PALM SPRINGS, Calif.-Alltel Corp. last week expanded its role as the go-to roaming carrier, announcing major reciprocal roaming agreements with Cingular Wireless L.L.C. and Sprint Nextel Corp. that put the nation’s fifth-largest operator in a position to provide voice and data roaming for as long as a decade.
Alltel extended its GSM roaming agreement with Cingular until 2012, and the pact includes voice roaming as well as data services. Kevin Beebe, Alltel’s group president for operations, said at last week’s Rural Cellular Association convention that Alltel plans to build out GSM service in more markets for Cingular and add EDGE data services to its current GPRS capabilities.
Alltel inherited a significant GSM footprint following its acquisition of Western Wireless Corp. last year, which Western Wireless built after signing a long-term roaming agreement and receiving spectrum from T-Mobile USA Inc. Alltel also recently closed on the purchase of First Cellular of Illinois, a small operator that sells GSM and CDMA wireless service to consumers. Alltel historically only provided GSM roaming service for other carriers and sold its own customers CDMA service, but the First Cellular purchase could open the door for the carrier to sell both technologies to its customers.
Beebe said the Cingular deal would “provide our company with some revenue upside in our wholesale business and gives Alltel an inside view of the development path of GSM technologies.”
The data arrangement does not extend to UMTS/HSDPA technology, according to what Alltel’s Chief Financial Officer Sharilyn Gasaway told analysts during a meeting in Chicago.
Gasaway said Alltel plans to continue expanding its data products and although data services only account for around 5 percent of Alltel’s average revenue per user today, she saw no reason why that percentage shouldn’t increase to 8 or 10 percent-to be more in line with its larger competitors. She also indicated that Alltel is open to picking up more wireless properties.
“We will continue to acquire wireless assets that fit operationally and that are at the right price,” Gasaway said.
Alltel’s roaming deal with Sprint Nextel takes effect July 1 and pushes out to 2016. The agreement covers CDMA voice services as well as 1x and EV-DO data services, and Beebe indicated that Alltel also has committed to work with Sprint Nextel in moving its network to EV-DO Revision A.
Alltel expects to extend its EV-DO coverage from around a dozen markets today to 60 percent of its potential customers by the end of this year.
“The new agreement expands our current voice and data roaming relationship while providing customers greater access to services in more places,” said Len Lauer, chief operating officer for Sprint Nextel. “Our technology alignment ensures an improved seamless roaming experience for text messaging, call/messaging notification and mobile broadband services.”
The deal provides Alltel access to Sprint Nextel’s extensive EV-DO footprint as well as the carrier’s voice coverage in larger markets. Analysts noted the deal gives Alltel another option for its roaming needs, which presently are served by an extensive voice and data agreement with Verizon Wireless that is set to expire in 2010.
Kitty Weldon, telecommunications industry analyst at Current Analysis, wrote in a research report that the deal with Sprint Nextel puts Alltel in a better negotiating position with Verizon Wireless once the companies’ reciprocal roaming agreement expires.
“By 2010, Verizon Wireless will need Alltel more than ever to continue its America’s Choice national plans,” Weldon pointed out. She added that the GSM roaming extension “validates Alltel’s decision to maintain multiple technologies and increases Alltel’s value within the wireless industry in offering true national voice and data plans.”
Bear Stearns telecommunications analyst Phil Cusick also noted that the deal increases the possibility of Sprint Nextel acquiring Alltel, though Cusick noted he did not expect such an action until at least 2007.
“We wouldn’t expect this in 2006, but a deal could become more likely in 2007+ as Sprint gets the Nextel transition under control,” Cusick said. “The possibility of a bidding war for Alltel is the most bullish story in the stock, and having Sprint more interested and aligned is a big plus.”
Financial details of the roaming agreements were not released.
