T-Mobile will acquire the wireless assets of USCellular including about 4.5 million subscribers and about 30% of the spectrum assets as the figure below shows [see here]. The value of the transaction is $4.4 billion. USCellular will retain ~70% of its spectrum, which it says it plans to monetize immediately. USCellular will also keep its towers to become the 5th largest tower company in the US (by number of towers).
The estimated book value of the spectrum that T-Mobile is acquiring is about $1.4 billion. This is based on prices USCellular paid at auctions. It does not include any secondary transactions involving all bands, but particularly the PCS band.
| Band | MHz-PoP (million) [acquired at auctions and secondary market] | Price at Auction ($/MHz-PoP) | Estimated book value, $ |
|---|---|---|---|
| 600 MHz | 594 | 0.59 | 348,001,008 |
| 700 MHz A-Block (70%) | 319 | 0.49 | 156,310,000 |
| AWS (96%) | 563 | 0.97 | 546,110,000 |
| PCS (93%) | 443 | 0.5(e) | 221,500,000 |
| 2.5 GHz | 50 | 0.07 | 3,500,000 |
| Total Sub 6 GHz | 1,969 | 1,275,421,008 | |
| 24 GHz | 8,973 | 0.015 | 132,623,113 |
| Total for T-Mobile acquired spectrum | 1,408,044,121 | ||
| PCS band prices are estimates | |||
Similarly, looking at the spectrum that remains in the possession of USCellular, the book value is around $3 billion using a similar estimate to the Cellular band as I did for the PCS band; and using the same auction prices to acquisitions on the secondary markets for all other bands.
| mm MHz-PoP | T-Mobile | USCellular | Total |
| Sub 6 GHz | 1,969 | 4,161 | 6,130 |
| mmWave | 8,973 | 17,459 | 26,432 |
| Total | 10,942 | 21,620 | 32,562 |
The estimated price per subscriber T-Mobile paid to USCellular is then around $667/sub, factoring out spectrum costs (vs. ~$978/sub all in).
The acquisition highlights the challenging competitive environment for small mobile network operators who see pressure from cable operators through their MVNO services and from the national incumbent service providers. It is the latest in a trend that dates back to a number of acquisitions such as Verizon/Alltel (2008) and AT&T/Leap (2014).
A note: after writing this article, LightReading published an article on the challenges of rural wireless operators that is worth the read. See here.