T-Mobile to buy most of UScellular for $4.4B

• The $4.4 billion deal includes 4 million wireless customers and certain spectrum assets

• But US Cellular is keeping about 70% of its spectrum assets and its 4,382 towers

• T-Mobile will enter into a long-term lease agreement on at least 2,100 towers

T-Mobile has agreed to buy substantially all of UScellular’s wireless operations for about $4.4 billion, including its 4 million wireless customers and certain spectrum assets.

The transaction includes a combination of cash and up to $2 billion of debt to be assumed by T-Mobile.

Importantly, UScellular is retaining about 70% of its spectrum assets and its 4,382 towers. T-Mobile will enter into a long-term lease arrangement on at least 2,100 towers.

UScellular has been steadily losing subscribers, in part due to the larger national wireless carriers like T-Mobile expanding into rural America, as well as the rise of cable competitors in wireless.

In addition, the capital required to build and operate modern wireless networks led UScellular to decide its best course of action is to combine with a national player, according to UScellular CEO Laurent Therivel.

UScellular’s parent company, TDS, announced in August that the company was undergoing a strategic review and remained mum on the process since then. Earlier this month, the Wall Street Journal reported that T-Mobile and Verizon were in talks about carving up UScellular.

At the beginning of a conference call today about the transaction, Therivel acknowledged that nine months is a long time for a review process like this, “but we wanted to be really comprehensive” in the assessment about possible ways forward.

UScellular was founded four decades ago by LeRoy Carlson. The Carlson family has remained involved with the company ever since.

Tower business

After the transaction, UScellular will continue to be a player in the tower industry – solidifying it as the fifth largest tower business in the U.S. T-Mobile will enter into a long-term master license agreement (MLA) on at least 2,015 towers for an initial 15-year term and extend the term on 600 UScellular towers where T-Mobile is already a tenant for at least 15 years post-closing.

“This is a great deal for our tower business,” Therivel said. “We’ve been able to get a fantastic anchor tenant in place, very well financed long-term, 15-year deal, so that provides I think a really strong tenant on a significant chunk of our towers.”

Other third-party co-locators are on other towers and UScellular will be working to grow the co-location business.

Spectrum assets

The other important piece of this deal is the spectrum. UScellular has a plan to “monetize” its spectrum and that will get under way immediately but it’s unknown how long it will take.

T-Mobile will acquire about 30% of UScellular’s spectrum portfolio, including all of the company’s 600 MHz, 2.5 GHz and 24 GHz, as well as the majority of its 700 MHz A Block, AWS and PCS holdings.

UScellular will retain some 700 and 850 MHz spectrum, as well as all of its C-band and 3.45 GHz, CBRS and millimeter wave spectrum. “It’s a very robust chunk of spectrum. We expect there will be a high amount of demand for that,” Therivel said, declining to talk about more specifics on the sale process.

The deal, which received the OK by the boards of UScellular and TDS, still must be approved by regulators. The companies expect the deal to close by mid-2025.

A $60 million break-up fee is attached to the deal, which applies to both parties.

In a press release, T-Mobile said it does not expect the transaction to impact its 2024 guidance or 2024 authorized shareholder return program. T-Mobile expects the transaction will yield about $1 billion in total opex and capex annual run rate cost synergies upon integration, with the total cost to achieve the integration estimated at between $2.2 billion to $2.6 billion.

Prospects of regulatory approval

T-Mobile’s acquisition of Mint Mobile took far longer than anticipated, noted analyst Ric Prentiss of Raymond James during today’s conference call. He asked about the likelihood for this transaction getting through Washington, D.C., given there’s a presidential election this year.

Therivel said they’re optimistic because customers will see lower prices and a better network.

“We’re taking our spectrum and our coverage and we’ll be combining it with T-Mobile’s spectrum and T-Mobile’s coverage and the net result of that is a better overall experience,” for both UScellular and T-Mobile customers, he said. T-Mobile also agreed to offer employment to a “significant” number of UScellular employees, although he did not say how many.

On the spectrum, “we’ve been very thoughtful in the way that we structured this deal in order to mitigate some of the spectrum aggregation issues that regulators might be concerned about,” Therivel said.

Putting it all together, “we think not only is it a compelling regulatory story, but more importantly, it’s a compelling story for all of our stakeholders … We’re very optimistic about the path forward from a regulatory approval process.”

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