Verizon eyes Alltel in a $27-billion deal

05 June 2008

Mumbai: Verizon Wireless is reported to be close to signing a $27-billion deal to acquire the US-based rural mobile service provider Alltel Corp, in its race to get ahead of AT&T Inc as the top wireless service in the US.

If the deal materialises , Verizon would take on around $23 billion of Alltel's debt. This is said to be something of a surprise for analysts, as it comes just seven months after Alltel was acquired by a consortium of private equity players including TPG Capital and Goldman Sachs' GS Capital Partners, whose leveraged buyout saddled Alltel with the debt.

Alltel's $27.5-billion private equity deal in November 2007 was the largest ever private equity investment in the US wireless industry. Sources say that a deal with Verizon could come soon, as talks were ongoing and the details were yet to be finalised.

Verizon Wireless has approximately 67 million subscribers, and Alltel over 13 million. Combined, they could outweigh AT&T, which has around 71 million subscribers.

Though analysts expressed some surprise at the early exit of the private equity players, they say Verizon would be a better option for running Alltel, giving Verizon more exposure to the wireless business, which is the strongest component of their service portfolio, along with providing for economies of scale.

Verizon is 55 per cent owned by Verizon Communications Inc and 45 per cent owned by Vodafone Group Plc. The acquisition would extend the UK-based telecom company's leadership in Europe across the Atlantic as well.