T-Mobile’s latest acquisition brings U.S. Internet into the fold

T-Mobile has made another acquisition, although this one is not a huge, flashy transaction. While this deal has not closed yet, T-Mobile is buying US Internet (USI). This firm is a small fiber broadband operator that does business with residential and business customers in Minneapolis and small areas of Wisconsin. Current USI customers have received a letter stating that they will become customers of T-Mobile “on or after Sept. 2.”

USI subscribers become T-Mobile customers on or around September 2nd

The letter, which did not mention the terms of the acquisition, said, “Although the closing date for our transaction has not yet been set, we anticipate that following regulatory approval, you’ll become a T-Mobile customer on or after Sept. 2.” T-Mobile continues to build out its nationwide fiber network and comes after its recent purchase of Metronet. That deal was done with KKR, a familiar name for anyone who remembers the great takeovers on Wall Street during the 1980s. T-Mobile also acquired Lumos, another fiber internet provider, earlier this year.

Promo photo for T-Mobile Fome Fiber Internet.

T-Mobile Home Fiber launched this year on June 5th. | Image credit-PhoneArena

The latest acquisition is, by all accounts, not a large one. New Street Research analyst Vikash Harlalka estimates that it had 152,000 locations a couple of years ago, which rose to 192,000 by the end of last year. The vast majority of USI’s coverage in Minnesota is in Hennepin County, the most populous county in the state. T-Mobile might have been pressured to look for more fiber acquisitions after being downgraded by KeyBanc Capital Markets analyst Brandon Nispel.

Nispel reduced his rating on T-Mobile‘s shares last month to “Underweight” with a price target of $200. T-Mobile shares closed today at $251.95 after falling $6.23 or 2.41%.
“We think [T-Mobile] is fiber deficient in a converged/bundled world,” Nispel said in his research note issued in July. This comment was made following the acquisitions of Metronet and Lumos.

USI currently offers cap-free service in Minneapolis with pricing tiers based on speed. Service at 500 Mbit/s costs $65 per month, 1 Gbit/s for $75 monthly, 2.5 Gbit/s for $125 each month, and the fastest and most expensive service runs at 10 Gbit/s for $195 per month. New Street Research’s Harlalka says that T-Mobile‘s current footprint is not big enough. “If T-Mobile management is serious about convergence, they need to explore possible combinations with one of the large Cable operators,” he stated. “These small acquisitions aren’t going to move the needle by much.”

Craig Moffett is the co-founder and Senior Research Analyst at equity research firm MoffetNathanson. The firm focuses on the Technology, Media, and Telecom sectors, known on Wall Street as TMT. He says that AT&T has fiber in 13% of the U.S., rising to about 31% with its plan to bring fiber to 60 million locations by 2030. Early next year when it completes the acquisition of Frontier Communications, Verizon will have fiber in 13% of the U.S.

T-Mobile might be interested in these other fiber companies

Compare that to T-Mobile‘s U.S. fiber footprint of 1.5% after the Lumos and Metronet deals but before the USI pick up. Moffett says about T-Mobile‘s fiber acquisitions, “That’s not a winning strategy.” Harlalka also believes that T-Mobile‘s fiber footprint is not big enough for a widescale convergence strategy. With that in mind, you can bet your bottom dollar that T-Mobile is far from finished making fiber acquisitions.

New Street Research believes that some fiber companies that could be under T-Mobile‘s microscope include Brightspeed, Uniti/Windstream, Consolidated Communications, TDS Telecom, Altafiber, and Shentel.

USI customers will experience a seamless move to T-Mobile Fiber Home Internet with plans ranging in speed from 500 Mbps to 2 Gbps. There are no equipment fees, installation charges, or annual contracts. T-Mobile Fiber features a five-year price guarantee, although for a limited time. T-Mobile is offering a Fiber Founders Club plan featuring 2 Gbps speeds for $70/month and a 10-year price lock in select areas. More exciting, subscribers will be eligible to receive weekly perks from the T-Mobile Tuesdays customer reward plan.

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T-Mobile’s latest acquisition brings U.S. Internet into the fold

USI subscribers become T-Mobile customers on or around September 2nd

T-Mobile might be interested in these other fiber companies

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