The U.S. carrier market appears to be headed for further constriction on news that regional carrier Alltel Corp. is in advanced negotiations to buy Western Wireless Corp. for $4 billion. The report follows Cingular Wireless L.L.C.’s purchase of AT&T Wireless Services Inc. and Sprint Corp.’s recently announced plan to merge with Nextel Communications Inc.
Western Wireless’ stock shot up 14 percent on the news to $35.34 per share. Alltel’s stock dropped around 3 percent to about $56.08 per share.
According to a report in the New York Times, a deal could be reached within a week. Under the reported terms of the agreement, Western Wireless shareholders would get $40 per share, a premium over the carrier’s trading levels prior to the announcement. However, Raymond James analyst Ric Prentiss said the price could go higher as a combination of cash and stock.
Alltel said it had no comment on the report.
A combined Alltel and Western Wireless would have around 9.7 million subscribers in parts of the Southeast, Midwest and West-solidifying Alltel’s position as the largest of the nation’s second-tier carriers.
The deal would give CDMA carrier Alltel a solid footing in the western United States, as well as access to Western Wireless’ GSM operations. Aside from its own 8.4 million wireless customers, Alltel provides roaming services to other CDMA carriers, primarily Verizon Wireless. Western Wireless also offers roaming services to CDMA carriers, but around half of its network also includes GSM technology. T-Mobile USA Inc. is Western Wireless’ primary GSM roaming partner. John Stanton, Western Wireless’ chief executive officer, headed VoiceStream Wireless, which Deutsche Telecom purchased in 2001 and re-branded as T-Mobile. If Alltel purchases Western Wireless, it could diversify the carrier’s potential roaming partners.
Alltel has recently been working to expand its network by purchasing network assets from the likes of U.S. Cellular and Cingular Wireless. Indeed, when Alltel purchased CenturyTel Inc.’s wireless business in 2001, the company said at the time it was looking to expand into the West.
Alltel has also been rumored to be considering U.S. Cellular, the second-largest tier-two carrier. A combination of Alltel, Western Wireless and U.S. Cellular would create the nation’s fifth-largest carrier with about 15 million subscribers, just behind that of T-Mobile.
Alltel’s reported discussions with Western Wireless fly against speculation that Verizon Wireless would purchase Alltel. Verizon, once the nation’s largest carrier, has so far stayed above the consolidation commotion.
For the nine months ended Sept. 30, Western Wireless reported revenues of $1.4 billion and a net income of $107.9 million. During the same period, Alltel reported revenues of $6.11 billion and a net income of $756 million.
