UNITED STATES CELLULAR CORP (Form: 10-K, Received: 02/26/2018 08:51:01)

UNITED STATES

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, 2017

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

For the transition period from to

Commission file number 001-09712

UNITED STATES CELLULAR CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware

62-1147325

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

8410 West Bryn Mawr, 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:

Title of each class

Name of each exchange on which registered

Common Shares, $1 par value

New York Stock Exchange

6.95% Senior Notes Due 2060

New York Stock Exchange

7.25% Senior Notes Due 2063

New York Stock Exchange

7.25% Senior Notes Due 2064

New York Stock Exchange

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

Yes

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

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[x]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

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[x]

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.

[x]

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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[x]

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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.

[x]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

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Accelerated filer

[x]

Non-accelerated filer

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(Do not check if a smaller reporting company)

Smaller reporting company

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Emerging growth company

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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Yes

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

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[x]

As of June 30, 2017, the aggregate market value of the registrant's Common Shares held by non-affiliates was approximately $541 million, based upon the closing price of the Common Shares on June 30, 2017, of $38.32, as reported by the New York Stock Exchange. For purposes hereof, it was assumed that each director, executive officer and holder of 10% or more of any class of voting equity security of U.S. Cellular is an affiliate.

The number of shares outstanding of each of the registrant's classes of common stock, as of January 31, 2018, is 52,122,000 Common Shares, $1 par value, and 33,006,000 Series A Common Shares, $1 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Those sections or portions of the registrant's 2017 Annual Report to Shareholders (Annual Report), filed as Exhibit 13 hereto, and of the registrant’s Notice of Annual Meeting of Shareholders and Proxy Statement (Proxy Statement) to be filed prior to April 30, 2018, for the 2018 Annual Meeting of Shareholders scheduled to be held May 22, 2018, are herein incorporated by reference into Parts II and III of this report.

United States Cellular Corporation

Annual Report on Form 10-K

For the Period Ended December 31, 201 7

TAB LE OF CONTENTS

Page No.

Unresolved Staff Comments

Mine Safety Disclosures

Part II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6.

Selected Financial Data

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A.

Quantitative and Quali tative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A.

Controls and Procedures

Directors, Executive Officers and Corporate Governance

Item 11.

Executive Compensation

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Item 14.

Principal Accountant Fees and Services

Part IV

Item 15.

Exhibits and Financial Statement Schedules

Item 16.

Form 10-K Summary

PA RT I

Item 1. Busi ness

General

United States Cellular Corporation ( U.S. Cellular ) provides wireless telecommunications services to customers with approximately 5.1 million connections in 22 states collectively rep resenting a total population of 32 million. U.S. Cellular operates in one reportable segment , and all of its wireless o perating markets are in the United States.

U.S. Cellular’s strategy is to attract and retain wireless customers through a value proposition comprised of a high-quality network , outstanding customer service, and competitive devices, plans and pricing, all p rovided with a local focus.
U.S. Cellular Common Shares trade on the New York Stock Exchange ( NYSE ) under the ticker symbol “USM.”
U. S. Cellular is a majority-owned subsidiary of Telephone and Data Systems, Inc. (NYSE: TDS). As of December 31, 2017 , TDS owns 83% of U.S. Cellular ’s C ommon Shares , has the voting power to elect all of the directors of U.S. Cellular and controls over 96% of the voting power in matters other than the election of directors of U.S. Cellular.

U.S. Cellular was incorporated under the laws of the state of Delaware in 1983.

The map below highlights areas of operation of U.S. Cellular’s consolidated operating markets.

Customers, Services and Products

Customers. U.S. Cellular provides service to postpaid and prepaid customers from a variety of demographic segments. U.S. Cellular focuses on retail consumers, government entities , and small-to-mid-size business customers in industries such as construction, retail, agriculture, professiona l services and real estate. These customers are served primarily through U.S. Cellular’s retail and direct sales channels. U.S. Cellular builds customer loyalty by offering high-quality network services, outstanding customer - foc used support services, com petitive pricing, and other benefits as discussed further in “Marketing, Customer Service, and Sales and Distribution Channels.”

Services. U.S. Cellular’s customers are able to choose from a variety of national plans with voice, messaging and data usage o ptions and pricing that are designed to fit different customer needs, usage patterns and budgets. Helping a customer find the right plan is an important element of U.S. Cellular’ s brand positioning . In early 2017, U.S. Cellular introduced new Total Plans to postpaid customers that include unlimited offerings and no hidden fees such as overage charges and activation fees. Business rate plans are designed to meet the unique needs of the business customer. U.S. Cellular’s national plans price all domestic calls as local calls, regardless of where they are made or received in the United States, with no long distance or roaming charges , made possible by roaming agreement s with other wireless carriers . See “Network Technology, Roaming, and System Design” sect ion below for further discussion related to roaming.

U.S. Cellular’s portfolio of smartphones, tablets and other connected devices is a key part of its strategy to deliver wireless devices that allow customers to stay productive, entertained and connected on the go ; these devices are backed by U.S. Cellular’s high-speed networks, including a fourth generation ( 4G ) Long-Term Evolution ( LTE ) network. U.S. C ellular’s 4G LTE network features smartphone messaging, data and internet services that allow custo mers to access the web and social network sites, e-mail, text, picture and video message, utilize GPS navigation, and browse and download thousands of applications to customize their wireless de vices to fit their lifestyles. U.S. Cellular also offers adva nced wireless solutions to consumers and business and government customers, including a growing suite of connected machine - to - machine (M2M) solutions and software applications across the categories of monitor and control (e.g. , sensors and cameras), busine ss automation/operations (e.g. , e-forms), communication (e.g. , enterprise messaging, back-up router for business continuity services) and asset management (e.g. , telematics, fleet management). U.S. Cellular intends to continue to further enhance these off erings for consume r and business customers in 2018 and beyond.

Devices and Products. U.S. Cellular offers a comprehensive range of wireless devices such as handsets, tablets , mobile hotspots, home phone s and routers for use by its customers. U.S. Cellula r offers wireless devices that are compatible with its 4G LTE and third generation ( 3G ) networks and are compliant with the Federal Co mmunications Commission (FCC) enhanced wireless 911 requiremen ts. In addition, U.S. Cellular also offers a wide range of accessories, including wireless basics such as cases, screen protectors , chargers, and memory cards as well as an assortment of consumer electronics such as headphones, smart speakers, wearables and home automation products (e.g., cameras, sensors, and the rmostats) .

Throughout 2017, new postpaid handset sales to retail consumers were made under equipment installment plans (EIP) only; business and government customers may continue to purchase equipment under alternative plans subject to a service contract. For certain inst allment plans, after a specified period of time or number of payments , the customer may have the right to upgrade to a new device prior to reaching the end of the installment term , thus enabling customers to access the latest smartphones and provide a bet ter overall customer experience.

During 2017, U.S. Cellular began to offer accessories for purchase on installment plans. These plans allow new and existing postpaid customers to purchase certain accessories payable over a specified time period. These accessory installment plans are available through U.S. Cellular company-owned retail stores, telesales channels, and agent channels using direct fulfillment with U.S. Cellular’s inventory.

U.S. Cel lular continues to offer device service prog rams that provide customers a simple process to replace a defective device via direct mail. U.S. Cellular also offers its Trade-In program where U.S. Cellular buys consumers’ used equipment, Device Protection+ program , which includes overnight delivery of a replacement device for damaged, lost and stolen devices , Device Protection+ Advanced, which includes 100GB of data backup, TechSupport+, and AppleCare services for Apple iOS customers.

U.S. Cell ular offers a full array of iconic smartphones with options for both Android and iOS customers. U.S. Cellular continues to bolster its expanding smartphone portfolio with the Samsung Galaxy S® 8/8+ , the iPhone® 8 and 8 Plus and X , the LG G6, V 30 and K8, and the Motorola Z Force . Along with the iconic devices, U. S. Cellular supports the larger ecosystem of Samsung and Apple devices, such as the Samsung Gear VR, the Samsung Gear S 3 and the Apple Watch Series 3 . For tablets, U.S. Cellular offer s the full complement of iPads, the Samsung Galaxy Tab S 3 and various ot her tablets from LG, Samsung, and ZTE. U.S. Cellular’s smartphone offerings play a significant role in attracting customers and driving data service usage and revenues. U.S. Cellular also offers additional services and products that utilize the company’s network, including feature phones, mobile hotspots, LTE wireless routers and home phones.

U.S. Cellular purchases wireless devices and accessory products from a number of original equipment manufacturers, including Samsung, App le, Motorola, LG, Kyocera, ZTE, Tessco and Superior . U.S. Cellular also has relationships with its suppliers to ensure best possible pricing and identifies opportuni ties for promotional support. U.S. Cellular does not own significant product warehousing and distribution infrastru cture; rather, it contracts with third party providers for the majority of its product warehousing, distribution and direct customer fulfillment activities. U.S. Cellular also contracts with third party providers for services related to its device service programs.

U.S. Cellular continuously monitors the financial condition of its wireless device a nd accessory suppliers. Since U.S. Cellular has a diversified portfolio of products from more than one supplier , U.S. Cellular does not expect the financial con dition of any single supplier to affect its ability to offer a competitive portfolio of wireless devices and accessories for sale to customers.

Marketing, Customer Service, and Sales and Distribution Channels

Marketing and Advertising. U.S. Cellular’s mar keting plan is focused on acquiring, retaining and growing customer relationships by maintaining a high-quality wireless network, providing outstanding customer service, and offering a comprehensive portfolio of services and products built aroun d customer needs at fair prices with a local focus. U.S. Cellular believes that creating positive relationships with its customers enhances their wireless experience and builds customer loyalty. U.S. Cellular currently offers several customer-centric pro grams and services to customers.

To attract potential new customers and retain existing customers, and increase their usage of U.S. Cellular’s services , U.S. Cellular’s advertising is directed at increasing the public awareness of the U.S. Cellular brand, knowledge of the outstanding network that works in places where other carriers do not have coverage, and understanding of the wireless services it offers. U.S. Cellular supplements its advertising with a focused public relations program that improves ove rall brand sentiment and awareness, encourages engagement , supports sales of services and products , and builds preference and loyalty for the U.S. Cellular brand . The approach combines national and local media relations in mainstream and social media chan nels with market-wide activities, events, and sponsorships.

U.S. Cellular focuses its charitable giving on initiatives relevant to consumers in its service areas. These initiatives include programs that focus on STEM (Science, Technology, Engineering and Math) activities for youth in the communities U.S. Cellular serves and often involve collaboration with organizations such as the Boys and Girls Clubs of America.

Customer Service. U.S. Cellular manages customer retention by focusing on outstanding customer service through the development of processes that are customer-friendly, extensive training of frontline sales and support associates and the implementation of retention programs.

U.S. Cellular currently operates four regional customer care center s in its operating markets with personnel who are responsible for customer service activities, and a national financial services center with personnel who perform credit and other customer payment activities. U.S. Cellular also contracts with third partie s that provide additional customer care and financial services support.

Sales and Distribution Channels. U.S. Cellular supports a multi-faceted distribution program, including retail sales, direct sales, third-party national retailers, and independent age nts, plus a website and telesales.

Company retail store locations are designed to market wireless services and products to the consumer and small business segments in a setting familiar to these types of customers. As of December 31, 2017 , retail sales associates work in 256 U.S. Cellular-operated retail stores and kiosks. Direct sales representatives sell traditional wireless services as well as Internet of Things (IoT) and M2M products and solutions to medium- and large-sized businesses and government entities. Additionally, the U.S. Cellular website enables customers to activate service and purchase wireless devices online.

U.S. Cellular maintains an ongoing training program to improv e the effectiveness of retail sales associates and direct sales representatives by focusing their efforts on obtaining customers by facilitating the sale of appropriate packages for the customer’s expected usage and value-added services that meet the indiv idual needs of the customer.

U.S. Cellular has relationships with exclusive and non-exclusive agents (collectively “agents”), which are independent businesses that obtain customers for U.S. Cellular on a commission basis . At December 31, 2017 , U.S. Cellular had contracts with these businesses aggregating 455 locations. U .S. Cellular provides support and training to its agents to increase customer satisfaction and to ensure a consistent customer experience. U.S. Cellular’s agents are generally in the business of selling wireless devices, wireless service packages and other related products. No single agent accounted for 10% or more of U.S. Cellular’s operating revenues during the past three years.

U.S. Cellular services and products also are offered through third-party national and on-line retailers. Wal-Mart, Sam’s Club, and Dollar General offer U.S. Cellular services and products at select retail locations in U.S. Cellular’s service areas. Further, Amazon offers U.S. Cellular’s postpaid and prepaid services on-line. U.S. Cellular continues to explore new relationships with additional third-party retailers as part of its strategy to expand distribution.

Seasonality. S easonality in o perating expenses may cause operating income to vary from quarter to quarter. U.S. Cellular’s operating expenses tend to be higher in the fourth quarter due to increased marketing and promotional activities during t he holiday season.

Competition

The wirel ess telecommunication industry is highly competitive. U.S. Cellular competes directly with several wireless service providers in each of its markets. In general, there are between two and four competitors in each wireless market in which U.S. Cellular pr ovides service, excluding resellers and mobile virtual network operators (MVNO) . In its footprint, U.S. Cellular competes to varying degrees against each of the national wireless companies: Verizon Wireless, AT&T Mobility, Sprint, and T-Mobile USA, in add ition to a few smaller regional carriers in specific areas of its footprint. A ll of the national competitors have substantially greater financial and other resources than U.S. Cellular. In addition , U.S. Cellular competes with other companies that use al ternative communication technology and services to provide similar services and products .

Since each of these wireless competitors operates on systems using spectrum licensed by the FCC and has comparable technology and facilities, competition among wire less service providers for customers is principally on the basis of types of services and products , price, size of area covered, network quality, network speed and responsiveness of customer service. U.S. Cellular employs a customer satisfaction strategy that includes maintaining an outstanding wireless network throughout its markets. U.S. Cellular owns and operates low-band spectrum (less than 1 GHz) that covers the majority of its footp rint and enables more efficient coverage in rural areas (compared to spectrum above 1 GHz), which strengthens its network quality positioning. To the extent existing competitors or new entrants acquire such spectrum in U.S. C ellular markets, U.S. Cellular c ould face increased competition over time from competitors that ho ld such more-efficient low-band spectrum.

The use of national advertising and promotional programs by the top four wireless service providers is a source of additional competitive and pricing pressures in all U.S. Cellular markets, even if those operators do not provide direct service in a particular market. Over the past year, competition among top carriers has continued to be aggressive, with the top four carriers offering unlimited plans as well as engaging in rich promotional initiatives including device price reductions. In addition, in the current wireless environment, U.S. Cellular’s ability to compete depends on its ability to continue to offer national voice and data plans. U.S. Cellular provides wireless services comparable to the national c ompetitors, but the national wireless companies operate in a wider geographic area and are able to provide such services over a wider area on their own networks than U.S. Cellular can offer on its network. Although U.S. Cellular offers similar coverage ar ea as these competitors, U.S. Cellular incurs roaming charges for data sessions and calls made in portions of the coverage area which are not part of its network, thereby increasing its cost of operations. U.S. Cellular depends on roaming agreements with other wireless carriers to provide voice and data roaming capabilities in areas not covered by U.S. Cellular’s network. Similarly, U.S. Cellular provides roaming services on its network to other wireless carriers’ customers who travel within U.S. Cellular ’s coverage areas and receives revenue from other carriers for the provision of these services.

Convergence of connectivity is taking place on many levels, including wirel ess devices that can act as wireless or wireline replacement devices and the incorpor ation of wireless “hot spot” technology in wireless devices making internet access seamless regardless of location. Although less directly a substitute for other wireless services, wireless data services such as Wi-Fi may be adequate for those who do not need mobile wide-area roaming or full two-way voice services. Technological advances or regulatory changes in the future, such as the rollout and consumer adoption of Wi-Fi calling and Voice over Long - Term Evolution (VoLTE) capabilities, may make availabl e other alternatives to current wireless service, thereby creating additional sources of competition that shift consumers’ perceptions and preferences of network strength, speed and reliability. If the trend toward convergence continues , U.S. Cellular is at a competitive disadvantage to larger competitors, including the national wireless carriers , traditional cable companies, MVNOs and other potential large new entrants with much greater financial and other resources in adapting to such convergence. Cable companies have begun to compete in the wireless market. Most notably, Comcast currently offers wireless services and Charter is expected to begin offering wireless services in 2018.

U.S. Cellular’s approach in 2018 and in future years will be to focus o n the unique needs and attitudes of its customers towards wireless service. U.S. Cellular will deliver high- quality services and products at competitive prices and intends to continue to differentiate itself by seeking to provide an overall outstanding cu stom er experience, founded on a high- quality network. U.S. Cellular’s ability to compete successfully in the future will depend upon its ability to anticipate and respond to changes related to new service offerings, consumer preferences, competitors’ pric ing strategies and new product offerings , technology, demographic trends, economic conditions and its access to adequate spectrum resources.

Network Technology, Roaming, and System Design

Technology. Wireless telecommunication systems transmit voice, data , graphics and video through the transmission of signals over networks of radio towers using radio spectrum licensed by the FCC. Access to local, regional, national and worldwide telecommunications networks is provided through system interconnections. A high-quality network, supported by continued investments in that network, will remain an important factor for U.S. Cellular to remain competitive.

4G LTE technology enables more network capacity for more data per user as well as faster access to data. In addition, U.S. Cellular commercially deployed VoLTE technology for the first time in 2017 in one key market and will continue to build out VoLTE services over the next few years. The next commercial launch is expected to occur in several additional operat ing markets starting in early 2018. VoLTE technology allows customers to utilize a 4G LTE network for both voice and data services, and enables enhanced services such as high definition voice, video calling and simultaneous voice and data session s. In ad dition, the deployment of VoLTE technology expands U.S. Cellular’s ability to offer roaming services to other carriers. U.S. Cellular continues to offer services based on 3G technology and Code Division Multiple Access (CDMA) digital technology across its networks.

Roaming . U.S. Cellular’s main sources of revenues are its own customers and customers of other wireless operators who roam on its network. An inter-carrier roaming agreement is negotiated between the wireless operators to enable customer s who are in a wireless service area other than the customer’s home service area to place or receive a call or text message, or to use data services, in that service area. U.S. Cellular has entered into reciprocal roaming agreements with operators of other wire less systems covering virtua lly all systems with CDMA technology in the United States, Canada and Mexico. In addition, U.S. Cellular has entered into reciprocal 4G LTE roaming agreement s with national wireless companies and, as a result, a majority of U.S . Cellular customers currently have access to nationwide 4G LTE service.

Another digital technology, Global System for Mobile Communication (GSM), has a larger installed base of customers worldwide. U.S. Cellular customers now have the ability to roam o n GS M carriers with voice, data and text messaging in Canada, Mexico and internationally. Both CDMA and GSM technologies are being succeeded by 4G LTE and VoLTE technology.

System Design and Construction. U.S. Cellular designs and constructs its system s in a manner it believes will permit it to provide high-quality service to substantially all types of compatible wireless devices. Designs are based on engineering studies which relate to specific markets, in support of the larger network. Network relia bility is given careful consideration and extensive backup redundancy is employed in many aspects of U.S. Cellular’s network design. Route diversity, redundant equipment, ring topology and extensive use of emergency standby power also are used to enhance network reliability and minimize service disruption from any particular network element failure.

In accordance with its strategy of building and strengthening its operating market areas, U.S. Cellular has selected high-capacity, carrier-class digital wirel ess switching systems that are capable of serving multiple markets through a single mobile telephone switching office. Centralized equipment, used for network and data management, is located in high-availability facilities supported by multiple levels of power and network redundancy. U.S. Cellular’s systems are designed to incorporate Internet Protocol (IP) packet-based Ethernet technology, which allows for increased data capacity and a more efficient network. Interconnection between the mobile telephone switching office and the cell sites utilizes Ethernet technology for nearly all 4G LTE sites, over fiber or microwave links.

U.S. Cellular believes that currently available technologies and appropriate capital additions will allow sufficient capacity on i ts networks to meet anticipated demand for voice and data services over the next few years. However, increasing demand for high-speed data may require the acquisition of additional spectrum licenses to provide sufficient capacity and throughput.

Construct ion of wireless systems is capital-intensive, requiring substantial investment for land and improvements, buildings, towers, mobile telephone switching offices, cell site equipment, transport equipment, engineering and installation. U.S. Cellular primaril y uses its own personnel to engineer each wireless system it owns and operates, and engages contractors to construct the facilities.

The costs (inclusive of the costs to acquire licenses) to develop the systems which U.S. Cellular operates have historically been financed primarily through proceeds from debt offerings, with cash generated by operations, and proceeds from the sales of wireless interests and other non-strategic assets.

Business Development Strategy

U.S. Cellular groups its individual markets (geographic service areas a s defined by the FCC in which wireless carriers are licensed, for fixed terms, to provide service) into broader geographic market areas to offer customers large service areas that primarily utilize U.S. Cellul ar’s network. U.S. Cellular’s interests in wir eless licenses include both direct interests whereby U.S. Cellular is the licensee and investment interest s in entities which are licensees; together, these direct and investment interests involve operating and non-operating licenses covering 31 states and a total population of 51 million at December 31, 2017 .

U.S. Cellular’s business development strategy is to obtain interests in or access to wireless licenses i n its current operating markets and in areas that are adjacent to or in close proximity to its other wireless licenses, thereby building larger geographic operating market areas. U.S. Cellular believes that the acquisition of additional licenses within it s current operating markets will enhance its network capacity and speed to meet its customers’ growing demand for data services . From time to time, U.S. Cellular has divested outright or included in exchanges for other wireless interests certain consolida ted and investment interests that were considered less essential to its current and expected future operations. As part of its business development strategy, U.S. Cellular may periodically be engaged in negotiations relating to the acquisition, exchange o r disposition of companies, strategic properties , investment interests or wireless spectrum. See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for a description of recent significant acquisitions, divestitures and exchanges.

Occasionally, the FCC conducts auctions through which additional spectrum is made available for the provision of wireless services. Historically, U.S. Cellular has participated in certain prio r FCC auctions both directly and indirectly through its limited partnership interests. Each limited partnership that qualified as a “designated entity” was eligible for bidding credits with respect to most licenses purchased in accordance with the rules d efined by the FCC for each auction. In most cases, the bidding credits resulted in a 25% discount from the gross winning bid . In July 2016 , the FCC announced U.S. Cellular as a qualified bidder in the FCC’s forward auction of 600MHz spectrum licenses , referred to as Auction 100 2 . Due to changes in FCC rules, U.S. Cellular did not apply to participate in Auction 100 2 by investing in a “designated entity” limited partnership which would have qualified for a discount of 25% on any licenses won in the auct ion. Instead, U.S. Cellular applied to participate in the auction directly and did not qualify for such discount. The FCC announced by way of public notice that U.S. Cellular was the winning bidder for 188 licenses for an aggregate purchase price of $ 329 million and granted the licenses to U.S. Cellular during the second quarter of 2017. See Exhibit 13 to this Form 10-K, under “Regulatory Matters – FCC Auction 1002” for a summary of U.S. Cellular’s participation in Auction 100 2.

Regulation

U.S. Cellular’s operations are subject to federal, state and local regulation. Key regulatory consi derations are discussed below. Additional information relating to U.S. Cellular’s regulatory environment is in Risk Factors and incorporated by reference from E xhibit 13 to this Form 10-K, Annual Report section “Regulatory Matters . ”

U.S. Cellular provides various wireless services, including voice and data services, pursuant t o licenses granted by the FCC. The construction, operation and transfer of wireless sys tems in the United States are regulated to varying degrees by the FCC pursuant to the Communications Act of 1934, as a mended (Communications Act). The FCC currently does not require wireless carriers to comply with a number of statutory provisions otherwi se applicable to common carriers that provide, originate or terminate interstate or international telecommunications. However, the FCC has enacted regulations governing construction and operation of wireless systems, licensing (including renewal of licens es) and technical standards for the provision of wireless services under the Communications Act.

Wireless licenses segmented by geographic areas are granted by the FCC. The completion of acquisitions, involving the transfer of control of all or a portion of a wireless system , requires prior FCC approval. The FCC determines on a case-by-case basis whether an acquisition of wireless licenses is in the public interest. Wireless licenses are granted generally for a ten year term or, in some cases, for a fift een year term. The FCC establishes the standards for conducting comparative renewal proceedings between a wireless license holder seeking renewal of its license and challengers filing competing applications. All of U.S. Cellular’s licenses for whic h it a pplied for renewal since 1995 have been renewed. U.S. Cellular expects to continue to meet the criteria of the FCC’s license renewal process.

As part of its data services, U.S. Cellular provides internet access. Such internet access services may be subje ct to different regulatory requirements than other wireless services.

Reference is made to Exhibit 13 to this Form 10-K under “Regulatory Matters ” for information regarding any significant recent developments and proposals relating to the foregoing regulat ory matters .

Although the Communications Act generally pre-empts state and local governments from regulating the entry of, or the rates charged by, wireless carriers, certain state and local governments regulate other terms and conditions of wireless servi ces, including billing, termination of service arrangements, imposition of early termination fees, advertising, network outages, the use of handsets while driving, zoning, land use , privacy, data security and consumer protection . Further, the Federal Avia tion Administration also regulates the siting, lighting and construction of transmitter towers and antennae.

Debt Securities

The following securities trade on the NYSE: U.S. Cellular’s 6.95% Senior Notes due 2060 trade und er the symbol “UZA, ” U.S. Cellular’s 7.25% Senior Notes due 2 063 trade under the symbol “UZB, ” and U.S. Cellular’s 7.25% Senior Notes due 2064 trade under the symbol “UZC . ” U.S. Cellular’s 6.7% Senior Notes due 2033 are traded over the counter and are not listed on any stoc k exchange.

Employees

U.S. Cellular had approximately 5,900 full-time and part-time employees as of December 31, 2017 . None of U.S. Cellular’s employees are represented by labor organizations. U.S. Cellular considers its relationship with its employees to be good.

Location and Company Information

U.S. Cellular executive offices are located at 8410 West Bryn Mawr Avenue, Chicago, Illinois 60631. U.S. Cell ular’s telephone number is 773-399-8900 . U.S. Cellular’s website address is www.uscellular.com. U.S. Cellular files with, or furnishes to, the Securities and Exchange Commission (SEC ) annual reports on Form 10-K, quarterly reports on Form 10-Q, current r eports on Form 8-K, as well as various other information. Investors may access, free of charge, through the Investor Relations portion of the website, U.S. Cellular’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K , and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practical after such material is filed electronically with the SEC. The public may read and copy any materials U.S. Cellular f iles with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. The public may obtain information on the operation of the Reference Room by calling the SEC at 1-800-732-0330. The public may also view electronic filings of U.S. Cellular by accessing SEC filings at www.sec.gov.

Item 1A. R isk Factors

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

SAFE HARBOR CAUTIONARY STATEMENT

This Annual Report on Form 10-K, including exhibits, contains statements that are not based on historical facts and represent forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical f acts, that address activities, events or developments that U.S. Cellular intends, expects, projects, believes, estimates, plans or anticipates will or may occur in the future are forward-looking statements. The words “believes,” “anticipates,” “estimates, ” “expects,” “plans,” “intends,” “projects” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. Such forward-looking statements involve known and unknown risks, uncertaint ies and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include those set forth below under “Risk Factors” in this Form 10-K. Each of the following risks could have a material adverse effect on U.S. Cellular’s business, financial condition or results of operations. H owever, such factors are not necessarily al l of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document. Other unknown or unpredictable factors also cou ld have material adverse effects on future results, performance or achievements. U.S. Cellular undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. You should caref ully consider the following risk factors and other information contained in, or incorporated by reference into, this Form 10-K to understand the material risks relating to U.S. Cellular’s business.

Risk Factors

Intense competition in the markets in which U .S. Cellular operates could adversely affect U.S. Cellular’s revenues or increase its costs to compete.

Competition in the wireless industry is intense and is expected to intensify in the future due to multiple wireless industry factors such as increasing market penetration, decreasing customer churn rates, introduction of new products, new competitors and changing prices. There is competition in pricing; handsets and other devices; network quality, coverage, speed and technologies; distribution; new entra nts; and other categories. In particular, wireless competition includes aggressive promotional pricing to induce customers to switch carriers, which could result in switching activity and churn. U.S. Cellular’s ability to compete effectively will depend, in part, on its ability to anticipate and respond to various competitive factors affecting the telecommunications industry. In addition, the widening adoption of unlimited plans and other data pricing constructs across the industry, including U.S. Cellul ar’s introduction of unlimited plans earlier in 2017, may limit the industry’s ability to monetize future growth in data usage. U.S. Cellular anticipates that these competitive factors may cause the prices for services and products to continue to decline and the costs to compete to increase. Most of U.S. Cellular’s competitors are national or global telecommunications companies that are larger than U.S. Cellular, possess greater financial and other resources, possess more extensive coverage areas and more spectrum within their coverage areas, and market other services with their communications services that U.S. Cellular does not offer. Further, other companies that currently are less competitive may also add more efficient low-band spectrum to become mor e competitive in U.S. Cellular’s primary markets. In particular, to the extent that existing competitors or new entrants acquired low-band (600 MHz) spectrum in U.S. Cellular markets, U.S. Cellular could face increased competition over time. In addition, U.S. Cellular may face competition from technologies that may be introduced in the future. New technologies, services and products that are more commercially effective than the technologies, services and products offered by U.S. Cellular may be developed . Further, new technologies may be proprietary such that U.S. Cellular is not able to adopt such technologies. There can be no assurance that U.S. Cellular will be able to compete successfully in this environment.

Sources of competition to U.S. Cellular ’s business typically include two to four competing wireless telecommunications service providers in each market, wireline telecommunications service providers, cable companies, resellers (including MVNO), and providers of other alternate telecommunication s services. Many of U.S. Cellular’s wireless competitors and other competitors have substantially greater financial, technical, marketing, sales, purchasing and distribution resources than U.S. Cellular.

If U.S. Cellular does not adapt to compete effectiv ely in such a highly competitive environment, such competitive factors could result in product, service, pricing or cost disadvantages and could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

A failure by U.S. Cellular to successfully execute its business strategy (including planned acquisitions, spectrum acquisitions, divestitures and exchanges) or allocate resources or capital could have an adverse effect on U.S. Cellular’s business, financial condition o r results of operations.

U.S. Cellular is a regional wireless carrier, but competes primarily against much larger national wireless carriers with much greater resources. Its business strategy in attempting to attract and retain wireless customers through a value proposition comprised of a high-quality network, outstanding customer service, and competitive devices, plans and pricing, all provided with a local focus has not resulted in, and in the future may not result in, performance that achieves returns in line with or above its cost of capital. U.S. Cellular’s current forecast indicates that U.S. Cellular will not achieve a return on capital that exceeds its cost of capital in the foreseeable future. U.S. Cellular also might be unable to adopt technolo gies, services and products as fast as its larger competitors. As a result, consumers who are eager to adopt new technologies, services and products more quickly may select U.S. Cellular’s competitors rather than U.S. Cellular as their service provider. To the extent that U.S. Cellular does not attract or retain these types of customers, U.S. Cellular could be at a competitive disadvantage and have a customer base that generates lower profit margins relative to its competition.

The successful execution of strategy and optimal capital allocation decisions depend on various internal and external factors, many of which are not in U.S. Cellular’s control. U.S. Cellular’s ability to achieve projected financial results by implementing and executing its business strategy and optimally allocating its assets and capital could be affected by such factors. Such factors include but are not limited to pricing practices by competitors, relative scale, purchasing power, roaming and other strategic agreements, wireless d evice availability, timing of introduction of wireless devices, access to spectrum, emerging technologies and other factors. In addition, there is no assurance that U.S. Cellular’s strategy will be successful. Even if U.S. Cellular executes its business strategy as intended, such strategy may not be successful in the long term at achieving growth in customers, revenues, net income, or generating a return on capital greater than U.S. Cellular’s cost of capital. A failure by U.S. Cellular to execute its bu siness strategy successfully or to allocate resources or capital optimally could have an adverse effect on U.S. Cellular’s wireless business, financial condition or results of operations.

Uncertainty in U.S. Cellular’s future cash flow and liquidity or in the ability to access capital, deterioration in the capital markets, other changes in U.S. Cellular’s performance or market conditions, changes in U.S. Cellular’s credit ratings or other factors could limit or restrict the availability of financing on term s and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its construction, development or acquisition programs, reduce the acquisition of spectrum licenses, and/or reduce or cease share repurchases.

U.S. Cellular operates a cap ital-intensive business. Historically, U.S. Cellular has used internally-generated funds and also has obtained substantial funds from external sources for general corporate purposes. In the past, U.S. Cellular’s existing cash and investment balances, fun ds available under its revolving credit facilities, funds from other financing sources, including a term loan and other long-term debt, and cash flows from operating, certain investing and financing activities, including sales of assets or businesses, prov ided sufficient liquidity and financial flexibility for U.S. Cellular to meet its normal day-to-day operating needs and debt service requirements, to finance the build-out and enhancement of markets and to fund acquisitions. There is no assurance that thi s will be the case in the future. It may be necessary from time to time to increase the size of the existing revolving credit facility, to put in place new credit facilities, or to obtain other forms of financing in order to fund potential expenditures. U.S. Cellular’s liquidity would be adversely affected if, among other things, U.S. Cellular is unable to obtain short or long-term financing on acceptable terms, U.S. Cellular makes significant spectrum license purchases, the Los Angeles SMSA Limited Partn ership (LA Partnership) discontinues or reduces distributions compared to historical levels, or Federal USF and/or other regulatory support payments decline substantially. In addition, although sales of assets or businesses by U.S. Cellular have been an i mportant source of liquidity in prior periods, U.S. Cellular does not expect a similar level of such sales in the future, which will reduce a source of liquidity for U.S. Cellular. U.S. Cellular’s credit rating currently is sub-investment grade. U.S. Cel lular has incurred negative free cash flow (defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment) at times in the past and this will occur in the future if operating results do not improve or capital expenditures are not reduced. U.S. Cellular may require substantial additional capital for, among other uses, funding day-to-day operating needs including working capital, acquisitions of providers of wireless telecommunications services, spectrum licens e or system acquisitions, system development and network capacity expansion, debt service requirements, the repurchase of shares, or making additional investments. There can be no assurance that sufficient funds will continue to be available to U.S. Cellu lar or its subsidiaries on terms or at prices acceptable to U.S. Cellular. Insufficient cash flows from operating activities, changes in its credit ratings, defaults of the terms of debt or credit agreements, uncertainty of access to capital, deterioratio n in the capital markets, reduced regulatory capital at banks which in turn limits their ability to borrow and lend, other changes in the performance of U.S. Cellular or in market conditions or other factors could limit or restrict the availability of fina ncing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its acquisition, capital expenditure and business development programs , reduce the acquisition of spectrum licenses, and/or reduce or cease share repurchases . U.S. Cellular cannot provide assurance that circumstances that could have a material adverse effect on its liquidity or capital resources will not occur. Any of the foregoing would have an adverse impact on U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants a nd incur additional debt.

U.S. Cellular has a significant amount of indebtedness and may need to incur additional indebtedness. U.S. Cellular’s level of indebtedness could have important consequences. For example, it (i) may limit U.S. Cellular’s ability to obtain additional financing for working capital, capital expenditures or general corporate purposes, particularly if the ratings assigned to its debt securities by rating organizations are revised downward; (ii) will require U.S. Cellular to dedicate a substantial portion of its cash flow from operations to the payment of interest and principal on its debt, reducing the funds available to U.S. Cellular for other purposes including expansion through acquisitions, capital expenditures, marketing spending and expansion of its business; and (iii) may limit U.S. Cellular’s flexibility to adjust to changing business and market conditions and make U.S. Cellular more vulnerable to a downturn in general economic conditions as compared to U.S. Cellular’s competito rs. U.S. Cellular’s ability to make scheduled payments on its indebtedness or to refinance it will depend on its financial and operating performance, which, in turn, is subject to prevailing economic and competitive conditions and other factors beyond its control. In addition, U.S. Cellular’s leverage may put it at a competitive disadvantage to some of its competitors that are not as leveraged.

U.S. Cellular’s revolving credit facility, term loan facility and receivables securitization facility require U.S. Cellular to comply with certain affirmative and negative covenants, including certain financial covenants. Depending on actual financial performance of U.S. Cellular, there is a risk that U.S. Cellular could fail to satisfy the required financial cov enants. If U.S. Cellular breaches a financial or other covenant of any of these agreements, it would result in a default under that agreement, and could involve a cross-default under other debt instruments. This could in turn cause the affected lenders t o accelerate the repayment of principal and accrued interest on any outstanding debt under such agreements and, if they choose, terminate the facility. If appropriate, U.S. Cellular may request the applicable lenders for an amendment of financial covenant s in the U.S. Cellular facilities, in order to provide additional financial flexibility to U.S. Cellular, and may also seek other changes to such facilities. There is no assurance that the lenders will agree to any amendments. If the lenders agree to ame ndments, this may result in additional payments or higher interest rates payable to the lenders and/or additional restrictions. Restrictions in such debt instruments may limit U.S. Cellular’s operating and financial flexibility.

As a result, U.S. Cellula r’s level of indebtedness, restrictions contained in debt instruments and/or possible breaches of covenants, defaults, and acceleration of indebtedness could have an adverse effect on U.S. Cellular’s business, financial condition, revenues, results of oper ations and cash flows.

Changes in roaming practices or other factors could cause U.S. Cellular's roaming revenues to decline from current levels, roaming expenses to increase from current levels and/or impact U.S. Cellular's ability to service its custom ers in geographic areas where U.S. Cellular does not have its own network, which could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.

U.S. Cellular’s service revenues include roaming revenues related to th e use of U.S. Cellular’s network by other carriers’ customers who travel within U.S. Cellular’s coverage areas. Changes in FCC rules or actions, industry practices or the network footprints of carriers due to mergers, acquisitions or network expansions co uld have an adverse effect on U.S. Cellular’s roaming revenues. For example, consolidation among other carriers which have network footprints that currently overlap U.S. Cellular’s network could decrease the amount of roaming revenues for U.S. Cellular.

S imilarly, U.S. Cellular's customers can access another carrier’s digital system automatically only if the other carrier allows U.S. Cellular's customers to roam on its network. U.S. Cellular relies on roaming agreements with other carriers to provide roam ing capability to its customers in areas of the U.S. and internationally outside of its service areas, including Mexico and Canada, and to improve coverage within selected areas of U.S. Cellular's network footprint. Such agreements cover traditional voice services as well as data services. Although U.S. Cellular currently has long-term roaming agreements with certain other carriers, these agreements generally are subject to renewal and termination if certain events occur. FCC rules and orders impose cert ain requirements on wireless carriers to offer certain roaming arrangements to other carriers. However, carriers frequently disagree on what is required. Although U.S. Cellular has entered into 4G LTE and VoLTE roaming agreements with national carriers, there is no assurance that U.S. Cellular will be able to maintain these agreements and/or enter into new agreements with other carriers to provide roaming services using 4G LTE or other technologies or that it will be able to do so on reasonable or cost-ef fective terms.

Some competitors may be able to obtain lower roaming rates than U.S. Cellular is able to obtain because they have larger call volumes or may be able to reduce roaming charges by providing service principally over their own networks. In addi tion, the quality of service that a wireless carrier delivers to a U.S. Cellular customer while roaming may be inferior to the quality of service U.S. Cellular provides, the price of a roaming call may not be competitive with prices of other wireless carri ers for such call, U.S. Cellular’s customers may not be able to use some of the advanced features, such as voicemail notification or data applications, that U.S. Cellular’s customers enjoy when making calls on U.S. Cellular’s network, and U.S. Cellular cus tomers’ service experience may be negatively impacted, particularly when accessing data services, upon reaching a defined allotment of high-speed usage. U.S. Cellular’s rate of adoption of new technologies, such as those enabling high-speed data and voice services, could affect its ability to enter into or maintain roaming agreements with other carriers. In addition, U.S. Cellular’s wireless technology may not be compatible with technologies used by other carriers, which may limit the ability of U.S. Cell ular to enter into voice or data roaming agreements with such other carriers. Carriers whose customers roam on U.S. Cellular’s network could switch their business to new operators or, over time, to their own networks. Changes in roaming usage patterns, r ates for roaming usage , or roaming relationships with other carriers could have an adverse effect on U.S. Cellular’s roaming revenues and /or expenses .

To the extent that other carriers expand their networks in U.S. Cellular’s service areas, the roaming arrangements between U.S. Cellular and these other carriers could become less strategic for them. That is, these other carriers will have fewer or less extensive geographic areas where roaming services are required by their customers and, as a result, the roaming arrangements could become less critical to serving their customer base. This presents a risk to U.S. Cellular in that, to the extent U.S. Cellular is not able to enter into economically viable roaming arrangements with these other carriers, this could impact U.S. Cellular’s ability to service its customers in geographic areas where U.S. Cellular does not have its own network.

If U.S. Cellular’s roaming revenues decline, or its roaming expenses increase, or if U.S. Cellular is unable to obtain or m aintain roaming agreements with other carriers that contain pricing and other terms that are competitive and acceptable to U.S. Cellular and that satisfy U.S. Cellular’s quality and interoperability requirements, its business, financial condition or result s of operations could be adversely affected.

A failure by U.S. Cellular to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on U.S . Cellular’s business, financial condition or results of operations.

U.S. Cellular’s business depends on the ability to use portions of the radio spectrum licensed by the FCC. U.S. Cellular could fail to obtain access to sufficient spectrum capacity, incl uding spectrum needed to support 5G technology, in new or existing critical markets, whether through FCC auctions or other transactions, in order to meet the anticipated spectrum requirements associated with increased demand for existing services, especial ly increases in customer demand for data services, and to enable deployment of next-generation services. U.S. Cellular believes that this increased demand for data services reflects a trend that will continue for the foreseeable future. Data usage, inclu ding usage under unlimited plans, could exceed current forecasts resulting in a need for increased investment in spectrum or network. U.S. Cellular could fail to accurately forecast its future spectrum requirements considering changes in plan offerings, c ustomer usage patterns, technology requirements and the expanded demands of new services. Such a failure could have an adverse impact on the quality of U.S. Cellular’s services or U.S. Cellular’s ability to roll out such future services in some markets, o r could require that U.S. Cellular curtail existing services in order to make spectrum available for next-generation services. Spectrum constrained providers could be effectively capped in increasing market share. As spectrum constrained providers gain c ustomers, they use up their network capacity. Since they lack spectrum, they can respond to demand only by adding cell sites, which is capital intensive, adds fixed operating costs, is limited by zoning considerations, and ultimately may not be cost effec tive.

U.S. Cellular may acquire access to spectrum through a number of alternatives, including acquisitions, exchanges and participation in spectrum auctions. U.S. Cellular may participate in spectrum auctions conducted by the FCC in the future. As req uired by law, the FCC has conducted auctions for licenses to use some parts of the radio spectrum. The decision to conduct auctions, and the determination of what spectrum frequencies will be made available for auction and the determination of geographic size of licenses, are made by the FCC pursuant to laws that it administers. The FCC may not be able to allocate spectrum sufficient to meet the demands of all those wishing to obtain licenses for new market entry or to expand their spectrum holdings to me et the expanding demand for data services or to address other spectrum constraints. Due to factors such as geographic size of licenses and auction bidders that may raise prices beyond acceptable levels, U.S. Cellular may not be successful in FCC auctions in obtaining access to the spectrum that it believes is necessary to implement its business and technology strategies.

In addition, newly auctioned spectrum may not be compatible with existing spectrum, and vendors may not create suitable products to use such spectrum. Further, access to spectrum licenses won in FCC auctions may not be available on a timely basis. Such access is dependent upon the FCC actually granting licenses won, which can be delayed for various reasons. Furthermore, newly licensed spectrum may not be available for immediate use since the radio operations of incumbent users, including in some cases government agencies, may need to be relocated to other portions of the radio spectrum, and/or the newly licensed spectrum may be subject to sharing and coordination obligations. U.S. Cellular also may seek to acquire radio spectrum through purchases and exchanges with other spectrum licensees. However, U.S. Cellular may not be able to acquire sufficient spectrum through these types of tra nsactions, and U.S. Cellular may not be able to complete any of these transactions on favorable terms.

To the extent conducted by the FCC, U.S. Cellular ma y participate in FCC auctions for additional spectrum or for funding in certain Universal Service pro grams in the future directly or indirectly and, during certain periods, will be subject to the FCC’s anti-collusion rules, which could have an adverse effect on U.S. Cellular.

From time to time, the FCC conducts auctions through which additional spectrum is made available for the provision of wireless services. U.S. Cellular has participated in such auctions in the past and may participate in other auctions conducted by the FCC in the future. The FCC is also planning on conducting a series of auctions co ncerning dispersal of Universal Service Funding shortly . FCC anti-collusion rules place certain restrictions on business communications and disclosures by participants in an FCC auction. These anti-collusion rules may restrict the normal conduct of U.S. Cellular’s business, U.S. Cellular’s acquisition, divestiture, exchange and other corporate development activity and/or disclosures by U.S. Cellular relating to an FCC auction . The restrictions could have an adverse effect on U.S. Cellular’s business, fin ancial condition or results of operations.

