Shares of U.S. Cellular surged nearly 6% on Tuesday following the announcement that T-Mobile plans to acquire most of the company, including its stores, spectrum assets, and customers, in a deal valued at $4.4 billion. The transaction, which includes cash and up to $2 billion in assumed debt, marks a significant move in the telecommunications industry, enhancing T-Mobile's coverage and capacity, particularly in rural areas.
According to a press release from T-Mobile, up to $100 million of the cash portion is contingent on specific financial and operational metrics being met between the signing and closing of the deal. T-Mobile's shares also experienced a positive response, rising more than 1% during Tuesday's trading session.
The acquisition encompasses approximately 30% of U.S. Cellular's wireless spectrum, which T-Mobile aims to utilize to improve connectivity for customers across the United States. U.S. Cellular customers will have the option to retain their current plans or switch to a T-Mobile plan, offering flexibility and potentially better service.
Under the terms of the deal, U.S. Cellular will retain 70% of its wireless spectrum and towers, leasing space on at least 2,100 additional towers to T-Mobile. The agreement also includes provisions for T-Mobile to sign new long-term leases on at least 2,015 U.S. Cellular-owned towers and extend existing leases on about 600 others. This arrangement ensures a strong anchor tenant for U.S. Cellular for at least 15 years post-deal closure, which is expected in mid-2025.
This acquisition follows T-Mobile's recent $1.35 billion purchase of Ka'ena, the parent company of Mint Mobile, approved by the U.S. Federal Communications Commission in April. Additionally, T-Mobile's merger with Sprint in 2020, valued at $26 billion, further solidified its position in the market.
Earlier in May, The Wall Street Journal reported that T-Mobile and Verizon were in discussions to "carve up" U.S. Cellular's wireless spectrum. While a deal with Verizon remains uncertain, the acquisition by T-Mobile is set to proceed, reinforcing T-Mobile's competitive edge in the telecom sector.
Mike Sievert, CEO of T-Mobile, expressed optimism about the acquisition, stating, "As customers from both companies will get more coverage and more capacity from our combined footprint, our competitors will be forced to keep up - and even more consumers will benefit." U.S. Cellular CEO Laurent Therivel echoed this sentiment, highlighting the benefits for customers, including better coverage and speeds, unlimited texting in over 215 countries, and various other perks associated with T-Mobile's services.
U.S. Cellular, which will retain about 4,400 owned towers and approximately 70% of its spectrum portfolio, plans to explore ways to monetize these remaining assets. The company will also maintain equity method investments, including its wireless partnerships.
The transaction has received approval from the boards of U.S. Cellular and its parent company, Telephone and Data Systems, Inc., and is now subject to regulatory approvals. Citigroup Global Markets Inc. served as the lead financial adviser, with Centerview Partners LLP and Sidley Austin LLP also advising on the deal. Legal regulatory advice was provided by Clifford Chance LLP and Wilkinson Barker Knauer LLP, while Cleary Gottlieb Steen & Hamilton LLP and DLA Piper LLP served as legal counsel to T-Mobile.
