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By Mike Caggeso
The deal values Alltel – the fifth-largest wireless carrier in the United States – at more than eight times its earnings before interest, tax, depreciation and amortization (EBITDA). Or about $22 billion, which includes Alltel's debts.
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Alltel has 13 million customers and spans rural markets and smaller cities in 34 states, comprising a 5% share of the market. It also handles calls for Verizon and AT&T in areas where they don't have coverage.
The purchase will allow Verizon to offer service in 57 rural markets. Synergies are expected to generate incremental savings of $1 billion in the second year after the deal closes,.
"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," Lowell McAdam, Verizon Wireless president and chief executive officer, said in the statement.
An Alltel acquisition would not only shoot Verizon Wireless past AT&T as the top U.S. wireless service provider, but it will also put additional downward pressure on the T-Mobile USA Inc. and troubled Sprint Nextel Corp. (S).
Telecom Titans Getting Bigger Around the World
The high profile merger of telecom titans has quickly developed into a strong global trend.
In Europe, France Telecom SA's (FTE) $41.9 billion offer for Finnish fixed-line provider TeliaSonera AB (PINK: ) was rejected Thursday. But that doesn't mean the deal is over.
"The question is how much can they raise the offer," Thomas Romig, a fund manager at Cominvest Asset Management in Frankfurt, told Bloomberg Television.
And in China,– with the top six companies being melded into three – as the country ramps up efforts to adopt third-generation wireless technology.
Domestically, the industry trends only makes expansion more difficult for large – but not large enough – wireless providers such United States Cellular Corp. (USM), Rural Cellular Corp. (RCCC) and Shenandoah Telecommunications Co. (SHEN) to compete.
Unfortunately, that's their problem to deal with because the mobile industry is expanding by leaps and bounds as customers increasingly ditch fixed-line service to wireless.
And the leaders of wireless service and technology are the ones that will thrive.
News and Related Story Links:
Verizon Wireless To Acquire Alltel; Will Expand Nation's Most Reliable Wireless Network
Money Talks: China Leads World in Global Shift From Fixed-Line Phones to Mobile Multimedia