Quickly following up on earlier confirmations by its partner Vodafone, Verizon on Thursday said it would buy out Alltel in a cash merger with a total value of about $28.1 billion. The deal is mutually agreed upon and should see the union take place by the end of the year following approvals from the US government; Alltel chief Scott Ford will continue to run Alltel until the deal is completed.
The companies both see immediate advantages to the deal. Verizon expects to make an immediate gain from the venture after discounting the costs of the deal, and says it will pick up about 57 largely countryside markets that it doesn't currently own. The move also gives Verizon an extra 13 million subscribers over what it claimed as of the first quarter of this year, pushing its total customer base to over 80 million and surpassing AT&T's 71 million to become the largest carrier in the US.
Alltel in turn primarily receives a technological upgrade, including a shorter timeframe for its planned upgrade to 4G using the Long Term Evolution standard. It additionally gives Alltel customers access to an over-the-air music store, national coverage without roaming fees, and the ability to use unrestricted devices and software through the Open Development Initiative, Verizon says.
The impact on jobs at either company has yet to be determined, though Verizon expects to save as much as $1 billion two years into a successful merger.
If completed, the merger gives the CDMA cellular standard a temporary lead in the US market. While CDMA is used by more carriers today, AT&T's lead presently gives GSM the most subscribers attached to an individual carrier. It will also adopt LTE, however, permitting its customers to roam on the now unified Alltel and Verizon networks when they switch to the 4G format by about 2010.
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