Wireless

AT&T said it will pay $2.35 billion in cash to buy the bulk of the Alltel Wireless assets that Verizon Communications must divest as part of its acquisition of Alltel, the company announced Friday.

As part of the deal, AT&T will get wireless spectrum licenses, network assets, and 1.5 million subscribers in 79 service areas.

Verizon Wireless was required to sell assets in parts of 18 different states as a condition for getting regulatory approval to buy Alltel. The Verizon-Alltel deal, valued at $28.1 billion, was announced in June 2008, and closed in January this year. After the merger, Verizon Wireless became the largest U.S. wireless operator, surpassing AT&T in terms of subscribers.

So what does this mean for former Alltel wireless customers? Well, for customers in parts of Alabama, Arizona, California, Colorado, Iowa, Kansas, Michigan, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Tennessee, Utah, Virginia, and Wyoming, it means that they will become AT&T wireless customers.

The asset acquisition also included a few markets from Verizon Wireless and the former Rural Cellular, AT&T said in its statement. The old Rural Cellular, or Unicel as it was also called, had operations in parts of Maine, New Hampshire, Massachusetts, Alabama, Mississippi, Minnesota, North Dakota, South Dakota, Wisconsin, Idaho, Washington, and Oregon.

AT&T said in its statement that after the network and billing integration is complete, the new AT&T customers will have access to all the same phones and service plans available to all its AT&T customers, including free Wi-Fi for 3G LaptopConnect customers and qualified smartphone subscribers. And for interested rural wireless customers, it will be the first chance to get their hands on the popular iPhone, which is exclusively sold in the U.S. to operate on AT&T's network. These customers will also get access to other AT&T exclusive devices, such as the BlackBerry Bold.

AT&T's executives said that acquiring these assets helps fill a hole in its offering to rural subscribers.

"This transaction will complement our existing network coverage, particularly in rural areas," Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets, said in a statement. "The acquisition will add network assets, distribution channels and 850 MHz spectrum in a significant portion of the U.S., enabling even better coverage for AT&T's subscribers in those areas."

Also, as part of the deal, AT&T is selling Verizon its former Centennial Wireless properties. This deal, worth $240 million, includes licenses, network assets and nearly 120,000 current subscribers, in five service areas in Louisiana and Mississippi.

The deal is expected to close in the fourth quarter of 2009, contingent on regulatory approval, AT&T said.

Alltel announced on Thursday an upgrade to its My Circle feature that will let customers add up to five additional members for unlimited calling. The upgrade, which will be free, will be available only in the Alltel markets that are not part of the merger with Verizon Wireless.

Starting Friday, the My Circle 10 plan will expand to My Circle 15 and the My Circle 20 plan will expand to My Circle 25. Other plan features, including the monthly price, will not change. The upgrade will not apply to My Circle 1 or My Circle 5 plans.

To gain federal approval for its acquisition of Alltel, Verizon agreed to sell assets in 91 markets where service overlapped. Customers in those areas will continue to get service under the Alltel brand until another wireless carrier buys the assets.

Alltel customers migrating to Verizon will be able to keep their plans and My Circle features for the time being. Verizon customers have a similar, though more expensive, option with Verizon's "Friends & Family" plan.

Now that Verizon Wireless has swallowed Alltel, Alltel customers are on the edge of their seats waiting to see how the carrier will integrate its new minion. Naturally, the future of Alltel's popular "My Circle" plan is a top concern--who wouldn't like an option for unlimited calling for up to 10 numbers? But if Verizon's "Friends & Family" announcement is a sign of how the integration will proceed, then I fear for my Alltel friends.

On Wednesday, Verizon unveiled a new My Circle-esque option that will allow unlimited calling to a select group of numbers, even landlines. Starting February 15, "Friends & Family" (does anyone else think of MCI?) will give single line users up to 5 numbers and family line users up to 10 numbers.

As with My Circle, you'll be able to call your friends and family members as often as you'd like without deducting minutes from your monthly allowance. Sound good? Well, in a way it is convenient, but a comparison with Alltel's MyCircle shows that Friends & Family is more expensive.

AT&T could end up with the lion's share of the wireless assets that Verizon Wireless must get rid of as part of its acquisition of Alltel, The Wall Street Journal reported Wednesday.

The newspaper cites sources who said that AT&T is among several bidders hoping to get their hands on the Alltel subscribers and network. The private-equity firms Carlyle Group and Kohlberg Kravis & Roberts & Co., supposedly are bidding on the assets together as is Providence Equity Partners on its own. At least one cable provider also has expressed interest, the Journal says.

In order to close its $28.1 billion acquisition of Alltel, Verizon Wireless agreed to sell off assets in 22 states to appease regulators. Included in these assets are 2.1 million wireless subscribers and wireless spectrum and equipment valued at around $3 billion.

AT&T is considered to be in the strongest position to bid on the assets, but consumer advocates and rural phone companies say that allowing AT&T to purchase these assets is bad for consumers.

Verizon Wireless and AT&T are the No. 1 and No. 2 wireless operators in the U.S., respectively. Together, they have over 160 million subscribers and account for nearly 60 percent of all cell phone service in the country. Critics, such as Gigi Sohn of Public Knowledge, told the Journal that Alltel's assets should end up with a smaller wireless player to spur more competition, rather than allowing the second largest operator to gobble up more customers and spectrum.

Rural trade groups believe that AT&T could charge expensive roaming rates to other smaller carriers in these regions, which could affect competitive pricing for consumers.

Even if AT&T ends up as the highest bidder for the assets, the deal still has to be approved by the U.S. Department of Justice. But because the deal will likely be evaluated market by market, AT&T could still end up with a significant amount of the assets if it is bidding for assets where it doesn't have a strong presence already.

