When in a recession, regional companies struggle to survive. Often times, they will start a form of a price war - great for customers in the short term, but usually fatal for small companies in the long term. Regional telecommunications provider Telephone and Data Systems, Inc. (TDS) is facing increasing pressure to sell to a larger provider.
This is the company that owns 81 percent of U.S. Cellular, the fifth-largest wireless carrier and the largest regional wireless provider in the nation. The company is still unsure as to what strategy to follow, and as a result, investors are beginning to become frustrated. A proxy battle may be in the company's future against Mario Gabelli's Gamco Investors, which owns a 14.8 percent stake. Southeastern Asset Management controls approximately 15 percent in the company, and wants the company to put itself on the market, according to those familiar with the matter. "TDS is more valuable in the hands of a larger player," said one of the unnamed sources.
In the battle to keep existing and add new customers, larger providers are investing in exclusivity agreements with various phone manufacturers (case in point: AT&T and the iPhone). Additionally, the national players are quickly working on new 4G technologies, leaving smaller regional companies in the dust. With the push to consolidation in today's world, I wouldn't be surprised if one of the larger carriers picks U.S. Cellular up. As much as I love the company, most of their markets remain saddled with antiquated 1X CDMA technology; unacceptable in today's world, given the status of their competitors.
Source: Reuters