F ailure by U.S. Cellular to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular’s operations are subject to varying degrees of regulation by the FCC, state public utility commissions and other federal, state and local regulatory agencies and legislative bodies. Changes in the administration of th e various regulatory agencies and legislative bodies could result in different policies with respect to many federal laws and regulations, including but not limited to changes to fiscal and tax policies. New or amended regulatory requirements could increa se U.S. Cellular’s costs and divert resources from other initiatives. Adverse decisions, increased regulation, or changes to existing regulation by regulatory bodies could negatively impact U.S. Cellular’s operations by, among other things, permitting gre ater competition or limiting U.S. Cellular’s ability to engage in certain sales or marketing activities, or retention and recruitment of skilled resources. New regulatory mandates or enforcement may require unexpected or increased capital expenditures, lo st revenues, higher operating expenses or other changes. Court decisions and rulemakings could have a substantial impact on U.S. Cellular’s operations, including rulemakings on broadband access to the internet, intercarrier access compensation and state a nd federal support funding. Litigation and different objectives among federal and state regulators could create uncertainty and delay U.S. Cellular’s ability to respond to new regulations. Further, wireless licenses are subject to renewal by the FCC and could be revoked in the event of a violation of applicable laws or regulatory requirements. Also, FCC rules relating to net neutrality and other rules may result in additional costs for compliance and may limit opportunities to derive profits from certain business practices or resources, if not amended or rescinded. For additional information related to U.S. Cellular’s regulatory environment, including information related to net neutrality, see Risk Factor Number 15 below and “Regulatory Matters” in Exhib it 13 to this Form 10-K.

U.S. Cellular attempts to timely and fully comply with all regulatory requirements. However, U.S. Cellular is unable to predict the future actions of the various legislative and regulatory bodies that govern U.S. Cellular, but suc h actions could have adverse effects on U.S. Cellular’s business. Any failure by U.S. Cellular to timely or fully comply with any regulatory requirements could adversely affect U.S. Cellular’s financial condition, results of operations or ability to do bu siness.

An inability to attract people of outstanding potential, to develop their potential through education and assignments, and to retain them by keeping them engaged, challenged and properly rewarded could have an adverse effect on U.S. Cellular's busi ness, financial condition or results of operations.

U.S. Cellular’s business is highly technical and competition for skilled talent in the wireless industry is intense. Due to competition and/or limited supply for qualified management, technical, sales an d other personnel, there can be no assurance that U.S. Cellular will be able to continue to attract and/or retain people of outstanding potential for the development of its business. The loss of the services of existing key personnel as well as the failur e to recruit additional qualified personnel in a timely manner could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular’s assets and revenue are concentrated in the U.S. wireless telecommunicatio ns industry. Consequently, its operating results may fluctuate based on factors related primarily to conditions in this industry.

The U.S. wireless telecommunications industry is facing significant change and an uncertain operating environment. U.S. Cell ular’s focus on the U.S. wireless telecommunications industry, together with its positioning relative to larger competitors with greater resources within the industry, may represent increased risk for investors due to the lack of diversification. This cou ld have an adverse effect on U.S. Cellular’s ability to attain and sustain long-term, profitable revenue growth and could have an adverse effect on its business, financial condition or results of operations.

U.S. Cellular’s smaller scale relative to larger competitors that may have greater financial and other resources than U.S. Cellular could cause U.S. Cellular to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations.

There has been a tr end in the telecommunications and related industries towards consolidation of service providers through acquisitions, reorganizations and joint ventures. This trend could continue, leading to larger competitors over time. U.S. Cellular has smaller scale efficiencies compared to larger competitors. U.S. Cellular may be unable to compete successfully with larger companies that have substantially greater financial, technical, marketing, sales, purchasing and distribution resources or that offer more service s than U.S. Cellular, which could adversely affect U.S. Cellular’s revenues and costs of doing business. Specifically, U.S. Cellular’s smaller scale relative to most of its competitors could have the following impacts, among others:

Low profit margins and returns on investment that are below U.S. Cellular’s cost of capital;
Increased operating costs due to lack of leverage with vendors;
Limited opportunities for strategic partnerships as potential partners are focused on wireless companies with greater scale and scope ;
Limited access to content;
Limited ability to influence industry standards;
Reduced ability to invest in research and development of new services and products ;
Vendors may deem U.S. Cellular non-strategic and not develop or sell services a nd products to U.S. Cellular, particularly where technical requirements differ from those of larger companies;
Limited access to intellectual property; and
Other limited opportunities such as for software development or third party distribution.

U.S. Cel lular’s business increasingly depends on access to content for data and access to new wireless devices being developed by vendors. U.S. Cellular’s ability to obtain such access depends in part on other parties. If U.S. Cellular is unable to obtain timely access to new content or wireless devices being developed by vendors, its business, financial condition or results of operations could be adversely affected.

As a result of the foregoing, U.S. Cellular’s smaller scale relative to larger competitors could adversely affect U.S. Cellular’s business, financial condition or results of operations.

Changes in various business factors, including changes in demand, customer preferences and perceptions, price competition, churn from customer switching activity and o ther factors, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Changes in any of several factors could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations. These factors include, but are not limited to:

Demand for or usage of services, particularly data services , due to the introduction of unlimited plans ;
Customer preferences, including type of wireless devices;
Customer perceptions of network quality and p erformance;
The pricing of services , including an increase in price-based competition ;
The overall size and growth rate of U.S. Cellular’s customer base;
Penetration rates;
Churn rates;
Selling expenses;
Net customer acquisition and retention costs;
Customers’ ability to pay for wireless service and the potential impact on bad debts expense;
Roaming agreements and rates;
Third-party vendor support;
Capacity constraints;
The mix of services and products offered by U.S. Cellular and purchased by custome rs; and
The costs of providing services and products .

Advances or changes in technology could render certain technologies used by U.S. Cellular obsolete, could put U.S. Cellular at a competitive disadvantage, could reduce U.S. Cellular’s revenues or coul d increase its costs of doing business.

The telecommunications industry is experiencing significant changes in technologies and services expected by customers, as evidenced by evolving industry standards, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new services and products, and enhancements and changes in end-user requirements and preferences. Widespread deployment of new technologies , including 5G technology, could cause the technology used on U.S. Cellular’s wireless networks to become less competitive or obsolete. Further, fixed-mobile convergence services that combine wireline broadband services with mobile services represent a competitive threat. If the trend toward convergence continues, U.S. Cellular is at a competitive disadvantage to larger competitors, including the national wireless carriers and other potential large new entrants with much greater financial and other resources in adapting to such co nvergence. Future technological changes or advancements may enable other wireless technologies to equal or exceed U.S. Cellular’s current levels of service and render its system infrastructure obsolete. For example, the timing, cost, and availability of CDMA enabled devices and other CDMA ecosystem support needs, including voice roaming on other carrier networks, may inhibit U.S. Cellular’s ability to maintain 3G wireless voice service until it is fully replaced by VoLTE. U.S. Cellular may not be able to respond to such changes and implement new technology on a timely or cost-effective basis, which could reduce its revenues or increase its costs of doing business. If U.S. Cellular cannot keep pace with these technological changes or other changes in the telecommunications industry over time, its financial condition, results of operations or ability to do business could be adversely affected.

Complexities associated with deploying new technologies present substantial risk and U.S. Cellular investments in u nproven technologies may not produce the benefits that U.S. Cellular expects.

U.S. Cellular has completed the transition to 4G LTE and has implemented 4G LTE as well as VoLTE roaming agreements with national carriers. U.S. Cellular began commercial deploy ment of VoLTE in 2017 and has begun testing 5G technology. Transition to new technologies involves significant time and cost. Furthermore, the wireless business experiences rapid technology changes and new services and products. If U.S. Cellular fails t o effectively deploy new wireless technologies, services or products on a timely basis, this could have an adverse impact on U.S. Cellular’s business, financial condition and results of operations.

Furthermore, it is not certain that U.S. Cellular’s invest ments in various new, unproven technologies and service and product offerings will be effective. The markets for some of these services, products and solutions may still be emerging and the overall potential for these markets may be uncertain. If custome r demand for these new services, products and solutions does not develop as expected, U.S. Cellular’s business, financial condition or results of operations could be adversely affected.

U.S. Cellular receives regulatory support and is subject to numerous s urcharges and fees from federal, state and local governments, and the applicability and the amount of the support and fees are subject to great uncertainty , which could have an adverse effect on U.S. Cellular’s business, financial condition or results of o perations .

Telecommunications companies may be designated by states, or in some cases by the FCC, as an ETC to receive universal service support payments if they provide specified services in “high cost” areas. U.S. Cellular has been designated as an ETC in certain states and received $ 92 m illion in high cost support for service to high cost areas in 201 7 .

In 20 11, the FCC released an order (USF Order) to: reform its universal service and intercarrier compensation mechanisms; est ablish a new, broadband-focused support mechanism; and propose further rules to advance reform. For a discussion of the USF Order and risks to such regulatory support, see “Regulatory Matters – FCC Mobility Fund Phase II Order” in Exhibit 13 to this Form 10-K, which is incorporated by reference herein. If the foregoing regulatory support is reduced from current levels, this could have an adverse effect on U.S. Cellular’s business, financial condition or operating results.

Telecommunications providers pa y a variety of surcharges and fees on their gross revenues from interstate and intrastate services, including USF fees and common carrier regulatory fees.

The division of services between interstate services and intrastate services, including the division s associated with F ederal USF fees, is a matter of interpretation and may in the future be contested by the FCC or state authorities. The FCC also may change in the future the basis on which F ederal USF fees are charged. The Federal government and many s tates also apply transaction-based taxes to sales of telecommunications services and products and to purchases of telecommunications services from various carriers . In addition, state regulators and local governments have imposed and may continue to impos e various surcharges, taxes and fees on telecommunications services. The applicability of these surcharges and fees to U.S. Cellular’s services is uncertain in many cases and jurisdictions may contest whether U.S. Cellular has assessed and remitted those monies correctly. Periodically, state and federal regulators may increase or change the surcharges and fees U.S. Cellular currently pays. In some instances, U.S. Cellular passes through these charges to its customers. However, Congress, the FCC, state r egulatory agencies or state legislatures may limit the ability to pass through transaction-based tax liabilities, regulatory surcharges and regulatory fees imposed on U.S. Cellular to customers. U.S. Cellular may or may not be able to recover some or all of those taxes from its customers and the amount of taxes may deter demand for its services or increase its cost to provide service which could have an adverse effect on its business, financial condition or operating results.

Performance under device purc hase agreements could have a material adverse impact on U.S. Cellular's business, financial condition or results of operations.

U.S. Cellular has entered into purchase commitments with certain vendors and may enter into similar purchase commitments with ot her vendors in the future. If U.S. Cellular is unable to sell all of the devices that it is required to purchase under such agreements, or if it is unable to sell them at the prices it projects, its business, financial condition or results of operations c ould be adversely affected.

Changes in U.S. Cellular’s enterprise value, changes in the market supply or demand for wireless licenses, adverse developments in the business or the industry in which U.S. Cellular is involved and/or other factors could requir e U.S. Cellular to recognize impairments in the carrying value of its licenses and/or physical assets.

A large portion of U.S. Cellular’s assets consists of indefinite-lived intangible assets in the form of licenses. U.S. Cellular also has substantial inv estments in long-lived assets such as property, plant and equipment. U.S. Cellular reviews its licenses, goodwill and other long-lived assets for impairment annually or whenever events or circumstances indicate that the carrying amount of such assets may not be fully recoverable. An impairment loss may need to be recognized to the extent the carrying value of the assets exceeds the fair value of such assets. The amount of any such impairment loss could be significant and could have an adverse effect on U .S. Cellular’s reported financial results for the period in which the loss is recognized. The estimation of fair values requires assumptions by management about factors that are uncertain. Different assumptions for these factors could create materially d ifferent results. During 2017, U.S. Cellular recognized an impairment on its goodwill and reduced the balance of its goodwill to zero.

Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or licenses and/or expansion of U.S. Cellular’s business could have an adverse effect on U.S. Cellular’s business, financial condition or res ults of operations.

As part of U.S. Cellular’s operating strategy, U.S. Cellular from time to time may be engaged in the acquisition, divestiture or exchange of companies, businesses, strategic properties, wireless spectrum or other assets. U.S. Cellular may change the markets in which it operates and the services that it provides through such acquisitions, divestitures and/or exchanges. In general, U.S. Cellular may not disclose the negotiation of such transactions until a definitive agreement has been r eached.

These transactions commonly involve a number of risks, including:

Identification of attractive companies, businesses, properties, spectrum or other assets for acquisition or exchange, and/or the selection of U.S. Cellular’s businesses or assets for divestiture or exchange;
Competition for acquisition targets and the ability to acquire or exchange businesses at reasonable prices;
Inability to make acquisitions that would achieve sufficient scale to be competitive w ith competitors with greater scale;
Possible lack of buyers for businesses or assets that U.S. Cellular desires to divest and the ability to divest or exchange such businesses or assets at reasonable prices;
Ability to negotiate favorable terms and conditi ons for acquisitions, divestitures and exchanges;

Significant expenditures associated with acquisitions, divestitures and exchanges;
R isks associated with integrating new businesses or markets, including risks relating to cybersecurity and privacy ;
Ability to enter markets in which U.S. Cellular has limited or no direct prior experience and competitors have stronger positions;
Ability to integrate and manage businesses that are engaged in activities other than traditional wireless service;
Uncertain revenu es and expenses associated with acquisitions, with the result that U.S. Cellular may not realize the growth in revenues, anticipated cost structure, profitability, or return on investment that it expects;
Difficulty of integrating the technologies, service s, products, operations and personnel of the acquired businesses, or of separating such matters for divested businesses or assets;
Diversion of management’s attention;
Disruption of ongoing business;
Impact on U.S. Cellular’s cash and available credit line s for use in financing future growth and working capital needs;
Inability to retain key personnel;
Inability to successfully incorporate acquired assets and rights into U.S. Cellular’s service offerings;
Inability to maintain uniform standards, controls, p rocedures and policies;
Possible conditions to approval by the FCC, the Federal Trade Commission and/or the Department of Justice; and
Impairment of relationships with employees, customers or vendors.

No assurance can be given that U.S. Cellular will be s uccessful with respect to its acquisition, divestiture or exchange strategies or initiatives. If U.S. Cellular is not successful with respect to its acquisitions, divestitures or exchanges, its business, financial condition or results of operations could be adversely affected.

A failure by U.S. Cellular to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network, support and other systems and infrastructure could have an adverse effect on its operations.

U.S. Cellular’s business plan includes significant construction activities and enhancements to its network, support and other systems and infrastructure. As U.S. Cellular deploys, expands and enhances its network, it may need to acquire additional spectrum. Also, as U.S. Cellular continues to build out and enhance its network, U.S. Cellular must, among other things, continue to:

Lease, acquire or otherwise obtain rights to cell and switch sites;
Obtain zoning variances or other local governmental or third-party approvals or permits for network construction;
Complete and update the radio frequency design, including cell site design, frequency planning and network optimization, for each of U.S. Cellular’s markets; and
Improve, expand and maintain customer care, network management, billing and other financial and management systems.

Any difficulties encountered in completing these activities, as well as problems in vendor equipment availabi lity, technical resources, system performance or system adequacy, could delay expansion of operations and product capabilities in new or existing markets or result in increased costs. Failure to successfully build-out and enhance U.S. Cellular’s network a nd necessary support facilities and systems in a cost-effective manner, and in a manner that satisfies customer expectations for quality and coverage, could have an adverse effect on U.S. Cellular’s business, business prospects, financial condition or resu lts of operations.

Difficulties involving third parties with which U.S. Cellular does business, including changes in U.S. Cellular's relationships with or financial or operational difficulties of key suppliers or independent agents and third party national retailers who market U.S. Cellular’s services, could adversely affect U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular has relationships with independent agents and third party national retailers who market U.S. Cellul ar services. If such relationships are seriously harmed or if such parties experience financial difficulties, including bankruptcy, U.S. Cellular’s business, financial condition or results of operations could be adversely affected.

U.S. Cellular depends u pon certain vendors to provide it with equipment (including wireless devices), services or content to continue its network construction and upgrades and to operate its business. U.S. Cellular does not have operational or financial control over such key su ppliers and has limited influence with respect to the manner in which these key suppliers conduct their businesses. If these key suppliers experience financial difficulties or file for bankruptcy or experience other operational difficulties, they may be u nable to provide equipment, services or content to U.S. Cellular on a timely basis, or at all, or they may otherwise fail to honor their obligations to U.S. Cellular. Furthermore, consolidation among key suppliers may result in less competition and higher prices or the discontinuation of support for equipment owned by U.S. Cellular.

Regulations regarding the use of “conflict minerals” mined from the Democratic Republic of Congo and adjoining countries may affect some of U.S. Cellular’s suppliers. These re gulations may limit the availability of conflict free minerals and, as a result, U.S. Cellular may not be able to obtain products in sufficient quantities or at competitive prices from its vendors who utilize such minerals in the manufacture of products. In such cases, U.S. Cellular may be unable to maintain and upgrade its network or provide services and products to its customers in a competitive manner, or could suffer other disruptions to its business. In that event, U.S. Cellular’s business, financial condition or results of operations could be adversely affected.

In addition, operation of U.S. Cellular’s supply chain and management of its inventory require accurate forecasting of customer growth and demand, which has become increasingly challenging. If overall demand for wireless devices or the mix of demand for wireless devices is significantly different than U.S. Cellular’s expectations, U.S. Cellular could face inadequate or excess supplies of particular models of wireless devices. This could res ult in lost sales opportunities or an excess supply of inventory. Either of these situations could adversely affect U.S. Cellular’s revenues, costs of doing business, results of operations or financial condition.

Also, U.S. Cellular has other arrangements with third parties, including arrangements pursuant to which U.S. Cellular now outsources certain support functions to third party vendors. Operational problems associated with such functions, including any failure by the vendor to provide the required l evel of service under the outsourcing arrangements, including possible cyber-attacks or other breaches of network or information technology security or privacy, could have adverse effects on U.S. Cellular’s business, financial condition or results of opera tions.

U.S. Cellular has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on U.S. Cellular’s financial condition or results of operations.

U.S. Cellular has significant i nvestments in entities that it does not control, including equity investments and interests in certain variable interest entities. U.S. Cellular’s interests in such entities do not provide U.S. Cellular with control over the business strategy, financial g oals, network build-out plans or other operational aspects of these entities. U.S. Cellular cannot provide assurance that these entities will operate in a manner that will increase or maintain the value of U.S. Cellular’s investments, that U.S. Cellular’s proportionate share of income from these investments will continue at the current level in the future or that U.S. Cellular will not incur losses from the holding of such investments. Losses in the values of such investments or a reduction in income from these investments could adversely affect U.S. Cellular’s financial condition or results of operations. In addition, certain investments have historically contributed significant cash flows to U.S. Cellular and a reduction or suspension of such cash flows could adversely affect U.S. Cellular’s financial condition.

A failure by U.S. Cellular to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular relies extensively on its telecommunication networks and information technology to operate and manage its business, process transactions and summarize and report results. These network s and technology become obsolete over time and must be upgraded, replaced and/or otherwise enhanced over time. Enhancements must be more flexible and dependable than ever before. All of this is capital intensive and challenging. A failure by U.S. Cellul ar to maintain flexible and capable telecommunication networks or information technology could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

The increased provision of data services has introduced signifi cant new demands on U.S. Cellular’s network and also has increased complexities related to network management. Further, the increased provision of data services, especially given the introduction of unlimited plans, on U.S. Cellular’s networks has created an increased level of risk related to quality of service. This is due to the fact that many customers increasingly rely on data communications to execute and validate transactions. As a result, redundancy and geographical diversity of U.S. Cellular’s ne twork facilities are critical to providing uninterrupted service. Also, the speed of repair and maintenance procedures in the event of network interruptions is critical to maintaining customer satisfaction. U.S. Cellular’s ability to maintain high-qualit y, uninterrupted service to its customers is critical, particularly given the increasingly competitive environment and customers’ ability to choose other service providers.

In addition, U.S. Cellular’s networks and information technology and the networks and information technology of vendors on which U.S. Cellular relies are subject to damage or interruption due to various events, including power outages, computer, network and telecommunications failures, computer viruses, security breaches, hackers and ot her cyber security risks, catastrophic events, natural disasters, errors or unauthorized actions by employees and vendors, flawed conversion of systems, disruptive technologies and technology changes.

U.S. Cellular has experienced and, in the future, expe cts to experience cyber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.

U.S. Cellul ar experiences cyber-attacks of varying degrees on a regular basis. U.S. Cellular maintains administrative, technical and physical controls, as well as other preventative actions, to reduce the risk of security breaches. Although to date U.S. Cellular ha s not discovered a material security breach, these efforts may be insufficient to prevent a material security breach stemming from future cyber-attacks. If U.S. Cellular’s or its vendors’ networks and information technology are not adequately adapted to c hanges in technology or are damaged or fail to function properly, and/or if U.S. Cellular’s or its vendors’ security is breached or otherwise compromised, U.S. Cellular could suffer adverse consequences, including theft, destruction or other loss of critic al and private data, including customer and/or employee data, interruptions or delays in its operations, inaccurate billings, inaccurate financial reporting, and significant costs to remedy the problems. If U.S. Cellular’s or its vendors’ systems become u navailable or suffer a security breach of customer or other data, U.S. Cellular may be required to expend significant resources and take various actions to address the problems, including notification under data privacy laws and regulations, may be subject to fines, sanctions and litigation, and its reputation and operating results could be adversely affected. Any material disruption in U.S. Cellular’s networks or information technology, including security breaches, could have an adverse effect on U.S. Cel lular’s business, financial condition or results of operations.

The market price of U.S. Cellular’s Common Shares is subject to fluctuations due to a variety of factors.

Factors that may affect the future market price of U.S. Cellular’s Common Shares inclu de:

General economic conditions, including conditions in the credit and financial markets;
Industry conditions;
Fluctuations in U.S. Cellular’s quarterly customer additions, churn rate, revenues, results of operations or cash flows;
Variations between U.S. Cellular’s actual financial and operating results and those expected by analysts and investors; and
Announcements by U.S. Cellular’s competitors.

Any of these or other factors could adversely affect the future market price of U.S. Cellular’s Common Shares, or could cause the future market price of U.S. Cellular’s Common Shares to fluctuate from time to time.

Changes in facts or circumstances, including new or additional information, could require U.S. Cellular to record charges relating to adjustment s of amounts reflected in the financial statements, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

The preparation of financial statements requires U.S. Cellular to make estimates and assumptio ns that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. U.S. Cellular bases its estimates on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from estimates under diff erent assumptions or conditions. Changes in facts or circumstances, including new or additional information, could require U.S. Cellular to record charges in excess of amounts accrued in the financial statements, if any, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede U.S. Cellular’s access to o r increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on U.S. Cellular’s business, financial condition or results of operatio ns.

Disruptions in the credit and financial markets, declines in consumer confidence, increases in unemployment, declines in economic growth and uncertainty about corporate earnings could have a significant negative impact on the U.S. and global financial and credit markets and the overall economy. Such events could have an adverse impact on financial institutions resulting in limited access to capital and credit for many companies. Furthermore, economic uncertainties make it very difficult to accurately forecast and plan future business activities. Changes in economic conditions, changes in financial markets, deterioration in the capital markets or other factors could have an adverse effect on U.S. Cellular’s business, financial condition, revenues, resu lts of operations and cash flows.

Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on U.S. Cellular’s business, financial condi tion or results of operations.

U.S. Cellular is regularly involved in a number of legal and policy proceedings before the FCC and various state and federal courts. Such legal and policy proceedings can be complex, costly, protracted and highly disruptive to business operations by diverting the attention and energies of management and other key personnel.

The assessment of legal and policy proceedings is a highly subjective process that requires judgments about future events. Additionally, amounts ultimate ly received or paid upon settlement or resolution of litigation and other contingencies may differ materially from amounts accrued in the financial statements. Depending on a range of factors, these or similar proceedings could impose restraints on U.S. C ellular’s current or future manner of doing business. Such potential outcomes could have an adverse effect on U.S. Cellular’s financial condition, results of operations or ability to do business.

The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices such as pac emakers, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Media reports and certain professional studies have suggested that certain radio frequency emissions from wireless devices may be linked to var ious health problems, including cancer or tumors, and may interfere with various electronic medical devices, including hearing aids and pacemakers. U.S. Cellular is a party to and may in the future be a party to lawsuits against wireless carriers and othe r parties claiming damages for alleged health effects, including cancer or tumors, arising from wireless phones or radio frequency transmitters. Concerns over radio frequency emissions may discourage use of wireless devices or expose U.S. Cellular to pote ntial litigation. In addition, the FCC or other regulatory authorities may adopt regulations in response to concerns about radio frequency emissions. Any resulting decrease in demand for wireless services, costs of litigation and damage awards or regulat ion could have an adverse effect on U. S. Cellular’s business, financial condition or results of operations.

In addition, some studies have indicated that some aspects of using wireless devices while driving may impair drivers’ attention in certain circums tances, making accidents more likely. These concerns could lead to potential litigation relating to accidents, deaths or serious bodily injuries, any of which could have an adverse effect on U.S. Cellular’s business, financial condition or results of oper ations.

Numerous state and local legislative bodies have enacted or proposed legislation restricting or prohibiting the use of wireless devices while driving motor vehicles. These enacted or proposed laws or other similar laws, if passed, could have the e ffect of reducing customer usage and/or increasing costs, which could have an adverse effect on U.S. Cellular’s business, financial condition, or results of operations.

Claims of infringement of intellectual property and proprietary rights of others, prima rily involving patent infringement claims, could prevent U.S. Cellular from using necessary technology to provide products or services or subject U.S. Cellular to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

U.S. Cellular faces possible effects of industry litigation relating to patents, other intellectual property or otherwise, that may restrict U.S. Cellular’s access to device s for sale to customers. If technology that U.S. Cellular uses in products or services were determined by a court to infringe a patent or other intellectual property right held by another person, U.S. Cellular could be precluded from using that technology and could be required to pay significant monetary damages. U.S. Cellular also may be required to pay significant royalties to such person to continue to use such technology in the future. The successful enforcement of any intellectual property rights, o r U.S. Cellular’s inability to negotiate a license for such rights on acceptable terms, could force U.S. Cellular to cease using the relevant technology and offering services incorporating the technology. Any litigation to determine the validity of claims that U.S. Cellular’s products or services infringe or may infringe intellectual property rights of another, regardless of their merit or resolution, could be costly and divert the effort and attention of U.S. Cellular’s management and technical personnel. Regardless of the merits of any specific claim, U.S. Cellular cannot give assurance that it would prevail in litigation because of the complex technical issues and inherent uncertainties in intellectual property litigation. Although U.S. Cellular genera lly seeks to obtain indemnification agreements from vendors that provide it with technology, there can be no assurance that any claim of infringement will be covered by an indemnity or that U.S. Cellular will be able to recover all or any of its losses and costs under any available indemnity agreements. Any claims of infringement of intellectual property and proprietary rights of others could prevent U.S. Cellular from using necessary technology to provide its services or subject U.S. Cellular to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

There are potential conflicts of interests between TDS and U.S. Cellular.

TDS owns over 8 0% of the combined total of both classes of common stock of U.S. Cellular, including a majority of the outstanding Common Shares and 100% of the Series A Common Shares, and controls over 96% of their combined voting power. As a result, TDS is effectively able to elect all of U.S. Cellular’s thirteen directors and otherwise control the management and operations of U.S. Cellular. Seven of the thirteen directors of U.S. Cellular are also directors of TDS and/or executive officers of TDS and/or U.S. Cellular. Directors and officers of TDS who are also directors or officers of U.S. Cellular, and TDS as U.S. Cellular’s controlling shareholder, are in positions involving the possibility of conflicts of interest with respect to certain transactions concerning U.S . Cellular. When the interests of TDS and U.S. Cellular diverge, TDS may exercise its influence in its own best interests.

U.S. Cellular and TDS have entered into contractual arrangements governing certain transactions and relationships between them. Som e of these agreements were executed prior to the initial public offering of U.S. Cellular’s Common Shares and were not the result of arm’s-length negotiations. Accordingly, there is no assurance that the terms and conditions of these agreements are as fav orable to U.S. Cellular as could have been obtained from unaffiliated third parties. See “Certain Relationships and Related Transactions” in this Form 10-K.

Conflicts of interest may arise between TDS and U.S. Cellular when faced with decisions that could have different implications for U.S. Cellular and TDS, including technology decisions, financial budgets, the payment of distributions by U.S. Cellular, agreements or transactions between TDS and U.S. Cellular, business activities and other matters. TDS also may take action that favors its other businesses and the interests of its shareholders over U.S. Cellular’s wireless business and the interests of U.S. Cellular shareholders and debt holders. Because TDS controls U.S. Cellular, conflicts of interest could be resolved in a manner adverse to U.S. Cellular and its other shareholders or its debt holders.

The U.S. Cellular Restated Certificate of Incorporation provides that, so long as not less than 500,000 Series A Common Shares are outstanding, U.S. Cellular, without the written consent of TDS, shall not, directly or indirectly own, invest or otherwise have an interest in, lease, operate or manage any business other than a business engaged solely in the construction of, the ownership of interest s in and/or the management of wireless telephone systems. This limitation on the scope of U.S. Cellular’s potential business could hurt the growth of U.S. Cellular’s business. This restriction would preclude U.S. Cellular from pursuing attractive related or unrelated business opportunities unless TDS consents in writing. TDS has no obligation to consent to any business opportunities proposed by U.S. Cellular and may withhold its consent in its own best interests.

Certain matters, such as control by TDS a nd provisions in the U.S. Cellular Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of U.S. Cellular.

The control of U.S. Cellular by TDS may tend to deter non-negotiated tender offers or other effor ts to obtain control of U.S. Cellular and thereby deprive shareholders of opportunities to sell shares at prices higher than those prevailing in the market.

The U.S. Cellular Restated Certificate of Incorporation also contains provisions which may serve to discourage or make more difficult a change in control of U.S. Cellular without the support of TDS or without meeting various other conditions. In particular, the authorization of multiple classes of capital stock with different voting rights could preven t shareholders from profiting from an increase in the market value of their shares as a result of a change in control of U.S. Cellular by delaying or preventing such change in control.

The U.S. Cellular Restated Certificate of Incorporation also authorizes the U.S. Cellular Board of Directors to designate and issue Preferred Shares in one or more classes or series from time to time. Generally, no further action or authorization by the shareholders is necessary prior to the designation or issuance of the ad ditional Preferred Shares authorized pursuant to the U.S. Cellular Restated Certificate of Incorporation unless applicable laws or regulations would require such approval in a given instance. Such Preferred Shares could be issued in circumstances that wou ld serve to preserve TDS’ control of U.S. Cellular.

Any of the foregoing events or other events could cause revenues, earnings, capital expenditures and/or any other financial or statistical information to vary from U.S. Cellular’s forward-looking estimate s by a material amount.

From time to time, U.S. Cellular may disclose forward-looking information, including estimates of future operating revenues; various measures of income before income taxes; and/or capital expenditures. Any such forward-looking info rmation includes consideration of known or anticipated changes to the extent disclosed, but dynamic market conditions and/or other unknown or unanticipated events, including but not limited to the risks discussed above, could cause such estimates to differ materially from the actual amounts.

Item 1B. Unre solved Staff Comments

None.

Item 2. Pr operties

U.S. Cellular has properties located throughout the United States. U.S. Cellular’s mobile telephone switching offices, cell sites, cell site equipment, call centers and retail stores are located primarily in U.S. Cellular’s operating markets and are either owned or leased by U.S. Cellular, one of its subsidiaries, or the partnership, limited liability company or corporation which holds the license issued by the FCC.

As of December 31, 2017 , U.S. Cellular’s Property, plant and equipment, net of accumulated depreciation, totaled $ 2,320 million.

U.S. Cellular considers the properties owned or leased by it and its subsidiaries to be maintained in good operating co ndition and suitable and adequate for its business operations.

Item 3. Leg al Proceedings

U.S. Cellular is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts. If U.S. Cellular believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss. If only a range of loss can be determined, the best estimate within that range i s accrued; if none of the estimates within that range is better than another, the low end of the range is accrued. The assessment of the expected outcomes of legal proceedings is a highly subjective process that requires judgments about future events. Th e legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financial statement disclosures. The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements. Se e Note 12 — Commitments and Contingencies in the Notes to Consolidated Financial Statements for further information.

Item 4. Mine S afety Disclosures

Not applicable.

PA RT II

Item 5. Mar ket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market, holder, dividend and performance graph information is incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report sections entitled “Sh areholder Information” and “Consolidated Quarterly Information (Unaudited).”

U.S. Cellular has not paid any cash dividends in recent periods and currently intends to retain all earnings for use in U.S. Cellular’s business.

Information relating to Issuer Purchases of Equity Securities is set forth below.

In November 2009, U.S. Cellular announced by Form 8-K that the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginnin g in 2009 and continuing each year thereafter, on a cumulative basis. In December 2016, the U.S. Cellular Board amended this authorization to provide that, beginning on January 1, 2017, the authorized repurchase amount with respect to a particular year wi ll be any amount from zero to 1,300,000, as determined by the Pricing Committee, and that if the Pricing Committee did not specify an amount for any year, such amount would be zero for such year. The Pricing Committee did not specify any increase as of Ja nuary 1, 2018. The Pricing Committee was also authorized to decrease the cumulative amount of the authorization at any time, but has not taken any action to do so at this time. As a result, there was no change to the cumulative amount of the share repurc hase authorization as of January 1, 2018. The authorization provides that share repurchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on market prices and other conditions. This authorizat ion does not have an expiration date. U.S. Cellular did not determine to terminate the foregoing Common Share repurchase program, as amended, or cease making further purchases thereunder, during the fourth quarter of 2017 .

The maximum number of shares that may yet be purchased under this program was 5,900,849 as of December 31, 2017 . There were no purchases made by or on behalf of U .S. Cellular, and no open market purchases made by any “affiliated purchaser” (as defined by the SEC) of U.S. Cellular, of U.S. Cellular Common Shares during the quarter ended December 31, 2017 .

Item 6. Sele cted Financial Data

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

Item 7. Manag ement’s Discussi on and Analysis of Financial Condition and Results of Operations

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 7A. Quan titative and Qualitative Disclosures About Market Risk

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report section entitled “Market Risk.”

Item 8. Finan cial Statements and Supplementary Data

Incorporated by reference from Exhibit 13 to this Form 10-K, Annual Report sections entitled “Consolidated Statement of Operat ions,” “Consolidated Statement of Cash Flows,” “Consolidated Balance Sheet,” “Consolidated Statement of Changes in Equity,” “Notes to Consolidated Financial Statements,” “Management’s Report on Internal Control Over Financial Reporting,” “Report of Indepe ndent Registered Public Accounting Firm,” and “Consolidated Quarterly Information (Unaudited).” The Consolidated Statement of Comprehensive Income was not included because comprehensive income for the years ended Dec ember 31, 2017 , 2016 and 2015 equaled net income.

Item 9. Cha nges in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Con trols and Procedures

Evaluation of Disclosure Controls and Procedures

U.S. Cellular maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in its reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to U.S. Cellular’s management, including its princip al executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As required by SEC Rule 13a-15(b), U.S. Cellular carried out an evaluation, under the supervision and with the participation of man agement, including its principal executive officer and principal financial officer, of the effectiveness of the design and operation of U.S. Cellular’s disclosure controls and procedures as of the end of the period covered by this Annual Report. Based on this evaluation, the principal executive officer and principal financial officer have concluded that U.S. Cellular’s disclosure controls and procedures were effective as of December 31, 2017 , at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) und er the Exchange Act. U.S. Cellular’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in acco rdance with accounting principles generally accepted in the United States of America (GAAP). U.S. Cellular’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonabl e detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and, where required, the board of directors of the issuer; and (iii) provide reasonable assurance regarding prevention or timely detection of u nauthorized acquisition, use, or disposition of the issuer’s assets that could have a material effect on the interim or annual consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of U.S. Cellular’s management, including its principal executive officer and principal financial officer, U.S. Cellular conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2017 , based on the criteria established in the 2013 version of Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management has concluded that U.S. Cellular maintained effective internal control over financial reporting as of December 31, 2017 , based on criteria established in the 2013 version of Internal Control — Integrated Framework issued by the COSO.

The effectiveness of U.S. Cellular’s internal control over financial reporting as of December 31, 2017 , has been audited by PricewaterhouseCoopers LLP, an indepen dent registered public accounting firm, as stated in the firm’s report which is incorporated by reference into Item 8 of this Annual Report on Form 10-K from Exhibit 13 filed herewith.

Changes in Internal Control over Financial Reporting

There were no changes in U.S. Cellular’s internal control over financial reporting during the fourth quarter of 2017 that have materially affected, or are reasonably likely to materially affect, U.S. Cellular’s int ernal control over financial reporting, except as follows: U.S. Cellular implemented internal controls during the fourth quarter of 2017 to ensure that, upon adoption of the new revenue recognition accounting standard, contracts will be properly evaluated and any impacts to the financial statements will be recognized in accordance with this new accounting standard effective January 1, 2018.

Item 9B. Oth er Information

The following information is being provided to update prior disclosures made pursuant to t he requirements of Form 8-K, Item 2.03 – Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

U.S. Cellular did not borrow or repay any cash amounts under its revolving credit facility in the fourth quarter of 2017 or through the filing date of this Form 10-K, and had no cash borrowings outstanding under its revolving credit facility as of December 31, 2017 , or as of the filing date of this Form 10-K.

Further, U.S. Cellular did not borrow or repay any cash amounts under its receivables securitization facility in the fourth quarter of 2017 or through the filing date of this Form 10-K, and had no cash borrowings outstanding under its receivables securitization facility as of December 31, 2017 , or as of the filing date of this Fo rm 10-K.

PAR T III

Item 10. Dire ctors, Executive Officers and Corporate Governance

Incorporated by reference from Proxy Statement sections entitled “Election of Directors,” “Corporate Governance,” “Executive Officers” and “Section 16(a) Beneficial Owners hip Reporting Compliance.”

Item 11. Execu tive Compensation

Incorporated by reference from Proxy Statement section entitled “Executive and Director Compensation.”

Item 12. Sec urity Ownership of Certain Beneficial Owners and Management and Related Stockhol der Matters

Incorporated by reference from Proxy Statement sections entitled “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance under Equity Compensation Plans.”

Item 13. Ce rtain Relationships and Rela ted Transactions, and Director Independence

Incorporated by reference from Proxy Statement sections entitled “Corporate Governance” and “Certain Relationships and Related Transactions.”

Item 14. Prin cipal Accountant Fees and Services

Incorporated by reference from Proxy Statement section entitled “Fees Paid to Principal Accountants.”

PA RT IV

Item 15. Exh ibits and Financial Statement Schedules

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

	(1)	Financial Statements

		Consolidated Statement of Operations		Annual Report*
		Consolidated Statement of Cash Flows		Annual Report*
		Consolidated Balance Sheet		Annual Report*
		Consolidated Statement of Changes in Equity		Annual Report*
		Notes to Consolidated Financial Statements		Annual Report*
		Management's Report on Internal Control Over Financial Reporting		Annual Report*
		Report of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP		Annual Report*
		Consolidated Quarterly Information (Unaudited)		Annual Report*

			*Incorporated by reference from Exhibit 13.

	(2)	Financial Statement Schedules
				Location
		Los Angeles SMSA Limited Partnership and Subsidiary Financial Statements		S-1
			Report of Independent Registered Public Accounting Firm — Ernst & Young LLP	S-2
			Consolidated Balance Sheets	S-3
			Consolidated Statements of Income and Comprehensive Income	S-4
			Consolidated Statements of Changes in Partners’ Capital	S-5
			Consolidated Statements of Cash Flows	S-6
			Notes to Consolidated Financial Statements	S-7

		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 below are filed as a part of this Report. Compensatory plans or arrangements are identified below with an asterisk.

Index to E xhibits

Exhibit Number	Description of Documents
3.1	Restated Certificate of Incorporation, is hereby incorporated by reference to Exhibit 3.1 to U.S. Cellular’s Current Report on Form 8-K dated November 10, 20 14.
3.2	Restated Bylaws are hereby incorporated by reference to Exhibit 3.1 to U.S. Cellular’s Current Report on Form 8-K dated August 19, 2014.
4.1	Restated Certificate of Incorporation incorporated herein as Exhibit 3.1.
4.2	Restated Bylaws are incorporated herein as Exhibit 3.2.
4.3	Revolving Credit Agreement, among U.S. Cellular, Toronto Dominion (Texas) LLC, as administrative agent, and the other lenders thereto, dated as of June 15, 2016, including Schedules and Exhibits, including the form of the subsidiary Guaranty and Subordinat ion Agreement, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular's Form 8-K dated June 15, 2016.
4.4(a)	Indenture for Senior Debt Securi ties dated June 1, 2002 , between U.S. Cellular and The Bank of New York Mellon Trust Company, N.A., formerly known as BNY Midwe st Trust Company of New York ( BNY) is hereby incorporated by reference to Exhibit 4.1 to Form S-3 dated May 31, 2013 (File No. 33 3-188971).
4.4(b)	Form of Third Supplemental Indenture dated December 3, 2003 , between U.S. Cellular and BNY Midwest Trust Company, relating to $444,000,0 00 of U.S. Cellular’s 6.7% Senior Notes due 2033, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Current Report on Form 8-K dated December 3, 2003.
4.4(c)	Form of Fifth Supplemental Indenture dated June 21, 2004 , between U.S. Cellular and BNY Midwest Trust Company, relating to $100,000,000 of U.S. Cellular’s 6.7 % Senior Notes due 2033, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Current Report on Form 8-K dated June 21, 2004.
4.4(d)	For m of Sixth Supplemental Indenture dated as of May 9, 2011 , between U.S. Cellular and BNY Midwest Trust Company, related to $342,000,000 of U.S. Cellular’s 6.95% Senior Notes due 2060, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Cu rrent Report on Form 8-K dated May 9, 2011.
4.4(e)	Form of Seventh Supplemental Indenture dated as of December 8, 2014 , between U.S. Cellular and BNY Midwest Tru st Company, related to $275,000,000 of U.S. Cellular’s 7.25% Senior Notes due 2063, is hereby incorporated by reference to Exhibit 2 to U.S. Cellular’s Registration Statement on Form 8-A dated December 2, 2014.
4.4(f)	Form of Eighth Supplemental Indenture dated as of November 23, 2015 , between U.S. Cellular and BNY Midwest Trust Company, related to $300,000,000 of U.S. Cellu lar’s 7.25% Senior Notes due 2064, is hereby incorporated by reference to Exhibit 2 to U.S. Cellular’s Registration Statement on Form 8-A dated November 17, 2015.
4.5	Indenture for Subordinated Debt Securities between U.S. Cellular and BNY is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular’s Current Report on Form 8-K dated September 16, 2013.
4.6	Amended and Restated Term Loan Credit Agreement, among U.S. Cellular and CoBank, ACB, as administrative agent, and the other lenders thereto, dated as of June 15, 2016, including Schedules and Exhibits, includ ing the forms of the subsidiary Guaranty and Subordination Agreement, is hereby incorporated by reference to Exhibit 4.1 to U.S. Cellular's Form 8-K dated June 15, 2016.
4.7	Master Indenture for asset-backed notes by and among USCC Master Note Trust, USCC Services, LLC and U.S. Bank National Association, as Indenture Trustee, dated December 20, 2017, is hereby incorporated by reference to Exhibit 4.1 to U. S. Cellular’s Form 8-K dated December 20, 2017.
4.8	Supplemental Indenture for Series 2017-VFN Floating Rate Asset-Backed Notes by and among USCC Master Note Trust, USCC Services, LLC and U.S. Bank National Association, dated December 20, 2017, is hereby incorporated by reference to Exhibit 4.2 to U.S. Cellular’s Form 8-K dated December 20, 2017.
9.1	Amendment and Restatement (dated April 22, 2005) of Voting Trust Agreement dated June 30, 1989 is hereby incorporated by reference to the Exhibit filed on Amendment No. 3 to the Schedule 13D dated May 2, 2005 , filed by the trustees of such voting trust with respect to TDS Common Shares.
10.1***	Tax Allocation Agreement between U.S. Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Regist ration No. 33-16975).

