U.S. Cellular Corporation USM recently inked a definitive agreement with Verizon Communication, Inc. VZ to divest a portion of its spectrum holdings. The all-cash transaction is valued at $1 billion, subject to some potential adjustments specified in the purchase agreement, regulatory approvals and customary closing conditions. Post completion of the acquisition, Verizon will gain access to 663 million MHz POPs (Megahertz-Population) of USM’s Cellular (850 MHz) spectrum licenses, as well as 11 million MHz POPs of its AWS and 19 million MHz POPs of PCS licenses.
These additional spectrum assets will likely boost Verizon’s network capacity and improve network performance with consistent connectivity and better coverage. This will strengthen VZ’s position in a highly competitive and saturated U.S. wireless market. Telephone and Data Systems, Inc., which owns 82% share in U.S. Cellular has provided approval for the transaction.
Apart from this, U.S. Cellular has also opted to divest some other selected spectrum licenses to two other mobile network operators. Following the closure of these deals, USM will retain several low and mid-band spectrums (700 MHz, 3.45GHz, CBRS and C-Band) and mmWave spectrum.
Will This Move Drive USM’s Share Performance?
U.S. Cellular is one of the largest wireless service providers with 4.5 million retail connections in 21 states. The company is taking several initiatives to enhance efficiency and drive cost optimization across its operations.
Earlier this year, the company inked a definitive agreement with T-Mobile. Per the deal, TMUS is set to acquire USM’s wireless operations along with 30% of its spectrum assets. TMUS will pay $4.4 billion, which includes a combination of cash and up to $2 billion of assumed debt. This transaction will likely close midway in 2025.
In May 2024, USM revealed the company’s intention to opportunistically monetize its spectrum holdings, which was not part of the TMUS deal. The recent agreements with Verizon and other mobile network operators perfectly align with that strategy. This initiative will enable USM to reduce its debt burden, improve liquidity and accelerate investments in network advancements.
This is worth mentioning that the agreement with Verizon and other network operators cannot be accomplished until TMUS completes the acquisition of its USM spectrum in mid-2025.
USM’s Stock Price Movement
Shares of USM have gained 52.2% in the past year compared with the industry’s growth of 50.4%.
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USM’s Zacks Rank and Key Picks
USM currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader industry have been discussed below.
Zillow Group, Inc. ZG carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the last reported quarter, it delivered an earnings surprise of 25.81%. ZG delivered an earnings surprise of 37.41%, on average, in the trailing four quarters. The company is witnessing solid momentum in rental revenues, driven by growth in multi and single-family listings, which is a positive factor.
Ubiquiti Inc. UI sports a Zacks Rank of 1 at present. The company offers a comprehensive portfolio of networking products and solutions for service providers and enterprises.
Its excellent global business model, which is flexible and adaptable to evolving changes in markets, helps UI to beat challenges and maximize growth. The company’s effective management of its strong global network of more than 100 distributors and master resellers improved UI’s visibility for future demand and inventory management techniques.
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United States Cellular Corporation (USM) : Free Stock Analysis Report
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
Zillow Group, Inc. (ZG) : Free Stock Analysis Report
Ubiquiti Inc. (UI) : Free Stock Analysis Report
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