Verizon Wireless Buys Alltel for $28B

By Reuters  |  Posted 06-05-2008 Print Email
The deal creates the largest wireless service provider in the U.S.

Verizon Wireless said on Thursday it will buy rural mobile service provider Alltel for $28.1 billion including debt, which would vault it to first place in the U.S. market ahead of AT&T.

Under terms of the deal, Verizon Wireless would acquire the equity of Alltel for $5.9 billion, and assume an estimated $22.2 billion in debt that was incurred primarily when Alltel was taken private in a leveraged buyout last November by TPG Capital and Goldman Sachs's GS Capital Partners.

Shares of Verizon Communications, which owns 55 percent of Verizon Wireless, jumped nearly 6 percent after the announcement. Shares of Vodafone Group, which owns the remaining 45 percent, rose 2.4 percent.

"This is a way of getting growth from a market that's becoming fully saturated and beginning to slow down in growth," said analyst Joseph Bonner at Argus Research.

"They get the bragging rights," he said, referring to Verizon overtaking AT&T as the largest player in the U.S. mobile services market.

Verizon Wireless said the deal would generate savings of $1 billion in the second year after closing, which is targeted for the end of 2008, pending regulatory approval.

It forecast total savings of more than $9 billion by 2011, saying that was driven by reduced capital and operating expenses.

Verizon said the deal would be cash-flow positive and add to earnings in the first year, estimating integration costs at $1.1 billion to $1.2 billion in the first year and $500 million to $600 million in the second.

It said it would prepurchase about $5 billion in debt in relation to the deal.

Verizon's move comes about seven months after Alltel's $27.5 billion leveraged buyout that was the largest-ever private equity investment in the U.S. wireless industry.


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