10.2	Cash Management Agreement between U.S. Cellular and TDS dated December 15, 2017.
10.3***	Registration Rights Agreement between U.S. Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Registration No. 33-16975).
10.4***	Exchange Agreement between U.S. Cellular and TDS, as amended, is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Registration No. 33-16975).
10.5***	Intercompany Agreement between U.S. Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Registration No. 33-16975).
10.6***	Employee Benefit Plans Agreement between U.S. Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Registration No. 33-16975).
10.7***	Insurance Cost Sharing Agreement between U.S. Cellular and TDS is hereby incorporated by reference to an exhibit to U.S. Cellular’s Registration Statement on Form S-1 (Registration No. 33-16975).
10.8(a)*	TDS Supp lemental Executive Retirement Plan, as amended and restated, effective January 1, 2009 , is hereby incorporated by reference to Exhibit 10.1 to TDS’ Current Report on Form 8-K dated August 27, 2008.
10.8(b)*	Amendment Number One to the TDS Supplemental Executive Retirement Plan, is hereby incorporated by reference to Exhibit 10.2 to TDS’ Current Report on Form 8-K dat ed March 15, 2012.
10.8(c)*	Amendment Number Two to the TDS Supplemental Executive Retirement Plan, is hereby incorporated by reference to Exhibit 10.3 to TD S’ Current Report on Form 8-K dated November 3, 2014.
10.9*	U.S. Cellular Amended and Restated Compensation Plan for Non-Employee Directors , is hereby incorporated by reference to Exhibit 10.7 to U.S. Cellular’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 .
10.10*	U.S. Cellular 2005 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit C to the U.S. Cellular Notice of Annual Meeting of Shareholders and Proxy Statement dated April 15, 2009, which was filed with the SEC on Schedule 14A on April 15, 2009.
10.11(a)*	U.S. Cellular 2013 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit B to the U.S. Cellular Notice of Annual Meeting of Shareholders and Proxy Statement dated April 12, 2016, which was filed with the SEC on Schedule 14A on April 12, 2016.
10.11(b)*	Amendment No. 1 to U.S. Cellular 2013 Long-Term Incentive Plan is hereby incorporated by reference to Exhibit A to the U.S. Cellular Notice of Annual Meeting of Shareholders and Proxy Statement dated April 12, 2016, which was filed with the SEC on Schedule 14A on April 12, 2016.
10.12*	U.S. Cellular Form of Long-Term Incentive Plan Executive Deferred Compensation Agreement —Phantom Stock Account for office rs is hereby incorporated by reference to Exhibit 10.5 to U.S. Cellular’s Current Report on Form 8-K dated May 14, 2013.
10.13(a)*	U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference to Exhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated December 10, 2007.
10.13(b)*	First Amendment to U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference to Exhibit 10.6 to U.S. Cellular’s Current Report on Form 8-K dated December 9, 2008.
10.13(c)*	Second Amendment to U.S. Cellular Executive Deferred Compensation Interest Account Plan is hereby incorporated by reference to Exhibit 10.12(c) t o U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2012.
10.13(d)*	Election Form for U.S. Cellular Executive Deferred Compens ation Interest Account Plan is hereby incorporated by reference to Exhibit 10.12(d) to U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2012.
10.14*	U.S. Cellular Form of Long-Term Incentive Plan Restricted Stock Unit Award Agreement for the President and CEO, is hereby incorporated by reference to Exhibit 10. 2 t o U.S. Cellular’s Current Report on Form 8-K dated April 3 , 201 7 .
10.15*	U.S. Cellular Form of Long-Term Incentive Plan Performance Award Agreement for the Presi dent and CEO, is hereby incorporated by reference to Exhibit 10. 1 to U.S. Cellular’s Current Report on Form 8-K dated April 3, 2017 .

10.16*	U.S. Cellular Form of Long-Term Incentive Plan 2017 Performance Award Agreement for Officers other than the President and CEO, is hereby incorporated by reference to Exhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated March 1 3 , 201 7 .
10.17*	U.S. Cellular Form of Long-Term Incentive Plan Restricted Stock Unit Award Agreement for Officers other than the President and CEO, is hereby incorporated by reference to E xhibit 10.2 to U.S. Cellular’s Current Report on Form 8-K dated March 1 3 , 201 7 .
10.18*	U.S. Cellular 2018 Executive Officer Annual Incentive Plan effective January 1, 2018, is hereby incorporated by reference to Exhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated February 19, 2018.
10.19*	U.S. Cell ular 2018 Officer Annual Incentive Plan effective January 1, 2018, is hereby incorporated by reference to Exhibit 10.2 to U.S. Cellular’s Current Report on Form 8-K dated February 19, 2018.
10.20*	Guidelines for the Determination of Annual Bonus for President and Chief Executive Officer of U.S. Cellular, are hereby incorporated by reference to Exhibit 10.2 t o U.S. Cellular’s Current Report on Form 8-K dated August 19, 2014.
10.21*	Letter Agreement dated July 25, 2013 , between U.S. Cellular and Kenneth R. Meyers is h ereby incorporated by reference to Exhibit 10.1 to U.S. Cellular’s Current Report on Form 8-K dated July 25, 2013.
10.22**	Master Service Agreement entered into by United States Cellular Corporation and Amdocs Software Systems Limited on August 17, 2010 , to develop a Billing and Operational Support System (B/OSS) with a new point-of-sale system to consolidate billing on one platform, is hereby incorporated by referen ce to Exhibit 10.8 to U.S. Cellular’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010.
10.23**	Software License and Maintenance Agre ement entered into by United States Cellular Corporation and Amdocs Software Systems Limited on August 17, 2010 , to develop a Billing and Operational Support System (B/OSS) with a new point-of-sale system to consolidate billing on one platform, is hereby i ncorporated by reference to Exhibit 10.9 to U.S. Cellular’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010.
10.24**	Master S tatement of Work, dated as of November 25, 2014, between U.S. Cellular and Amdocs Software Systems, Ltd., is hereby incorporated by reference from Exhibit 10.26 to U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2014.
10.25*	Offer Letter dated June 6, 2017, between U.S. Cellular and Jay Spenchian , is hereby incorporated by reference to Exhibit 10.6 to U.S. Cellular’s Quarterly Repo rt on Form 10-Q for the quarterly period ended September 30, 2017 .
10.26	Series 2017-VFN Note Purchase Agreement by and among USCC Receivables Funding L LC, as transferor, USCC Master Note Trust, as issuer, USCC Services, LLC, as Servicer, U.S. Cellular as guarantor, and Royal Bank of Canada, as administrative agent for owners of the notes, dated December 20, 2017, is hereby incorporated by reference to Ex hibit 10.1 to U.S. Cellular’s Form 8-K dated December 20, 2017.
10.27	Performance Guaranty and Parent Undertaking Agreement by U.S. Cellular in favor of the Guaranteed Parties defined therein, dated December 20, 2017, is hereby incorporated by reference to Exhibit 10.2 to U.S. Cellular’s Form 8-K dated December 20, 2017.
10.28	Amended and Restated Trust Agreement between USCC Receivables Funding LLC, as transferor, and Wilmington Trust, National Association, as Trustee, is hereby incorporated by reference to Exhibit 10.3 to U.S. Cellular’s Form 8-K dated December 20, 2017.
11	Statement regarding computation of earnings per share (included in Note 5 — Earnings Per Share in the Notes to Consolidated Financial Statements in Exhibit 13).
12	Statement regarding computation of ratio of earnings to fixed charges for t he years ended December 31, 2017 , 201 6 , 201 5 , 201 4 , and 201 3 .
13	Incorporated portions of 201 7 Annual Report to Shareholders.
21	Subsidiaries of U.S. Cellular.
23.1	Consent of Independent Registered Public Accounting Firm—PricewaterhouseCoopers LLP.
23.2	Consent of Independent Regis tered Public Accounting Firm—Ernst & Young LLP.
31.1	Principal executive officer certification pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.

31.2	Principal financial officer certification pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
32.1	Principal executive officer certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.2	Principal financial officer certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Docum ent
*	Indicates a management contract or compensatory plan or arrangement.
**	Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to the Securities Exchange Act of 1934, as amended. The application for confidential treatment has been granted.
***	Indicates a paper filing prior to the adoption of EDGAR.

Item 16. Form 10-K Summary

None.

LOS ANGELES SMSA LIMITED PARTNERSHIP AND SUBSIDIARY
FINANCIAL STATEMENTS

U.S. Cellular owns a 5.5% limited partnership interest in the Los Angeles SMSA Limited Partnership and Subsidiary, and accounts for such interest by the equity method. The partnership’s consolidated financial statements were obtained by U.S. Cellular as a limited partner.

Report of Independent Registered Public Accounting Firm

The Partners of Los Angeles SMSA Limited Partnership

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Los Angeles SMSA Limited Partnership and Subsidiary (the Partnership) as of December 31, 2017 and 2016, the related consolidated statements of income and comprehensive income, changes in partners’ capital and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, th e consolidated financial statements present fairly, in all material respects, the financial position of the Partnership at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended Dece mber 31, 2017 in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S. federal se curities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our December 31, 2017 and 2016 audits in accordance with the standards of the PCAOB and in accordance with auditing standards gene rally accepted in the United States of America. We conducted our 2015 audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles use d and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

Certified Public Accountants

We h ave served as the Partnership’s auditor since 2014.

Orlando, Florida

February 26, 2018

Los Angeles SMSA Partnership and Subsidiary
Consolidated Balance Sheets - As of December 31, 2017 and 2016

(Dollars in Thousands)				2017		2016
ASSETS

CURRENT ASSETS:
	Due from affiliate		$	218,838	$	281,846
	Accounts receivable, net of allowances of $26,916 and $31,093			423,285		489,043
	Unbilled revenue			21,901		23,190
	Prepaid expenses			19,015		18,716
		Total current assets		683,039		812,795

PROPERTY, PLANT AND EQUIPMENT - NET				1,936,038		1,862,892

WIRELESS LICENSES				2,075,448		2,075,448

OTHER ASSETS - NET				349,484		228,770

TOTAL ASSETS			$	5,044,009	$	4,979,905

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
	Accounts payable and accrued liabilities		$	158,099	$	202,284
	Advance billings and other			174,965		160,434
	Financing obligation			12,926		12,744
	Deferred rent			8,360		8,382
		Total current liabilities		354,350		383,844

LONG TERM LIABILITIES:
	Financing obligation			111,318		112,552
	Deferred rent			141,410		146,547
	Other liabilities			7,841		158
		Total long term liabilities		260,569		259,257

		Total liabilities		614,919		643,101

PARTNERS' CAPITAL
	General Partner's interest			1,771,636		1,734,722
	Limited Partners' interest			2,657,454		2,602,082
		Total partners' capital		4,429,090		4,336,804

TOTAL LIABILITIES AND PARTNERS' CAPITAL			$	5,044,009	$	4,979,905

See notes to consolidated financial statements.

Los Angeles SMSA Limited Partnership and Subsidiary
Consolidated Statements of Income and Comprehensive Income - For the Years Ended December 31, 2017, 2016 and 2015

(Dollars in Thousands)				2017		2016		2015

OPERATING REVENUES:
	Service revenues		$	3,791,371	$	3,996,989	$	4,181,377
	Equipment revenues			982,251		930,690		943,419
	Other			246,322		256,917		221,918
		Total operating revenues		5,019,944		5,184,596		5,346,714

OPERATING EXPENSES:
	Cost of service (exclusive of depreciation and amortization)			1,107,614		1,070,302		968,132
	Cost of equipment			1,174,858		1,193,924		1,267,801
	Depreciation and amortization			355,696		356,848		360,463
	Selling, general and administrative			1,168,978		1,278,205		1,397,856
		Total operating expenses		3,807,146		3,899,279		3,994,252

OPERATING INCOME				1,212,798		1,285,317		1,352,462

OTHER INCOME (EXPENSE):
	Interest income (expense), net			2,857		(6,552)		(3,197)
	Other			1,631		–		–
		Total other income (expense)		4,488		(6,552)		(3,197)

NET INCOME AND COMPREHENSIVE INCOME			$	1,217,286	$	1,278,765	$	1,349,265

Allocation of Net Income:
	General Partner		$	486,914	$	511,507	$	539,706
	Limited Partners		$	730,372	$	767,258	$	809,559

See notes to consolidated financial statements.

Los Angeles SMSA Limited Partnership and Subsidiary
Consolidated Statements of Changes in Partners' Capital - For the Years Ended December 31, 2017, 2016 and 2015

(Dollars in Thousands)

		General Partner		Limited Partners
		AirTouch Cellular Inc.		AirTouch Cellular Inc.		Cellco Partnership		United States Cellular Investment Corporation of Los Angeles		Total Partners' Capital

BALANCE - January 1, 2015		$	893,509	$	944,886	$	272,520	$	122,859	$	2,233,774

	Net Income		539,706		570,740		164,611		74,208		1,349,265

BALANCE - December 31, 2015		$	1,433,215	$	1,515,626	$	437,131	$	197,067	$	3,583,039

	Distributions		(210,000)		(222,075)		(64,050)		(28,875)		(525,000)

	Net Income		511,507		540,917		156,009		70,332		1,278,765

BALANCE - December 31, 2016		$	1,734,722	$	1,834,468	$	529,090	$	238,524	$	4,336,804

	Distributions		(450,000)		(475,875)		(137,250)		(61,875)		(1,125,000)

	Net Income		486,914		514,912		148,509		66,951		1,217,286

BALANCE - December 31, 2017		$	1,771,636	$	1,873,505	$	540,349	$	243,600	$	4,429,090

See notes to consolidated financial statements.

Los Angeles SMSA Limited Partnership and Subsidiary
Consolidated Statements of Cash Flows - For the Years Ended December 31, 2017, 2016 and 2015

(Dollars in Thousands)						2017		2016		2015

CASH FLOWS FROM OPERATING ACTIVITIES:
	Net Income				$	1,217,286	$	1,278,765	$	1,349,265
	Adjustments to reconcile net income to net cash provided by
		operating activities:
		Depreciation and amortization				355,696		356,848		360,463
		Imputed interest on financing obligation				12,374		12,284		9,135
		Provision for losses on accounts receivable				56,505		71,925		79,063
		Gain on device installment plan receivables sold				–		–		(7,632)
		Changes in certain assets and liabilities:
			Accounts receivable			(36,907)		(153,704)		42,964
			Unbilled revenue			1,289		(307)		1,628
			Prepai d expenses			(299)		(6,931)		1,403
			Other assets - net			(137,062)		20,037		(151,954)
			Accoun ts payable and accrued liabilities			(54,321)		24,685		24,105
			Advance billings and other			14,531		(6,099)		(31,182)
			Deferr ed rent			(5,159)		(4,010)		88,115
			Other liabilities			7,683		41		4,046
				Net cash provided by operating activities		1,431,616		1,593,534		1,769,419

CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures					(434,350)		(449,005)		(470,954)
	Fixed asset transfers out					15,648		23,453		25,371
	Acquisition of wireless licenses					–		(1,697)		(1,994,208)
	Collections on deferred purchase price					46,161		1,783		–
	Collection on beneficial interest - net					16,343		–		–
	Change in due from affiliate					63,008		(281,846)		(583,060)
				Net cash used in investing activities		(293,190)		(707,312)		(3,022,851)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Change in due to affiliate					–		(348,724)		1,137,057
	Proceeds from financing obligation					–		–		126,635
	Repayments of financing obligation					(13,426)		(12,498)		(10,260)
	Distributions					(1,125,000)		(525,000)		–
				Net cash used in financing activities		(1,138,426)		(886,222)		1,253,432

CHANGE IN CASH						–		–		–

CASH - Beginning of year						–		–		–

CASH - End of year					$	–	$	–	$	–

CASH PAID FOR INTEREST					$	–	$	2,576	$	24,269

NONCASH TRANSACTIONS FROM INVESTING ACTIVITIES:
	Accruals for capital expenditures				$	25,757	$	15,621	$	28,829

See notes to consolidated financial statements.

Los Angeles SMSA Limited Partnership and Subsidiary

Notes to Consolidated Financial Statements – For the Years E nded December 31, 2017 , 2016 and 2015

(Dollars in Thousands)

1. ORGANIZATION AND MANAGEMENT

The Consolidated Financial Statements include the accounts of the Los Angeles SMSA Limited Partnership (“Los Angeles SMSA”) and Los Angeles Edge LLC, a wholly owned subsidiary of L os Angeles SMSA (collectively, the “Partnership”). The principal activity of Los Angeles SMSA, formed in 1984, is to provide cellular service in the Los Angeles metropolitan statistical area. Los Angeles Edge LLC was formed during 2015 and is a bankruptcy remote special purpose entity (SPE) , created for the purpose of selling wireless device payment plan agreement receivables to third parties (see Note 3).

In accordance with the partnership agreement, AirTouch Cellular Inc., an indirect wholly owned subsi diary of Cellco Partnership (“Cellco”), doing business as Verizon Wireless, and general partner of the Partnership, is responsible for managing the operations of the Partnership (see Note 8).

The partners and their respective ownership percentages of the P artnership as of December 31, 201 7, 2016, and 2015 are as follows:

General Partner:
	AirTouch Cellular Inc.	40.0%

Limited Partners:
	AirTouch Cellular Inc.	42.3%
	Cellco Partnership	12.2%
	United States Cellular Investment Corporation of Los Angeles	5.5%

2. SIGNIFICANT ACCOUNTING POLICIES

Consolidation – The method of accounting applied to investments involves an evaluation of all significant terms of the investments that explicitly grant or suggest evidence of control or influence over the operations of the investee. The consolidated financial statements include our subsidiary which is a variable interest entity (VIE) where Los Ang eles SMSA is deemed to be the primary beneficiary. All significant intercompany accounts and transactions have been eliminated (see Note 3).

Use of e stimates – The consolidated financial statements are prepared using U.S. generally accepted accounting prin ciples (GAAP), which requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates.

Examples of significant estimates include: the allowance for doubtful accounts, the r ecoverability of property, plant and equipment, the recoverability of wireless licenses and unbilled revenues, fair v alues of financial instruments, deferred purchase price, beneficial interest, accrued expenses and contingencies.

Revenue r ecognition – The Partnership offers products and services to customers through bundled arrangements. These arrangements involve multiple deliverables which may include products, services, or a combination of products and services.

The Partnership earns revenue primarily b y providing access to and usage of its network as well as the sale of equipment. In general, access revenue is billed one month in advance and recognized when earned. Usage revenue is generally billed in arrears and recognized when service is rendered. Equ ipment revenue associated with the sale of wireless devices and accessories is generally recognized when the products are delivered to and accepted by the customer, as equipment sales is considered to be a separate earnings process from providing wireless services. For agreements involving the resale of third-party services in which the Partnership is considered the primary obligor in the arrangements, the revenue is recorded gross at the time of sale.

Under the Verizon device payment plan program, eligibl e wireless customers purchase wireless devices under a device payment plan agreement. The Partnership may offer certain promotions that allow a customer to trade in his or her owned device in connection with the purchase of a new device. Under these types of promotions, the customer receives a credit for the value of the trade-in device. In addition, the Partnership may provide the customer with additional future credits that will be applied against the customer’s monthly bill as long as service is maintain ed. The Partnership recognizes a liability for the trade-in device measured at fair value, which is approximated by considering several factors, including the weighted-average selling prices obtained in recent resales of devices eligible for trade-in. Futu re credits are recognized when earned by the customer.

From time to time, the Partnership offers certain marketing promotions that allow our customers to upgrade to a new device after paying down a certain specified portion of the ir required device payme nt plan agreement amount and trading in their device in good working order. When a customer enters into a device payment plan agreement with the right to upgrade to a new device, the Partnership accounts for this trade-in right as a guarantee obligation. T he full amount of the trade-in right’s fair value (not an allocated value) is recognized as a guarantee liability and the remaining allocable consideration is allocated to the device. The value of the guarantee liability effectively results in a reduction to the revenue recognized for the sale of the device.

In multiple element arrangements that bundle devices and monthly wireless service, revenue is allocated to each unit of accounting using a relative selling price method. At the inception of the arrangement, the amount allocable to the delivered units of accounting is limited to the amount that is not contingent upon the delivery of the monthly wireless service (the noncontingent amount). The Partnership effectively recognizes revenue on the deliv ered device at the lesser of the amount allocated based on the relative selling price of the device or the noncontingent amount owed when the device is sold.

Roaming revenue reflects service revenue earned by the Partnership when customers not associated w ith the Partnership operate in the service area of the Partnership and use the Partnership’s network. The roaming rates with third party carriers associated with those customers are based on agreements with such carriers. The roaming rates and methodology to determine roaming volumes charged by the Partnership to Cellco are established by Cellco on a periodic basis and may not reflect current market rates (see Note 8).

Other revenues primarily consist of certain fees billed to customers for surcharges and e lected services . The Partnership reports taxes imposed by governmental authorities on revenue - producing transactions between the Partnership and its customers which is passed through to the customers on a net basis. Other revenues also include switch reven ue. This revenue represents revenue earned by the Partnership for switch services provided to other Cellco owned entities by the Partnership. The switch revenue rates charged by the Partnership to Cellco are established by Cellco on a periodic basis and ma y not reflect current market rates (see Note 8).

Operating e xpenses – Operating expenses include expenses incurred directly by the Partnership, as well as an allocation of selling, general and administrative, and operating costs incurred by Cellco or its a ffiliates on behalf of the Partnership. Employees of Cellco provide services on behalf of the Partnership. These employees are not employees of the Partnership, therefore operating expenses include direct and allocated charges of salary and employee benefi t costs for the services provided to the Partnership. Cellco believes such allocations, principally based on the Partnership’s total subscribers, are calculated in accordance with the Partnership agreement and are a reasonable method of allocating such cos ts (see Note 8). In 2016, allocations were principally based on the Partnership’s percentage of certain revenue streams, total subscribers and customer gross additions or minutes-of-use; in 2017, allocations were principally based on total subscribers. The impact of the change in allocation factors was insignificant.

Cost of roaming , included in cost of service, reflects costs incurred by the Partnership when customers associated with the Partnership operate in a service area not associated with the Partner ship and use a network not associated with the Partnership. The roaming rates with third party carriers are based on agreements with such carriers. The roaming rates and methodology to determine roaming volumes charged to the Partnership by Cellco are esta blished by Cellco on a periodic basis and may not reflect current market rates (see Note 8).

Cost of equipment is recorded upon sale of the related equipment at Cellco’s cost basis. Inventory is wholly owned by Cellco until the moment of sale and is not re corded in the consolidated financial statements of the Partnership.

Maintenance and r epairs – The cost of maintenance and repairs, including the cost of replacing minor items not constituting substantial betterments, is charged principally to Cost of servi ce as these costs are incurred.

Advertising c osts – Costs for advertising products and services as well as other promotional and sponsorship costs are charged to Selling, general and administrative expense in the periods in which they are incurred (See Not e 8) .

Comprehensive i ncome – Comprehensive income is the same as net income as presented in the accompanying statements of income and comprehensive income.

Income t axes – On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted. The TCJA significantly revised the U.S. federal corporate income tax by, among other things, lowering the corporate income tax rate to 21% and imposing limitations on the deduction of interest expense. The Partnership is treated as a pass through entity fo r income tax purposes and, therefore, is not subject to federal, state or local income taxes. Accordingly, no provision has been recorded for income taxes in the Partnership’s consolidated financial statements. The results of operations, including taxable income, gains, losses, deductions and credits, are allocated to and reflected on the income tax returns of the respective partners.

The Partnership files partnership income tax returns in the U.S. federal jurisdiction and various state and local jurisdicti ons . The Partnership remain s subject to examination by tax authorities for tax years as early as 2014. It is reasonably possible that various current tax examinations will conclude or require reevaluations of the Company’s tax positions during this period. An estimate of the range of the possible change cannot be made until these tax matters are further developed or resolved .

Due to/from affiliate – Due to/from affiliate principally represents the Partnership’s cash position with Cellco. Cellco manages, on behalf of the Partnership, all cash, investing and financing activities , including all transactions associated with the sales of wireless device payment plan agreement receivables, of the Partnership. As such, the change in due to/from affiliate is reflec ted as an investing activity or a financing activity in the statements of cash flows depending on whether it represents a net asset or net liability for the Partnership.

Additionally, cost of equipment, administrative and operating costs incurred by Cell co on behalf of the Partnership, as well as property, plant and equipment and wireless license transactions with affiliates, are charged to the Partnership through this account. Interest income on due from affiliate is based on the Applicable Federal Rate which was approximately 1.2 %, 0. 7 % and 0. 5 % for the years ended December 31, 201 7 , 201 6 and 201 5 , respectively. Interest expense on due to affiliate is calculated by applying Cellco’s average cost of borrowing from Verizon Communications Inc., which was ap proximately 4. 7 %, 4.8% and 4.8 % for the years ended December 31, 2017, 2016 and 2015 respectively , to the outstanding due to/from affiliate balance. Included in Interest Income (expense) , net is interest income of $5,928 , $ 1,390 and $ 0 for the years ended December 31, 201 7 , 201 6, and 201 5 , respectively, related to due to/from affiliate. Interest expense of $ 0, $2,683 and $23,878 was incurred during the year s ended December 31, 2017, 2016 and 2015 respectively , of which all was capitaliz ed.

Allowance for doubtful a ccounts – Accounts receivable are recorded in the consolidated financial statements at cost , net of allowance for credit losses, with the exception of device payment plan agreement receivables which are initially recorded at fai r value based on a number of factors including historical write-off experience, credit quality of the customer base and other factors such as macroeconomic conditions. The Partnership maintains allowances for uncollectible accounts receivable, including de vice payment plan agreement receivables, for estimated losses resulting from the failure or inability of customers to make required payments. The allowance for uncollectible accounts receivable is based on Cellco’s assessment of the collectability of each Partnership’s specific customer accounts and includes consideration of the credit worthiness and financial condition of those customers. The Partnership records an allowance to reduce the receivables to the amount that is reasonably believed to be collecti ble. The Partnership also records an allowance for all other receivables based on multiple factors including historical experience with bad debts, the general economic environment and the aging of such receivables. Similar to traditional service revenue ac counting treatment, the Partnership records device payment plan agreement bad debt expense based on an estimate of the percentage of equipment revenue that will not be collected. This estimate is based on a number of factors including historical write-off experience, credit quality of the customer base and other factors such as macroeconomic conditions. Due to the device payment plan agreement being incorporated in the standard Verizon Wireless bill, the collection and risk strategies continue to follow his torical practices. The Partnership monitors the aging of accounts with device payment plan agreement receivables and writes off account balances if collection efforts are unsuccessful and future collection is unlikely.

Property, plant and equipment, and De preciation – Property, plant and equipment is recorded at cost. Property, plant and equipment are generally depreciated on a straight-line basis.

Leasehold improvements are amortized over the shorter of the estimated life of the improvement or the remainin g term of the related lease, calculated from the time the asset was placed in service.

When depreciable assets are retired or otherwise disposed of, the related cost and accumulated depreciation are deducted from the property, plant and equipment accounts and any gains or losses on disposition are recognized in income. Transfers of property, plant and equipment between Cellco and affiliates are recorded at net book value on the date of the transfer with an offsetting entry included in due to/from affiliate.

Interest associated with the construction of network-related assets is capitalized. Capitalized interest is reported as a reduction in interest expense and depreciated as part of the cost of the network-related assets.

In connection with the ongoing revie w of estimated useful lives of property, plant and equipment during 2016, Cellco determined that the average useful lives of certain leasehold improvements would be increased from 5 to 7 years. This change was immaterial in 2016. Cellco determined that cha nges were also necessary to the remaining estimated useful lives of certain assets as a result of technology upgrades, enhancements, and planned retirements. While the timing and extent of current deployment plans are subject to ongoing analysis and modifi cation, Cellco and the Partnership believe the current estimates of useful lives are reasonable.

Other assets – Other assets - net primarily include beneficial interest and long term device payment plan agreement receivables, net of allowances of $ 12,261 and $ 16,545 at December 31, 201 7 and 201 6 , respectively (see Note 3) .

Impairment – All long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If any i ndications were to become present, the Partnership would test for recoverability by comparing the carrying amount of the asset group to the net undiscounted cash flows expected to be generated from the asset group. If those net undiscounted cash flows do n ot exceed the carrying amount, the next step would be to determine the fair value of the asset and record an impairment, if any. The Partnership re - evaluates the useful life determinations for these long-lived assets each year to determine whether events a nd circumstances warrant a revision to their remaining useful lives.

Wireless l icenses – W ireless licenses provide the Partnership with the exclusive right to utilize designated radio frequency spectrum to provide wireless communications services. In addit ion, Cellco maintains wireless licenses that provide the Partnership with the exclusive right to utilize designated radio frequency spectrum to provide wireless communications services (see Note 4) . While licenses are issued for only a fixed time, generall y ten years, such licenses are subject to renewal by the Federal Communications Commission (FCC). License renewals, which are managed by Cellco, have historically occurred routinely and at nominal cost. Moreover, Cellco determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of the Partnership’s wireless licenses. As a result, wireless licenses are treated as an indefinite-lived intangible asset. The useful life determination f or wireless licenses is re - evaluated each year to determine whether events and circumstances continue to support an indefinite useful life. When evaluating for impairment, Cellco aggregates wireless licenses into one single unit of accounting, as they are utilized on an integrated basis.

Cellco on behalf of the Partnership test s the wireless licenses balance for potential impairment annually or more frequently if impairment indicators are present. In 201 7, 2016, and 2015 , Cellco performed a qualitative impairment assessment to determine whether it is more likely than not that the fair value of the Partnership’s wireless licenses was less than the carrying amount. As part of the assessment, several qualitative factors were considered including market tra nsactions, the business enterprise value of the Partnership , macroeconomic conditions (including changes in interest rates and discount rates), industry and market considerations (including industry revenue and EBITDA (Earnings before interest, taxes, depr eciation and amortization) margin projections), the projected financial performance, as well as other factors . In 2017 and 2016, Cellco also performed a qualitative impairment assessment similar to that described for the Partnership for its aggregate wirel ess licenses. In 2015, Cellco performed a quantitative impairment assessment for its aggregate wireless licenses which consisted of comparing the estimated fair value of its aggregate wireless licenses to the aggregated carrying amount as of the test date.

Interest expense incurred while qualifying activities are performed to ready wireless licenses for their intended use is capitalized as part of wireless licenses (see Note 4). The capitalization period ends when the development is discontinued or substant ially complete and the license is ready for its intended use.

In addition, Cellco believes that under the Partnership agreement it has the right to allocate, based on a reasonable methodology, any impairment loss recognized by Cellco for licenses included in Cellco’s national footprint. Cellco and the Partnership eva luated their wireless licenses for potential impairment as of December 15, 2017, 2016 and 2015. These evaluations resulted in no impairment of wireless licenses.

Financial i nstruments – The Partnership’s trade receivables and payables are short-term in nat ure, and accordingly, their carrying value approximates fair value .

Fair value m easurements – Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or p aid to transfer a liability in an orderly transaction between market participants. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3 - No observable pricing inputs in the market

F inancial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The assessment of the significance of a particular input to the fair value measurements requir es judgment, and may affect the valuation of the assets and liabilities being measured and their categorization within the fair value hierarchy. As of December 31, 2017 and 2016 the Partnership does not have any assets or liabilities measured at fair value on a recurring basis.

Distributions – The Partnership is required to make distributions to its partners based upon the Partnership’s operating results, due to/from affiliate status, and financing needs as determined by the General Partner at the date of t he distribution.

Variable interest e ntities (VIEs) – VIEs are entities which lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, have equity investors which do not have the ability to make significant decisions relating to the entity’s operations through voting rights, do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. The assets and liabiliti es of the VIEs are consolidated when the Partnership is deemed to be the primary beneficiary. The primary beneficiary is the party which has the power to make the decisions that most significantly affect the economic performance of the VIE and the obligati on to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

Recent accounting s tandards – In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . ” This standard update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice for these issues. Among the updates, this standard update requires cash receipts from payments on a transfe ror’s beneficial interests in securitized trade receivables to be classified as cash inflows from investing activities. This standard update is effective as of the first quarter of 2018; however, early adoption is permitted. We expect the amendment relatin g to beneficial interests in securitization transactions will have an impact on our presentation of collections of the deferred purchase price from sales of wireless device payment plan agreement receivables in our consolidated statements of cash flows. Up on adoption of this standard update in the first quarter of 2018, we expect to retrospectively reclassify approximately $39,848 of collections of deferred purchase price related to collections from customers from Cash flows from operating activities to Cas h flows from investing activities in our consolidated statement of cash flows for the year ended December 31, 2017 and $81,670 for the year ended December 31, 2016.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard update requires that certain financial assets be measured at amortized cost net of an allowance for estimated credit losses such that the net receivable represents the present valu e of expected cash collection. In addition, this standard update requires that certain financial assets be measured at amortized cost reflecting an allowance for estimated credit losses expected to occur over the life of the assets. The estimate of credit losses must be based on all relevant information including historical information, current conditions and reasonable and supportable forecasts that affect the collectability of the amounts. This standard update is effective as of the first quarter of 2020; however early adoption is permitted. The Partnership is currently evaluating the impact that this standard update will have on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This standard update intends to increase transparency and improve comparability by requiring entities to recognize assets and liabilities on the balance sheet for all leases, with certain exceptions. In addition, through improved disclosure requirements, the standard update w ill enable users of financial statements to further understand the amount, timing, and uncertainty of cash flows arising from leases. This standard update is effective as of the first quarter of 2019; however early adoption is permitted. The Partnership’s current operating lease portfolio is primarily comprised of spectrum, network, real estate, and equipment leases. Upon adoption of th is standard, the Partnership expects the balance sheet to include a right of use asset and liability related to substantial ly all opera ting lease arrangements. A t Cellco, a cross-functional coordinated implementation team has been established to implement the standard update related to leases. The Partnership is in the process of determining the scope of arrangements that will be subject to this standard as well as assessing the impact to its systems, processes and internal controls to meet the standard update’s reporting and disclosure requirements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from C ontracts with Custome rs (Topic 606) . ” This standard , along with related subsequently issued updates clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP. The standard provides a more robust framework for addressing revenue issues; im proves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; and provides more useful information to users of financial statements through improved disclosure requirements. The standard update also amends current guidance for the recognition of costs to obtain and fulfill contracts with customers such that incremental costs of obtaining and direct costs of fulfilling contracts with customers will be deferred and amortized consistent with the transfer of the related good or service. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the s tandard would be recognized at the earliest period shown, or the modified retrospective method, in which case the standard is applied only to the most current period presented and the cumulative effect of applying the standard would be recognized at the da te of initial application. In August 2015, an accounting standard update was issued that delay ed the effective date of this standard until the first quarter of 2018, at which time the Partnership will adopt the standard using the modified retrospective app roach to open contracts. At Cellco, a cross-functional coordinated team has been established to implement this standard . Summarized below are the key impacts and areas requiring significant judgement arising from the initial adoption of Topic 606.

The ulti mate impact on revenue resulting from the application of the new standard is subject to assessments that are dependent on many variables, including, but not limited to, the terms of the contractual arrangements and mix of business. T he Partnership expects the allocation of revenue between equipment and service for wireless subsidy contracts will result in more revenue allocated to equipment and recognized upon delivery, and less service revenue recognized over the contract term than under current GAAP. Tota l revenue over the full contract term will be unchanged and there will be no change to customer billing, the timing of cash flows or the presentation of cash flows.

Additionally, the new standard requires the deferral of incremental costs to obtain a cust omer contract, which are then amortized to expense, as part of Selling, general and administrative expense, over the respective periods of expected benefit. As a result, a significant amount of our sales commission costs, which would have historically bee n expensed as incurred will be deferred and amortized. In addition, for certain contractual arrangements, the device may be sold by one Cellco entity but the service contract is the performance obligation of another Cellco entity. In contractual arrangeme nts where another Cellco entity sells the device on behalf of the Partnership, the Partnership will compensate the other Cellco entity for obtaining the service contract. This represents an incremental cost to obtain the service contract and will be deferr ed by the Partnership and recognized over the expected benefit period. The Partnership will recognize service revenue for the wireless service that it provides to the customer. In contractual arrangements where the Partnership sells the device on behalf of another Cellco entity, the equipment revenue associated with the transaction will be recognized by the Partnership, and the Partnership will also recognize commission revenue as compensation for obtaining the service contract on behalf of the other Cellco entity.

Based on currently available information, we expect the cumulative effect of initially applying the new standard to result in an increase to the opening balance of retained earnings ranging from approximately $125,000 to $175,000 .

Subsequent e vents – Events subsequent to December 31, 201 7 have been evaluated through February 2 6 , 201 8 , the date the consolidated financial statements were issued.

3. WIRELESS DEVICE PAYMENT PLANS

Under the Verizon device payment program, eligible wireless customers purchase wireless devices under a device payment plan agreement. Customers that activate service on devices purchased under the device payment program pay lower service fee s as compared to those under fixed-term service plans , and their device payment plan charge is included o n their standard wireless monthly bill. As of January 2017, we no longer offer consumers new fixed-term service plans for phones, however we continue to service existing plans and provide these plans to business customers.

Wireless device payment plan agreement receivables – The following table displays device payment plan agreement receivables, net, that continue to be recog nized in the accompanying consolidated balance sheets:

	2017		2016
Device payment plan agreement receivables, gross	$	311,677	$	272,174
Unamortized imputed interest		(15,430)		(11,544)
Device payment plan agreement receivables, net of unamortized imputed interest		296,247		260,630
Allowance for credit losses		(33,897)		(36,026)
Device payment plan agreement receivables, net	$	262,350	$	224,604

Classified on the consolidated balance sheets:
Accounts receivable, net	$	140,895	$	120,747
Other assets, net	$	121,455	$	103,857
Device payment plan agreement receivables, net	$	262,350	$	224,604

The Partnership may offer customers certain promotions that allow a customer to trade in his or her owned device in connection with the purchase of a new device. Under these types of promotions, the customer receive s a credit for the value of the tr ade-in device. In addition, the Partnership may provide the customer with additional future credits that will be applied against the customer’s monthly bill as long as service is maintained. The Partnership recognizes a liability for the trade-in device me asured at fair value , which is determined by considering several factors, including the weighted-average selling prices obtained in recent resale s of similar devices eligible for trade-in. Future credits are recognized when earned by the customer. Device payment plan agreement receivables, net does not reflect the trade-in device liability. At December 31, 2017 and 2016 , the amount of trade-in liability was insignificant.

From time to time, the Partnership offers certain marketing promotions that allow ou r customers to upgrade to a new device after paying down a certain specified portion of the required device payment plan agreement amount as well as trading in their device in good working order. When a customer enters into a device payment plan agreement with the right to upgrade to a new device, we account for this trade-in right as a guarantee obligation. At December 31, 2017 and 2016, the amount of the guarantee obligation was insignificant. The amount of the guarantee obligation was included in Advan ce billings and other on the accompanying consolidated balance sheets.

At the time of sale, the Partnership imputes risk adjusted interest on the device payment plan agreement receivables. I mputed interest is recorded as a reduction to the related accoun ts receivable. Interest income, which is included within Other revenues on the consolidated statements of income and comprehensive income, is recognized over the financed device payment term.

When originating device payment plan agreements, the Partnershi p uses internal and external data sources to create a credit risk score to measure the credit quality of a customer and to determine eligibility for the device payment program. If a customer is either new to the Partnership or has less than 210 days of cus tomer tenure (a new customer), the credit decision process relies more heavily on external data sources. If the customer has 210 days or more of customer tenure (an existing customer), the credit decision process relies on internal data sources. The Partne rship’s experience has been that the payment attributes of longer tenured customers are highly predictive in estimating their ability to pay in the future. External data sources include obtaining a credit report from a national consumer credit reporting ag ency, if available. I nternal data and/or credit data obtained from the credit reporting agencies is used to create a custom credit risk score. The custom credit risk score is generated automatically (except with respect to a small number of applications wh ere the information needs manual intervention) from the applicant’s credit data using Verizon Wireless proprietary custom credit models, which are empirically derived and demonstrably and statistically sound. The credit risk score measures the likelihood t hat the potential customer will become severely delinquent and be disconnected for non-payment. For a small portion of new customer applications, a traditional credit report is not available from one of the national credit reporting agencies because the po tential customer does not have sufficient credit history. In those instances, alternate credit data is used for the risk assessment.

Based on the custom credit risk score, each customer is assigned to a credit class, each of which has a specified required down payment percentage , which ranges from zero to 100%, and specified credit limits. Device payment plan agreement receivables originated from customers assigned to credit classes requiring no down payment represent the lowest risk. Device payment plan ag reement receivables originated from customers assigned to credit classes requiring a down payment represent a higher risk.

Subsequent to origination, the Partnership monitors delinquency and write-off experience as key credit quality indicators for its portfolio of device payment plan agreements and fixed-term service plans. The extent of collection efforts with respect to a particular customer are based on the result s of proprietary custom empirically derived internal behavioral scoring models that analyze the customer’s past performance to predict the likelihood of the customer falling further delinquent. These customer scoring models assess a number of variables, in cluding origination characteristics, customer account history and payment patterns. Based on the score derived from these models, accounts are grouped by risk category to determine the collection strategy to be applied to such accounts. The Partnership con tinuously monitors collection performance results and the credit quality of device payment plan agreement receivables based on a variety of metrics, including aging. The Partnership considers an account to be delinquent and in default status if there are u npaid charges remaining on the account on the day after the bill’s due date.

As of December 31, 20 1 7 and 2016, t he balance and aging of the device payment plan agreement receivables o n a gross basis was as follows:

		2017		2016
Unbilled	$	292,834	$	264,724
Billed:
Current		15,500		5,885
Past Due		3,343		1,565
Device payment plan agreement receivables, gross	$	311,677	$	272,174

Activity in the allowance for credit losses for the device payment plan agreement receivables was as follows:

			2017		2016
Balance at January 1		$	36,026	$	25,873
	Bad debt expenses		42,873		48,965
	Write-offs		(40,181)		(24,482)
	Allowance related to receivables sold		(3,800)		(16,829)
	Other		(1,021)		2,499
Balance at December 31		$	33,897	$	36,026

Sales of wireless device payment plan agreement receivables – Dur ing 2015 and 2016 Cellco established program s pursuant to a Receiva bles Purchase Agreement (RPA) to sell from time to time, on an uncommitted basis, eligible device payment plan receivables t o a group of primarily relationship banks (Purchasers) on both a revolving (Revolving Program) and non-revolving (Non-Revolving Program) basis . Additionally, d uri ng September of 2016, Cellco entered into a device payment plan agreement receivables financing facility (the “ABS Financing Facility”) with a number of financial institutions. The receivables sold under the RPA and the ABS Financing Facility were no longer considered assets of the Partnership. The proceeds received from the Purchasers wer e recorded within c ash flows provided by operating activities on the consolidated statements of cash flows.

Receivables Purchase Agreement – Under the Non-Revolving Program, Los Angeles SMSA would transfer the eligible receivables to Los Angeles Edge (Sell er or SPE). The Seller would then sell the receivables to the Purchasers for upfront proceeds and additional consideration upon settlement of the receivables (the deferred purchase price). Under the Revolving Program, Los Angeles SMSA transferred the eligi ble device payment plan agreement receivables to the Seller. The Seller then sold the eligible receivables on a revolving basis, subject to a maximum funding limit, to the Purchasers. Sales of eligible receivables by the Sellers, once initiated, generally occurred and were settled on a monthly basis. Customer payments made towards receivables sold under the Revolving Program were available to purchase additional eligible device payment plan agreement receivables originated during the revolving period. Under the Programs, eligible device payment plan agreement receivables were transferred to the Purchasers for upfront cash proceeds and additional consideration upon settlement of the receivables, referred to as the deferred purchase price. Throughout 2017, as permitted by the RPA agreements, Cellco exercised its clean up call options to trigger the repurchase of an immaterial amount of outstanding receivables in consideration for the rights to collect any remaining deferred purchase price assets, ending the pro gram.

There were no sales of device payment plan agreement receivables under the Programs during 2017 . There were no reinvested collections in 2017.

During 2016, the Partnership sold $178,981 of receivables, net of allowances and imputed interest under the Revolving Program. The Partnership received proceeds from new transfers of $132,483 and proceeds from reinvested collections of $36,855, and recorded a deferred purchase price of $23,873.

During 2015, the Partnership sold $418,615 of receivables, net of a llowances and imputed interest, under the Non-Revolving Program. In connection with this sale, proceeds from new transfers of $308,659 were received and a deferred purchase price of $117,587 was recorded. During 2015, the Partnership also sold $201,283 of receivables, net of allowances and imputed interest, under the Revolving Program. In connection with this sale, proceeds from new transfers of $168,854 were received and a deferred purchase price of $32,429 was recorded.

During 2017, 2016, and 2015, the sales of receivables under the RPA did not have a material impact on the consolidated statements of income and comprehensive income.

Deferred purchase price – During 2017, 2016 and 2015, the Partnership collected $39,848, $81,670, and an insignificant amou nt, respectively, which was returned as deferred purchase price and recorded within Cash flows provided by operating activities on our consolidated statement of cash flows. Collections recorded within Cash flows from investing activities on our consolidate d statements of cash flows were $46,161 during 2017 and insignificant during 2016 and 2015. At December 31, 2017 and 2016 , our deferred purchase price receivable was $0 and $95,827, respectively . The deferred purchase price was initially recorded at fair v alue, based on the remaining device payment amounts expected to be collected, adjusted, as applicable, for the time value of money and by the timing and estimated value of the device trade-in in connection with upgrades. The estimated value of the device t rade-in considers prices expected to be offered to us by independent third parties. This estimate contemplates changes in value after the launch of a device. The fair value measurements were considered to be Level 3 measurements within the fair value hiera rchy. The collection of the deferred purchase price was contingent on collections from customers.

Variable interest entities (VIEs) – Under the RPA, the SPE’s sole business consists of the acquisition of the receivables from Los Angeles SMSA and the resal e of the receivables to the Purchasers. The assets of the SPE are not available to be used to satisfy obligations of any Partnership entities other than the SPE’s. It was determined that the SPE is a VIE as it lacks sufficient equity to finance its activit ies. Given that Los Angeles SMSA has the power to direct the activities of the SPE that most significantly impact the SPE’s economic performance, Los Angeles SMSA is deemed to be the primary beneficiary of the SPE. As a result, Los Angeles SMSA consolidate s the assets and liabilities of the SPE into the consolidated financial statements (see Note 2). As of December 31, 2017 and 2016 the VIE held DPP assets of $0 and $95,827, respectively and held no liabilities.

Continuing Involvement – We no longer have continuing involvement in the RPA because the program ended in 2017. There was no loss related to the RPA. The Partnership’s maximum exposure to loss related to the sold receivables was limited to the amount of the outstanding deferred p urchase price, which was $0, $95,827 and $148,941 as of December 31, 2017, 2016, and 2015, respectively. The maximum exposure to loss represents an estimated loss that would have been incurred under severe, hypothetical circumstances whereby the Partnershi p would not receive the total portion of the proceeds withheld by the Purchasers. As the Partnership believed the probability of these circumstances occurring was remote, the maximum exposure to loss was not an indication of the Partnership’s expected loss .

In addition, the Partnership had continuing involvement related to the sold receivables as the Partnership is responsible for absorbing additional credit losses pursuant to the agreements. Credit losses on receivables sold were $5,277 during 2017 and $11 ,755 during 2016.

The outstanding device payment plan agreement receivables derecognized from the Partnership’s consolidated balance sheets, but which Cellco continues to service, was $ 0 and $ 259,856 at December 31, 2017 and 2016, respectively.

ABS Finan cing Facility – Under the terms of the ABS Financing Facility, the counterparties to the facility made advances under asset-backed loans backed by device payment plan agreement receivables for proceeds. There is a two year revolving period, which may be ex tended, during which Cellco may transfer additional receivables to an ABS Entity. Subject to certain conditions, Cellco may also remove receivables from the ABS Entity. Cellco may prepay the outstanding amounts of the loans without penalty, but in certain cases, with breakage costs. During 2017 and 2016 , the Partnership sold $ 706,729 and $389,800 , respectively, of device payment plan agreement receivables, net of allowances and imputed interest to affiliates of Cellco and received proceeds of $ 581,224 and $331,454 and recorded a beneficial interest of $ 125,505 and $58,346 respectively, which was recorded within Other assets - net on the consolidated balance sheets.

Variable interest entities (VIEs) – Under the ABS Financing Facility, there is a Trust entity (the “Trust”) whose sole business consists of holding collected receivables which are sold by the Partnership to Cellco affiliates under the terms of the ABS Financing Facility. The activity of servicing the receivables and distribution of the cash collec ted is the activity that has the most significant impact on the Trust. Cellco is the master and special servicer for the receivables but does not have a direct variable interest in the Trust. The Partnership holds a beneficial interest in the Trust which represents the residual interest in the Trust and as such are variable interests. Since Cellco maintains decision making rights as servicer and has an obligation to absorb losses, it is the primary beneficiary in the Trust.

Beneficial interest – Under the ABS Financing Facility , the beneficial interest was initially recorded at fair value, based on the remaining device payment amounts expected to be collected, adjusted, as applicabl e, for the time value of money and credit risk. The initial fair value measu rements are considered to be Level 3 measurements within the fair value hierarchy. The collection of the beneficial interest is contingent on collections from customers. At December 31, 2017 and 2016 , the Partnership’s beneficial interest was $ 174,077 and $56,359 respectively, which is included within Other Assets – net on the consolidated balance sheets. During 2017 and 2016, the Partnership collected a net $16,343 and $0, respectively, which was recorded within Cash flows provided by investing activities on our consolidated statement of cash flows.

Continuing involvement – Cellco has continuing involvement with the sold receivables as it services the receivables pursuant to the ABS Financing Facility on behalf of the Partnership. Cellco services their related receivables, including facilitating customer payment collection. While servicing the receivables, the same policies and procedures are applied to the sold receivables that apply to owned receivables, and the Partnership continues to maintain normal relationships with their customers. The credit quality of the customers the Partnership continues to service was consistent throughout the periods presented. The Partnership’s maximum exposure to loss related to the sold receivables was limited to the amo unt of the outstanding beneficial interest, which was $ 174,077 and $ 56,359 as of December 31, 2017 and 2016, respectively. The maximum exposure to loss represents an estimated loss that would have been incurred under severe, hypothetical circumstances wher eby the Partnership would not receive the total portion of the proceeds withheld by the Trust. As the Partnership believes the probability of these circumstances occurring was remote, the maximum exposure to loss was not an indication of the Partnership’s expected loss.

In addition, the Partnership has continuing involvement related to the sold receivables as the Partnership is responsible for absorbing additional credit losses pursuant to the agreements. Credit losses on receivables sold were $11,176 durin g 2017 and insignificant during 2016.

The outstanding device payment plan agreement receivables derecognized from the Partnership’s consolidated balance sheets, but which Cellco continues to service, was $ 629,686 and $350,134 at December 31, 2017 and 2016, respectively.

4. WIRELESS LICENSES

Changes in the carrying amount of wireless licenses are as follows :


Balance at January 1, 2016		$	2,073,751
	Acquisitions		–
	Capitalized interest on wireless licenses		1,697
Balance at December 31, 2016		$	2,075,448
	Acquisitions		–
	Capitalized interest on wireless licenses		–
Balance at December 31, 2017		$	2,075,448

The average remaining renewal period of the Partnership’s wireless license portfolio was 8.6 years as of December 31, 2017 .

Spectrum license transaction – On January 29, 2015, the FCC completed an auction of 65 MHz of spectrum, which it identified as the AWS-3 band. Cellco participated in that auction and was the high bidder on the licenses covering the Partnership service area. The licenses were deemed to b e right to use assets and were allocated and recorded by the Partnership as wireless licenses. The cash payment made by the Partnership of $1,972,824 is classified within Acquisition of wireless licenses on the statement of cash flows for the year ended De cember 31, 2015 .

5. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consist of the following at December 31, 2017 and 2016 :

	2017		2016
Land	$	7,716	$	7,716
Buildings and improvements (15-45 years)		1,031,746		940,411
Wireless plant and equipment (3-50 years)		4,383,737		4,165,458
Furniture, fixtures and equipment (3-10 years)		62,653		63,565
Leasehold improvements (5-7 years)		466,657		428,995

		5,952,509		5,606,145

Less: accumulated depreciation		(4,016,471)		(3,743,253)

Property, plant and equipment, net	$	1,936,038	$	1,862,892

Capitalized interest cost of $0 and $772, and capitalized network engineering costs of $23,414 and $24,656, were recorded during the years ended December 31, 2017 and 2016, respectively. Construction in progress included in certain classifications shown above, principally consists of wireless plant and equipment, amounted to $122,335 and $127,758, as of December 31, 2017 and 2016, respectively. Depreciation expense of $355,692, $354,329, and $353,975 was incurred during the years ended December 31, 2017, 2016 and 2015 .

6. TOWER MONETIZATION TRANSACTION

Prior to the acquisition of the Partnership interest by Cellco in 2000, Vodafone Group PLC (“Vodafone”), then parent company of AirTouch Cellular, entered into agreements to sublease all of its unused space on up to 430 of it s communications towers (“Sublease Agreement”) to SpectraSite Holdings, Inc. (“SpectraSite”) in exchange for $155,000. At various closings in 2001 and 2000, SpectraSite leased 274 communications towers owned and operated by the Partnership for $98,465. At December 31, 201 7, 201 6 , and 2015 the Partnership has $ 14,053, $ 18,967 , and $23,932 respectively, recorded as deferred re nt . The Sublease Agreement requires monthly maintenance fees for the existing physical space used by the Partnership’s cellular equipme nt. The Partnership paid $1,180 and $ 1,528 and $2,152 to SpectraSite pursuant to the Sublease Agreement for the years ended December 31, 201 7, 201 6 , and 2015, respectively, which is included in cost of service in the accompanying statements of income and c omprehensive i ncome .

During March 2015, Verizon Communications, the parent company of Cellco, entered into an agreement with American Tower Corporation (ATC) giving ATC exclusive rights to lease and operate approximately 11,300 wireless towers owned and o perated by Cellco and its subsidiaries for an upfront payment of $5.0 billion (not in thousands). Verizon Communications also sold 162 towers to ATC for an upfront payment of $0.1 billion (not in thousands). Under the terms of the lease agreements, ATC has exclusive rights to lease and operate the towers over an average term of approximately 28 years. As the leases expire, ATC has fixed-price purchase options to acquire these towers based on their anticipated fair market values at the end of the lease terms . The Partnership has subleased capacity on the towers from ATC for a minimum of 10 years at current market rates, with options to renew. The Partnership participated in this arrangement and has leased 538 towers to ATC for an upfront payment of $221,653 a nd has sold 1 tower to ATC for an upfront payment of $616. The upfront payment, including the towers sold was $222,269 and was accounted for as deferred rent and as a financing obligation. The $95,634 accounted for as deferred rent was included in cash flo ws provided by operating activities and relates to the portion of the towers for which the right-of-use has passed to ATC. The deferred rent is being recognized on a straight-line basis over the Partnership’s average lease term of 30 years. As of December 31, 2015, a financing obligation in the amount of $126,635 was included in cash flows provided by financing activities, which relates to the portion of the towers that continue to be occupied and used for the Partnership’s network operations. The Partnersh ip makes a sublease payment to ATC for $1.9 per month per site, with annual increases of 2 percent. During 2017, 2016, and 2015, the Partnership made $13,42 6 , $12,498, and $10,260, respectively, of sublease payments to ATC, which are recorded as Repayments of financing obligation .

At December 31, 2017 , 2016, and 201 5 , the balance of deferred rent was $85,618 and $89,605 and $93,057, respectively. At December 31, 2017, 2016 and 2015, the balance of the financing obligation was $124,24 4 and $125,296 and $125,510, respectively .

7. CURRENT LIABILITIES

Accounts payable and accrued liabilities consist of the following at December 31, 2017 and 2016 .

	2017		2016

Accounts payable	$	144,549	$	189,081
Accrued liabilities		13,550		13,203
Accounts payable and accrued liabilities	$	158,099	$	202,284

Advance billings and other consist of the following at December 31, 2017 and 2016 :

	2017		2016

Advance billings	$	145,795	$	139,714
Customer deposits		26,693		17,880
Guarantee liability, net		2,477		2,840
Advance billings and other	$	174,965	$	160,434

8. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

In addition to fixed asset purchases and right to use licenses substantially all of service revenues, equipment revenues, other revenues, cost of service, cost of equipment, and selling, general and administrative expenses represent transactions processed by affiliates (Cellco and its related parties) on behalf of the Partnership or represent transactions with affiliates. These transactions consist of (1) revenues and expenses that pertain to the Partnership which are processed by Cellco and directly attrib uted to or directly charged to the Partnership; (2) roaming revenue by customers of other Cellco affiliated markets within the Partnership market or Partnership customers’ cost when roaming in other Cellco affiliated markets; (3) certain revenues and expen ses that are processed or incurred by Cellco which are allocated to the Partnership based on factors such as the Partnership’s percentage of revenue streams, customers, gross customer additions, or minutes of use in 2015 and 2016 and on total subscribers i n 2017; (4) certain costs of operating switches which are allocated to the Partnership; and (5) lease agreements with Cellco, whereas the Partnership has the right to use certain spectrum. These transactions do not necessarily represent arm’s length transa ctions and may not represent all revenues and costs that would be present if the Partnership operated on a standalone basis. Cellco periodically reviews the methodology and allocation bases for allocating certain revenues, operating costs, selling, general and administrative expenses to the Partnership. Resulting changes, if any, in the allocated amounts have historically not been significant , other than the roaming revenue and cost impacts discussed below .

Service revenues – Service revenues include monthl y customer billings processed by Cellco on behalf of the Partnership and roaming revenues relating to customers of other affiliated markets that are specifically identified to the Partnership. For the years ended December 31, 2017, 2016, and 2015 roaming r evenues were $510,521, $486,262, and $438,105, respectively. During 2017, Cellco updated its roaming rates and methodology for determining roaming volume s charged for postpaid, prepaid and reseller r evenue, resulting in a net de crease of $145,797 to roamin g revenue as compared to prior periods. Service revenues also include long distance, data, and certain revenue reductions including revenue concessions that are processed by Cellco and allocated to the Partnership based on certain factors deemed appropriat e by Cellco .

Equipment revenues – Equipment revenues include equipment sales processed by Cellco and specifically identified to the Partnership, as well as certain handset and accessory revenues, contra-revenues including equipment concessions, and coupon rebates that are processed by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco .

Other revenues – Other revenues include switch revenue and other fees and surcharges charged to the customer that are specifically identified to the Partnership. For the years ended December 31, 2017, 2016, and 2015 switch revenues were $2,781, $8,570, and $9,234, respectively .

Cost of s ervice – Cost of service includes roaming costs relating to the Partnership’s customers roaming in other affiliated markets and switch costs that are incurred by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco. For the years ended December 31, 2017, 2016 and 2015, roaming costs were $637,264, $619,985, and $ 547,672, respectively. During 2017, Cellco updated its roaming rates and methodology for determining roaming volumes charged for postpaid, prepaid and rese ller cost, resulting in a net de crease of $182,169 to roaming cost as compared to prior periods. Cost of service also includes cost of telecom, long distance and application content that are incurred by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco. The Partnership has lease agreements for the right to use a dditional spectrum owned by Cellco. See Note s 2 and 9 for further information regarding these arrangements .

Cost of equipment – Cost of equipment is recorded at Cellco’s cost basis (see Note 2). Cost of equipment also includes certain costs related to hand sets, accessories and other costs incurred by Cellco and allocated to the Partnership based on certain factors deemed appropriate by Cellco .

Selling, general and administrative – Selling, general and administrative expenses include commissions, customer bi lling, office telecom, customer care, salaries, sales and marketing and advertising expenses that are specifically identified to the Partnership as well as incurred by Cellco and allocated to the Partnership based on certain factors deemed appropriate by C ellco. The Partnership was allocated $100,183, $113,3 00 and $117,409 in advertising costs for the years ended December 31, 2017, 2016 and 2015, respectively .

Property, plant and equipment – Property, plant and equipment includes assets purchased by Cellco and directly charged to the Partnership as well as assets transferred between Cellco and the Partnership (see Note 2) .

Wireless licenses – Wireless licenses include the right to use assets that were allocated by Cellco and recorded by the Partnership in ex change for a $1,972,824 payment (see Note 4) .

9. COMMITMENTS

Cellco, on behalf of the Partnership, and the Partnership itself have entered into o perating leases for facilities and equipment used in its operations. Lease contracts include renewal options that include rent expense adjustments based on the Consumer Price Index as well as annual and end-of-lease term adjustments. Rent expense is record ed on a straight-line basis. The noncancellable lease term used to calculate the amount of the straight-line rent expense is generally determined to be the initial lease term, including any optional renewal terms that are reasonably assured of occurring. L easehold improvements related to these operating leases are amortized over the shorter of their estimated useful lives or the noncancellable lease term. For the years ended December 31 , 2017, 2016 and 2015 the Partnership incurred a total of $1 34,337 , $ 125 ,754, and $ 110,380, respectively, as rent expense related to these operating leases, which is included in Cost of service and Selling, general and administrative expenses in the accompanying statements of income and comprehensive income depending on the na ture of the facility. Aggregate future minimum rental commitmen t s under noncancellable operating leases, excluding renewal options that are not reasonably assured of occurring and remaining tower maintenance fees of $ 7,862 ( s ee Note 6 ), for the years shown are as follows :

Years	Amount

2018	$	105,123
2019		93,176
2020		70,037
2021		46,859
2022		32,029
2023 and thereafter		160,607

Total minimum payments	$	507,831

The Partnership has also entered into certain agreements with Cellco, whereas the Partnership leases certain spectrum from Cellco that overlaps the Los Angeles metropolitan statistical area. Total rent expense under these spectrum leases amounted to $125,608 in 2017, $124,943 in 2016, and $124,722 in 2015, which is included in Cost of service in the accompanying consolidated statements of income and comprehensive income .

Based on the terms of these leases as of December 31, 2017, future spectrum lease obligations are as follows :

Years	Amount

2018	$	126,288
2019		116,359
2020		106,439
2021		106,996
2022		107,562
2023 and thereafter		975,828

Total minimum payments	$	1,539,472

The General Partner currently expects that any renewal option in the leases will be exercised .

10. CONTINGENCIES

Cellco and the Partnership are subject to lawsuits and other claims including class actions, product liability, patent infringement, intellectual property, a ntitrust, partnership disputes, and claims involving relations with resellers and agents. Cellco is also currently defending lawsuits filed against it and other participants in the wireless industry alleging various adverse effects as a result of wireless phone usage. Various consumer class action lawsuits allege that Cellco violated certain state consumer protection laws and other statutes and defrauded customers through misleading billing practices or statements. These matters may involve indemnification obligations by third parties and/or affiliated parties covering all or part of any potential damage awards against Cellco and the Partnership and/or insurance coverage. All of the above matters are subject to many uncertainties, and the outcome s are not cu rrently predictable .

The Partnership may be allocated a portion of the damage s that may result upon adjudication of these matters if the claimants prevail in their actions. The Partnership has no accrual for any pending matters. An estimate of the reasonably possible loss or range of loss with respect to these matters as of Decembe r 31, 2017 cannot be made at this time due to various factors typical in contested proceedings, including (1) uncertain damage theories and demands; (2) a less than complete factual record; (3) uncertainty concerning legal theories and their resolution by courts or regulators; and (4) the unpredictable nature of the opposing party and its demands. Cellco and the Partnership continuously monitors these proceedings as they develop and will adjust any accrual or disclosure as needed. It is not expected that th e ultimate resolution of any pending regulatory or legal matter in future periods will have a material effect on the financial condition of the Partnership, but it could have a material effect on the results of operations for a given reporting period .

11. RECONCILIATION OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

		Balance at Beginning of the Year		Additions Charged to Expenses		Write-offs Net of Recoveries		Balance at End of the Year (a)



Accounts Receivable Allowances:
	2017	$	47,638	$	56,505	$	(64,966)	$	39,177
	2016		45,751		71,925		(70,038)		47,638
	2015		24,136		79,063		(57,448)		45,751

a)	Allowance for Uncollectible Accounts Receivable includes approximately $12,261, $16,545, and $8,661, at December 31, 2017, 2016, and 2015, respectively, related to long-term device payment plan receivables.

******

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 s igned on its behalf by the undersigned, thereunto duly authorized.

		UNITED STATES CELLULAR CORPORATION

		By:	/s/ Kenneth R. Meyers
			Kenneth R. Meyers President and Chief Executive Officer (principal executive officer)

		By:	/s/ Steven T. Campbell
			Steven T. Campbell Executive Vice President-Finance, Chief Financial Officer and Treasurer (principal financial officer)

		By:	/s/ Douglas D. Shuma
			Douglas D. Shuma Chief Accounting Officer (principal accounting officer)

		By:	/s/ Douglas W. Chambers
			Douglas W. Chambers Vice President and Controller

Dated: February 26, 2018

Power of Attorney

Each person whose signature appears below constitutes and appoints LeRoy T. Carlson, Jr. as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place, and stead, in any and all capacities to sign any and all amendments to this Annual Repor t on Form 10-K under the Securities Exchange Act of 1934, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent fu ll power and authority to do so and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all the sai d attorney-in fact and agent or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

Signature	Title	Date


/s/ LeRoy T. Carlson, Jr.	Director	February 26, 2018
LeRoy T. Carlson, Jr.

/s/ Kenneth R. Meyers	Director	February 26, 2018
Kenneth R. Meyers

/s/ James Barr III	Director	February 26, 2018
James Barr III

/s/ Steven T. Campbell	Director	February 26, 2018
Steven T. Campbell

/s/ Walter C. D. Carlson	Director	February 26, 2018
Walter C. D. Carlson

/s/ J. Samuel Crowley	Director	February 26, 2018
J. Samuel Crowley

/s/ Ronald E. Daly	Director	February 26, 2018
Ronald E. Daly

/s/ Harry J. Harczak, Jr.	Director	February 26, 2018
Harry J. Harczak, Jr.

/s/ Gregory P. Josefowicz	Director	February 26, 2018
Gregory P. Josefowicz

/s/ Peter L. Sereda	Director	February 26, 2018
Peter L. Sereda

/s/ Douglas D. Shuma	Director	February 26, 2018
Douglas D. Shuma

/s/ Cecelia D. Stewart	Director	February 26, 2018
Cecelia D. Stewart

/s/ Kurt B. Thaus	Director	February 26, 2018
Kurt B. Thaus

Exhibit 10.2

CASH MANAGEMENT AND INVESTMENT SERVICES AGREEMENT

This Cash Management and Investment Services Agreement (“ Agreement ”) is made as of the 15th day of December, 2017 by and among Telephone and Data Systems, Inc. (“TDS”), United States Cellular Corporation (“U.S. Cellular”) and U.S. Cellular’s wholly and majority owned subsidiaries, CellVest, Inc., a Delaware corporation and direct wholly-owned subsidiary of U.S. Cellular (“CellVest”) and USCC Services, LLC, a Delaware limited liability company and direct wholly-owned subsidiary of U.S. Cellular (“USCC Services”). The parties agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Definitions

“ Affiliated Cash Balance ” shall mean Company funds aggregated and handled by USCC Services an d invested in STIF on behalf of the Company.

“ Authorized Persons ” shall mean those persons authorized to act on behalf of Company to approve cash management services and the aggregation and handling of Company funds by USCC Services and short-term investm ent of Company funds into the STIF.

“ Bank ” shall mean such financial institution or other service provider designated as depositary for funds of the Company and for other purposes pursuant to the General Banking Resolutions of the Company as adopted by th e Company’s Board of Directors from time to time.

“ Cash Management Services ” shall mean the services described in Section 2.02.

“ Cash Management Investment Services ” shall mean the services described in Section 3.01.

“ Company ” shall mean U.S. Cellular or any of its wholly or majority owned direct or indirect subsidiaries participating in this Agreement.

“ Corporate Cash Investment Policy ” shall mean the policy published on the TDS intranet under the title Corporate Cash Investment Policy #132, as amende d from time to time at TDS’ sole discretion. This policy provides guidelines indicating acceptable and unacceptable investment securities for TDS’ and TDS Affiliates’ cash.

“ Investments ” shall have the meaning ascribed to it in Section 3.03.

“ STIF ” sh all mean CellVest’s short-term investment fund program.

“ STIF Account ” shall mean the STIF’s custodial account(s).

“ STIF Balance ” shall mean assets Company has on deposit with CellVest .

“ STIF Participants ” shall mean all TDS Affiliates participating in the STIF.

“ TDS Affiliate ” shall mean a direct or indirect operating subsidiary or affiliate of TDS.

“ USCC Cash Management Agreement ” shall mean that certain Cash Management Agreement, dated as of March 16, 2009, between U.S. Cellular and CellVest, as ma y be amended from time to time.

ARTICLE II

CASH MANAGEMENT SERVICES

Section 2.01. Cash Management Services .

By way of this Agreement, TDS hereby makes available to Company certain cash management services through the Bank pursuant to the terms of this Agreement.

Section 2.02. Cash Management Agreements .

TDS is hereby designated as an authorized agent of the Company and is authorized to enter into agreements with the Bank for cash management services which may include, without limitation, agreements relating to (A) the disbursement of funds (via check, automated clearing house (ACH) transfer, wire transfer, ot her electronic funds transfer and otherwise) of the Company which may be accomplished in writing or electronic transmission, (B) the deposit or collection of funds of the Company, (C) access to information relating to any and all accounts, collection and d isbursement activity of the Company, and (D) the use of software and/or Internet-based products in order to undertake any or all of the foregoing.

Section 2.03. Instructions to the Bank .

TDS is hereby authorized to provide instructions to the Bank rel ating to the accounts, disbursements, collections or other cash management services for the Company to make, direct or undertake any of the actions contemplated in Section 2.02 above.

Section 2.04. Authorized Persons .

Each of the officers or persons au thorized or designated to act for the Company pursuant to the General Banking Resolution of the Company as adopted by the Company’s Board of Directors from time to time, is hereby authorized to carry out the terms of this Agreement.

ARTICLE III

CASH MANAGEMENT INVESTMENT SERVICES

Section 3.01. Cash Management Investment Services .

By way of this Agreement, CellVest hereby makes available to Company, either directly or through USCC Services, certain cash management services entitling Company to depo sit its excess cash, either directly or through USCC Services, with CellVest for investment pursuant to the terms of this Agreement. CellVest shall engage TDS to direct the investment of funds swept into the STIF Account on behalf of Company and at Compan y’s sole risk until CellVest receives written notice of termination by Company. Pursuant to such authorization, CellVest (at the sole power and discretion of TDS) may purchase, sell, exchange, convert and otherwise trade securities in the STIF, arrange fo r delivery and payment in connection therewith, and act on behalf of Company in all other matters necessary or appropriate to the investment of funds, all without prior consultation with or notification to Company. CellVest may receive and act upon instru ctions from Authorized Persons.

Section 3.02. Investment Decisions .

TDS will make all investment decisions for the STIF in accordance with the Corporate Cash Investment Policy.

Section 3.03. Participation in the Cash Management Investment Services .

Under the Cash Management Investment Services provided by CellVest, excess Company funds being held in USCC Services’ bank account (including the Affiliated Cash Balance) will be automatically swept into the STIF Account each business day. Funds on depo sit in the STIF Account, together with amounts contributed thereto by other STIF Participants, shall comprise the STIF and shall be invested in investments that are approved under the Corporate Cash Investment Policy (“ Investments ”). Company acknowledges that such Investments may include Investments pursuant to the USCC Cash Management Agreement. All Investments shall be made in CellVest’s own name “as Nominee for Participating Affiliates”.

Section 3.04. Documentation Evidencing Company Affiliated Cash Balance .

USCC Services and Company will each record on their respective general ledger a daily and monthly accounting of Company’s Affiliated Cash Balance on deposit in the STIF Account.

Section 3.05. Investment Earnings and Distributions .

Daily investment earnings (or charges) of the STIF Investments are credited (or deducted) pro rata among the STIF Participants based on their respective invested balances. The STIF Participants’ respective pro rata interests in the Investments in the STIF shall be calculated daily by TDS based on each STIF Participant’s invested balance. Daily STIF investment earnings are accumulated for the month and distributed to Company on or before the second business day of the following month.

Section 3.06. Custodia l Arrangements .

Company funds shall be swept into its associated STIF Account as described in Section 3.03. All funds shall be deposited in the STIF Account and held for the benefit of Company. Neither CellVest, USCC Services nor TDS (except to the ext ent USCC Services or TDS is a STIF Participant with funds other than Affiliated Cash Balance) shall own or have any interest in any funds contained in the STIF Account, Affiliated Cash Balance or Investments or of any other funds in which Company has a ben eficial interest.

Section 3.07. Company’s Interest in the STIF .

In the event there is more than one TDS Affiliate utilizing CellVest’s Cash Management Investment Services, Company funds will be invested along with the assets of the other STIF Participa nts. Company acknowledges that it will own a pro rata interest in the Investments held by the STIF based on Company’s STIF Balance as compared with all other STIF Balances, as calculated by TDS.

Section 3.08. Withdrawal .

Subject to the STIF having a vailable liquidity, Company shall, at any time, be able to withdraw all or any part of Company STIF Balance or Affiliated Cash Balance in the amount specified by Company.

Section 3.09. Fees .

Net fees incurred by CellVest are assessed against each STIF Participant’s monthly investment earnings based on the weighted average monthly STIF balance of each Participant. Accounting for the fees charged by CellVest is performed by TDS.

Section 3.10. Cash Aggregation and Handling .

TDS will handle cash for the Company including but not limited to deposit transactions, accounts payable transactions, payroll transactions, and sweeping aggregated cash on a daily basis to CellVest for investments made pursuant to this Agreement. This centralized cash managemen t reduces the fees associated with multiple bank accounts.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.01. General Representations .

As an inducement to enter into this Agreement, each party represents to and agrees with the other that:

(a) it is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of its state of incorporation or formation and has all requisite corporate power to carry on its business as presently conducted and to ca rry out the transactions contemplated by this Agreement;

(b) it has duly and validly taken all corporate action necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transaction contemplated hereby;

(c) this Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation enforceable in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally from time to time in effect, and subject to equitable limitations on the availability of the remedy of specific performance); and

(d) none of the execut ion and delivery of this Agreement, the consummation of the transactions contemplated hereby or the compliance with any of the provisions of this Agreement will (i) conflict with or result in a breach of any provision of its corporate charter or by-laws, ( ii) breach, violate or result in a default under any of the terms of any agreement or other instrument or obligation to which it is a party or by which it or any of its properties or assets may be bound, or (iii) violate any order, writ, injunction, decree , statute, rule or regulation applicable to it or affecting any of its properties or assets.

Section 4.02. Company Representations .

In addition to the representations and warranties contained in Section 3.01, Company further represents and agrees that:

(a) it has reviewed the Corporate Cash Investment Policy and understands the nature of the transactions permitted under the same;

(b) it has reviewed the USCC Cash Management Agreement and understands that all or a portion of the funds deposited in the STIF Accounts may be invested pursuant to the terms of the USCC Cash Management Agreement.

(c) it understands that investment decision -making for the STIF is performed by TDS in accordance with the Corporate Cash Investment Policy.

Section 4.03. CellVest Representations .

In addition to the representations and warranties contained in Section 5.01 CellVest further represents and agrees that the STIF Account is a custodial account established for the benefit of the Company and other STIF Participants, and CellVest shall only have a custodial interest and shall neither own nor have any other interest in any Affiliated Cash Balance, STIF Ac counts or Investments contained in the STIF Accounts or the STIF.

Section 4.04. USCC Services Representations .

In addition to the representations and warranties contained in Section 4.01, USCC Services further represents and agrees that the Affiliate d Cash Balance is an account established for the benefit of the Company, and USCC Services shall only have a custodial interest and shall neither own nor have any other interest in any Affiliated Cash Balance, STIF Accounts or Investments except to the ext ent USCC Services is a STIF Participant with funds other than Affiliated Cash Balance.

ARTICLE V

MISCELLANEOUS

Section 5.01. Term and Termination .

This Agreement shall continue in effect with respect to a party until terminated by such party upon written notice to the other parties.

Section 5.02. Severability .

If any term, provision, covenant or restriction of this Agreement is held by a court o f competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

* * * * *

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.

Telephone and Data Systems, Inc. ,

By:	/s/ Peter L. Sereda
	Peter L. Sereda
	Senior Vice President - Finance and Treasurer

United States Cellular Corporation
for itself and on behalf of its wholly
and majority owned subsidiaries

By:	/s/ Steven T. Campbell
	Steven T. Campbell
	Executive Vice President – Finance, Chief Financial Officer and Treasurer

CellVest, Inc.

By:	/s/ Steven T. Campbell
	Steven T. Campbell
	Executive Vice President – Finance, Chief Financial Officer and Treasurer

USCC Services, LLC

By:	/s/ Steven T. Campbell
	Steven T. Campbell
	Executive Vice President – Finance, Chief Financial Officer and Treasurer

SIGNATURE PAGE TO

CASH MANAGEMENT AND INVESTMENT SERVICES AGREEMENT
AMONG TDS, U.S. CELLULAR AND ITS WHOLLY AND MAJORITY OWNED SUBSIDIARIES, CELLVEST AND USCC SERVICES

Exhibit 12

UNITED STATES CELLULAR CORPORATION

RAT IO OF EARNINGS TO FIXED CHARGES

For the Year Ended December 31,		2017		2016		2015		2014		2013
(Dollars in millions)
EARNINGS:
I ncome (loss) before income taxes 1		$	(272)	$	82	$	404	$	(59)	$	258
Add (deduct):
	Equity in earnings of unconsolidated entities		(137)		(140)		(140)		(130)		(132)
	Distributions from unconsolidated entities		136		93		60		112		126
	Amortization of capitalized interest		6		6		6		6		4
	Income attributable to noncontrolling interests in subsidiaries that do not have fixed charges		(1)		(1)		(6)		(2)		(7)
			(268)		40		324		(73)		249
Add fixed charges:
	Consolidated interest expense 2		113		113		86		57		44
	Interest portion (1/3) of consolidated rent expense		55		54		51		51		54
		$	(100)	$	207	$	461	$	35	$	347
FIXED CHARGES:
	Consolidated interest expense 2	$	113	$	113	$	86	$	57	$	44
	Capitalized interest		1		1		3		6		18
	Interest portion (1/3) of consolidated rent expense		55		54		51		51		54
		$	169	$	168	$	140	$	114	$	116

RATIO OF EARNINGS TO FIXED CHARGES			*		1.23		3.29		*		2.99

1	Includes non-cash charges related to losses on impairment of $370 million in 2017.
	Includes gain on sale of business and other exit costs, net of $1 million, $114 million, $33 million and $247 million in 2017, 2015, 2014 and 2013, respectively.
	Includes gain on license sales and exchanges, net of $22 million, $19 million, $147 million, $113 million and $255 million in 2017, 2016, 2015, 2014 and 2013, respectively.
	Includes gain on investments of $19 million in 2013.
2	Interest expense on income tax contingencies is not included in fixed charges.
*	Earnings in 2017 and 2014 were inadequate to cover fixed charges by $269 million and $79 million, respectively.

Exhibit 13

United States Cellular Corporation and Subsidiaries



FINANCIAL REPORTS CONTENTS		Page No.

Management’s Discussion and Analysis of Financial Condition and Results of Operations		1
	Executive Overview	1
	Terms used by U.S. Cellular	4
	Operational Overview	5
	Financial Overview	7
	Liquidity and Capital Resources	12
	Contractual and Other Obligations	17
	Consolidated Cash Flow Analysis	18
	Consolidated Balance Sheet Analysis	19
	Applications of Critical Accounting Policies and Estimates	20
	Other Items	22
	Regulatory Matters	23
	Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement	24
	Market Risk	27
	Supplemental Information Relating to Non-GAAP Financial Measures	29
Financial Statements		33
	Consolidated Statement of Operations	33
	Consolidated Statement of Cash Flows	34
	Consolidated Balance Sheet – Assets	35
	Consolidated Balance Sheet – Liabilities and Equity	36
	Consolidated Statement of Changes in Equity	37
	Notes to Consolidated Financial Statements	40
Reports of Management		67
Report of Independent Registered Public Accounting Firm		69
Selected Consolidated Financial Data		71
Consolidated Quarterly Information (Unaudited)		72
Shareholder Information		73

United S tates Cellular Corporation

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Exe cutive Overview

The following Management’s Discussion and Analysis ( MD&A ) should be read in conjunction with United States Cellular Corporation’s (U.S. Cellular) audited consolidated financial s tatements and notes for the year ended December 31, 2017 , and with the description of U.S. Cellular’s business included herein. Certain numbers included herein are rounded to millions for ease of presentation; however, calculated amounts and percentages are determined using the unrounded numbers .

This report contains statements that are not based on historical facts, including the words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “projects” and similar expressions . These statements constitute and represent “forward looking statements” as this term is defined in the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by s uch forward looking statements. See Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement for additional information.

U.S. Cellular uses certa in “non-GAAP financial measures,” and each such measure is identified in the MD&A . A discussion of the reason U.S. Cellular determines these metrics to be useful and a reconciliation of these measures to their most directly comparable measures determined in accordance with accounting principles generally accepted in the Unit ed States of America (GAAP) are included in the Supplemental Information Relating to Non-GAAP Financial Measures section within the M D&A of this Form 10-K Report.

General

U.S. Cellular owns, operates, and invests in wireless markets throughout the United States. U.S. Cellular is an 83 %-owned subsidiary of Telephone and Data Systems , Inc. (TDS). U.S. Cellular’s strategy is to attract and retain wireless customers through a value proposition comprised of a high-quality network, outstanding customer service, and competitive devices, plans, and pricing, all provided with a local focus.

OPERATIONS

Serves customers with approximately 5.1 million connections including 4.5 million postpaid, 0.5 million prepaid and 0.1 million reseller and other connections
Operates in 22 states
Employs approximately 5,900 associates
6,460 cell sites including 4,080 owned towers in service

Financial and Operational Highlights

The following is a summary of certain selected information contained in the comprehensive MD&A that follows. The overview does not contain all of the information that may be important. You should carefully read the entire MD&A and not rely solely on the highlights.

Net income attributable to U.S. Cellular shareholders was $ 12 million in 2017 , compared to $ 48 million in 2016 . Diluted earnings per share was $ 0.14 in 2017 compared to $ 0.56 a year ago.
During the third quarter of 2017, U.S. Cellular recognized a non-cash charge related to goodwill impairment of $ 370 million ($ 307 million , net of tax ).
Due to the enactment on December 22, 2017, of H.R.1, originally known as the Tax Cuts and Jobs Act of 2017, which reduced the U.S. fed eral statutory corporate income tax rate from 35% to 21%, U.S. Cellular recognized a deferred tax benefit of $ 269 m illion due to the revaluation of its deferred tax assets and liabilities at the new corporate rate. See Note 4 — Income Taxes in the Notes to Consolidated Financial Statements for additional information.
Total additions to Property, plant and equipment were $469 million , including expenditures to (i) enhance U.S. Cellular’s network capabilities through the continuous deployment of VoLTE technology ; (ii) improve network support and billing related systems and platforms ; and (iii) construct new cell sites.

Trends and Developments

U.S. Cellular’s mission is to provide exceptional wireless communication services which enhance consumers’ lives, increase the competitiveness of local businesses, and improve the efficiency of government operations in the mi d-sized and rural markets serve d.

Network and Technology :

U.S. Cellular continues to devote efforts to enhance its network capabilities. In 2017, U.S. Cellular commercially deployed VoLTE technology for the first time in one key market and will continue to build out VoLTE services over the next few years. The next commercial launch is expected to occur in several additional operating markets starting in early 2018. VoLTE technology allows customers to utilize a 4G LTE network for both voice and data services, and enables enhanced services such as high definition voice, video calling and simultaneous voice and data session s. In addition, the deployment of VoLTE technology expands U.S. Cellular’s ability to offer roaming services to other carriers.
U.S. Cellular is committed to continuous innovation to provide customers in the markets it serves with the latest technology that can enhance their l ives or businesses. U.S. Cellular successfully tested 5G technology for the first time in 2016 in both indoor and outdoor environments and perform ed additional tests in 2017. U.S. Cellular remain s committed to ongoing tests geared towards understanding the propagation characteristics of the new technology and contributing to the development of 5G standards. When deployed commercially, 5G technology is expected to help address customers’ growing demand for data services as well as create opportunities for new services requiring high speed and reliability as well as low latency.

Asset Management:

U.S. Cellular continues to enhance its spectrum position and monetize non-strategic assets by participating in auctions and entering into agreements with third parties. In 2017, the FCC announced by way of public notice that U.S. Cellular was the winning bidder for 188 licenses for an aggregate purchase price of $329 million in the Auction 1002. In addition, U.S. Cellular closed on certain license exchange agreement s and received $15 million of cash and recognized gains of $22 million. See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to these transactions.

Services and Products :

U.S. Cellular’s customers are able to choose from a variety of national plans with voice, messaging and data usage options and pricing that are designed to fit different customer needs, usage patterns and budgets. In early 2017, U.S. Cellular introduced new Total Plans to postpaid customers that include unlimited offerings and no hidden fees such as overage charges and activation fees.

U.S. Cellular offers a wide range of accessories, including wireless basics such as cases, screen protectors , chargers, and memory cards as well as an assortment of consumer electronics such as headphones, smart speakers, wearables and home automation products (e.g. cameras, sensors, and thermostats) . During the fourth quarter of 2017, U.S. Cellular began to offer accessories for purchase on installment plans. These plans allow new and existing postpaid customers to purchase certain accessories payable over a specified time period.

Terms U sed b y U.S. Cellular

The following is a list of definitions of certain industry terms that are used throughout this document :

4G LTE – fourth generation Long-Term Evolution , which is a wireless broadband technology.
5G – fifth generation wireless broadband technology.
Account – represents an individual or business financially responsible for one or m ultiple associated connections. An account may include a variety of types of connections such as handsets and connected devices.
Auction 97 – a Federal Communications Comm ission (FCC) auction of AWS-3 spectrum licenses that ended in January 2015.
Auctions 1000, 1001, and 1002 – Auction 1000 is an FCC auction of 600 MHz spectrum licenses that started in 2016 and concluded in 2017 involving: (1) a “reverse auction” in which broadcast television licensees submit ted bids to voluntarily relinquish spectrum usage rights in exchange for payments (referred to as Auction 1001); (2 ) a “repacking” of the broadcas t television bands in order to free up certain broadcast spectrum for other uses; and (3) a “forward auction” of licenses for spectrum cleared through this process to be used for wireless communications (referred to as Auction 1002).
Churn Rate – represents the percentage of the c onnections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.
Connections - individual line s of service associated with each device activated by a customer . This includes smartphones, feature phones, tablets, modems, hotspots, and machine-to-machine devices.
Connected Devices – non-handset devices that connect directly to the U.S. Cellular network. Connected devices include products such as tablets, modems, and hotspots.
EBITDA – refers to earnings before interest, taxes, depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted EBITDA throughout this document.
Eligible Telecommunications Carrier (ETC) – designation by states for providing specified services in “high cost” areas which enables participation in universal service support mechanisms.
Free Cash Flow – non-GAAP metric defined as Cash flows from operating activities less Cash paid for additions to property, plant, and equipment .
Gross Additions – represents the to tal number of new connections a dded during the p eriod , without regard to connections that wer e terminated during that period.
Machine-to-Machin e or M2M – technology that involves the transmission of data between networked devices, as well as the performance of actions by devices without human intervention. U.S. Cell ular sells and supports M2M sol utions to customers, provides connectivity for M2M solutions via the U.S. Cellular network, and has agreements with device manufacturers and software developers which offer M2M solutions.
Net Additions – represents the tota l number of new connections add ed during the period, net of connections that were terminated during that period .
OIBDA – refers to operating income before depreciation, amortization and accretion and is used in the non-GAAP metric Adjusted OIBDA throughout this document.
Postpaid Average Bil lings per Account (Postpaid AB PA) – non-GAAP metric which is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid accounts and by the number of months in the period.
Postpaid Average Billings per User (Postpaid ABPU ) – non-GAAP metric which is calculated by dividing total postpaid service revenues plus equipment installment plan billings by the average number of postpaid connections and by the number of months in the period.
Postpaid Average Revenue per Account ( Postpaid ARPA) – metric which is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.
Postpaid Average R evenue per User (Postpaid ARPU ) – met ric which is calculated by dividing total postpaid service revenue s by the average number of postpaid connections and by the number of months in the period.
Re tail Connections – the sum of postpaid connections and prepaid connections.
Tax Act – refers to c omprehensive federal tax legislation enacted on December 22, 2017, which made broad and complex changes to the U.S. tax code. Now titled H.R.1, the Tax Act was originally identified as the Tax Cuts and Jobs Act of 2017.
Universal Service Fund (U SF) – a system of telecommunications collected fees and support payments managed by the FCC intended to promote universal access to telecommunications services in the United States.
VoLTE – Voice over Long-Term Evolution is a technology specification that defines the standards and procedures for delivering voice communications and related services over 4G LTE networks.

Operational Overview


As of December 31,		2017		2016	2015
Retail Connections – End of Period
	Postpaid		4,518,000	4,482,000	4,409,000
	Prepaid		519,000	484,000	387,000
	Total		5,037,000	4,966,000	4,796,000


Year Ended December 31,			2017	2016	2015
Postpaid Activity:
	Gross Additions		688,000	773,000	831,000
	Net Additions		36,000	73,000	111,000
	Churn		1.21%	1.31%	1.39%

2017 - 2016 Commentary

Postpaid net additions decreased in 2017 mainly due to lower connected devices net additions which reflected both lower tablet gross additions and an increase in tablet churn . The decline in tablet gross additions reflects industry-wide trends including (i) reduced consumer demand for network-connected tablets, and (ii) carriers including U.S. Cellular have curtailed promotions of heavily discounted tablets designed to stimulate demand due to poor economics. The decrease in connected devices net additions was partially offset by an improvement in handsets net additions driven by both higher gross additions and a decrease in churn.

