Verizon Wireless agreed to buy Alltel Corp for US$28.1 billion in cash and debt to overtake AT&T Inc as the biggest mobile phone company in the US.
The deal is worth 2.1 percent more than the US$27.5 billion that TPG Inc and Goldman Sachs Group Inc paid last year to take Alltel private. The acquisition includes about US$5.9 billion in cash and US$22.2 billion in debt, the Basking Ridge, New Jersey-based company said yesterday. Verizon Wireless is jointly owned by Verizon Communications Inc and Vodafone Group PLC.
Verizon Wireless has vied with AT&T for new customers as they ditch their landlines in favor of mobile phones. Alltel, with 13 million customers, owns the biggest wireless network in the US geographically, spanning mostly smaller cities and rural areas in 34 states. It handles calls for Verizon and AT&T in places where they do not provide coverage.
“I’m surprised Verizon did not buy Alltel to begin with,” before the leveraged buyout last year, said Rick Franklin, an analyst with Edward Jones & Co in St. Louis, before the announcement.
The purchase will allow Verizon to start offering its service in 57 rural markets, a statement said yesterday. Verizon said the transaction may help save as much as US$1 billion in the second year after the acquisition closes.
Banks are under pressure to get leveraged buyout loans off their books after taking more than US$386 billion in asset writedowns and credit losses triggered by the collapse of subprime mortgages. They are sitting on more than US$77 billion of loans from the buyout boom of 2006 and last year, New York-based research firm CreditSights Inc, down from a peak of US$230 billion last year. Some has been sold at a discount to private equity firms,.
The Alltel-Verizon combination may be reviewed by the Justice Department because of antitrust concerns, Franklin said.
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