TDS Board Announces Unanimous Support for Sale of UScellular's Wireless Operations and Select Spectrum Assets to T-Mobile
Telephone and Data Systems (NYSE: TDS) announced its board approved the sale of UScellular's wireless operations and 30% of its spectrum assets to T-Mobile for $4.4 billion, including cash and assumed debt. This decision follows a strategic review started in August 2023 and aims to provide significant value to UScellular customers and shareholders. TDS will receive proceeds proportionate to its ownership and plans to invest in fiber infrastructure and reduce leverage. Additionally, TDS announced dividends for Q2 2024. The transaction requires regulatory approval and is expected to close in mid-2025.
UScellular will retain 70% of its spectrum assets and continue to generate revenue from its tower business with T-Mobile as a key tenant. TDS is adjusting its capital allocation strategy to support fiber expansion.
- Sale of wireless operations and 30% spectrum assets to T-Mobile for $4.4 billion.
- TDS will receive proceeds proportionate to its 83% ownership in UScellular.
- Plans to invest proceeds in fiber infrastructure and reduce leverage.
- TDS Board declared dividends for Q2 2024.
- UScellular retains 70% of spectrum assets for potential future monetization.
- T-Mobile to be a long-term tenant on 2,015 towers owned by UScellular.
- Potential for long-term contracted revenue stream from tower leases.
- Expected mid-2025 transaction close provides time for strategic adjustments.
- Dividend for Common Shares and Series A shares reduced by 80%.
- Transaction closure subject to regulatory approvals and customary conditions.
- Significant debt assumption ($2 billion) part of the transaction.
- Uncertainty over the distribution of proceeds from the sale by UScellular board.
Insights
The sale of UScellular's wireless operations and 30% of its spectrum assets to T-Mobile for
From a financial perspective, this deal is beneficial in both the short-term and long-term. Short-term, it injects substantial cash, which might be used to invest in growth areas such as fiber expansion or to reduce leverage. Long-term, it positions UScellular to pivot towards a more focused infrastructure business, potentially increasing profitability and shareholder value.
This transaction also impacts market dynamics. T-Mobile acquiring additional spectrum and wireless operations strengthens its market position, enhancing its competitive edge. For UScellular customers, the integration into T-Mobile's robust network likely means better service quality and more choices. The strategic move to focus on fiber expansion reflects a growing trend in the telecom industry, where providers are investing heavily in broadband infrastructure to meet increasing demand for high-speed internet, especially in underserved areas.
The decision to reduce dividend payout and redirect funds towards fiber expansion also indicates a strategic shift towards long-term growth and investment in emerging opportunities, which could attract investors looking for growth-oriented companies.
The transaction is subject to regulatory approvals, which could pose a risk. The complexity of telecom mergers and acquisitions often involves scrutiny from various regulatory bodies to ensure compliance with antitrust laws and other regulations. Delays or challenges in securing these approvals could affect the deal's timeline and overall success. Additionally, the terms of the agreement, such as the assumed debt and long-term lease agreements, will need to be carefully managed to ensure they align with UScellular's strategic goals and financial health.
Overall, assuming regulatory hurdles are cleared, the legal structure of this deal appears sound, providing a balanced approach to asset monetization and strategic realignment.
TDS believes transaction delivers significant value to UScellular customers and shareholders
TDS announces second quarter 2024 dividends
TDS and UScellular to hold conference call at 8:30 a.m. Central Time
"Over the past four decades, TDS has supported the growth and development of UScellular, its wireless business and the company's mission to connect people to what matters most. Continuing to deliver for UScellular's customers requires a level of scale and investment that is best achieved by integrating its wireless operations with those of T-Mobile. We are confident that T-Mobile is the right partner and now is the right time to divest the operations," said Walter C. D. Carlson, Chair of the TDS Board. "T-Mobile's robust capabilities and offerings will enhance service, choice, and value for UScellular's wireless customers, while the financial terms will deliver significant shareholder value and position UScellular with a healthy balance sheet and a transformed tower infrastructure business poised for strong growth and value creation."
In addition to the sale of the wireless operations and select spectrum assets for
While decisions regarding the distribution of proceeds from the sale of the wireless operations will be determined solely by the UScellular board of directors, TDS will receive such proceeds in proportion to its ownership of UScellular. To the extent cash distributions are made to UScellular shareholders, including from proceeds, if any, related to the monetization of retained spectrum assets, TDS will utilize such proceeds in the best interests of its shareholders. Depending on the amount of proceeds, those uses are expected to include continuing to invest in the company's fiber build-out program and reducing leverage levels, and may include return of capital to shareholders and the pursuit of other opportunities to grow the business.
