US operator Sprint Nextel has agreed to pay US Cellular US$480m to acquire PCS spectrum licences and over half-a-million of its customers.
The deal gives Sprint additional capacity in a number of cities across America’s Midwest as it deploys its…
US operator Sprint Nextel has agreed to pay US Cellular US$480m to acquire PCS spectrum licences and over half-a-million of its customers.
The deal gives Sprint additional capacity in a number of cities across America’s Midwest as it deploys its Network Vision upgrade and rolls out 4G. It is acquiring 10MHz and 20MHz blocks in the 1900MHz band.
As part of the transaction Sprint will also take over 585,000 of US Cellular’s 5.9 million customers. Sprint should be able to integrate the subscribers fairly seamlessly as US Cellular operates a similar common CDMA network and uses comparable spectrum.
The transaction is subject to regulatory approvals by the Department of Justice and the Federal Communications Commission and the companies expect to close in mid-2013.
“This transaction will enable us to strengthen our business and become a more robust competitor,” said Dan Hesse, Sprint’s CEO.
Last month Japanese group Softbank agreed to purchase Sprint for US$20.1bn and it is expected that Softbank plans to increase Sprint’s size and scale going forward.
The US number three-operator recently received US$3.1bn from Softbank after issuing a convertible bond and the Japanese group is set to put US$8bn on Sprint’s balance sheet should its agreed acquisition go through.
Wells Fargo analyst Jennifer Fritzsche said it was an interesting deal for US Cellular, which owns the eighth largest network in the US market and had US$4bn of revenue last year.
“The company is abandoning one of its core markets in Chicago,” Fritzsche said in a research note.
“US Cellular appears to be placing its focus on the rural markets where it is apparently much more profitable due to the higher penetration it has as well as the roaming revenue it generates from other carriers.”
New Street Telecom analyst Jonathan Chaplin said in a note that the deal slightly improved Sprint’s business, but believed that the real consolidation opportunities were still to come.
“We believe Sprint could create significant value through combinations with some or all of T-Mobile USA, MetroPCS, Leap Wireless and Clearwire,” Chaplin said.
