................................... 222,000 58.54 29.27% 87.81 195,000
Richland-Kennewick-Pasco, WA *....................... 187,000 100.00 100.00 187,000
Pacific (WA 6) *................................... 184,000*..................................... 186,000 100.00 100.00 184,000
Richland-Kennewick-Pasco, WA *..................... 183,000186,000
Butte (ID 5) (3)..................................... 168,000 100.00 100.00 183,000
Butte (ID 5)....................................... 160,000168,000
Okanogan (WA 4)...................................... 120,000 100.00 100.00 160,000
Yakima, WA *....................................... 219,000 54.55 58.54 128,000
Okanogan (WA 4).................................... 118,000 100.00 100.00 118,000120,000
Umatilla (OR 3) *.................................. 151,000 60.42 60.42 91,000*.................................... 152,000 76.39 76.39 116,000
Kittitas (WA 5) * (2).............................................................. 72,000 85.20 13.02 98.22 71,000 83.50 85.20 61,000
Hood River (OR 2) *................................ 74,000 45.10 45.10 34,000*.................................. 75,000 65.55 65.55 49,000
Skamania (WA 7) *.................................. 28,000 45.10 45.10 13,000*.................................... 29,000 65.55 65.55 19,000
--------------- ---------------
1,482,000 1,266,0001,506,000 1,406,000
--------------- ---------------
OREGON/CALIFORNIA:
Coos (OR 5)........................................ 260,000.......................................... 261,000 100.00 100.00 260,000261,000
Del Norte (CA 1)........................................................................ 209,000 100.00 100.00 209,000
Crook (OR 6) *....................................... 199,000 100.00 100.00 199,000
Medford, OR *...................................... 171,000*........................................ 174,000 100.00 100.00 171,000174,000
Mendocino (CA 9)................................... 139,000..................................... 140,000 100.00 100.00 139,000
Crook (OR 6) *..................................... 196,000 62.50 62.50 122,000140,000
Modoc (CA 2)................................................................................ 63,000 100.00 100.00 63,000
--------------- ---------------
1,038,000 964,0001,046,000 1,046,000
--------------- ---------------
TOTAL NORTHWEST REGIONAL MARKET CLUSTER............ 2,520,000 2,230,000CLUSTER.............. 2,552,000 2,452,000
--------------- ---------------
--------------- ---------------
MAINE/NEW HAMPSHIRE/VERMONT MARKET CLUSTER:
Manchester-Nashua, NH.............................. 357,000 92.49 92.49 330,000NH................................ 360,000 92.70 92.70 334,000
Coos (NH 1) *...................................... 224,000*........................................ 225,000 100.00 100.00 224,000225,000
Kennebec (ME 3).......................................................................... 221,000 100.00 100.00 221,000
Carroll (NH 2)..................................... 216,000....................................... 218,000 100.00 100.00 216,000218,000
Somerset (ME 2).................................... 148,000...................................... 146,000 100.00 100.00 148,000146,000
Bangor, ME......................................... 145,000 91.47 91.47ME........................................... 144,000 91.88 91.88 132,000
Addison (VT 2) * (2)................................................................ 107,000 100.00 100.00 107,000
Washington (ME 4) *................................*.................................. 86,000 100.00 100.00 86,000
Lewiston-Auburn, ME................................ 101,000 82.67 82.67ME.................................. 100,000 83.63 83.63 84,000
Oxford (ME 1).............................................................................. 83,000 100.00 100.00 83,000
--------------- ---------------
TOTAL MAINE/NEW HAMPSHIRE/VERMONT MARKET CLUSTER... 1,688,000 1,631,000CLUSTER..... 1,690,000 1,636,000
--------------- ---------------
--------------- ---------------
FLORIDA/GEORGIA MARKET CLUSTER:
Fort Pierce, FL * (3).............................. 291,000 49.00 51.00% 100.00 291,000
Tallahassee, FL.................................... 280,000*.................................... 297,000 100.00 100.00 280,000297,000
Tallahassee, FL...................................... 285,000 100.00 100.00 285,000
Worth (GA 14)...................................... 253,000........................................ 256,000 100.00 100.00 253,000256,000
Gainesville, FL.................................... 222,000FL...................................... 225,000 100.00 100.00 222,000225,000
Toombs (GA 11)..................................... 155,000....................................... 156,000 100.00 100.00 155,000156,000
Walton (FL 10)..................................... 119,000....................................... 121,000 100.00 100.00 119,000121,000
Putnam (FL 5) (2).................................. 70,000.................................... 71,000 100.00 100.00 70,00071,000
Dixie (FL 6)....................................... 57,000......................................... 58,000 100.00 100.00 57,00058,000
Jefferson (FL 8) (2)............................... 49,000................................. 50,000 100.00 100.00 49,000
Calhoun (FL 9)..................................... 43,000 100.00 100.00 43,000
--------------- ---------------
TOTAL FLORIDA/GEORGIA MARKET CLUSTER............... 1,539,000 1,539,000
--------------- ---------------
--------------- ---------------50,000

1211

Calhoun (FL 9)....................................... 43,000 100.00% 100.00% 43,000
--------------- ---------------
TOTAL FLORIDA/GEORGIA MARKET CLUSTER................. 1,562,000 1,562,000
--------------- ---------------
--------------- ---------------
TEXAS/OKLAHOMA/MISSOURI/KANSAS REGIONAL MARKET
CLUSTER:
OKLAHOMA/MISSOURI/KANSAS:
Tulsa, OK *........................................ 798,000 55.06% 55.06% 440,000*.......................................... 804,000 55.06 55.06 442,000
Joplin, MO *....................................... 147,000*......................................... 149,000 100.00 100.00 147,000149,000
Seminole (OK 6).......................................................................... 219,000 55.06 55.06 120,000
Elk (KS 15) *......................................*........................................ 154,000 75.00 75.00 116,000115,000
Nowata (OK 4) * (2).................................................................. 102,000 55.06 55.06 56,000
--------------- ---------------
1,420,000 879,0001,428,000 882,000
--------------- ---------------
TEXAS/OKLAHOMA:
Garvin (OK 9)...................................... 203,000........................................ 204,000 100.00 100.00 203,000
Haskell (OK 10).................................... 83,000 100.00 100.00 83,000204,000
Wichita Falls, TX *................................*.................................. 140,000 51.65 51.65 72,00070.45 70.45 99,000
Haskell (OK 10)...................................... 84,000 100.00 100.00 84,000
Lawton, OK *....................................... 111,000 51.65 51.65 57,000*......................................... 110,000 70.45 70.45 78,000
Jackson (OK 8) *...................................*..................................... 97,000 51.65 51.65 50,00070.45 70.45 68,000
Hardeman (TX 5) * (2).............................. 38,000 51.65 51.65 19,000................................ 37,000 70.45 70.45 26,000
Briscoe (TX 4) * (2)............................... 13,000 51.65 51.65 6,000................................. 12,000 70.45 70.45 9,000
Beckham (OK 7) * (2)................................................................ 10,000 51.65 51.65 5,00070.45 70.45 7,000
--------------- ---------------
695,000 495,000694,000 575,000
--------------- ---------------
TOTAL TEXAS/OKLAHOMA/MISSOURI/ KANSAS REGIONAL MARKET
CLUSTER.................................. 2,115,000 1,374,000CLUSTER............................................ 2,122,000 1,457,000
--------------- ---------------
--------------- ---------------
EASTERN TENNESSEE/WESTERN NORTH CAROLINA MARKET
CLUSTER:
Knoxville, TN *.................................... 556,000*...................................... 560,000 96.03 96.03 534,000538,000
Asheville, NC *.................................... 212,000*...................................... 214,000 100.00 100.00 212,000214,000
Henderson (NC 4) * (2)............................. 194,000............................... 196,000 100.00 100.00 194,000196,000
Bledsoe (TN 7) * (2)............................... 151,000................................. 152,000 96.03 96.03 145,000146,000
Hamblen (TN 4) * (2)............................... 135,000................................. 136,000 100.00 100.00 135,000136,000
Macon (TN 3) *..................................... 344,000*....................................... 347,000 16.67 16.67 57,00058,000
Yancey (NC 2) * (2).................................................................. 31,000 100.00 100.00 31,000
--------------- ---------------
TOTAL EASTERN TENNESSEE/WESTERN NORTH CAROLINA MARKET
CLUSTER.................................. 1,623,000 1,308,000CLUSTER............................................. 1,636,000 1,319,000
--------------- ---------------
--------------- ---------------
SOUTHWESTERNSOUTHERN TEXAS MARKET CLUSTER:
Corpus Christi, TX................................. 388,000TX................................... 392,000 100.00 100.00 388,000392,000
Atascosa (TX 19)................................... 231,000 (3)................................. 266,000 100.00 100.00 231,000266,000
Edwards (TX 18).................................... 223,000...................................... 227,000 100.00 100.00 223,000227,000
Laredo, TX......................................... 182,000TX........................................... 188,000 93.74 93.74 171,000177,000
Wilson (TX 20)..................................... 148,000....................................... 150,000 100.00 100.00 148,000150,000
Victoria, TX....................................... 82,000TX......................................... 83,000 100.00 100.00 82,00083,000
--------------- ---------------
TOTAL SOUTHWESTERNSOUTHERN TEXAS MARKET CLUSTER............ 1,254,000 1,243,000CLUSTER.................. 1,306,000 1,295,000
--------------- ---------------
--------------- ---------------
OTHER OPERATIONS:
Hawaii (Hl(HI 3)...................................... 140,000........................................ 141,000 100.00 100.00 140,000141,000
--------------- ---------------
Total Managed Markets............................ 25,301,000 23,179,000Markets............................. 25,850,000 24,015,000
--------------- ---------------
--------------- ---------------
MARKETS MANAGED BY OTHERS:
Los Angeles/Oxnard, CA *........................... 15,645,000*............................. 15,795,000 5.50 5.50 861,000869,000
Jefferson (NY 1) *................................... 255,000 60.00 60.00 153,000
Oklahoma City, OK *................................ 1,003,000*.................................. 1,010,000 14.60 14.60 146,000
Portland, ME *..................................... 288,000 49.00 49.00 141,000
McAllen, TX........................................ 509,000 26.20 26.20 133,000147,000

