Another week, another move by Sprint Nextel (NYSE:S, news, filings) to transform itself back into a real alternative to Verizon and AT&T. With ink still wet on the Softbank investment and the clarifying Clearwire ownership move, Sprint found another inorganic step to make yesterday. They are buying a 10% surgical slice of US Cellular.
Basically, they're spending $480M in cash to acquire key PCS spectrum plus 585K 3G customers in the Midwestern states of Illinois, Indiana, Michigan, Missouri, and Ohio. But they're not buying US Cellular or taking on the 980 affected employees who will be laid off as a result. The spectrum will go toward what they need for their LTE buildout, while the additional customers won't move the needle much but won't hurt either.
For its part, US Cellular is basically abandoning the region to focus on its more profitable, but more rural customer base. In other words, they think they'll do better as a roaming partner to the big three than as a direct competitor in major markets. Traders were not happy with that plan today, as they had apparently either expected a better price for the spectrum or some offense rather than defense in these markets.
Sprint also disclosed plans to drop the Nextel half of its name with the closing of the Softbank deal, which will be one of the least surprising rebrandings of 2013. I'm amazed the Nextel brand has managed to tag along this long given the integration disasters it is now associated with and the shutting down of the network itself next year.
The Softbank deal has obviously emboldened Sprint to clean house in the near term, presumably with approval from Japan to make such strategic moves in advance of the closing next year. Hence, perhaps I need to revisit my thought that any Sprint move on the wireline business would wait a while. Maybe they'll get an early start, just in time for the holidays. But it's probably more likely that they will find other incremental pieces to further bolster the underlying strategic position of the wireless business.
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