CHICAGO - United States Cellular Corporation (NYSE: NYSE:USM), commonly known as UScellular, has reached an agreement to sell part of its spectrum licenses to AT&T (NYSE: T) for $1.018 billion in cash. This deal, announced today, is in line with the company’s May 28, 2024, strategy to monetize spectrum assets not included in its proposed sale to T-Mobile.
UScellular President and CEO Laurent C. Therivel expressed satisfaction with the value realized from the recent transactions, including this latest agreement with AT&T. He emphasized that the sale will benefit AT&T subscribers nationwide and assured that UScellular customers would continue to receive uninterrupted service.
With this transaction and prior ones, including the October 18, 2024, sales to Verizon (NYSE:VZ) and other operators, UScellular has arranged to monetize approximately 55% of its non-mmWave spectrum holdings, totaling around $2.02 billion. Including the T-Mobile proposal, the company is set to divest about 70% of its overall spectrum portfolio.
Therivel highlighted the retained value in the C-band spectrum, noting its favorable attributes for long-term value, such as its mid-band frequency suitable for 5G, the existing ecosystem, and the extended timeline for development, with build-out dates set for 2029 and 2033.
The agreement with AT&T encompasses the sale of 1,250 million MHz-Pops of 3.45 GHz and 331 million MHz-Pops of 700 MHz B/C block licenses. The transaction is subject to regulatory approvals and customary closing conditions, and it is largely contingent upon the completion of the T-Mobile deal.
A portion of the licenses to be sold to AT&T is currently owned by a third party, and UScellular's acquisition of these is pending regulatory approval. TDS, as the 83% shareholder of UScellular, has approved the transaction, and no further shareholder action is required.
UScellular, based in Chicago, serves 4.5 million retail connections across 21 states and employed 4,200 associates as of September 30, 2024. Telephone and Data Systems, Inc. holds an 83% ownership stake in the company.
This news is based on a press release statement and includes forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from those projected.
In other recent news, AT&T has inked a multi-year agreement worth over $1 billion with Corning (NYSE:GLW) to purchase fiber, cable, and connectivity solutions. This deal is a significant move in AT&T's strategy to expand its high-speed internet offerings and control deployment costs. In line with this, the company plans to surpass 30 million fiber passings by the end of 2025.
AT&T's third-quarter 2024 earnings report presented mixed results, with total revenues standing at $29 billion and capital expenditures increasing to $5.3 billion. The company added 403,000 postpaid phone subscribers and saw a 6% EBITDA growth in its Mobility segment. However, the number of fiber additions was lower than expected, and guidance for the Business Wireline segment was reduced.
Analyst firms TD Cowen and Oppenheimer have both adjusted their price targets for AT&T. TD Cowen raised its target to $26.00 from the previous $23.00, maintaining a Hold rating on the stock. Oppenheimer, influenced by AT&T's strong quarterly performance and progress in reducing debt, raised its price target to $24, maintaining an Outperform rating. Both firms noted potential challenges in achieving free cash flow growth due to uncertainties surrounding the DIRECTV stream service.
InvestingPro Insights
As AT&T (NYSE: T) moves to acquire spectrum licenses from UScellular, it's worth examining AT&T's current financial position and market standing. According to InvestingPro data, AT&T boasts a substantial market capitalization of $160.15 billion, underlining its position as a major player in the telecommunications industry.
AT&T's P/E ratio of 17.97 and adjusted P/E ratio of 12.49 for the last twelve months suggest the stock may be reasonably valued relative to its earnings. This is further supported by an InvestingPro Tip indicating that AT&T is "Trading at a low P/E ratio relative to near-term earnings growth," which could be attractive to value-oriented investors considering the company's expansion moves like this spectrum acquisition.
The company's dividend yield of 4.97% is noteworthy, especially given another InvestingPro Tip highlighting that AT&T "Has maintained dividend payments for 41 consecutive years." This long-standing commitment to shareholder returns may provide some reassurance to investors as the company invests in expanding its spectrum holdings.
AT&T's recent market performance has been strong, with a 17.43% price total return over the past three months and a significant 34.34% return over six months. An InvestingPro Tip notes that the stock is "Trading near 52-week high," which aligns with the company's strategic moves and market confidence.
For readers interested in a deeper analysis, InvestingPro offers additional tips and metrics that could provide further insights into AT&T's financial health and growth prospects. There are 12 more InvestingPro Tips available for AT&T, offering a comprehensive view of the company's position as it continues to strengthen its market presence through strategic acquisitions like the UScellular spectrum deal.
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