T-Mobile US Inc. (NASDAQ:TMUS), the second-largest mobile carrier in the United States, has reached an agreement to purchase the wireless operations of US Cellular Corp. along with some of its spectrum assets for around $4.4 billion.
As per statements from both companies, the deal encompasses US Cellular’s wireless subscriber base, retail outlets, and 30% of its spectrum assets. T-Mobile will pay a total of $4.4 billion, inclusive of cash and up to $2 billion in assumed debt. The transaction is slated to close by mid-2025, subject to regulatory approvals.
While T-Mobile’s shares saw a modest increase of less than 1% during Tuesday morning trading in New York, US Cellular observed a 2.5% rise, while its parent company, Telephone and Data Systems Inc., experienced a slight decline of about 2.4%.
Analysts at Bloomberg Intelligence noted that this acquisition will hasten T-Mobile’s expansion into smaller markets where its presence is currently limited. Furthermore, it provides T-Mobile with valuable assets, including retail stores and spectrum, while preventing them from falling into the hands of competitors.
In recent times, T-Mobile, like its telecom counterparts, has encountered heightened competition in a saturated wireless market. Additionally, it faces stiff competition from cable providers offering bundled phone services to their video subscribers.
Nevertheless, T-Mobile has managed to outpace its competitors by capitalizing on its lead in high-speed 5G networks, expanding its coverage to rural areas, and offering wireless internet access in regions with limited broadband options.
Under the terms of the agreement, T-Mobile will enter into a new master license agreement concerning at least 2,015 additional US Cellular towers, while extending its existing lease on approximately 600 towers for an additional 15 years, as stated by US Cellular.
Despite relinquishing its wireless operations, US Cellular will retain one of the largest tower businesses in the US, 70% of its spectrum portfolio, and significant investment interests, including wireless partnerships. Additionally, a $60 million breakup fee is applicable should either party opt out of the deal, as confirmed by US Cellular executives during a call with analysts.
T-Mobile intends to finance the acquisition using its existing cash reserves. Moreover, the company plans to propose a swap of $2 billion of US Cellular debt for T-Mobile debt.
Earlier reports from The Wall Street Journal suggested that both Verizon and T-Mobile were in discussions to acquire portions of US Cellular, which boasts more than 4 million wireless subscribers across 21 states and a market value of $3.71 billion.
According to Laurent Therivel, CEO of US Cellular, customers of both US Cellular and T-Mobile can expect lower prices, improved network quality, and an enhanced overall experience as a result of the acquisition.
Legal counsel for T-Mobile is provided by Cleary Gottlieb Steen & Hamilton and DLA Piper. Citigroup Global Markets Inc. is the lead financial adviser, with Centerview Partners acting as a financial adviser and Sidley Austin serving as the lead legal adviser to TDS. TD Securities (USA) and Wells Fargo are also enlisted as financial advisers to TDS for the transaction. PJT Partners is the financial adviser, while Cravath, Swaine & Moore serves as the legal adviser to the independent directors of US Cellular.
Recent developments have seen Verizon Communications Inc.’s consumer chief expressing interest in repurchasing US Cellular’s stake in its Los Angeles business. Verizon has long been eager to reclaim this share, should a reasonable price be agreed upon.
In the previous month, T-Mobile reported quarterly earnings that surpassed analysts’ expectations, while also adding more wireless phone subscribers than projected by Wall Street estimates.
Furthermore, T-Mobile secured US approval to acquire Mint Mobile, a budget wireless provider in which actor Ryan Reynolds holds a partial ownership stake. The proposed acquisition of Mint’s parent company, Ka’ena Corp., involves a combination of 39% cash and 61% stock, valued at up to $1.35 billion, with the deal expected to close in March 2023.
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