It’s official: Verizon Wireless to acquire Alltel and become nation’s largest: Combined carrier would have more than 80 million subscribers

Hours after media reports indicated a deal was close, Verizon Wireless announced an agreement to acquire Alltel Communications L.L.C.for $5.9 billion in cash and assume $22.2 billion in debt, for a total package price of $28.1 billion. If approved, the deal would create the nation’s largest carrier with more than 80 million customers.
Verizon Wireless said it expects to immediately save $9 billion through the deal thanks to “reduced capital and operating expense savings.” The carrier said it would save around $1 billion in “incremental cost savings” in the second year after the agreement closes.
Many in the industry have long expected such a transaction. Both Verizon Wireless and Alltel operate CDMA networks, and both recently announced plans to upgrade their networks to Long Term Evolution (LTE) technology, a 4G standard that promises faster data connections.
Further, Alltel and Verizon Wireless both use Qualcomm Inc.’s BREW application download service.
For Verizon Wireless, the agreement would give the carrier a significantly larger customer base as well as a broader network reach. Alltel serves more than 13 million customers in markets in 34 states, which includes 57 primarily rural markets that Verizon Wireless does not serve.
For Alltel, the deal serves to erase the pressure of competing with nationwide carriers in a market that is becoming fiercely competitive on price, technology, handsets and marketing.
And the deal, if approved, has wide-ranging implications for the national and international wireless community. A combined Verizon Wireless-Alltel would offer major new opportunities for handset and network vendors, and would create an even larger player that has so far made it a point to be at the forefront of technology and policy issues.
But Verizon Wireless’ competitors will likely take the brunt of the carrier’s new deal. AT&T Mobility, T-Mobile USA Inc. and Sprint Nextel Corp., along with a range of smaller players, will have to position themselves for a carrier that is already highly successful, and may become more so. Alltel also serves as a primary roaming partner with major operators as it operates both CDMA and GSM networks in rural markets not typically served by the nationwide operators.
But Verizon Wireless could face significant challenges in attempting to finalize its acquisition of Alltel. Federal authorities are sure to carefully consider antitrust concerns. For instance, Alltel was forced to divest some properties in southern Minnesota following its acquisition of Western Wireless Corp. in 2006. Those markets were eventually acquired by Rural Cellular Corp., which Verizon Wireless is now in the process of acquiring.
If the deal is consummated it would cap an eventful year for Verizon Wireless. The carrier inked a $2.67 billion deal to acquire Rural Cellular (although the deal has not yet been approved), it earlier this year paid $9.4 billion for 700 MHz spectrum in the Federal Communications Commission’s auction, and announced plans to both open its network to devices and applications from other suppliers as well as upgrade its network to Long Term Evolution technology.
Interestingly, Verizon Wireless’ purchase of Alltel has precedent, both good and bad. AT&T Corp. purchased Cingular Wireless L.L.C. for $41 billion, a deal that many have hailed as successful, while Sprint Corp. acquired Nextel Communications Inc. for $35 billion, an expense the carrier recently had to write off as largely a failure.
Verizon Wireless’ stock was up more than 5% on the news to around $39 per share.