Array Digital Infrastructure

We will discontinue analyst coverage of Array Digital on or about July 7.

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We lower our fair value estimate to $34 from $45 to reflect the special dividend paid on June 11. Our fair value estimate is based on our view of Array as a stand-alone firm, but we don't expect the combination with TDS to have a huge impact on our valuation.

Our Array valuation includes the cash received from AT&T in January and $750 million in net proceeds from the sale of spectrum to Verizon, which closed on June 1. We assume the firm's remaining spectrum licenses can be sold at a small premium to the price paid for them, for a total of about $1.8 billion before taxes.

We estimate the stake in the Verizon Los Angeles partnership and other investments are worth about $1.2 billion, which is equal to 10 times the distributions we expect Array will receive in 2026 from these investments, less estimated taxes paid.

The remaining tower business accounts for only about 20% of our total firm valuation. We assume Array ended 2025 with tenants for about 70% of its tower sites, including sites leased to T-Mobile as part of the wireless operations sale agreement. We then assume it decommissions about 15% of its sites and that it can find tenants for the remainder in the coming years. These assumptions leave a business generating nearly $250 million in revenue five years from now, with EBITDA margins above 50%.

Array Digital Infrastructure does not have an economic moat, in our view, as the majority of the firm's value is in unutilized assets and passive investments. The firm has wisely, in our view, chosen to sell its wireless operations to T-Mobile, while carving up its spectrum holdings between that firm, AT&T, and Verizon. Array has been distributing the cash proceeds from these transactions to shareholders through special dividends shortly after they have closed.

Array's remaining operations are in the wireless tower business. It holds a portfolio of approximately 4,400 towers, which is significantly smaller than that of the three largest US wireless tower firms: American Tower, Crown Castle, and SBA Communications. With the legacy US Cellular business moving to T-Mobile, a large portion of Array's sites could end up without a tenant, severely curtailing returns on capital. We won't have a complete picture of Array's tower business until T-Mobile completes its integration and other carriers decide which, if any, sites to lease.

The decision to sell the wireless business and most spectrum licenses has unlocked massive shareholder value. Combining with TDS should make it easier for more deals to follow, delivering more cash to shareholders.

Array's new focus on leasing space on its towers to other carriers brings revenue opportunities on an asset base that has historically been undermonetized and therefore undervalued.

Array has many other valuable assets it could sell to unlock value, including its stake in Verizon’s Los Angeles operations. TDS may be able to flip this asset to Verizon for fiber assets.

Selling out to TDS in an all-equity deal will dilute the cash payouts from future Array asset sales, as more than half of those payouts will go to existing TDS shareholders.

The remaining tower business is tiny and disadvantaged relative to major tower firms like Crown Castle. Given how long it took to sell the core wireless business, Array may refuse to sell these assets to maximize their value.

Selling assets like the Verizon LA partnership could require hefty tax payments.