Verizon Wireless is in talks to buy Alltel Communications LLC, the country’s fifth-largest wireless carrier by subscribers, for $27 billion, according to news reports.
If consummated, an acquisition would be the biggest telecom deal since AT&T Inc. bought BellSouth Corp. at the end of 2006. Adding Alltel’s 13.2 million subscribers to Verizon Wireless’ 67.2 million would create the largest wireless carrier in the country, far ahead of AT&T Inc. with 71.4 million customers.
Talks are at a sensitive stage, according to CNBC and The Wall Street Journal. Both reports cited unnamed sources close to the discussions. Representatives of Verizon Communications Inc. and Alltel had no comment Wednesday.
Shares of Verizon Communications, the controlling parent of Verizon Wireless, dipped after the report, closing down 38 cents, or 1 percent, to $36.98. Verizon Wireless’ other parent is Vodafone Group PLC of Britain, with a 45 percent share of the joint venture.
Little Rock, Ark.-based Alltel was a public company until it was bought out by TPG Capital and GS Capital Partners in November for $24.7 billion. It has a wide-ranging network covering parts of 35 states, mainly in the middle of the country.
A deal could save Verizon Wireless more than $1 billion per year, according to analyst Christopher King at Stifel Nicolaus. Verizon Wireless now pays hundreds of millions in roaming charges every year to Alltel, he estimated.
King also remarked that Alltel’s private-equity owners would likely jump at a chance to sell, since tight credit markets could make it difficult to wrest a profit from the highly leveraged company. He expects a deal would pass regulatory review, but Verizon Wireless may have to divest radio licenses in some areas.
Verizon Wireless uses the same network technology as the majority of Alltel’s network. That makes Verizon Wireless a more likely acquirer than AT&T Inc., which uses an incompatible technology. Regulatory scrutiny of an AT&T deal would also be tougher, since AT&T is the largest carrier.