- The Washington Times - Friday, June 6, 2008

NEW YORK - Verizon Wireless‘ deal to buy Alltel Corp. for $5.9 billion was applauded by investors and should mean a greater range of choices for Alltel subscribers, but some worried that Alltel’s commitment to rural coverage will get lost.

Dan Yahro in Bishop, Calif., close to the border with Nevada, has two options for wireless service: Alltel and Verizon Wireless. Now that one is buying the other, he wonders what will happen.

“Alltel has twice the coverage of Verizon here. When you get into Death Valley National Park, which is where I spend a lot of time, Alltel is the only game out there,” Mr. Yahro said.

Alltel’s wide-ranging rural coverage in 35 states has given it 13.2 million subscribers and plenty of fans. In its area, mainly in the interior of the country and in the Southeast, it provides an alternative to the four big national carriers: Verizon Wireless, AT&T; Inc., Sprint Nextel Corp. and T-Mobile USA.

Having the No. 2 carrier, Verizon Wireless, swallow the No. 5 carrier, Alltel, would catapult it beyond 80 million subscribers and past AT&T; Inc. to become the largest carrier in the country. It could also reduce competition in areas where Verizon Wireless and Alltel overlap.

The deal would also mean that Verizon Wireless, along with AT&T;, will pull further away from the competition. No. 3 Sprint is in financial disarray and is losing subscribers. T-Mobile USA is a distant fourth.

A Justice Department spokeswoman said Thursday the agency “would be interested in looking at the proposed transaction.”

“Anything that makes Verizon … bigger will draw regulatory attention,” said Rebecca Arbogast, an analyst at Stifel Nicolaus.

Analysts said a likely outcome of a regulatory review would be an approval of the deal, on the condition that Verizon Wireless sells off spectrum licenses in areas where its coverage overlaps Alltel’s.

Alltel Chief Executive Officer Scott Ford said customers will not see their rates or plans immediately change due to the Verizon Wireless takeover. Alltel has a popular My Circles option that provides unlimited calls to five, 10 or 20 numbers for a monthly fee. Verizon Wireless lacks that option, but its customers actually pay slightly less on average: $51.40 per month compared with $53.64 at Alltel.

The deal could speed the building of faster wireless broadband. Building a fourth-generation network would have been a big task for Alltel. Verizon Wireless, on the other hand, has the scale to build out and has unexploited spectrum licenses that cover nearly the entire country.

On Wall Street, the deal went over well. Shares of New York-based Verizon Communications Inc., the controlling parent of Verizon Wireless, rose $1.98, or 5.4 percent, to close at $38.96, unusual for a company spending $28.1 billion (including assumed debt) on an acquisition.

Alltel was public until November, when it was taken private by TPG Capital and a unit of Goldman Sachs Group. A group of banks financed the deal with a view to selling the debt to investors. But the corporate credit market seized up much like the mortgage market, leaving the debt on their books.

“The banks couldn’t move their paper. Because they couldn’t move their paper, the debt traded at a discount,” Alltel CEO Ford told reporters at the company’s Little Rock, Ark., headquarters. Verizon taking over the debt “puts liquidity back into the banking system. I think this is one of those things where federal regulators … will all look at this and say, ‘Thank goodness.’”

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