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Telephone and Data Systems Inc. (TDS - Analyst Report) sold 5.875% Senior Notes for $175 million, which are due to mature in 2061. These notes will be listed on the New York Stock Exchange and will trade under the symbol "TDA".
The company also provided the underwriters the option to buy up to $25 million of additional notes. The sale will close on December 3, 2012 and are callable at par on and after December 1, 2017.
From the offering, Telephone and Data Systems expects to raise about $168.9 million that will be utilized for general corporate expenses as well as acquisition purposes. The amount will go up to $193.1 million if the underwriters fully use the over-allotted notes.
Based in Chicago, Illinois, Telephone and Data Systems is a diversified telecom service provider offering wireless and wireline services. The company – which owns 83% of United States Cellular Corp. (USM - Analyst Report) – currently retains a Zacks #3 Rank, implying a short-term Hold rating.
Earlier this month, Telephone and Data Systems reported its third quarter results wherein earnings missed our estimate and declined year over year. The company, however, registered slightly higher revenue compared to year-ago quarter.
Looking ahead, we believe that Telephone and Data Systems will benefit from bundled and unlimited service plans, smartphone upgrades, expansion of handset portfolio including Android-powered devices, and innovative programs like battery swap and overage protection. Moreover, expansion into the rapidly developing managed hosting and cloud services offerings would also remain accretive to the company’s future prospects.
However, regulatory issues on Universal Service Fund (USF), fierce competition, and heavy investment in an uncertain market conditions may limit the upside potential of the company. We maintain a long-term Neutral recommendation on the stock.
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