On May 10, we issued an updated research report on wireless service provider United States Cellular Corp. USM – a subsidiary of Telephone and Data Systems Inc. TDS.United States Cellular posted dismal first-quarter 2016 results wherein both the top and the bottom line failed to beat the Zacks Consensus Estimate. Nonetheless, we expect U.S. Cellular to benefit from its LTE expansion and increased smartphone sales, which are likely to drive earnings.The PositivesU.S. Cellular has successfully completed its 4G LTE network rollout in 2015. Moreover, the company has initiated testing of voice over LTE or VoLTE and plans for commercial deployment early next year. Additionally, multiple 4G LTE roaming agreements have been duly signed. We thus expect the company to benefit from the implementation of its VoLTE services.U.S. Cellular is optimistic about the growing demand for smartphones, which enjoy significant market penetration, supporting growth in data revenues. Given the improvement in the company’s smartphone portfolio, smartphone sales represented 75% penetration among postpaid customers in the first quarter, up from 67% recorded in the year-ago quarter.Meanwhile, over the last few years, U.S. Cellular has been divesting its non-strategic assets in order to focus on long-term growth opportunities. The company has also taken a number of strategic actions that will likely accelerate growth in the future, thus enhancing its returns. Also, continued focus on subscriber base expansion and reduction of churn through various initiatives should boost the company’s performance.RisksHowever, U.S. Cellular operates in an intensely competitive wireless market and remains highly susceptible to aggressive pricing by rivals like Verizon Communications Inc. VZ and AT&T, Inc. T.Moreover, though U.S. Cellular has sufficient liquidity, the resources might be inadequate for future expansion purposes such as the purchase of spectrum license in the upcoming FCC auctions. This might lead to high levels of borrowing and the company’s liquidity would be affected if it is unable to obtain short or long-term financing on acceptable terms, further pressurizing its cash flow.Additionally, the ongoing consolidation in the wireless industry, roaming revenues related woes, declining service revenues and high costs remain potent headwinds.U.S. Cellular currently carries a Zacks Rank #3 (Hold).Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AT&T INC (T): Free Stock Analysis Report VERIZON COMM (VZ): Free Stock Analysis Report TELEPHONE &DATA (TDS): Free Stock Analysis Report US CELLULAR (USM): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research