2016 - 2015 Commentary

Postpaid net additions decreased in 2016 mainly due to lower handsets gross additions, partially offset by an improvement in postpaid churn.

Postpaid Revenue

Year Ended December 31,		2017		2016		2015
Average Revenue Per User (ARPU) 1		$	44.38	$	46.96	$	54.50
Average Billings Per User (ABPU) 1,2		$	55.60	$	56.12	$	59.74

Average Revenue Per Account (ARPA) 1		$	118.96	$	124.09	$	136.90
Average Billings Per Account (ABPA) 1,2		$	149.02	$	148.29	$	150.07

1	The discontinuation of the loyalty rewards points program had the effect of increasing Postpaid ARPU/ABPU and Postpaid ARPA/ABPA by $1.12 and $2.82, respectively, in 2015.

2	Postpaid ABPU and Postpaid ABPA are non-GAAP financial measures. Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of these measures.

2017 - 2016 Commentary

Postpaid ARPU and Postpaid ARPA decreased in 2017 due primarily to industry-wide price competition resulting in overall price reductions on plan offerings.

Equipment installment plans increase equipment sales revenue as customers pay for their wireless devices in inst allments at a total device pric e that is generally higher than the device price offered to customers in conjunction with alternative plans that are subject to a service contract. Equipment installment plans also have the impact of reducing service revenues as certain plan offerings provide for reduced monthly access charges. In order to show the trends in total service and equipment revenues received, U.S. Cellular has presented Postpaid ABPU and Postpaid ABPA, which are calculated as Postpaid ARPU and Postpaid ARPA plus aver age monthly equipment installment plan billings per connection and account, respectively.

Equipment installment plan billings increased in 2017 due to increased penetration of equipment installment plans. Postpaid ABPU decreased in 2017 as the incre ase in equipment installment plan billings was more than offset by the decline in Postpaid ARPU discussed above. Postpaid ABPA, however, increased slightly in 2017 as the increase in equipment installment plan billings more than offset the decline in Postpaid ARPA discussed above.

2016 - 2015 Commentary

Postpaid ARPU and Postpaid ARPA decreased in 2016 due primarily to industry-wide price competition, discounts on shared data plans provided to customers on equipment installment plans and those providing their own device at the time of activation or renewal , and the $58 million impact of the discontinuation of the loyalty rewards points program in 2015. These fact ors were partially offset by the impact of increased adoption of smartphones and the related increase in s ervice revenues from data usage.

Equipment installment plan billings increased in 2016 due to increased adoption of equipment installment plans by postpaid customers. Postpaid ABPU and ABPA decreased in 2016 as the incre ase in equipment installment plan billings was more than offset by the decline in Postpaid ARPU and ARPA discussed above.

Financial Ov erview

Components of Operating Income (Loss)

Year Ended December 31,	2017		2016		2015		2017 vs. 2016	2016 vs. 2015
(Dollars in millions)
Retail service	$	2,589	$	2,700	$	2,994	(4)%	(10)%
Inbound roaming		129		152		192	(15)%	(21)%
Other		260		229		198	13%	16%
Service revenues		2,978		3,081		3,384	(3)%	(9)%
Equipment sales		912		909		647	-	41%
Total operating revenues		3,890		3,990		4,031	(3)%	(1)%

System operations (excluding Depreciation,
amortization and accretion reported below)		732		760		775	(4)%	(2)%
Cost of equipment sold		1,071		1,081		1,053	(1)%	3%
Selling, general and administrative		1,412		1,480		1,494	(4)%	(1)%
Depreciation, amortization and accretion		615		618		607	-	2%
Loss on impairment of goodwill		370		–		–	N/M	N/M
(Gain) loss on asset disposals, net		17		22		16	(22)%	36%
(Gain) loss on sale of business and other exit costs, net		(1)		–		(114)	>(100)%	100%
(Gain) loss on license sales and exchanges, net		(22)		(19)		(147)	(17)%	87%
Total operating expenses		4,194		3,942		3,684	6%	7%
Operating income (loss)	$	(304)	$	48	$	347	>(100)%	(86)%

Net income	$	15	$	49	$	247	(70)%	(80)%
Adjusted OIBDA (Non-GAAP) 1	$	675	$	669	$	709	1%	(6)%
Adjusted EBITDA (Non-GAAP) 1	$	820	$	816	$	852	1%	(4)%
Capital expenditures	$	469	$	446	$	533	5%	(16)%

N/M - Percentage change not meaningful

1 Refer to Supplemental Information Relating to Non-GAAP Financial Measures within this MD&A for a reconciliation of this measure.

S ervice revenues consist of:

Retail Service – C harges for access, airtime, roaming, recovery of regulatory costs and value added services, including data services and products
Inbound Roaming – Charges to other wireless carriers whose customers use U.S. Cellular’s wireless systems when roaming
Other Service – Primarily amounts received from the Federal USF, imputed interest recognized on equipment installment plan contracts and tower rental revenues

Equipment revenues consist of:

Sales of wireless devices and related accessories to new and existing customers, agent s, and third-party distributors

Key components of changes in the statement of operations line items were as follows:

2017-2016 Commentary

Total operating revenues

Service revenues decreased as a result of (i) a decrease in retail service revenues driven by industry-wide price competition resulting in overall price reductions on plan offerings; and (ii) a decrease in inbound roaming revenue mainly due to lower roaming rates. Such reductions were partially offset by an increase in imputed interest income due to an increase in the total number of active equipment installment plans.

U.S. Cellular offers certain promotions that provide the customer with future credits for a fixed period of time as long as service is maintained. Such credits are applied against the customer’s monthly bill and recognized as a reduction to Retail service revenues when earned by the customer.

Federal USF revenue remained flat year over year at $92 million. See the Regulatory Matters section in this MD&A for a description of the FCC Mobility Fund Phase II Order (MF2 Order) and its expected impacts on U.S. Cellular’s current Federal USF support.

Equipment sales revenues increased by a modest amount year over year reflecting an increase in average revenue per device sold, a mix shift to higher end smartphone devices and , to a lesser extent , an increase in accessories revenues. Such increases were almost entirely offset by a decrease in the number of devices sold, a reduction in guarantee liability amortization for equipment installment contracts as a result of changes in plan offerings, and lower device activation fees.

System operations expenses

System operations expenses decreased in 2017 as a result of (i) a decrease in customer usage expenses driven mainly by decreased circuit costs; and (ii) a decrease in roaming expenses driven primarily by lower roaming rates, partially offset by increased data roaming usage .

Cost of equipment sold

Cost of equipment sold decreased mainly due to a reduction in the number of devices sold partially offset by a mix shift from feature phones and connected devices to higher cost smartphones. Loss on equipment, defined as Equipment sales revenues less Cost of equipment sold, was $1 59 million and $ 172 million for 201 7 and 201 6 , respectively.

Selling, general and administrative expenses

Selling expenses decreased by $26 million due to lower advertising expenses, including a decrease in sponsorship expenses related to the termination of a naming rights agreement in 2016. Such reductions were partially offset by an increase in commissions expenses.

General and administrative expenses decreased by $42 million mainly due to lower expenses for bad debts and phone programs, along with reductions in numerous other general and administrative expense categories.

Loss on impairment of goodwill

In 2017, U.S. Cellular recorded a $370 million loss on impairment related to goodwill. See Note 7 — Intangible Assets in the Notes to Consolidated Financial Statements for additional information.

(Gain) loss on asset disposals, net

Loss on asset disposals, net decreased primarily as a result of fewer disposals of certain network assets.

(Gain) loss on license sales and exchanges , net

The net gains in 2017 and 2016 were due to license exchange transactions with third parties . See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information .

2016-2015 Commentary

Total operating revenues

Service revenues decreased as a result of (i) a decrease in retail service revenues and resulting ARPU and ARPA primarily driven by industry-wide price competition and discounts on shared data plans provided to customers on equipment installment plans and those providing their own device at the time of activation or renewal; (ii) the $58 million of revenue recognized in 2015 from unredeemed rewards points upon termination of U.S. Cellular’s rewards program; and (iii) a decrease in inbound roaming revenue driven by lower roaming rates . Such reductions were partially offset by an increase in average connections base and increased adoption of smartphones as well as an increase in imputed interest income recognized on equipment installment plans.

Federal USF revenue remained flat year over year at $92 million.

Equipment sales revenues increased year over year due primarily to an increase in average revenue per device sold driven by the increase in sales under equipment installment plans, an overall increase in the number of devices sold, and a shift to smartphon es. Equipment installment plan sales contributed $710 million and $351 million in 2016 and 2015, respectively. Equipment installment plan connections represented 44% and 27% of total postpaid connections as of December 31, 2016 and 2015 , respectively.

Cost of equipment sold

Cost of equipment sold increased primarily as the result of a shift to smartphone sales and an overall increase in the number of devices sold, partially offset by a decrease in the average cost per device sold driven by lower cost smartphones and connected devices. Cost of equipment sold in 2016 included $758 million related to equipment installment plan sales compared to $449 million in 2015. Loss on equipment was $ 172 million and $ 406 million for 2016 and 2015, respectively.

(Gain) loss on asset disposals, net

Loss on asset disposals, net increased primarily as a result of more disposals of certain network assets.

(Gain) loss on sale of business and other exit costs, net

The net gain in 2015 was due primarily to a $108 million gain recognized on the sale of towers and certain related contracts, assets and liabilities. See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information.

(Gain) loss on license sales and exchanges , net

The net gains in 2016 and 2015 were due to license exchange transactions with third parties . See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information .

Components of Other Income (Expense)

Year Ended December 31,	2017		2016		2015		2017 vs. 2016	2016 vs. 2015
(Dollars in millions)
Operating income (loss)	$	(304)	$	48	$	347	>(100)%	(86)%

Equity in earnings of unconsolidated entities		137		140		140	(2)%	-
Interest and dividend income		8		6		2	40%	>100%
Interest expense		(113)		(113)		(86)	-	(31)%
Other, net		–		1		1	(19)%	10%
Total investment and other income		32		34		57	(1)%	(42)%

Income (loss) before income taxes		(272)		82		404	>(100)%	(80)%
Income tax expense (benefit)		(287)		33		157	>(100)%	(79)%

Net income		15		49		247	(70)%	(80)%
Less: Net income attributable to noncontrolling
interests, net of tax		3		1		6	56%	(71)%
Net income attributable
to U.S. Cellular shareholders	$	12	$	48	$	241	(74)%	(80)%

2017-2016 Commentary

Equity in earnings of unconsolidated entities

Equity in earnings of unconsolidated entities r epresents U.S. Cellular’s share of net income from entities in which it has a noncontrolling interest and that are accounted for by the equity method. U.S. Cellular’s investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed $66 million and $71 million to Equity in earnings of unconsolidated entities in 2017 and 2016, respectively. See Note 8 – Investments in Unconsolidated Entities in the Notes to Consolidated Financial Statements for additional information.

Income tax expense (benefit)

U.S. Cellular’s effective tax rate on Income (loss) before income taxes for 2017 was not meaningful as discussed below. The rate for 2016 was 39.7%. In December 2017, the Tax Act was signed into law. U.S. Cellular adjusts for the effects of changes in tax laws and rates in the period of enactment. The major provisions of the Tax Act impacting U.S. Cellular are the reduction of the U.S. federal corporate tax rate from 35% to 21% and the bonus depreciation deduction allowing for full expensing of qualified property additions. Income tax expense decreased in 2017 due primarily to a reduction in the Net deferred income tax liability of $ 269 million as a result of the impact of the rate decrease on U.S. Cellular’s federal taxable temporary differences.

The disclosed amounts within include provisional estimates, pursuant to SEC Staff Accounting Bulletin No. 118, for current and deferred taxes related to tax depreciation of fixed assets. For property acquired and placed in service after September 27, 2017, the Tax Act provides for full expensing if such property was not subject to a written binding agreement in existence as of September 27, 2017. As of December 31, 2017, U.S. Cellular has not completed a full analysis of all contracts and agreements related to fixed assets placed in service during 2017, but was able to record a reasonable estimate of the effects of these changes based on capital expenditures made during 2017. U.S. Cellular expects any final adjustments to the provisional amounts to be recorded by the third quarter of 2018, which could be material to U.S. Cellular’s financial statements. The accounting for all other applicable provisions of the Tax Act was performed based on U.S. Cellular’s current interpretation of the provisions of the law as enacted as of December 31, 2017.

The overall effective tax rate for 2017 is not meaningful due to the effect of the Tax Act combined with the impaired goodwill, since portions of the goodwill balance are not amortizable for income tax purposes. For 2018 and future years, U.S. Cellular expects its effective income tax rate will decrease consistent with the statutory federal rate reduction provided in the Tax Act. However, the effective rate in future years also may be impacted by discrete items and permanent tax adjustments. After considering the bonus depreciation provision of the Tax Act , U.S. Cellular does not expect to incur a significant current federal income tax liability in 2018 . See Note 4 — Income Taxes in the Notes to Consolidated Financial Statements for additional information.

Net income attributable to noncontrolling interests, net of tax

The increase year over year is due to higher income from certain partnerships in 2017 .

2016-2015 Commentary

Equity in earnings of unconsolidated entities

U.S. Cellular’s investment in the Los Angeles SMSA Limited Partnership (LA Partnership) contributed $71 million and $74 million to Equity in earnings of unconsolidated entities in 2016 and 2015, respectively.

Interest expense

Interest expense increased in 2016 as a result of U.S. Cellular’s issuance of $300 million of 7.25% Senior Notes due 2064 in November 2015 and borrowing of $225 million on its senior term loan facility that was drawn in July 2015.

Income tax expense

The effective tax rates on Income before income taxes for 2016 and 2015 were 39.7 % and 38.7% , respectively. The effective tax rates for both years are consistent with a normalized tax rate inclusive of federal and state tax during those periods. Discrete items did not have a significant impact on the effective tax rates in either year.

Net income attributable to noncontrolling interests, net of tax

The decrease year over year is due to lower income from certain partnerships in 2016 .

Liqu idity and Capital Resources

Sources of Liquidity

Although U.S. Cellular currently has a significant cash balance, U.S. Cellular has incurred negative free cash flow at times in the past and this will occur in the future if operating results do not improve or capital expenditures are not reduced. However, U.S. Cellular believes that existing cash and investment balances, funds available under its revolving credit facility, receivables securitization facility and expected cash flows from operating and investing activities provide liquidity for U.S. Cellular to meet its normal day-to-day operating needs and debt service requirements for the coming year.

U.S. Cellular may require substantial additional capital for, among other uses, fun ding day-to-day operating needs including working capital, acquisitions of providers of wireless telecommunications services, spectrum license or system acquisitions, system development and network capacity expansion, debt service requirements, the repurchase of shares, the payment of dividends, or making additional investments. I t may be necessary from time to time to increase the size of the existing revolving credit facility, to put in place a new credit facility, or to obtain other forms of financing in order to fund potential expenditures. U.S. Cellular’s liquidity would be adversely affected if, among other things, U.S. Cellular is unable to obtain short or long-term financing on acceptable terms, U.S. Cellular makes significant spectrum license purchases, the LA Partnership discontinues or reduces distributions compared to historical levels, or Federal USF and/or other regulatory support payments decline. In addition, although sales of assets or businesses by U.S. Cellular have been an important source of liquidity in prior periods, U.S. Cellular does not expect a similar level of such sales in the future .

U.S. Cellular’s credit rating currently i s sub-investment grade . There can be no assurance that sufficient funds will continue to be available to U.S. Cellular or its subsidiaries on terms or at prices acceptable to U.S. Cellular. Insufficient cash flows from operating activities, changes in its credit ratings, defaults of the terms of debt or credit agreements, uncertainty of access to capital, deterioration in the capital markets, reduced regulatory capital at banks which in turn limits their ability to borrow and lend, other changes in the performance of U.S. Cellular or in market conditions or other factors could limit or restrict the availability of financing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its acquisition, capital expenditure and business development programs, reduce the acquisition of spectrum licenses, and/or reduce or cease share repurchases and /or the payment of dividends. U.S. Cellular cannot provide assurance that circumstances that could have a material adverse effect on its liquidity or capital resources will not occur. Any of the foregoing would have an adverse impact on U.S. Cellular’s businesses, financial condition or results of operations.

Cash and Cash Equivalents

Cash and cash equivalents include cash and money market investments . The primary objective of U.S. Cellular’s Cash and cash equivalents is for use in its operations and acquisition, capital expenditure and business development programs .

At December 31, 2017 , U.S. Cellular’s C ash and cash equivalents totaled $ 352 million compared to $ 586 million and $ 715 million at December 31, 2016 and December 31, 2015 , respectively.

The majority of U.S. Cellular’s Cash and cash equivalents was held in bank deposit accounts and in money market funds that purchase only debt issued by the U.S. Treasury or U.S. government agencies across a range of eligible money market investments that may include, but are not limited to, government agency repurchase agreements, government agency debt, U.S. Treasury repurchase agreements, U.S. Treasury debt, and other securities collateralized by U.S. government obligations. U.S. Cellular monitors the financial viability of the money market funds and direct investments in which it invests and believes that the credit risk associated with these investments is low.

Short-term investments

At December 31 , 2017, U.S. Cellular held $ 50 million of Short-term investments which consisted of U.S. Treasury Bills with original maturities of six months. For these investments, U.S. Cellular’s objective is to earn a higher rate of return on funds that are not anticipated to be required to meet liquidity needs in the immediate future while maintaining low investment risk.

Financing

Revolving Credit Facility

U.S. Cellular ha s a n unsecured revolving credit facility available for general corporate purposes including acquisitions, spectrum purchases and capital expenditures, with a maximum borrowing capacity of $300 million. Amounts under the revolving credit facility may be borrowed, repaid and reborrowed from time to time until maturity in June 2021. As of December 31, 2017 , there were no outstanding borrowings under the revolving credit facility, except for letters of credit , and U.S. Cellular’s unused capacity under its revolving credit facility was $ 298 million . The continued availability of the revolving credit facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and provide representations on certain matters at the time of each borrowing. U.S. Cellular believes it was in compliance as of December 31, 2017 , with all of the covenants and requirements set forth in its revolving credit facility. See Financial Covenants below.

See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information regarding the revolving credit facility.

Term Loan

In January 2015, U.S. Cellular entered into a n unsecured senior term loan credit facility. In July 2015, U.S. Cellular borrowed the full amount of $225 million available under this facility in two separate draws. This term loan credit facility was amended and restated in June 2016. Principal reductions are due and payable in quarterly installments of $3 million beginning in March 2016 through December 2021, and the remaining unpaid balance will be due and payable in January 2022. This facility was entered into for general corporate purposes, including working capital, spectrum purchases and capital expenditures.

The continued availability of the term loan facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and make representations regarding certain matters at the time of each borrowing, that are substantially the same as those in U.S. Cellular’s revolving credit facility described above. U.S. Cellular believes that it was in compliance at December 31, 2017 , with all of the covenants and requirements set forth in the term loan facility. See Financial Covenants below.

See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information regarding the term loan.

Receivable s Securitization Facility

In December 2017, U.S. Cellular, through its subsidiaries, entered into a $200 million credit facility to permit securitized borrowings using its equipment installment receivables for general corporate purposes. U.S. Cellular entered into a performance guaranty whereby U.S. Cellular guarantees the performance of certain wholly-owned subsidiaries of U.S. Cellular under the facility. Amounts under the receivables securitization facility may be borrowed, repaid and reborrowed from time to time until maturity in December 2019, which may be extended from time to time as specified therein. As of December 31, 2017, there were no outstanding borrowings under the receivables securitization facility, and the entire unused capacity of $200 million was available, subject to sufficient collateral to satisfy the asset borrowing base provisions of the facility. The continued availability of the receivables securitization facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and provide representations on certain matters at the time of each borrowing. U.S. Cellular believes that it was in compliance as of December 31, 2017, with all of the covenants and requirements set forth in its receivables securitization facility. See Financial Covenants below.

See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information regarding the receivables securitization facility.

Financial Covenants

As noted above, the revolving credit facility , senior term loan facility and receivables securitization facility require U.S. Cellular to comply with certain affirmative and negative covenants, which include certain financial covenants. In particular, under these agreements, U.S. Cellular is required to maintain the Consolidated Interest Coverage Ratio at a level not lower than 3.00 to 1.00 as of the end of any fiscal quarter. U.S. Cellular also is required to maintain the Consolidated Leverage Ra tio at a level not to exceed 3.2 5 to 1.00 as of the end of any fiscal quarter through June 30, 2019. From July 1, 2019 and thereafter, the Consolidated Leverage Ratio is not to exceed 3.00 to 1.00 as of the end of any fiscal quarter. U.S. Cellular believes that it was in compliance at December 31, 2017 , with all such financial covenants.

Other Long-Term Financing

U.S. Cellular has an effective shelf registration statement on Form S-3 to issue senior or subordinated debt securities. The proceeds from any such issuance may be used for general corporate purposes, including: the possible reduction of other short-term or long-term debt, spectrum purchases, and capital expenditures; in connection with acquisition, construction and development programs; for working capital; to provide additional investments in subsidiaries; or the repurchase of shares. The U.S. Cellular shelf registration statement permits U.S. Cellular to issue at any time and from time to time senior or subordinated debt securities in one or more offerings, up to the amount registered, which is currently $500 million. The ability of U.S. Cellular to complete an offering pursuant to such shelf registration statement is subject to market conditions and other factors at the time.

U.S. Cellular believes that it was in compliance as of December 31, 2017 , with all covenants and other requirements set forth in the U.S. Cellular long-term debt indentures. The U.S. Cellular long-term debt indentures do not include any financial covenants. U.S. Cellular has not failed to make nor does it expect to fail to make any scheduled payment of principal or interest under such indentures.

The total long-term debt principal payments due for the next five years are $ 223 million , which represent 13% of the total gross long-term debt obligation at December 31, 2017 . Refer to Market Risk — Long-Term Debt for additional information regarding required principal payments and the weighted average interest rates related to U.S. Cellular’s Long-term debt.

U.S. Cellular, at its discretion, may from time to time seek to retire or purchase its outstanding debt through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information on long-term financing.

Credit Rating s

In certain circumstances, U.S. Cellular’s interest cost on its revolving credit and term loan facilities may be subject to increase if its current credit ratings from nationally recognized credit rating agencies are lowered, and may be subject to decrease if the ratings are raised. U.S. Cellular’s facilities do not cease to be available nor do the maturity dates accelerate solely as a result of a downgrade in credit rating. However, a downgrade in U.S. Cellular’s credit rating could adversely affect its ability to renew the facilities or obtain access to other credit facilities in the future.

U.S. Cellular is rated at sub-investment grade. U.S. Cellular’s credit ratings as of December 31, 2017 , and the dates such ratings were issued/re-affirmed were as follows:

Rating Agency	Rating	Outlook
Moody's (updated August 2017)	Ba1	stable outlook
Standard & Poor's (re-affirmed October 2017)	BB	stable outlook
Fitch Ratings (re-affirmed August 2016)	BB+	stable outlook

Capital Requirements

The discussion below is intended to highlight some of the significant cash outlays expected during 2018 and beyond and to highlight the spending incurred in prior years for these items. This discussion does not include cash required to fund normal operations, and is not a comprehensive list of capital requirements. Significant cash requirements that are not routine or in the normal course of business could arise from time to time.

Capital Expenditures

U.S. Cellular makes substantial investments to acquire , construct and upgrade wireless telecommunications networks and facilities to remain competitive and as a basis for creating long-term value for shareholders. In recent years, rapid changes in technology and new opportunities (such as 4G LTE and VoLTE technology) have required substantial investments in potentially revenue ‑ enhancing and cost-reducing upgrades of U.S. Cellular’s networks to remain competitive .

Capital expenditures (i.e., additions to property, plant and equipment and system development expenditures), which include the effects of accruals and capitalized interest, in 2017 , 2016 and 2015 were as follows:

U.S. Cellular’s capital expenditures in 2017 were $ 469 million compared to $ 446 million in 2016 and $ 533 million in 2015 . In 2017 , these capital expenditures were used to (i) enhance U.S. Cellular’s network capabilities through the deployment of VoLTE technology; (ii) improve network support and billing related systems and platforms; and (iii) construct new cell sites.

U.S. Cellular’s capital expenditures for 2018 are expected to be between $500 million and $550 million . These expenditures are expected to be used for the following purposes:

Enhance network coverage by continuing to deploy VoLTE technology in certain markets and providing additional capacity to accommodate increased network usage, principally data usage, by current customers; and
Invest in and replace end of life platforms.

U.S. Cellular plans to finance its capital expenditures program for 2018 using primarily Cash flows from operating activities , existing cash balances and, if required, its receivables securitization and/or revolving credit facilities.

Acquisitions, Divestitures and Exchanges

U.S. Cellular assesses its existing wireless interests on an ongoing basis with a goal of improving the competitiveness of its operations and maximizing its long-term return on capital. As part of this strategy, U.S. Cellular reviews attractive opportunities to acquire additional wireless operating markets and wireless spectrum, including pursuant to FCC auctions.

In July 2016, the FCC announced U.S. Cellular as a qualified bidder in the FCC’s forward auction of 600 MHz spectrum licenses, referred to as Auction 1002. In April 2017, the FCC announced by way of public notice that U.S. Cellular was the winning bidder for 188 licenses for an aggregate purchase price of $ 329 million. Prior to commencement of the forward auction, U.S. Cellular made an upfront payment to the FCC of $ 143 million in June 2016. U.S. Cellular paid the remaining $ 186 million to the FCC and was granted the licenses during the second quarter of 2017.

Total cash payments for acquisitions of licenses were $ 189 million, $ 196 million and $ 286 million in 2017 , 2016 and 2015 , respectively. The 2016 amount includes the $143 million deposit that was made to the FCC.

Cash received from divestitures in 2017 , 2016 and 2015 was as follows:

U.S. Cellular may seek to divest outright or include in exchanges for other wireless interests those interests that are not strategic to its long-term success. As a result, U.S. Cellular may be engaged from time to time in negotiations (subject to all applicable regulations) relating to the acquisition, divestiture or exchange of companies, properties or wireless spectrum. In general, U.S. Cellular may not disclose such transactions until there is a definitive agreement.

In February 2016, U.S. Cellular entered into an agreement with a third part y to exchange certain 700 MHz licenses for certain AWS and PCS licenses and $ 28 million of cash . This license exchange was accomplished in two closings. The first closing occurred in the second quarter of 2016, at which time U.S. Cellular received $ 13 million of cash and recorded a gain of $ 9 million. The second closing occurred in the first quarter of 2017, at which time U.S. Cellular received $ 15 million of cash and recorded a gain of $ 17 million.

See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to significant transactions.

Variable Interest Entities

U.S. Cellular consolidates certain “variable interest entities” as defined under GAAP. See Note 13 — Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information related to these variable interest entities. U.S. Cellular may elect to make additional capital contributions and/or advances to these variable interest entities in future periods in order to fund their operations.

Common Share Repurchase Program

U.S. Cellular has repurchased and expects to continue to repurchase its Common Shares, subject to its repurchase program. Share repurchases made under this program were as follows:

Year Ended December 31,	2017		2016		2015
Number of shares		–		154,449		177,508
Average cost per share	$	–	$	34.55	$	34.86
Dollar amount (in millions)	$	–	$	5	$	6

Depending on its future financial performance, construction, development and acquisition programs, and available sources of financing, U.S. Cellular may not have sufficient liquidity or capital resources to make significant share repurchases. Therefore, there is no assurance that U.S. Cellular will make any significant share repurchases in the future.

For additional information related to the current repurchase authorization, see Note 15 — Common Shareholders’ Equity in the Notes to Consolidated Financial Statements .

Off-Balance Sheet Arrangements

U.S. Cellular had no transactions, agreements or other contractual arrangements with unconsolidated entities involving “off-balance sheet arrangements,” as defined by SEC rules, that had or are reasonably likely to have a material current or future effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources.

Contractu al and Other Obligations

At December 31, 2017 , the resources required for contractual obligations were as follows:

				Payments Due by Period
		Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years
(Dollars in millions)
Long-term debt obligations 1		$	1,684	$	18	$	36	$	169	$	1,461
Interest payments on long-term debt obligations			3,584		112		223		214		3,035
Operating leases 2			1,334		145		253		199		737
Capital leases			6		1		2		1		2
Purchase obligations 3			2,001		1,177		730		63		31
		$	8,609	$	1,453	$	1,244	$	646	$	5,266

1	Includes current and long-term portions of debt obligations. The total long-term debt obligation differs from Total long-term debt, net due to capital leases, debt issuance costs, unamortized discounts related to the 6.7% Senior Notes, and unamortized discounts related to the Installment payment agreement. See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information.

2	Includes future lease costs related to office space, retail sites, cell sites and equipment. See Note 12 — Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information.

3	Includes obligations payable under non-cancellable contracts, commitments for device purchases, network facilities and transport services, agreements for software licensing, long-term marketing programs, as well as certain agreements, to purchase goods or services, calculated based on termination fees that can be paid to exit the contract.

The table above excludes potential liabilities related to “unrecognized tax benefits” as defined by GAAP because U.S. Cellular is unable to predict the outcome or period of settlement of such liabilities . Such unrecognized tax benefits were $ 47 million at December 31, 2017 . See Note 4 — Income Taxes in the Notes to Consolidated Financial Statements for additional information on unrecognized tax benefits.

See Note 12 — Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information.

Conso lidated Cash Flow Analysis

U.S. Cellular operates a capital ‑ and marketing ‑ intensive business. U.S. Cellular makes substantial investments to acquire wireless licenses and properties and to construct and upgrade wireless communications networks and facilities as a basis for creating long-term value for shareholders. In recent years, rapid changes in technology and new opportunities have required substantial investments in potentially revenue ‑ enhancing and cost-reducing upgrades to U.S. Cellular’s networks. U.S. Cellular utilizes cash on hand, cash from operating activities, cash proceeds from divestitures and dispositions of investments, short-term credit facilities and long-term debt financing to fund its acquisitions (including spectrum licenses), construction costs, operating expenses and share repurchases. Cash flows may fluctuate from quarter to quarter and year to year due to seasonality, the timing of acquisitions and divestitures, capital expenditures and other factors. The following discussion summarizes U.S. Cellular’s cash flow activities in 2017 , 2016 and 2015 .

2017 Commentary

U.S. Cellular’s Cash, cash equivalents and restricted cash decreased $ 234 million in 2017. Net cash provided by operating activities was $ 469 million in 2017 due primarily to net income of $ 15 million plus non-cash items of $ 598 million (including a $ 370 million loss on impairment of goodwill and a $ 365 million decrease in the deferred income tax liability) and distributions received from unconsolidated entities of $ 136 million (including $ 62 million from the LA Partnership). This was partially offset by changes in working capital items which decreased net cash by $ 280 million. The decrease resulting from changes in working capital items was due primarily to a $ 261 million increase in equipment installment plan receivables, which are expected to continue to increase and further require the use of working capital in the near term. U.S. Cellular paid income taxes, net of refunds received, of $ 55 million in 2017. After considering the bonus depreciation provision of the Tax Act, U.S. Cellular does not expect to incur a significant current federal income tax liability in 2018.

Cash flows used for investing activities were $ 683 million. Cash paid in 2017 for additions to property, plant and equipment totaled $ 465 million. Cash paid for licenses was $ 189 million which included the remaining $ 186 million due to the FCC for licenses U.S. Cellular won in Auction 1002. Cash paid for investments was $ 50 million which included the purchase of short-term Treasury bills. This was partially offset by Cash received from divestitures and exchanges of $ 21 million. See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to these transactions.

Cash flows used for financing activities were $ 20 million, primarily for scheduled repayments of debt.

2016 Commentary

U.S. Cellular’s Cash, cash equivalents and restricted cash decreased $ 129 million in 2016. Net cash provided by operating activities was $ 501 million in 2016 due primarily to net income of $ 49 million plus non-cash items of $ 609 million and distributions received from unconsolidated entities of $ 93 million, including $29 million in distributions from the LA Partnership. This was partially offset by changes in working capital items which decreased cash by $250 million. The decrease in working capital items was due primarily to a $ 246 million increase in equipment installment plan receivables.

The net cash provided by operating activities was offset by cash flows used for investing activities of $ 618 million. Cash paid in 2016 for additions to property, plant and equipment totaled $ 443 million. In June 2016, U.S. Cellular made a deposit of $ 143 million to the FCC for its participation in Auction 1002. Cash paid for acquisitions and licenses in 2016 was $ 53 million partially offset by Cash received from divestitures and exchanges of $ 21 million. See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for additional information related to these transactions.

Cash flows used for financing activities were $12 million in 2016, reflecting ordinary activity such as scheduled repayments of debt.

2015 Commentary

Cash flows from operating activities were $ 555 million in 2015. An increase in cash flows from operating activities was due primarily to improved net income and working capital factors. In 2015, increased receivables related to equipment installment plans decreased cash flows from operating activities.

In December 2015, as part of the Protecting Americans from Tax Hikes Act of 2015, bonus depreciation was enacted which allowed U.S. Cellular to accelerate deductions for depreciation, resulting in an overpayment of estimated tax amounts paid during 2015. Primarily as a result of this overpayment, U.S. Cellular recorded $34 million of Income taxes receivable at December 31, 2015. U.S. Cellular paid income taxes, net of refunds, of $59 million in 2015.

Cash flows used for investing activities were $ 550 million in 2015. Cash paid for additions to property, plant and equipment totaled $ 581 million in 2015.

During 2015, a $278 million payment was made by Advantage Spectrum, L.P. to the FCC for licenses for which it was the provisional winning bidder. See Note 6 — Acquisitions, Divestitures and Exchanges and Note 13 — Variable Interest Entities in the Notes to Consolidated Financial Statements for additional information.

Cash flows from financing activities were $ 497 million in 2015. In July 2015, U.S. Cellular borrowed $225 million on its Term Loan. In November 2015, U.S. Cellular issued $300 million of 7.25% Senior Notes due 2064.

Conso lidated Balance Sheet Analysis

The following discussion addresses certain captions in the consolidated balance sheet and changes therein. This discussion is intended to highlight the significant changes and is not intended to fully reconcile the changes. Changes in financial condition during 2017 are as follows:

Cash and cash equivalents

See the Consolidated Cash Flow analysis above for a discussion of cash and cash equivalents.

Short-term investments

Short-term investments increased $ 50 million due to the purchase of short-term investments, which consisted of U.S. Treasury Bills with original maturities of six months.

Accounts receivable - customers and agents

Accounts receivable from customers and agents increased $ 117 million due primarily to an increase in equipment installment plan receivables.

Licenses

Licenses increased $ 337 million due primarily to an aggregate winning bid of $329 million in FCC Auction 1002. These licenses were granted by the FCC in the second quarter of 2017. See Note 6 — Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements for more information about this transaction.

Goodwill

Goodwill decreased $ 370 million due to the impairment loss recorded in the third quarter of 2017. See Note 7 — Intangible Assets in the Notes to Consolidated Financial Statements for additional information.

Deferred income tax liability, net

In December 2017, the Tax Act was signed into law. The major provisions of the Tax Act impacting U.S. Cellular are the reduction of the U.S. federal corporate tax rate from 35% to 21% and the enactment of the bonus depreciation allowing for full expensing of qualified property. Deferred income tax liability, net, decreased $ 365 million due primarily to the impact of the rate decrease on U.S. Cellular’s federal taxable temporary differences as well as the impairment of tax-amortizable goodwill.

Appl ication of Critical Accounting Policies a nd Estimates

U.S. Cellular prepares its consolidated financial statements in accordance with GAAP. U.S. Cellular’s significant accounting policies are discussed in detail in Note 1 — Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the Notes to Consolidated Financial Statements.

Management believes the application of the following critical accounting policies and the estimates required by such application reflect its most significant judgments and estimates used in the preparation of U.S. Cellular’s consolidated financial statements. Management has discussed the development and selection of each of the following accounting policies and related estimates and disclosures with the Audit Committee of U.S. Cellular’s Board of Directors.

Intangible Asset Impairment

Licenses represent, and Goodwill previously represented, a significant component of U.S. Cellular’s consolidated assets. These assets are considered to be indefinite-lived assets and, therefore, are not amortized but rather are tested annually for impairment. U.S. Cellular performs annual impairment testing of Licenses and Goodwill as of November 1 of each year or more frequently if triggering events are present. Significant negative events, such as changes in any of the assumptions described below as well as decreases in forecasted cash flows, could result in an impairment in future periods. Licenses are tested for impairment at the level of reporting referred to as a unit of accounting. Goodwill was tested for impairment at the level of reporting referred to as a reporting unit.

See Note 7 — Intangible Assets in the Notes to Consolidated Financial Statements for informat ion related to L icenses and Goodwill activity in 2017 and 2016 .

Wireless Licenses

U.S. Cellular performs its annual impairment assessment of Licenses as of November 1 of each year or more frequently if there are events or circumstances that cause U.S. Cellular to believe the carrying value of Licenses exceeds their fair value on a more likely than not basis. For purposes of its 2017 and 2016 impairment testing of Licenses, U.S. Cellular separated its FCC licenses into eight units of accounting. The eight units of accounting consisted of one unit of accounting for developed operating market licenses (built licenses) and seven geographic non-operating market licenses (unbuilt licenses). U.S. Cellular performed a quantitative impairment assessment in 2017 , and a qualitative impairment assessment in 2016 , to determine whether it was more likely than not that the fair value of the built and unbuilt licenses exceed ed their carrying value .

In 2017 , a market approach was used to value the spectrum license portfolio. The licenses were segregated by type and by similar geographical area. The market approach develops an indication of fair value by calculating estimated market values using observable license purchase and auction transactions as a basis for such values for each pool of licenses. The sum of the fair values of the discrete pools represents the estimated fair value of U.S. Cellular’s licenses. Based on the assessment, the fair values of the license units of accounting exceeded their respective carrying values by amounts ranging from 16% to greater than 100%. Therefore, no impairment of licenses existed.

In 2016 , U.S. Cellular considered several qualitative factors, including analysts’ estimates of license values, which contemplated recent spectrum auction results, recent U.S. Cellular and other market participant transactions and other industry and market factors. Based on this assessment, U.S. Cellular concluded that it was more likely than not that the fair value of the licenses in each unit of accounting exceeded the respective carrying values. Therefore, no impairment of licenses existed and no Step 1 quantitative impairment evaluation was completed.

Goodwill

U.S. Cellular had recorded Goodwill as a result of the acquisition of wireless companies. For purposes of the 2017 and 2016 Goodwill impairment tests, U.S. Cellular had one reporting unit. U.S. Cellular early adopted ASU 2017-04, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment , in the third quarter of 2017 and applied the guidance to interim goodwill impairment tests completed in 2017. ASU 2017-04 eliminated Step 2 of the goodwill impairment test.

During the third quarter of 2017, management identified a triggering event and performed an interim impairment assessment. A discounted cash flow approach was used to value the reporting unit, using value drivers and risks specific to U.S. Cellular and the industry and current economic factors. The cash flow estimates incorporated certain assumptions that market participants may use in their estimates of fair value and may not be indicative of U.S. Cellular specific assumptions. However, the discount rate used in the analysis considers any additional risk a market participant might place on integrating the U.S. Cellular reporting unit into its operations. The most significant assumptions made in this process were the revenue growth rate (shown as a compound annual growth rate in the table below), the terminal revenue growth rate, and the discount rate.

Key Assumptions
Revenue growth rate		0.8%
Terminal revenue growth rate		2.0%
Discount rate		9.5%

The results of the interim goodwill impairment test indicated that the carrying value of the U.S. Cellular reporting unit exceeded its fair value. Therefore, U.S. Cellular recognized a loss on impairment of goodwill of $370 million to reduce the carrying value of goodwill to zero .

In connection with the interim goodwill impairment test in the third quarter of 2017, conditions existed that indicated U.S. Cellular’s long-lived asset group might not be recoverable. As a result, the company also performed a long-lived asset recoverability assessment related to the U.S. Cellular asset group in the third quarter of 2017, and determined that no impairment of the long-lived asset group existed as of the interim assessment date.

Income Taxes

U.S. Cellular is included in a consolidated federal income tax return with other members of the TDS consolidated group. TDS and U.S. Cellular are parties to a Tax Allocation Agreement which provides that U.S. Cellular and its subsidiaries be included with the TDS affiliated group in a consolidated federal income tax return and in state income or franchise tax returns in certain situations. For financial statement purposes, U.S. Cellular and its subsidiaries calculate their income, income tax and credits as if they comprised a separate affiliated group. Under the Tax Allocation Agreement between TDS and U.S. Cellular, U.S. Cellular remits its applicable income tax payments to TDS.

The amounts of income tax assets and liabilities, the related income tax provision and the amount of unrecognized tax benefits are critical accounting estimates because such amounts are significant to U.S. Cellular’s financial condition and results of operations.

The preparation of the consolidated financial statements requires U.S. Cellular to calculate a provision for income taxes. This process involves estimating the actual current income tax liability together with assessing temporary differences resulting from the different treatment of items for tax purposes. These temporary differences result in deferred income tax assets and liabilities, which are included in U.S. Cellular’s Consolidated Balance Sheet. U.S. Cellular must then assess the likelihood that deferred income tax assets will be realized based on future taxable income and, to the extent management believes that realization is not likely, establish a valuation allowance. Management’s judgment is required in determining the provision for income taxes, deferred income tax assets and liabilities and any valuation allowance that is established for deferred income tax assets.

U.S. Cellular recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on management’s judgment as to the possible outcome that has a greater than 50% cumulative likelihood of being realized upon ultimate resolution.

See Note 4 — Income Taxes in the Notes to Consolidated Financial Statements for details regarding U.S. Cellular’s income tax provision, deferred income taxes and liabilities, valuation allowances and unrecognized tax benefits, including information regarding estimates that impact income taxes.

Equipment Installment Plans

U.S. Cellular sells devices and certain accessories to customers under installment contracts over a specified time period and, under certain of these plans, offers the customer a trade-in right. Customers on an installment contract who elect to trade-in the device will receive a credit in the amount of the outstanding balance of the installment contract, provided the customer trades-in an eligible used device in good working condition and purchases a new device from U.S. Cellular. Equipment revenue under these contracts is recognized at the time the device is delivered to the end-user customer for the selling price of the device, net of any deferred imputed interest and the value of the trade-in right, if applicable. See Note 3 — Equipment Installment Plans in the Notes to Consolidated Financial Statements for additional information.

Trade-In Right

U.S. Cellular values the trade-in right as a guarantee liability. This liability is initially measured at fair value and is determined based on assumptions including the probability and timing of the customer upgrading to a new device and the fair value of the device being traded-in at the time of trade-in . U.S. Cellular reevaluates its estimate of the guarantee liability quarterly. A significant change in any of the aforementioned assumptions used to compute the guarantee liability would impact the amount of revenue recognized under these plans and the timing thereof . In 2017 and 2016 , U.S. Cellular assumed the earliest contractual time of trade-in, or the minimum amount of payments as specified in the device installment contract, for all customers on installment contracts with trade-in rights.

When a customer exercises the trade-in option, both the outstanding receivable and guarantee liability balances related to the respective devices are reduced to zero, and the value of the used device that is received in the transaction is recognized as inventory. If the customer does not exercise the trade-in option at the time of eligibility, U.S. Cellular begins amortizing the liability and records this amortization as additional equipment revenue.

Interest

U.S. Cellular equipment installment plans do not provide for explicit interest charges. Because equipment installment plans have a duration of greater than twelve months, U.S. Cellular imputes interest using a market rate and recognizes such interest income over the duration of the plan as Services revenues. Changes in the imputed interest rate would impact the amount of revenue recognized under these plans.

Allowance for doubtful accounts

U.S. Cellular maintains an allowance for doubtful accounts for estimated losses that result from the failure of its customers to make payments due under the equipment installment plans. The allowance is estimated based on historical experience, account aging and other factors that could affect collectability. When it is probable that an account balance will not be collected, the account balance is charged against the allowance for doubtful accounts. To the extent that actual loss experience differs significantly from historical trends, the required allowance amounts could differ from the original estimates.

Ot her Items

Inflation

Management believes that inflation affects U.S. Cellular’s business to no greater or lesser extent than the general economy.

Seasonality

U.S. Cellular’s profitability historically has been lower in the fourth quarter as a result of significant marketing and promotional activity during the holiday season.

Recently Issued Accounting Pronouncements

See Note 1 — Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the Notes to Consolidated Financial Statements for information on recently issued accounting pronouncements.

Cer tain Relationships and Related Transactions

See Note 18 – Certain Relationships and Related Transactions in the Notes to Consolidated Financial Statements.

