According to The Wall Street Journal, Sprint (click ticker for report: ) will acquire spectrum and wireless operations from Midwest-provider US Cellular (USM) for approximately $480 million. Sprint will acquire key markets, including Chicago and St. Louis, and the deal includes approximately 585,000 customers. We don’t see any material impact on our fair value estimate for Sprint.
The deal isn’t incredibly material for Sprint, but we think it certainly acquired these assets on the cheap. US Cellular has struggled to maintain market share in large markets due to the competition from larger providers with stronger smartphone offerings. We believe giving existing US Cellular customers the option of the iPhone, as well as other high-end Android phones, will help reduce churn. US Cellular continues to run operations in over 20 states, and we wouldn’t be shocked to see another company acquire its assets.
Leap Wireless (LEAP) will probably be the next firm to fall prey to consolidation, though the US Cellular deal brings into question what, if any, premium shareholders will receive. Clearwire (CLWR) also looks like a possible takeover candidate, but recent legal actions make that situation more unclear.