1312

McAllen, TX.......................................... 526,000 26.20% 26.20% 138,000
Portsmouth-Dover-Rochester, NH-ME *.......................................... 280,000 40.00% 40.00% 112,000*.................. 282,000 40.00 40.00 113,000
Others (Fewer than 100,000 population equivalents
each)............................................ 728,000............................................... 730,000
---------------
Total Population Equivalents of Markets Managed by
Others...................................... 2,121,000Others.......................................... 2,150,000
---------------
Total Population Equivalents..................... 25,300,000Equivalents...................... 26,165,000
---------------
---------------

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

* Designates wireline market.

(1) Interests under these agreements are expected to be acquired at the time
specified therein,in the agreements, following the satisfaction of customary closing
conditions.

(2) These markets have been partitioned into more than one licensed area. The
19971998 population, percentage ownership and number of population equivalents
shown are for the licensed areas within the markets in which the Company
owns an interest.

(3) The Company owns 80%These markets include territory and population equivalents of the entityfill-in areas
which owns and operates this market but
has only a 49% interest in the earnings and profits. Pursuant to a
definitive agreement, the Company has rights to acquire the remaining 20% of
the equity and 51% of the earnings and profits of this entity.were annexed from adjacent MSAs or RSAs.

SYSTEM DESIGN AND CONSTRUCTION. The Company designs and constructs its
systems in a manner it believes will permit it to provide high-quality service
to mobile, transportable and portable cellular telephones, generally based on market and
engineering studies which relate to specific markets. Engineering studies are
performed by Company personnel or independent engineering firms. The Company's
switching equipment is digital, which reduces noise and crosstalk and is capable
of interconnecting in a manner which reduces costs of operation. While digital
microwave interconnections are typically made between the MTSO and cell sites,
primarilyboth analog and digital radio transmission is usedtransmissions are made between cell sites and the
cellular telephones themselves. Network reliability is given careful
consideration and extensive redundancy is employed in virtually all aspects of
the Company's network design. Route diversity, ring topology and extensive use
of emergency standby power are also utilized to enhance network reliability and
minimize service disruption from any particular network failure.

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

The Company expandedhas continued to expand its internal network in 1996Wide Area Network to encompass all of its
managed markets. This network providesaccomodate
various business functions, including: automatic call delivery, forintersystem
handoff, credit validation, fraud prevention, network management, long-distance
traffic, SS7 signaling and virtually all internal data communications between
various Company office locations and a significant number of the Company's
customers and handoff between adjacent markets. The network has also been
extended through links with certain systems operated by several other carriers,
including GTE, AirTouch/US West, Ameritech, BellSouth, Centennial Cellular
Corp., Southwestern Bell, AT&T Wireless Communications, Vanguard Cellular
Systems and others. Additionally, the Company has implemented certain Signal
Transfer Points which have allowed it to interconnect efficiently with network
providers such as Illuminet and the North American Cellular Network.

The Company plans to integrate the systems in the markets acquired in the
exchange with BellSouth into its internal network as quickly as possible. This
may involve changing out certain system equipment and replacing it with new
equipment which will allow for more efficient networking.

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

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

COSTS OF SYSTEM CONSTRUCTION AND FINANCING

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

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

MARKETING

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

14
telephone equipment which are designed to meet the needs of a variety of
customer segments and their usage patterns. The Company's distribution channels
include direct sales personnel, agents and retail service centers in the vast
majority of its markets.

The retail locations are Company-owned and managed andlocations are designed to market cellular service
to the consumer segment in a familiar setting. In late 1996,1997, the Company
implementedexpanded its newe-commerce site onto offer three rate plans across the WorldWideWeb
to support its marketing efforts and to be a future distribution channel.
Customers may now ordercountry aimed
at each of the Company's service throughthree major segments. Sales are relatively light at
this Website.time, but the Company anticipates that as customers become more comfortable
with on-line purchasing, the Internet will become more of a robust marketing
channel.

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

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

15
The Company opened its first retail locations in late 1993, expanding to
260over 280 stand-alone retail stores by the end of 1997.1998. These Company-owned and
operated businesses utilize rental facilities in high-traffic areas.areas, primarily
in strip malls. The Company has implemented a uniform appearance in these
stores, with all having similar displays and layouts. The retail centers' hours
of business match those of the retail trade in the local marketplace, often
staying open on weekends and later in the evening than a typical business
supplier. To fully serve customer needs, these stores sell accessories to
complement the phones and services the Company has traditionally provided.
During 1996,1998, the Company further expanded its retail presence by opening smaller
retail kiosks within other larger merchandisers, and
grocery stores. At December 31, 1997, the Company had opened over 140called "stores within a store,"
primarilyand had several of these locations in place at year-end. Additionally, the
Company operates small kiosks within stores such as Wal-Mart locations.

In addition to its own retail centers,and staffs those
kiosks with Company personnel. At December 31, 1998, the Company managed nearly
170 of these kiosks.

The Company actively pursues national retail accounts, as agents of the
Company, which yield new customer additions in multiple markets. Agreements have
been entered into with such national distributors as Ford Motor Company, General
Motors, Radio Shack, Best Buy, Circuit City, Staples, Office Depot, Sears, TDS
Telecom, TSR Wireless and Sears, Roebuck & Co.Onstar in certain of the Company's markets. Upon the
sale of a cellular telephone by one of these national distributors, the Company
receives, often exclusively within the territories served, the resulting
cellular customer. The Company created a new class of agent during 1998, the
Value Added Distributor agent channel. This channel's initial focus was on the
sale of the Company's prepaid service product, TalkTracker, to selected market
segments, and complements the Company's own distribution channels.

