Advertising

The Seattle Times Company

NWjobs | NWautos | NWhomes | NWsource | Free Classifieds | seattletimes.com

The Seattle Times

Business / Technology


Our network sites seattletimes.com | Advanced

Originally published June 5, 2008 at 12:00 AM | Page modified June 5, 2008 at 5:33 PM

E-mail article     Print view

Verizon to buy Alltel in $28.1 billion deal

Verizon Wireless has agreed to buy Alltel in a $28.1 billion deal — about $5.9 billion in cash and $22.2 billion in assumed debt ...

The Associated Press

NEW YORK — Verizon Wireless has agreed to buy Alltel in a $28.1 billion deal — about $5.9 billion in cash and $22.2 billion in assumed debt — which would make it by far the largest cellular carrier in the U.S.

The deal announced today comes just seven months after Alltel was taken private by TPG Capital and a unit of Goldman Sachs Group. They paid $24.7 billion for the stock and took on $2.7 billion in debt, bringing the value of that deal to $27.4 billion.

Alltel has 13.2 million subscribers in 34 states, mainly in rural areas away from the coasts. Alltel purchased Bellevue-based Western Wireless in 2005 for $4.4 billion in cash and stock. Western Wireless also focused on serving rural markets,

With Verizon Wireless's 67.2 million subscribers, the size of the combined Verizon-Alltel company would surpass the current U.S. cellular leader AT&T, with 71.4 million subscribers.

The parties expect the deal to close by the end of the year, pending regulatory approvals. The deal is likely to face scrutiny by the Department of Justice and the Federal Trade Commission, but analysts expect it to pass.

Shares of New York-based Verizon Communications, the controlling parent of Verizon Wireless, closed up $1.98, or 5.4 percent, to $38.96 today. Verizon Wireless' other parent is Vodafone Group of Britain, with a 45 percent share of the joint venture.

Verizon Wireless expects the deal to add immediately to earnings, excluding transaction and integration costs. It expects the deal to generate "synergies" of more than $9 billion due to reduced capital and operating spending. Analysts believe Verizon Wireless pays Alltel hundreds of millions of dollars a year in roaming fees, since Alltel provides coverage in many areas where Verizon Wireless does not.

In a statement, Verizon Communications Chairman and Chief Executive Ivan Seidenberg said Alltel is a "a perfect fit," given its valuable customer base and solid financials. He also pointed to the fact that the carriers share the same network technology. AT&T and Bellevue-based wireless carrier T-Mobile USA use an incompatible technology.

The $28.1 billion Verizon Wireless is paying, including debt, points to a small profit for the private-equity firms. The buyout happened at a difficult time in the credit markets, and the banks that financed the deal reportedly ended up holding some of the debt on their books, rather than selling it. That put pressure on the buyout group to cash out.

Talks between Verizon Wireless and Alltel were reported Wednesday by CNBC and The Wall Street Journal. Based on those reports, analyst Craig Moffett at Sanford Bernstein said the deal could yield significant economies of scale.

"The consolidation of Alltel takes another step towards rationalizing and consolidating the U.S. wireless industry, something that must be viewed as a positive" from an investor perspective, he said.

He said regulatory approval was likely, since the industry is already viewed as consisting of four players: the national carriers Verizon Wireless, AT&T, Sprint Nextel and T-Mobile USA. The deal signals that "the days for a midsized, regional stand-alone wireless operator are numbered," he wrote.

Copyright © 2008 The Seattle Times Company

More Business & Technology headlines...

E-mail article Print view      Share:    Digg     Newsvine

advertising

Credit-card holders to pay the price for banks' struggles

Kraft's offer for sweets giant Cadbury turns bitter after rejection

NEW - 10:08 PM
Fewer fliers expected over holidays

Big bonuses coming at 3 big banks

On the move

Advertising

Video

Medal of Honor
Bruce Crandall and John "Bud" Hawk of Kitsap County say no one "wins" the Medal of Honor. The two recipients of the medal explain they weren't trying to be heroes - just do their duty.

Pelosi answers questions at Swedish Medical Center
Pelosi speaks at Swedish Medical Center
"Pistol" Pete Ryan
Mourners gather at KeyArena for slain officer's memorial
Procession for slain SPD officer
Election Night: Approve R-71
Election Night: Reject R-71
Election Night: Joe Mallahan
Election Night: Mike McGinn

Marketplace

nwautos

2009's most fuel-efficient sedansnew
Choosing a new sedan? Weigh the impact of your choice on your wallet and on the planet.
Post a comment

Open Houses

Find this weekend's open house listings.
Or search by location:

 
Most read
Most commented
Most e-mailed
 
 
Advertising