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3/13/2009
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U.S. Cellular Facing Pressure To Sell

With more than 6 million subscribers, U.S. Cellular could be an attractive acquisition target for Sprint or Verizon Wireless.

U.S. Cellular, the fifth-largest U.S. wireless operator, is reportedly under pressure to sell to one of its larger rivals.

Telephone & Data Systems, which owns 81% of U.S. Cellular, could be facing a proxy battle to make a deal as subscribers flee to rivals AT&T, Sprint, T-Mobile, and Verizon Wireless. Multiple sources told Reuters that TDS's investors are urging the company to sell the mobile operator because it would be more valuable to a larger entity.

U.S. Cellular does have more than 6 million subscribers, but it has a difficult time attracting many new subscribers because it doesn't get high-profile handsets like the iPhone 3G, G1, or BlackBerry Storm. The carrier could be an attractive target for Sprint and Verizon, which use the same CDMA network infrastructure. With the $28 billion Alltel acquisition last year, Verizon showed it's not shy about snapping up regional carriers. Sprint was the only major carrier to lose subscribers last quarter, and an acquisition could help shore up its postpaid subscriber base.

With more than 80% of the U.S. population having a cell phone, it's becoming increasingly difficult for the four major carriers to gain new subscribers organically. This could lead to more carriers looking toward acquisitions as a way to grow their customer base.

"The wireless market is fairly mature in the United States in that there isn't a vast pool of brand-new customers," said Pete Dailey, analyst with Stratecast. "By and large, I think you'll see continued industry consolidation because it's the easiest way to gain subscribers, and then companies can layer on additional services and features to increase the average revenue per user."


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