Analysts approved of a proposed combination between Verizon Wireless and Alltel Communications LLC Thursday, saying the two companies could save money in the deal.
Verizon Wireless, a joint venture between Verizon Communications Inc. and Vodafone PLC, is in talks to buy Alltel Communications LLC for $27 billion, Vodafone confirmed earlier Thursday. Alltel was sold to private equity firms TPG Capital and GS Capital Partners, a subsidiary of Goldman Sachs, for $24.7 billion in November. Several analysts were surprised that the company might be sold again, and for a similar price.
Goldman Sachs analyst Jason Armstrong said the move comes at a good time, as business trends for Alltel and for the wireless industry have improved. Subscribers are rising and data revenue is growing, he wrote. He said a combination could be "a largely beneficial move" because Alltel and Verizon share technology and are looking to grow.
Armstrong also thinks there will be few other bidders: technological differences would reduce AT&T Inc.'s interest, he said, and Sprint Nextel Corp.'s business problems will probably prevent it from making an offer.
Goldman Sachs, which is acting as a financial adviser in the transaction, subsequently removed its ratings and price target for Verizon Communications pending the negotiations.
Baird analyst William Power said the deal, if completed, would give Verizon the largest subscriber base in the industry.
Citi Investment Research analyst Michael Rollins said the deal might lead to a slight decline in shares of broadcast and communications tower operators.