United States Cellular Corporation
) - the sixth largest wireless telecom operator in the U.S.,
received funds worth $40.1 million from Federal Communications
Commission (FCC) as a part of FCC's Mobility Auction 901 plan.
This funding, which also forms a part of Broadband Stimulus
Program of the U.S. government will allow U.S. Cellular to provide
broadband service to rural areas in the U.S. where it operates. The
company will cover 10 states including Illinois, Iowa, Maine, North
Carolina, Oklahoma, Tennessee, Virginia, Washington, West Virginia
and Wisconsin where it will be offering its wireless services.
U.S. Cellular is already a part of American Recovery and
Reinvestment Act and Universal Service Fund (USF) program, which
provides government grant to the U.S. telecom carriers to offer
wireless services to rural areas in the country. The company also
receives $160 million annually from USF as part of internet
expansion plan in rural areas. Accordingly, we believe that
continuous funding from the U.S. government will help the company
expand its rural wireless service going forward.
U.S. Cellular continues to invest in constructing new cell
sites, increasing capacity in existing cell sites and switches,
upgrading technology, developing new and enhancing existing office
systems. Moreover, the company also completed a spectrum swap with
Verizon Communications Inc.
) in September last year that provided U.S. Cellular with eighteen
700 MHz spectrum licenses, thereby supporting its LTE deployment
strategy across the U.S.
Although these developments, over the long haul are envisioned
to be accretive to the company's profitability, we apprehend that
heavy capital expenditures may prove detrimental for its financial
position in the near term. Furthermore, a competitive market,
intense pricing and regulatory pressures can further forestall the
company's near-term profitability.
We have a long-term Neutral recommendation on U.S. Cellular
Corporation. Nevertheless, currently, the stock holds a Zacks #2
Rank, implying a short-term Buy rating.
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