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Telephone and Data Systems to Buy K2 to Strengthen Broadband

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Leading wireline service provider Telephone and Data Systems Inc. (TDS - Free Report) has signed an agreement to acquire Mead, Colorado-based K2 Communications LLC., a provider of broadband, video and voice products to residential customers. However, financial terms of the agreement are yet to be disclosed. The deal is subject to regulatory approval at both federal and local levels.

The merger with K2 will add more than 1,200 service addresses to the adjacent Berthoud and Johnstown serving areas of TDS Broadband division. The company entered this area in 2013 with the purchase of Baja Broadband. K2 is Telephone and Data Systems’ fourth acquisition in 2017. Earlier this year, the company acquired Crestview Communications, Sun Prairie Utilities and InterLinx Communications. All three acquisitions have strengthened the company’s fiber-based broadband networks.

Telephone and Data Systems completed its IPTV market roll out. Its IPTV connections were 46,200, increasing 12.1% year-over-year in the second quarter of 2017. Additionally, the company is planning to expand its service availability by increasing its fiber footprint. For the current year, the company is focused on completing the planned fiber builds which will reach approximately 21% of its ILEC service addresses. This, when combined with its existing copper service, will take its IPTV enabled markets to cover approximately 25% of its total ILEC service addresses.

Apart from the wireline business, Telephone and Data Systems is experiencing strong smartphone demand at its wireless wing, – United States Cellular Corp. (USM - Free Report) . Of the total smartphone sales, nearly 94% are 4G devices.

Notably, United States Cellular has submitted an application to the Federal Communications Commission (FCC) for a six-month special temporary authority (STA) to conduct trial runs in the 3.5 GHz band in some areas of Maine and North Carolina. Major U.S. telecom operators such as, Verizon Communications Inc. (VZ - Free Report) , AT&T Inc. (T - Free Report) and T-Mobile US Inc. (TMUS - Free Report) are exploring ways of commercializing usage of 3.5 GHz unlicensed wireless spectrum.

Price Performance of Telephone and Data Systems

Telephone and Data Systems’ shares have increased 2.06%, a shade below the industry’s gain of 2.49% in the last three months. The company has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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