It's easy to understand why Alltel Wireless' private equity owners want to flip the company to Verizon Wireless for no profit less than a year after they bought it. Thanks to the credit boom's collapse, they'd have to search long and hard for any other buyer at any price.
But there's another reason for them to speed-dial this deal.
The next administration is likely to oppose such an anti-consumer combo no matter who is in the White House. Even at the merger-happy Bush administration, an Alltel-Verizon marriage faces "head winds" and is "vulnerable to challenge," Stifel Nicolaus analysts wrote to clients last week.
Which gives an idea of how troublesome it is. Instead of simply forcing a few divestitures, the Federal Communications Commission and the Justice Department ought to surprise everybody and block it.
Verizon Wireless, owned jointly by Verizon and Vodafone, is the No. 2 wireless-phone carrier. Merging with No. 5 Alltel would give it 80 million customers and the top spot, surpassing AT&T. Together, AT&T and Verizon would control about 60 percent of the U.S. market, facing an enfeebled Sprint/Nextel, T-Mobile and other, even smaller, fry.
Such market power threatens to slow or stop a steady decline in the price of wireless phone calls - down to 7 cents a minute in 2006 from 11 cents in 2002, according to the FCC. Verizon Communications stock rose almost $2 the day the deal was announced, as investors saw higher profits ahead.
If that's not bad enough, AT&T and Verizon just locked up another big piece of the airwave spectrum. Devoted to analog television signals that will cease next year, the spectrum gives the phone companies new opportunities to make money shipping wireless data at high speeds and volumes.
Consumer advocates hoped Google or some other outsider would win a big block and found a new company to battle the wireless incumbents, but no luck. AT&T and Verizon won most of the spectrum in a government auction and now are even more entrenched than before. Adding Alltel to the oligopoly would raise Verizon's anti-competitive battlements even higher.
Verizon missed a chance to buy Alltel a year ago, when two private equity groups bought the company for $28 billion, most of it debt. The resulting interest payments wiped out Alltel's profits, and the credit slump diminishes the owners' chances of reselling it to a financial buyer any time soon.
