T-Mobile reached an agreement to buy Sprint-branded assets from a municipal utility-owned affiliate serving parts of South Dakota and Iowa, one of the last remaining Sprint affiliates.
The agreement with Brookings Municipal Utilities (BMU), which does wireless business as Swiftel, covers cell sites, retail locations and PCS spectrum. Under the former Sprint brand BMU provides wireless and data services to about 14,000 customers in Sioux Falls, Watertown, and Brookings, South Dakota, as well as Sioux City, Iowa.
BMU has been a Sprint PCS affiliate since 1998. It also provides local telephone services, under the name Swiftel Communications, and electric and water. In 1998 BMU purchased two FCC licenses from then Sprint affiliate WirelessCo., covering portions of eastern South Dakota and later in 2000 the PCS license for Sioux City, Iowa Basic Trading Area (BTA) covering part of northwestern Iowa.
Data from spectrum ownership and analysis company AllNet Insights & Analytics puts BMU’s PCS holdings at roughly 13 million MHz-POPs.
T-Mobile says it plans to fully integrate the assets into its network and retail footprint in the region, expanding its distribution and coverage in the area.
The deal is expected to close in the first quarter of 2021.
“No purchase price was announced, as we await the final appraisal valuation for T-Mobile to acquire the last, and much larger Sprint affiliate portfolio from SHEN (expected January 21), that includes ~1.2M customers,” wrote Raymond James analyst Ric Prentiss in a Monday note to investors.
T-Mobile disclosed in SEC filings in late August it would exercise the option to buy Shentel’s (Shenandoah Telecommunications Company) wireless assets. That was on the heels of officially sunsetting the Sprint brand on August 2, to unite under the T-Mobile brand.
Pointing to the firm’s estimates after Shenandoah Telecommunications Company (Shentel) Q3 earnings, Raymond James projects “the price for the SHEN wireless business at 90% of the Entire Business Value (EBV) will be ~$2 billion before-tax and ~$1.5 billion after-tax.”
“So, if the SHEN transaction closes by 2Q21, TMUS will have consolidated the last of the remaining Sprint affiliates and focus on rationalizing and upgrading the combined networks,” Prentiss wrote.
Discussions with Shentel were underway soon after T-Mobile closed its Sprint merger in April, but Swiftel’s significantly smaller outfit didn’t appear to get the exact same treatment.
In early August 2020, the municipal utility filed a complaint in the U.S. District Court of South Dakota against T-Mobile and Sprint alleging “unlawful and abusive treatment” from the carriers during and after their $30 billion merger, claiming breach of contractual obligations under its affiliation and services agreement with Sprint.
As with Shentel, the affiliate agreement, according to the complaint, outlined a variety of options alongside timelines in the event of a merger or acquisition.
Those included negotiating for BMU to continue as an affiliate of the new T-Mobile. If that failed, a window for T-Mobile to exercise the option to purchase BMU’s wireless network-related asset for 90% of the entire business value; or stop operating a competing network via BMU buying the legacy T-Mobile network and subscribers in the area and negotiating to continue as an affiliate; T-Mobile selling its competing network assets to an unrelated party or decommissioning it.
BMU said it indicated its desire to continue to be an affiliate post-merger, but T-Mobile/Sprint weren’t interested and declined to negotiate.
Among BMU’s claims was that while T-Mobile and Sprint didn’t want Swiftel as an affiliate and wouldn’t negotiate in good faith, they also harmed the business, including “attempts to begin poaching Swiftel customers” and convert them to T-Mobile in overlapping service areas.
For example, the BMU said Sprint sent text messages as early as mid-June 2020 to Swiftel customers “blurring the line between Sprint PCS service and T-Mobile service.”
But by late September the parties said they reached an agreement in principle that would settle all disputes. A judge agreed to put the proceeding on hold, initially until November and again later until January 11, 2021.
FierceWireless reached out to T-Mobile and BMU but did not hear back as of publication.