The Company uses a variety of direct mail, billboard, radio, television and
newspaper advertising to stimulate interest by prospective customers in
purchasing the Company's cellular service and to establish familiarity with the
Company's name. In 1997,1998, the Company increased its focus on brand advertising,
including the addition of several new television commercials, using the tag line
"The Way People Talk Around Here"(SM) to promote the United States
Cellular-TM-Cellular-Registered Trademark- brand. Additionally, the Company began actively
advertising its digital service offerings through both television and radio
advertising during the year. Advertising is directed at gaining customers,
improving customers' awareness of the United States
CellularCellular-Registered Trademark- brand, increasing existing

customers' usage and increasing the public awareness and understanding of the
cellular services offered by the Company. The Company attempts to select the
advertising and promotion media that are most appealing to the targeted groups
of potential customers in each local market. The Company utilizes local
advertising media and public relations activities and establishes programs such
as its CommunityCare programs to enhance public awareness of the Company. These
programs are aimed at supporting the communities in which the Company such as providing telephones andserves.
The programs range from loaning phones to support public service for public events and emergency uses.operations in
emergencies to assisting victims of domestic abuse.

The following table summarizes, by operating cluster, the total population,
the Company's customer units and penetration for the Company's majority-owned
and managed markets that were operational as of December 31, 1997.1998.

OPERATING CLUSTERS POPULATION CUSTOMERS PENETRATION
- ----------------------------------------------------------------- ---------- ---------- ----------------------------------------------------------------------------------- ------------- ----------- -------------

Wisconsin/Illinois..................................................... 4,874,000 498,000 10.22%
Iowa/Missouri/Illinois/Indiana....................................... 5,778,000 452,000 7.82%
Iowa/Missouri.................................................... 3,154,000 257,000 8.15Indiana......................................... 4,096,000 426,000 10.40
Eastern North Carolina/South Carolina............................ 2,379,000 124,000 5.21Carolina.................................. 2,602,000 168,000 6.46
West Virginia/Maryland/Pennsylvania/Ohio......................... 1,138,000 69,000 6.06
Virginia......................................................... 1,152,000 70,000 6.08Ohio............................... 1,129,000 90,000 7.97
Virginia/North Carolina................................................ 1,320,000 107,000 8.11
Washington/Oregon/Idaho.......................................... 1,380,000 102,000 7.39Idaho................................................ 1,506,000 124,000 8.23
Oregon/California................................................ 1,038,000 71,000 6.84California...................................................... 1,046,000 86,000 8.22
Maine/New Hampshire/Vermont...................................... 1,688,000 103,000 6.10Vermont............................................ 1,690,000 129,000 7.63
Florida/Georgia.................................................. 1,539,000 115,000 7.47Georgia........................................................ 1,562,000 136,000 8.71
Oklahoma/Missouri/Kansas......................................... 1,420,000 111,000 7.82Kansas............................................... 1,428,000 133,000 9.31
Texas/Oklahoma................................................... 695,000 46,000 6.62Oklahoma......................................................... 694,000 59,000 8.50
Eastern Tennessee/Western North Carolina......................... 1,279,000 117,000 9.15
Southwestern Texas............................................... 1,254,000 56,000 4.47Carolina............................... 1,289,000 137,000 10.63
Southern Texas......................................................... 1,306,000 70,000 5.36
Other Operations................................................. 140,000 17,000 12.14
---------- ----------Operations....................................................... 141,000 20,000 14.18
------------- ----------- -----
24,034,000 1,710,000 7.11%
---------- ----------24,683,000 2,183,000 8.84%
------------- ----------- -----
---------- ----------------------- ----------- -----

CUSTOMERS AND SYSTEM USAGE

Cellular customers come from a wide range of occupations. Theydemographic segments. Business
users typically include a large proportion of individuals who work outside of
their offices such as people in the construction, real estate, wholesale and
retail distribution businesses and professionals. Increasingly, the Company is
providing cellular service to consumers and to customers who use their cellular
telephones for mixed business and personal use as well as for security purposes.
A major portion of the Company's recent customer growth is from these lower
revenue segments. Although some of the Company's customers still use in-vehicle
cellular telephones, most new customers

16
are selecting portable cellular
telephones. These units have become more compact and fully featured as well as
more attractively priced, and they appeal to newer segments of the customer
population.

The Company's cellular systems are used most extensively during normal
business hours between 7:00 amAM and 6:00 pm.PM. On average, the local retail
customers in the Company's consolidated markets used their cellular systems
approximately 103105 minutes per unit each month and generated retail revenue of
approximately $33 per month during 1998, compared to 103 minutes and $36 per
month during 1997, compared to 107 minutes and $40 per
month in 1996.1997. Revenue generated by roamers using the Company's systems
("inbound roaming"), together with local retail, toll and other revenues,
brought the Company's total average monthly service revenue per customer unit in
consolidated markets to $54$49 during 1997.1998. Average monthly service revenue per
customer unit decreased approximately 15%10% during 1997.1998. This decrease is relatedresulted
from decreases in average revenue per minute of use from both local retail
customers and inbound roamers. Competitive pressures and the Company's
increasing use of pricing and other incentive programs that encourage weekend
and off-peak usage at reduced rates, in order to the industry-wide trend of newer customers tending to use
fewer minutes during peak business hours, which has reduced thestimulate overall usage,
resulted in a decrease in average local retail revenue per minute and toof use in
1998. Although the declining contributionintroduction of "one rate" pricing plans by other wireless
companies has helped increase inbound roaming minutes of use on the Company's
systems during 1998,

inbound roaming revenue per customer.minute decreased during the year. The Company believes that its customer basedecrease is
growing
faster than thatpartially a result of the ongoing trend toward reduced per minute prices for
roaming negotiated between the Company and other cellular industry as a whole,operators and also due
to the additional minutes generated by customers with "one rate" pricing plans,
which has a dilutive
effect on inbound roaming revenue per customer.are at lower than average rates. The Company anticipates that average
monthly service revenue per customer unit will continue to decline as
its distribution channels provide additional customers who generate lower
revenue per local minute of use and as roaming revenues grow more slowly.in the
future. However, this effect is more than offset by the Company's increasing
number of customers; therefore, the Company expects total revenues to continue
to grow for the next few years.

In addition toThe Company's main sources of revenue are from local retail customers, the Company generates
revenue from roamingits own customers and other services.from
inbound roaming customers. The Company's roaming service allows a customer to
place or receive a call in a cellular service area away from the customer's home
service area. The Company has entered into "roaming agreements" with operators
of other cellular systems covering virtually all systems in the United States,
Canada and Canada. TheseMexico. The Company also has roaming agreements offer customers the
opportunity to roam in these systems. These reciprocal agreements automatically
pre-register the customers of the Company's systems in the other carriers'
systems. Also, a customer of a participating system roaming (i.e., travelling)
in a Company market where this arrangement is in effect is able to make and
receive calls on the Company's system.with several PCS
operators. The charge for this service is typically at premium rates and is
billed by the Company to the customer's home system, which then bills the
customer. The Company has entered into agreements with other cellular carriers
to transfer roaming usage at agreed-upon rates. In some instances, based on
competitive factors, the Company may charge a lower amount to its customers than
the amount actually charged to the Company by another cellular carrier for
roaming.

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

YEAR ENDED OR AT DECEMBER 31,
------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
1993
------------- ------------- ----------- ----------- ----------- --------- ---------

Majority-owned and managed markets:
Cellular markets in operation (1)..................................... 138 134 131 137 130 116
Total population of markets in service
(000s).................................................. 24,683 24,034 21,712 22,309 21,314
19,383
Customer Units: (2)
at beginning of period (2)............................period....................... 1,710,000 1,073,000 710,000 421,000 261,000
150,800
additions during period (2)...........................period...................... 915,000 941,000 561,000 426,000 250,000
165,300
disconnects during period (2).........................period.................... 442,000 304,000 198,000 137,000 90,000
55,100
at end of period (2)..................................period............................. 2,183,000 1,710,000 1,073,000 710,000 421,000 261,000
Market penetration at end of period (3)......................... 8.84% 7.11% 4.94% 3.18% 1.98% 1.35%

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

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

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

(3) Computed by dividing the number of customer units at the end of the period
by the total population of markets in service as estimated by Claritas
(1997-1998) or Donnelley Marketing Service (1994-1996) for the respective
years (Claritas in 1997).

17
years.

PRODUCTS AND SERVICES

CELLULAR TELEPHONES AND INSTALLATION. There are a number of different types
of cellular telephones, all of which are currently compatible with cellular
systems nationwide. The Company offers a full range of vehicle-mounted,
transportable and hand-held portable cellular telephones. Features offered in some of the
cellular telephones include hands-free calling, repeat dialing, horn alert and
others. In the systems where the Company offers digital service, additional
features such as caller ID and short messaging services are available on those
cellular telephones.

