Note: Job cut numbers are updated to correct confusion over numbers supplied by U.S. Cellular.
Chicago-based wireless carrier U.S. Cellular said Wednesday it is selling its Chicago, St. Louis and central Illinois markets, along with three others in the Midwest, to subsidiaries of Sprint Nextel Corp. for $480 million.
The deal, which requires regulatory approval and is expected to close in mid-2013, will transfer PCS spectrum and about 585,000 customers -- just under 10 percent of U.S. Cellular's subscribers -- to Sprint. The markets account for about 11 percent of U.S. Cellular's service revenues.
As part of the transition, about 640 local jobs -- 160 of them in Chicago proper -- will be eliminated over time. The local job cuts represent the lion's share of the layoffs expected to take place, as overall losses in the affected markets will number about 980 positions. U.S. Cellular will be closing retail stores in the geographies it's exiting; engineering and business support jobs will also be eliminated.
U.S. Cellular, which employed about 8,400 at the end of September, will retain its Chicago headquarters along with 860 jobs there.
President and Chief Executive Mary Dillon described the move as getting "stronger by initially getting smaller" and said the decision was "not taken lightly," given the effect on the company's employees.
In the markets that U.S. Cellular is selling to Sprint, "we aren't reaching the rate of profitable customer growth and return on investment we need to operate effectively," Dillon said on a conference call.
In the affected markets, postpaid churn -- a wireless industry figure that measures defections among customers who are on contracts -- was roughly double that of the carrier's other geographies, Dillon said, indicating a "disproportionate share of subscriber losses." She added that because the company entered those markets later than its rivals, it had difficulty gaining share and incurred financial losses. Penetration in the affected markets was 3.9 percent versus a rate of 16.2 percent in other areas, Dillon said.
U.S. Cellular will also be transitioning a Bolingbrook customer call center to an existing vendor partner Jan. 1, with that partner retaining most of the jobs and employees, Dillon said.
On a conference call with analysts, the company said it remains committed to Chicago, including the naming rights on the home field for the White Sox, U.S. Cellular Field.
"We have a long-term relationship with the White Sox," said David Kimbell, chief marketing officer at U.S. Cellular. "Even after this transaction, we're going to have 1,400 associates in Chicago so that relationship (with the White Sox) is not part of that deal and will not be changing."
Dillon emphasized that the carrier will continue to provide the same level of customer service during the transition period and that its subscribers will experience "no immediate change." The company has created a website, www.uscellularinfo.com, that explains the transaction to consumers.
Also on Wednesday, U.S. Cellular said its third-quarter net income dropped 43 percent, as the company subsidized sales of new smartphones.
U.S. Cellular earned $35.5 million, or 42 cents per share, down from $62.1 million, or 73 cents per share, in the same quarter last year. Revenue rose 3 percent to $1.14 billion.
Sprint shares were down 1.2 percent to $5.66 in morning trade. U.S. Cellular Corp. shares were dropping 6.5 percent, to $36.50.
wawong@tribune.com | Twitter @VelocityWong
-- The Associated Press contributed.
U.S. Cellular exiting Chicago market
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