Analyst Says T-Mobile’s Acquisition of USCellular Is Key to 5G Network Leadership and Market Expansion – T-Mobile US (NASDAQ:TMUS), United States Cellular (NYSE:USM)

Benchmark analyst Matthew Harrigan maintained his Buy rating T-Mobile US, Inc (NASDAQ:TMUS) with a price target of $200.

On Tuesday, T-Mobile officially announced its predictions United States Cellular Corp (NYSE:USM) deal. It agreed to pay ~$4.4 billion for 4.5 million retail mobile customers in 21 states and 30% of the much smaller carrier’s wireless spectrum.

USCellular will retain all of its 2,100 towers (with space leased to T-Mobile for fifteen years) and its interest in Verizon Communications Inc (NYSE:VZ) joint venture company. T-Mobile will also extend the existing lease agreements for 600 towers.

Harrigan said the proposed transaction is consistent with T-Mobile’s M&A strategy, which is disciplined and modest in scale following the transformational Sprint transaction. This follows the recently closed $1.3 billion acquisition of value market entrant Mint Mobile.

The analyst said that in addition to T-Mobile exceeding soft spectrum limits in certain markets, foreseeable consumer dissatisfaction over MNO primary service pricing will likely result in antitrust scrutiny from the Biden administration in the election year.

According to Harrigan, the FCC or DOJ’s challenge to the proposed USCellular deal does not require even the aggressive horizontal M&A strategies proposed by DOJ’s Jonathan Kanter or even the more extreme ambitions of FTC Chair Lina M. Khan.

According to the analyst, the proposed transaction represents only approximately 2% of T-Mobile’s equity capitalization and transaction approval risk and is immaterial to T-Mobile’s investment thesis.

The analyst expects T-Mobile to continue to benefit from the facts and perceptions of its 5G leadership and share profits with smaller markets and smaller businesses.

Harrigan forecast second-quarter revenue and EPS of $20.27 billion and $2.23.

Reduction: TMUS stock was up 0.99% at $168.97 at last check on Wednesday.

Photo: Mike Mozart via Flickr