U.S. Cellular enters $4.4 billion deal to sell T-Mobile its wireless operations

By Tomi Kilgore

Deal will give UScellular customers access to lower-priced T-Mobile plans, with no switching costs

U.S. Cellular Corp., and its parent Telephone and Data Systems Inc., announced an agreement Tuesday in which T-Mobile U.S. Inc. will buy the UScellular wireless operations and some spectrum assets in a deal valued at $4.4 billion, including about $2 billion worth of debt.

As part of the deal, which is expected to close in mid-2025, T-Mobile will enter into a new license agreement on at least 2,015 telecommunications towers owned by U.S. Cellular, and extend leases for about 600 towers in which T-Mobile is already a tenant.

Customers of UScellular will not see any interruption in service from the deal, and will have the opportunity to change to T-Mobile's lower-priced comparable plans with no switching costs.

U.S. Cellular's stock (USM) climbed 4.9% in midday trading, but pared earlier intraday gains of as much as 13.4%, while and TDS shares (TDS) shed 1.2% to reverse an earlier rally of as much as 10.2%.

U.S. Cellular is an 83%-owned subsidiary of TDS.

Meanwhile, T-Mobile's stock (TMUS) gained 0.9%, which put it just above its record closing price of $167.42 seen on March 6, 2024.

"The decisions we announced today are in the best interests of our customers and our shareholders," said U.S. Cellular Chief Executive Laurent Therivel. "T-Mobile is the right partner for our wireless operations and will ensure that customers have access to best-in-class wireless speeds and performance, including 5G and a nationwide network, at compelling prices."

The deal will provide UScellular customers with access to T-Mobile's "Un-carrier" benefits, which includes content offers, additional savings for seniors and increased customer service options, the companies said. The deal will also significantly expand coverage across rural America, for customers of both companies.

Chris Stafford, partner at technology advisory firm West Monroe, said that after closing the deal should provide UScellular customers with a broader set of services and more flexibility.

Over the longer term, Stafford believes T-Mobile will look for opportunities to increase prices, through the offering of premium plans and tiered and/or bundled offerings.

Before the deal, UScellular served customers with about 4.5 million retail connections, including 4.1 million postpaid connections. The company operated in 21 states, owned 4,382 towers and operated 6,995 cell cites in service.

U.S. Cellular said it will keep about 70% of its spectrum assets, "and will seek to opportunistically monetize these retained assets."

The deal comes a few weeks after The Wall Street Journal reported that Verizon Communications Inc. (VZ) and T-Mobile U.S. (TMUS) were in talks to carve up U.S. Cellular, with T-Mobile expected to announce a deal in May. The report said a deal with Verizon, if one can be worked out, could take longer.

In August 2023, U.S. Cellular and Telephone and Data Systems said they were reviewing strategic options for U.S. Cellular.

Shares of U.S. Cellular have gained 8.5% year to date and TDS' stock has tacked on 1.1%, while T-Mobile's stock has advanced 4.5% and the S&P 500 index has climbed 11.3%.

-Tomi Kilgore

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05-28-24 1229ET

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