Is U.S. Cellular's Strategic Transformation a Buy Signal for Value Investors?

In August 2025, U.S. Cellular's $4.3 billion divestiture of its wireless retail operations to T-Mobile marked a seismic shift in the telecom sector. The transaction, which transformed the company into Array Digital Infrastructure, Inc., has sparked a debate among value investors: Does this strategic pivot unlock long-term value, or is it a high-risk gamble in a crowded infrastructure market? Let's dissect the financial and operational implications of this transformation to determine whether Array represents a compelling entry point for patient capital.

The T-Mobile Divestiture: A Catalyst for Value Creation

The sale of U.S. Cellular's wireless business to T-Mobile was not merely a liquidity event—it was a strategic rebirth. By offloading its retail operations, Array secured $4.3 billion in proceeds, with $2.6 billion in cash and $1.7 billion in debt assumed by T-Mobile. This allowed the company to declare a $23-per-share special dividend, distributing $1.63 billion to its parent company, Telephone and Data Systems (TDS). The dividend, combined with debt reduction, slashed TDS's interest expenses by $80 million annually and improved its credit profile. S&P's upgrade of TDS's rating to BBB– from BB, coupled with the removal from CreditWatch, signals a stronger balance sheet and reduced default risk.

The divestiture also freed Array to focus on its core infrastructure assets: 4,400 towers, 70% of its spectrum portfolio, and a growing fiber network. This shift aligns with a broader industry trend where telecom companies are shedding low-margin retail operations to capitalize on the higher-growth infrastructure sector. For value investors, the key question is whether Array's new business model can generate returns comparable to established infrastructure REITs like American Tower Corporation (AMT) and Crown Castle (CCI).

Spectrum Monetization: A $2 Billion Tailwind

Array's strategic playbook extends beyond the T-Mobile deal. Pending spectrum sales to AT&T and Verizon, expected to close in 2025 and 2026, could generate an additional $2 billion in liquidity. These transactions, subject to regulatory approvals, will further bolster Array's capital base and fund its fiber expansion. The company's retained 70% of its spectrum portfolio also positions it to monetize assets through licensing or partnerships with private 5G operators—a growing market as enterprises seek tailored connectivity solutions.

The spectrum monetization strategy is critical for Array's valuation re-rating. Unlike traditional telecom providers, which trade at 10–15x EBITDA, infrastructure REITs command 15–20x multiples due to their stable cash flows and defensive characteristics. Array's dual-asset model (towers + spectrum) could bridge this gap, offering investors exposure to both recurring lease income and high-margin asset sales.

Fiber and Tower Growth: The New Revenue Engine

Array's 2025 capital allocation strategy is a masterclass in capital efficiency. With 80% of its budget directed toward fiber expansion, the company aims to reach 1.8 million fiber service addresses by 2026. TDS Telecom, its fiber subsidiary, has already added 27,000 new service addresses in Q2 2025, with 83% of customers on 100 Mbps or higher speeds. This focus on rural broadband aligns with FCC universal service funding programs, which could add 300,000 more service addresses over several years.

The tower business is equally promising. Array's 15-year Master License Agreement (MLA) with T-Mobile includes 2,015 new colocations and 1,800 interim site leases, ensuring inflation-protected cash flows. Tower revenue grew 12% in Q2 2025, driven by T-Mobile's onboarding and the elimination of U.S. Cellular as a tenant. While the tenancy rate temporarily dropped to 1.0 from 1.57, the long-term outlook is bullish: T-Mobile's commitment to rural connectivity and 5G expansion will drive demand for colocation sites.

Valuation Analysis: A Discounted Infrastructure Play

Array's current valuation remains anchored to its telecom roots, trading at a discount to infrastructure REITs. As of Q2 2025, the company reported $254 million in adjusted EBITDA, with 2025 guidance of $320–$350 million. At 15x EBITDA, this implies a market cap of $4.8–$5.3 billion. Compare this to AMT's $99.32 billion market cap and CCI's $46.54 billion, and Array's scale appears modest. However, its smaller size also means greater growth potential.

The company's BBB– credit rating and disciplined capital allocation (e.g., $1.5 billion share repurchase program) suggest a path to re-rating. If Array can replicate the operating leverage and disciplined capital returns of AMT and CCI, its valuation could migrate to 18–20x EBITDA over time. The pending spectrum sales and fiber expansion targets are key catalysts for this re-rating.

Risks and Challenges

Array's transformation is not without risks. Execution risks loom large: The company lacks the operational history of AMT or CCI and must prove its ability to manage infrastructure assets, negotiate leases, and scale fiber deployments. Regulatory delays in spectrum sales could also disrupt liquidity plans. Additionally, competition from established REITs and private 5G players could pressure margins.

However, these risks are mitigated by Array's strategic advantages. Its focus on rural broadband—a $100 billion underserved market—positions it to capture government funding and first-mover advantages. The company's debt reduction and improved credit profile also provide a buffer against macroeconomic headwinds.

Investment Thesis: A Buy for Patient Capital

For value investors, Array presents a compelling case. The T-Mobile divestiture unlocked immediate value through debt reduction and special dividends, while the spectrum monetization and fiber/tower strategy position the company for long-term growth. At current multiples, Array trades at a discount to its infrastructure peers, offering a margin of safety for those who believe in its re-rating potential.

The key to success lies in execution. Investors should monitor the closure of spectrum sales, progress in fiber expansion, and the company's ability to secure long-term tenant agreements. If Array can demonstrate operational scalability and consistent cash flow growth, it could become a high-conviction holding in the telecom infrastructure space.

Conclusion

U.S. Cellular's transformation into Array Digital Infrastructure is a textbook example of value creation through strategic reinvention. By shedding low-margin operations and pivoting to infrastructure, the company has positioned itself to capitalize on the $100 billion rural broadband market and the 5G revolution. While risks remain, the combination of special dividends, credit upgrades, and a clear path to re-rating makes Array a compelling opportunity for value investors seeking undervalued, transformation-driven plays in the telecom sector.

Final Verdict: Buy for long-term investors who can tolerate near-term execution risks and are positioned to benefit from the company's re-rating to infrastructure REIT multiples.