Verizon set to surpass AT&T with purchase of Alltel

Verizon Wireless, the joint venture of Vodafone Group PLC and Verizon Communications Inc. has agreed to buy Alltel Corp. for $28.1 billion in cash and debt, making a deal that would allow it to beat AT&T Inc. as the biggest mobile-phone company in the U.S.

The acquisition will comprise about $5.9 billion in cash and $22.2 billion in debt, the Basking Ridge, New Jersey- based company said today. The transaction, subject to regulatory approval is expected to be completed by the end of this year.

Verizon Wireless and AT&T have been in competition for new customers as people switch from landlines to mobile phones. With 13 million customers, Alltel owns the biggest wireless network in the U.S. geographically, spanning mostly smaller cities and rural areas in 34 states. It handles calls for Verizon and AT&T in places where they don't provide coverage.

"This is a perfect fit, with Alltel's high-value post-paid customer base, its solid financials, our common network technology, and significant, readily attainable synergies," said Verizon Communications Chairman and CEO Ivan Seidenberg, of joining hands with the Alltel.

Interestingly, Alltel was bought by TPG Capital and a unit of Goldman Sachs Group in a $27.5 billion leveraged buyout, only seven months ago. The rapid resale indicates how the credit crunch is influencing the business world.

AT&T, with 71.4 million customers is currently the nation's largest cellphone operator but after merging with Alltel, Verizon would become larger with 80 million customers. Vodafone has a 45 percent stake in Verizon Wireless, while Verizon Communications owns 55 percent.

Verizon Communications went up $1.08, or 2.9 percent, to $38.06 at 9:59 a.m. on the New York Stock Exchange. The shares had dropped 15 percent this year before today. Vodafone, on the other hand dropped 1.9 percent to 151.75 pence ($2.96) by midday in London.