Everybody Wants It, But Who Would Buy Alltel?
Friday, January 5th, 2007
The Wall Street Journal helped generate buzz about a possible buyout of Alltel, the fifth largest cellular carrier in the U.S. It seems that its stock is a relative bargain and the company has very little debt. And private equity takeovers of public companies are all the rage right now.
A private equity takeover of Alltel would probably mean practically nothing to its 11 million-or-so mostly-rural subscribers.
So why are we talking about it here?
Because when a buyout this big is talked about, competing companies start thinking about whether they should offer their own bids. In this case, both Sprint and Verizon Wireless would be candidates, since they are the bigger service providers, and use the same CDMA technology as Alltel uses to route their calls.
So Alltel customers might wind up as customers of Sprint or Verizon, whether they like it or not.
For Verizon Wireless, the biggest obstacle to acquiring Alltel might be the Federal Trade Commission, which might object to already-big Verizon getting much bigger. Verizon would probably have to dump subscribers in some areas where it currently competes with Alltel.
For Sprint, the biggest obstacle to acquiring Alltel is the fact that the company has struggled after it acquired Nextel.
For wireless customers generally, there’s a delicate balance between having enough competition to keep prices low, and having your provider be big enough to give you decent nationwide (or worldwide) coverage. Alltel’s existing service and roaming agreements with Verizon Wireless seem to make its subscribers happy.
So there are lots of good reasons why Alltel could and should remain independent - even if it does get swallowed up by private equity money.
Alltel, Wall Street Journal, Verizon Wireless, Sprint, Nextel
[via Wall Street Journal]