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

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

CELLULAR SERVICES. The Company's customers are able to choose from a
variety of packaged pricing plans which are designed to fit different calling
patterns. The ability to help a customer find the right technology and the right
pricing plan is central to the Company's brand positioning. During 1998, the
Company has developedfocused its efforts on new products with the continued introduction of
its digital service offering, called Digital PCS, and introduced its prepaid offering,
TalkTracker-Registered Trademark-. Both offerings were very successful, as many
higher revenue customers purchased the Company's digital offering and new consumer line of
products undermarket
segments such as individuals with credit difficulties were able to purchase
cellular service through the CarryPhone brand. These products include a) Express, a
pre-packaged phone plus price plan aimed at the convenience buyer; b)
TalkTracker, a cellular phone with usage prepaid; and c) Home and Away, a
combination cordless and cellular phone in a single package.Company's prepaid offering. The Company's customer
bills typically show separate charges for custom-calling features, airtime in
excess of the packaged amount, and toll calls. Custom-calling features provided
by the Company include wide-area call delivery, call forwarding, call waiting,
three-way calling and no-answer transfer. The Company also offers a voice
message service in many of its markets. This service, which functions like a
sophisticated answering machine, allows customers to receive messages from
callers when they are not available to take calls. Additional services, such as
short messaging service, are available in the Company's markets where digital
service is offered.

REGULATION

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

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

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

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

18
subject to certain Federal Aviation Administration ("FAA") regulations with
respect to the siting and construction of cellular transmitter towers and
antennas as well as local zoning requirements.

Beginning in 1996, the FCC has also imposed a requirement that all licensees
register and obtain FCC registration numbers for all of their antenna towers
which require prior FAA clearance. The Company is currently engaged in this
registration process. All new towers must be registered at the time
of construction and existing towers are beingwere required to be registered on a
staggered state-by-state basis to be concluded inby May 1998. USM has completed the registration
of its existing towers.

Beginning in October 1997, cellular systems, which previously were
"categorically excluded" from having to evaluate their facilities to ensure
their compliance with federal "radio frequency" (RF) radiation requirements,
were made subject to those requirements (cellular(all cellular towers of less than 10
meters in height, building-mounted antennae and cellular telephones)telephones must comply
with RF radiation guidelines). After October 1997, all new cellular facilities
must be in compliance when they are brought into service. Existing facilities
must be brought into compliance with the requirements when their licenses are
renewed. The CompanyUSM believes that the great majority of its existing facilities already
comply with the requirements, that the remainder will be brought into compliance
as required and that the cellular telephones it sells comply with the standards.

Initial cellular telephone licenses were granted tor ten-year periods. The
FCC has established standards for conducting comparative renewal proceedings
between a cellular licensee seeking renewal of its license and challengers
filing competing applications. The FCC has: (i) established criteria for
comparing the renewal applicant to challengers, including the standards under
which a renewal expectancy will be granted to the applicant seeking license
renewal; (ii) established basic qualifications standards for challengers; and
(iii) provided procedures for preventing possible abuses in the comparative
renewal process. The FCC has concluded that it will award a renewal expectancy
if the licensee has (i) provided "substantial" performance, which is defined as
"sound, favorable and substantially above a level of mediocre service just
minimally justifying renewal," and (ii) complied with FCC rules, policies and
the Communications Act. If a renewal expectancy is awarded to an existing
licensee, its license is renewed and competing applications are not considered.
The Company's Tulsa and KnoxvilleAll of USM's licenses werewhich it applied to have renewed in 1995, 1996, 1997 and
the
Company's Des Moines, Iowa; Peoria, Illinois; and Roanoke, Virginia licenses1998 were renewed in 1996. In September 1997, the Company filed license renewal
applications for its Davenport, Iowa; Tallahassee, Florida; Asheville, North
Carolina; Manchester, New Hampshire; Columbia, Missouri; Wichita Falls, Texas;
Gainesville, Florida; Lewiston, Maine; Joplin, Missouri; Cedar Rapids, Iowa; La
Crosse, Wisconsin; Bangor, Maine; Fort Pierce, Florida; Victoria, Texas;
Evansville, Indiana; and Owensboro, Kentucky licenses. Those applications were
unopposed. On October 30, 1997, the Company assigned its Evansville and
Owensboro licenses to a subsidiary of BellSouth as part of the exchange
transaction between the two companies. As part of the same transaction,
BellSouth assigned its Appleton, Wisconsin; Rockford, Illinois; Green Bay,
Wisconsin; and Janesville, Wisconsin licenses to the Company. All of those
licenses were renewed in January 1998.

The Companyrenewed.

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

The FCC has also provided that five years after the initial licenses are
granted, unserved areas within markets previously granted to licensees may be
applied for by both wireline and non-wireline entities and by third parties.
Accordingly, many unserved area applications have been filed by the CompanyUSM and others. The Company'sothers
and have generally been routinely granted. USM's strategy with respect to system
construction in its markets has been and will be to build cells covering areas within such
markets that the CompanyUSM considers economically feasible to

19
serve or might conceivably
wish to serve and to do so within the five-year period following issuance of the
license. In cases where applications for unserved areas are filed which are
mutually exclusive and would result in overlapping service areas, the FCC
decides between the competing applicants by an auction process.

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

RECENT EVENTS. There are certain regulatory proceedings currently pending
before the FCC which are of particular importance to the cellular industry. In
one proceeding, the FCC has imposed new "enhanced 911" regulations on cellular
carriers. Enhanced 911 capabilities would enable

19
cellular systems to determine the precise location of persons making emergency
calls. The new rules will require cellular carriers to work with local public
safety officials to process 911 calls, including those made from mobile
telephones not registered with the cellular system, will requiresystem. Since April 1998, cellular
carriers by April 1998have had to be able to identify the cell from which the call has been
made, andmade. The rules will require cellular systems to improve their ability to locate
wireless 911 callers over a five-year period.by 2001.

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

The FCC has adopted requirements which will make it possible for subscribers
to retain, at the same location,subject to certain geographic and other limitations, their existing
telephone numbers when they switch from one service provider to another. This
numbering portability will include switching between Local Exchange Carriers
("LECs") and other wireline providers, between wireless service providers and
between LEC/wireline and wireless providers. LECs, in the 100 largest MSAs, have
implementation deadlines by the end of 1998.
Broadband1998 at those switches which received
specific requests for numbering portability. The FCC recently extended the
compliance date for cellular, broadband PCS cellular and certain other wireless providers
have phased
implementation deadlines in 1998 and 1999.to November 2002.

In another proceeding, the FCC in 1996 adopted rules regarding the method by
which cellular carriers and LECs shall compensate each other for interconnecting
cellular and local exchange facilities. The FCC rules provided for symmetrical
and reciprocal compensation between LECs and cellular carriers, and also
prescribed interim interconnection proxy rates, which are much lower than the
rates formerly paid by cellular carriers to LECs. Symmetrical and reciprocal
compensation means they must pay each other at the same rate. The U.S. Court of
Appeals for the Eighth Circuit has vacated the FCC's rules. However, the FCC's
rules requiring reciprocal and symmetrical compensation remain in effect as
applied to the cellular industry. Interconnection
rate issues will be decided by the states. Whether the issue is decided by the states or the federal
government, cellularCellular carriers are now paying and
in the future can be expected to pay lower rates to LECs than they previously
paid. This result is expected to be favorable to the wireless industry and
somewhat unfavorable to LECs.

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

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

Only narrow powers over competitive entry are left to state and local
authorities. Each state retains the power to impose competitively neutral
requirements that are consistent with the 1996 Act's universal 20
service provision
and necessary for universal services, public safety and welfare, continued
service quality and consumer rights. While a state may not
impose requirements that effectively function as barriers to entry, it retains
limited authority to regulate certain competitive practices in rural telephone
company service areas.

