February 27, 2007 5:41 PM PST

Is Verizon Wireless really looking to buy Alltel?

The rumor du jour is that Alltel, the largest rural mobile operator in the U.S., is up for sale. But at least two experts are split over whether the company widely mentioned as the likely buyer, Verizon Wireless, is the most logical suitor.

Rumors about a Verizon-Alltel marriage are nothing new. Two years ago, Wall Street was buzzing that the two might hook up. The rumor mill got churning again last week when Alltel executives said during the company's fourth-quarter conference call they were exploring several strategic "options." Analysts and investors on Wall Street have taken this to mean that the board of directors is looking to sell the company.

Verizon Wireless could be the most logical competitor to buy Alltel because the two companies both use the CDMA (code division multiple access) cellular technology. Sprint Nextel also uses CDMA, but many on Wall Street believe that Sprint is saddled with its own problems integrating Nextel's network. T-Mobile and AT&T's Cingular Wireless are unlikely candidates, because their networks are built using a different technology called GSM (Global System for Mobile Communications).

Albert Lin, an equities analyst with American Technology Research, said this week that this time around a merger between Alltel and Verizon Wireless makes sense on several levels. With the Alltel network and subscriber base, Verizon Wireless would become the largest mobile operator in the U.S.

But Alltel's price tag would likely be pretty hefty. A recent Reuters article estimated it could be close to $30 billion.

That's why Michael Nelson, an equities research analyst at the Stanford Group, said it's far more likely that Alltel would be bought by a private equity firm. He said that Verizon is better off waiting for the Federal Communications Commission's 700MHz spectrum auction, which is expected to get under way later this year, to buy some spectrum in rural areas and build its own network.

"Verizon has had a significant amount of success growing organically," he said. "I just don't see any reason why they would need to buy Alltel. They can build their own network for a lot less than $30 billion."

Nelson said, however, that he could see Verizon Wireless buying Alltel if the company fears it will lose the asset to a competitor. Right now, Verizon leases capacity from Alltel's network to provide service in rural regions of the country. Alltel has significant coverage throughout the Midwest and the southeastern U.S. If Sprint were to buy Alltel, Verizon would likely be forced to work with other rural carriers in those regions or build its own network in those areas.

But Nelson said he thinks the chances of that happening are pretty slim.

"Verizon is simply not a willing buyer," he said. "And Sprint is in no position to be making a move of this size right now, so it's really up to private equity."

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12 comments

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Noo! If VZW buys Alltel, who will...
...release Moto firmware so I can get that atrocious VZW interface off my phone?

Alltel has been mine (and many others') hero for carrying the same phones as Verizon and therefore their firmware can be used (after some major tweaking from some great people at howardforums.com) to replace Verizon's terrible firmware. It's very clunky and sucks the battery down terribly, and is bereft of many features. My K1M almost doubled its battery life thanks to the Alltel firmware.
Posted by Kamokazi (40 comments )
Reply Link Flag
Hopefully NOT!
It would definitely be a bad move to buy Alltel if their customer base is made up of idiots like kamokazi.
Verizon Wireless does not manufacture phones. If someone needs changing the way a phone works, they can easily contact the manufacturer of the phone for that info.
As the article writer stated though, it would be foolish for Verizon Wireless to purchase this organization as it gains little for the money. And, soon enough it may need the money for the spectrum auction, which would be a better investment, especially as the analog band is going to be discontinued.
Posted by datajoe (1 comment )
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You're right...
I agree with datajoe. If vZw would ever buy Alltel, their customer service department would be flooded with calls from those h-forum zombie/noobs, like kamokazi.

