Chicago, Illinois – Telephone and Data Systems, Inc., a telecom operator in the United States, is undergoing significant changes with its latest deal to sell its wireless operations. The company’s preferred shares, TDS.PR.U, have seen a surge in value following the announcement of this strategic move, outperforming the market.

The deal involves the sale of United States Cellular Corporation’s wireless operations to T-Mobile for $4.4 billion. This transaction includes cash and assumption of debt, allowing Telephone and Data Systems to monetize a large part of its stake in United States Cellular. While the deal is pending regulatory approval and expected to be completed by mid-2025, the company’s business profile is not expected to change significantly in the coming months.

In the first quarter of 2024, Telephone and Data Systems reported mixed performance in its wireless segment, with revenues declining due to lower equipment sales and net customer losses. However, the company’s focus on cost control led to higher adjusted profitability. On the other hand, its wireline business saw revenue growth, supported by investments in fiber and network expansion.

Despite some weakness in the wireless segment, analysts expect Telephone and Data Systems to maintain positive momentum in the wireline segment. However, the company’s operating performance in recent quarters has not justified its current valuation, as its ordinary shares are trading at a premium compared to historical levels and peers such as AT&T and Verizon. This disconnect between valuation and performance makes the company’s ordinary shares less attractive from a risk-return perspective, highlighting the potential benefits of investing in its preferred shares instead.

As the company navigates through its ongoing transformation and deal with T-Mobile, investors are closely watching how Telephone and Data Systems manages its assets and capital allocation moving forward. The outcome of the deal will significantly impact the company’s future outlook and profitability, making it crucial for investors to consider all available options, including the potential benefits of holding preferred shares for income and value.