Wade4Wireless

TMO Buys Most of USCC!


Oh the humanity! The telecom landscape will never be the same. Oh, that’s right, so many small telecoms have already been sucked up. US Cellular was one of the few holdouts, until now. Business as usual.

It’s finally official: T-Mobile (TMO) bought most of US Cellular Company (USCC)!

Let’s look at the highlights of the deal. For our industry, this is an exciting M&A deal.

To be clear, this is from me, Wade, and is not the viewpoint or opinion of anyone I work for or with. If some of them agree with me, great! 

What is the deal?

  • TMO will get about 30% of USCC.
  • TMO will pay about $4.4B, yes, USD Billions!
  • TMO gains a lot of spectrum, I’ll explain below.
  • TMO will extend its lease to USCC for 600 existing towers. I am not sure how long, and I have looked.
  • TMO will lease an additional 2,015 towers from USCC.
  • TMO will take over stores.
  • TMO will take over operations.
  • TMO gains an estimated 4.5M subs. TMO will take over the customer base and keep them for up to 15 years. (Assuming they want to stay.)
  • TMO gains rural coverage in USCC areas. (No more roaming or dead spots in USCC coverage areas.)
  • TMO expands their 4G and 5G coverage footprint, reducing the need for roaming.

Spectrum notes

From what I read, TMO will get 30% of USCC’s spectrum.

TMO will get:

  • All of USCC’s 600 MHz spectrum
  • All of USCC’s 2.5 GHz spectrum
  • All of USCC’s 24 GHz spectrum
  • The majority of USCC’s 700 MHz A block

So, I am assuming the rest of it will go to Verizon if they pony up. Vz loves C Band so I imagine they will take that. It would be interesting if AT&T would bid against them.

Tower Notes

I read that TMO will extend the lease on 600 towers and add 2,015 more. That means ongoing revenue for USCC assuming they’re getting paid. Maybe there’s something in the deal where TMO will get a break or some rent for free. I will never know. 

Thai I do know, if TMO extended its lease time and added leases, then USCC will have more value in the towers. The lessor paying rent could look sexy to American Tower or Crown Castle. 

OK, there is a downside. If I remember correctly, most of these towers will only support one lessor. So, if they were to add revenue, then they would need to beef up the towers which means more sunk costs. 

Vendors

I think that USCC vendors will be winners here because of the rural location of most of the sites. They know the sites, understand how things are done, and should get the work.

On the other hand, the USCC vendors will need to sign up with TMO, if they’re not already, and do things TMO’s way. That might be an adjustment for many of them. I would think it’s worth it to get all the TMO upgrade work.

As for TMO vendors, it may not look so good in existing markets. Not that it looks all that great today. The work has pretty much dried up and for TMO to dish out another $4B, they have to make cysts somewhere. I would imagine vendors in existing markets will feel the pain.

OEMs

Well, this all depends. TMO has two main OEMs, Nokia and Ericsson. So, the TMO market will continue to use the vendor of their choice in that market. It should be a good thing for TMO OEMs. 

However, on the USCC side, maybe a short run. Let’s face it, in the long run it will dry up. If the OEM has a large USCC team, it might get ugly. They have to step over to the TMO side of the business or they will be let go. Sorry folks.

USCC employees

Hey people, here is where you find out how valuable you are. If you’re valuable to USCC then you have a shot of hanging on. 

If you’re just along for the paycheck, you may want to start looking for something new, possibly outside of telecom.

I think for the first 2 years you will be OK, but going into the third year you will be able to see the writing on the wall. At least that’s what I think based on past experience.

If you’re a market manager, wait and check out the playing field. You may be more valuable than you previously thought. You have a shot of remaining and perhaps gaining territory.

TMO employees

You guys should be fine. The managers will get more work unless they are replaced. I know TMO is already running lean. They made deep cuts over the last 18 months. With the limited overlap I would think most of you would be fine if you had survived this long.

USCC Shareholders

They are very happy. This is what they seem to have wanted. They get the payout they were hoping for. 

Now all they have to do is see if Verizon or AT&T will bite on the C Band spectrum.

What does it mean to the industry now and beyond?

See my video here.

I have issues here because we lose a competitor. Thank you again Bill Clinton.

We all knew that USCC was retreating into rural America. I guess they didn’t know where else to go. Let’s face it, both TMO and Vz are pushing rural areas. I don’t think USCC saw a bright future, at least not one where they were growing and profitable.

I would like to think this is good for the industry. It may be and might push TMO past all of its competitors. Vz and AT&T seem to be waning. AT&T appears to be so far behind in the 5G expansion. They waited so long they were able to push Nokia out and let Ericsson become the single vendor. 

