- T-Mobile wants to acquire about 4 million wireless customers and certain spectrum assets from UScellular
- UScellular has been losing customers for years to national players in its regional markets
- It’s hard to guess how regulators will react but analysts say odds are good it will eventually pass muster
It’s been one week since T-Mobile said it plans to acquire most of UScellular’s wireless business for about $4.4 billion. Since then, analysts have speculated whether it will be approved.
The short answer? Probably, but with conditions.
“We think the deal ought to be approved,” in part because UScellular is not viable as a standalone business over the long term and recent trends bear this out, wrote New Street Research (NSR) analyst Jonathan Chaplin in a report for investors last week.
UScellular “lacks the scale to compete against national carriers,” he said. Moreover, UScellular customers will be better off with T-Mobile, with lower prices and an improved network experience, he added.
Indeed, UScellular’s plans are generally more expensive than the three national carriers, and the regional carrier hasn’t had much impact on market pricing in the markets where it operates. “It would be difficult to argue that by eliminating USM as a competitor, prices are likely to rise,” Chaplin said.
T-Mobile has offered to migrate UScellular customers to comparable T-Mobile plans that will lower the cost to the customer while at the same time giving them access to a better 5G network.
Push for scrutiny
Of course, not everyone believes prices will remain low. The consumer advocacy group Accountable.US on Monday released a statement pushing for wider federal scrutiny of the UScellular deal and calling out T-Mobile’s “greedy” behavior since acquiring Sprint in 2020.
The group pointed to T-Mobile’s recent decision to raise prices on some legacy plans as “the latest in a series of anti-consumer moves since acquiring Sprint.”
Sticking with the “greed” theme, Accountable.US published T-Mobile CEO Mike Sievert’s compensation over the past four years, where he earned “a staggering $144 million,” including nearly $55 million when T-Mobile completed its merger with Sprint. Former CEO John Legere walked away with $137.1 million in 2020, ranking him as the third highest paid CEO in 2020, the organization noted.
Placing bets
Regulatory scrutiny is difficult to access, and it’s an election year.
“The voters will decide whether the deal will be judged by Biden or Trump appointed officials,” wrote NSR analyst Blair Levin in a note for investors on Monday. “If Biden wins, we now think that a Democratic majority FCC” may require a commitment from T-Mobile to serve low-income households.
The reasoning is thus: President Biden released a statement at the end of the Affordable Connectivity Program (ACP) spelling out voluntary commitments by carriers to offer plans of $30 or less to low-income households through the end of 2024. But T-Mobile was not on that list.
Levin suggested that T-Mobile may be holding back from offering a more attractive package for low-income households (of which it already has some offerings) until it needs it for approval of the UScellular deal.
“We don’t think there is a serious risk to the ultimate approval but there may be some adjustment in the economic calculations, depending on the nature of the ‘voluntary’ commitments,” Levin wrote.
One reason the deal is expected to be approved is how it was structured with spectrum holdings. Spectrum divestitures may be required, but “we assume that T-Mobile has been careful in picking licenses that will go with the assets,” noted NSR’s Chaplin. “It will be interesting to see if either AT&T or Verizon tries to force further spectrum divestitures.”
UScellular retained many of its most valuable spectrum licenses, including 850 MHz licenses, the 3 GHz licenses and most of the 700 MHz licenses, as well as a small number of AWS and PCS licenses. NSR values the retained licenses at $4.1 billion.
Lost opportunities?
Roger Entner, founder of Recon Analytics, agreed the deal will likely get regulatory approval.
“They will look at this on a market-by-market level and spectrum level, and they’re buying only 30 percent of the spectrum from UScellular,” he said. “It should go through.”
In many rural parts of the country, T-Mobile stepped up its game and got more aggressive since the acquisition of Sprint. “The writing was on the wall. T-Mobile would have eaten UScellular for breakfast,” he said.
“UScellular should have been the rural ‘un-carrier.’ And they didn’t find the courage to do it,” Entner said. “They missed several opportunities to shake up the game.”