Management’s Discussion and Analysis of Results of Oper ations and Financial Condition The declines in operating income and operating income margin in both years reflect the following: 2003 than in 2002 as depreciation on the properties transferred to AT&T Wireless in the exchange transaction was only recorded through March 2003 in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” In 2002, depreciation expense increased $15.0 million due to a charge to reflect the write-off of certain analog equipment based on fixed asset inventory reviews performed in 2002. Amortization and accretion expense increased $18.4 million, or 47%, to $57.6 million in 2003 from $39.2 million in 2002 and decreased $24.2 million, or 38%, in 2002 from $63.4 million in 2001. The increase in 2003 is primarily driven by the $11.1 million increase in amortization related to the customer list intangible assets and other deferred charges acquired in the USCOC of Chicago transaction during 2002. The cus- tomer list assets are amortized based on the average customer retention periods related to each customer list. In accordance with SFAS No. 143 “Accounting for Asset Retirement Obligations,” as of January 1, 2003, U.S. Cellular began accreting liabili- ties for future remediation obligations associated with leased properties. Such accretion expense totaled $4.4 million in 2003. In accordance with SFAS No. 142 “Goodwill and Other Intangible Assets,” effective January 1, 2002, U.S. Cellular no longer amortizes previously recorded goodwill and intangible assets with indefinite lives. These assets will be subject to periodic impairment tests, which will be conducted annually or more often if necessary. In 2001, amortization  of these intangibles totaled $36.5 million. Loss on impairment of intangible assets totaled $49.6 million in 2003. In conjunction with the restatement related to SFAS No. 142, U.S. Cellular reperformed the annual impairment test for its investment in licenses for 2003, which was originally performed during the second quarter of 2003. The carrying value of the licenses in each reporting unit was compared to the estimated fair value of the licenses in each report- ing unit. The license values in two reporting units were determined to be impaired and a loss of $49.6 million was recorded. See “Application of Critical Accounting Policies and Estimates – Investment in Licenses and Goodwill” for further discussion of U.S. Cellular’s intangible asset impairment testing. Loss on assets held for sale totaled $45.9 million in 2003. Of this  total, $23.9 million represents the difference between the fair value  of the assets U.S. Cellular received and expects to receive in the AT&T Wireless exchange transaction completed on August 1, 2003, as  determined by an independent valuation, and the recorded value of  the Florida and Georgia market assets it transferred to AT&T Wireless. The loss also includes a $22.0 million write-down related to the wireless assets to be sold to AT&T Wireless in February 2004. Operating income decreased $162.2 million, or 58%, to $119.0 million in 2003 from $281.2 million in 2002 and decreased $36.0 million, or 11%, in 2002 from $317.2 million in 2001. The operating income margins (as a percent of service revenues) were 4.9% in 2003, 13.4%  in 2002 and 17.4% in 2001. U.S. Cellular anticipates that service revenues will total approximately $2.5 billion in 2004, compared to service revenues of $2.4 billion in 2003. The anticipated service revenue growth in 2004 reflects the effects of the sale of properties to AT&T Wireless in February 2004, the Related to U.S. Cellular’s acquisition and subsequent transition of  the Chicago market’s operations, U.S. Cellular plans to incur additional expenses in 2004 as it competes in the Chicago market. Additionally, U.S. Cellular plans to build out its network into other as yet unserved portions of its licensed areas, and will begin sales and marketing opera- tions in those areas in the next few years. U.S. Cellular also incurred additional expenses related to its launch of data-related wireless ser- vices in many of its markets in 2003, and expects to incur expenses related to its continued marketing of data-related wireless services in the next few years. As a result, depending on the timing and effective- ness of these initiatives, U.S. Cellular’s operating income may range from $160 million to $210 million in 2004, compared to operating income of $119 million in 2003. Its corresponding operating margins may range from 6% to 8% in 2004, compared to an operating margin of 4.9% in 2003. U.S. Cellular expects most of the above factors, except for those related to the transition of the Chicago market and the losses on assets held  for sale and impairments, to continue to have an effect on operating income and operating margins for the next several quarters. Any changes in the above factors, as well as the effects of other drivers of U.S. Cellular’s operating results, may cause operating income and oper- ating margins to fluctuate over the next several quarters. These expense increases were partially offset by increased service revenues, which were driven by growth in the number of customers served by U.S. Cellular’s systems and increases in average monthly revenue per customer. 27 Operating Income • increased selling, general and administrative expenses, primarily driven by the acquisition and subsequent transition of the Chicago market’s operations and billing system; and additional costs related to advertising and marketing the U.S. Cellular brand, especially in the Chicago market, and related to the launch of U.S. Cellular’s data- related wireless services in certain markets; • increased depreciation expense, driven by an increase in average fixed assets related to ongoing improvements to and the expansion of U.S. Cellular’s wireless network; • increased system operations expenses, primarily driven by  increases in the number of cell sites in and the number of minutes used by U.S. Cellular’s customers and roaming customers on U.S. Cellular’s network; and • increased equipment subsidies, primarily due to U.S. Cellular’s prac- tice of selling handsets to agents; this practice began in 2002 and increased the volume of handset sales, as well as the increase in customer retention-related equipment transactions. • the losses on assets held for sale related to both the exchange trans- action and pending sale transaction involving AT&T Wireless; and • the loss on impairment of intangible assets. Operating income and operating income margin in 2003 also reflect: