Verizon Wireless will become the largest U.S. carrier in terms of subscribers when its $28.1 billion acquisition of Alltel Wireless is finalized Jan. 9, according to a regulatory filing.
Verizon will assume $22.2 billion in debt, and it will pay $5.9 billion for Alltel's privately held equity. Alltel, the fifth-largest U.S. cell phone operator, will add about 13.2 million subscribers to Verizon's subscriber base of about 66 million. The deal will move Verizon ahead of current leader AT&T, which has about 72 million wireless customers.
Alltel also will bring valuable spectrum to the deal, as the company has the largest geographical footprint of all the carriers. The carrier has a wide-ranging network that covers parts of 35 states, mostly in the Midwest and South. This could potentially be a major asset for Verizon as it allows the company to save on roaming charges.
Both companies use CDMA technology for their networks, which should ease the transition for subscribers and the service provider. Alltel is also in the middle of upgrading its EV-DO 3G network from Revision 0 to Revision A, which would put its wireless data network in line with Verizon's.
A merger of this size will probably lead to job cuts, with most expected to occur in Alltel's headquarters in Little Rock, Ark. The companies did not comment on if any job losses would occur.
The acquisition was announced in June, but some worried that the global credit crisis would derail the deal. But Verizon said in December it has received financial commitments from eight institutions to cover the bulk of the acquisition. The deal also received the blessing of regulatory bodies once Verizon agreed to divest in 105 markets.
With nearly 80% of U.S. consumers owning a cell phone, it's becoming difficult for carriers to grow subscribers organically. This is leading to increased competition among AT&T, Sprint, T-Mobile, and Verizon to maintain their subscribers while trying to poach other companies' customers.
Acquisitions could also be an avenue for subscriber growth, but the uncertain financial market could put a damper on that for the immediate future. However, U.S. Cellular and its 6.2 million subscribers could be an attractive acquisition target.