UScellular’s parent company Telephone & Data Systems (TDS) is signaling that it’s ready to explore “strategic alternatives” for the wireless company. TDS owns 83% of UScellular, which is the fifth largest wireless operator in the U.S. with about 4.2 million customers.
TDS’ board said it has retained Citi as its financial advisor and has hired legal counsel in connection with the UScellular review. In addition, UScellular’s independent directors said they have also retained a financial advisor and legal counsel.
The operator has struggled for the past several years to retain its wireless customer base amid growing competition from the big Tier 1 operators and new competitors such as the cable mobile virtual network operators (MVNOs).
The news came as little surprise to the wireless industry. John Byrne, vice president of research, communications service providers at IDC, said via X (formerly Twitter) that UScellular has been a rumored acquisition target for at least 20 years. However, he believes that the company’s “goofy footprint,” which spans several states but is scattered across the U.S. makes it difficult to envision a single buyer.
Roger Entner, founder of Recon Analytics, said that he believes a sale of UScellular is inevitable because the wireless operator hasn’t been able to turn around its losses. “The company has tried to run away from the competition and it has just followed them,” Entner said. He added that as a small service provider the only way to compete is to be “flexible and innovative” and instead of doing that UScellular launched pricing plans that were “me-toos” of the big operators.
Three years ago, UScellular hired Laurent (L.T.) Therivel as its president and CEO in hope that his leadership could turn around its losses. However, Therival struggled to stop the steady decline in subscribers. During the company’s Q2 earnings that it posted today, UScellular lost 28,000 postpaid net adds and ended the quarter with 4.2 million wireless subscribers, down from 4.3 million subscribers in the same quarter of 2022. It also reported net income of $5 million, compared to $21 million in the same quarter a year ago.
As far as potential buyers for the company, Entner said that he believes it could be any of the three Tier 1 operators but said that it’s likely that any potential buyer will shutter UScellular’s network and instead migrate its subscribers to their own network. Entner also said that the real value in UScellular is not its 4.2 million wireless subscribers but its spectrum.
The company is in the midst of deploying 5G across its mid-band spectrum. It owns mid-band spectrum in the 3.45 GHz band that it is currently deploying in several states. In addition, it spent $1.28 billion on 254 C-band spectrum licenses in Auction 107 and it is planning to deploy 5G in the C-band later this year.
UScellular also owns 4,341 towers and has been trying to grow its tower revenue by adding more tenants to its sites. Austin Summerford, chief of strategy, partnership and towers at UScellular, said during the company’s Q2 earnings call that it has increased its tower tenancy ratio from 1.44 tenants per site two years ago to 1.55 tenants per site today, adding that there’s room for it to grow revenue on its tower sites. In Q2 total tower revenue was $25.2 million, up from $22.9 million in the same quarter in 2022.
Another bright spot for UScellular is its fixed wireless access (FWA) business. The company said its FWA subscribers grew 66% to 96,000 at the end of Q2 and it exceeded 100,000 FWA subscribers last month. The company’s FWA subscribers are primarily on its 4G LTE network and it expects to offer FWA over its mid-band 5G spectrum later this year which Therival said will make it possible to more effectively compete against cable broadband offerings.