T-Mobile claims acquiring UScellular will boost competition, but M&A in such a concentrated market will attract scrutiny over the potential effects on pricing and consumers
T-Mobile agrees to acquire customers, stores and spectrum from UScellular
On 28 May 2024, T-Mobile in the US announced that it had agreed to buy regional operator UScellular’s mobile operations in a deal worth approximately $4.4bn (£3.5bn). UScellular is the fifth largest mobile provider in the country and is currently active in 21 states. The proposed transaction would mean further concentration of the mobile market, which is often criticised for its relatively high prices, particularly compared to Europe. In contrast, European operators often refer to the US model as more healthy and sustainable, and would be eager to see competition authorities at home adopt a more supportive approach to consolidation. The acquisition includes UScellular’s ~4.5m mobile customers and its retail stores, as well as certain spectrum assets – equivalent to around 30% of its total holdings. T-Mobile expects the deal would yield around $1bn (£0.8bn) per year in total capex and opex synergies upon integration, of which “a portion” would be reinvested, for example into network quality. Following the expected closing of the acquisition in mid-2025, which T-Mobile acknowledges is contingent on obtaining regulatory approval, UScellular would retain ownership of its other spectrum, as well as its towers. T-Mobile would enter into a long-term arrangement to lease space on at least 2,100 of the additional towers being retained.
The parties argue that further consolidation of the mobile market will increase competition instead of reduce it
Through the deal, T-Mobile would acquire all of UScellular’s 600MHz, 2.5GHz and 24GHz spectrum, and the majority of its low-band and lower mid-band holdings. The mid-band spectrum could be particularly valuable given it is a key input to T-Mobile’s 5G network and its fixed wireless access (FWA) proposition. UScellular would still retain about 70% of its spectrum assets, including those in the C-band. T-Mobile also claims that the acquisition would increase competition rather than harm it by creating much-needed choice in both the fixed and mobile broadband markets. It states that by bringing competitive offers to more people, the transaction would help narrow the digital divide and deliver value for money, which would force other operators – i.e. AT&T and Verizon – to respond accordingly. In addition, T-Mobile states that the deal would benefit end users through enhanced nationwide coverage and greater capacity. This line of argument reflects similar thinking employed by Three and Vodafone in the UK, which have pledged that their combination would, from day one, give millions of customers a better network experience with greater coverage and reliability at no extra cost.
The proposed deal is sure is to capture the attention of US regulators
The announcement follows T-Mobile’s acquisition of MVNO Mint Mobile, which the Federal Communications Commission (FCC) only approved in April 2024 after a lengthy review, as well its mega-merger with Sprint in 2020 that reduced the number of national mobile network operators in the US from four to three. The Sprint merger in particular has come under fire over suggestions that it caused prices to decline at a slower rate than they were before the two players combined or to plateau entirely. However, T-Mobile states that if UScellular customers were to choose to switch to T-Mobile post-merger, together they could save “hundreds of millions of dollars” annually. It is unclear at this stage whether and what issues will arise during the regulatory review process, especially as it’s an election year. Since the winning President will determine the partisan majority of the FCC, the election could have a bearing on the transaction’s chances of approval, as well as any commitments required of T-Mobile. In any case, the UScellular deal is arguably more significant and complex than the Mint Mobile acquisition, with the FCC’s latest Communications Market Report positioning UScellular as an important competitor and investor despite accounting for around 1% of total connections. In an already highly concentrated market, it should be expected that the FCC – as well as potentially the Federal Trade Commission (FTC) and Department of Justice (DOJ) – will give the proposed transaction genuine scrutiny over the possible impacts on competition, prices and consumers.
