US Cellular: Sale of the Wireless Business Will Be a Boon to Shareholders if It Gets Approved

Nine months after initiating a strategic review, US Cellular finally took a substantive step by agreeing to sell its wireless operations and 30% of its spectrum licenses to T-Mobile. Notably, this leaves the firm with significant remaining assets that we expect it will look to sell. Considering the firm’s continually deteriorating business, which we believe was destined to continue due to lack of scale, we see this as a huge win for shareholders. On the merits, we think this transaction should gain regulatory approval, but considering the tougher stance the current administration has taken on mergers and antitrust matters, we can’t assume the deal will be completed. We are raising our fair value estimate to $52, which reflects a 75% probability that this transaction gets approved and that US Cellular then proceeds to sell its other nonoperating assets. We factor in a 25% chance that the firm continues to operate independently, in which case our stand-alone fair value estimate of $25 would remain.