The 1996 Act establishes principles and a process for implementing a
modified "universal service" policy. This policy seeks nationwide, affordable
service and access to advanced telecommunications and information services. It
calls for reasonably comparable urban and rural rates and services. The 1996 Act
also requires universal service to schools, libraries and rural health
facilities at discounted rates. Cellular carriers must provide such discounted
rates in accordance with federal regulations. The FCC has implemented the
mandate of the 1996 Act to create a new universal service support mechanism "to
ensure that all Americans have access to

20
telecommunications services." The 1996 Act requires all interstate
telecommunications providers, including wireless service providers, to "make an
equitable and non-discriminatory contribution,"contribution" to support the cost of providing
universal service, unless their contribution would be de minimis.DE MINIMIS. At present,
the provision of landline telephone service in high-cost areas is subsidized by
access charges and other payments by interexchange carriers to LECs. The
obligation to make payments to support universal service has been expanded to
include other telecommunications service providers, including cellular carriers.
Such payments which are to be based on a percentage of the total "billed revenue" of
carriers for a given previous half year and began in the first quarter of 1998.
Carriers are free to pass such charges on to their customers. Cellular carriers
are also eligible to receive universal service support payments in certain
circumstances under the new systems if they provide specified services in
"high-cost" areas. The CompanyUSM has sought designation as an "eligible telecommunications
carrier" qualified to receive universal service support in certain states.

Under a 1994 federal law, the Communications Assistance to Law Enforcement
Act, all telecommunications carriers, including the CompanyUSM and other wireless
licensees, must,were to have implemented by October 1998 implement certain equipment changes
necessary to assist law enforcement authorities in achieving an enhanced ability
to conduct electronic surveillance of those suspected of criminal activity.
However, owing to disputes between the Federal Bureau of Investigation and the
relevant industry groups about the law's requirements, the FCC has not yet
adopted the necessary technical standards to enable carriers to meet those
requirements. Questions also exist regarding reimbursement by a federal fund of
certain of the costs involved. The Company hasUSM supported the efforts of industry groups to
obtain from the FCC a postponement of the October 1998 deadline on the grounds
that compliance with the originally proposed schedule iswas impossible. In
September 1998, the FCC postponed the compliance deadline until June 2000.

The FCC is considering these requestsalso has pending proceedings: (1) to ensure that the customers of
wireless providers, among others, receive complete, accurate and understandable
bills; (2) to establish safeguards to protect against unauthorized access to
customer information; (3) to retain, relax or repeal its 45 megahertz ("MHz")
cap on the amount of spectrum which entities under common ownership and control
may hold in a single market and its related cellular cross-interest
restrictions; and (4) to implement requirements for postponement, and legislation mandating a
two-year postponement is also pendingwireless providers to set
interstate interexchange rates in Congress.each state at levels no higher than the rates
charged to subscribers in any other state.

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

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

Media reports have suggested that certain radio frequency ("RF") emissions
from portable cellular telephones might be linked to cancer. The Company has
reviewed relevant scientific information and, based on such information, is not
aware of any credible evidence linking the usage of portable cellular telephones
with cancer.

21
STATE AND LOCAL REGULATION. The CompanyUSM is also subject to state and local
regulation in some instances. In 1981, the FCC preempted the states from
exercising jurisdiction in the areas of licensing, technical standards and
market structure. In 1993, Congress preempted states from

regulating the entry of cellular systems into service and the rates charged by
cellular systems to customers. The siting and construction of the cellular
facilities, including transmitter towers, antennas and equipment shelters are
still subject to state or local zoning and land use regulations. However, in
1996, Congress amended the Communications Act to provide that states could not
discriminate against wireless carriers in tower zoning proceedings and had to
decide on zoning requests with reasonable speed. In addition, states may still
regulate other terms and conditions of cellular service.

The FCC is currently considering
whether to take action to preempt moratoria imposed by certain localities on the
construction of wireless towers. The Company has supported such FCC action.

The FCC is required to forbear from applying any statutory or regulatory
provision that is not necessary to keep telecommunications rates and terms
reasonable or to protect consumers. A state may not apply a statutory or
regulatory provision that the FCC decides to forbear from applying. In addition,
the FCC must review its telecommunications regulations every two years and
change any that are no longer necessary. Further, the FCC is empowered under
certain circumstances to preempt state regulatory authorities if a state is
obstructing the Communications Act's basic purposes.

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

COMPETITION

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

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

In addition to competition from the other cellular licensee in each market,
there is also competition from among other technologies, SMR systems,PCS providers and ESMR system providers, both of
which are able to connect with the landline telephone network. The Company believes that
conventional SMR systems are competitively disadvantaged because of
technological limitations on the capacity of such systems. The FCC has recently
given approval, through waivers of its rules, to ESMR, an enhanced SMR system.
ESMR systems may have cells and frequency reuse like cellular, thereby
potentially eliminating any current technological limitation. The first ESMR
systems were implemented in 1993 in Los Angeles and are beginning to be
constructed in several other cities across the United States. In 1995, an ESMR
provider initiated service in Tulsa, Oklahoma, where the Company operates a
cellular system. ESMR service is also being provided in certain other of the
Company's markets. Although less directly a substitute for cellular service,
wireless data services and one-way paging service (and in the future, two-way
paging services) may be adequate for those who do not need full two-way voice
service. PCS providers
have initiated service in many markets across the United States, including
markets where the Company has operations. PCS providers offer digital, wireless
communications services to their customers. The Company expects PCS operators to
continue deployment of PCS in portions of all of the Company's clusters
throughout 1999. ESMR, an enhanced SMR system, has cells and frequency reuse
like other wireless services, thereby eliminating any technological limitation.
In recent years, ESMR providers have initiated service in several of the
Company's markets. Although less directly a substitute for cellular service,
wireless data services and paging services may be adequate for those who do not
need full two-way voice service. Similar technological advances or regulatory
changes in the future may make available other alternatives to cellular service,
thereby creating additional sources of competition. The Company expects PCS operators to complete initial deployment of
PCS in portions of all of the Company's clusters by the end of 1998.

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

22
frequencies to cellular telephone service to provide for more than two cellular
telephone systems per market.

EMPLOYEES

The Company had 4,6004,800 employees as of December 31, 1997.1998. None of the
Company's employees is represented by a labor organization. The Company
considers its relationship with its employees to be good.

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

ITEM 2. PROPERTIES

TheWith the exception of certain parcels of land which are leased under
long-term leases, all of the property and equipment used for mobile telephone
switching offices and cell sites are
eitheris owned or leased under long-term leases by the Company, one of its
subsidiaries or the partnership or corporation which holds the construction
permit or license. The Company has not experienced major problems with obtaining
zoning approval for cell sites or operating facilities and does not anticipate
any such problems in the future which are or will be material to the Company and
its subsidiaries as a whole.

The Company's investment in property is small compared to its
investment in licenses and cellular system equipment.

The Company leases approximately 95,00093,000 square feet of office space for its
headquarters in Chicago, Illinois.

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

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

ITEM 3. LEGAL PROCEEDINGS

In addition to the legal proceedings discussed previously in "Proposed TDS
Corporate Restructuring," theThe Company is involved in a number of legal proceedings relatedbefore the FCC and
various state and federal courts. In some cases, the litigation involves
disputes regarding rights to its business from time to time.certain cellular telephone systems and other
interests. The Company does not believe that any such proceeding should have a
material adverse impact on the Company.

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

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

No matter was submitted to a vote of securities holders during the fourth
quarter of 1997.1998.

- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------

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

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

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

ITEM 6. SELECTED FINANCIAL DATA

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

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

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

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

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.Incorporated by reference from Exhibit 13, Annual Report section entitled
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" under the caption "Market Risk."

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

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

None.

- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

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

ITEM 11. EXECUTIVE COMPENSATION

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

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

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

- --------------------------------------------------------------------------------
PART IV
- --------------------------------------------------------------------------------

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

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

(a)(1) Financial Statements

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

- ---------

* Incorporated by reference from Exhibit 13.

(2) Schedules

LOCATION
------------------

Report of Independent Public Accountants on Financial Statement Schedule..........Schedule.......................... page 2928
II. Valuation and Qualifying Accounts for eachEach of the Three Years in the Period Ended
December 31, 1997....................................................1998...................................................................... page 3029

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

(3) Exhibits

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

EXHIBIT
NUMBER DESCRIPTION
- ---------------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------

10.1 Supplemental Benefit Agreement between the Company and H. Donald Nelson is hereby incorporated by
reference to an exhibit to the Company's Registration Statement on Form S-1 (Registration No.
33-16975).

