Alltel Corp. continued its rural expansion by gobbling up privately held Midwest Wireless for $1.075 billion in cash. The acquisition comes just months after Alltel closed on its $6 billion purchase of Western Wireless Corp. and follows its 2002 acquisition of CenturyTel Inc.’s wireless assets for $1.6 billion.
Alltel said the Midwest Wireless deal includes the carrier’s 400,000 wireless customers, network assets and 850 MHz and 1.9 GHz spectrum licenses covering southern Minnesota, northern and eastern Iowa and western Wisconsin. Both carriers operate CDMA-based networks and rely on Qualcomm Inc.’s BREW platform to deliver content.
Midwest Wireless recently began to deploy high-speed wireless data services using CDMA2000 1x EV-DO technology and also offers a fixed broadband Internet service in select locations, which the carrier said offers network speeds of up to 768 kilobits per second for $100 per month.
Alltel noted that the deal will add new markets contiguous to its existing operations and that Midwest Wireless’ highly coveted 850 MHz spectrum covers approximately 1.9 million potential customers in the region.
“The Midwest Wireless business strengthens our position in the wireless industry by adding CDMA properties that are contiguous to our existing markets in the Midwestern U.S.,” said Scott Ford, president and chief executive officer of Alltel. “The company has a very strong post-pay customer base and its management team has built a business that has performed exceptionally well.”
The purchase should not significantly alter Alltel’s financial position. Analysts noted the company is lightly leveraged and still plans to spin off its wireline assets, as well as Western Wireless’ remaining international holdings. Alltel’s stock was up slightly following the announcement.
Midwest Wireless announced in late September that it was looking at potential strategic alternatives, including the sale of the company. The carrier hired Bear Stearns & Co. Inc. as its financial adviser.
Prior to Alltel’s acquisition announcement, published reports indicated that Midwest Wireless could garner up to $1 billion for its assets, which was substantially more than the value of the regional telecommunications companies that control Midwest Wireless. Analysts listed Alltel and Verizon Wireless, which also operates a CDMA/BREW-based network, as the most likely buyers.
Alltel said it expects the Midwest Wireless deal to close in the second half of next year, pending regulatory approval. Analysts noted that Alltel might be forced to divest a handful of 850 MHz markets that overlap its operations. Cingular Wireless L.L.C. and U.S. Cellular Corp., which also operate a CDMA/BREW network, are the most likely buyers for those assets.
