southtownstar
COARSE 
Weather Updates

U.S. Cellular pulls out of Chicago, sells market to Sprint

U.S. Cellular FIeld.  | Rich Hein~Sun-Times file photo

U.S. Cellular FIeld. | Rich Hein~Sun-Times file photo

storyidforme: 39729021
tmspicid: 14654166
fileheaderid: 6689353
Article Extras
Story Image

Updated: December 9, 2012 7:42PM



U.S. Cellular said it has reached a deal to sell markets in Chicago, St. Louis and other parts of the Midwest to Sprint Nextel Corp. for $480 million, part of a strategic plan to focus on its stronger markets. The move will cost 640 jobs in the Chicago area, including 160 in the city, among 980 to be cut in the Midwest.

Overland Park, Kan.-based Sprint will buy spectrum and 585,000 customers in Illinois, Indiana, Michigan, Missouri and Ohio, which is 10 percent of U.S. Cellular’s customer base.

U.S. Cellular will continue to have 1,400 associates in the Chicago area — including 860 at its headquarters, where no cuts are planned — the company said. But upon completion of a transition services period, the majority of its retail, engineering and business support associates will lose their jobs, according to the company. During the transition period, the company may keep open certain retail locations in the affected markets and will provide certain transition services to Sprint, U.S. Cellular said. But over time, both company- and agent-owned stores will be closed.

Despite pulling out of the Chicago market as a service provider, U.S. Cellular will not change the name of U.S. Cellular Field. It’s 25-year naming rights contract started in 2003.

“For us, it’s a great partnership we’ve had with the White Sox, and we’ll continue that relationship,” U.S. Cellular President and Chief Executive Officer Mary Dillon said in a Chicago Sun-Times interview.

“We’re going to continue to be headquartered here in Chicago, and in the Chicago area, we’ll have several offices. We will have a strong presence. In fact, we’ll still be a top 40 employer by revenues in Chicago.”

The markets it’s pulling out of generated service revenues of roughly $340 million, or 11 percent of reported consolidated service revenues for the nine months ended Sept. 30, the company said. But the markets experienced an operating loss after all direct and indirect costs.

“These are markets that we’ve pretty much always had a lower market position, maybe (the) No. 4, No. 5 player,” Dillon said. “We’ve decided that we really need to be in markets where we have a stronger market position, No. 1 or No. 2, to really focus on future growth.”

The company has provided service in the Chicago market since 2002.

“The cost to compete in the wireless industry is pretty different actually than in 2002,” Dillon said. “Costs to compete continue to grow. So for us to really focus our resources on things like launching LTE {4G technology} and making sure we have cutting edge devices, putting those in places where we have a stronger position, sets us up for future growth.”

The company will continue to serve more than 5.2 million U.S. customers.

Asked if regulators have cause to be concerned about how consumers will be affected with one competitor leaving the market here, Dillon said, “We expect that this is the kind of transaction that will get approval by the regulators.”

But the Citizens Utility Board, a Chicago-based consumer advocacy group, is worried about how consumers’ bills will ultimately be affected.

“We’re always concerned about consolidation in the cell phone industry,” spokesman Jim Chilsen said. “We worry about what long-term impact this will have on customer prices in an industry that already is plagued by a lack of competition.”

U.S. Cellular and Sprint will enter into transition services agreements for network operations and billing and customer service, and U.S. Cellular will retain its direct and indirect ownership interests in roughly 560 towers and other spectrum in the affected markets, U.S. Cellular said.

The sale, which is subject to regulatory approval, is expected to close in the middle of next year.

U.S. Cellular said it will work very closely with its customers to create a seamless transition to Sprint.

The transition and exit costs are expected to reduce facilities expenses by more than $3 million annually beginning in 2014.



© 2014 Sun-Times Media, LLC. All rights reserved. This material may not be copied or distributed without permission. For more information about reprints and permissions, visit www.suntimesreprints.com. To order a reprint of this article, click here.