10.10 Stock Option and Stock Appreciation Rights Plan is hereby incorporated by reference to Exhibit B to
the Company's definitive Notice of Annual Meeting and Proxy Statement dated April 15, 1991, as filed
with the Commission on April 16, 1991.

10.11 Summary of 19971998 Bonus Program for Senior Corporate Staff of the Company.

10.12(a) United States Cellular Corporation 1994 Long-Term Incentive Plan is hereby incorporated by reference
to Exhibitexhibit 99.1 to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).

10.12(b) Form of 1994 Long-Term Stock Option Agreement (Transferable Form) is hereby incorporated by reference
to Exhibit 99.2 to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).

10.12(c) Form of 1994 Long-Term Stock Option Agreement (Nontransferable Form) is hereby incorporated by
reference to Exhibit 99.3 to the Company's Registration Statement on Form S-8 (Registration No.
33-57255).

EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------------------------------------------------------------------------------------------------

10.12(d) Form of 1995 Performance Stock Option Agreement (Transferable Form) is hereby incorporated by
reference to Exhibit 99.4 to the Company's Registration Statement on Form S-8 (Registration No.
33-57255).

10.12(e) Form of 1995 Performance Stock Option Agreement (Nontransferable Form) is hereby incorporated by
reference to Exhibit 99.5 to the Company's Registration Statement on Form S-8 (Registration No.
33-57255).

10.13 Supplemental Executive Retirement Plan of TDS is hereby incorporated by reference to Exhibit 10.13 to
the Company's Annual Report on Form 10-K for the year ended December 31, 1994.

10.18 Deferred Compensation Agreement for H. Donald Nelson dated July 15, 1996, is hereby incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1996.

10.19 Deferred Compensation Agreement for Richard Goehring dated July 15, 1996, is hereby incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1996.

10.20 Cellular Interest Transfer Agreement by and between TDS and the Company dated June 20, 1996 is
hereby incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.

10.21 United States Cellular Corporation Compensation Plan for Non-Employee Directors is hereby
incorporated by reference to Exhibit 99.1 to the Company's Registration Statement on Form S-8
(Registration No. 333-19403).

10.22 United States Cellular Corporation 1996 Senior Executive Stock Bonus and Restricted Stock Award Plan
is hereby incorporated by reference to Exhibit 99.1 to the Company's Registration Statement on Form
S-8 (Registration No. 333-19405).

10.23 United States Cellular Corporation Special Retention Restricted Stock Award Plan is hereby
incorporated by reference to Exhibit 99.1 to the Company's Registration Statement on Form S-8
(Registration No. 333-23861).

(b) Reports on Form 8-K filed during the quarter ended December 31, 1997.

The Company filed a Current Report on Form 8-K on December 8, 1997 dated
December 1, 1997, which included a press release that announced that AirTouch
Communications, Inc. ("AirTouch") will acquire interests owned by the Company in
cellular systems serving Seattle and Olympia, Washington; Tucson, Arizona;
Duluth, Minnesota; and rural areas in Colorado and Idaho in exchange for
approximately 4,000,000 shares of AirTouch's common stock and approximately $50
million in cash.

The Company filed a Current Report on Form 8-K on December 29, 1997 dated
December 18, 1997, which included a press release that announced that the
Company had received an offer from TDS to acquire all of the issued and
outstanding Common Shares of the Company not already owned by TDS. The offer was
made in connection with, and is subject to TDS shareholder approval of and the
effectiveness of, TDS's announced corporate restructuring. The restructuring
plan calls for TDS to issue three new classes of common stock, commonly known as
"Tracking Stocks," each of which is intended to separately reflect one of TDS's
primary business groups.

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

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE

To the Shareholders and Board of Directors of United States Cellular
Corporation:

We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in United States Cellular Corporation
and Subsidiaries Annual Report to Shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 28, 1998. Our audits
were made for the purpose of forming an opinion on the basic consolidated
financial statements taken as a whole. The financial statement schedule listed
in Item 14(a)(2) is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This financial statement schedule has been subjected to the auditing
procedures applied in the audits of the basic consolidated financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic consolidated financial
statements taken as a whole.

ARTHUR ANDERSEN LLP

Chicago, Illinois
January 28, 1998

UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
- --------------------------------------------------------------------------------

COLUMN A
DESCRIPTION COLUMN B COLUMN C-1 COLUMN C-2 COLUMN E
- ---------------------------------------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER COLUMN D END OF
(DOLLARS IN THOUSANDS) PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
------------ ------------ ------------ ----------- ------------

FOR THE YEAR ENDED DECEMBER 31, 1997
Deducted from deferred federal tax asset:
For unrealized net operating losses $ (2,147) $ -- $ 2,147 $ -- $ --
Deducted from deferred state tax asset:
For unrealized net operating losses (11,003) 877 (107) -- (10,233)
Deducted from accounts receivable:
For doubtful accounts (4,199) (25,578) -- 24,518 (5,259)
FOR THE YEAR ENDED DECEMBER 31, 1996
Deducted from deferred federal tax asset:
For unrealized net operating losses $ (8,141) $ 5,795 $ 199 $ -- $ (2,147)
Deducted from deferred state tax asset:
For unrealized net operating losses (11,969) 2,305 (1,339) -- (11,003)
Deducted from accounts receivable:
For doubtful accounts (3,820) (17,534) -- 17,155 (4,199)
FOR THE YEAR ENDED DECEMBER 31, 1995
Deducted from deferred federal tax asset:
For unrealized net operating losses $ (23,761) $ 16,730 $ (1,110) $ -- $ (8,141)
Deducted from deferred state tax asset:
For unrealized net operating losses (14,203) 8,257 (6,023) -- (11,969)
Deducted from accounts receivable:
For doubtful accounts (2,073) (12,532) -- 10,785 (3,820)
- -------------------------------------------------------------------------------------------------------------------------------

SIGNATURES

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

UNITED STATES CELLULAR CORPORATION

By: /S/ H. DONALD NELSON
------------------------------------------
H. Donald Nelson
PRESIDENT (CHIEF EXECUTIVE OFFICER)
By: /S/ KENNETH R. MEYERS
------------------------------------------
Kenneth R. Meyers
SENIOR VICE PRESIDENT--FINANCE AND
TREASURER
(CHIEF FINANCIAL OFFICER)
By: /S/ PHILLIP A. LORENZINI
------------------------------------------
Phillip A. Lorenzini
CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)

Dated March 26, 1998

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

SIGNATURE TITLE DATE
- -------------------------------------------------------------------- ----------- ---------------------

/S/ H. DONALD NELSON DIRECTOR March 26, 1998
-----------------------------------------------
H. Donald Nelson
/S/ LEROY T. CARLSON, JR. DIRECTOR March 26, 1998
-----------------------------------------------
LeRoy T. Carlson, Jr.
/S/ LEROY T. CARLSON DIRECTOR March 26, 1998
-----------------------------------------------
LeRoy T. Carlson
/S/ WALTER C.D. CARLSON DIRECTOR March 26, 1998
-----------------------------------------------
Walter C. D. Carlson
/S/ MURRAY L. SWANSON DIRECTOR March 26, 1998
-----------------------------------------------
Murray L. Swanson
/S/ PAUL-HENRI DENUIT DIRECTOR March 26, 1998
-----------------------------------------------
Paul-Henri Denuit

- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
- --------------------------------------------------------------------------------

EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------------ ------------------------------------------------------------------------------------------------------------------

3.1 Restated Certificate of Incorporation, as amended, is hereby incorporated by reference to an exhibit to the
Company's Amendment No. 2 on Form 8 dated December 28, 1992, to the Company's Report on Form 8-A.

3.2 Restated Bylaws, as amended, are hereby incorporated by reference to Exhibit 3 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 1997.

4.1 Restated Certificate of Incorporation, as amended, is hereby incorporated by reference to an exhibit to the
Company's Amendment No. 2 on Form 8 dated December 28, 1992 to the Company's Report on Form 8-A.