Regula tory Matters

FCC Auction 1002

U.S. Cellular was a bidder in the FCC’s forward auction of 600 MHz spectrum licenses, referred to as Auction 1002, which concluded in March 2017. In April 2017, the FCC announced by way of public notice that U.S. Cellular was the winning bidder for 188 licenses for an aggregate purchase price of $329 million. Prior to commencement of the forward auction, U.S. Cellular made an upfront payment to the FCC of $143 million in June 2016. U.S. Cellular paid the remaining $186 million to the FCC and was granted the licenses during the second quarter of 2017.

FCC Mobility Fund Phase II Order

In October 2011, the FCC adopted its USF/Intercarrier Compensation Transformation Order (USF Order). Pursuant to this order, U.S. Cellular’s then current Federal USF support was to be phased down at the rate of 20% per year beginning July 1, 2012. The USF Order contemplated the establishment of a new mobile USF program and provided for a pause in the phase down if that program was not timely implemented by July 2014. The Phase II Connect America Mobility Fund (MF2) was not operational as of July 2014 and, therefore, as provided by the USF Order, the phase down was suspended at 60% of the baseline amount until such time as the FCC had taken steps to establish the MF2. In February 2017, the FCC adopted the MF2 Order addressing the framework for MF2 and the resumption of the phase down. The MF2 Order establishes a support fund of $453 million annually for ten years to be distributed through a market-based, multi-round reverse auction. For areas that receive support under MF2, legacy support to MF2 Auction winners will terminate and be replaced with MF2 support effective the first day of the month following release of the public notice closing the auction. Legacy support in areas where the legacy support recipient is not an MF2 winner will be subject to phase down over two years unless there is no winner in a particular census block, in which case it will be continued for one legacy support recipient only. The MF2 Order further states that the phase down of legacy support for areas that were not eligible for support under MF2 will commence on the first day of the month following the completion of the auction and will conclude two years later .

In August 2017, the FCC adopted the MF2 Challenge Process Order, which laid out procedures for establishing areas that would be eligible for support under the MF2 program. This will include a collection process to be followed by a challenge window, a challenge response window, and finally adjudication of any coverage disputes. In September 2017, the FCC issued a public notice initiating the collection of 4G LTE coverage data. Responses submitting the collected data were due on January 4, 2018.

In October 2017, the FCC issued a public notice proposing and seeking comment on detailed challenge procedures and a schedule for the challenge process. Under this proposal, the challenge window would begin no earlier than four weeks after the January 4 collection date and would last 150 days. No earlier than five business days after the close of the challenge window, the FCC would open a thirty-day challenge response window. Following the challenge response window, the FCC would adjudicate any disputes. This entire process must be completed before an auction can be commenced.

U.S. Cellular cannot predict at this time when the MF2 auction will occur, when the phase down period for its existing legacy support from the Federal USF will commence, or whether the MF2 auction will provide opportunities to U.S. Cellular to offset any loss in existing support. However, the FCC has indicated that it currently plans to hold the MF2 auction in 2018. U.S. Cellular currently expects that its legacy support will continue at the 2017 level through 2018.

FCC Rulemaking – Restoring Internet Freedom

In December 2017, the FCC approved rules reversing or revising decisions made in the FCC’s 2015 Open Internet and Title II Order (Restoring Internet Freedom) . The 2017 action reversed the FCC’s 2015 decision to reclassify Broadband Internet Access Services as telecommunications services subject to regulation under Title II of the Telecommunications Act. The 2017 action also reversed the FCC’s 2015 restrictions on blocking, throttling and paid prioritization, and modified transparency rules relating to such practices. Parties are pursuing legal proceedings challenging the 2017 actions. U.S. Cellular cannot predict the outcome of these proceedings or the impact on its business.

Action is being pursued in a number of states, including certain states in which U.S. Cellular operates, to adopt state laws that would be intended to reinstate aspects of the foregoing net neutrality regulations that were reversed or revised by the FCC in 2017. To the extent such laws are enacted, it is expected that legal proceedings will be pursued challenging such laws. U.S. Cellular cannot predict the outcome of these proceedings or the impact on its business.

Other Regulatory Matters

In March 2017, both the U.S. Senate and U.S. House of Representatives approved a joint resolution under the Congressional Review Act to repeal regulations approved by the FCC in October 2016 governing consumer privacy by broadband Internet service providers. The President approved the resolution in April 2017. The repeal removed the pending FCC rules, wh ich would have gone into effect in 2017 and reinstated the prior set of rules that apply to telecommunication services . The privacy broadband rules would have prohibited broadband internet service providers from sharing certain sensitive customer information unless customers opted in and expressly agreed to share such information. U.S. Cellular will continue to protect customer information in accordance with Section 222 of the Telecommunications Act and applicable regulations and also its publicly available Privacy Statement until such time as it becomes subject to other privacy requirements .

PRIVA TE SECURITIES LITIGATION REFORM ACT OF 1995

SAFE HARBOR CAUTIONARY STATEMENT

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Annual Report contain statements that are not based on historical facts, including the words “believes,” “anticipates,” “estimates,” “expects,” “plans,” “intends,” “ projects ” and similar expressions . These statements constitute and represent “forward ‑ looking statements” as this term is defined in the Private Securities Litigation Reform Act of 1995. Such forward ‑ looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be significantly different from any future results, events or developments expressed or implied by such forward ‑ looking statements. Each of the following risks could have a material adverse effect on U.S. Cellular’s business, financial condition or results of operations. However, such factors are not necessarily all of the important factors that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements contained in this document. Other unknown or unpredictable factors also could have material adverse effects on future results, performance or achievements. Such risks, uncertainties and other factors include, but are not limited to, the following risks. See “Risk Factors” in U.S. Cellular’s Annual Report on Form 10-K for the year ended December 31, 2017 , for a further discussion of these risks. U.S. Cellular undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. Readers should evaluate any statements in light of these important factors.

Intense competition in the markets in which U.S. Cellular operates could adversely affect U.S. Cellular’s revenues or increase its costs to compete.
A failure by U.S. Cellular to successfully execute its business strategy (including planned acquisitions, spectrum acquisitions, divestitures and exchanges) or allocate resources or capital could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
Uncertainty in U.S. Cellular’s future cash flow and liquidity or in the ability to access capital, deterioration in the capital markets, other changes in U.S. Cellular’s performance or market conditions, changes in U.S. Cellular’s credit ratings or other factors could limit or restrict the availability of financing on terms and prices acceptable to U.S. Cellular, which could require U.S. Cellular to reduce its construction, development or acquisition programs , reduce the acquisition of spectrum licenses, and/or reduce or cease share repurchases .
U.S. Cellular has a significant amount of indebtedness which could adversely affect its financial performance and in turn adversely affect its ability to make payments on its indebtedness, comply with terms of debt covenants and incur additional debt.
Changes in roaming practices or other factors could cause U.S. Cellular's roaming revenues to decline from current levels , roaming expenses to increase from current levels and/or impact U.S. Cellular's ability to service its customers in geographic areas where U.S. Cellular does not have its own network, which could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.
A failure by U.S. Cellular to obtain access to adequate radio spectrum to meet current or anticipated future needs and/or to accurately predict future needs for radio spectrum could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
To the extent conducted by the FCC, U.S. Cellular may participate in FCC auctions for additional spectrum or for funding in certain Universal Service programs in the future directly or indirectly and, during certain periods, will be subject to the FCC’s anti-collusion rules, which could have an adverse effect on U.S. Cellular.
F ailure by U.S. Cellular to timely or fully comply with any existing applicable legislative and/or regulatory requirements or changes thereto could adversely affect U.S. Cellular’s business, financial condition or results of operations.
An inability to attract people of outstanding potential, to develop their potential through education and assignments, and to retain them by keeping them engaged, challenged and properly rewarded could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.
U.S. Cellular’s assets and revenue are concentrated in the U.S. wireless telecommunications industry. Consequently , its operating results may fluctuate based on factors related primarily to conditions in this industry.
U.S. Cellular’s smaller scale relative to larger competitors that may have greater financial and other resources than U.S. Cellular could cause U.S. Cellular to be unable to compete successfully, which could adversely affect its business, financial condition or results of operations.
Changes in various business factors , including changes in demand, customer preferences and perceptions, price competition, churn from customer switching activity and other factors, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.

Advances or changes in technology could render certain technologies used by U.S. Cellular obsolete, could put U.S. Cellular at a competitive disadvantage, could reduce U.S. Cellular’s revenues or could increase its costs of doing business.
Complexities associated with deploying new technologies present substantial risk and U.S. Cellular investments in unproven technologies may not produce the benefits that U.S. Cellular expects .
U.S. Cellular receives regulatory support and is subject to numerous surcharges and fees from federal, state and local governments, and the applicability and the amount of the support and fees are subject to great uncertainty , which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations .
Performance under device purchase agreements could have a material adverse impact on U.S. Cellular's business, financial condition or results of operations.
Changes in U.S. Cellular’s enterprise value, changes in the market supply or demand for wireless licenses, adverse developments in the business or the industry in which U.S. Cellular is involved and/or other factors could require U.S. Cellular to recognize impairments in th e carrying value of its licenses and/or physical assets .
Costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or licenses and/or expansion of U.S. Cellular’s business could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
A failure by U.S. Cellular to complete significant network construction and systems implementation activities as part of its plans to improve the quality, coverage, capabilities and capacity of its network, support and other systems and infrastructure could have an adverse effect on its operations.
Difficulties involving third parties with which U.S. Cellular does business, including changes in U.S. Cellular's relationships with or financial or operational difficulties of key suppliers or independent agents and third party national retailers who market U.S. Cellular ’s services, could adversely affect U.S. Cellular’s business, financial condition or results of operations.
U.S. Cellular has significant investments in entities that it does not control. Losses in the value of such investments could have an adverse effect on U.S. Cellular’s financial condition or results of operations.
A failure by U.S. Cellular to maintain flexible and capable telecommunication networks or information technology, or a material disruption thereof, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
U.S. Cellular has experienced and, in the future, expects to experience c yber-attacks or other breaches of network or information technology security of varying degrees on a regular basis, which could have an adverse effect on U.S. Cellular's business, financial condition or results of operations.
The market price of U.S. Cellular’s Common Shares is subject to fluctuations due to a variety of factors.
Changes in facts or circumstances, including new or additional information, could require U.S. Cellular to record charges relating to adjustments of amounts reflected in the financial statements, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
Disruption in credit or other financial markets, a deterioration of U.S. or global economic conditions or other events could, among other things, impede U.S. Cellular’s access to or increase the cost of financing its operating and investment activities and/or result in reduced revenues and lower operating income and cash flows, which would have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
Settlements, judgments, restraints on its current or future manner of doing business and/or legal costs resulting from pending and future litigation could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
The possible development of adverse precedent in litigation or conclusions in professional studies to the effect that radio frequency emissions from wireless devices and/or cell sites cause harmful health consequences, including cancer or tumors, or may interfere with various electronic medical devices such as pacemakers, could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
Claims of infringement of intellectual property and proprietary rights of others, primarily involving patent infringement claims, could prevent U.S. Cellular from using necessary technology to provide products or services or subject U.S. Cellular to expensive intellectual property litigation or monetary penalties, which could have an adverse effect on U.S. Cellular’s business, financial condition or results of operations.
There are potential conflicts of interests between TDS and U.S. Cellular.
Certain matters, such as control by TDS and provisions in the U.S. Cellular Restated Certificate of Incorporation, may serve to discourage or make more difficult a change in control of U.S. Cellular.

Any of the foregoing events or other events could cause revenues, earnings, capital expenditures and/or any other financial or statistical information to vary from U.S. Cellular’s forward-looking estimates by a material amount.

MAR KET RISK

Long-Term Debt

As of December 31, 2017 , the majority of U.S. Cellular’s long-term debt was in the form of fixed-rate notes with remaining maturities ranging up to 47 years . Fluctuations in market interest rates can lead to significant fluctuations in the fair value of these fixed-rate notes.

The following chart presents the scheduled principal payments on long-term debt by maturity dates at December 31, 2017 :

The following table presents the scheduled princ ipal payments on long-term debt, capital lease obligations and other installment arrangements, and the related weighted average interest rates by maturity dates at December 31, 2017 :

		Principal Payments Due by Period
		Long-Term Debt Obligations 1		Weighted-Avg. Interest Rates on Long-Term Debt Obligations 2
(Dollars in millions)
2018		$	19	2.8%
2019			19	2.8%
2020			19	2.8%
2021			11	4.3%
2022			158	4.3%
After 5 years			1,463	7.0%
Total		$	1,689	6.6%

1	The total long-term debt obligation differs from Long-term debt in the Consolidated Balance Sheet due to unamortized debt issuance costs on all non-revolving debt instruments, unamortized discounts related to the 6.7% Senior Notes, and unamortized discounts related to the Installment payment agreement. See Note 11 — Debt in the Notes to Consolidated Financial Statements for additional information.

2	Represents the weighted average interest rates at December 31, 2017, for debt maturing in the respective periods.

Fair Value of Long-Term Debt

At December 31, 2017 and 2016 , the estimated fair value of long-term debt obligations, excluding capital lease obligations , other installment arrangements, the current portion of such long-term debt and debt financing costs , was $ 1,652 m illion and $ 1,664 m illion, respectively. See Note 2 — Fair Value Measurements in the Notes to Consolidated Financial Statements for additional information .

Other Market Risk Sensitive Instruments

The substantial majority of U.S. Cellular’s other market risk sensitive instruments (as defined in item 305 of SEC Regulation S-K) are short-term, including Cash and cash equivalents. Accordingly, U.S. Cellular believes that a significant change in interest rates would not have a material effect on such other market risk sensitive instruments.

Sup plemental Information Relating to Non-GAAP Financial Measures

U.S. Cellular sometimes use s information derived from consolidated financial information but not presented in its financial statements prepared in accordance with U.S. GAAP to evaluate the performance of its business. Certain of these measures are considered “non-GAAP financial measures” under U.S. Securities and Exchange Commission Rules. Specifically, U.S. Cellular ha s referred to the following mea sures in this Form 10-K Report:

EBITDA
Adjusted EBITDA
Adjusted OIBDA
Free cash flow
Postpaid ABPU
Postpaid ABPA
Goodwill impairment, net of tax

Following are explanations of each of these measures:

EBITDA, Adjusted EBITDA and Adjusted OIBDA

EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation below. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under GAAP and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. U.S. Cellular does not intend to imply that any such items set forth in the reconciliation below are non-recurring, infrequent or unusual; such items may occur in the future.

Management uses Adjusted EBITDA and Adjusted OIBDA a s measurements of profitability and , therefore , reconciliations to Net income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of U.S. Cellular’s operating results before significant recurring non-cash charges, gains and losses, and other items as presented below as they provide additional relevant and useful information to investors and other users of U.S. Cellular’s financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and l osses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income.

		2017		2016		2015
(Dollars in millions)
Net income (GAAP)		$	15	$	49	$	247
Add back or deduct:
	Income tax expense (benefit)		(287)		33		157
	Interest expense		113		113		86
	Depreciation, amortization and accretion		615		618		607
EBITDA (Non-GAAP)			456		813		1,097
Add back or deduct:
	Loss on impairment of goodwill		370		–		–
	(Gain) loss on sale of business and other exit costs, net		(1)		–		(114)
	(Gain) loss on license sales and exchanges, net		(22)		(19)		(147)
	(Gain) loss on asset disposals, net		17		22		16
Adjusted EBITDA (Non-GAAP)			820		816		852
Deduct:
	Equity in earnings of unconsolidated entities		137		140		140
	Interest and dividend income		8		6		2
	Other, net		–		1		1
Adjusted OIBDA (Non-GAAP)			675		669		709
Deduct:
	Depreciation, amortization and accretion		615		618		607
	Loss on impairment of goodwill		370		–		–
	(Gain) loss on sale of business and other exit costs, net		(1)		–		(114)
	(Gain) loss on license sales and exchanges, net		(22)		(19)		(147)
	(Gain) loss on asset disposals, net		17		22		16
Operating income (loss) (GAAP)		$	(304)	$	48	$	347

Free Cash Flow

The following table presents Free cash flow. Management uses Free cash flow as a liquidity measure and it is defined as Cash flows from operating activities less Cash paid for additions to property, plant and equipment. Free cash flow is a non-GAAP financial measure which U.S. Cellular believes may be useful to investors and other users of its financial information in evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment.

		2017		2016		2015
(Dollars in millions)
Cash flows from operating activities (GAAP)		$	469	$	501	$	555
Less: Cash paid for additions to property, plant and equipment			465		443		581
	Free cash flow (Non-GAAP)	$	4	$	58	$	(26)

Postpaid ABPU and Postpaid ABPA

U.S. Cellular presents Postpaid ABPU and Postpaid ABPA to reflect the revenue shift from Service revenues to Equipment sales resulting from the increased adoption of equipment installment plans. Postpaid ABPU and Postpaid ABPA, as previously defined, are non-GAAP financial measures which U.S. Cellular believes are useful to investors and other users of its financial information in showing trends in both service and equipment sales revenues received from customers.

		2017		2016		2015
(Dollars and connection counts in millions)
Calculation of Postpaid ARPU
Postpaid service revenues		$	2,389	$	2,517	$	2,831
Average number of postpaid connections			4.49		4.47		4.33
Number of months in period			12		12		12
	Postpaid ARPU (GAAP metric)	$	44.38	$	46.96	$	54.50

Calculation of Postpaid ABPU
Postpaid service revenues		$	2,389	$	2,517	$	2,831
Equipment installment plan billings			604		491		272
	Total billings to postpaid connections	$	2,993	$	3,008	$	3,103
Average number of postpaid connections			4.49		4.47		4.33
Number of months in period			12		12		12
	Postpaid ABPU (Non-GAAP metric)	$	55.60	$	56.12	$	59.74

Calculation of Postpaid ARPA
Postpaid service revenues		$	2,389	$	2,517	$	2,831
Average number of postpaid accounts			1.67		1.69		1.72
Number of months in period			12		12		12
	Postpaid ARPA (GAAP metric)	$	118.96	$	124.09	$	136.90

Calculation of Postpaid ABPA
Postpaid service revenues		$	2,389	$	2,517	$	2,831
Equipment installment plan billings			604		491		272
	Total billings to postpaid accounts	$	2,993	$	3,008	$	3,103
Average number of postpaid accounts			1.67		1.69		1.72
Number of months in period			12		12		12
	Postpaid ABPA (Non-GAAP metric)	$	149.02	$	148.29	$	150.07

Goodwill impairment, net of tax

The following non-GAAP financial measure isolates the total effect on net income of the current period loss on impairment of goodwill including tax impacts. U.S. Cellular believes this measure may be useful to investors and other users of its financial information to assist in comparing the current period financial results with periods that were not impacted by such a charge.

			2017		2016	2015
(Dollars in millions)
Goodwill impairment:
	Loss on impairment of goodwill	$	370	$	–	$	–
	Tax benefit on impairment of goodwill 1		(63)		–		–
	Goodwill impairment, net of tax (Non-GAAP)	$	307	$	–	$	–

1	Tax benefit represents the amount associated with the tax-amortizable portion of the loss on goodwill impairment

Financial Statements

United S tates Cellular Corporation

Consolidated Statement of Operations

Year Ended December 31,			2017		2016		2015
(Dollars and shares in millions, except per share amounts)
Operating revenues
	Service		$	2,978	$	3,081	$	3,384
	Equipment sales			912		909		647
		Total operating revenues		3,890		3,990		4,031

Operating expenses
	System operations (excluding Depreciation, amortization and accretion reported below)			732		760		775
	Cost of equipment sold			1,071		1,081		1,053
	Selling, general and administrative (including charges from affiliates of $85 million, $94 million and $96 million in 2017, 2016 and 2015)			1,412		1,480		1,494
	Depreciation, amortization and accretion			615		618		607
	Loss on impairment of goodwill			370		–		–
	(Gain) loss on asset disposals, net			17		22		16
	(Gain) loss on sale of business and other exit costs, net			(1)		–		(114)
	(Gain) loss on license sales and exchanges, net			(22)		(19)		(147)
		Total operating expenses		4,194		3,942		3,684

Operating income (loss)				(304)		48		347

Investment and other income (expense)
	Equity in earnings of unconsolidated entities			137		140		140
	Interest and dividend income			8		6		2
	Interest expense			(113)		(113)		(86)
	Other, net			–		1		1
		Total investment and other income		32		34		57

Income (loss) before income taxes				(272)		82		404
	Income tax expense (benefit)			(287)		33		157

Net income				15		49		247
	Less: Net income attributable to noncontrolling interests, net of tax			3		1		6
Net income attributable to U.S. Cellular shareholders			$	12	$	48	$	241

Basic weighted average shares outstanding				85		85		84
Basic earnings per share attributable to U.S. Cellular shareholders			$	0.14	$	0.56	$	2.86

Diluted weighted average shares outstanding				86		85		85
Diluted earnings per share attributable to U.S. Cellular shareholders			$	0.14	$	0.56	$	2.84

The accompanying notes are an integral part of these consolidated financial statements.

United Stat es Cellular Corporation

Consolidated Statement of Cash Flows

Year Ended December 31,				2017		2016		2015
(Dollars in millions)
Cash flows from operating activities
	Net income			$	15	$	49	$	247
	Add (deduct) adjustments to reconcile net income to net
	cash flows from operating activities
		Depreciation, amortization and accretion			615		618		607
		Bad debts expense			89		96		106
		Stock-based compensation expense			30		26		25
		Deferred income taxes, net			(365)		6		55
		Equity in earnings of unconsolidated entities			(137)		(140)		(140)
		Distributions from unconsolidated entities			136		93		60
		Loss on impairment of goodwill			370		–		–
		(Gain) loss on asset disposals, net			17		22		16
		(Gain) loss on sale of business and other exit costs, net			(1)		–		(114)
		(Gain) loss on license sales and exchanges, net			(22)		(19)		(147)
		Noncash interest			2		2		2
		Other operating activities			–		(2)		–
	Changes in assets and liabilities from operations
		Accounts receivable			(68)		(23)		(96)
		Equipment installment plans receivable			(261)		(246)		(134)
		Inventory			–		8		118
		Accounts payable			(14)		48		5
		Customer deposits and deferred revenues			(3)		(54)		(37)
		Accrued taxes			26		40		34
		Accrued interest			–		(2)		4
		Other assets and liabilities			40		(21)		(56)
			Net cash provided by operating activities		469		501		555

Cash flows from investing activities
	Cash paid for additions to property, plant and equipment				(465)		(443)		(581)
	Cash paid for licenses				(189)		(53)		(286)
	Cash paid for investments				(50)		–		–
	Cash received from divestitures and exchanges				21		21		317
	Federal Communications Commission deposit				–		(143)		–
			Net cash used in investing activities		(683)		(618)		(550)

Cash flows from financing activities
	Issuance of long-term debt				–		–		525
	Repayment of long-term debt				(14)		(11)		–
	Common shares reissued for benefit plans, net of tax payments				1		6		2
	Common shares repurchased				–		(5)		(6)
	Payment of debt issuance costs				(2)		(2)		(13)
	Acquisition of assets in common control transaction				–		–		(2)
	Distributions to noncontrolling interests				(4)		(1)		(6)
	Payments to acquire additional interest in subsidiaries				–		–		(2)
	Other financing activities				(1)		1		(1)
			Net cash provided by (used in) financing activities		(20)		(12)		497

Net increase (decrease) in cash, cash equivalents and restricted cash					(234)		(129)		502

Cash, cash equivalents and restricted cash
	Beginning of period				586		715		213
	End of period			$	352	$	586	$	715

The accompanying notes are an integral part of these consolidated financial statements.

Unit ed States Cellular Corporation

Consolidated Balance Sheet — Assets

December 31,				2017		2016
(Dollars in millions)
Current assets
	Cash and cash equivalents			$	352	$	586
	Short-term investments				50		–
	Accounts receivable
		Customers and agents, less allowances of $55 and $51, respectively			775		658
		Roaming			26		16
		Affiliated			1		2
		Other, less allowances of $1 and $1, respectively			41		51
	Inventory, net				138		138
	Prepaid expenses				79		84
	Other current assets				21		23
			Total current assets		1,483		1,558

Assets held for sale					10		8

Licenses					2,223		1,886
Goodwill					–		370
Investments in unconsolidated entities					415		413

Property, plant and equipment
	In service and under construction				7,628		7,712
	Less: Accumulated depreciation and amortization				5,308		5,242
			Property, plant and equipment, net		2,320		2,470

Other assets and deferred charges					390		405

Total assets 1				$	6,841	$	7,110

The accompanying notes are an integral part of these consolidated financial statements.

Unit ed States Cellular Corporation

Consolidated Balance Sheet — Liabilities and Equity

December 31,				2017		2016
(Dollars and shares in millions, except per share amounts)
Current liabilities
	Current portion of long-term debt			$	18	$	11
	Accounts payable
		Affiliated			8		12
		Trade			302		309
	Customer deposits and deferred revenues				185		190
	Accrued taxes				56		39
	Accrued compensation				74		73
	Other current liabilities				90		84
			Total current liabilities		733		718

Deferred liabilities and credits
	Deferred income tax liability, net				461		826
	Other deferred liabilities and credits				337		302

Long-term debt, net					1,622		1,618

Commitments and contingencies

Noncontrolling interests with redemption features					1		1

Equity
	U.S. Cellular shareholders’ equity
		Series A Common and Common Shares
			Authorized 190 shares (50 Series A Common and 140 Common Shares)
			Issued 88 shares (33 Series A Common and 55 Common Shares)
			Outstanding 85 shares (33 Series A Common and 52 Common Shares)
			Par Value ($1.00 per share) ($33 Series A Common and $55 Common Shares)		88		88
		Additional paid-in capital			1,552		1,522
		Treasury shares, at cost, 3 Common Shares			(120)		(136)
		Retained earnings			2,157		2,160
			Total U.S. Cellular shareholders' equity		3,677		3,634

	Noncontrolling interests				10		11

		Total equity			3,687		3,645

Total liabilities and equity 1				$	6,841	$	7,110

The accompanying notes are an integral part of these consolidated financial statements.


1		The consolidated total assets as of December 31, 2017 and 2016, include assets held by consolidated variable interest entities (VIEs) of $785 million and $827 million, respectively, which are not available to be used to settle the obligations of U.S. Cellular. The consolidated total liabilities as of December 31, 2017 and 2016, include certain liabilities of consolidated VIEs of $24 million and $19 million, respectively, for which the creditors of the VIEs have no recourse to the general credit of U.S. Cellular. See Note 13 — Variable Interest Entities for additional information.

United St ates Cellular Corporation

Consolidated Statement of Changes in Equity

	U.S. Cellular Shareholders
	Series A Common and Common shares		Additional paid-in capital		Treasury shares		Retained earnings		Total U.S. Cellular shareholders' equity		Noncontrolling interests		Total equity



(Dollars in millions)
December 31, 2016	$	88	$	1,522	$	(136)	$	2,160	$	3,634	$	11	$	3,645
Net income attributable to U.S. Cellular shareholders		–		–		–		12		12		–		12
Net income attributable to noncontrolling interests classified as equity		–		–		–		–		–		3		3
Incentive and compensation plans		–		–		16		(15)		1		–		1
Stock-based compensation awards		–		30		–		–		30		–		30
Distributions to noncontrolling interests		–		–		–		–		–		(4)		(4)
December 31, 2017	$	88	$	1,552	$	(120)	$	2,157	$	3,677	$	10	$	3,687

The accompanying notes are an integral part of these consolidated financial statements.

United States Cellular Corporation

Consolidated Statement of Changes in Equity

	U.S. Cellular Shareholders
	Series A Common and Common shares		Additional paid-in capital		Treasury shares		Retained earnings		Total U.S. Cellular shareholders' equity		Noncontrolling interests		Total equity



(Dollars in millions)
December 31, 2015	$	88	$	1,497	$	(157)	$	2,133	$	3,561	$	10	$	3,571
Net income attributable to U.S. Cellular shareholders		–		–		–		48		48		–		48
Net income attributable to noncontrolling interests classified as equity		–		–		–		–		–		2		2
Repurchase of Common Shares		–		–		(5)		–		(5)		–		(5)
Incentive and compensation plans		–		–		26		(21)		5		–		5
Stock-based compensation awards		–		25		–		–		25		–		25
Distributions to noncontrolling interests		–		–		–		–		–		(1)		(1)
December 31, 2016	$	88	$	1,522	$	(136)	$	2,160	$	3,634	$	11	$	3,645

The accompanying notes are an integral part of these consolidated financial statements.

United States Cellular Corporation

Consolidated Statement of Changes in Equity

	U.S. Cellular Shareholders
	Series A Common and Common shares		Additional paid-in capital		Treasury shares		Retained earnings		Total U.S. Cellular shareholders' equity		Noncontrolling interests		Total equity



(Dollars in millions)
December 31, 2014	$	88	$	1,473	$	(169)	$	1,910	$	3,302	$	11	$	3,313
Net income attributable to U.S. Cellular shareholders		–		–		–		241		241		–		241
Repurchase of Common Shares		–		–		(6)		–		(6)		–		(6)
Incentive and compensation plans		–		–		18		(16)		2		–		2
Stock-based compensation awards		–		24		–		–		24		–		24
Tax windfall (shortfall) from stock awards		–		(1)		–		–		(1)		–		(1)
Distributions to noncontrolling interests		–		–		–		–		–		(1)		(1)
Acquisition of assets in common control transaction		–		1		–		(2)		(1)		–		(1)
December 31, 2015	$	88	$	1,497	$	(157)	$	2,133	$	3,561	$	10	$	3,571

The accompanying notes are an integral part of these consolidated financial statements.

United States Cellular Corporation

Notes to Consolidated Financial Statements

N ote 1 Summary of Significant Accounting Policies and Recent Accounting Pronouncements

United States Cellular Corporation (U.S. Cellular), a Delaware Corporation, is an 83% -owned subsidiary of Telephone and Data Systems, Inc. (TDS).

Nature of Operations

U.S. Cellular owns, operates and invests in wireless systems throughout the United States. As of December 31, 2017 , U.S. Cellular served customers with 5.1 million total connections. U.S. Cellular has one reportable segment.

Principles of Consolidation

The accounting policies of U.S. Cellular conform to accounting principles generally accepted in the United States of America (GAAP) as set forth in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). Unless otherwise specified, references to accounting provisions and GAAP in these notes refer to the requirements of the FASB ASC. The consolidated financial statements include the accounts of U.S. Cellular, subsidiaries in which it has a controlling financial interest, general partnerships in which U.S. Cellular has a majority partnership interest and certain entities in which U.S. Cellular has a variable interest that require s consolidation under GAAP. See Note 13 — Variable Interest Entities for additional information relating to U.S. Cellular’s VIEs. All material intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (b) the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates are involved in accounting for goodwill and indefinite-lived intangible assets, income taxes and equipment installment plans.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less. Cash and cash equivalents subject to contractual restrictions are classified as restricted cash. On December 31, 2017, U.S. Cellular early adopted the provisions of Accounting Standards Update 2016-18, Statement of Cash Flows: Restricted Cash (ASU 2016-18) on a retrospective basis which requires that restricted cash be presented with cash and cash equivalents in the statement of cash flows. U.S. Cellular had less than $1 million of restricted cash as of December 31, 2017 , and had no restricted cash balances as of December 31, 2016 or 2015 .

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consist primarily of amounts owed by customers for wireless services and equipment sales, including sales of certain devices under equipment installment plans, by agents for sales of equipment to them and by other wireless carriers whose customers have used U.S. Cellular’s wireless systems.

The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related to existing billed and unbilled accounts receivable. The allowance is estimated based on historical experience, account aging and other factors that could affect collectability. Accounts receivable balances are reviewed on either an aggregate or individual basis for collectability depending on the type of receivable. When it is probable that an account balance will not be collected, the account balance is charged against the allowance for doubtful accounts. U.S. Cellular does not have any off-balance sheet credit exposure related to its customers.

Inventory

Inventory consists primarily of wireless devices stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. Net realizable value is determined by reference to the stand-alone selling price.

Licenses

Licenses consist of direct and incremental costs incurred in acquiring Federal Communications Commission (FCC) licenses to provide wireless service.

U.S. Cellular has determined that wireless licenses are indefinite-lived intangible assets and, therefore, not subject to amortization based on the following factors:

Radio spectrum is not a depleting asset.
The ability to use radio spectrum is not limited to any one technology.

U.S. Cellular and its consolidated subsidiaries are licensed to use radio spectrum through the FCC licensing process, which enables licensees to utilize specified portions of the spectrum for the provision of wireless service.
U.S. Cellular and its consolidated subsidiaries are required to renew their FCC licenses every ten years or, in some cases, every fifteen years. To date, all of U.S. Cellular’s license renewal applications have been granted by the FCC. Generally, license renewal applications filed by licensees otherwise in compliance with FCC regulations are routinely granted. If, however, a license renewal application is challenged either by a competing applicant for the license or by a petition to deny the renewal application, the license will be renewed if the licensee can demonstrate its entitlement to a “renewal expectancy.” Licensees are entitled to such an expectancy if they can demonstrate to the FCC that they have provided “substantial service” during their license term and have “substantially complied” with FCC rules and policies. U.S. Cellular believes that it is probable that its future license renewal applications will be granted.

U.S. Cellular performed a quantitative impairment assessment in 2017 and a qualitative impairment assessment in 2016 to determine whether it was more likely than not that the fair value of the built and unbuilt licenses exceed their carrying value. Based on the impairment assessments performed, U.S. Cellular did not have an impairment of its Licenses in 2017 or 2016 . See Note 7 — Intangible Assets for additional details related to Licenses.

Goodwill

U.S. Cellular early adopted Accounting Standards Update 2017-04, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment (ASU 2017-04) , in the third quarter of 2017 and applied the guidance to interim goodwill impairment tests completed in 2017. ASU 2017-04 eliminated Step 2 of the goodwill impairment test. Goodwill impairment loss will be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

U.S. Cellular had Goodwill as a result of its acquisitions of wireless businesses. Such Goodwill represents the excess of the total purchase price over the fair value of net assets acquired in these transactions.

For purposes of conducting its impairment tests, U.S. Cellular identified one reporting unit. A discounted cash flow approach was used to value the reporting unit for purposes of the Goodwill impairment review. U.S. Cellular performs its annual impairment test as of November 1. However, in the third quarter of 2017, management identified a triggering event and performed an interim impairment test of Goodwill, which resulted in the recognition of an impairment loss of $370 million. U.S. Cellular did not have an impairment of its Goodwill in 2016 .

See Note 7 — Intangible Assets for additional details related to Goodwill.

Investments in Unconsolidated Entities

For its equity method investments for which financial information is readily available, U.S. Cellular records its equity in the earnings of the entity in the current period. For its equity method investments for which financial information is not readily available, U.S. Cellular records its equity in the earnings of the entity on a one quarter lag basis.

Property, Plant and Equipment

U.S. Cellular’s Property, plant and equipment is stated at the original cost of construction or purchase including capitalized costs of certain taxes, payroll-related expenses, interest and estimated costs to remove the assets.

Expenditures that enhance the productive capacity of assets in service or extend the ir useful lives are capitalized and dep reciated. Expenditures for maintenance and repairs of assets in service are charged to System operations expense or Selling, general and administrative expense, as applicable. Retirements and disposals of assets are recorded by removing the original cost of the asset (along with the related accumulated depreciation) from plant in service and charging it, together with net removal costs (removal costs less an applicable accrued asset retirement obligation and salvage value realized), to (Gain) loss on asset disposals, net.

U.S. Cellular capitalizes certain costs of developing new information systems. Software licenses are accounted for as the acquisition of an intangible asset and the incurrence of a liability to the extent that the license fees are not fully paid at acquisition.

Depreciation and Amortization

Depreciation is provided using the straight-line method over the estimated useful life of the related asset.

U.S. Cellular depreciates leasehold improvement assets associated with leased properties over periods ranging from one to thirty years; such periods approximate the shorter of the assets’ economic lives or the specific lease terms.

Useful lives of specific assets are reviewed throughout the year to determine if changes in technology or other business changes would warrant accelerating the depreciation of those specific assets. There were no material changes to useful lives of property, plant and equipment in 2017 , 2016 or 2015 . See Note 9 — Property, Plant and Equipment for additional details related to useful lives.

Impairment of Long-Lived Assets

U.S. Cellular reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired.

U.S. Cellular has one asset group for purposes of assessing property, plant and equipment for impairment based on the fact that the individual operating markets are reliant on centrally operated data centers, mobile telephone switching offices and a network operations center. U.S. Cellular operates a single integrated natio nal wireless network. T he cash flows generated by this single interdependent network represent the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

In connection with the interim goodwill impairment test in the third quarter of 2017, conditions existed that indicated U.S. Cellular’s long-lived asset group might not be recoverable. As a r esult, the company performed a long-lived asset recoverability assessment related to the U.S. Cellular asset group and determined that no impairment of the long-lived asset group existed.

Agent Liabilities

U.S. Cellular has relationships with agents, which are independent businesses that obtain customers for U.S. Cellular. At December 31, 2017 and 2016 , U.S. Cellular had accrued $ 61 million and $ 57 million, respectively, for amounts due to agents. These amounts are included in Other current liabilities in the Consolidated Balance Sheet.

Debt Issuance Costs

Debt issuance costs include underwriters’ and legal fees and other charges related to issuing various borrowing instruments and other long-term agreements, and are amortized over the respective term of each instrument. U.S. Cellular presents certain debt issuance costs in the balance sheet as an offset to the related debt obligation. Debt issuance costs related to U.S. Cellular’s revolving credit facility and receivable s securitization facility are recorded in Other assets and deferred charges in the Consolidated Balance Sheet.

Asset Retirement Obligations

U.S. Cellular accounts for asset retirement obligations by recording the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligations are incurred. At the time the liability is incurred, U.S. Cellular records a liability equal to the net present value of the estimated cost of the asset retirement obligation and increases the carrying amount of the related long-lived asset by an equal amount. Until the obligation is fulfilled, U.S. Cellular updates its estimates relating to cash flows required and timing of settlement. U.S. Cellular records the present value of the changes in the future value as an increase or decrease to the liability and the related carrying amount of the long-lived asset. The liability is accreted to future value over a period ending with the estimated settlement date of the respective asset retirement obligation. The carrying amount of the long-lived asset is depreciated over the useful life of the related asset. Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability is recognized in the Consolidated Statement of Operations.

Treasury Shares

Common Shares repurchased by U.S. Cellular are recorded at cost as treasury shares and result in a reduction of equity. When treasury shares are reissued, U.S. Cellular determines the cost using the first-in, first-out cost method. The difference between the cost of the treasury shares and reissuance price is included in Additional paid-in capital or Retained earnings.

Revenue Recognition

Multiple Deliverable Arrangements

U.S. Cellular sells multiple element service and equipment offerings. In these instances, revenues are allocated using the relative selling price method. Under this method, arrangement consideration is allocated to each element on the basis of its relative selling price. Revenue recognized for the delivered items is limited to the amount due from the customer that is not contingent upon the delivery of additional products or services.

Loyalty Reward Program

In March 2015, U.S. Cellular announced that it would discontinue its loyalty reward program effective September 1, 2015. All unredeemed reward points expired at that time and the deferred revenue balance of $ 58 million related to such expired points was recognized as service revenues.

U.S. Cellular followed the deferred revenue method of accounting for its loyalty reward program. Under this method, revenue allocated to loyalty reward points was deferred. The amount allocated to the loyalty points was based on the estimated retail price of the services and products for which points were redeemable divided by the number of loyalty points required to receive such services and products . This was calculated on a weighted average basis and required U.S. Cellular to estimate the percentage of loyalty points that would be redeemed for each product or service.

Revenue was recognized at the time of customer redemption or when such points were depleted via an account maintenance charge. U.S. Cellular employed the proportional model to recognize revenues associated with breakage. Under the proportional model, U.S. Cellular allocated a portion of the estimated future breakage to each redemption and recorded revenue proportionally.

Equipment Installment Plans

Equipment revenue under equipment installment plan contracts is recognized at the time the device is delivered to the end-user customer for the selling price of the device, net of any deferred imputed interest or trade-in right, if applicable. Imputed interest is reflected as a reduction to the receivable balance and recognized over the duration of the plan as Service revenues.

Incentives

Discounts and incentives that are deemed cash are recognized as a reduction of Operating revenues concurrently with the associated revenue.

U.S. Cellular issues rebates to its agents and end customers. These incentives are recognized as a reduction to revenue at the time the wireless device sale to the customer occurs. The total potential rebates and incentives are reduced by U.S. Cellular’s estimate of rebates that will not be redeemed by customers based on historical experience of such redemptions.

From time to time, U.S. Cellular may offer certain promotions to incentivize customers to switch to, or to purchase additional services from, U.S. Cellular. Under these types of promotions, an eligible customer may receive an incentive in the form of a discount off additional services purchased shown as a rebate or credit to the customer’s monthly bill. U.S. Cellular accounts for the future discounts at the time of the initial transaction by allocating and deferring a portion of equipment revenue based on the relative proportion of the future discounts in comparison to the aggregate initial purchase plus the minimum future purchases required to receive the discounts. The deferred revenue will be recognized as service revenue in future periods.

Activation Fees

U.S. Cellular has charged its end customers activation fees in connection with the sale of certain services and equipment. Device activation fees charged at both agent locations and U.S. Cellular company-owned retail stores in connection with equipment installment plan device transactions are deferred and recognized over a period that corresponds with the equipment upgrade eligibility date based on the contract terms. Device activation fees charged at agent locations in connection with subsidized device sales are deferred and recognized over a period that corresponds with the length of the customer’s service contract. Device activation fees charged at U.S. Cellular company-owned retail stores in connection with subsidized device sales are recognized at the time the device is delivered to the customer.

Amounts Collected from Customers and Remitted to Governmental Authorities

U.S. Cellular records amounts collected from customers and remitted to governmental authorities on a net basis within a tax liability account if the tax is assessed upon the customer and U.S. Cellular merely acts as an agent in collecting the tax on behalf of the imposing governmental authority. If the tax is assessed upon U.S. Cellular, then amounts collected from customers as recovery of the tax are recorded in Service revenues and amounts remitted to governmental authorities are recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations. The amounts recorded gross in revenues that are billed to customers and remitted to governmental authorities totaled $ 58 million, $ 64 million and $ 77 million for 2017 , 2016 and 2015 , respectively.

Eligible Telecommunications Carrier (ETC) Revenues

Telecommunications companies may be designated by states, or in some cases by the FCC, as an ETC to receive support payments from the Universal Service Fund if they provide specified services in “high cost” areas. ETC revenues recognized in the reporting period represent the amounts which U.S. Cellular is entitled to receive for such period, as determined and approved in connection with U.S. Cellular’s designation as an ETC in various states.

Advertising Costs

U.S. Cellular expenses advertising costs as incurred. Advertising costs totaled $ 211 million, $ 245 million and $ 231 million in 2017 , 2016 and 2015 , respectively.

Income Taxes

U.S. Cellular is included in a consolidated federal income tax return with other members of the TDS consolidated group. For financial statement purposes, U.S. Cellular and its subsidiaries calculate their income, income taxes and credits as if they comprised a separate affiliated group. Under a tax allocation agreement between TDS and U.S. Cellular, U.S. Cellular remits its applicable income tax payments to TDS. U.S. Cellular had a tax payable balance with TDS of $ 23 million and $ 8 million as of December 31, 2017 and 2016 , respectively .

Deferred taxes are computed using the liability method, whereby deferred tax assets are recognized for future deductible temporary differences and operating loss carryforwards, and deferred tax liabilities are recognized for future taxable temporary differences. Both deferred tax assets and liabilities are measured using the tax rates anticipated to be in effect when the temporary differences reverse. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. U.S. Cellular evaluates income tax uncertainties, assesses the probability of the ultimate settlement with the applicable taxing authority and records an amount based on that assessment. Deferred taxes are reported as a net non-current asset or liability by jurisdiction. Any corresponding valuation allowance to reduce the amount of deferred tax assets is also recorded as non-current.

Stock-Based Compensation and Other Plans

U.S. Cellular has established a long-term incentive plan and a non-employee director compensation plan. These plans are considered compensatory plans and, therefore, recognition of compensation cost for grants made under these plans is required.

U.S. Cellular recognizes stock compensation expense based upon the fair value of the specific awards granted using established valuation methodologies. The amount of stock compensation cost recognized on either a straight-line basis or graded attribution method is based on the portion of the award that is expected to vest over the requisite service period, which generally represents the vesting period. Stock-based compensation cost recognized has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. See Note 16 — Stock-Based Compensation for additional information.

Defined Contribution Plans

U.S. Cellular participates in a qualified noncontributory defined contribution pension plan sponsored by TDS; such plan provides pension benefits for the employees of U.S. Cellular and its subsidiaries. Under this plan, pension benefits and costs are calculated separately for each participant and are funded currently. Pension costs were $ 11 million in 2017 , 2016 and 2015 .

