U.S. Cellular deals Chicago, central Illinois and St. Louis territory to Sprint Nextel for 480 million
Nov 08, 2012 (Menafn - Chicago Tribune - McClatchy-Tribune Information Services via COMTEX) --U.S. Cellular Corp., whose name adorns the White Sox's stadium, is exiting its home market and several others amid heavy competitive pressure.
The Chicago-based wireless carrier said Wednesday that it is selling its Chicago, central Illinois and St. Louis markets, along with those in Indiana, Michigan and Ohio, to subsidiaries of Overland Park, Kan.-based Sprint Nextel Corp. for 480 million.
The deal, which requires regulatory approval and is expected to close in mid-2013, will transfer spectrum and about 585,000 customers -- roughly 10 percent of U.S. Cellular's subscribers -- to Sprint. The markets accounted for 11 percent of U.S. Cellular's service-related revenues through the first nine months of the year. After the sale closes, the company will have more than 5.2 million customers in 23 states. In Illinois, the carrier's remaining markets include Joliet and Rockford.
About 640 jobs in the Chicago area, 160 of them in the city proper, will be eliminated over time. Overall job losses in the affected markets will number about 980 positions. U.S. Cellular, which employed about 8,400 at the end of September, will retain its Chicago headquarters along with 860 jobs there. In the greater Chicago area, the company will have more than 1,400 employees after the transition.
The Sprint deal "positions us, I believe, very strongly for the future, and we're going to continue to be headquartered here in Chicago," President and Chief Executive Mary Dillon told the Tribune.
Dillon said the carrier will continue to provide the same level of customer service during the transition. But for now, neither U.S. Cellular nor Sprint is offering details about changes in pricing plans or contracts for affected subscribers, other than to say cellphone numbers will stay the same. Dillon said the company will be keeping an eye on its subscriber base to prevent defections and "making sure our customers are very aware there is no change or impact on them for many months."
The company has created a website, uscellularinfo.com, with information for consumers.
Investors reacted poorly to the deal. Shares of U.S. Cellular closed down 12.4 percent at 34.18, and its parent company, Chicago-based Telephone and Data Systems Inc., fell 16.6 percent to 21.87.
On a morning conference call, Dillon described the move as getting "stronger by initially getting smaller" and said the decision was "not taken lightly," given the impact on employees.
"We aren't reaching the rate of profitable customer growth and return on investment we need to operate effectively" in the affected markets, Dillon said on a conference call. She noted that the rate of customer defections is disproportionately higher, and because the company entered those geographies later than its rivals, it had difficulty gaining share.
U.S. Cellular does not offer Apple's iPhone and has lost subscribers to other carriers as a result. It also does not offer 4G service in Chicago, lagging competitors such as AT&T and Verizon Wireless. Sprint is rolling out its newest 4G network in Chicago and the surrounding suburbs. Dillon acknowledged that launching 4G service requires a step up in technology investment that did not make financial sense in markets where penetration is low.
"This move does allow us to get to the next generation of technology in our remaining markets faster," Dillon said. The company expects 58 percent of its customers to be covered by 4G by year-end.
The carrier said the Sprint deal does not change naming rights for U.S. Cellular Field.
"We have a long-term relationship with the White Sox," David Kimbell, chief marketing officer at U.S. Cellular, told analysts on a conference call. "Even after this transaction, we're going to have 1,400 associates in Chicago, so that relationship (with the White Sox) is not part of that deal and will not be changing."
Also Wednesday, U.S. Cellular reported third-quarter net income of 35.5 million, or 42 cents per share, a 43 percent decline from net income of 62.1 million, or 73 cents per share, a year earlier. Revenue was up 3 percent to 1.14 billion.
wawong@tribune.com
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