USCellular up for sale
Telephone & Data Systems (TDS), the major shareholder of the nation’s largest regional cellular provider, has embarked on a journey to explore "strategic alternatives." Both US Cellular and TDS have expressed their commitment to considering a broad spectrum of options while they undergo this strategic exploration. The announcement had a remarkable impact on the market, driving US Cellular's stock up by nearly 90% as it would be a main acquisition target for the large operators. Presently, US Cellular boasts a customer base of 4.7 million retail connections in 21 states, making it the fifth largest operator behind Dish Networks, which acquired the Boost Mobile assets from Sprint.
The Circana Take:
- The U.S. cellular market is highly consolidated as the top three operators have been scooping competition when the opportunity presents itself. However, it is hard to argue whether a bid for USCellular, an aged regional network operator, is an opportunity considering that the company is an end-to-end operator with ownership of all network-related assets including the network towers, which the top three prefer to lease. Any bidder would have to de-invest parts of the assets such as the network towers or aged equipment that may not be compatible with their existing network structure. Nevetheless, 4.7 million connections with tolerable churn rates (over 90% are on postpaid accounts) is not easy to ignore for any of the top three carriers.
- Dish Network, which is relentlessly trying to build a postpaid base off the ground with its Boost Infinite push, could be a potential buyer. But acquiring an old legacy network operation that will not be compatible with its Open RAN 5G network for the sake of fast access to a large postpaid base is not feasible (especially considering Dish’s financial challenges).
- A cable MVNO push is unlikely, but there might be a churn opportunity in the areas they serve within USCellular’s footprint. The transition of close to 5 million subscribers over to the new parent should give Charter and Comcast the opportunity to poach some of these users with attractive bundle offers.
- If and when USCellular is acquired by an existing operator, Consumer Cellular will remain as the last standing target. Like USCellular, Consumer Cellular has over 4 million customers, but its MVNO structure makes it a much more appealing acquisition option. Moreover, Consumer Cellular’s aged user base stands out with its credit rating and low churn.
Rate hikes at AT&T and Verizon
Verizon and AT&T have opted for a change of tune, this time dialing up the costs on some of their vintage plans. AT&T has set the stage with a $2.50/month hike on the bills of customers who signed up for the Unlimited Elite plan prior to August 1, 2022. Meanwhile, Verizon has taken a page from the same playbook, increasing the price on what they term "select legacy plans" (including the 5G Start, Go Unlimited, Beyond Unlimited, Beyond Unlimited w/5G Ultra-Wideband, Above Unlimited, Above Unlimited w/5G Ultra-Wideband, and Single Unlimited Talk & Text 500MB plans) by a “modest” $3 per month. Notably, Verizon had orchestrated a similar scenario back in April when it increased the price of an array of other legacy plans by $2/month.
The Circana Take:
- Raising the monthly fee of legacy plans to convince customers to upgrade to the latest (and more lucrative) rate plans is a classic practice in the mobile space. AT&T and Verizon’s timing with this pricing move is spot on; the market is getting ready for a new device upgrade cycle with Apple’s new iPhone models, which will be subject to aggressive carrier promotions if customers sign up for the new and expensive rate plans. The price hike on the legacy plans gives potential device upgraders an extra reason to sign up for the new rate plans and take advantage of their carriers’ attractive trade-in discounts for the new iPhones.
- High service prices continue to be the number one driver of dissatisfaction (leading to churn) among mobile customers; a third of customers citing any kind of dissatisfaction with their service provider highlight service prices as the reason. AT&T and Verizon lead the market in this sentiment due to their premium pricing, and while the goal/hope is to get users off the legacy plans, such hikes can lead additional churn when cable MVNOs continue their attractive internet/mobile bundles at $49/month.