Verizon Wireless, Alltel sign $28.1 billion deal

Confirming market speculation, the two companies released a joint statement Thursday that said Verizon would acquire the equity of Alltel as well as assume its debt.

Verizon Wireless is jointly owned by US telco Verizon and European telco Vodafone, which yesterday was the first to confirm that talks between VZW and Alltel were taking place.

The equity stake of Alltel is valued at some $5.9 billion, while it carries about $22.2 billion in debt. If the deal is approved, it is expected to close by the end of the year. Verizon Wireless would become the largest carrier -- with the nation's fifth largest carrier in tow -- with an estimated combined total of some 80 million plus customers.

Alltel serves about 13 million customers in 34 states. In addition, it has holdings in 57 rural markets where Verizon currently does not serve. Since both companies were working towards LTE for fourth generation services, the deal seems like a natural fit.

Another possible reason for the merger is the fact that Verizon's service in some rural areas where Alltel is very strong -- namely the Midwest and Great Plains -- is far less reliable than its traditional strongholds in the eastern and western parts of the company's territory.

"This move will create an enhanced platform of network coverage, spectrum and customer care to better serve the growing needs of both Alltel and Verizon Wireless customers for reliable basic and advanced broadband wireless services," Verizon Wireless president and CEO Lowell McAdam said in a statement issued this morning.

VZW expects to see an immediate return on its large investment, saying Alltel's financials and solid customer base will provide "opportunities for enhanced value" for Verizon shareholders. Savings of $1 billion annually are expected as a result of the combined operation.

Wall Street reaction to the merger was almost immediately positive. As of midday, shares of Verizon Communications shot up nearly five percent to $38.79. Alltel is not publicly traded. Shares of VZW co-owner Vodafone soared this afternoon by nearly four percent on the London Stock Exchange, since 2:30 pm local time.