Then there were four
The number of significant players in wireless telephony in the US will be reduced from five to four, if Verizon Wireless's acquisition of competitor Alltel goes through. The move would unite the #2 and #5 players in this lucrative and highly concentrated market. The enhanced Verizon Wireless would be the new #1 company in the business, leapfrogging AT&T. The deal is for $28.1 billion in cash and debt.
Verizon Wireless is co-owned jointly by Verizon Communications and UK-based Vodafone Group. Alltel, which services mostly rural wireless customers, is owned by private equity groups from TPG and Goldman Sachs, which bought the firm with an LBO only seventh months ago. Their profit in the sale is $1.3 billion.
Vodafone shareholders have been trying to have the British company sell off its Verizon Wireless holdings, due to lack of dividends. The $29.1 billion deal will make any near-term dividends even more unlikely. So there is amorous pressure on the British wireless company to exit the joint venture.
Verizon Wireless announced that the move would enhanced customer service. Other than making for better connectivity in some rural area, such claims should be treated with great skepticism.
The further concentration of the industry will doubtless mean higher prices and even less pressure to innovate. Verizon Wireless, AT&T, Sprint-Nextel, and T-Mobile now have one less competitor, and Sprint-Nextel is fading fast, so the prospect of only three wireless companies is not out of the question. If nothing else, Verizon's Alltel buys means it has little money available for innovation, including better Internet connectivity.
An article on Internetnews.com ('Alltel, Verizon Merger Not a Win-Win for All," 6/5/08( quotes telco analyst Carmi Levy as stating the simple truth: "The big need to get bigger, and the only way to protect yourself in a turbulent market is to grow…And it's easier to grow by buying than through organic customer acquisition," He also noted "When there are fewer players there is less competition, and less competition means less incentives and benefits for consumers"
It is thought that Verizon Wireless wants to get this deal through the federal authorities as quickly as possible, before a possible change in the administration.
4:12:13 PM 
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