Carlson continued, "As UScellular works to complete this transaction, TDS remains committed to executing on our strategy to grow our fiber footprint while increasing broadband penetrations and improving profitability. This includes bringing fiber to small and mid-sized, suburban and rural communities across
Other Transaction Details
TDS, in its role as the 83 percent shareholder of UScellular, has delivered its written consent approving the transaction. The transaction is expected to close in mid-2025, subject to the receipt of regulatory approvals and the satisfaction of customary closing conditions.
For more information, please refer to the release filed today by UScellular, which can be accessed in UScellular's website at https://investors.uscellular.com.
Advisors
Citigroup Global Markets Inc. is serving as lead financial advisor, Centerview Partners LLC is serving as financial advisor and Sidley Austin LLP is serving as lead legal advisor to TDS. TD Securities (
Capital Allocation Strategy and Dividends
TDS remains confident in its plans to drive growth and create value by investing in fiber expansion. To support those plans, TDS is resetting its approach to capital allocation. Specifically, the Board has declared dividends for the second quarter 2024 at approximately
TDS is paying a quarterly dividend of
TDS is paying a quarterly dividend of
TDS is paying a quarterly dividend of
The tickers for the TDS Common shares is "TDS", the Series UU depositary shares is "TDSPrU" and the Series VV depositary shares is "TDSPrV".
Conference Call Information
TDS and UScellular will hold a joint conference call on May 28, 2024, at 8:30 a.m. Central Time.
- Access the live call on TDS Events & Presentations or UScellular Events & Presentations or at https://events.q4inc.com/attendee/598119900
- Access the call by phone at (800) 715-9871 (
U.S. /Canada ), conference ID: 2264212
Before the call, information to be discussed during the call will be posted to TDS Events & Presentations. The call will be archived on TDS Events & Presentations and UScellular Events & Presentations.
About TDS
Telephone and Data Systems, Inc. (TDS), a Fortune 1000® company, provides wireless; broadband, video and voice; and hosted and managed services to approximately 6 million connections nationwide through its businesses, UScellular, TDS Telecom, and OneNeck IT Solutions. Founded in 1969 and headquartered in
Visit investors.tdsinc.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations about the consummation and benefits of the proposed transactions, including anticipated synergies, and T-Mobile's, UScellular's and TDS' plans, objectives, expectations and intentions, and the expected timing of completion of the proposed transaction. These statements are based on current plans, estimates, projections, and assumptions, and the anticipated timing of completion of the proposed transactions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: the failure to obtain, or delays in obtaining, required regulatory approvals and the risk that such approvals may be conditioned upon or result in the imposition of terms or conditions that could adversely affect the expected benefits of the proposed transaction; the failure to satisfy any of the other conditions to the proposed transaction on a timely basis, or at all; the occurrence of events that may allow one or more parties to terminate the definitive agreement; the adverse effects on TDS', UScellular's or T-Mobile's common stock and on TDS', UScellular's or T-Mobile's operating results because of a failure to complete the proposed transactions in the anticipated timeframe or at all; adverse changes in the ratings of TDS', UScellular's or T-Mobile's debt securities or adverse conditions or disruptions in the financial or credit markets; negative effects of the announcement, pendency or consummation of the transaction on TDS' or UScellular's operating results, including as a result of changes in key customer, supplier, employee or other business relationships; significant transaction costs and unknown liabilities; failure to realize the expected benefits and synergies of the proposed transaction in the expected timeframes or at all; costs or difficulties related to the integration of UScellular's network and operations into T-Mobile's; the risk of litigation or regulatory actions, including antitrust litigation; the risk that certain contractual restrictions contained in the definitive agreement during the pendency of the proposed transaction could adversely affect TDS' or UScellular's ability to pursue business opportunities or strategic transactions; effects of changes in the state or federal regulatory environment in which TDS, UScellular and T-Mobile operate; intense competition; the ability of UScellular to obtain or maintain leases for its towers; the ability of TDS, UScellular and T-Mobile to retain and attract people of outstanding talent throughout all levels of the organization; 'advances in technology; impacts of costs, integration problems or other factors associated with expansion of TDS' businesses; the ability of UScellular to successfully construct and manage its towers; difficulties involving third parties with which TDS and UScellular does business; uncertainties in TDS' and UScellular's future cash flows and liquidity and access to the capital markets; the ability to make payments on TDS and UScellular indebtedness or comply with the terms of debt covenants; changes in tax rules or pronouncements; inability to timely and successfully execute on its fiber expansion plans or to realize significant incremental revenue from its deployment; the possibility that the Board of Directors of TDS or UScellular will not declare dividends; conditions in the
Additional Information and Where to Find It
UScellular will prepare an information statement on Schedule 14C for its shareholders with respect to the transaction described herein. When completed, the information statement will be delivered to UScellular's shareholders. You may obtain copies of all documents filed by UScellular with the SEC regarding this transaction, free of charge, at the SEC's website, www.sec.gov or from UScellular's website at https://investors.uscellular.com.
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SOURCE Telephone and Data Systems, Inc.
FAQ
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