Consumer Cellular, the Portland, Oregon-based MVNO founded by two friends in 1995, has agreed to sell a controlling stake to the Chicago-based private equity firm GTCR. Terms were not disclosed.
Consumer Cellular focuses on the older demographic. But it wasn’t always that way. When John Marick and Greg Pryor founded it 25 years ago, they saw how the early adopters of cellular phones were high-end business users and they wanted to make wireless affordable for everybody. Both worked at cellular industry pioneer McCaw Communications.
In the early days, they were focused on safety and convenience, but in 2008, they formed a partnership with AARP and put a stake in the ground to focus on the 50+ demographic.
That differentiated the company, which sees itself competing with the national carriers, Marick said. It eventually grew to serve 4 million customers.
Consumer Cellular has been an approved AARP provider for over 10 years now and offers AARP members special discounts on service. It uses the networks of AT&T and T-Mobile.
Consumer Cellular doesn’t operate its own stores; its primary retail partner is Target, where it has set up what Marick describes as a sort of “Genius Bar Lite” so that customers can get help with their wireless purchases. Consumer Cellular’s main equipment providers are Samsung, Apple and Motorola; it recently sold out of the iPhone 12 but more stock is on the way.
Reports pegged the company’s selling price at about $2.3 billion. Marick said that “wasn’t quite right,” but declined to comment on the price. Light Reading also reported there was a bidding war that involved Dish Network, Altice USA, Ultra Mobile, a group led by Boost Mobile founder Peter Adderton and others.
Marick isn’t naming names, but he said there was a wide and diverse group of companies in the industry and in various industries that support seniors. “We were super excited about the amount of interest in the company,” he said.
Ultimately, GTCR rose to the top, and the founders feel they’re leaving it in good hands. “We’ve built a great company and we’re confident it will continue,” he said.
The transaction is expected to close by the end of 2020, with existing shareholders retaining a “significant” minority position. The company will keep the current office and call center locations in Oregon and Arizona. Marick, 55, will retire as CEO of the company but continue his involvement as an ongoing shareholder and member of the board.
“We really started to see a lot of synergies there that really got us excited about working together,” he said of GTCR. The tipping point was they had some people who could come in and take over the management roles on a daily basis and “enable us to transition out as a team,” he said.
Because the management team, which includes about six individuals who consider themselves friends first and business partners second, have been together so long, no one wanted to be the last person at the office, so to speak, as they slowly found replacements. They’ll still have an ownership interest, and they’ll be able to walk out together.
Each of its employees – almost 2,000 – will receive part of the proceeds from the acquisition throughout the next year. Eligible employees will get up to the equivalent of a year and a half worth of their current yearly salary.
Ed Evans will take the role of CEO. He was at Dobson Communications early in the cellular industry and partnered with GTCR on its prior investment in Syniverse Technologies. Plans call for him to eventually relocate from Oklahoma City to Oregon.
Jeff Moore, principal of Wave7 Research, likes to call Consumer Cellular the “poster child” for MVNOs. A lot of MVNOs have launched over the past two decades, and many of them didn’t last. Having focused its core competency on the senior demographic was “brilliant,” he said.
And while there’s a lot of consolidation once again going on in the wireless industry – Sprint just merged with T-Mobile and Verizon announced it plans to acquire Tracfone – this is not part of that. Because Consumer Cellular is being acquired by a private equity firm, the expectation is it will continue as a standalone company with growth prospects.