February 2, 2021
T-Mobile plans to purchase roughly 1.1 million mobile customers across portions of Virginia, West Virginia, Pennsylvania, Maryland, Kentucky and Ohio from regional operator Shentel for $1.95 billion.
The agreement would bring to a close one of the final plot threads stemming from T-Mobile's blockbuster purchase of Sprint last year.
Shentel is a longtime Sprint affiliate; the company operates its own wireless network and retail operation, but sells services under the Sprint brand. As part of the affiliate agreement that Sprint and Shentel inked in 1999, any company that acquires Sprint also has the option to acquire Shentel's wireless business.
T-Mobile announced last year it would do just that – however, the companies couldn't agree on a price for the transaction. As a result, the two companies agreed to follow the terms of the affiliate agreement between Sprint and Shentel by putting the question to three independent "valuation providers." The providers appraised Shentel's business at around $2.1 billion and T-Mobile agreed to purchase it at roughly 90% of that price, or around $1.95 billion in cash, per the terms of the original affiliate agreement.
"With Shentel's wireless operations producing $217 million in EBITDA [earnings before interest, taxes, depreciation, and amortization] in its last year of full results, the assets were valued at 9.7x EBITDA, in line with past affiliate transactions," noted the financial analysts at New Street Research in a note to investors.
Shentel and T-Mobile said they expect to close the transaction in the second quarter.
According to the financial analysts at Raymond James, Shentel will gain around $1.5 billion from the sale, and could potentially use that cash to issue shareholder dividends, grow its broadband business, acquire other companies or make other corporate uses.
T-Mobile's acquisition of Shentel helps to boost its customer base and also represents yet another draw on its financial war chest. That's noteworthy considering T-Mobile participated in the FCC's recent C-band spectrum auction, and many expect the company to walk away with billions of dollars worth of spectrum licenses. The FCC is expected to announce the winners of the auction in late February or early March.
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