CHICAGO - United States Cellular Corporation (NYSE: NYSE:USM) and Telephone and Data Systems, Inc. (NYSE: TDS) have announced the sale of UScellular's wireless operations and select spectrum assets to T-Mobile US (NASDAQ:TMUS), Inc. for $4.4 billion. The deal includes $2 billion in assumed debt and cash, with T-Mobile acquiring approximately 30% of UScellular's spectrum assets across various bands.
As part of the transaction, T-Mobile will also enter into a long-term master license agreement (MLA) for a minimum of 2,015 towers owned by UScellular, in addition to extending leases for about 600 existing towers. This move aims to provide continuous service to UScellular customers and generate a contracted revenue stream for UScellular's tower assets for at least 15 years post-transaction.
UScellular will retain roughly 70% of its spectrum portfolio and significant equity method investment interests, which generated $158 million in equity method income in 2023. The company also plans to return capital to shareholders after the transaction closes, though specific decisions on capital allocation will be determined by the UScellular Board of Directors at a later date.
The acquisition is expected to offer UScellular customers access to T-Mobile's 5G network, promising lower prices, more robust plans, and a superior network experience. T-Mobile's CEO Mike Sievert highlighted the opportunity to provide millions of UScellular customers with the "Un-carrier's superior value" on their 5G network.
This strategic move comes after an extensive review process that began in August 2023, with the independent directors of UScellular and the boards of both UScellular and TDS unanimously approving the agreement. TDS, as the 83 percent shareholder of UScellular, has also consented to the transaction, which is anticipated to close in mid-2025, subject to regulatory approvals and customary closing conditions.
The announcement was made on Tuesday, with UScellular and TDS holding a joint conference call to discuss the transaction details. Citigroup Global Markets Inc. and other financial and legal advisors are assisting TDS in the transaction, while PJT Partners (NYSE:PJT) LP and legal advisors are aiding the independent directors of UScellular.
The information provided is based on a press release statement, and the transaction is subject to the customary risks and uncertainties that could affect the anticipated benefits and timing of completion.
InvestingPro Insights
United States Cellular Corporation (NYSE: USM), in the midst of a significant transaction with T-Mobile, shows a complex financial picture according to real-time data from InvestingPro. With a market capitalization of $3.67 billion, USM's valuation metrics present a nuanced scenario for investors.
The company’s current P/E ratio stands at a lofty 62.22, indicating a high earnings multiple which suggests that investors are expecting higher future earnings growth compared to the broader market. Yet, the adjusted P/E ratio for the last twelve months as of Q1 2024 is slightly lower at 55.81, potentially reflecting adjustments that the market has made based on recent performance.
The InvestingPro Tips highlight that USM has had a high return over the last year, with a 192.78% price total return, showcasing the company’s strong market performance. Moreover, the company is not only profitable over the last twelve months but also provides a strong return over the last three months with a 26.56% price total return, further cementing its attractive position for investors looking at recent performance.
Despite not paying a dividend, which could be a downside for income-seeking shareholders, USM's liquid assets exceed its short-term obligations, indicating a stable financial position in terms of liquidity. This could reassure investors of the company's ability to meet its immediate financial commitments even as it navigates through the transition of selling part of its wireless operations to T-Mobile.
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