T-Mobile takes over US Cellular
Billion dollar deal: Telekom subsidiary buys in the USA
28.05.2024, 17:16
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Once the group’s problem child, T-Mobile is now Telekom’s profit driver. The mobile phone subsidiary is now reaching out to a competitor in its home market – including customers and some frequencies.
Around four years after the merger with Sprint, T-Mobile is expanding its position in the US mobile communications market with another billion-dollar acquisition. The Deutsche Telekom subsidiary announced that it would take over almost the entire mobile communications business of its rival US Cellular for $4.4 billion. This included customers and branches as well as certain mobile phone frequencies.
“The transaction will give our customers access to better coverage and higher speeds,” said US Cellular CEO Laurent Therivel. According to an earlier report in the Wall Street Journal, the mobile operator Verizon was also interested in the company. In response to the partial sale of the business, US Cellular shares rose by as much as 13 percent on Wall Street. The shares of major shareholder Telephone & Data Systems, which reportedly agreed to the deal, gained almost ten percent. T-Mobile shares gained almost one percent, while Verizon shares fell by around half a percent.
No impact on annual target and dividend
In the transaction, T-Mobile will pay part of the purchase price in cash. In addition, the Telekom subsidiary will take on up to two billion dollars of debt from US Cellular. T-Mobile does not expect this to have an impact on its full-year targets or on the distributions to its own shareholders. The company estimates the potential savings at around one billion dollars. The total costs for the integration are expected to be between 2.2 billion and 2.6 billion dollars.
Assuming the approval of the antitrust authorities, the deal should be completed by the middle of next year. US Cellular will then still have around 70 percent of its current mobile phone frequencies and 4,400 transmission towers. T-Mobile will lease at least 2,600 of these facilities on a long-term basis.
US Cellular has been struggling with declining sales for some time and has missed market expectations several times in recent quarters. As a result, the company announced almost a year ago that it wanted to examine strategic options for the future.
At T-Mobile, however, things are going well: the mobile operator has been able to surprise customers several times in recent quarters with its increase in customers and is optimistic about the future. What was once Deutsche Telekom’s problem child has now blossomed into the Bonn-based company’s revenue and profit driver.