I am assuming Ericsson is throwing in a lot of free stuff to gain a huge market share. Good for them. They got aggressive and really stuck it to Nokia. Nokia on the other hand seems to be handing the US market over to Ericsson. I have no idea why. They lost Verizon and now AT&T. To me, that’s not the sign of a winner.

Failures:

Well, first off, President Clinton’s Telecom Reform Act of 1996 was a complete failure. It literally did the complete opposite of what it promised. To quote the Wikipedia page, “let anyone enter any communications business – to let any communications business compete in any market against any other.” Smaller companies protested because they said it would put them out of business. I guess they were right. Do you still think regulation promotes competition?

Don’t you worry about former President Bill Clinton, he’s doing just fine. He’s financially better off than former President Obama. Both have more than President Biden. At least on paper.

However, let’s see what the Telecom Reform Act did for the carrier sector.

  • Since then, innovation has been slow, cumbersome, and done by major OEMs. 
  • Venture capitalists left the industry, literally all of them.
  • In 1995 we had many telcos, including but not limited to;
    • AT&T
    • Ameritech
    • Bell Atlantic
    • Bell South
    • NYNEX
    • Pacific Telesis
    • Sprint
    • Nextel
    • US West
    • Cellular One
    • VoiceStream
    • Airtouch
    • SBC
    • Many more across the US.
  • In 2024 including but not limited to;
    • T-Mobile
    • Verizon
    • AT&T
    • DISH
    • US Cellular which will soon be part of T-Mobile and probably Verizon
    • Lumen
    • FYI – if you look at a list they include Cox, Comcast, and Charter, which makes no sense to me since they are MVNOs
    • Altice
    • Frontier
    • Windstream
    • Very few survived the last 20 years

Right now it appears AT&T is a big loser. They let this happen and they’re behind on 5G. They seem to be letting TMO eat their lunch. Bloody hell, why are they just sitting back?

Verizon appears to be losing everything to TMO. Coverage, speed tests, quality, and innovation. Bummer.

DISH, but maybe because they seem to have disappeared, lost subscribers, and rumor has it they’re filing for bankruptcy soon.

In my opinion, the customers will be losers. Consumers. There is so little competition that we have to go to the big 3. I know, you say DISH is number 4, but are they? When was the last time they made the news in a good way?

Winners:

For one, TMO is a huge winner. Another aggressive move where they are willing to put their money where their mouths are. They gained a ton of spectrum, customers, and territory. Kudos to them!

USCC shareholders. They got the big payout they wanted and got to cash in before USCC declined too much in value.

Whomever gets the C Band spectrum, AT&T or Verizon.

Probably the cable companies like Comcast, Charter, and COX. It could be good for them because they have a large reach and people may choose them over one of the big 3.

Unknowns:

At least I don’t know.

  • Who will buy USCC’s towers?
  • Will DISH be able to compete now?
  • Will AT&T catch up?
  • Will Verizon buy the rest of the USCC’s spectrum?
  • Do we, as consumers, have a shot at fair pricing in 5 years?
  • Is telecom a commodity today?
  • Will TMO continue to grow and dominate?
  • Will Verizon’s and AT&T’s stock stop losing value?
  • Will TMO’s stock continue to gain value?

Questions:

Does anyone really see this merger spurring growth and competition in the wireless sector? Between TMO, Vz, and AT&T maybe. All the smaller competitors are already getting crushed. Hence, USCC had to sell.

Will this improve TMO’s coverage? Definitely YES!!!

Will this merger create innovation in the wireless sector? I don’t see it. I feel government regulation has stifled innovation. That bums me out a little, but when is the last time a small company broke into wireless with an innovative product? 

Airspan is struggling, and they’re an American company that has been crushed by the huge OEMs. 

Let’s sum it up:

– T-Mobile acquires 30% of US Cellular’s spectrum for $4.4 billion.

– Deal includes over 2,600 tower leases and 4.5 million subscribers.

– Enhances TMO’s rural coverage and reduces roaming dependencies.

– Spectrum specifics: TMO gets all of USCC’s 600 MHz, 2.5 GHz, 24 GHz, and majority of 700 MHz A block.

– Long-term implications of tower arrangements and potential bids from other telecom giants remain uncertain.

Goodbye US Cellular, we will miss you!

T-Mobile (TMO) has acquired a significant portion of US Cellular Company (USCC), marking a pivotal shift in the industry. This acquisition is not just a mere transaction; it’s a strategic T-Mobile expansion that could change the game for rural connectivity and signal strength.

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