T-Mobile sells wireline business to Cogent Communications

A sign for a T-Mobile store is seen in Manhattan, New York, U.S.

T-Mobile US Inc is doubling down on 5G services by selling its wireline business to Cogent Communications Holdings Inc in a deal it expects to result in a $1 billion pre-tax charge.

The deal announced on Wednesday has a value of $1 and under it Cogent will also offer certain services to T-Mobile for $700 million for the next four and a half years after the transaction closes.

T-Mobile has been shifting its focus away from the wireline business, which includes assets from its $26 billion acquisition of Sprint Corp in 2020, as the carrier expands its 5G and high-speed internet services.

In the most recent earnings call, T-Mobile CEO Michael Sievert said the company was no longer using Sprint infrastructure to support its wireless business and that an asset review was underway.

Last year, the company earned $739 million in revenue from the business that houses communications systems, data processing equipment and fibre optic cable.

Cogent said the purchase would strengthen its offering to consumers and enterprises, and added the U.S. long-haul network could eventually replace its current leased network and help expand its product set.

The company does not plan to issue new debt or equity to finance the acquisition and will continue to maintain its current dividend plan.

The deal is expected to close in the second half of 2023, and T-Mobile said it would book the charge in the third quarter of 2022.

Morgan Stanley served as the financial advisor for Cogent, while Houlihan Lokey served as the financial advisor to T-Mobile.

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