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Tuesday, January 11, 2005 6:42:04 AM
BY BILL W. HORNADAY
http://www.nwanews.com/story.php?paper=adg§ion=News&storyid=104530
Posted on Tuesday, January 11, 2005
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Alltel Corp. has agreed to buy Western Wireless in a deal worth $6 billion that soon will create the nation’s fifth-largest cell-phone service provider in the fast-consolidating telecom industry.
The combination will expand Alltel’s reach to 33 states from 14 and give the Little Rock-based company about 9.8 million U.S. subscribers along with 1.6 million international customers.
The deal calls for each share of Western Wireless stock to be exchanged for 0.535 share of Alltel common stock and $9.25 in cash — and gives Western Wireless investors the option of an all-cash or allstock payout.
All told, Alltel will issue some 60 million shares and disburse about $1 billion — for a total cost of about $4.5 billion.
Alltel also will assume about $1.5 billion in debt from Western Wireless, which is based in Bellevue, Wash.
Alltel shares dropped $1.37 on Monday to close at $54.75 on the New York Stock Exchange. Western Wireless stock gained 85 cents to finish at $37.37 on the Nasdaq Stock Market.
Now the nation’s No. 6 cellular provider, Alltel moved up a spot last fall when Cingular Wireless acquired AT&T Wireless for $41 billion.
Once the merger of Sprint and Nextel that was announced last month closes later this year, Alltel will move up another notch and solidify its role as the largest regional player behind national giants Cingular, Verizon, Sprint and T-Mobile.
That’s something President and Chief Executive Officer Scott Ford said he did not expect — at least not so quickly — when talks with Western Wireless began. "The timing of our discussions began last fall, before we even heard rumors about Sprint and Nextel," Ford said at a Monday news conference. "We thought this would be the big news in the wireless industry last fall."
Once the deal is approved by Western Wireless shareholders and federal regulators around midyear, Alltel would command about 6 percent of the nation’s 173 million wireless subscribers.
After the buyout, Alltel will have a coverage area that encompasses 56 percent of the continental United States in areas occupied by 25 percent of its population.
Annual revenues for Alltel will grow to $10 billion from $8 billion annually, but the deal is not expected to affect earnings until 2006.
As for employees — 22,000 for Alltel and 4,000 for Western — Ford said that everything is a "wild guess" so far, but that layoffs, if any, likely would be limited to corporate staff or areas where services overlap. Alltel employs 2,800 in the Little Rock-area. "It’s an issue where we’ll sit down and plan what makes the best sense," Ford said. "Some of their people are pretty talented and might just raise the bar a bit." Alltel’s headquarters will remain at its Little Rock campus along the Arkansas River. Western’s facilities in Washington will be used for operations, call centers and other operations — and might see the arrival of "additional talent" from Alltel’s ranks.
Most field personnel will not be affected by the merger, Ford said. Nor will the 1,500 employees of Western’s international operations who serve subscribers in six countries — mostly in Austria and Ireland.
International business, which Alltel plans to expand, would contribute about 5 percent of the combined company’s annual revenue, he said.
Domestically, the Alltel brand gradually will replace the Cellular One and Western Wireless brands, said Western’s Chairman and CEO John W. Stanton.
Stanton, who with several partners merged two companies to form Western Wireless in 1994, will join Alltel’s board of directors.
Monday’s announcement momentarily quells recent analyst speculation that Alltel could be a prime takeover target for Verizon Wireless should it wish to overtake Cingular as the nation’s largest wireless provider.
Ford poked fun at such buzz Monday, noting that it goes back as far as 1965 when Allied Telephone Co. — an Alltel predecessor — once was reported to be a buyout target of GTE. "Every time we go into a new deal, people think it’s because we’re being bought out and I think it’s funny. At the same time, we are seeing economic conditions that make such a possibility more probable," Ford said. "If you want a better read on it, you’d have to call six or eight people who aren’t in this room — obviously people with other wireless companies — and ask them how things will play out."
In that vein, Ford hinted Alltel likely is not finished with its buyout binge.
Indeed, analysts such as Morgan Keegan’s Tavis McCourt said last week that other large regional providers — Chicagobased U.S. Cellular with 4.8 million customers and Jackson, Miss.-based Cellular South — both feature the same CDMA (code division multiple access) network technology as Alltel.
At the same time, Alltel is working to add new technology such as GSM (Global System for Mobile communication) to its network. It will continue to support areas where GSM already is used by Western Wireless and plans to gradually add it to its own network.
While this could open the door to still other regional buys, analysts such as McCourt and Merrill Lynch’s David Janazzo insist that the bigger Alltel gets, the more attractive it becomes to suitors such as Verizon or Sprint.
But Ford seems preoccupied with other outcomes. "If all other M&A [merger and acquisition] activity stops, I can say we’re in a great position as a long-term business that’s focused — as the folks in New York call it — [on] the ‘secondtier’ and ‘third-tier’ markets. That’s our focus."
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