The Wall Street Journal continues to speculate that US rural mobile operator Alltel Corp could be snapped up by US telecoms and mobile goliath AT&T Inc.
Back January this year, the WSJ reported that private equity firms saw the Little Rock, Arkansas-based carrier as a potential takeover target. Then in March the newspaper, quoting people familiar with the situation, said that Alltel had been touting for a buyer amongst carriers such as AT&T Inc, Verizon Communications Inc, and Sprint Nextel Corp.
Earlier this week the WSJ’s Deal Journal blog speculated that AT&T CEO, Ed Whitacre, would acquire the carrier as part of a swan song acquisition before he retires.
Alltel is the fifth largest US wireless operator with 12 million customers in 35 states, mostly in the rural regions of the US. In the year ended December 31, net income declined 15% to $1.13bn, down from $1.33bn in 2005. Sales rose 20% to $7.88bn from $6.57bn in 2005.
Shares in the carrier rose 1.49% to $62.56 on the New York Stock Exchange on Thursday.
Alltel has undergone a radical transformation over the past couple of years. In January 2005, it finally confirmed much-leaked speculation it would pay $4.3bn for fellow rural carrier Western Wireless. Then in December 2005 it spun out its fixed-line business and merged it with Valor Communications Group Inc in a deal worth $9.1bn, to form Windstream Corp.
This has left the carrier with one of the strongest balances sheets in the US as by December 31, 2006, it only had $2.7bn of outstanding debt, coupled with $934m in cash and short-term investments.
This means that Alltel will not come cheap. It has a market capitalization of $22.5bn, and AT&T risks a number of potential antitrust problems if it decides to make a play.
More importantly, there is a problem on the technology front. AT&T’s Cingular network is mostly GSM-based, whereas Alltel’s network is CDMA-based. A more logical purchaser, from a technology point of view, would be Verizon Wireless.