updated 04:30 pm EDT, Wed June 4, 2008
Verizon May Buy Alltel
The American cellular industry may consolidate once again with a potential Verizon buyout of Alltel, CNBC claims. Referring to anonymous sources said to be aware of the deal, the TV news network asserts that Verizon would pay as much as eight times Alltel's pre-interest, pre-tax earnings, or $27 billion, for the acquisition. The deal would be a friendly takeover as Goldman Sachs and TPG, the financial institutions that took Alltel into private holding just last year, are eager to turn a premium no matter how small.
Verizon in turn would make the move as it sees the company's up-front value as low enough to be worth a buy; during an auction in spring of last year, that value was too high, according to the report.
The deal is said to be advantageous to Verizon as it would reduce competition and increase the subscriber base while providing "cost advantages" to the carrier. Alltel's service areas overlap nearly all of Verizon's, while Alltel also has a roaming deal with Verizon that allows its customers to borrow the latter's airspace.
Although unconfirmed by either Alltel or Verizon, a deal would substantially reshape the US mobile landscape by narrowing or even eliminating the lead held by AT&T over Verizon in total subscriber share. It would also temporarily give more support to the largely US-centric CDMA phone network standard, although both Alltel and Verizon have planned to move to LTE for their 4G cellular networks, putting them on the same standard as AT&T when the faster services are widely available in 2010.