Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements In 1999, Vodafone merged with AirTouch Communications, Inc. The Company received 12,945,915 Vodafone AirTouch plc ADRs for its AirTouch Communications, Inc. shares, and $46.6 million of cash, and recognized a $327.1 million gain. Following is a schedule of activity of cellular license costs. Accumulated amortization of cellular license costs was $259.9 million and $221.5 million at December 31, 2001 and 2000, respectively. Beginning January 1, 2002, upon implementation of SFAS No. 142, the Company expects to cease the amortization of license costs. Following is a schedule of activity of telephone franchise and other costs in excess of the underlying book value. Accumulated amortization of excess cost was $57.6 million and $51.4 million at December 31, 2001 and 2000, respectively. Beginning January 1, 2002, upon implementation of SFAS No. 142, the Company will cease the amortization of excess cost. TDS reduced the carrying value of its investment (including $11.0 million of notes receivable) in TSR Wireless Holdings, LLC by $80.4 million to zero in 2000. The charge was included in the caption Gain (loss) on marketable securities and other investments in the Consolidated Statements of Operations. In December 2000, TSR Wireless filed for Chapter 7 bankruptcy. The Company’s more significant investments in unconsolidated entities consist of the following. Investments in unconsolidated entities include goodwill and costs in excess of the underlying book value of certain investments. These costs were amortized from 10 to 40 years. The aggregate carrying value, net of accumulated amortization, of investments in unconsolidated entities was $233.7 million at December 31, 2001, of which $156.9 million represented the investment in underlying equity and $76.8 million in unamortized goodwill. Beginning January 1, 2002, upon implementation of SFAS No. 142, the Company will cease the amortization of equity method goodwill.  Following is a schedule of activity of investments in unconsolidated entities. 7 Intangible Assets 8 Investments in Unconsolidated Entities Cellular license costs Telephone franchise and other costs in excess  of the underlying book value of subsidiaries December 31, 2001 2000 1999 (Dollars in thousands) Balance, beginning of year $ 1,261,404 $ 1,188,066 $ 1,233,406 Additions 165,678 111,487 22,567 Amortization (37,564) (34,371) (34,333) Sales — (9,234) (41,274) Deposit receivable from FCC (56,060) — — Other changes 1,065 5,456 7,700 Balance, end of year $ 1,334,523 $ 1,261,404 $ 1,188,066 December 31, 2001 2000 1999 (Dollars in thousands) Balance, beginning of year $ 203,532 $ 177,677 $ 181,517 Additions 151,401 31,656 1,500 Amortization (6,237) (5,801) (5,340) Balance, end of year $ 348,696 $ 203,532 $ 177,677 Percentage Ownership December 31, 2001 2000 Cellular investments Los Angeles SMSA Limited Partnership 5.5% 5.5%  Volcano Communications Company 45.0% 45.0% Raleigh-Durham MSA Limited Partnership 8.0% 8.0% Midwest Wireless Communication, LLC 15.7% 14.7% North Carolina RSA 1 Partnership 50.0% 50.0% Oklahoma City SMSA Limited Partnership 14.6% 14.6% Telephone and Data Systems, Inc. Annual Report 2001 50 December 31, 2001 2000 1999 (Dollars in thousands) Balance, beginning of year $182,325 $240,709 $269,168 Investment Income 50,639 38,723 31,324 Distributions (14,729) (33,787) (24,385) Amortization (1,257) (9,291) (12,036) Acquisitions 23,000 50,093 203 Sales (2,305) (33,095) (12,999) TSR Wireless write-down — (69,360) — Other (3,995) (1,667) (10,566) Balance, end of year $233,678 $182,325 $240,709 Based primarily on data furnished to the Company by third parties, the following summarizes the unaudited combined assets, liabilities and equity, and the unaudited combined results of operations of the entities for which TDS’s investments are accounted for by the equity method. U.S. Cellular’s property, plant and equipment consists of the following. 10 Property, Plant and Equipment U.S. Cellular 9 Notes Receivable TDS Telecom Notes receivable at December 31, 2001 and 2000, reflect primarily loans to Airadigm Communications, Inc. ($52.7 million and $44.1 million, respectively) and Kington Management Corporation ($44.2 million and $37.3 million, respectively). The notes range in length from one to twelve years and bear interest at rates from six to eleven percent. The notes have a weighted average interest rate of 8.2% and average life of 8.1 years at December 31, 2001. The carrying amount of Notes receivable approximates their fair value. 51 Telephone and Data Systems, Inc. Annual Report 2001 TDS Telecom’s property, plant and equipment consists of the following. Useful lives range from four to twenty-five years for cell site- related equipment, ten to twenty years for buildings and leasehold improvements, three to eight years for switching- related equipment, three to five years for office furniture and equipment, three to seven years for systems development, and ten years for other operating equipment. The provision for depreciation as a percentage of depreciable property was 12.1% in 2001, 13.0% in 2000, and 12.4% in 1999. December 31, 2001 2000 (Unaudited, dollars in millions) Assets Current $ 278 $ 338 Due from affiliates 371 7 Property and other 1,431 1,307 $2,080 $1,652 Liabilities and Equity Current liabilities $ 215 $ 479 Due to affiliates 24 10 Deferred credits 123 7 Long-term debt 43 13 Partners’ capital and stockholders’ equity 1,675 1,143 $2,080 $1,652 Year Ended December 31, 2001 2000 1999 (Unaudited, dollars in millions) Results of Operations Revenues $2,107 $1,996 $1,794 Costs and expenses 1,504 1,472 1,492 Operating Income 603 524 302 Other income (expense) (1) (13) 29 Interest expense (4) (21) (15) Income taxes (5) (6) (19) Net income $ 593 $ 484 $ 297 December 31, 2001 2000 (Dollars in thousands) Cable and wire  $ 991,354 $ 873,308 Central office equipment  656,865 543,053 Office furniture and equipment 222,140 178,738 Land and buildings  81,332 70,625 Other equipment  75,017 66,020 Work in process 33,775 51,695 2,060,483 1,783,439 Accumulated depreciation 1,030,257 862,761 $1,030,226 $ 920,678 December 31, 2001 2000 (Dollars in thousands) Cell site-related equipment  $1,274,315 $ 1,041,670 Land, buildings and leasehold  improvements  370,732 305,617 Switching-related equipment  251,706 201,202 Office furniture and equipment 132,305 114,399 Systems development  168,591 163,150 Other operating equipment  86,796 71,160 Work in process 137,162 67,330 2,421,607 1,964,528 Accumulated depreciation 893,802 699,181 $1,527,805 $ 1,265,347 Telephone and Data Systems, Inc.