"Can you hear me now? " Verizon Wireless roared Thursday when the company announced that it had agreed to buy Alltel in a deal valued at...
WASHINGTON — “Can you hear me now?”
Verizon Wireless roared Thursday when the company announced that it had agreed to buy Alltel in a deal valued at $28.1 billion. Verizon plans to pay $5.9 billion in cash and assume $22.2 billion in debt.
By acquiring Alltel, Verizon Wireless would leapfrog AT&T to become the nation’s largest cellular carrier.
But consumers might not like the sound of another wireless provider biting the dust.
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“There’s not enough aggressive competition in the wireless industry as it is, and this would take out one of the better players,” said Bob Williams, a telecommunications expert at Consumers Union, the nonprofit publisher of Consumer Reports.
Alltel has scored high in the magazine’s surveys of wireless providers.
Consumers Union and Public Knowledge, a Washington, D.C., public-interest group, called for close review of the deal by federal regulators.
And Rep. Edward J. Markey, D-Mass., a key congressional voice on telecommunications issues, said the Alltel purchase “merits the utmost scrutiny … to ensure that competition and consumers are fully protected.”
Analysts expect approval from the Department of Justice and the Federal Communications Commission but probably with conditions, such as requiring Verizon to divest some airwaves in markets where there will be only one or two other competitors after Alltel’s departure.
By adding Alltel’s 13 million customers to its 67.2 million wireless subscribers, Verizon would surpass AT&T, which has 71 million customers.
Alltel serves 34 states, including 57 largely rural markets that Verizon does not reach, Verizon said. Alltel is strong through the interior West, Southwest, Midwest and Southeast but in California offers service only in Imperial, Inyo and Mono counties.
Ivan Seidenberg, chief executive of Verizon Communication, which owns Verizon Wireless jointly with British wireless carrier Vodafone, called Alltel “a perfect fit.”
Verizon Wireless expects to achieve more than $9 billion in cost savings by integrating the companies. The two use common network technology, which will allow a “seamless transition for Alltel customers,” Verizon said.
Charles Golvin, an industry analyst with Forrester Research, said he had been predicting Verizon would acquire Alltel.
“There’s just too many synergies between Verizon and Alltel when you think about ways for Verizon to grow,” he said.
New York-based Verizon Communications rose $1.98, or 5.4 percent, to $38.96 Thursday. The gain was the largest since April 2003.
Little Rock, Ark.-based Alltel is owned by TPG Capital and GS Capital Partners of Goldman Sachs. The firms purchased the No. 5 wireless carrier in November for $27.5 billion. Alltel is not publicly traded.
If completed, the transaction would solidify Verizon Wireless as one of two behemoths in a quickly consolidating industry. The other, AT&T, became the biggest wireless company in late 2006 after it acquired full control of Cingular Wireless as part of the purchase of BellSouth.
“If the deal goes through, two companies, Verizon and AT&T, will control about 150 million of the 260 million wireless customers in the U.S.,” said Gigi B. Sohn, president of Public Knowledge. “Verizon will have about 80 million alone.”
She added, “With Sprint in a weakened condition, this deal will speed the unfortunate trend of giving consumers fewer, rather than more, choices in telecommunications services, while giving a few companies more control over the lives of consumers.”
Golvin said that even with the loss of Alltel, competition was still strong in the wireless industry.
“I don’t think there’s any real downside for consumers because in most of these markets, you still have three or four competitors to choose from,” he said.
Material from Bloomberg News and USA Today was used in this report.