Verizon Wireless to Buy Alltel

If regulators agree that there are no monopoly violations, Verizon Wireless (joint venture between Verizon Communications Inc. and British Vodafone Group PLC) will have bought Alltel Corp. by the end of the year in a $28.1 billion deal. This deal covers a payment of $5.9 billion as well as Verizon assuming a $22.2 billion Alltel debt. Approval is likely, though Verizon will probably need to sell its asset where there is an overlap of coverage with Alltel.

According to the Atlanta Journal-Constitution, who has published the article, this will add around 57 rural markets to Verizon that it has previously not had along with Alltel’s approximately 13 million customers in 34 states. With this deal, Verizon will re-acquire the top telecommunications spot which was taken from Verizon by Cingular when that company acquired AT&T Wireless.

Verizon executives have stated in the article that this deal will provide a better experience, with less wireless roaming, for its present and future customers.

Even though this deal will affect Sprint Nextel Corp., who Alltel has roaming arrangements with and contract renewal would involve “sticky” talks, Verizon has said that, due to administrative cuts and reduced roaming charges, there will be an approximate $1 billion savings within the first two years.
Verizon’s and AT&T’s benefits within the market have come at Sprints expense. That carrier has been facing both financial troubles as well as many defecting subscribers.

The Atlanta Journal-Constitution article also says that this deal, most recent in a wave of mergers amongst the biggest players within this field, is the beginning of the next wave amid the smaller carriers, whose management may wonder “Who’s next?”

The Verizon-Alltel merger comes seven months after Alltel was bought by TPG Capital and a Goldman Sachs Group unit for approximately $24.7 billion for the company’s stock and taking on a $2.7 billion debt.

(June 9, 2008)