Some people, such as Dan Meyer at RCR Wireless, argue that AT&T buying the divested Alltel assets might not be such a bad thing for consumers. Alltel primarily operates in rural markets, where national carriers don't offer service. And some of these consumers might be happy to have another national operator, such as AT&T, he said.

But the biggest benefit for rural consumers is that they could finally be able to get the Apple iPhone. AT&T is the exclusive carrier for the iPhone and many people in rural markets have complained that this exclusivity agreement has prohibited them from having access to the latest and greatest technology. While the real policy issue here centers around exclusivity deals, the fact remains that a big group of people want the iPhone and can't get it because AT&T isn't offered in their market.

So even though allowing AT&T to gobble up more spectrum and assets may hurt smaller wireless operators and could ultimately drive up wireless prices, I'm sure there are plenty of people living in rural areas where AT&T doesn't offer service today who would be more than happy for the chance to have an iPhone.

What do you think?

Verizon Wireless has finally completed its $28.1 billion acquisition of regional wireless carrier Alltel.

Verizon announced its plan to buy Alltel in June for $5.9 billion in equity, and it assumed about $22.2 billion in Alltel's debt. The deal was struck only seven months after Alltel was bought out by TPG Capital, a unit of Goldman Sachs Group, for $27.5 billion.

The deal now makes Verizon the largest wireless carrier in the United States, with more than 83.7 million customers. AT&T, which had held that title, had 74.9 million wireless customers as of September 30.

Most of Verizon's new customers are in the Midwest and South, where Alltel operates.

In order to receive approval from regulators, Verizon Wireless agreed to sell operations in 105 markets where Alltel also operates. As a result, Alltel customers in those areas will not be part of the merger with Verizon Wireless.

Alltel customers who are part of the merger will receive letters informing them that their service will change to Verizon Wireless, the company said in an FAQ on its Web site.

Verizon and Alltel both use the cellular technology CDMA. And both companies have built 3G wireless networks using a technology called EV-DO. But it will take months before the companies can integrate their network operations and billing systems.

This means that during the transition, Verizon customers will not be able to receive service at Alltel stores, and vice versa. Alltel customers are also not yet a part of Verizon's in-calling plans. But once the integration is complete, that will change.

And at least for the time being, Alltel customers will not be offered handsets for which Verizon Wireless is the exclusive carrier, including Research In Motion's BlackBerry Storm.

And it's not yet clear when or if deals such as Alltel's My Circle, which allows for unlimited calling between people in a preselected group, will continue. For now, My Circle will be available to Alltel customers while they are on Alltel's pricing plan. Verizon is considering whether to create a similar plan for new and existing Verizon Wireless customers.

The Federal Communications Commission approved the $28 billion acquisition between Verizon Wireless and Alltel on Tuesday after a four hour delay in which commissioners negotiated terms of the deal.

The meeting was supposed to start at 11 a.m. EST. But didn't actually get under way until nearly 4 p.m. EST.

The delay was attributed to discussions among commissioners and Verizon to hammer out a deal that satisfied concerns over roaming conditions put on the deal.

During the meeting, the two Democratic commissioners on the FCC, Michael Copps and Jonathan Adelstein, expressed concern that combining Verizon and Alltel will limit the number of roaming partners that smaller carriers in rural markets could work with. And as a result, they say this will limit competition and drive up prices for consumers.

As part of a compromise, Verizon agreed to keep its roaming rates the same for the next four years.

Verizon Wireless, which is jointly owned by Verizon Communications and Vodafone, announced its plan to buy regional operator Alltel earlier this year, in a deal that will make it the largest wireless operator in the U.S. The phone company won approval for the deal from the U.S. Department of Justice last week.

The FCC had also been expected to approve the merger. But like the Justice Department, which is requiring Verizon to sell off assets in 22 states, the FCC was also expected to put its own conditions on the merger.

In addition to keeping roaming rates the same, the FCC is also requiring Verizon to divest service in a total of 100 markets. It is also requiring e911 accuracy and Universal Service Fund contributions.

The FCC's original agenda for the November 4 meeting had been packed full. But over the past two days, the FCC has managed to whittle down the agenda, approving three minor issues and tabling one controversial issue. Of the original seven agenda items, only three remain, including an item that deals with opening up "white space" spectrum for unlicensed use.

For more on the FCC meeting, check back later when more updates will be posted.

Verizon Wireless has made it through an important regulatory hurdle in its bid to acquire rural wireless operator Alltel, but the approval didn't come without conditions.

The U.S. Justice Department on Thursday gave the green light on the merger. But it is requiring Verizon to divest assets in 22 states, including service in all of North Dakota and South Dakota; large portions of Colorado, Georgia, Kansas, Montana, South Carolina, Utah and Wyoming; and parts of Alabama, Arizona, California, Idaho, Illinois, Iowa, Minnesota, Nebraska, Nevada, New Mexico, North Carolina, Ohio, and Virginia.

The $28.1 billion deal, which was announced in June, still needs approval from the Federal Communications Commission. The agency is expected to vote on the acquisition at its November 4th meeting.

The bulk of the deal's value comes from Alltel's debt. Verizon plans to pay Alltel about $5.9 billion for equity in the company, but it will also take on about $22.2 billion in debt. Alltel incurred most of this debt when it was taken over in a leveraged buyout last year.

Investors have been concerned that the acquisition has gotten too expensive as debt financing costs have risen. But Verizon's CEO Ivan Seidenberg assured them during the company's quarterly conference call this week that Alltel is still a good purchase and would pay for itself in the long run.

Once the purchase is complete, Verizon will become the largest cell phone operator in the U.S. in terms of subscribers, unseating AT&T, which is currently the largest U.S. wireless operator.