United States Cellular's Q1 2025: Key Contradictions in REIT Structure, Spectrum Monetization, and AI Impact

Tower reporting and REIT structure, monetization strategy for spectrum, tower monetization strategies, and impact of AI on competitive intensity are the key contradictions discussed in United States Cellular Corporation's latest 2025Q1 earnings call.



Transaction Progress and Financial Impact:
- UScellular is progressing towards a mid-2025 closing for its proposed transaction with T-Mobile, which is subject to regulatory approval.
- The transaction is anticipated to deliver significant proceeds, with an estimated purchase price of $4.4 billion, which could decrease to $4.3 billion if certain performance targets are not met.
- Upon closing, UScellular plans to declare a special dividend to shareholders, with proceeds expected to be used to repay TDS' outstanding bank debt.

Tower Business and Capacity Demand:
- UScellular's tower business increased third-party tower revenue by 6% in the quarter due to new colocations and escalators on renewed leases.
- The demand for towers is expected to rise due to the capacity needs of the wireless industry, which should be strengthened post the T-Mobile transaction and the initiation of a tower MLA.
- The company is working on cost optimization and reducing cash costs, which drove $79 million in free cash flow in Q1 2025, a $18 million increase over the previous year.

Fiber Expansion and Market Strategy:
- TDS Telecom delivered 14,000 new fiber service addresses and aims for 150,000 addresses by the year's end.
- The company continues to expand its fiber footprint, with a focus on increasing penetration in expansion markets, aiming for 25% to 30% residential broadband penetration in year one.
- Strategic divestitures were made, including the sale of two copper ILEC companies in Colorado, aligning with the goal of minimizing copper network exposure.

Dividend and Financial Considerations:
- TDS does not plan to redeem the Series UU and Series BB preferred stock, considering them as foundational capital post-transaction.
- The company anticipates a significant amount of separation, integration, and transition work to ensure a smooth transition across both UScellular and TDS post-transaction.