U.S. Cellular also participates in a defined contribution retirement savings plan (401(k) plan) sponsored by TDS. Total costs incurred for U.S. Cellular’s contributions to the 401(k) plan were $ 16 million, $ 16 million and $ 15 million in 2017 , 2016 and 2015 , respectively.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASU 2014-09) and has since amended the standard with Accounting Standards Update 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date , Accounting Standards Update 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) , Accounting Standards Update 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing , Accounting Standards Update 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients , and Accounting Standards Update 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers . These standards replace existing revenue recognition rules with a single comprehensive model to use in accounting for revenue arising from contracts with customers. U.S. Cellular will adopt ASU 2014-09, as amended, on January 1, 2018, under the modified retrospective transition method whereby a cumulative effect adjustment to retained earnings will be recognized upon adoption and the guidance is applied prospectively. U.S. Cellular has implemented new systems, processes and controls to adopt ASU 2014-09, as amended. ASU 2014-09, as amended, impacts U.S. Cellular’s revenue recognition related to the allocation of contract revenues between various services and equipment, and the timing of when those revenues are recognized. In addition, ASU 2014-09, as amended, requires deferral of incremental contract acquisition and fulfillment costs and subsequent expense recognition over the contract period or expected customer life. Upon adoption, the cumulative effect adjustment will include the establishment of contract asset and contract liability accounts with a corresponding adjustment to retained earnings to reflect the reallocation of revenues between service and equipment performance obligations for which control is transferred to customers in different periods. Reallocation impacts generally arise when bundle discounts are provided in a contract arrangement that includes equipment and service performance obligations. In these cases, the revenue will be reallocated according to the relative stand-alone selling prices of the performance obligations included in the bundle and this may be different than how the revenue is billed to the customer and recognized under current guidance. In addition, contract cost assets will be established to reflect costs that will be deferred as incremental contract acquisition costs. Incremental contract acquisition costs generally relate to commissions paid to sales associates. The cumulative effect of adoption of the new standard will be to increase R etained earnings as of January 1, 2018, by approximately $ 160 million. Based on currently available information, U.S. Cellular estimates that the new standard will not have a significant impact on operating income in 2018.

In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01). This ASU introduces changes to current accounting for equity investments and financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. U.S. Cellular is required to adopt ASU 2016-01 on January 1, 2018 , using the modified retrospective approach . The adoption of ASU 2016-01 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (ASU 2016-02). ASU 2016-02 requires lessees to record a right-of-use asset and lease liability for almost all leases. This ASU does not substantially impact the lessor accounting model. However, some changes to the lessor accounting guidance were made to align with lessee accounting changes within Accounting Standards Codification (ASC) 842, Leases and certain key aspects of ASC 606, Revenue from Contracts with Customers. Early adoption is permitted; however, U.S. Cellular plans to adopt ASU 2016-02 on a modified retrospective basis when required on January 1, 2019. In January 2018, the FASB issued Accounting Standards Update 2018-01, Leases (ASU 2018-01), which permits an entity to elect an optional transition practical expedient to not evaluate land easements that exist or expired before the entities adoption of ASU 2016-02. U.S. Cellular plans to adopt ASU 2018-01 in conjunction with its adoption of ASU 2016-02. U.S. Cellular is evaluating the full effect that adoption of ASU 2016-02 and ASU 2018-01 will have on its financial condition, results of operations and disclosures. Upon adoption, U.S. Cellular expects a substantial increase to assets and liabilities on its balance sheet and is in the process of implementing a new lease management and accounting system to assist in the application of the new standard.

In March 2016, the FASB issued Accounting Standards Update 2016-04, Liabilities – Extinguishments of Liabilities: Recognition of Breakage from Certain Prepaid Stored-Value Products (ASU 2016-04). ASU 2016-04 requires companies that sell prepaid stored-value products redeemable for goods, services or cash at third-party merchants to recognize breakage (i.e., the value that is ultimately not redeemed by the consumer) in a way that is consistent with how it will be recognized under the new revenue recognition standard. U.S. Cellular is required to adopt ASU 2016-04 on January 1, 2018 , retrospectively . The adoption of ASU 2016-04 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses. It also requires additional disclosure relating to the credit quality of trade and other receivables, including information relating to management’s estimate of credit allowances. U.S. Cellular is required to adopt ASU 2016-13 on January 1, 2020 , using the modified retrospective approach . Early adoption is permitted as of January 1, 2019. U.S. Cellular is evaluating the effects that adoption of ASU 2016-13 will have on its financial position, results of operations and disclosures.

In October 2016, the FASB issued Accounting Standards Update 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16). ASU 2016-16 impacts the accounting for the income tax consequences of intra-entity transfers of assets other than inventory when the transfer occurs between entities in different tax jurisdictions. U.S. Cellular is required to adopt ASU 2016-16 on January 1, 2018 , using the modified retrospective approach. The adoption of ASU 2016-16 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In February 2017, the FASB issued Accounting Standards Update 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (ASU 2017-05). ASU 2017-05 clarifies how entities account for the derecognition of a nonfinancial asset and adds guidance for partial sales of nonfinancial assets. U.S. Cellular is required to adopt ASU 2017-05 on January 1, 2018 , either retrospectively or using the modified retrospective approach . The adoption of ASU 2017-05 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In May 2017, the FASB issued Accounting Standards Update 2017-09, Compensation – Stock Compensation (ASU 2017-09). ASU 2017-09 clarifies when changes to the terms or conditions of share-based payment awards must be accounted for as modifications. U.S. Cellular is required to adopt ASU 2017-09 prospectively on January 1, 2018. The adoption of ASU 2017-09 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In July 2017, the FASB issued Accounting Standards Update 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity, Derivatives and Hedging: I. Accounting for Certain Financial Instruments with Down Round Features, II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (ASU 2017-11). The amendments in Part I of ASU 2017-11 that relate to liability or equity classification of financial instruments (or embedded features) affect all entities that issue financial instruments (for example, warrants or convertible instruments) that include down round features. The amendments in Part II ASU 2017-11 do not have an accounting effect since the amendments only replace the indefinite deferral of certain guidance with a scope exception. U.S. Cellular is required to adopt ASU 2017-11 on January 1, 2019 , either retrospectively or using the modified retrospective approach . Early adoption is permitted. The adoption of ASU 2017-11 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

In August 2017, the FASB issued Accounting Standards Update 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). ASU 2017-12 amends hedge accounting recognition and presentation requirements to improve transparency and understandability of information disclosed in the financials as well as simplifies the application of hedge accounting guidance. U.S. Cellular is required to adopt ASU 2017-12 on January 1, 2019 , using the modified retrospective approach. Early adoption is permitted. The adoption of ASU 2017-12 is not expected to have a significant impact on U.S. Cellular’s financial position or results of operations.

Note 2 Fair Value Measurements

As of December 31, 2017 and 2016 , U.S. Cellular did not have any material financial or nonfinancial assets or liabilities that were required to be recorded at fair value in its Consolidated Balance Sheet in accordance with GAAP.

The provisions of GAAP establish a fair value hierarchy that contains three levels for inputs used in fair value measurements. Level 1 inputs include quoted market prices for identical assets or liabilities in active markets. Level 2 inputs include quoted market prices for similar assets and liabilities in active markets or quoted market prices for identical assets and liabilities in inactive markets. Level 3 inputs are unobservable. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. A financial instrument’s level within the fair value hierarchy is not representative of its expected performance or its overall risk profile and, therefore, Level 3 assets are not necessarily higher risk than Level 2 assets or Level 1 assets.

U.S. Cellular has applied the provisions of fair value accounting for purposes of computing the fair value of financial instruments for disclosure purposes as displayed below.

		Level within the Fair Value Hierarchy	December 31, 2017				December 31, 2016
		Level within the Fair Value Hierarchy	Book Value		Fair Value		Book Value		Fair Value
(Dollars in millions)
Cash and cash equivalents		1	$	352	$	352	$	586	$	586
Short-term investments		1		50		50		–		–
Long-term debt
	Retail	2		917		939		917		929
	Institutional	2		534		522		533		532
	Other	2		191		191		203		203

The fair value of Cash and cash equivalents and Short-term investments approximate their book values due to the short-term nature of these financial instruments . Long-term debt excludes capital lease obligations, other installment arrangements , the current portion of Long-term debt and debt financing costs. The fair value of “Retail” Long-term debt was estimated using market prices for the 6.95% Senior Notes, 7.25% 2063 Senior Notes and 7.25% 2064 Senior Notes. U.S. Cellular’s “Institutional” debt consists of the 6.7% Senior Notes which are traded over the counter. U.S. Cellular’s “Other” debt consists of a senior term loan credit facility. U.S. Cellular estimated the fair value of its Institutional and Other debt through a discounted cash flow analysis using the interest rates or estimated yield to maturity for each borrowing, which ranged from 4.74% to 7.13% and 3.78% to 6.93% at December 31, 2017 and 2016 , respectively.

Note 3 Equipment Installment Plans

U.S. Cellular sells devices to customers under equipment installment contracts over a specified time period. For certain equipment installment plans, after a specified period of time or amount of payments, the customer may have the right to upgrade to a new device and have the remaining unpaid equipment installment contract balance waived, subject to certain conditions, including trading in the original device in good working condition and signing a new equipment installment contract. U.S. Cellular values this trade-in right as a guarantee liability. The guarantee liability is initially measured at fair value and is determined based on assumptions including the probability and timing of the customer upgrading to a new device and the fair value of the device being traded-in at the time of trade-in. When a customer exercises the trade-in option, both the outstanding receivable and guarantee liability balances related to the respective device are reduced to zero, and the value of the used device that is received in the transaction is recognized as inventory. If the customer does not exercise the trade-in option at the time of eligibility, U.S. Cellular begins amortizing the liability and records this amortization as additional equipment revenue. As of December 31, 2017 and 2016 , the guarantee liability related to these plans was $ 15 million and $ 33 million, respectively, and is reflected in Customer deposits and deferred revenues in the Consolidated Balance Sheet.

U.S. Cellular equipment installment plans do not provide for explicit interest charges. Because equipment installment plans have a duration of greater than twelve months, U.S. Cellular imputes interest. U.S. Cellular records imputed interest as a reduction to the related accounts receivable and recognizes it over the term of the installment agreement as a component of Service revenues. Equipment installment plan receivables had a weighted average effective imputed interest rate of 12.5% and 11.2% as of December 31, 2017 and 2016 , respectively.

The following table summarizes equipment installment plan receivables as of December 31, 2017 and 2016 .

December 31,	2017		2016
(Dollars in millions)
Equipment installment plan receivables, gross	$	873	$	628
Deferred interest		(80)		(53)
Equipment installment plan receivables, net of deferred interest		793		575
Allowance for credit losses		(65)		(50)
Equipment installment plan receivables, net	$	728	$	525

Net balance presented in the Consolidated Balance Sheet as:
Accounts receivable — Customers and agents (Current portion)	$	428	$	345
Other assets and deferred charges (Non-current portion)		300		180
Equipment installment plan receivables, net	$	728	$	525

U.S. Cellular uses various inputs, including internal data, information from the credit bureaus and other sources, to evaluate the credit profiles of its customers. From this evaluation, a credit class is assigned to the customer that determines the number of eligible lines, the amount of credit available, and the down payment requirement, if any. Customers assigned to credit classes requiring no down payment represent a lower risk category, whereas those assigned to credit classes requiring a down payment represent a higher risk category. The balance and aging of the equipment installment plan receivables on a gross basis by credit category were as follows:

	December 31, 2017						December 31, 2016
	Lower Risk		Higher Risk		Total		Lower Risk		Higher Risk		Total
(Dollars in millions)
Unbilled	$	807	$	20	$	827	$	553	$	38	$	591
Billed — current		31		1		32		23		2		25
Billed — past due		12		2		14		10		2		12
Equipment installment plan receivables, gross	$	850	$	23	$	873	$	586	$	42	$	628

The activity in the allowance for credit losses balance for the equipment installment plan receivables was as follows:

	2017		2016
(Dollars in millions)
Allowance for credit losses, beginning of year	$	50	$	26
Bad debts expense		62		63
Write-offs, net of recoveries		(47)		(39)
Allowance for credit losses, end of year	$	65	$	50

U.S. Cellular recorded out-of-period adjustments in 2016 due to errors related to equipment installment plan transactions occurring in 2015 (2016 EIP adjustments). The 2016 EIP adjustments had the impact of increasing Equipment sales revenues by $ 2 million, decreasing bad debts expense, which is a component of Selling, general and administrative expense, by $ 2 million and increasing Income before income taxes by $ 4 million in 2016. Additionally, U.S. Cellular recorded out-of-period adjustments in 2015 due to errors related to equipment installment plan transactions (2015 EIP adjustments) that were attributable to 2014. The 2015 EIP adjustments had the impact of reducing Equipment sales revenues and Income before income taxes by $ 6 million in 2015. U.S. Cellular has determined that these adjustments were not material to any of the periods impacted.

Note 4 Income Taxes

U.S. Cellular is included in a consolidated federal income tax return and in certain state income tax returns with other members of the TDS consolidated group. For financial statement purposes, U.S. Cellular and its subsidiaries compute their income tax expense as if they comprised a separate affiliated group and were not included in the TDS consolidated group.

U.S. Cellular’s current income taxes balances at December 31, 2017 and 2016 , were as follows:

December 31,	2017		2016
(Dollars in millions)
Federal income taxes payable	$	22	$	8
Net state income taxes payable		1		–

Income tax expense (benefit) is summarized as follows:

Year Ended December 31,			2017		2016		2015
(Dollars in millions)
Current
	Federal		$	68	$	29	$	97
	State			10		(2)		5
Deferred
	Federal			(354)		1		48
	State			(11)		5		7
		Total income tax expense (benefit)	$	(287)	$	33	$	157

In December 2017, the Tax Act was signed into law. U.S. Cellular adjusts for the effects of changes in tax laws and rates in the period of enactment. The major provisions of the Tax Act impacting U.S. Cellular are the reduction of the U.S. federal corporate tax rate from 35% to 21% and the bonus depreciation deduction allowing for full expensing of qualified property additions.

A reconciliation of U.S. Cellular’s income tax expense computed at the statutory rate to the reported income tax expense, and the statutory federal income tax expense rate to U.S. Cellular’s effective income tax expense rate is as follows:

Year Ended December 31,		2017				2016				2015
		Amount		Rate		Amount		Rate		Amount		Rate
(Dollars in millions)
Statutory federal income tax expense and rate		$	(95)	35.0	%	$	29	35.0	%	$	141	35.0	%
State income taxes, net of federal benefit 1			(4)	1.4			3	3.6			8	2.1
Effect of noncontrolling interests			(2)	0.8			(1)	(1.1)			3	0.6
Federal income tax rate change 2			(254)	93.3			–	–			–	–
Goodwill impairment 3			71	(26.2)			–	–			–	–
Other differences, net			(3)	1.2			2	2.2			5	1.0
Total income tax expense (benefit) and rate		$	(287)	105.5	%	$	33	39.7	%	$	157	38.7	%

1	State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to the valuation allowance.
2	Federal income tax rate change due to the Tax Act reducing the federal income tax rate from 35% to 21% and a corresponding reduction to the deferred tax liability. The amount is slightly different from the total impact of the federal tax rate change because the rate change also impacts the amount of State income taxes, net of federal benefit.
3	Goodwill impairment reflects an adjustment to increase income tax expense by $71 million related to a portion of the impaired goodwill that is not amortizable for income tax purposes. See Note 7 — Intangible Assets for additional information related to the goodwill impairment.

Significant components of U.S. Cellular’s deferred income tax assets and liabilities at December 31, 2017 and 2016 , were as follows:

December 31,		2017		2016
(Dollars in millions)
Deferred tax assets
	Net operating loss (NOL) carryforwards	$	103	$	88
	Stock-based compensation		20		26
	Compensation and benefits - other		5		21
	Deferred rent		21		21
	Other		59		56
Total deferred tax assets			208		212
	Less valuation allowance		(77)		(65)
Net deferred tax assets			131		147
Deferred tax liabilities
	Property, plant and equipment		276		473
	Licenses/intangibles		192		326
	Partnership investments		123		173
	Total deferred tax liabilities		591		972
Net deferred income tax liability		$	460	$	825

Presented in the Consolidated Balance Sheet as:
Deferred income tax liability, net		$	461	$	826
Other assets and deferred charges			(1)		(1)
	Net deferred income tax liability	$	460	$	825

At December 31, 2017 , U.S. Cellular and certain subsidiaries had $ 1,989 million of state NOL carryforwards (generating a $ 92 million deferred tax asset) available to offset future taxable income. The state NOL carryforwards expire between 2018 and 2037 . Certain subsidiaries had federal NOL carryforwards (generating an $ 11 million deferred tax asset) available to offset their future taxable income. The federal NOL carryforwards expire between 2018 and 2037 . A valuation allowance was established for certain state NOL carryforwards and federal NOL carryforwards since it is more likely than not that a portion of such carryforwards will expire before they can be utilized.

A summary of U.S. Cellular’s deferred tax asset valuation allowance is as follows:

		2017		2016		2015
(Dollars in millions)
Balance at beginning of year		$	65	$	55	$	53
	Charged to income tax expense		12		10		2
Balance at end of year		$	77	$	65	$	55

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

		2017		2016		2015
(Dollars in millions)
Unrecognized tax benefits balance at beginning of year		$	43	$	39	$	36
	Additions for tax positions of current year		6		12		7
	Additions for tax positions of prior years		1		3		1
	Reductions for tax positions of prior years		(1)		(1)		–
	Reductions for lapses in statutes of limitations		(2)		(10)		(5)
Unrecognized tax benefits balance at end of year		$	47	$	43	$	39

Unrecognized tax benefits are included in Accrued taxes and Other deferred liabilities and credits in the Consolidated Balance Sheet. If these benefits were recognized, they would have reduced income tax expense in 2017 , 2016 and 2015 by $ 38 million , $ 29 million and $ 25 million , respectively, net of the federal benefit from state income taxes.

U.S. Cellular recognizes accrued interest and penalties related to unrecognized tax benefits in Income tax expense (benefit) . The amounts charged to income tax expense related to interest and penalties resulted in an expense of $ 3 million in 2017 , a benefit of $ 2 million in 2016 and an expense of $ 1 million in 2015 . Net accrued liabilities for interest and penalties were $ 19 million and $ 15 million at December 31, 2017 , and 2016 , respectively, and are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

U.S. Cellular is included in TDS’ consolidated federal and certain state income tax returns. U.S. Cellular also files certain state and local income tax returns separately from TDS. With only limited exceptions, TDS is no longer subject to federal and state income tax audits for the years prior to 2013 .

Note 5 Earnings Per Share

Basic earnings per share attributable to U.S. Cellular shareholders is computed by dividing Net income attributable to U.S. Cellular shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share attributable to U.S. Cellular shareholders is computed by dividing Net income attributable to U.S. Cellular shareholders by the weighted average number of common shares outstanding during the period adjusted to include the effects of potentially dilutive securities. Potentially dilutive securities primarily include incremental shares issuable upon the exercise of outstanding stock options and the vesting of performance and restricted stock units.

The amounts used in computing earnings per common share and the effects of potentially dilutive securities on the weighted average number of common shares were as follows:

Year Ended December 31,	2017		2016		2015
(Dollars and shares in millions, except per share amounts)
Net income attributable to U.S. Cellular shareholders	$	12	$	48	$	241

Weighted average number of shares used in basic earnings per share		85		85		84
Effect of dilutive securities		1		–		1
Weighted average number of shares used in diluted earnings per share		86		85		85

Basic earnings per share attributable to U.S. Cellular shareholders	$	0.14	$	0.56	$	2.86

Diluted earnings per share attributable to U.S. Cellular shareholders	$	0.14	$	0.56	$	2.84

Certain Common Shares issuable upon the exercise of stock options or vesting of performance and restricted stock units were not included in average diluted shares outstanding for the calculation of Diluted earnings per share attributable to U.S. Cellular shareholders because their effects were antidilutive. The number of such Common Shares excluded was 3 million shares, 3 million shares and 4 million shares for 2017 , 2016 and 2015 , respectively.

Note 6 Acquisitions, Divestitures and Exchanges

In July 2016, the FCC announced U.S. Cellular as a qualified bidder in the FCC’s forward auction of 600 MHz spectrum licenses, referred to as Auction 1002. Prior to commencement of the forward auction, U.S. Cellular made an upfront payment to the FCC of $ 143 million in June 2016 to establish its initial bidding eligibility. In April 2017, the FCC announced by way of public notice that U.S. Cellular was the winning bidder for 188 licenses for an aggregate purchase price of $ 329 million. U.S. Cellular paid the remaining $ 186 million to the FCC and was granted the licenses during the second quarter of 2017.

In March 2016, U.S. Cellular entered into an agreement with a third party to transfer FCC licenses in non-operating markets and receive FCC licenses in operating markets. The agreement provided for the transfer of certain AWS and PCS spectrum licenses to U.S. Cellular in exchange for U.S. Cellular transferring certain PCS spectrum licenses with a carrying value of $ 8 million and $ 1 million of cash to the third party. This transaction closed in the fourth quarter of 2016, at which time U.S. Cellular recorded a gain of $ 3 million.

In February 2016, U.S. Cellular entered into an agreement with a third party to exchange certain 700 MHz licenses for certain AWS and PCS licenses and $ 28 million of cash. This license exchange was accomplished in two closings. The first closing occurred in the second quarter of 2016 at which time U.S. Cellular received $ 13 million of cash and recorded a gain of $ 9 million. The second closing occurred in the first quarter of 2017, at which time U.S. Cellular received $15 million of cash and recorded a gain of $17 million.

In February 2016, U.S. Cellular entered into an additional agreement with a third party that provided for the transfer of certain AWS spectrum licenses and $ 2 million in cash to U.S. Cellular, in exchange for U.S. Cellular transferring certain AWS, PCS and 700 MHz licenses with a carrying value of $ 7 million to the third party. This transaction closed in the third quarter of 2016, at which time U.S. Cellular recorded a gain of $ 7 million.

In 2015 and 2016, U.S. Cellular entered into multiple agreements to purchase spectrum licenses located in U.S. Cellular’s existing operating markets. The aggregate purchase price for these spectrum licenses is $ 57 million, of which $ 53 million closed in 2016 and $3 million closed in 2 017. The remaining agreement is expected to close in early 2018.

In March 2015, U.S. Cellular exchanged certain of its unbuilt PCS licenses for certain other PCS licenses located in U.S. Cellular’s existing operating markets and $ 117 million of cash. As of the transaction date, the licenses received in the transaction had an estimated fair value, per a market approach, of $ 43 million. A gain of $ 125 million was recorded in (Gain) loss on license sales and exchanges, net in the Consolidated Statement of Operations in the first quarter of 2015.

U.S. Cellular participated in Auction 97 indirectly through its limited partnership interest in Advantage Spectrum. Advantage Spectrum was the provisional winning bidder for 124 licenses for an aggregate winning bid of $ 338 million, after its designated entity discount of 25% . Advantage Spectrum’s bid amount, less the upfront payment of $ 60 million paid in 2014, was paid to the FCC in March 2015. These licenses were granted by the FCC in July 2016. See Note 13 — Variable Interest Entities for additional information.

In December 2014, U.S. Cellular entered into an agreement with a third party to sell 595 towers and certain related contracts, assets, and liabilities for $ 159 million. This agreement and related transactions were accomplished in two closings. The first closing occurred in December 2014 and included the sale of 236 towers, without tenants, for $ 10 million. On this same date, U.S. Cellular received $ 8 million in earnest money. At the time of the first closing, a $ 4 million gain was recorded. The second closing for the remaining 359 towers, primarily with tenants, took place in January 2015, at which time U.S. Cellular received $ 142 million in additional cash proceeds and recorded a gain of $ 108 million in (Gain) loss on sale of business and other exit costs, net.

In September 2014, U.S. Cellular entered into an agreement with a third party to exchange certain PCS and AWS licenses for certain other PCS and AWS licenses and $ 28 million of cash. This license exchange was accomplished in two closings. The first closing occurred in December 2014 at which time U.S. Cellular transferred licenses to the counterparty with a net book value of $ 11 million, received licenses with an estimated fair value, per a market approach, of $ 52 million, recorded a $ 22 million gain and recorded an $ 18 million deferred credit in Other current liabilities. The license that was transferred to the counterparty in the second closing had a net book value of $ 22 million. The second closing occurred in July 2015. At the time of the second closing, U.S. Cellular received $ 28 million in cash and recognized the deferred credit from the first closing resulting in a total gain of $ 24 million recorded on this part of the license exchange.

Note 7 Intangible Assets

Activity related to U.S. Cellular's Licenses and Goodwill is presented below. See Note 6 — Acquisitions, Divestitures and Exchanges for information regarding transactions which affected Licenses during the periods.

Licenses

		2017		2016
(Dollars in millions)
Balance at beginning of year		$	1,886	$	1,834
	Acquisitions		331		53
	Transferred to Assets held for sale		(10)		(8)
	Exchanges - Licenses received		25		25
	Exchanges - Licenses surrendered		(9)		(18)
Balance at end of year		$	2,223	$	1,886

Goodwill

Year Ended December 31,		2017		2016
(Dollars in millions)
Balance at beginning of year		$	370	$	370
	Loss on impairment		(370)		–
Balance at end of year		$	–	$	370

Goodwill Interim Impairment Assessment

U.S. Cellular operates in an intensely competitive wireless industry environment and has experienced declining service revenues in recent periods. Based on recent 2017 developments, including wireless expansion plans announced by other companies and the results of the FCC’s forward auction of 600 MHz spectrum licenses and other FCC actions, U.S. Cellular anticipates increased competition for customers in its primary operating markets from new and existing market participants over the long term. In addition, the widening adoption of unlimited data plans and other data pricing constructs across the industry, including U.S. Cellular’s introduction of unlimited plans earlier in 2017, may limit the industry’s ability to monetize future growth in data usage. These factors when assessed and considered as part of U.S. Cellular’s annual planning process conducted in the third quarter of each year caused management to revise its long-range financial forecast in the third quarter of 2017. Based on the factors noted above, management identified a triggering event and performed a quantitative goodwill impairment test on an interim basis.

U.S. Cellular used a one-step quantitative approach that compared the fair value of the U.S. Cellular reporting unit to its carrying value. A discounted cash flow approach was used to value the reporting unit, using value drivers and risks specific to U.S. Cellular and the industry and current economic factors. The cash flow estimates incorporated certain assumptions that market participants would use in their estimates of fair value and may not be indicative of U.S. Cellular specific assumptions. However, the discount rate used in the analysis considers any additional risk a market participant might place on integrating the U.S. Cellular reporting unit into its operations.

Note 8 Investments in Unconsolidated Entities

Investments in unconsolidated entities consist of amounts invested in wireless entities in which U.S. Cellular holds a noncontrolling interest. These investments are accounted for using either the equity or cost method as shown in the following table:

December 31,	2017		2016
(Dollars in millions)
Equity method investments:
Capital contributions, loans, advances and adjustments	$	105	$	108
Cumulative share of income		1,717		1,577
Cumulative share of distributions		(1,411)		(1,276)
Total equity method investments		411		409
Cost method investments		4		4
Total investments in unconsolidated entities	$	415	$	413

The following tables, which are based on information provided in part by third parties, summarize the combined assets, liabilities and equity, and results of operations of U.S. Cellular’s equity method investments:

December 31,	2017		2016
(Dollars in millions)
Assets
Current	$	668	$	739
Due from affiliates		323		387
Property and other		4,804		4,615
Total assets	$	5,795	$	5,741

Liabilities and Equity
Current liabilities	$	435	$	466
Deferred credits		176		184
Long-term liabilities		199		187
Long-term capital lease obligations		1		6
Partners' capital and shareholders' equity		4,984		4,898
Total liabilities and equity	$	5,795	$	5,741

Year Ended December 31,	2017		2016		2015
(Dollars in millions)
Results of Operations
Revenues	$	6,562	$	6,747	$	6,958
Operating expenses		4,965		5,047		5,226
Operating income		1,597		1,700		1,732
Other income (expense), net		(1)		(11)		(7)
Net income	$	1,596	$	1,689	$	1,725

Note 9 Property, Plant and Equipment

Property, plant and equipment in service and under construction, and related accumulated depreciation and amortization, as of December 31, 2017 and 2016 , were as follows:

December 31,	Useful Lives (Years)	2017		2016
(Dollars in millions)
Land	N/A	$	36	$	35
Buildings	20		297		297
Leasehold and land improvements	1-30		1,178		1,153
Cell site equipment	7-25		3,411		3,383
Switching equipment	5-8		988		976
Office furniture and equipment	3-5		389		420
Other operating assets and equipment	3-5		57		53
System development	1-7		1,060		1,217
Work in process	N/A		212		178
Total property, plant and equipment, gross			7,628		7,712
Accumulated depreciation and amortization			(5,308)		(5,242)
Total property, plant and equipment, net		$	2,320	$	2,470

Depreciation and amortization expense totaled $ 604 million, $ 607 million and $ 596 million in 2017 , 2016 and 2015 , respectively. In 2017 , 2016 and 2015 , (Gain) loss on asset disposals, net included charges of $ 17 million, $ 22 million and $ 16 million, respectively, related to disposals of assets, trade-ins of older assets for replacement assets and other retirements of assets from service in the normal course of business.

Note 10 Asset Retirement Obligations

U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations in its operating markets. Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions. These obligations are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

In 2017 and 2016 , U.S. Cellular performed a review of the assumptions and estimated costs related to its asset retirement obligations. The results of the reviews (identified as Revisions in estimated cash outflows) and other changes in asset retirement obligations during 2017 and 2016 , were as follows:

		2017		2016
(Dollars in millions)
Balance at beginning of year		$	174	$	158
	Additional liabilities accrued		1		1
	Revisions in estimated cash outflows		(3)		5
	Disposition of assets		(1)		(1)
	Accretion expense		12		11
Balance at end of year		$	183	$	174

Note 11 Debt

Revolving Credit Facility

At December 31, 2017 , U.S. Cellular had a revolving credit facility available for general corporate purposes, including acquisitions, spectrum purchases and capital expenditures. Amounts under the revolving credit facility may be borrowed, repaid and reborrowed from time to time until maturity in June 2021. As of December 31, 2017 , there were no outstanding borrowings under the revolving credit facility, except for letters of credit. Interest expense representing commitment fees on the unused portion of the revolving line of credit was $ 1 million in each of 2017 , 2016 and 2015 . The commitment fees are based on the unsecured senior debt ratings assigned to U.S. Cellular by certain ratings agencies.

The following table summarizes the revolving credit facility as of December 31, 2017 :

(Dollars in millions)
Maximum borrowing capacity	$	300
Letters of credit outstanding	$	2
Amount borrowed	$	–
Amount available for use	$	298

Borrowings under the revolving credit facility bear interest either at a LIBOR rate plus 1.75% or at an alternative Base Rate as defined in the revolving credit agreement plus 0.75%, at U.S. Cellular’s option. U.S. Cellular may select a borrowing period of either one, two, three or six months (or other period of twelve months or less if requested by U.S. Cellular and approved by the lenders). U.S. Cellular’s credit spread and commitment fees on its revolving credit facility may be subject to increase if its current credit rating from nationally recognized credit rating agencies is lowered, and may be subject to decrease if the rating is raised.

In connection with U.S. Cellular’s revolving credit facility, TDS and U.S. Cellular entered into a subordination agreement dated June 15, 2016, together with the administrative agent for the lenders under U.S. Cellular’s revolving credit agreement. Pursuant to this subordination agreement, (a) any consolidated funded indebtedness from U.S. Cellular to TDS will be unsecured and (b) any (i) consolidated funded indebtedness from U.S. Cellular to TDS (other than “refinancing indebtedness” as defined in the subordination agreement) in excess of $105 million and (ii) refinancing indebtedness in excess of $250 million will be subordinated and made junior in right of payment to the prior payment in full of obligations to the lenders under U.S. Cellular’s revolving credit agreement. As of December 31, 2017 , U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the revolving credit agreement pursuant to the subordination agreement.

The continued availability of the revolving credit facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and make representations regarding certain matters at the time of each borrowing. U.S. Cellular believes it was in compliance as of December 31, 2017 , with all covenants and other requirements set forth in the revolving credit facility.

The revolving credit agreement includes the following financial covenants:

Consolidated Interest Coverage Ratio may not be less than 3.00 to 1.00 as of the end of any fiscal quarter.
Consolidated Leverage Ratio may not be greater than the ratios indicated as of the end of any fiscal quarter for each period specified below:

	Period	Ratios

	From the agreement date of June 15, 2016 through June 30, 2019	3.25 to 1.00

	From July 1, 2019 and thereafter	3.00 to 1.00

Certain U.S. Cellular wholly-owned subsidiaries have jointly and severally unconditionally guaranteed the payment and performance of the obligations of U.S. Cellular under the revolving credit agreement pursuant to a guaranty dated June 15, 2016. Other subsidiaries that meet certain criteria will be required to provide a similar guaranty in the future. U.S. Cellular believes it was in compliance with all of the financial and other covenants and requirements set forth in its revolving credit facility as of December 31, 2017 .

Term Loan

In July 2015, U.S. Cellular borrowed $225 million on a senior term loan credit facility in two separate draws. This facility was entered into in January 2015 and amended and restated in June 2016. The interest rate on outstanding borrowings is reset at three and six month intervals at a rate of LIBOR plus 250 basis points. This credit facility provides for the draws to be continued on a long-term basis under terms that are readily determinable. U.S. Cellular has the ability and intent to carry the debt for the duration of the agreement. Principal reductions are due and payable in quarterly installments of $3 million beginning in March 2016 through December 2021, and the remaining unpaid balance will be due and payable in January 2022. The senior term loan credit facility contains financial covenants and subsidiary guarantees that are consistent with the revolving credit agreements described above. This facility was entered into for general corporate purposes, including working capital, spectrum purchases and capital expenditures. U.S. Cellular believes that it was in compliance with all of the financial and other covenants and requirements set forth in its term loan credit facility as of December 31, 2017 .

In connection with U.S. Cellular’s term loan credit facility, TDS and U.S. Cellular entered into a subordination agreement in June 2016 together with the administrative agent for the lenders under U.S. Cellular’s term loan credit agreement, which is substantially the same as the subordination agreement for U.S. Cellular as described above under the “Revolving Credit Facilities.” As of December 31, 2017 , U.S. Cellular had no outstanding consolidated funded indebtedness or refinancing indebtedness that was subordinated to the term loan facility pursuant to this subordination agreement.

Receivables Securitization Facility

In December 2017, U.S. Cellular, through its subsidiaries, entered into a $200 million credit facility to permit securitized borrowings using its equipment installment receivables for general corporate purposes, including acquisitions, spectrum purchases and capital expenditures. In connection with the receivables securitization facility, U.S. Cellular formed a wholly-owned subsidiary, USCC Master Note Trust (Trust), which qualifies as a bankruptcy remote entity. Under the terms of the facility, U.S. Cellular, through its subsidiaries, transfers eligible equipment installment receivables to the Trust. The Trust then utilizes the transferred assets as collateral for notes payables issued to third party financial institutions. Since U.S. Cellular retains effective control of the transferred assets in the Trust, any activity associated with this receivables securitization facility will be treated as a secured borrowing. Therefore, U.S. Cellular will continue to report equipment installment receivables and any related balances on the Consolidated Balance Sheet. Cash received from borrowings under the receivables securitization facility will be reported as Debt. Refer to Note 13 — Variable Interest Entities for additional information.

U.S. Cellular entered into a performance guaranty whereby U.S. Cellular guarantees the performance of certain wholly-owned subsidiaries of U.S. Cellular under the receivables securitization facility. Amounts under the receivables securitization facility may be borrowed, repaid and reborrowed from time to time until maturity in December 2019, which may be extended from time to time as specified therein. As of December 31, 2017 , there were no outstanding borrowings under the receivables securitization facility, and the entire unused capacity of $200 million was available, subject to sufficient collateral to satisfy the asset borrowing base provisions of the facility. As of December 31, 2017, the Trust held less than $1 million of assets available to be pledged as collateral for the receivables securitization facility.

The continued availability of the receivables securitization facility requires U.S. Cellular to comply with certain negative and affirmative covenants, maintain certain financial ratios and provide representations on certain matters at the time of each borrowing. The covenants include the same financial covenants for U.S. Cellular as described above under the “Revolving Credit Facility.” U.S. Cellular believes that it was in compliance as of December 31, 2017 , with all of the financial covenants and requirements set forth in its receivables securitization facility.

Other Long-Term Debt

Long-term debt as of December 31, 2017 and 2016 , was as follows:

								December 31, 2017						December 31, 2016
				Issuance date	Maturity date	Call date (any time on or after)		Principal Amount		Less Unamortized discount and debt issuance costs		Total		Principal Amount		Less Unamortized discount and debt issuance costs	Total
(Dollars in millions)
	Unsecured Senior Notes
			6.700%	Dec 2003 and June 2004	Dec 2033	Dec 2003 and June 2004	$	544	$	15	$	529	$	544	$	15	$	529
			6.950%	May 2011	May 2060	May 2016		342		11		331		342		11		331
			7.250%	Dec 2014	Dec 2063	Dec 2019		275		10		265		275		10		265
			7.250%	Nov 2015	Dec 2064	Dec 2020		300		10		290		300		10		290
		Term Loan		Jul 2015	Jan 2022			203		2		201		214		2		212
	Capital lease obligations							4		–		4		2		–		2
	Installment payment agreement							21		1		20		–		–		–
Total long-term debt							$	1,689	$	49	$	1,640	$	1,677	$	48	$	1,629
	Long-term debt, current										$	18					$	11
	Long-term debt, noncurrent										$	1,622					$	1,618

U.S. Cellular may redeem its 6.95% Senior Notes, 7.25% 2063 Senior Notes and 7.25% 2064 Senior Notes, in whole or in part at any time after the respective call date, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest. U.S. Cellular may redeem the 6.7% Senior Notes, in whole or in part, at any time prior to maturity at a redemption price equal to the greater of (a) 100% of the principal amount of such notes, plus accrued and unpaid interest, or (b) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semi-annual basis at the Treasury Rate plus 30 basis points.

Interest on the Senior Notes outstanding at December 31, 2017 , is payable quarterly, with the exception of the 6.7% Senior Notes for which interest is payable semi-annually.

The annual requirements for principal payments on long-term debt are approximately $ 19 million for each of the years 2018 through 2020 , and $ 11 million and $ 158 million for the years 2021 and 2022 , respectively.

The covenants associated with U.S. Cellular’s long-term debt obligations, among other things, restrict U.S. Cellular’s ability, subject to certain exclusions, to incur additional liens, enter into sale and leaseback transactions, and sell, consolidate or merge assets.

U.S. Cellular’s long-term debt notes do not contain any provisions resulting in acceleration of the maturities of outstanding debt in the event of a change in U.S. Cellular’s credit rating. However, a downgrade in U.S. Cellular’s credit rating could adversely affect its ability to obtain long-term debt financing in the future.

Note 12 Commitments and Contingencies

Purchase Obligations

U.S. Cellular has obligations payable under non-cancellable contracts, commitments for device purchases, network facilities and transport services, agreements for software licensing, long-term marketing programs, as well as certain agreements to purchase goods or services. Where applicable, U.S. Cellular calculates its obligation based on termination fees that can be paid to exit the contract. Future minimum payments required under these commitments are as follows:

		Purchase
		Obligations
(Dollars in millions)
2018	$	1,177
2019		657
2020		73
2021		42
2022		21
Thereafter		31
Total	$	2,001

Lease Commitments

U.S. Cellular and its subsidiaries have leases for office space, retail store sites, cell sites and equipment which are accounted for as operating leases. Certain leases have renewal options and/or fixed rental increases. Renewal options that are reasonably assured of exercise are included in determining the lease term. Any rent abatements or lease incentives, in addition to fixed rental increases, are included in the calculation of rent expense and calculated on a straight-line basis over the defined lease term. Rent expense totaled $ 166 million, $ 161 million and $ 153 million in 2017 , 2016 and 2015 , respectively.

U.S. Cellular and its subsidiaries are also the lessors for tower space which are accounted for as operating leases. The leased assets are included in Property, plant and equipment on the Consolidated Balance Sheet.

As of December 31, 2017 , future minimum rental payments required under operating leases and rental receipts expected under operating leases that have noncancellable lease terms in excess of one year were as follows:

	Operating Leases Future Minimum Rental Payments		Operating Leases Future Minimum Rental Receipts
(Dollars in millions)
2018	$	145	$	54
2019		133		45
2020		120		34
2021		107		21
2022		92		9
Thereafter		737		2
Total	$	1,334	$	165

Indemnifications

U.S. Cellular enters into agreements in the normal course of business that provide for indemnification of counterparties. The terms of the indemnifications vary by agreement. The events or circumstances that would require U.S. Cellular to perform under these indemnities are transaction specific; however, these agreements may require U.S. Cellular to indemnify the counterparty for costs and losses incurred from litigation or claims arising from the underlying transaction. U.S. Cellular is unable to estimate the maximum potential liability for these types of indemnifications as the amounts are dependent on the outcome of future events, the nature and likelihood of which cannot be determined at this time. Historically, U.S. Cellular has not made any significant indemnification payments under such agreements.

Legal Proceedings

U.S. Cellular is involved or may be involved from time to time in legal proceedings before the FCC, other regulatory authorities, and/or various state and federal courts. If U.S. Cellular believes that a loss arising from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the financial statements for the estimated loss. If only a range of loss can be determined, the best estimate within that range is accrued; if none of the estimates within that range is better than another, the low end of the range is accrued. The assessment of the expected outcomes of legal proceedings is a highly subjective process that requires judgments about future events. The legal proceedings are reviewed at least quarterly to determine the adequacy of accruals and related financial statement disclosures. The ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial statements.

U.S. Cellular has accrued $ 1 million and less than $ 1 million with respect to legal proceedings and unasserted claims as of December 31, 2017 and 2016 , respectively . U.S. Cellular has not accrued any amount for legal proceedings if it cannot estimate the amount of the possible loss or range of loss. U.S. Cellular is unable to estimate any contingent loss in excess of the amounts accrued.

Note 13 Variable Interest Entities

Consolidated VIEs

U.S. Cellular consolidates variable interest entities (VIEs) in which it has a controlling financial interest as defined by GAAP and is therefore deemed the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE. U.S. Cellular reviews these criteria initially at the time it enters into agreements and subsequently when events warranting reconsideration occur. These VIEs have risks similar to those described in the “Risk Factors” in U.S. Cellular’s Form 10-K for the year ended December 31, 2017 .

During 2017, U.S. Cellular formed USCC EIP LLC (Seller/Sub-Servicer), USCC Receivables Funding LLC (Transferor) and the Trust, special purpose entities (SPEs), to facilitate a securitized borrowing using its equipment installment plan receivables. Under a Receivables Sale Agreement, U.S. Cellular wholly-owned, majority-owned and unconsolidated entities, collectively referred to as “affiliated entities”, transfer device equipment installment contracts to USCC EIP LLC. The Seller/Sub-Servicer will aggregate device equipment installment plan contracts, perform servicing, collection and all other administrative activities related to accounting for equipment installment plan contracts. The Seller/Sub-Servicer will sell the eligible equipment installment plan receivables to the Transferor, a bankruptcy remote entity, which will subsequently sell the receivables to the Trust. The Trust, which is bankruptcy remote and isolated from the creditors of U.S. Cellular, will be responsible for issuing asset-backed variable funding notes (Notes), which are collateralized by the equipment installment plan receivables owned by the Trust. Given that U.S. Cellular has the power to direct the activities of these SPEs, and that these SPEs lack sufficient equity to finance their activities, U.S. Cellular is deemed to have a controlling financial interest in the SPEs and, therefore, consolidates them. All transactions with third parties (e.g. issuance of the asset-backed variable funding notes) will be accounted for as a secured borrowing due to the pledging of equipment installment contracts as collateral, significant continuing involvement in the transferred assets , subordinated interests of the cash flows, and continued evidence of control of the receivables. Refer to Note 11 — Debt, Receivables Securitization Facility for additional details regarding the securitization facility for which these entities were established.

The following VIEs were formed to participate in FCC auctions of wireless spectrum and to fund, establish, and provide wireless service with respect to any FCC licenses won in the auctions:

Advantage Spectrum, L.P. (Advantage Spectrum) and Sunshine Spectrum, Inc. (Sunshine Spectrum), the general partner of Advantage Spectrum (former general partner was Frequency Advantage, L.P. (Frequency Advantage));
Aquinas Wireless, L.P. (Aquinas Wireless); and
King Street Wireless, L.P. (King Street Wireless) and King Street Wireless, Inc., the general partner of King Street Wireless.

These particular VIEs are collectively referred to as designated entities. The power to direct the activities that most significantly impact the economic performance of these VIEs is shared. Specifically, the general partner of these VIEs has the exclusive right to manage, operate and control the limited partnerships and make all decisions to carry on the business of the partnerships. The general partner of each partnership needs the consent of the limited partner, an indirect U.S. Cellular subsidiary, to sell or lease certain licenses, to make certain large expenditures, admit other partners or liquidate the limited partnerships. Although the power to direct the activities of these VIEs is shared, U.S. Cellular has the most significant level of exposure to the variability associated with the economic performance of the VIEs, indicating that U.S. Cellular is the primary beneficiary of the VIEs. Therefore, in accordance with GAAP, these VIEs are consolidated.

