WSJ: T-Mobile & Verizon in talks to carve up U.S. Cellular

Walter Journal reporting that T-Mobile and Verizon are in talks to carve up regional carry US Cellular Joining us for more is Walter Plastic of Light Shed Partners. Good morning to you, Walter. Help us understand how you think this plays out. And I’m also curious whether you think regulators are going to allow all this to take place these transactions. Let’s let’s handle the second question first Andrew that these transactions typically take a long time. T-Mobile was was just trying to buy an MVNO. That’s not anyone that owns spectrum. This is the the radio frequencies that the government really controls and that took a very long time to get approved. The current administration was not a fan of the T-Mobile acquisition of Sprint. However, we do have an election coming up. So the length, the length of this process will probably take it into 2025 and then the determination is going to be, you know, whoever happens to be in the administration at that point. In terms of the deal itself, I’m sorry, go ahead, Andrew. No, go ahead. Talk about the deal itself. I mean the deal itself, it’s it’s, I mean, this is just a company that stuck around because the Carlson family, the owners hadn’t wanted to sell at a price that anyone wanted to buy at. And it’s been sitting out there for a very long period of time. It’s very small. I mean, it has a one or 2% impact on T-Mobile, even if T-Mobile bought the whole thing. And this article is not even talking about them buying the whole thing. That doesn’t mean that the current administration no matter how small it is approves any deal as we’ve seen you know in countless deals that have been proposed you know over the past year or so. When you think about this deal is there is there first of all is there anybody else who would want to play in this at all in terms of a potential buyer how much does USA. They’re totally go for in the end. Right now it’s at 46 O 5I mean the are the headline of the article you know by the journal was was was saying this was going to get split up by Verizon. That’s really you know it has to because US Cellular has a joint venture with Verizon in in some markets that Verizon has the ability to purchase. I’m not even sure T-Mobile can. I don’t think there can be a transfer control. I could be wrong on that but Verizon has to be involved at least in a portion of this transaction and they might not be willing to to purchase at whatever you know US Cellular is willing to sell at. However, the the transaction size that was talked about 2 billion shouldn’t be enough to buy the remaining operations that are left. So there’s one or two things happening here. Either the article fell short in describing that they’re also going to assume the debt of US Cellular or they’re going to only buy a portion of US Cellular’s assets, which would mean that the US Cellular would still remain as a company unless they could figure out if AT&T or Verizon could could come up with the price to buy the remainder of their operations. Well, to go broader with me for a second of, of the cellular providers, capable providers, what do you like these days? What do you not like? I mean connectivity is very difficult right now across the board, right. You’re talking about a 2 to 3% growth business, even the fastest growing company like T-Mobile and wireless is 4%. They’re facing the challenges of a government subsidy program, ACP that they’re fighting try and get funding for adding it on as in into this FAA act. So it’s difficult to find attractive names in this space. We don’t recommend anything in connectivity within that group. Nothing, nothing, nothing. Look, the end game here, Andrew, globally is, is consolidation. Clearly not under the Biden administration, but you look around the world, we are going to buy our communication services, our home broadband and our wireless from one provider in the future. AT&T is at least executing on a strategy to build fiber to do that. T-Mobile now is starting to do that. They they announced they’re investing, you know, a couple of billion dollars with Lumen to build fiber. That’s the end game. You know, if the administration changes and they’re more willing, you know to have larger acquisitions, maybe we’ll see that that happened more blessedly. That’s where you put the cable providers, Charter, Comcast and the like into this mix. I mean the home broadband markets under a tap because they’re building fiber and they’re getting attacked on the fixed wireless side of things. So that is their remaining growth engine. They basically look and you know and sound like a telco and now trade like a telco. So in charters case, consolidation may be its only way out at this point. I mean look at the leverage and the amount of stock they’re buying back as opposed to deleveraging. The company, at least Comcast, has some diversity in their assets and and their wireless business might have a little bit more strategic approach to how they’re how they’re approaching the market.