{"id":27028,"date":"2016-01-28T16:22:43","date_gmt":"2016-01-28T22:22:43","guid":{"rendered":"http:\/\/news.medill.northwestern.edu\/chicago\/?p=27028"},"modified":"2016-01-28T16:22:43","modified_gmt":"2016-01-28T22:22:43","slug":"analysts-disagree-but-not-entirely-on-u-s-cellular","status":"publish","type":"post","link":"https:\/\/news.medill.northwestern.edu\/chicago\/analysts-disagree-but-not-entirely-on-u-s-cellular\/","title":{"rendered":"Analysts disagree, but not entirely, on U.S. Cellular"},"content":{"rendered":"

By Lucia Maffei<\/strong><\/p>\n

Stating that analysts are \u201cdivided\u201d in their outlook for United States Cellular Corp. is a euphemism \u2013 they flatly disagree with each other.<\/p>\n

Bulls say that the nation\u2019s fifth-largest wireless service provider, located in Chicago, holds a number of assets with considerable value, including wireless spectrum and licenses, partnership interests and one of the highest customer retention rates among its competitors.<\/p>\n

\u201cU.S. Cellular reported impressive third quarter 2015 operating cash flow of $150 million vs our expectation $140 million,\u201d Ric Prentiss, an analyst at Raymond James, wrote while reiterating his strong buy on the stock.<\/p>\n

<\/p>\n

On the other hand, bears say that U.S. Cellular, with scattered operations in three areas of the country, doesn\u2019t have the scale to compete against national carriers. They believe that capital spending needs due to infrastructure building and wireless spectrum purchase will soon cancel profit margins. They also point to a decline in annual revenue.<\/p>\n

There is only one thing everyone seems to agree on: U.S. Cellular should be sold.<\/p>\n

U.S. Cellular is a subsidiary of Telephone and Data System Inc., another Chicago-based telecommunications service company which owns about 74 percent of U.S. Cellular and has a 96 percent voting interest. Both companies are controlled by the Carlson family.<\/p>\n

U.S. Cellular Top Holders<\/h2>\n

[field name=”chart1″]<\/p>\n

U.S. Cellular is a subsidiary of Telephone and Data Systems. (Lucia Maffei\/MEDILL)<\/div>\n

On Jan. 4, J.P. Morgan downgraded both the companies\u2019 stocks from overweight to neutral, blaming a lack of strategic transactions, such as the sale of the company\u2019s towers, a full sale of U.S. Cellular or at least a breakup of the U.S. Cellular and Telephone and Data System ownership structure.<\/p>\n

Michael Hodel of Morningstar Inc. opines: \u201cA sale or coordinated liquidation of the firm could quickly create tremendous value for shareholders, in our view. We see little concrete evidence that management will choose this path.\u201d<\/p>\n

The Carlson family has indeed kept both companies. They also decided to invest $338 million in additional wireless spectrum.<\/p>\n

\u201cIn our opinion, U.S. Cellular\u2019s spectrum still has value, but at this point any industry consolidator looking at the company on a strategic basis would be likely to view its network as a liability to be turned off rather than an asset to leverage,\u201d Philip Cusick, analyst at J.P. Morgan, wrote in a report.<\/p>\n

Many analysts think that improvements in infrastructure will not make U.S. Cellular competitive.<\/p>\n

As one of the last remaining regional wireless carriers, the company has to face the fierce competition of national giants. Verizon and AT&T have many customers in U.S. Cellular territories, which include portions of New England, the Midwest and the Pacific Northwest.<\/p>\n

One of U.S. Cellular\u2019s widely recognized strengths, the low percentage of subscribers that discontinue their subscription (the so-called churn rate), may not be helpful.<\/p>\n

\u201cChurn is down 33 percent from the first quarter 2014 to the third quarter 2015 and now running near record lows,\u201d noted Cusick. But Verizon and AT&T customers are even less likely to switch carriers, according to reports.<\/p>\n

Also, analysts expect T-Mobile and Sprint coverage in the same territories to improve. \u201cU.S. Cellular may not have the scale, infrastructure, or national brand name to be able to compete effectively,\u201d wrote Cusick.<\/p>\n

Among analysts, two rate the stock sell, two buy, and four hold. Hodel, the Morningstar analyst, falls into this last category. He wrote, \u201cU.S. Cellular\u2019s competitive position is balanced between two opposing forces,\u201d meaning the competitive pressure of the four national carriers on one hand, countered by a continuing sale of \u201cnonstrategic and uncompetitive assets\u201d on the other. \u201cBut we believe the downward pressure on the business warrants a negative moat trend rating,\u201d Hodel concluded.<\/p>\n

The company has experienced a decline in annual revenue over the last three years, down 13 percent from $4.45 billion in 2012 to $3.89 billion in 2014.<\/p>\n

U.S. Cellular’s stock prices over the last year<\/h2>\n

[field name=”chart2″]<\/p>\n

On. Jan. 4, 2016 J.P. Morgan downgraded to hold the stock of both U.S. Cellular and Telephone and Data Systems. (Lucia Maffei\/MEDILL)<\/div>\n

Nevertheless, U.S. Cellular shares advanced last year, reaching a peak of $43.36 in November, when the company posted solid financial results for its third quarter of 2015. But in early January J.P. Morgan downgraded the stock to hold, sparking a sharp decline.<\/p>\n

On Thursday, the shares closed down 20 cents at $36.85.<\/p>\n

U.S. Cellular headquarters are located near Chicago O’Hare International Airport. (Lucia Maffei\/MEDILL)<\/div>\n","protected":false},"excerpt":{"rendered":"

By Lucia Maffei Stating that analysts are \u201cdivided\u201d in their outlook for United States Cellular Corp. is a euphemism \u2013 they flatly disagree with each other. Bulls say that the nation\u2019s fifth-largest wireless service provider, located in Chicago, holds a number of assets with considerable value, including wireless spectrum and licenses, partnership interests and one […]<\/p>\n","protected":false},"author":244,"featured_media":27036,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27,585],"tags":[1106,1105],"class_list":["post-27028","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-winter-2016","tag-u-s-cellular","tag-united-states-cellular"],"yoast_head":"\nAnalysts disagree, but not entirely, on U.S. Cellular - Medill Reports Chicago<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/news.medill.northwestern.edu\/chicago\/analysts-disagree-but-not-entirely-on-u-s-cellular\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Analysts disagree, but not entirely, on U.S. Cellular - Medill Reports Chicago\" \/>\n<meta property=\"og:description\" content=\"By Lucia Maffei Stating that analysts are \u201cdivided\u201d in their outlook for United States Cellular Corp. is a euphemism \u2013 they flatly disagree with each other. 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