Chairman and President’s Message The year 2001 was difficult for wireless telecommunications stocks. However, our stock held up reasonably well. TDS held steady during a year which saw some wireless stocks decline substantially. During the same period the S&P declined 13% and the NASDAQ declined 21%. We believe that the prospects for the wireless sector will brighten as the economy emerges from the recession. Our optimism is based on the continuing potential for wireless expansion in the United States. At year-end the United States penetration rate was about 45%, compared to over 80% in several European countries. U.S. Cellular’s customer penetration rates continued to climb, going from 12.3% in 2000 to 13.5% in 2001. The increase reflects well on our sales and marketing initiatives. Some analysts believe that wireless penetration rates in certain developed countries may ultimately approach 100% due to the growing wireless connectivity of devices such as personal digital assistants and portable computers in addition to the growth of traditional wireless phones. U.S. Cellular plans to participate aggressively in these wireless service developments. One of the primary responsibilities of management at TDS’s corporate office is to work with our business units to allocate financial resources to take advantage of the best opportunities. Our business units devoted substantial resources in 2001 to adding facilities to provide for organic growth in customers and in customer usage of our networks.  TDS METROCOM, our CLEC operation, should continue its rapid growth as potential customers look for alternatives to the RBOCs. There is much room to grow because other CLECs have made only modest inroads into most of the markets  TDS METROCOM serves. We will continue to evaluate expansion plans for TDS METROCOM using a disciplined discounted cash flow rate of return approach and our assessment of TDS METROCOM’s success in its current markets. At U.S. Cellular we continued to move customers from analog service to higher quality, feature-rich digital service. At the end of 2001, approximately 70% of U.S. Cellular customers were taking advantage of our digital networks. We added over 370 new cell sites in 2001 to extend and improve coverage and process large increases in wireless minutes of use. For 2002 we are projecting $620-$640 million in total capital expenditures at U.S. Cellular. This includes $80-$95 million associated with the first year of our three-year implementation plan for CDMA. We are also committed to improving TDS TELECOM’s operations and we will invest approximately $170-$190 million in 2002 to improve and expand our existing ILEC and CLEC operations. As part of our efforts to offer attractive new services, we began offering high-speed DSL service in 16 more of our large ILEC markets in 2001. These 16 additional ILEC markets were the beneficiaries of the experience already gained in our CLEC markets. This is a good example of how our ILEC and CLEC operations work together to use their experience synergistically to enhance shareholder value. By year-end we had over 9,000 DSL customers throughout our ILEC and CLEC operations. We are also actively seeking to acquire wireless and wireline properties that fit the clustering strategies we are pursuing to create value in the future. At U.S. Cellular we are constantly searching for properties that will strengthen our current markets. At TDS TELECOM, we are seeking to add ILEC properties that are geographically close to our existing ILEC operations so that synergies can produce service improvements and cost savings. We are also examining a few carefully selected opportunities to further expand our CLEC operations through additional “greenfield” builds. Growth prospects at TDS TELECOM are also excellent. The Company has built a very positive reputation in its ILEC markets by offering a full range of high-quality telecommunications services backed by outstanding, locally delivered customer service. We saw this reputation’s effect in 2001, the first full year that we offered our own brand of long-distance service to our customers. The service, TDS TRUE TALK ™ , was chosen by over 125,000 customers by the end of 2001. We anticipate future revenue growth at  TDS TELECOM as we continue to sell both data services, such as dial-up digital Internet access and high-speed Digital Subscriber Line (“DSL”), and additional voice services such as call waiting, voice mail and caller identification. In preparation for a dramatic increase in wireless data transmission, we announced plans to implement Code Division Multiple Access (“CDMA”) technology across U.S. Cellular’s entire network during 2002, 2003 and 2004. Detailed analysis conducted by our own engineering group and confirmed by outside consultants showed that CDMA was our best alternative. CDMA technology allows U.S. Cellular to maximize the capacity of its networks over the next three years and provides the lowest cost path to 3G services in the future. The three-year CDMA implementation will cost approximately $400-$450 million. 4 Cordially yours, The Company’s progress is only possible with the commitment of our exceptionally talented associates and employees. We thank you for your ongoing creativity and effort and for your dedication to serving our customers. We thank you, our shareholders, for your important part  in this process and for your support in 2001 and into the future. We welcome your ideas on how we can improve  our performance and thereby continue to grow the value of the Company. The year 2001 marked the twentieth anniversary of the original listing of TDS’s shares on the American Stock Exchange. The public capital markets in the United States have been and will continue to be vitally important to TDS’s ability to obtain the capital necessary to build the business. On February 11, 2002, LeRoy T. Carlson, the Company’s founder, retired as Chairman of the TDS Board of Directors and was elected to the office of Chairman Emeritus. His leadership was responsible for building TDS, which began with a small number of rural phone companies in southern Wisconsin, into a multi-regional telecommunications provider with over 4.3 million customer units in 34 states, revenues of $2.6 billion and 9,300 employees. We are thankful for his  U.S. Cellular because of the uncertainty associated with possible credit commitments for the licenses which the Black Crow partnership bid on, as well as the need to preserve capital  that may be employed to strengthen our wireless or  wireline markets. At U.S. Cellular we also had to anticipate the costs of our technology upgrade to CDMA. Share repurchase remains an option to increase shareholder value and we will continue to consider further purchases as business and market conditions warrant. Share repurchase remains another potentially important option for use of our capital. We were cautious during 2001 and did not make significant repurchases under existing board authorizations at either TDS or in a number of senior executive positions, most recently Vice President and Corporate Secretary, retired. We thank him for his many contributions, and wish him every success. During the year 2001 we had only one other officer transition at TDS. Kevin Gallagher joined us as Vice President and Corporate Secretary in December. He was Senior Vice President- General Counsel/Secretary of 360˚ Communications Company until it was acquired by another company. He has a strong legal background and excellent telecom- munications industry experience. Gregory Wilkinson, who had been with TDS almost from our inception Brown & Wood he has provided advice to a number of chief executive officers and boards of directors. the same industry segments as our own operating companies. Our tax basis in these investment positions is very low, so monetizing our investments presents tax issues. We are continuing to examine a variety of tax-advantaged methods that could reduce the tax consequences if we were to monetize any of our investment assets. We are also constantly monitoring our portfolio of investments. We are committed to understanding the future prospects for these companies which, with only one exception, operate in At the same time, the TDS Board of Directors unanimously elected Walter C.D. Carlson as non-executive Chairman of the Board. Walter Carlson has been a director of TDS since 1981 and a director of U.S. Cellular since 1989. As a partner at Sidley Austin vision of the importance of telecommunications in people’s lives and his passionate commitment to our customers, to our team members and to the Company’s success. We are pleased that he will continue to serve TDS as a director and officer.  Our development team is committed to analyzing potential acquisitions using net present value of discounted cash flow methodology with cost of capital determined by business segment. Our goal is to exceed our cost of capital in each of our telecommunications industry segments. 5 Walter C.D. Carlson Chairman of the Board LeRoy T. Carlson, Jr.  President and Chief Executive Officer On February 11, 2002, Walter C.D. Carlson  was elected Chairman of the Board of Directors. He succeeds LeRoy T. Carlson who will continue  to serve as an Officer and Director of  Telephone and Data Systems, Inc. Strategic Resource Allocation Conclusion Transition