Over the past couple of days I received some email asking for my thoughts on the Verizon Wireless / Alltel deal. At the time the Verizon Wireless purchase of Alltel had not been agreed to by the companies - it was "under discussion". Well.... late yesterday the two companies agreed. Here's some details on the deal from an Alltel press release and Alltel's Wikipedia entry:
- Alltel is the fifth largest wireless carrier in the United States.
- Alltel serves more than 13 million customers in markets in 34 states. This is the largest wireless coverage area in the United States and includes 57 primarily rural markets that Verizon Wireless does not serve.
- Alltel focuses on small to medium size cities but provides wireless services to residential and business customers in all 50 states through low-cost roaming agreements with the major national CDMA carriers including Verizon Wireless and Sprint Nextel. These agreements give Alltel customers access to nationwide service while providing those carriers coverage in rural areas.
- Verizon Wireless currently serves approximately 67.2 million customers. The deal will bump Verizon's customer numbers to over 80 million, placing Verizon ahead of AT&T in the number of wireless customers served.
- The deal is valued at $28.1 billion. Verizon Wireless will acquire Alltel's equity for $5.9 billion and assume Alltel's outstanding $22.2 billion in debt.
When compared to the big companies Alltel, with its 13 million customers, is a small player. Being small has provided some advantages though. Here's an interesting quote from a Washington Post piece titled Is Verizon Wireless Buying Alltel For Its Assets Or For Its Culture Of Innovation?:- Alltel serves more than 13 million customers in markets in 34 states. This is the largest wireless coverage area in the United States and includes 57 primarily rural markets that Verizon Wireless does not serve.
- Alltel focuses on small to medium size cities but provides wireless services to residential and business customers in all 50 states through low-cost roaming agreements with the major national CDMA carriers including Verizon Wireless and Sprint Nextel. These agreements give Alltel customers access to nationwide service while providing those carriers coverage in rural areas.
- Verizon Wireless currently serves approximately 67.2 million customers. The deal will bump Verizon's customer numbers to over 80 million, placing Verizon ahead of AT&T in the number of wireless customers served.
- The deal is valued at $28.1 billion. Verizon Wireless will acquire Alltel's equity for $5.9 billion and assume Alltel's outstanding $22.2 billion in debt.
[being relatively small] gives the company a level of comfort and flexibility to quickly roll out new services without the constraints larger carriers face. It doesn't worry that millions of users will start using a new service overnight that crash the network, and it doesn't have to train as many customer service and retail representatives every time it launches a new phone or application. So, the concern is that once a part of Verizon this attitude will fade.
My thoughts:Will Verizon Wireless maintain a level of separation and use Alltel as a wireless "skunk works"? I don't see how it can.
Are Sprint Nextel and T-Mobile next? I would not be surprised to see AT&T take a shot at one of them.
What do these kinds of mergers usually mean for consumers? Less competition and fewer choices commonly lead to higher prices.
The Verizon Wireless / Alltel deal still needs regulatory approval and is expected to be completed by the end of this year.
