US Cellular 2015 Annual Report Download - page 18

Advantage Spectrum was the provisional winning bidder of 124 AWS licenses for an aggregate bid of $338.3 million,
after its expected designated entity discount of 25%. Advantage Spectrum’s bid amount, less the initial deposit
amount of $60.0 million paid in 2014, was paid to the FCC in March 2015. These licenses have not yet been granted
by the FCC. U.S. Cellular’s strategy is to continue to obtain interests in and access to wireless licenses in current
operating markets. This strategy will help ensure adequate spectrum to deliver a best-in-class network that meets the
growing capacity and speed requirements of U.S. Cellular customers.
Asset Management:
ᔢU.S. Cellular continued to pursue opportunities to monetize non-strategic assets to support investment in the business.
In December 2014, U.S. Cellular entered into an agreement with a third party to sell 595 towers and certain related
contracts, assets, and liabilities for $159.0 million in cash. The gain recognized was $3.8 million and $108.2 million in
2014 and 2015, respectively. This agreement and related transactions are referred to as the ‘‘Tower Sale.’’
ᔢAdditionally, U.S. Cellular entered into various agreements to transfer certain non-operating licenses to third parties in
exchange for receiving licenses in operating markets and cash. In connection with these various agreements, U.S.
Cellular received cash totaling $145.0 million and recognized an aggregate pre-tax gain of $149.1 million in 2015.
ᔢIn January 2016, U.S. Cellular entered into an agreement to purchase a 700 MHz A Block license for $36.0 million.
The transaction is expected to close in the third quarter of 2016 pending regulatory approval. In February 2016, U.S.
Cellular entered into multiple agreements with third parties that provide for the transfer of certain AWS and PCS
spectrum licenses and approximately $30 million in cash to U.S. Cellular, in exchange for U.S. Cellular transferring
certain AWS, PCS and 700 MHz licenses to the third parties. The transactions are subject to regulatory approval and
other customary closing conditions, and are expected to close in 2016. Upon closing of the transactions, U.S. Cellular
expects to recognize a gain.
Products and Services:
ᔢU.S. Cellular continued to leverage competitive value-based pricing for its plans and services, including equipment
installment plan offerings. U.S. Cellular will continue to offer equipment installment plans in 2016. To the extent that
customers adopt these plans, U.S. Cellular expects an increase in equipment sales revenues. However, certain of the
equipment installment plans provide the customer with a reduction in the monthly access charge for the device; thus,
to the extent that existing customers adopt such plans, U.S. Cellular expects a reduction in retail service revenues and
ARPU.
ᔢU.S. Cellular launched iconic Samsung and Apple devices and expanded the portfolio of tablets and connected
devices in line with the strategic initiative to increase gross additions, reduce churn, and increase data usage.
ᔢU.S. Cellular continued to expand distribution through third-party national and on-line retailers. As a growing base of
customers purchase wireless service outside of corporate and agent owned locations, U.S. Cellular will continue to
explore new relationships with additional third-party retailers as part of the strategy to expand distribution.
ᔢU.S. Cellular also expanded its solutions available to business and government customers, including a growing suite
of machine-to-machine solutions across various categories. U.S. Cellular will continue to enhance its advanced
wireless services and connected solutions for consumer, business and government customers.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS