Alltel for sale?
Alltel, the #5 US wireless carrier, looks like it may be the next one to get absorbed b a rival. Such rumors have been in the air for years, but the company has confirmed that it has been in discussions with the other big wireless companies: AT&T (formerly Cingular), Verizon Wireless, Sprint/Nextel, and T-Mobile.
Alltel may be smaller in revenue, but it has the largest network in terms of geographical coverage. That's because its specialty is in serving rural customers, and it's made several deals to expand in that area. Other phone companies snow rent connectivity through Alltel's' network in order to expand their service coverage.
Sprint and Verizon are the likeliest bidders, since Alltel's cellular protocol (CDMA) is the same as the one used by those companies. AT&T and T-Mobile use a separate protocol (GBM), though that does not rule them out entirely. Verizon, with deep pockets may be the leading candidate, while Sprint, still struggling with the absorption of Nextel may not be ready to buy.
Any deal, if its goes through, will be another step on the progressive concentration of the US phone industry. And antitrust regulators can hardly complain if, for example, Verizon buys Alltel, since they had almost no objection to the SBC/BellSouth/Cingular roll-up.
But AT&T may be a serious contender, according to a Wall Street Journal story (Alltel Is Calling Potential Buyers", 5/5/07) puts it:
For AT&T, a deal would expand its customer base, already the largest, giving it increased clout with equipment makers and more potential eyeballs for brand marketers as the carrier pushes a new mobile-advertising initiative. And a deal would fit in line with the aggressive acquisition strategy of AT&T Chief Executive and Chairman Edward Whitacre Jr. However, AT&T may also be playing a high-stakes game of keep-away from Verizon, which has also considered buying Alltel, people familiar with the companies say. Neither side wants the carrier to fall into the other's hands.
The motive of the dog in the manger (spiting your rival) is a powerful impetus to making deals to spite your rivals, even when teh numbers don't make sense. And business analysts fall into the trap of seeing such deals as entirely rational.
