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U.S Cellular: Focus on Subscriber Addition to Drive Growth

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On Oct 12, wireless carrier United States Cellular Corporation (USM - Free Report) was raised to a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

U.S. Cellular is optimistic about the growing demand for smartphones, which enjoy significant market penetration, supporting growth in data revenues. For 2016, the company expects total operating revenue in the range of $3.9–$4.1 billion. The company’s focus on subscriber addition and churn management is likely to accelerate growth, thus enhancing returns. Focus on improving cost and profitability by managing data delivery cost will also help the company achieve high operating margins.

U.S. Cellular is determined to offer the best wireless experience to its customers by providing innovative devices coupled with superior quality network and national coverage. The company completed its 4G LTE network rollout in 2015 which transmits about 88% of the company’s data traffic and reaches 99% of its post paid customers, providing an exceptional network experience in the company’s suburban and rural markets. Moreover, the company has initiated testing of voice over LTE or VoLTE and plans for its commercial deployment early next year.

Over the last few years, U.S. Cellular has been divesting its non-strategic assets in order to focus on long-term growth opportunities. In the second quarter of 2016, U.S. Cellular continued to enhance its spectrum position and monetize non-strategic assets by entering into multiple agreements to transfer FCC licenses in non-operating markets and receive FCC licenses in operating markets. The transactions are subject to regulatory approval and are expected to close in 2016. Notably, upon closing of these transactions, U.S. Cellular expects to recognize a gain.

Cautionary Note

U.S. Cellular operates in an intensely competitive wireless market and remains significantly challenged by lower-cost mobile service plans from competitors. On a regional level, the company competes with AT&T Inc. (T - Free Report) -owned Leap Wireless. Also, U.S. Cellular remains highly susceptible to aggressive pricing by larger rivals like Verizon Communications Inc. (VZ - Free Report) and T-Mobile US Inc. (TMUS - Free Report) .

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