In January 2017, Sunshine Spectrum and the other owner of Frequency Advantage (the previous general partner of Advantage Spectrum) completed a series of transactions whereby Frequency Advantage was dissolved and Sunshine Spectrum became the new general partner of Advantage Spectrum. Consistent with its previous treatment of Frequency Advantage and in accordance with GAAP, U.S. Cellular consolidates Sunshine Spectrum in its financial statements.

In March 2015, King Street Wireless made a $ 60 million distribution to its owners. Of this distribution, $ 6 million was provided to King Street Wireless, Inc. and $ 54 million was provided to U.S. Cellular.

FCC Auction 97 ended in January 2015. U.S. Cellular participated in Auction 97 indirectly through its interest in Advantage Spectrum. An indirect subsidiary of U.S. Cellular is a limited partner in Advantage Spectrum. Advantage Spectrum applied as a designated entity, and received bid credits with respect to spectrum purchased in Auction 97. Advantage Spectrum was the winning bidder for 124 licenses for an aggregate bid of $ 338 million, after its designated entity discount of 25% . This amount is classified as Licenses in U.S. Cellular’s Consolidated Balance Sheet at December 31, 2017 , and 2016 . Advantage Spectrum’s bid amount, less the initial deposit of $ 60 million paid in 2014, plus certain other charges totaling $ 2 million, was paid to the FCC in March 2015. These licenses were granted by the FCC in July 2016.

U.S. Cellular also consolidates other VIEs that are limited partnerships that provide wireless service. A limited partnership is a variable interest entity unless the limited partners hold substantive participating rights or kick-out rights over the general partner. For certain limited partnerships, U.S. Cellular is the general partner and manages the operations. In these partnerships, the limited partners do not have substantive kick-out or participating rights and, further, such limited partners do not have the authority to remove the general partner. Therefore, these limited partnerships are also recognized as VIEs and are consolidated under the variable interest model.

The following table presents the classification and balances of the consolidated VIEs’ assets and liabilities in U.S. Cellular’s Consolidated Balance Sheet.


December 31,			2017		2016
(Dollars in millions)
Assets
	Cash and cash equivalents		$	3	$	2
	Accounts receivable			476		44
	Other current assets			8		6
	Assets held for sale			–		2
	Licenses			655		652
	Property, plant and equipment, net			99		105
	Other assets and deferred charges			303		16
		Total assets	$	1,544	$	827

Liabilities
	Current liabilities		$	39	$	21
	Deferred liabilities and credits			13		13
		Total liabilities	$	52	$	34

Unconsolidated VIEs

U.S. Cellular manages the operations of and holds a variable interest in certain other limited partnerships, but is not the primary beneficiary of these entities and, therefore, does not consolidate them under the variable interest model.

U.S. Cellular’s total investment in these unconsolidated entities was $ 4 million and $ 6 million at December 31, 2017 and 2016 , respectively, and is included in Investments in unconsolidated entities in U.S. Cellular’s Consolidated Balance Sheet. The maximum exposure from unconsolidated VIEs is limited to the investment held by U.S. Cellular in those entities.

Other Related Matters

U.S. Cellular made contributions, loans and/or advances to its VIEs totaling $ 821 million, of which $ 790 million is related to USCC EIP LLC as discussed above, $ 98 million and $ 281 million during 2017 , 2016 and 2015 , respectively . U.S. Cellular may agree to make additional capital contributions and/or advances to these or other VIEs and/or to their general partners to provide additional funding for operations or the development of licenses granted in various auctions. U.S. Cellular may finance such amounts with a combination of cash on hand, borrowings under its revolving credit agreement and/or other long-term debt. There is no assurance that U.S. Cellular will be able to obtain additional financing on commercially reasonable terms or at all to provide such financial support.

The limited partnership agreements of Advantage Spectrum, Aquinas Wireless and King Street Wireless also provide the general partner with a put option whereby the general partner may require the limited partner, a subsidiary of U.S. Cellular, to purchase its interest in the limited partnership. The general partner’s put options related to its interests in King Street Wireless and Aquinas Wireless will become exercisable in 2019 and 2020, respectively. The general partner’s put options related to its interest in Advantage Spectrum will become exercisable in 2021 and 2022. The put option price is determined pursuant to a formula that takes into consideration fixed interest rates and the market value of U.S. Cellular’s Common Shares. Upon exercise of the put option, the general partner is required to repay borrowings due to U.S. Cellular. If the general partner does not elect to exercise its put option, the general partner may trigger an appraisal process in which the limited partner (a subsidiary of U.S. Cellular) may have the right, but not the obligation, to purchase the general partner’s interest in the limited partnership at a price and on other terms and conditions specified in the limited partnership agreement. In accordance with requirements under GAAP, U.S. Cellular is required to calculate a theoretical redemption value for all of the put options assuming they are exercisable at the end of each reporting period, even though such exercise is not contractually permitted. Pursuant to GAAP, this theoretical redemption value, net of amounts payable to U.S. Cellular for loans and accrued interest thereon made by U.S. Cellular to the general partners (net put value), was $ 1 million at December 31, 2017 and 2016 . The net put value is recorded as Noncontrolling interests with redemption features in U.S. Cellular’s Consolidated Balance Sheet. Also in accordance with GAAP, changes in the redemption value of the put options, net of interest accrued on the loans, are recorded as a component of Net income attributable to noncontrolling interests, net of tax, in U.S. Cellular’s Consolidated Statement of Operations.

During 2015, U.S. Cellular recorded out-of-period adjustments attributable to the third quarter of 2013 through the second quarter of 2015 related to an agreement with King Street Wireless. U.S. Cellular determined that these adjustments were not material to the quarterly periods or the annual results for 2015. These out-of-period adjustments had the impact of reducing Net income by $ 3 million and Net income attributable to U.S. Cellular shareholders by $ 4 million in 2015.

Note 14 Noncontrolling Interests

U.S. Cellular’s consolidated financial statements include certain noncontrolling interests that meet the GAAP definition of mandatorily redeemable financial instruments. These mandatorily redeemable noncontrolling interests represent interests held by third parties in consolidated partnerships, where the terms of the underlying partnership agreement provide for a defined termination date at which time the assets of the subsidiary are to be sold, the liabilities are to be extinguished and the remaining net proceeds are to be distributed to the noncontrolling interest holders and U.S. Cellular in accordance with the respective partnership agreements. The termination dates of these mandatorily redeemable noncontrolling interests range from 2085 to 2 092 .

The estimated aggregate amount that would be due and payable to settle all of these noncontrolling interests assuming an orderly liquidation of the finite-lived consolidated partnerships on December 31, 2017 , net of estimated liquidation costs, is $ 27 million. This amount excludes redemption amounts recorded in Noncontrolling interests with redemption features in the Consolidated Balance Sheet. The estimate of settlement value was based on certain factors and assumptions which are subjective in nature. Changes in those factors and assumptions could result in a materially larger or smaller settlement amount. U.S. Cellular currently has no plans or intentions relating to the liquidation of any of the related partnerships prior to their scheduled termination dates. The corresponding carrying value of the mandatorily redeemable noncontrolling interests in finite-lived consolidated partnerships at December 31, 2017 , was $ 11 million, and is included in Noncontrolling interests in the Consolidated Balance Sheet. The excess of the aggregate settlement value over the aggregate carrying value of these mandatorily redeemable noncontrolling interests is due primarily to the unrecognized appreciation of the noncontrolling interest holders’ share of the underlying net assets in the consolidated partnerships. Neither the noncontrolling interest holders’ share, nor U.S. Cellular’s share, of the appreciation of the underlying net assets of these subsidiaries is reflected in the consolidated financial statements.

Note 15 Common Shareholders’ Equity

Tax-Deferred Savings Plan

At December 31, 2017, U.S. Cellular has reserved 67,215 Common Shares for issuance under the TDS Tax-Deferred Savings Plan, a qualified profit ‑ sharing plan pursuant to Sections 401(a) and 401(k) of the Internal Revenue Code. Participating employees have the option of investing their contributions in a U.S. Cellular Common Share fund, a TDS Common Share fund or certain unaffiliated funds.

Series A Common Shares

Series A Common Shares are convertible on a share-for-share basis into Common Shares. In matters other than the election of directors, each Series A Common Share is entitled to ten votes per share, compared to one vote for each Common Share. The Series A Common Shares are entitled to elect 75% of the directors (rounded down), and the Common Shares elect 25% of the directors (rounded up). As of December 31, 2017 , a majority of U.S. Cellular’s outstanding Common Shares and all of U.S. Cellular’s outstanding Series A Common Shares were held by TDS.

Common Share Repurchase Program

In November 2009, the Board of Directors of U.S. Cellular authorized the repurchase of up to 1,300,000 Common Shares on an annual basis beginning in 2009 and continuing each year thereafter, on a cumulative basis. In December 2016, the U.S. Cellular Board amended this authorization to provide that, beginning on January 1, 2017, the authorized repurchase amount with respect to a particular year will be any amount from zero to 1,300,000, as determined by the Pricing Committee, and that if the Pricing Committee did not specify an amount for any year, such amount would be zero for such year. The Pricing Committee did not specify any amount as of January 1, 2018. The Pricing Committee also was authorized to decrease the cumulative amount of the authorization at any time, but has not taken any action to do so at this time. As a result, there was no change to the cumulative amount of the share repurchase authorization as of January 1, 2018. As of December 31, 2017 , the total cumulative amount of Common Shares authorized to be purchased is 5,900,849 . The authorization provides that share repurchases will be made pursuant to open market purchases, block purchases, private purchases, or otherwise, depending on market prices and other conditions. This authorization does not have an expiration date.

Pursuant to certain employee and non-employee benefit plans, U.S. Cellular reissued the following Treasury Shares:

Year Ended December 31,	2017	2016	2015
(Shares in millions)
Treasury Shares Reissued	–	1	–

Note 16 Stock-Based Compensation

U.S. Cellular has established the following stock ‑ based compensation plans: Long-Term Incentive Plans and a Non-Employee Director compensation plan.

Under the U.S. Cellular Long-Term Incentive Plans, U.S. Cellular may grant fixed and performance based incentive and non-qualified stock options, restricted stock, restricted stock units, and deferred compensation stock unit awards to key employees. At December 31, 2017 , the only types of awards outstanding are fixed non-qualified stock option awards, restricted stock unit awards, performance share awards and deferred compensation stock unit awards.

Under the Non-Employee Director compensation plan, U.S. Cellular may grant Common Shares to members of the Board of Directors who are not employees of U.S. Cellular or TDS.

At December 31, 2017 , U.S. Cellular had reserved 14,449,000 Common Shares for equity awards granted and to be granted under the Long-Term Incentive Plans and 154,000 Common Shares for issuance under the Non-Employee Director compensation plan.

U.S. Cellular uses treasury stock to satisfy requirements for Common Shares issued pursuant to its various stock-based compensation plans.

Long-Term Incentive Plans – Stock Options

Stock options granted to key employees are exercisable over a specified period not in excess of ten years. Stock options generally vest over a period of three years from the date of grant. Stock options outstanding at December 31, 2017 , expire between 2018 and 2026. However, vested stock options typically expire 30 days after the effective date of an employee’s termination of employment for reasons other than retirement. Employees who leave at the age of retirement have 90 days (or one year if they satisfy certain requirements) within which to exercise their vested stock options. The exercise price of options equals the market value of U.S. Cellular Common Shares on the date of grant.

U.S. Cellular did not grant stock option awards in 2017. U.S. Cellular estimated the fair value of stock options granted during 2016 and 2015 using the Black-Scholes valuation model and the assumptions shown in the table below.

	2016	2015
Expected life	4.7 years	4.6 years
Expected annual volatility rate	30.5%	30.1%
Dividend yield	0%	0%
Risk-free interest rate	1.2%	1.2%
Estimated annual forfeiture rate	9.4%	9.7%

Pre-vesting forfeitures and expected life are estimated based on historical experience related to similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. U.S. Cellular believes that its historical experience provides the best estimates of future pre-vesting forfeitures and future expected life. The expected volatility assumption is based on the historical volatility of U.S. Cellular’s common stock over a period commensurate with the expected life. The dividend yield assumption is zero because U.S. Cellular has never paid a dividend, except a special cash dividend in June 2013, and has expressed its intention to retain all future earnings in the business. The risk-free interest rate assumption is determined using the U.S. Treasury Yield Curve Rate with a term length that approximates the expected life of the stock options.

The fair value of options is recognized as compensation cost using an accelerated attribution method over the requisite service periods of the awards, which is generally the vesting period.

A summary of U.S. Cellular stock options outstanding (total and portion exercisable) and changes during 2017 is presented in the table below:

Common Share Options		Number of Options	Weighted Average Exercise Price		Aggregate Intrinsic Value (in millions)		Weighted Average Remaining Contractual Life (in years)
Outstanding at December 31, 2016		3,973,000	$	41.92
(1,937,000 exercisable)			$	42.54
	Exercised	(162,000)		36.21
	Forfeited	(74,000)		41.62
	Expired	(242,000)		57.67
Outstanding at December 31, 2017		3,495,000	$	41.10	$	3	6.0
(2,475,000 exercisable)			$	40.79	$	2	5.4

The weighted average grant date fair value per share of the U.S. Cellular stock options granted in 2016 and 2015 was $ 12.77 and $ 9.94 , respectively. The aggregate intrinsic value of U.S. Cellular stock options exercised in 2017 , 2016 and 2015 was $ 1 million, $ 4 million and $ 2 million, respectively. The aggregate intrinsic value at December 31, 2017 , presented in the table above represents the total pre-tax intrinsic value (the difference between U.S. Cellular’s closing stock price and the exercise price multiplied by the number of in-the-money options) that would have been received by option holders had all options been exercised on December 31, 2017 .

Long-Term Incentive Plans – Restricted Stock Units

Restricted stock unit awards granted to key employees generally vest after three years. U.S. Cellular estimates the fair value of restricted stock units based on the closing market price of U.S. Cellular shares on the date of grant. The fair value is then recognized as compensation cost on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

A summary of U.S. Cellular nonvested restricted stock units at December 31, 2017 , and changes during the year then ended is presented in the table below:

Common Restricted Stock Units	Number	Weighted Average
		Grant Date
		Fair Value
Nonvested at December 31, 2016	1,310,000	$	40.74
Granted	557,000		38.04
Vested	(294,000)		41.24
Forfeited	(90,000)		40.07
Nonvested at December 31, 2017	1,483,000	$	39.67

The total fair value of restricted stock units that vested during 2017 , 2016 and 2015 was $ 11 million, $ 15 million and $ 13 million, respectively. The weighted average grant date fair value per share of the restricted stock units granted in 2017 , 2016 and 2015 was $ 38.04 , $ 43.32 and $ 37.24 , respectively.

Long-Term Incentive Plans – Performance Share Awards (Performance Shares)

Beginning in 2017, U.S. Cellular granted performance shares, specifically performance stock units, to key employees. The performance shares vest after three years. Each recipient may be entitled to shares of U.S. Cellular common stock equal to 50% to 200% of a communicated target award depending on the achievement of predetermined performance-based operating targets over the performance period, which is a one year period beginning on January 1 in the year of grant to December 31 in the year of grant. The remaining time through the end of the vesting period is considered the “time-based period”. Performance-based operating targets include Simple Free Cash Flow, Consolidated Total Revenue and Postpaid Handset Voluntary Defections. Subject to vesting during the time-based period, the performance share award agreement provides that in no event shall the award be less than 50% of the target opportunity as of the grant date.

U.S. Cellular estimates the fair value of performance shares using U.S. Cellular’s closing stock price on the date of grant. An estimate of the number of performance shares expected to vest based upon achieving the performance-based operating targets is made and the aggregate fair value is expensed on a straight-line basis over the requisite service period. Each reporting period, during the performance period, the estimate of the number of performance shares expected to vest is reviewed and stock compensation expense is adjusted as appropriate to reflect the revised estimate of the aggregate fair value of the performance shares expected to vest.

A summary of U.S. Cellular’s nonvested performance shares and changes during 2017 is presented in the table below:

Common Performance Shares	Number	Weighted Average
		Grant Date
		Fair Value
Nonvested at December 31, 2016	–	$	–
Granted	352,000	$	36.92
Forfeited	(10,000)	$	36.92
Nonvested at December 31, 2017	342,000	$	36.92

Long-Term Incentive Plans – Deferred Compensation Stock Units

Certain U.S. Cellular employees may elect to defer receipt of all or a portion of their annual bonuses and to receive a company matching contribution on the amount deferred. All bonus compensation that is deferred by employees electing to participate is immediately vested and is deemed to be invested in U.S. Cellular Common Share stock units. The amount of U.S. Cellular’s matching contribution depends on the portion of the annual bonus that is deferred. Participants receive a 25% match for amounts deferred up to 50% of their total annual bonus and a 33% match for amounts that exceed 50% of their total annual bonus; such matching contributions also are deemed to be invested in U.S. Cellular Common Share stock units and vest over three years.

The total fair value of deferred compensation stock units that vested during 2017 , 2016 and 2015 was less than $ 1 million. The weighted average grant date fair value per share of the deferred compensation stock units granted in 2017 , 2016 and 2015 was $ 36.02 , $ 41.31 and $ 35.96 , respectively. As of December 31, 2017 , there were 21,000 vested but unissued deferred compensation stock units valued at $1 million.

Compensation of Non-Employee Directors

U.S. Cellular issued 15,000 , 13,000 and 15,000 Common Shares in 2017 , 2016 and 2015 , respectively, under its Non-Employee Director compensation plan.

Stock ‑ Based Compensation Expense

The following table summarizes stock ‑ based compensation expense recognized during 2017 , 2016 and 2015 :

Year Ended December 31,	2017		2016		2015
(Dollars in millions)
Stock option awards	$	6	$	11	$	11
Restricted stock unit awards		19		14		13
Performance share awards		4		–		–
Awards under Non-Employee Director compensation plan		1		1		1
Total stock-based compensation expense, before income taxes		30		26		25
Income tax benefit		(11)		(10)		(10)
Total stock-based compensation expense, net of income taxes	$	19	$	16	$	15

The following table provides a summary of the classification of stock-based compensation expense included in the Consolidated Statement of Operations for the years ended:

December 31,	2017		2016		2015
(Dollars in millions)
Selling, general and administrative expense	$	27	$	23	$	22
System operations expense		3		3		3
Total stock-based compensation expense	$	30	$	26	$	25

At December 31, 2017 , unrecognized compensation cost for all U.S. Cellular stock ‑ based compensation awards was $ 32 million and is expected to be recognized over a weighted average period of 1.7 years.

U.S. Cellular’s tax benefits realized from the exercise of stock options and other awards totaled $ 5 million in 2017 .

Note 17 Supplemental Cash Flow Disclosures

Following are supplemental cash flow disclosures regarding interest paid and income taxes paid.

Year Ended December 31,	2017		2016		2015
(Dollars in millions)
Interest paid	$	111	$	113	$	81
Income taxes paid, net of refunds received		55		(11)		59

Following are supplemental cash flow disclosures regarding transactions related to stock-based compensation awards. In certain situations, U.S. Cellular withholds shares that are issuable upon the exercise of stock options or the vesting of restricted shares to cover, and with a value equivalent to, the exercise price and/or the amount of taxes required to be withheld from the stock award holder at the time of the exercise or vesting. U.S. Cellular then pays the amount of the required tax withholdings to the taxing authorities in cash.

Year Ended December 31,	2017		2016		2015
(Dollars in millions)
Common Shares withheld		144,755		308,010		228,011

Aggregate value of Common Shares withheld	$	6	$	13	$	8

Cash receipts upon exercise of stock options		5		12		7
Cash disbursements for payment of taxes		(4)		(6)		(5)
Net cash receipts from exercise of stock
options and vesting of other stock awards	$	1	$	6	$	2

Note 18 Certain Relationships and Related Transactions

The following persons are partners of Sidley Austin LLP, the principal law firm of U.S. Cellular and its subsidiaries: Walter C.D. Carlson, a director of U.S. Cellular, a director and non-executive Chairman of the Board of Directors of TDS and a trustee and beneficiary of a voting trust that controls TDS; William S. DeCarlo, the General Counsel of TDS and an Assistant Secretary of TDS and certain subsidiaries of TDS; and Stephen P. Fitzell, the General Counsel of U.S. Cellular and TDS Telecommunications LLC and an Assistant Secretary of U.S. Cellular and certain other subsidiaries of TDS. Walter C.D. Carlson does not provide legal services to TDS, U.S. Cellular or their subsidiaries. U.S. Cellular and its subsidiaries incurred legal costs from Sidley Austin LLP of $ 7 million, $ 6 million and $ 9 million in 2017 , 2016 and 2015 , respectively .

U.S. Cellular is billed for all services it receives from TDS, pursuant to the terms of various agreements between it and TDS. These billings are included in U.S. Cellular's Selling, general and administrative expenses. Some of these agreements were established at a time prior to U.S. Cellular's initial public offering when TDS owned more than 90% of U.S. Cellular's outstanding capital stock and may not reflect terms that would be obtainable from an unrelated third party through arms-length negotiations. Billings from TDS and certain of its subsidiaries to U.S. Cellular are based on expenses specifically identified to U.S. Cellular and on allocations of common expenses. Such allocations are based on the relationship of U.S. Cellular's assets, employees, investment in property, plant and equipment and expenses relative to all subsidiaries in the TDS consolidated group. Management believes the method TDS uses to allocate common expenses is reasonable and that all expenses and costs applicable to U.S. Cellular are reflected in its financial statements. Billings to U.S. Cellular from TDS totaled $ 85 million, $ 94 million and $ 96 million in 2017 , 2016 and 2015 , respectively .

In December 2014, U.S. Cellular entered into an agreement to sell 595 towers outside of its core markets to a third party for $ 159 million. The sale of certain of the towers was completed in December 2014, and the sale of the remaining towers was completed in January 2015. See Note 6 – Acquisitions, Divestitures and Exchanges in the Notes to Consolidated Financial Statements. Of the 595 towers, six towers were acquired by U.S. Cellular from Airadigm for a total of $ 3 million. These six towers were included as part of the sale of towers by U.S. Cellular in order to avoid the need for two sets of transaction documents. The value of $ 3 million paid by U.S. Cellular to Airadigm for such six towers was determined using the same method of valuation that was used to value the towers owned by U.S. Cellular that were sold to the third party. The Audit Committee of the board of directors reviewed and evaluated this transaction between U.S. Cellular and Airadigm.

The Audit Committee of the Board of Directors of U.S. Cellular is responsible for the review and evaluation of all related-party transactions as such term is defined by the rules of the New York Stock Exchange.

R e ports of Management

Management’s Responsibility for Financial Statements

Management of United States Cellular Corporation has the responsibility for preparing the accompanying consolidated financial statements and for their integrity and objectivity. The statements were prepared in accordance with accounting principles generally accepted in the United States of America and, in management’s opinion, were fairly presented. The financial statements included amounts that were based on management’s best estimates and judgments. Management also prepared the other information in the annual report and is responsible for its accuracy and consistency with the financial statements.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited these consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and has expressed herein its unqualified opinion on these financial statements.

/s/ Kenneth R. Meyers		/s/ Steven T. Campbell
Kenneth R. Meyers		Steven T. Campbell
President and Chief Executive Officer		Executive Vice President—Finance, Chief Financial Officer
(principal executive officer)		and Treasurer
		(principal financial officer)

/s/ Douglas D. Shuma		/s/ Douglas W. Chambers
Douglas D. Shuma		Douglas W. Chambers
Chief Accounting Officer		Vice President and Controller
(principal accounting officer)

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. U.S. Cellular’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (GAAP). U.S. Cellular’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and, where required, the Board of Directors of the issuer; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the issuer’s assets that could have a material effect on the interim or annual consolidated financial statements.

Under the supervision and with the participation of U.S. Cellular’s management, including its principal executive o fficer and principal financial o fficer, U.S. Cellular conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2017 , based on the criteria established in the 2013 version of Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management has concluded that U.S. Cellular maintained effective internal control over financial reporting as of December 31, 2017 , based on criteria established in the 2013 version of Internal Control — Integrated Framework issued by the COSO.

The effectiveness of U.S. Cellular’s internal control over financial reporting as of December 31, 2017 , has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in the firm’s report included herein.

/s/ Kenneth R. Meyers		/s/ Steven T. Campbell
Kenneth R. Meyers		Steven T. Campbell
President and Chief Executive Officer		Executive Vice President—Finance, Chief Financial Officer
(principal executive officer)		and Treasurer
		(principal financial officer)

/s/ Douglas D. Shuma		/s/ Douglas W. Chambers
Douglas D. Shuma		Douglas W. Chambers
Chief Accounting Officer		Vice President and Controller
(principal accounting officer)

Re port of Independent Registered Public Accounting Firm

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

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of United States Cellular Corporation and its subsidiaries (“the Company”) as of December 31, 201 7 and 2016, and the related consolidated statement of operations, changes in equity, and cash flows for each of the three years in the period ended December 31, 201 7, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 201 7, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 20 17 , based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO .

We did not audit the financial statements of Los Angeles SMSA Limited Partnership, a 5.5% equity investment of the Company, which is reflected in the consolidated financial statements of the Company as an equity method investment of $244,400,000 and $240,1 00,000 as of December 31, 201 7 and 201 6 , respectively, and income from equ ity investments of $66,200,000, $71 , 4 00,000 and $7 4 , 0 00,000 for each of the three years in th e period ended December 31, 2017 . The financial statements of Los Angeles SMSA Limited Partnership were audited by other auditors whose report thereon has been furnished to us, and our opinion on the financial statements expressed herein, insofar as it relates to the amounts included for Los Angeles SMSA Limited Partnership, is based solely on the report of the other auditors.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements , for maintaining effective internal control over financial reporting , and for its assessment of the effectiveness of internal control over financial reporting, included in Management ’s Report on Internal Control over Financial Reporting appearing under Item 9A . Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits . We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB . Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement , whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements . Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement s . Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits and the repor t of other auditors provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 26, 2018

We have served as the Company’s auditor since 2002.

Uni ted States Cellular Corporation

Selected Consolidated Financial Data

Year Ended or at December 31,		2017		2016		2015		2014		2013
(Dollars and shares in millions, except per share amounts)
Statement of Operations data
Service revenues		$	2,978	$	3,081	$	3,384	$	3,407	$	3,595
Equipment sales			912		909		647		495		324
Operating revenues			3,890		3,990		4,031		3,902		3,919
Loss on impairment of goodwill			370		–		–		–		–
(Gain) loss on sale of business and other
exit costs, net			(1)		–		(114)		(33)		(247)
(Gain) loss on license sales and exchanges, net			(22)		(19)		(147)		(113)		(255)
Operating income (loss)			(304)		48		347		(134)		147
Equity in earnings of unconsolidated
entities			137		140		140		130		132
Gain on investments			–		–		–		–		19
Income (loss) before income taxes			(272)		82		404		(59)		258
Income tax expense (benefit)			(287)		33		157		(12)		113
Net income (loss)			15		49		247		(47)		145
Net income (loss) attributable to
noncontrolling interests, net of tax			3		1		6		(4)		4
Net income (loss) attributable to
U.S. Cellular shareholders		$	12	$	48	$	241	$	(43)	$	140
Basic weighted average shares outstanding			85		85		84		84		84
Basic earnings (loss) per share attributable
to U.S. Cellular shareholders		$	0.14	$	0.56	$	2.86	$	(0.51)	$	1.67
Diluted weighted average shares
outstanding 1			86		85		85		84		85
Diluted earnings (loss) per share attributable
to U.S. Cellular shareholders 1		$	0.14	$	0.56	$	2.84	$	(0.51)	$	1.65
Special dividend per share to U.S. Cellular
shareholders 1		$	–	$	–	$	–	$	–	$	5.75

Balance Sheet data
Total assets		$	6,841	$	7,110	$	7,060	$	6,462	$	6,430
Net long-term debt, excluding current portion			1,622		1,618		1,629		1,127		863
Total U.S. Cellular shareholders' equity		$	3,677	$	3,634	$	3,561	$	3,302	$	3,391

1	On June 25, 2013, U.S. Cellular paid a special cash dividend of $5.75 per share, for an aggregate amount of $482 million, to all holders of U.S. Cellular Common Shares and Series A Common Shares as of June 11, 2013. Outstanding U.S. Cellular stock options and restricted stock unit awards were equitably adjusted for the special cash dividend.

Un ited States Cellular Corporation

Consolidated Quarterly Information (Unaudited)

		Quarter Ended
2017		March 31		June 30		September 30		December 31
(Dollars in millions, except per share amounts)
Operating revenues		$	936	$	963	$	963	$	1,029
Loss on impairment of goodwill 1			–		–		370		–
(Gain) loss on asset disposals, net			4		5		5		4
(Gain) loss on sale of business and other exit costs, net 2			–		–		(1)		–
(Gain) loss on license sales and exchanges, net 2			(17)		(2)		–		(3)
Operating income (loss)			54		5		(360)		(4)
Income tax expense (benefit) 3			33		–		(53)		(267)
Net income (loss)			28		12		(298)		273
Net income (loss) attributable to U.S. Cellular shareholders		$	26	$	12	$	(299)	$	273
Basic weighted average shares outstanding			85		85		85		85
Diluted weighted average shares outstanding			86		86		85		86
Basic earnings (loss) per share attributable
to U.S. Cellular shareholders		$	0.31	$	0.14	$	(3.51)	$	3.21
Diluted earnings (loss) per share attributable
to U.S. Cellular shareholders		$	0.31	$	0.14	$	(3.51)	$	3.18
Stock price
U.S. Cellular Common Shares 4
	High	$	46.01	$	40.87	$	40.84	$	38.57
	Low		35.53		36.03		34.30		32.29
	Close	$	37.33	$	38.32	$	35.40	$	37.63

		Quarter Ended
2016		March 31		June 30		September 30		December 31
(Dollars in millions, except per share amounts)
Operating revenues		$	969	$	992	$	1,023	$	1,006
(Gain) loss on asset disposals, net			5		5		7		6
(Gain) loss on license sales and exchanges, net 2			–		(9)		(7)		(3)
Operating income (loss)			10		30		22		(14)
Net income (loss)			9		27		18		(5)
Net income (loss) attributable to U.S. Cellular shareholders		$	9	$	27	$	17	$	(6)
Basic weighted average shares outstanding			84		85		85		85
Diluted weighted average shares outstanding			85		85		85		85
Basic earnings (loss) per share attributable
to U.S. Cellular shareholders		$	0.10	$	0.32	$	0.20	$	(0.07)
Diluted earnings (loss) per share attributable
to U.S. Cellular shareholders		$	0.10	$	0.32	$	0.20	$	(0.07)
Stock price
U.S. Cellular Common Shares 4
	High	$	45.80	$	45.87	$	41.73	$	44.82
	Low		32.72		35.66		35.86		33.30
	Close	$	45.69	$	39.27	$	36.34	$	43.72

Due to rounding, the sum of quarterly results may not equal the total for the year.

1	See Note 7 — Intangible Assets for additional information on Loss on impairment of goodwill.
2	See Note 6 — Acquisitions, Divestitures and Exchanges for additional information on (Gain) loss on sale of business and other exit costs, net and (Gain) loss on license sales and exchanges, net.
3	In December 2017, the Tax Act was enacted. The Tax Act reduced the federal income tax rate from 35% to 21%. See Note 4 — Income Taxes for additional information.
4	The high, low and closing sales prices as reported by the New York Stock Exchange (NYSE).

United St ates Cellular Corporation

Shareholder Information

Stock and Dividend Information

U.S. Cellular's Common Shares are listed on the New York Stock Exchange under the symbol “USM” and in the newspapers as “US Cellu.” As of January 31, 2018 , the last trading day of the month, U.S. Cellular's Common Shares were held by approximately 2 47 record owners. All of the Series A Common Shares were held by TDS. No public trading market exists for the Series A Common Shares. The Series A Common Shares are convertible on a share-for-share basis into Common Shares.

U.S. Cellular has not paid any cash dividends , except for a special cash dividend of $5.75 per share in June 2013, and currently intends to retain all earnings for use in U.S. Cellular’s business.

See “Consolidated Quarterly Information (Unaudited)” for information on the high and low trading prices of the USM Common Shares for 2017 and 2016 .

Stock Performance Graph

The following chart provides a comparison of U.S. Cellular’s cumulative total return to shareholders (stock price appreciation plus dividends) during the previous five years to the returns of the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones U.S. Telecommunications Index. As of December 31, 2017 , the Dow Jones U.S. Telecommunications Index was composed of the following companies: AT&T Inc., CenturyLink Inc., Frontier Communications Corp., SBA Communications Corp., Sprint Corp., T-Mobile US Inc., Telephone and Data Systems, Inc. (TDS) and Verizon Communications Inc.

Note: Cumulative total return assumes reinvestment of dividends.

	2012		2013		2014		2015		2016		2017
U.S. Cellular (NYSE: USM)	$	100	$	139.05	$	132.44	$	135.69	$	145.37	$	125.12
S&P 500 Index		100		132.39		150.51		152.59		170.84		208.14
Dow Jones U.S. Telecommunications Index		100		114.13		116.85		120.96		149.94		149.53

Assumes $100.00 invested at the close of trading on the last trading day preceding the first day of 2012 , in U.S. Cellular Common Shares, S&P 500 Index and the Dow Jones U.S. Telecommunications Index.

Investor relations

U.S. Cellular’s annual report, SEC filings and news releases are available to investors, securities analysts and other members of the investment community. These reports are provided, without charge, upon request to our Corporate Office. Investors may also access these and other reports through the Investor Relations portion of the U.S. Cellular website ( www.uscellular.com ).

Questions regarding lost, stolen or destroyed certificates, consolidation of accounts, transferring of shares and name or address changes should be directed to:

Julie Mathews, IRC, Director — Investor Relations
Telephone and Data Systems, Inc.
30 North LaSalle Street, Suite 4000
Chicago, IL 60602
312.592.5341
312.630.9299 (fax)
julie.mathews@tdsinc.com

General inquiries by investors, securities analysts and other members of the investment community should be directed to:

Jane W. McCahon, Senior Vice President — Corporate Relations and Corporate Secretary
Telephone and Data Systems, Inc.
30 North LaSalle Street, Suite 4000
Chicago, IL 60602
312.592.5379
312.630.9299 (fax)
jane.mccahon@tdsinc.com

Directors and executive officers

See “Election of Directors” and “Executive Officers” sections of the Proxy Statement issued in 2018 for the 2018 Annual Meeting.

Principal counsel
Sidley Austin LLP, Chicago, Illinois

Transfer agent
Computershare Trust Company, N.A.
462 South 4 th Street, Suite 1600

Louisville, KY 40202
312.360.5326

Independent registered public accounting firm
PricewaterhouseCoopers LLP

Visit U.S. Cellular's website at www.uscellular.com

Exhibit 21

UNITED STATES CELLULAR CORPORATION

SUBSIDIARY COMPANIES

December 31, 2017

SUBSIDIARY COMPANIES		STATE OF ORGANIZATION

BANGOR CELLULAR TELEPHONE, L.P.		DELAWARE
BARAT WIRELESS, INC.		DELAWARE
BARAT WIRELESS, L.P.		DELAWARE
CALIFORNIA RURAL SERVICE AREA #1, INC.		CALIFORNIA
CARROLL PCS, INC.		DELAWARE
CARROLL WIRELESS, L.P.		DELAWARE
CEDAR RAPIDS CELLULAR TELEPHONE, L.P.		DELAWARE
CELLVEST, INC.		DELAWARE
CENTRAL CELLULAR TELEPHONES, LTD.		ILLINOIS
CHAMPLAIN CELLULAR, INC.		NEW YORK
COMMUNITY CELLULAR TELEPHONE COMPANY		TEXAS
CROWN POINT CELLULAR, INC.		NEW YORK
DUBUQUE CELLULAR TELEPHONE, L.P.		DELAWARE
EASTERN NORTH CAROLINA CELLULAR JOINT VENTURE		DELAWARE
HARDY CELLULAR TELEPHONE COMPANY		DELAWARE
INDIANA RSA # 5, INC.		INDIANA
INDIANA RSA NO. 4 LIMITED PARTNERSHIP		INDIANA
INDIANA RSA NO. 5 LIMITED PARTNERSHIP		INDIANA
IOWA RSA # 3, INC.		DELAWARE
IOWA RSA # 9, INC.		DELAWARE
IOWA RSA # 12, INC.		DELAWARE
JACKSONVILLE CELLULAR PARTNERSHIP		NORTH CAROLINA
JACKSONVILLE CELLULAR TELEPHONE COMPANY		NORTH CAROLINA
KANSAS #15 LIMITED PARTNERSHIP		DELAWARE
KENOSHA CELLULAR TELEPHONE, L.P.		DELAWARE
LAB465, LLC		ILLINOIS
MADISON CELLULAR TELEPHONE COMPANY		WISCONSIN
MAINE RSA # 1, INC.		MAINE
MAINE RSA # 4, INC.		MAINE
MCDANIEL CELLULAR TELEPHONE COMPANY		DELAWARE
MINNESOTA INVCO OF RSA # 7, INC.		DELAWARE
NEWPORT CELLULAR, INC.		NEW YORK
NH #1 RURAL CELLULAR, INC.		NEW HAMPSHIRE
OREGON RSA #2, INC.		OREGON
PCS WISCONSIN, LLC		WISCONSIN
RACINE CELLULAR TELEPHONE COMPANY		WISCONSIN
TENNESSEE NO. 3, LIMITED PARTNERSHIP		TENNESSEE
TEXAHOMA CELLULAR LIMITED PARTNERSHIP		TEXAS
TEXAS INVCO OF RSA # 6, INC.		DELAWARE
TOWNSHIP CELLULAR TELEPHONE, INC.		DELAWARE
UNITED STATES CELLULAR INVESTMENT CO. OF OKLAHOMA CITY, INC.		OKLAHOMA
UNITED STATES CELLULAR INVESTMENT COMPANY, LLC		DELAWARE
UNITED STATES CELLULAR INVESTMENT CORPORATION OF LOS ANGELES		INDIANA
UNITED STATES CELLULAR OPERATING COMPANY LLC		DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY OF BANGOR		MAINE
UNITED STATES CELLULAR OPERATING COMPANY OF CEDAR RAPIDS		DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY OF CHICAGO, LLC		DELAWARE
UNITED STATES CELLULAR OPERATING COMPANY OF DUBUQUE		IOWA

UNITED STATES CELLULAR OPERATING COMPANY OF KNOXVILLE		TENNESSEE
UNITED STATES CELLULAR OPERATING COMPANY OF MEDFORD		OREGON
UNITED STATES CELLULAR OPERATING COMPANY OF YAKIMA		WASHINGTON
UNITED STATES CELLULAR TELEPHONE COMPANY (GREATER KNOXVILLE), L.P.		TENNESSEE
USCC DISTRIBUTION CO., LLC		DELAWARE
USCC EIP LLC		DELAWARE
USCC FINANCIAL L.L.C.		ILLINOIS
USCC FIRST RESPONDER, INC		DELAWARE
USCC MASTER NOTE TRUST		DELAWARE
USCC PURCHASE, LLC		DELAWARE
USCC RECEIVABLES FUNDING LLC		DELAWARE
USCC SERVICES, LLC		DELAWARE
USCC WIRELESS INVESTMENT, INC.		DELAWARE
USCCI CORPORATION		DELAWARE
USCIC OF FRESNO		CALIFORNIA
USCOC NEBRASKA/KANSAS, INC.		DELAWARE
USCOC NEBRASKA/KANSAS, LLC		DELAWARE
USCOC OF CENTRAL ILLINOIS, LLC		ILLINOIS
USCOC OF CHICAGO REAL ESTATE HOLDINGS, LLC		DELAWARE
USCOC OF CUMBERLAND, LLC		DELAWARE
USCOC OF GREATER IOWA, LLC		DELAWARE
USCOC OF GREATER MISSOURI, LLC		DELAWARE
USCOC OF GREATER NORTH CAROLINA, LLC		DELAWARE
USCOC OF GREATER OKLAHOMA, LLC		OKLAHOMA
USCOC OF JACK/WIL, INC.		DELAWARE
USCOC OF JACKSONVILLE, LLC		DELAWARE
USCOC OF LACROSSE, LLC		WISCONSIN
USCOC OF OREGON RSA # 5, INC.		DELAWARE
USCOC OF PENNSYLVANIA RSA NO. 10-B2, INC.		DELAWARE
USCOC OF RICHLAND, INC.		WASHINGTON
USCOC OF ROCHESTER, INC.		DELAWARE
USCOC OF SOUTH CAROLINA RSA # 4, INC.		SOUTH CAROLINA
USCOC OF TEXAHOMA, INC.		TEXAS
USCOC OF VIRGINIA RSA # 3, INC.		VIRGINIA
USCOC OF WASHINGTON-4, INC.		DELAWARE
USCOC OF WILMINGTON, LLC		DELAWARE
VERMONT RSA NO. 2-B2, INC.		DELAWARE
WASHINGTON RSA # 5, INC.		WASHINGTON
WESTELCOM CELLULAR, INC.		NEW YORK
WESTERN SUB-RSA LIMITED PARTNERSHIP		DELAWARE
WILMINGTON CELLULAR PARTNERSHIP		NORTH CAROLINA
WILMINGTON CELLULAR TELEPHONE COMPANY		NORTH CAROLINA
YAKIMA MSA LIMITED PARTNERSHIP		DELAWARE

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No.333-209673), Form S-4 (No.33-41826) and Form S-8 (Nos.333-42366, 333-105675, 333-161119, 333-188966, 333-190331 and 333-211485) of United States Cellular Corporation of our report dated February 2 6 , 2018, relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in the An nual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 26, 2018

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements of United States Cellular Corporation:

	(1)	Registration Statement (Form S-3 No. 333-209673)
	(2)	Registration Statement (Form S-4 No. 33-41826)
	(3)	Registration Statement (Form S-8 No. 333-42366)
	(4)	Registration Statement (Form S-8 No. 333-105675)
	(5)	Registration Statement (Form S-8 No. 333-161119)
	(6)	Registration Statement (Form S-8 No. 333-188966)
	(7)	Registration Statement (Form S-8 No. 333-190331); and
	(8)	Registration Statement (Form S-8 No. 333-211485);

of our report dated February 26 , 2018, with respect to the consolidated financial statements of Los Angeles SMSA Limited Partnership and Subsidiary included in this Annual Report (Form 10-K) of United States Cellular Corporation for the year ended December 31, 201 7 .

/s/ Ernst & Young LLP

Certified Public Accountants

Orlando, Florida

February 26, 2018

Exhibit 31. 1

Certification of principal e xecutive o fficer

I, Kenneth R. Meyers , certify that:

I have reviewed this annual report on Form 10-K of United States Cellular Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the fi nancial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The r egistrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchan ge Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to th e registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such inter nal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accep ted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covere d by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in th e case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most rec ent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that i nvolves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2018

/s/ Kenneth R. Meyers

Kenneth R. Meyers

President and Chief Executive Officer

(principal executive officer)

Exhibit 31.2

Certification of principal f inancial o fficer

I, Steven T. Campbell, certify that:

I have reviewed this annual report on Form 10-K of United States Cellular Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledg e, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this repo rt;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relat ing to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused s uch internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with genera lly accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the peri od covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quar ter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal contr ol over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material w eaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not materia l, that involves management or other employees who have a significant role in the registrant’s internal c ontrol over financial reporting.

Date: February 26, 2018

/s/ Steven T. Campbell

Steven T. Campbell

Executive Vice President-Finance,

Chief Financial Officer and Treasurer

(principal financial officer)

Exhibit 32.1

Certification Pursuant to Section 1350 of Chapter 63

of Title 18 of the United States Code

I, Kenneth R. Meyers, the principal executive officer of United States Cellular Corporation, certify that (i) the annual report on Form 10-K for the year ended December 31, 2017 , fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Uni ted States Cellular Corporation.

	/s/ Kenneth R. Meyers
	Kenneth R. Meyers
	February 26, 2018

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to United States Cellular Corporation and will be retained by United States Cellular Corporation and furnished to the Securiti es and Exchange Commission or its staff upon request.

Exhibit 32.2

Certification Pursuant to Section 1350 of Chapter 63

of Title 18 of the United States Code

I, Steven T. Campbell, the principal financial officer of United States Cellular Corporation, certify that (i ) the annual report on Form 10-K for the year ended December 31, 2017 , fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of United States Cellular Corporation.

	/s/ Steven T. Campbell
	Steven T. Campbell
	February 26, 2018

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to United States Cellular Corporation and will be retained by United States Cellular Corporation and furnished to the Securities and Exc hange Commission or its staff upon request.