T-Mobile US and Verizon look to buy UScellular

This latest UScellular sale rumours comes from the Wall Street Journal, which late last week quoted unnamed sources as saying that the two major MNOs are working on deals, one of which could come pretty soon.

The Journal claims that T-Mobile US is close to brokering what looks set to be the lion's share of any transactions. It could pick up mobile operations and spectrum licences for in excess of US$2 billion, potentially signing on the dotted line later this month. The paper puts UScellular's market value at around $3 billion.

It has less information on Verizon's part in the matter, noting that its talks with the company could take longer and may yet not result in an agreement.

It is likely a matter of when, rather than if, UScellular announces some sort of M&A deal though.

The company revealed back in August that it was exploring its options for the future, without sharing any more details. And when it published first quarter results earlier this month it simply noted that "the review remains active and on-going." There's a shareholder meeting coming up next week, so might learn more then.

Despite the fact that UScellular and parent company TDS are playing their cards close to their chests, tongues started wagging as soon as they announced the strategic review. The big three US mobile carriers were naturally named as possible buyers, attracted as much by UScellular's spectrum licences as by its dwindling customer base.

UScellular saw its mobile base fall yet again in the first quarter of the year; as of the end of March it had a retail base of 4.49 million, down slightly from 4.56 million three months earlier and 4.74 million at end-2022. Arguably more significant than the overall total is the fact that its postpaid mobile customer base – which makes up the bulk of the total – is falling, with prepaid growth unable to make up the difference.

"Although we experienced some month-to-month improvement in postpaid net additions in the first quarter, postpaid handset gross additions continue to be a challenge, and this drove the postpaid net addition decline in the quarter," said UScellular Laurent Therivel, in the results statement. "We have made recent promotional changes in order to drive improvement in postpaid handset subscriber momentum, while keeping us financially disciplined," he said.

Whether or not there is a sale afoot, the company needs to keep its customers.

Another company struggling to hold on to customers is beleaguered Dish Network, which last year was tipped as a likely buyer for UScellular. And Dish Network executives were pretty frank that they would be interested in UScellular's assets; Tom Cullen, EVP of corporate development at Dish Network, highlighted the telco's towers and spectrum assets in particular. As an aside, the Journal indicates that UScellular's towers were not included in recent sale talks.

It's safe to assume that Dish is no longer a viable buyer. Although it needs to bulk up to establish itself as a credible fourth player in the US mobile market, Dish is facing the threat of bankruptcy. It needs a rescue plan to meet its November debt repayments and fund operations in the fourth quarter of the year, it announced last week. Never say never in this industry, particularly where a company like Dish is concerned, but it seems the way is now clear for the big mobile players.

As the Journal points out, splitting UScellular's assets between T-Mobile and Verizon would help sidestep any regulatory issues linked to competition, thus breaking up the company likely makes sense for all parties.

UScellular's customer base is not the big draw here, but a few million more customers is no bad thing for the two larger players; it had 124,000 fixed wireless customers at the end of March too, a base that is growing quickly. But really, the telcos want to get their hands on its spectrum. It will be interesting to see what they are willing to pay to do so.