TDS Tempered by Market

We maintain our Hold rating for Telephone and Data Systems (TDS) following the release of recent quarterly results highlighted by modest overall revenue growth. The company's wireless business (U.S. Cellular, (USM) provided improved financial metrics, which offset declines in wireline physical access lines.

The results demonstrate sequential improvement in net additions for both wireless and broadband Internet subscriber bases. TDS was successful in maintaining low churn (customer switch) as expanded deployment of EVDO wireless networks and associated usage of smartphones boosted revenue per subscriber. Additionally, the company solidified improved returns to shareholders with increased dividend payouts and ongoing share repurchases.

Management provided a stable outlook for 2009 with continued focus on revenue and subscriber growth through network technology upgrades and coverage expansion. Although the company's ongoing business initiatives look promising, we believe investors should take into consideration higher expenses for network infrastructure upgrades and current macroeconomic uncertainties.

Anindya Barman contributed to this report.

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