4.2 Restated Bylaws, as amended, are hereby incorporated by reference to Exhibit 3 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 1997.

4.3(a) Amended and restated Term Loan Agreement between NTFC Capital Corporation and the Company dated December 22, 1994
is hereby incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.

4.3(b) First Amendment to Amended and Restated Term Loan Agreement between NTFC Capital Corporation and the Company dated
September 29, 1995 is hereby incorporated by reference to Exhibit 4.3(b) to the Company's Annual Report on Form
10-K for the year ended December 31, 1995.

4.4 Indenture dated June 1, 1995 between registrant and Harris Trust and Savings Bank, as Trustee, relating to the
LYONs is hereby incorporated by reference to the Company's Form 8-K dated June 16, 1995.

4.5 Form of Certificate for Liquid Yield Option Note (included in Exhibit 4.4).

4.6 Indenture dated July 31, 1997 between registrant and the First National Bank of Chicago, as Trustee, relating to
the Company's shelf registration of debt securities is hereby incorporated by reference to Exhibit 4 to the
Company's Form 8-K dated August 26, 1997.

4.7 Revolving Credit Agreement dated August 19, 1997, among registrant and BankBoston N.A. and Toronto Dominion
(Texas), Inc., as agents, is hereby incorporated by reference to Exhibit 4 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1997.

9.1 Voting Trust Agreement, dated as of June 30, 1989, with respect to Series A Common Shares of TDS, is hereby
incorporated by reference to an exhibit to the Company's Registration Statement on Form S-1 (Registration No.
33-38644).

9.2 Amendment dated as of May 9, 1991, to the Voting Trust Agreement dated as of June 30, 1989, is hereby incorporated
by reference to Exhibit 9.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.

9.3 Amendment dated as of November 20, 1992, to the Voting Trust Agreement dated as of June 30, 1989, as amended is
hereby incorporated by reference to Exhibit 9.3 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.

10.1 Supplemental Benefit Agreement between the Company and H. Donald Nelson is hereby incorporated by reference to an
exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).

EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------------ ------------------------------------------------------------------------------------------------------------------

10.2(a) Revolving Credit Agreement, between the Company and TDS, as amended, is hereby incorporated by reference to an
exhibit to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No.
33-23492).

10.2(b) Amendment dated as of March 31, 1997, to Revolving Credit Agreement between the Company and TDS is hereby
incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1997.

10.3 Tax Allocation Agreement, between the Company and TDS, is hereby incorporated by reference to an exhibit to the
Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.4 Cash Management Agreement, between the Company and TDS, is hereby incorporated by reference to an exhibit to the
Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.5 Registration Rights Agreement, between the Company and TDS, is hereby incorporated by reference to an exhibit to
the Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.6 Exchange Agreement, between the Company and TDS, as amended, is hereby incorporated by reference to an exhibit to
the Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.7 Intercompany Agreement, between the Company and TDS, is hereby incorporated by reference to an exhibit to the
Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.8 Employee Benefit Plans Agreement, between the Company and TDS, is hereby incorporated by reference to an exhibit
to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.9 Insurance Cost Sharing Agreement, between the Company and TDS, is hereby incorporated by reference to an exhibit
to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.10 Stock Option and Stock Appreciation Rights Plan, is hereby incorporated by reference to Exhibit B to the Company's
definitive Notice of Annual Meeting and Proxy Statement dated April 15, 1991, as filed with the Commission on
April 16, 1991.

10.11 Summary of 1997 Bonus Program for the Senior Corporate Staff of the Company.

10.12(a) United States Cellular Corporation 1994 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit
99.1 to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).

10.12(b) Form of 1994 Long-Term Stock Option Agreement (Transferable Form) is hereby incorporated by reference to Exhibit
99.2 to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).

10.12(c) Form of 1994 Long-Term Stock Option Agreement (Nontransferable Form) is hereby incorporated by reference to
Exhibit 99.3 to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).

10.12(d) Form of 1995 Performance Stock Option Agreement (Transferable Form) is hereby incorporated by reference to Exhibit
99.4 to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).

10.12(e) Form of 1995 Performance Stock Option Agreement (Nontransferable Form) is hereby incorporated by reference to
Exhibit 99.5 to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).

EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------------ ------------------------------------------------------------------------------------------------------------------

10.13 Supplemental Executive Retirement Plan of TDS is hereby incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994.

10.14 Securities Loan Agreement, dated June 31, 1995, between TDS and Merrill Lynch & Co. is hereby incorporated by
reference to Exhibit 99.1 to the Company's Form 8-K dated June 16, 1995.

10.15 Registration Rights Agreement among TDS, Merrill Lynch & Co. and United States Cellular Corporation is hereby
incorporated by reference to Exhibit 99.2 to the Company's Form 8-K dated June 16, 1995.

10.16 Common Share Delivery Arrangement Agreement among TDS, Merrill Lynch & Co. and United States Cellular Corporation
is hereby incorporated by reference to Exhibit 99.3 to the Company's Form 8-K dated June 16, 1995.

10.17 LYONs Offering Agreement between TDS and United States Cellular Corporation is hereby incorporated by reference to
Exhibit 99.4 to the Company's Form 8-K dated June 16, 1995.

10.20 Cellular Interest Transfer Agreement by and between TDS and the Company dated June 20, 1996 is hereby
incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31,
1996.

10.24 Form of 1997 Special Retention Restricted Stock Awards is hereby incorporated by reference to Exhibit
99.2 to the Company's Registration Statement on Form S-8 (Registration No. 333-57063).

10.25 United States Cellular Corporation 1998 Long-Term Incentive Plan is hereby incorporated by
referenceto Exhibit 99.4 to the Company's Registration Statement on Form S-8 (Registration No.
333-57063).

10.26 Deferred Compensation Agreement for Joyce Gab Kneeland dated December 31, 1997.

(b) Reports on Form 8-K filed during the quarter ended December 31, 1998.

The Company filed a Current Report on Form 8-K on December 23, 1998 dated
December 18, 1998, which included a press release that announced that TDS was
withdrawing its offer to acquire all of the issued and outstanding Common Shares
of USM not already owned by TDS (the "Offer"). The original offer was made in
December 1997 and called for TDS to issue a new class of common stock, commonly
known as "Tracking Stock" and which would reflect the performance of the
Company, in exchange for the Common Shares of USM it proposed to acquire.
Because the Offer was withdrawn, a special committee of the Company's Board of
Directors that had been appointed to review the Offer was dissolved.

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

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE

To the Shareholders and Board of Directors of United States Cellular
Corporation:

We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in United States Cellular Corporation
and Subsidiaries Annual Report to Shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 27, 1999. Our audits
were made for the purpose of forming an opinion on the basic consolidated
financial statements taken as a whole. The financial statement schedule listed
in Item 14(a)(2) is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This financial statement schedule has been subjected to the auditing
procedures applied in the audits of the basic consolidated financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic consolidated financial
statements taken as a whole.

ARTHUR ANDERSEN LLP

Chicago, Illinois
January 27, 1999

UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
- --------------------------------------------------------------------------------

COLUMN A
DESCRIPTION COLUMN B COLUMN C-1 COLUMN E
- ---------------------------------------- BALANCE AT CHARGED TO COLUMN C-2 BALANCE AT
BEGINNING OF COSTS AND CHARGED TO COLUMN D END OF
(DOLLARS IN THOUSANDS) PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
------------- ------------ --------------- ----------- -----------

FOR THE YEAR ENDED DECEMBER 31, 1998
Deducted from deferred state tax asset:
For unrealized net operating losses $ (10,233) $ (705) $ (2,510) $ -- $ (13,448)
Deducted from accounts receivable:
For doubtful accounts (5,259) (20,197) -- 19,402 (6,054)
FOR THE YEAR ENDED DECEMBER 31, 1997
Deducted from deferred federal tax
asset:
For unrealized net operating losses $ (2,147) $ -- $ 2,147 $ -- $ --
Deducted from deferred state tax asset:
For unrealized net operating losses (11,003) 877 (107) -- (10,233)
Deducted from accounts receivable:
For doubtful accounts (4,199) (25,578) -- 24,518 (5,259)
FOR THE YEAR ENDED DECEMBER 31, 1996
Deducted from deferred federal tax
asset:
For unrealized net operating losses $ (8,141) $ 5,795 $ 199 $ -- $ (2,147)
Deducted from deferred state tax asset:
For unrealized net operating losses (11,969) 2,305 (1,339) -- (11,003)
Deducted from accounts receivable:
For doubtful accounts (3,820) (17,534) -- 17,155 (4,199)
- ----------------------------------------------------------------------------------------------------------------

