CHICAGO - Telephone and Data Systems, Inc. (NYSE: TDS), parent company of United States Cellular Corporation (NYSE: NYSE:USM), commonly known as UScellular, has entered into a definitive agreement to sell UScellular's wireless operations and a portion of its spectrum assets to T-Mobile for $4.4 billion. The transaction, which includes cash and the assumption of debt, was unanimously approved by the TDS board and is part of a strategic review process initiated in August 2023.
Walter C. D. Carlson, Chair of the TDS Board, stated that the sale to T-Mobile will enhance service and value for UScellular's customers while delivering significant shareholder value. UScellular will retain about 70% of its total spectrum assets and its tower business, which is set to become one of the largest in the U.S. Post-transaction, T-Mobile will become a long-term tenant on over 2,000 towers owned by UScellular, with an extended lease term on approximately 600 existing towers.
The deal also includes T-Mobile's commitment to a 15-year tenancy, ensuring uninterrupted service for UScellular customers and a stable revenue stream for the tower business. In 2023, UScellular's equity method investments yielded $158 million in income and $150 million in distributions.
UScellular's board will decide on the distribution of sale proceeds, with TDS receiving its proportional share. TDS plans to use these funds for its fiber build-out program, debt reduction, and potentially for returning capital to shareholders or pursuing growth opportunities.
The transaction, subject to regulatory approvals and customary closing conditions, is expected to close by mid-2025. TDS, as the 83% shareholder of UScellular, has consented to the agreement.
In a related announcement, TDS declared reduced dividends for the second quarter of 2024 to support its fiber expansion strategy. Dividends for Common Shares and Series A shares have been set at $0.04 per share, payable on June 28, 2024, to shareholders on record as of June 14, 2024. Dividends for Series UU and Series VV preferred shares remain unchanged.
InvestingPro Insights
As Telephone and Data Systems, Inc. (NYSE: TDS) reshapes its business structure with the sale of UScellular's wireless operations to T-Mobile, investors are closely monitoring the company's financial health and future prospects. According to InvestingPro metrics, TDS has a market capitalization of $2.12 billion, reflecting the scale of the company within the telecommunications sector. Despite a challenging environment, TDS has maintained a strong dividend yield of 4.05%, which is a testament to its commitment to returning value to shareholders.
An InvestingPro Tip highlights that TDS has impressively raised its dividend for 31 consecutive years, showcasing a consistent and reliable income stream for investors. Additionally, the company has maintained dividend payments for an outstanding 51 consecutive years. This enduring ability to provide dividends could reassure investors, especially in light of the recent transaction with T-Mobile and the reduced dividends for the second quarter of 2024 to support TDS's fiber expansion strategy.
Investors should note that while TDS has seen a strong return over the last year with a price total return of 195.29%, analysts do not anticipate the company will be profitable this year. This outlook is reflected in the negative P/E ratio of -3.87, indicating that the market is pricing in the company's current lack of profitability. However, the significant returns over the past year and the recent strategic moves could suggest potential for future growth.
For those looking to delve deeper into TDS's financials and future outlook, InvestingPro offers further insights and additional tips. To explore these tips and gain a comprehensive understanding of TDS's investment profile, visit https://www.investing.com/pro/TDS. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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