NEW YORK (AP) -- Sprint Nextel Corp. on Wednesday said it has agreed to buy U.S. Cellular Corp.'s service areas in the Midwest for $480 million to boost its network capacity in that region.
Sprint, the third-largest U.S. cellphone carrier, is buying spectrum and 585,000 customers in Illinois, Indiana, Michigan, Missouri and Ohio. That's about 10 percent of U.S. Cellular's customer base and includes its key Chicago and St. Louis markets.
U.S. Cellular said 980 jobs will be lost with the sale. Sprint isn't taking over any employees. U.S. Cellular's headquarters will stay in Chicago. The company's remaining network spans states that include Wisconsin, Iowa, Oregon, Maine and North Carolina.
U.S. Cellular shares fell $4.28, or 11 percent, to $34.74 on the news, their lowest point since February 2010, amid a broad market decline.
Analyst Christopher King at Stifel Nicolaus said that while Sprint's offer seems fair, "we believe the spectrum in Chicago and St. Louis represented a portion of the most valuable assets that US Cellular had," and investors were banking on a better return for it. Finding a buyer for the rest of the company will be more difficult now, he said.
Sprint shares fell 7 cents to $5.66 in afternoon trading, as the major indexes fell 2 percent.
The acquisition should boost Overland Park, Kan.-based Sprint's data capacity and speeds in the Midwest. It doesn't have as much available spectrum, or space on the airwaves, as the larger carriers do for its new "4G LTE" network, which holds back its speeds.
Last month, Sprint struck a deal to sell 70 percent of itself to Japanese cellphone carrier Softbank Corp. for $20 billion. Though the deal hasn't closed yet, Softbank has lent Sprint money, giving the previously cash-strapped carrier freedom to pursue deals.
U.S. Cellular is the country's sixth-largest wireless carrier, with 5.8 million devices on its network. As wireless data speeds become more and more important to customers, smaller carriers like U.S. Cellular are finding it hard to compete against the biggest carriers, Verizon Wireless and AT&T, and it's been losing high-paying customers at a slow but steady rate for the last three years.
The acquisition is subject to regulatory approval, and is expected to close in the middle of next year.
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.