Management’s Discussion and Analysis of Results of Operations and Financial Condition At December 31, 2003, U.S. Cellular had entered into an agreement to purchase the remaining equity interests in three licenses in which it currently owns controlling interests for $34.8 million in cash. This trans- action was completed in January 2004. In 2002 and 2001, U.S. Cellular had no material divestitures  of wireless interests. U.S. Cellular is a limited partner in a joint venture that was a successful bidder for 17 licenses in 13 markets in the January 2001 FCC spectrum auction (“Auction 35”). In 2001, the joint venture acquired five of such licenses in four markets for a total of $4.1 million and at December 31, 2001, had deposits with the FCC totaling $56.1 million for the  remaining licenses. On August 1, 2003, U.S. Cellular completed the transfer of properties to AT&T Wireless and the assignments to it by AT&T Wireless of a portion of the wireless licenses covered by the agreement with AT&T Wireless. On the initial closing date, U.S. Cellular also received approximately $34.0 million in cash and minority interests in six wireless markets  in which it currently owns a controlling interest. Also on the initial closing date, U.S. Cellular transferred wireless assets and customers in 10 markets in Florida and Georgia to AT&T Wireless. U.S. Cellular has deferred the assignment and development of 21 licenses it has the right to acquire from AT&T Wireless until later periods. The value of these licenses is recorded as License rights on the balance sheet. When this transaction is fully consummated, U.S. Cellular will have received  wireless licenses in 13 states contiguous to and that overlap existing properties in the Midwest and Northeast. In May 2002, the FCC refunded 85% of the deposits, or $47.6 million. On September 12, 2002, the FCC issued a public notice permitting the winning bidders in Auction 35 to dismiss some or all of their applica- tions. In November 2002, the joint venture notified the FCC of its election to opt out of its applications for the remaining 12 license applications and on December 9, 2002, the FCC issued a public notice dismissing the applications. On December 20, 2002, the joint venture received the remaining $8.5 million of deposits paid to the FCC. Management believes that U.S. Cellular’s cash flows from operations, existing cash balances and funds available from lines of credit arrange- ments provide substantial financial flexibility for U.S. Cellular to meet both its short- and long-term needs. U.S. Cellular also may have access to public and private capital markets to help meet its long-term financ- ing needs. U.S. Cellular anticipates issuing debt and equity securities only when capital requirements (including acquisitions), financial market conditions and other factors warrant. On November 26, 2003, U.S. Cellular announced that it had entered  into a definitive agreement to sell its southern Texas wireless properties  to AT&T Wireless for $95 million in cash plus a working capital adjust- ment, subject to certain closing provisions. The closing of the transaction occurred in February 2004. The U.S. Cellular assets sold to AT&T Wireless include wireless properties and 76,000 customers. Service revenues from the markets sold totaled $60.6 million for the year ended December 31, 2003, while operating income totaled $17.1 million. Operating income does not include shared services costs that have been allocated to the markets from the U.S. Cellular corporate office. However, the availability of financial resources is dependent on  economic events, business developments, technological changes, financial conditions or other factors, some of which may not be in  U.S. Cellular’s control. If at any time financing is not available on terms acceptable to U.S. Cellular, it might be required to reduce its business development and capital expenditure plans, which could have a materi- ally adverse effect on its business and financial condition. U.S. Cellular does not believe that any circumstances that could materially adversely affect its liquidity or its capital resources are currently reasonably likely to occur, but it cannot provide assurances that such circumstances  will not occur or that they will not occur rapidly. Economic downturns, changes in financial markets or other factors could rapidly change the availability of U.S. Cellular’s liquidity and capital resources. Uncertainty of access to capital for telecommunications companies, further deterio- ration in the capital markets, other changes 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 construction, development and acquisition programs. The sale was accounted for in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” The balance sheet at December 31, 2003 reflects assets and liabilities  of the wireless properties to be sold as assets and liabilities of opera- tions held for sale. The revenues and expenses of the markets were included in operations until the completion of the sale in February 2004. The following table summarizes the recorded value of the assets and liabilities of the markets that U.S. Cellular transferred. In December 2003, U.S. Cellular increased the capacity of its bank revolving credit facility originally entered into in 2002 to $700 million from $325 million. This facility expires in June 2007. Borrowings under this facility accrue interest at the London InterBank Offered Rate (“LIBOR”) plus 55 basis points (for a rate of 1.67% based on the one-month December 31, 2003 (Dollars in thousands) Current assets $ 5,363 Property, plant and equipment, net 45,710 Other assets 316 Licenses, net 63,569 Goodwill 7,565 Loss on assets held for sale (22,000) Total assets $100,523 Current liabilities 2,189 Non-current liabilities 238 Total liabilities $ 2,427 Net assets to be transferred $ 98,096 Revolving Credit Facilities LIQUIDITY AND CAPITAL RESOURCES Divestitures FCC Auction 35 Transactions Exchanges 32