Verizon Wireless announced Thursday that it has entered into an agreement to acquire Alltel for US$5.9 billion, plus the assumption of debt, in a deal that will create the biggest mobile phone company in the U.S.
Based on Alltel's projected net debt at closing of $22.2 billion, the aggregate value of the deal is $28.1 billion, Verizon said. The merger should be complete by the end of the year, pending regulatory approvals, Verizon said.
Verizon said the acquisition will give users access to an expanded range of products and services.
Alltel has more than 13 million mobile phone customers in 34 states, including 57 primarily rural markets that Verizon Wireless does not serve. The merger will give Alltel customers access to next-generation wireless services that Verizon is rolling out, the companies said in a news release.
Alltel's customers will also be able to take advantage of Verizon Wireless' Open Development initiative, which will allow customers to bring outside wireless devices and applications onto the Verizon network, Verizon said.
"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 CEO, said in a statement.
Ivan Seidenberg, Verizon Communication's CEO and chairman, called the merger a "perfect fit."
Verizon Wireless expects to cut costs by more than $9 billion through the merger, the company said in a news release. The cost savings are expected to reach $1 billion in the second year after closing, Verizon said.
Public Knowledge, a consumer rights group that's a frequent critic of large telecom companies, suggested the deal could be bad for consumers.
The merger "raises serious questions for consumer that will have to be addressed through antitrust analysis," Gigi Sohn, Public Knowledge's president, said in an e-mail.
If the deal goes through, Verizon and AT&T will have 150 million of the nation's 260 million mobile customers, Sohn said. "With Sprint in a weakened condition, this deal will speed the unfortunate trend of giving consumers fewer, rather than more, choices in telecommunications services, while giving a few companies more control over the lives of consumers," she added.
Sohn called on the U.S. Department of Justice and the U.S. Federal Communications Commission to closely examine the deal.
Jeff Kagan, an independent telecom analyst, said the deal may make sense, especially for Alltel, which has struggled in recent years to attract customers.
"This deal would help Verizon Wireless grow by acquiring a new customer base," Kagan said in an e-mail. "Not that it matters much anymore, because they are all so big, but this deal would give Verizon Wireless the number one spot in the rankings."