Alltel Corp. will forge ahead as a wireless-only business, the company announced.
Alltel is spinning off its wireline business into a $9.1 billion merger with Texas-based Valor Communications Group Inc. The new wireline company will be located in central Arkansas and will focus on serving the rural U.S. Alltel shareholders will own 85 percent of the combined company, for which no name has yet been announced.The new wireline company will have about 3.4 million customers in 16 states. Valor already operates access lines in Arkansas, New Mexico, Oklahoma and Texas, where it offers phone, dial-up and broadband services.
The transaction will be tax-free to Alltel, Valor and both company’s shareholders. Alltel noted that the two companies’ wireline footprints are complementary and that Valor already uses Alltel’s billing platform. Alltel expects to receive cash and debt reduction to the tune of $4.2 billion.
The spinoff transaction is expected to close by mid-2006 and requires approval from state and federal regulators, Valor shareholders and the Internal Revenue Service.
According to Scott Ford, Alltel’s president and chief executive officer, both the wireless and wireline companies “will have sufficient scale to compete on (their) own and will be appropriately capitalized to take advantage of strategic, operational and financial opportunities.”
Managers from Alltel will lead both companies. Frances Franz, who has been with Alltel 15 years and currently serves as executive vice president and secretary, will become chairman of the board for the wireline company. Jeffrey Garner, currently Alltel’s executive vice president and chief financial officer, will become president and CEO of the new company.
“This is a big step for the company,” said independent telecommunications analyst Jeff Kagan. “The two new companies will become very different as the years unfold, but they will compete with each other. The competitive war is still in its very early stages, but the warriors are choosing sides and are preparing for battle. This next wave in telecom will be very interesting.”
Alltel has aggressively expanded its wireless offerings in the past year. It purchased Western Wireless Corp. in August; acquired assets and subscribers from Cingular Wireless L.L.C. and Public Service Cellular of Georgia; and has agreed to buy Midwest Wireless.
Alltel also last week said it expanded its CDMA2000 1x EV-DO network to a total of 12 cities, with launches in Richmond, Va., and Charlotte and Raleigh, N.C.
Alltel also has agreed to sell the Haitian and Bolivian wireless operations it acquired from Western Wireless. Terms were not disclosed for those transactions, which are expected to close by mid-2006.
