Alltel-Verizon deal to get scrutiny

Close review urged by critics to ensure competition

June 06, 2008|By Jim Puzzanghera | Jim Puzzanghera,LOS ANGELES TIMES

WASHINGTON - Even more people will be able to hear Verizon Wireless after the company announced yesterday that it had agreed to buy Alltel Corp. for $5.9 billion plus a mound of debt.

By acquiring Alltel, Verizon Wireless would leapfrog AT&T Inc. to become the nation's largest cellular carrier.

But consumers might not like the sound of another wireless provider biting the dust.

"There's not enough aggressive competition in the wireless industry as it is, and this would take out one of the better players," said Bob Williams, a telecommunications expert at Consumers Union, the nonprofit publisher of Consumer Reports. Alltel has scored high in the magazine's surveys of wireless providers.

Consumers Union and Public Knowledge, a Washington public interest group, called for close review of the deal by federal regulators. And Rep. Edward J. Markey, a Massachusetts Democrat and a key congressional voice on telecommunications issues, said the Alltel purchase "merits the utmost scrutiny ... to ensure that competition and consumers are fully protected."

Analysts expect approval from the Department of Justice and the Federal Communications Commission but probably with conditions, such as requiring Verizon to divest some airwaves in markets where there will be only one or two other competitors after Alltel's departure.

By adding Alltel's 13 million customers to its 67.2 million wireless subscribers, Verizon would surpass AT&T, which has 71 million customers.

Alltel serves 34 states, including 57 largely rural markets that Verizon does not reach, Verizon said. Alltel is strong through the interior West, Southwest, Midwest and Southeast.

Ivan G. Seidenberg, chief executive of Verizon Communications Inc., which owns Verizon Wireless jointly with British wireless carrier Vodafone, called Alltel "a perfect fit." Verizon Wireless expects to achieve more than $9 billion in cost savings by integrating the companies. The two use common network technology, which will allow a "seamless transition for Alltel customers," Verizon said.

Charles Golvin, an industry analyst with Forrester Research Inc., said he had been predicting Verizon would acquire Alltel.

"There's just too many synergies between Verizon and Alltel when you think about ways for Verizon to grow," he said.

The value of the deal is $28.1 billion, as Verizon Wireless will assume Alltel's $22.2 billion in debt. Shares of Verizon Communications rose 5.46 percent to close at $39 yesterday.

If competed, the transaction would solidify Verizon Wireless as one of two behemoths in a quickly consolidating industry. The other, AT&T, became the biggest wireless company in late 2006 after it acquired full control of Cingular Wireless as part of the purchase of BellSouth Corp.

"If the deal goes through, two companies, Verizon and AT&T, will control about 150 million of the 260 million wireless customers in the U.S.," said Gigi B. Sohn, president of Public Knowledge. "Verizon will have about 80 million alone."

She added, "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."

Golvin said that even with the loss of Alltel, competition was still strong in the wireless industry.

"I don't think there's any real downside for consumers," he said.

Jim Puzzanghera writes for the Los Angeles Times.

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