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US Cellular (USM) Scales a 52-Week High: Right Time to Buy?

Shares of wireless service provider United States Cellular Corp.USM - a subsidiary of Telephone & Data Systems Inc. TDS - hit a 52-week high of $43.56 on Mar 28. However, the company ended the day's trading a trifle lower at $43.25. Notably, year to date, the stock has returned nearly 6%.

U.S. Cellular reported fourth-quarter 2015 adjusted loss per share of 2 cents, significantly narrower than the Zacks Consensus Estimate of a loss of 43 cents and the year-ago loss of 25 cents per share. However, the top line failed to beat the mark.

U.S. Cellular has successfully completed the rollout of 4G LTE network in 2015. Moreover, the company has initiated testing of voice over LTE or VoLTE and plans its commercial deployment going forward. Additionally, multiple 4G LTE roaming agreements have been duly signed. We thus expect the company to benefit from its LTE expansion and VoLTE service drive.

Further, in order to offer services at competitive rates, U.S. Cellular continues to invest in the construction of new cell sites, capacity expansion of cell sites and switches, technology upgrades, new and existing office system enhancement, as well as the establishment of new and remodeling of existing retail stores.

While the company is steadily investing in new initiatives, the company seeks to control cost through the divestiture of call centers. U.S. Cellular is expected to benefit from the successful migration of customers from 3G to 4G networks and the deployment of a new billing system that will ultimately result in cost benefits.

The company is also determined to offer the best wireless experience to its customers by providing innovative devices with superior quality network and national coverage. Meanwhile, the continual launches of tablets and smartphones is a step forward in this direction.

The company is also optimistic about the growing demand for smartphones, which in turn will boost its market hold and data revenues. Evidently, in fourth-quarter 2015, smartphone sales were strong and represented 74% penetration among postpaid customers, up from 65% recorded in the year-ago quarter.

However, U.S. Cellular's high-margin roaming revenues are under pressure owing to lower voice usage and roaming rates. Further, the company operates in an intensely competitive wireless market and is significantly challenged by lower-cost mobile service plans from competitors.

Nonetheless, the company's launch of various promotional offers in order to provide better plans than Verizon Communications Inc. VZ and AT&T, Inc. T bode well and should help fend competition.

U.S. Cellular currently carries a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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