SIGNATURES

UNITED STATES CELLULAR CORPORATION

By: /S/ H. DONALD NELSON
------------------------------------------
H. Donald Nelson
PRESIDENT (CHIEF EXECUTIVE OFFICER)

By: /S/ KENNETH R. MEYERS
------------------------------------------
Kenneth R. Meyers
EXECUTIVE VICE PRESIDENT--FINANCE AND
TREASURER (CHIEF FINANCIAL OFFICER)

By: /S/ JOHN T. QUILLE
------------------------------------------
John T. Quille
CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)

Dated March 30, 1999

SIGNATURE TITLE DATE
- -------------------------------------------------------------------- ----------- ---------------------

/S/ H. DONALD NELSON DIRECTOR March 30, 1999
-----------------------------------------------
H. Donald Nelson

/S/ LEROY T. CARLSON, JR. DIRECTOR March 30, 1999
-----------------------------------------------
LeRoy T. Carlson, Jr.

/S/ LEROY T. CARLSON DIRECTOR March 30, 1999
-----------------------------------------------
LeRoy T. Carlson

/S/ WALTER C.D. CARLSON DIRECTOR March 30, 1999
-----------------------------------------------
Walter C. D. Carlson

/S/ SANDRA L. HELTON DIRECTOR March 30, 1999
-----------------------------------------------
Sandra L. Helton

/S/ PAUL-HENRI DENUIT DIRECTOR March 30, 1999
-----------------------------------------------
Paul-Henri Denuit

/S/ J. SAMUEL CROWLEY DIRECTOR March 30, 1999
-----------------------------------------------
J. Samuel Crowley

/S/ KENNETH R. MEYERS DIRECTOR March 30, 1999
-----------------------------------------------
Kenneth R. Meyers

- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
- --------------------------------------------------------------------------------

EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ---------- ----------------------------------------------------------------------------------------------------

3.1 Restated Certificate of Incorporation, as amended, is hereby incorporated by reference to an exhibit
to the Company's Amendment No. 2 on Form 8 dated December 28, 1992, to the Company's Report on Form
8-A.

3.2 Restated Bylaws, as amended.

4.1 Restated Certificate of Incorporation, as amended, is hereby incorporated by reference to an exhibit
to the Company's Amendment No. 2 on Form 8 dated December 28, 1992 to the Company's Report on Form
8-A.

4.2 Restated Bylaws, as amended, are included as Exhibit 3.2 to this Form 10-K filing.

4.3 Indenture dated June 1, 1995 between registrant and Harris Trust and Savings Bank, as Trustee,
relating to the LYONs is hereby incorporated by reference to the Company's Form 8-K dated June 16,
1995.

4.4 Form of Certificate for Liquid Yield Option Note (included in Exhibit 4.3).

9.1 Voting Trust Agreement, dated as of June 30, 1989, with respect to Series A Common Shares of TDS, is
hereby incorporated by reference to an exhibit to the Company's Registration Statement on Form S-1
(Registration No. 33-38644).

9.2 Amendment dated as of May 9, 1991, to the Voting Trust Agreement dated as of June 30, 1989, is
hereby incorporated by reference to Exhibit 9.2 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1991.

9.3 Amendment dated as of November 20, 1992, to the Voting Trust Agreement dated as of June 30, 1989, as
amended is hereby incorporated by reference to Exhibit 9.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1992.

9.4 Amendment dated as of May 22, 1998, to the Voting Trust Agreement dated as of June 30, 1989, as
amended is hereby incorporated by reference to Exhibit 99.3 to Telephone and Data Systems, Inc.'s
Current Report on Form 8-K filed on June 5, 1998.

10.3 Tax Allocation Agreement, between the Company and TDS, is hereby incorporated by reference to an
exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.4 Cash Management Agreement, between the Company and TDS, is hereby incorporated by reference to an
exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.5 Registration Rights Agreement, between the Company and TDS, is hereby incorporated by reference to
an exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.6 Exchange Agreement, between the Company and TDS, as amended, is hereby incorporated by reference to
an exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).

EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ---------- ----------------------------------------------------------------------------------------------------

10.7 Intercompany Agreement, between the Company and TDS, is hereby incorporated by reference to an
exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.8 Employee Benefit Plans Agreement, between the Company and TDS, is hereby incorporated by reference
to an exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.9 Insurance Cost Sharing Agreement, between the Company and TDS, is hereby incorporated by reference
to an exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-16975).

10.10 Stock Option and Stock Appreciation Rights Plan, is hereby incorporated by reference to Exhibit B to
the Company's definitive Notice of Annual Meeting and Proxy Statement dated April 15, 1991, as filed
with the Commission on April 16, 1991.

10.11 Summary of 1998 Bonus Program for the Senior Corporate Staff of the Company.

10.12(a) United States Cellular Corporation 1994 Long-Term Incentive Plan is hereby incorporated by reference
to Exhibit 99.1 to the Company's Registration Statement on Form S-8 (Registration No. 33-57255).

10.12(b) Form of 1994 Long-Term Stock Option Agreement (Transferable Form) is hereby incorporated by
reference to Exhibit 99.2 to the Company's Registration Statement on Form S-8 (Registration No.
33-57255).

10.13 Supplemental Executive Retirement Plan of TDS is hereby incorporated by reference to Exhibit 10.13
to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.

10.14 Securities Loan Agreement, dated June 31, 1995, between TDS and Merrill Lynch & Co. is hereby
incorporated by reference to Exhibit 99.1 to the Company's Form 8-K dated June 16, 1995.

10.15 Registration Rights Agreement among TDS, Merrill Lynch & Co. and United States Cellular Corporation
is hereby incorporated by reference to Exhibit 99.2 to the Company's Form 8-K dated June 16, 1995.

10.16 Common Share Delivery Arrangement Agreement among TDS, Merrill Lynch & Co. and United States
Cellular Corporation is hereby incorporated by reference to Exhibit 99.3 to the Company's Form 8-K
dated June 16, 1995.

10.17 LYONs Offering Agreement between TDS and United States Cellular Corporation is hereby incorporated
by reference to Exhibit 99.4 to the Company's Form 8-K dated June 16, 1995.

10.18 Deferred Compensation Agreement for H. Donald Nelson dated July 15, 1996 is hereby incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1996.

EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ---------- ----------------------------------------------------------------------------------------------------

10.19 Deferred Compensation Agreement for Richard Goehring dated July 15, 1996 is hereby incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1996.

10.24 Form of 1997 Special Retention Restricted Stock Awards is hereby incorporated by reference to
Exhibit 99.2 to the Company's Registration Statement on Form S-8 (Registration No. 333-57063).

10.25 United States Cellular Corporation 1998 Long-Term Incentive Plan is hereby incorporated by reference
to Exhibit 99.4 to the Company's Registration Statement on Form S-8 (Registration No. 333-57063).

10.26 Deferred Compensation Agreement for Joyce Gab Kneeland dated December 31, 1997.

11 Statement regarding computation of per share earnings.earnings (included in Note 4 to Consolidated Financial
Statements which are included in Exhibit 13).

12 Statement regarding computation of ratios.

13 Incorporated portions of 19971998 Annual Report to Security Holders.

21 Subsidiaries of the Registrant.

23.1 Consent of independent public accountants.

27.127 Financial Data Schedule for December 31, 1997 and for the period then ended.

27.2 Financial Data Schedule for December 31, 1995 and for the period then ended.

27.3 Financial Data Schedule for March 31, 1996; June 30, 1996; September 30, 1996; and December 31, 1996; and for the
periods then ended.

27.4 Financial Data Schedule for September 30, 1997 and for the period then ended.Schedules.

[LOGO]

8410 West Bryn Mawr
Suite 700
Chicago, Illinois 60631
(773) 399-8900