They have enough issues with smart and tech savvy users - they have no time to walk someone through easy-to-fix issues. Firmware is best to the OEM not the cell carrier to deal with.
Posted by AMPerez (33 comments )
Link Flag
When we had at&t and was never told of the break up of that group with cingular and suncom (for those in north carolina) our phones started acting funny. Like calls being cut off every call, battery going dead when phone not being used and before they announced the merger we started getting calls from cingular and suncom his was cingular mine was suncom. These were 2 phones on the same bill. Now my alltel phone is doing the same exact thing my at&t account did. Calls always dropped, The other day a verizon prerecorded operator came on saying the call I was making was out of my network. I was using my alltel phone to call my husbands alltel phone from my home, no way I was out of my network also the batteries won't last for more than 8 hours even if the phones haven't been used all day. These 2 phones are not even 6 months old. So from my experience this merger is just a matter of a month or 2 away from being announced.
Posted by lilrose1960 (2 comments )
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When we had at&t and was never told of the break up of that group with cingular and suncom (for those in north carolina) our phones started acting funny. Like calls being cut off every call, battery going dead when phone not being used and before they announced the merger we started getting calls from cingular and suncom his was cingular mine was suncom. These were 2 phones on the same bill. Now my alltel phone is doing the same exact thing my at&t account did. Calls always dropped, The other day a verizon prerecorded operator came on saying the call I was making was out of my network. I was using my alltel phone to call my husbands alltel phone from my home, no way I was out of my network also the batteries won't last for more than 8 hours even if the phones haven't been used all day. These 2 phones are not even 6 months old. So from my experience this merger is just a matter of a month or 2 away from being announced.
Posted by lilrose1960 (2 comments )
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Yup bought Altell this morning. I know this because I went in to get me a new phone and the dude say that they are verizon wireless. (he didnt say it like that) So me and my mom is switching to cingular.
Posted by Cocolishis08 (1 comment )
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You mean you and your mom are switching to AT&T.
Posted by analblast001 (1 comment )
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Switching away from Alltel? I have been with Alltel for 8 years and I love the service. Hopefully it won't change. I have tried Cingular before AT&T and I hated it. No service anywhere I went.
Posted by BlackDuck20 (1 comment )
Link Flag
So are you just following the rumors or has it finally happened? I just not got off the phone with a customer support idiot for Alltel who said that it would be happening, not that it had... so which is it? Like the article says, the rumors have been flying for years! I live where there are only Cingular towers and all the other companies lease the air space, I would just want to see a descent and well priced service come here, and I am not saying Verizon is one, but it really can't be worse than AhHell, oops Alltell...
Posted by LeBarefootBohemian (1 comment )
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I'm currently an alltel costumer and i wanted to get a phone that only sells with verizon... will i be able to get this phone in january without switching over because alltel would have been bought? or the two companies have already merged? really my question is, exactly when is this going to happen?
Posted by reesetaylor (1 comment )
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Basically, what I understand from my boss, is that this will work one of two ways. Either, Alltel customers are going to become Verizon users, and they're phones are going to automatically download a VZW firmware, or Alltell customers will basically keep the same firmware, and just have the ability to operate off of the VZW network as well as the Alltel network. Either way, Verizon customers will keep the same firmware, and just have a larger network than they had before.

Verizon and Alltel work the same, their network is the same, their phones are basically the same, and different variations of the same firmware.
Posted by Scottyboy129 (2 comments )
Reply Link Flag
Basically, what I understand from my boss, is that this will work one of two ways. Either, Alltel customers are going to become Verizon users, and they're phones are going to automatically download a VZW firmware, or Alltell customers will basically keep the same firmware, and just have the ability to operate off of the VZW network as well as the Alltel network. Either way, Verizon customers will keep the same firmware, and just have a larger network than they had before.

Verizon and Alltel work the same, their network is the same, their phones are basically the same, and different variations of the same firmware.


Also, to be honest. It's not up to the phone makers to decide on their firmware for their phone. The only way this happens, is if you are talking about the iPhone or the G1 from T-Mobile.

Look at the Razr, for ATT and Verizon. Same phone physically, totally different phones once you start using them. The cell phone service provider decides what goes onto a phone, and what doesn't. If you notice, the basic way all Verizon phones work, is the same. The right button is contacts, while the other button is for messages. IF you hit "OK", then you'll hit the main menu. The uniform design is also the same with the service bars, battery life, and basic main menu. ATT phones, have the same uniformity, but that differs from the Verizon phones.
Posted by Scottyboy129 (2 comments )
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