T-Mobile Buying UScellular's Wireless Operations, Including Some Spectrum

T-Mobile will buy “substantially all” of UScellular’s wireless operations in a deal valued at about $4.4 billion, including $2 billion in assumed debt, the companies said Tuesday. The transaction includes about 30% of UScellular spectrum and all the company’s wireless customers and stores. UScellular will remain a tower business. Both companies agreed to a $60 million breakup fee if they back out of the deal. T-Mobile said the transaction is likely to close in mid-2025.

Reports surfaced earlier this month that a T-Mobile/UScellular announcement could be imminent (see 2405090053). UScellular has 4.5 million retail connections in 21 states and TDS owns about 83% of the carrier. Last summer, the TDS and UScellular boards said they were examining the carrier's future and “strategic alternatives" (see 2308070043).

T-Mobile’s buy of Sprint gave it the 2.5 GHz spectrum that's key to its 5G deployment. In this case, UScellular and parent TDS will retain much of their spectrum, which they expect to “monetize.” T-Mobile also recently completed its acquisition of Ka’ena, including brands Mint Mobile and Ultra Mobile (see 2405080033).

UScellular's retained spectrum includes 700 and 850 MHz, the C-band, 3.45 GHz, citizens broadband radio service and millimeter-wave licenses, CEO Laurent Therivel said during a call with analysts Tuesday. It retains “very valuable spectrum” and expects “a high amount of demand” for the licenses, he added.

“Upon closing, T-Mobile’s leading 5G network will expand to provide millions of UScellular customers, particularly those in underserved rural areas, a superior connectivity experience, moving from a roaming experience outside of the UScellular coverage area to full nationwide access on the country’s largest and fastest 5G network,” T-Mobile said.

TDS will use the sale proceeds to strengthen its balance sheet and make additional fiber investment, Vicki Villacrez, chief financial officer, said on the call. “We are all very excited about the prospects for TDS in the near term and following the close of the transaction,” she said. TDS has “a strong, growing fiber business with very attractive returns” and will retain a majority ownership of UScellular and its towers.

TDS plans to expand its fiber business in small and mid-size communities across the U.S. and is focused on improving profitability, Villacrez said. The transaction “will be key in accomplishing and potentially accelerating that strategy,” she added.

TDS and UScellular plan on monetizing their remaining spectrum “immediately,” but there's no time frame for completing the process, Therivel said. “There isn’t a ton of detail I can share,” he said. “We’ve got a path in front of us in order to go get regulatory approval for this transaction” and “a lot of work" on network integration, he said.

T-Mobile has 600 collocations on UScellular towers and will lease 1,600 towers on an interim basis for up to 30 months, Therivel said. T-Mobile also agreed to enter into a master license agreement on more than 2,000 towers. “This is a great deal for our tower business -- we’ve been able to get a fantastic anchor tenant in place,” he said. UScellular also plans to grow its collocation business, he added.

Raymond James analyst Ric Prentiss noted the long time frame for regulatory approval of T-Mobile’s buy of Mint and other assets from Ka’ena, which didn’t involve spectrum or a network. Prentiss then asked about the path forward on the newly announced deal.

“I’m not really in a position … to evaluate why that deal took so long,” Therivel said. “What I can talk about is why we’re optimistic on ours,” he said. Customers will see lower prices and a better network, with a “better overall experience,” he said. In addition, UScellular customers will get access to content and other offers from T-Mobile, he noted. Regulators are concerned about the effect on employees and T-Mobile has committed to extending offers to "a significant number of our associates,” he said.

The deal will also mean more investment in rural America, where scale is key, Therivel said. The two companies also looked closely at spectrum in the transaction to mitigate spectrum aggregation concerns, he said.

Public Knowledge urged the FCC to look closely at the deal. T-Mobile’s buy of Sprint “transformed a competitive market with four major wireless companies into a concentrated market of the ‘Big Three’ and a handful of competitors with tiny market share,” said Senior Vice President Harold Feld. Since then, the market “has become further concentrated as the Big Three bought up independent providers such as Tracfone and Mint," he said. The buy would put more spectrum in the hands of the biggest carriers, while T-Mobile gains “tower slots that could otherwise have been leased by competitors,” he said.

MoffettNathanson’s Craig Moffett said the regulatory outlook is unclear. Will the FCC and DOJ “allow a transaction that will put T-Mobile above the FCC’s spectrum ownership ‘soft cap’ in select markets?” Moffett asked: “We don’t know. But it is clear that spectrum concentration concerns are at the very top of the list of issues that made this transaction take so long to announce.”