Looking to expand its rural footprint, T-Mobile could be interested in this struggling carrier،
So spending over $26 billion to buy Sprint (for its holdings in the 2.5GHz mid-band spectrum) only to end up getting pissed off by Verizon and AT&T subscribers is not enough punishment for Mike Sievert? The latter is the CEO of T-Mobile who was John Legere’s right-hand man during those wild and crazy days when the operator fought its way from the fourth largest wireless provider in the United States to its current position of number two.
There is another operator that might be available at the right price: UScellular. Last August, Telephone & Data Systems (TDS), the company that owns 83% of the wireless service provider, said it was exploring strategic alternatives, which is merger and acquisition talk for “Someone one, please redeem us.” Although nothing earth-shattering has emerged from the parent company, TDS said the process is “active and ongoing.”
UScellular currently has 4.6 million customers, but that number is slowly dissolving like salt placed in a glass of hot water. During the third quarter, the operator lost 38,000 postpaid phone customers, the benchmark for industry metrics. This is an increase from the 28,000 postpaid phone customers who left UScellular during the second quarter. For what it’s worth (or FWIW as you might call it), T-Mobile added 850,000 net new postpaid phone subscribers during the third quarter, more than Verizon and AT&T combined.
Mike Sievert, CEO of T-Mobile
There were some bright spots for UScellular during the third quarter. Average revenue per user (ARPU) increased 2% to $51.11 in the third quarter, compared to $50.64 in the second quarter. USCellular CEO Laurent (LT) Therivel said the increase in ARPU was due to more customers upgrading to higher plans.
In September, T-Mobile’s Sievert was asked if he would be interested in a rural carrier if it helped speed up T MobileThe government’s timetable is to achieve a 20% market share in rural markets by 2025. The executive would simply say: “Maybe, but I really like our Plan A.” Sievert also emphasized that “the hurdles for mergers and acquisitions would be high” and he could have described regulatory or monetary issues.
UScellular has a market cap of $3.84 billion, which appears to be achievable for T Mobile. However, T Mobile is sitting on $70 billion in long-term debt and had just over $5 billion in available cash at the end of the third quarter. Unlike Sprint, which was sitting on a goldmine in 2.5GHz spectrum, it seems the only attraction for T Mobile here is UScellular’s rural coverage.
If T Mobile decides to go after UScellular, it may have to bite the bullet and dilute its stock by using its high-priced shares to buy the wireless company.
