Telecommunications provider McLeodUSA Inc. sold two of its personal communications services licenses and entered into agreements to sell the remainder of its PCS licenses to four buyers for more than $100 million. The buyers include U.S. Cellular Corp., TeleCorp PCS, HickoryTech Corp. and Midwest Wireless.
McLeodUSA originally purchased the 10 to 20 megahertz D- and E-block licenses in 1997 for $30 million, but was in danger of losing the licenses next year if it did not build out 25 percent of the markets within five years. The licenses include markets in Iowa, Illinois, Minnesota, Nebraska and South Dakota.
“When we spoke with our financial analysts and key investors on Feb. 21, we indicated that there are both opportunities and challenges in our forecasts for 2001,” said Steve Gray, co-chief executive officer of McLeodUSA. “An opportunity has been realized with this sale of our wireless licenses.”
U.S. Cellular’s portion of the deal includes an estimated 14 licenses with 10 megahertz of spectrum covering 4.7 million pops in Iowa, Illinois and Nebraska for $74 million. The carrier, which plans to use the licenses to build up its Midwest holdings, expects the deal to close as two separate transactions late in the second quarter and early in the fourth quarter.
“This transaction demonstrates our commitment to strengthen our competitive position in our largest markets in the Midwest,” said John Rooney, president and chief executive officer of Chicago-based U.S. Cellular. The carrier currently operates in 146 markets nationwide.
Equity research firm Raymond James & Associates Inc. said the purchase will provide U.S. Cellular with a stronger position for competing with national operators.
“The addition of 10 megahertz of PCS spectrum on top of 25 megahertz of cellular spectrum suggests that U.S. Cellular continues to position itself for a technology overbuild,” Raymond James said in a report.
Midwest Wireless said its acquisition, covering eight markets in Minnesota and South Dakota, would provide it with additional capacity for deploying wireless data services and other advanced technology in the future. The carrier expects its portion of the acquisition to be completed within 90 days.
HickoryTech’s share includes two contiguous markets in southern Minnesota covering 493,000 pops, and adds 10 Minnesota counties and one Iowa county to its operations. The carriers financial obligations to the deal were not disclosed.
