Verizon is the nation’s second-largest wireless carrier in terms of subscribers, while Alltel ranks fifth. The deal would catapult a newly formed company ahead of AT&T, currently the largest wireless company.
BY JASON WIEST
STEPHENS MEDIA
LITTLE ROCK, ARK. — Alltel Corp. officials were mum Wednesday about reports wireless giant Verizon is in talks to purchase the Little Rock-based telecom.
Citing unnamed sources Wednesday, CNBC reported Verizon was deep in talks to buy Alltel for roughly $27 billion, slightly less than what private equity firms TPG Capital and GS Capital Partners paid for Alltel in a debt and equity deal that closed in November.
“Our policy is to not comment on rumors,” said Andrew Moreau, Alltel’s vice president for corporate communications.
CNBC reported that TPG and GS Capital Partners “are willing to sell only six months after they closed the deal because they’ll get a slight premium to their equity investment, and there is a broad desire within private equity these days to generate a return when one is available.”
Since Alltel’s go-private transaction, losses in the subprime housing market have made it more difficult for private equity firms to obtain loans and have also raised lending costs.
The Wall Street Journal reported in its online edition the banks that backed the $27.5 billion leveraged buyout “are still sitting on about $24 billion in loan and bond financing, and see a Verizon sale as a way to cut losses on the financing.”
That report also cited “a person familiar with the matter” as saying that the private equity firms would earn a “nominal return on their investment” under the deal being negotiated with Verizon.
Verizon failed to bid on Alltel when it was auctioned last year, believing that its valuation was too high, according to people involved in the auction, CNBC said.
One selling point of a deal now is that Alltel has increased its earnings before interest, taxes, depreciation and amortization by 10 percent since the announcement of the go-private transaction, the CNBC article said.
Verizon has long been seen to be a potential buyer of Alltel. Both companies use the same network technology and Verizon also has a roaming agreement with Alltel that allows Verizon customers to use Alltel’s network when they are not within range of Verizon’s cell towers.
Alltel is primarily a rural wireless provider and has the largest geographic footprint of any wireless carrier.
Verizon is the nation’s second-largest wireless carrier in terms of subscribers, while Alltel ranks fifth. The deal would catapult a newly formed company ahead of AT&T, currently the largest wireless company.