In a move that will bring fierce competition to AT&T, Verizon Wireless on Thursday agreed to buy Alltel for $28.1 billion in cash and debt. The acquisition will make Verizon Wireless, a joint venture of Verizon Communications and Vodafone, the largest mobile-phone company in the U.S.
Verizon Wireless will add 13 million clients in 34 states and save about $9 billion from the purchase. Synergies are expected to generate incremental cost savings of $1 billion in the second year after closing.
At $28.1 billion, the deal is worth 2.2 percent more than the $27.5 billion TPG Inc. and Goldman Sachs Group paid last year to take Alltel private. The acquisition agreement caused Verizon Communications stock to rise.
"This move will create an enhanced platform of network coverage, spectrum and customer care to better serve the growing needs of both Alltel and Verizon Wireless customers for reliable basic and advanced broadband wireless services," said Lowell McAdam, Verizon Wireless president and CEO.
GAINING IN RURAL AREAS
Once the transaction closes, customers of both companies will have access to an expanded range of products and services, including a lineup of basic and advanced devices and an expanded network calling community.
Alltel customers also will benefit from advanced services, including downloadable music and a nationwide network. They also will be able to take advantage of consumer policies such as Test Drive and Worry Free Guarantee.
Verizon will gain customers in 57 primarily rural markets that it does not serve. The companies said the transaction puts the Alltel markets and customers on a path to advanced fourth-generation services as Verizon Wireless deploys LTE technology throughout its network over the next several years. Alltels customers also will reap the benefits of Verizon Wireless Open Development initiative, which welcomes third-party devices and services to use the Verizon Wireless network.
"This is a perfect fit, with Alltels high-value post-paid customer base, its solid financials, our common network technology, and significant, readily attainable synergies," said Ivan Seidenberg, Verizon CEO and chairman. "Verizon Wireless acquisition of Alltel clearly provides opportunities for enhanced value for Verizon shareholders."
TRANSITIONING TO GSM
What Verizon and Alltel arent talking about is the long-term implications of the merger. Alltel and Verizon Wireless both use a common network technology, CDMA. But that is bound to change, according to Mike Disabato, a wireless analyst at The Burton Group.
Heres Disabatos take: The two largest CDMA carriers have just merged. The larger of the two recently made a public announcement that it is moving to LTE (Long Term Evolution, a fourth-generation mobile telephone standard), essentially migrating to GSM. That means theres only one major CDMA carrier left in the U.S. -- Sprint.
"All the customers of second-tier CDMA regional carriers that have been riding on the coattails of Verizon and Alltel for roaming may find theres no place to roam in a few years," Disabato said. "The CDMA networks are going to get shut down. All that traffic is going to move to the LTE network that Verizon is putting in place. So over time these regional players are going to be forced to upgrade to GSM. Long-term what that means is the U.S. is going to finally be all GSM."
GSM stands for Global System for Mobile communications, the most popular standard for mobile phones in the world.
Verizon Wireless will add 13 million clients in 34 states and save about $9 billion from the purchase. Synergies are expected to generate incremental cost savings of $1 billion in the second year after closing.
At $28.1 billion, the deal is worth 2.2 percent more than the $27.5 billion TPG Inc. and Goldman Sachs Group paid last year to take Alltel private. The acquisition agreement caused Verizon Communications stock to rise.
"This move will create an enhanced platform of network coverage, spectrum and customer care to better serve the growing needs of both Alltel and Verizon Wireless customers for reliable basic and advanced broadband wireless services," said Lowell McAdam, Verizon Wireless president and CEO.
GAINING IN RURAL AREAS
Once the transaction closes, customers of both companies will have access to an expanded range of products and services, including a lineup of basic and advanced devices and an expanded network calling community.
Alltel customers also will benefit from advanced services, including downloadable music and a nationwide network. They also will be able to take advantage of consumer policies such as Test Drive and Worry Free Guarantee.
Verizon will gain customers in 57 primarily rural markets that it does not serve. The companies said the transaction puts the Alltel markets and customers on a path to advanced fourth-generation services as Verizon Wireless deploys LTE technology throughout its network over the next several years. Alltels customers also will reap the benefits of Verizon Wireless Open Development initiative, which welcomes third-party devices and services to use the Verizon Wireless network.
"This is a perfect fit, with Alltels high-value post-paid customer base, its solid financials, our common network technology, and significant, readily attainable synergies," said Ivan Seidenberg, Verizon CEO and chairman. "Verizon Wireless acquisition of Alltel clearly provides opportunities for enhanced value for Verizon shareholders."
TRANSITIONING TO GSM
What Verizon and Alltel arent talking about is the long-term implications of the merger. Alltel and Verizon Wireless both use a common network technology, CDMA. But that is bound to change, according to Mike Disabato, a wireless analyst at The Burton Group.
Heres Disabatos take: The two largest CDMA carriers have just merged. The larger of the two recently made a public announcement that it is moving to LTE (Long Term Evolution, a fourth-generation mobile telephone standard), essentially migrating to GSM. That means theres only one major CDMA carrier left in the U.S. -- Sprint.
"All the customers of second-tier CDMA regional carriers that have been riding on the coattails of Verizon and Alltel for roaming may find theres no place to roam in a few years," Disabato said. "The CDMA networks are going to get shut down. All that traffic is going to move to the LTE network that Verizon is putting in place. So over time these regional players are going to be forced to upgrade to GSM. Long-term what that means is the U.S. is going to finally be all GSM."
GSM stands for Global System for Mobile communications, the most popular standard for mobile phones in the world.
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