On Wednesday, a deal was announced in which Sprint Nextel Corp. was buying some Midwest US Cellular service areas, including their customers.
The deal is worth $480 million dollars and involves 585,000, or 10% of all US Cellular customers in Illinois, Indiana, Michigan, Missouri and Ohio. Sprint, which is based in Overland Park, Kansas, made the deal in order to boost network capacity in the region.
Before the deal US Cellular was the 6th largest network in the country with 5.8 million devices on its network. The company had been in a steady decline in last several years as it slowly lost customers to the bigger named providers.
Sprint has also been struggling to compete, but had recently reached a deal with Japanese based Softbank Corp. for $20 billion, which has been lending Sprint the money to seek out such deals as the one with US Cellular.
Unfortunately, the Chicago based US Cellular, said that the deal would see about 980 of its employees lose their jobs, as Sprint doesn’t want to take them on.
US Cellular’s remaining network will span areas in Wisconsin, Iowa, Oregon, Maine and North Carolina, and is also up for sale.
Analyst Christopher King at Stifel Nicolaus said that while Sprint’s offer seems fair, “we believe the spectrum in Chicago, and St. Louis represented a portion of the most valuable assets that US Cellular had,” and investors were banking on a better return for it. Finding a buyer for the rest of the company will be more difficult now, he said.
After the sale was announced US Cellular shares fell $4.28 or nearly 11% to $34.74 a share, the lowest since early 2010 when the market was in a broad decline. The acquisition did not immediately help Sprint investor’s as they saw shares in the company actually fall 7 cents after the announcement, ending the day at $5.66 per share.