We introduce the prize-collecting generalized minimum spanning tree problem. In this problem a network of node clusters needs to be connected via a tree architecture using exactly one node per cluster. Nodes in each cluster compete by offering a payment for selection. This problem is NP-hard, and we describe several heuristic strategies, including local search and a genetic algorithm. Further, we present a simple and computationally efficient branch-and-cut algorithm. Our computational study indicates that our branch-and-cut algorithm finds optimal solutions for networks with up to 200 nodes within two hours of CPU time, while the heuristic search procedures rapidly find near-optimal solutions for all of the test instances.Keywords Networks · Heuristics · Local search · Genetic algorithms · Branch-and-cutIn the prize-collecting generalized minimum spanning tree (PCGMST) problem, which arises in the design of regional telecommunications networks, a set of regions needs to be connected by a minimum cost tree structure and, for that purpose, one gateway site needs to be selected out of a set of candidate sites from each region. The competing sites in each region offer a monetary compensation, or a "prize," if selected as the gateway node for their region. The objective is to minimize the total cost of links used to connect the regions offset by the total sum of prizes collected from gateway sites selected for the design.Examples of providing a monetary compensation for selection into a telecommunication network arise in many real-world contexts. For example, in the design of B. Golden · S. Raghavan ( ) · D. Stanojević