UScellular State of Spectrum: What is left over?

Published on Nov 21, 2024

By Zev Stravitz

UScellular has been involved in 3 major transactions since May with T-Mobile, Verizon, and AT&T. What spectrum is left over, and what is it worth?

T-Mobile Deal

On May 28, UScellular announced that T-Mobile was to purchase significant spectrum and network assets for $4.4 billion and take on about $2B of debt. The spectrum includes low band, mid band, and high band licenses.

We can break the spectrum down into two categories:

Assignments and transfers: 10.15B MHz-Pops across 679 licenses, with an Airwave Research Valuation (ARV) estimate of $2.24B.
New leases: 4.696B MHz-Pops across 951 licenses

Here is a breakdown of the assignments and transfers by band:

Verizon Deal

Then on Oct. 18, UScellular announced a significant sale to Verizon. According to the UScellular release, this includes:

“663 million MHz POPs of Cellular (850 MHz) spectrum licenses as well as 11 million MHz POPs of AWS and 19 million MHz POPs of PCS licenses for a total of $1.0 billion”.

Note on MHz-Pop's reported in Verizon deal

The MHz-Pops total for the T-Mobile and Verizon deals combined exceeds the total MHz-Pops in UScellular's PCS portfolio. Only five licenses remain in the PCS portfolio post-T-Mobile deal, totaling about 3 million MHz-Pops. We believe the additional 16 million MHz-Pops Verizon claims to have purchased likely includes licenses initially intended for T-Mobile. It’s plausible the T-Mobile deal had contingencies, resulting in these PCS licenses going to Verizon instead.

Regardless, we assume that Verizon acquired the remaining PCS spectrum, so when determining the value of the remaining spectrum, this discrepancy is irrelevant.

Given that almost the entirety of UScellular's AWS-1 spectrum was sold to T-Mobile in May, the 11M MHz-Pops referenced here must include AWS-1 and AWS-3, which they are labeling as "AWS".

Furthermore, while the cellular spectrum sold in the Verizon deal includes the entirety of their cellular spectrum, it makes up a smaller portion of their total AWS and PCS portfolio, which we calculate at 586M and 464M MHz-Pops, respectively.

Unfortunately, the market-level details of the spectrum in the Verizon deal was not provided to the public, so to derive a precise valuation for the remaining AWS spectrum in the UScellular portfolio, we used the average market index of the UScellular AWS spectrum post-TMO transaction, and applied it to the remaining MHz-Pops after the Verizon deal. Given that the Verizon deal is a small portion of the UScellular AWS portfolio, this provides a reasonable approximation of the remaining AWS spectrum.

AT&T Deal

On Nov 7, UScellular announced a sale to AT&T for $1.018B, which includes:

All of their 700L B and C block licenses except for a small 700 B block license in Kansas (1.5M MHz-Pops), which will be going to Nex-Tech. On Oct. 29, an application was filed to transfer this license (WQJQ763).
All of their 3.45 GHz spectrum.

This transaction includes 1.575B MHz-Pops total, broken down by 331M MHz-Pops in 700L and 1.244B MHz-Pops in 3.45 GHz.

What is left over?

Using the information from all three transactions and the original state of the portfolio, we derived an approximate valuation for the remaining spectrum in each band of the UScellular portfolio. The results are summarized in the table above.

The "Leftover ARV Estimate" for each band is based on the Airwave Research Valuation (ARV) model, which utilizes band and channel block prices and adjusts for market-differences. To read more about the ARV model, see our ARV announcement post. You can also access the whitepaper for additional details.

We also included a range of possible outcomes, which includes a conservative estimate and an aggressive estimate of the remaining spectrum value. We believe that because T-Mobile, Verizon, and AT&T have already made their initial deals, the absence of competitive buyers skews likelihood towards the conservative estimate.

Our platform allows for conservative estimates or even “fire sales” to be considered, which you can generate yourself with an Airwave Research license.

In summary, an estimated $2.28 billion worth of spectrum remains, accounting for 38% of the original $6.067 billion portfolio value before the three deals.

In the conservative case we value the spectrum at $1.59B, and in the aggressive case we value the spectrum at $4.04B.