T-Mobile (TMUS, Financial) is expanding its wireless operations by acquiring most of UScellular's (USM, Financial) assets. This $4.4 billion deal includes UScellular's wireless customers, stores, and 30% of its spectrum assets. The acquisition is expected to close by mid-2025.
- UScellular will retain its cell towers, one of the largest tower businesses in the US, due to its high exposure to rural areas. T-Mobile will become a long-term tenant on at least 2,015 UScellular-owned towers and extend leases on approximately 600 towers where it is already a tenant.
- Retaining the towers will provide UScellular a long-term revenue stream from T-Mobile for over 15 years. UScellular will also keep about 70% of its spectrum portfolio and significant equity method investment interests, which generated $158 million in income in 2023. UScellular plans to monetize these retained assets.
- Telephone and Data Systems (TDS, Financial), which owns an 83% stake in UScellular, will receive proportional proceeds from the deal. This will support TDS's fiber build-out program and help reduce leverage. TDS remains committed to expanding its fiber footprint, focusing on small, mid-sized, suburban, and rural communities.
- T-Mobile's 5G network will extend to millions of UScellular customers, especially in underserved rural areas, offering them improved connectivity. T-Mobile customers will also gain access to UScellular's network in previously limited coverage areas.
Investors have reacted positively to the deal, evident from the initial price movements in USM and TDS stocks. UScellular's retention of valuable assets like 70% of its spectrum and tower business is a key benefit for USM and TDS shareholders. A previous report indicated that Verizon (VZ, Financial) was also interested in acquiring portions of UScellular, but T-Mobile's sole involvement may have required a higher purchase price, benefiting USM.
This acquisition aligns with T-Mobile's M&A strategy, following previous acquisitions of MetroPCS and Sprint. The deal will add over 4 million customers, particularly in rural areas, to T-Mobile's base. Given the regulatory landscape, it will be interesting to see if this deal gets approved, especially in an election year with inflation concerns and fears of reduced competition leading to higher prices.
