TECH

T-Mobile US acquired most of US Cellular's operations

T-Mobile US announced on Tuesday, May 28, an agreement to acquire most of the operations of US Cellular, one of the last major regional mobile operators, in an attempt to consolidate its position in the telecommunications market.

T-Mobile shares rose 0.7% following the announcement. US Cellular (NYSE:USM) shares are up about 3.1%, while US Cellular's majority-owned Telephone and Data Systems (NYSE:TDS) shares are down 0.6%.

The transaction involves a payment of approximately US$2.4 billion in cash, in addition to a commitment to assume approximately US$2 billion in debt. Under the deal, T-Mobile will buy all of US Cellular's wireless operations and about 30% of its spectrum assets across various frequency bands. The transaction is expected to close in mid-2025.

The main benefit for T-Mobile is access to spectrum, which will increase the capacity, speed and coverage of its phone networks. This is essential in a highly competitive market where operators struggle to attract customers by offering better services and superior network coverage.

The saturation of the U.S. telecommunications market means that most consumers already use one of the major providers: T-Mobile, Verizon Communications or AT&T. Therefore, companies are looking for strategies to acquire customers who are looking for better offers or network coverage.

US Cellular will retain 70% of its spectrum and the majority of its tower portfolio, with plans to monetize these assets opportunistically. T-Mobile, in turn, will have access to millions of US Cellular customers, especially in rural areas of the Midwest, strengthening its presence in small and rural markets. T-Mobile's market share in these markets increased to 17.5% at the end of last year, up from 13% in 2021.

However, retaining these new customers can be a challenge, as there is nothing stopping them from switching to Verizon or another provider after the acquisition.

Regulatory approval could prove to be a significant hurdle under the current administration. The difficulty of obtaining approvals for acquisitions in technology, media and telecommunications has increased, as demonstrated by hedge fund Standard General's failed attempt to acquire the Tegna station group for $8.6 billion last year.

mundophone