14 DAY TRIAL // Verizon confirmed today it was moving forward with the plans of acquiring Alltel for $28.1 billion. A spokesperson for Verizon said that they estimated to close the deal before the end of this year. Clearly, Verizon’s plans have not been influenced by the current financial crisis going on in the US.
At the moment, Verizon Wireless owns and operates the second largest wireless communications network in the US, based on a total of 68.7 million US subscribers, and has the highest revenue of all wireless companies based in the States, with an annual gross of $43.9 billion.
Alltel Corporation, on the other hand, is the fifth largest wireless telecommunications company in the US, having 13.4 million customers. If the transaction is completed, Verizon will become the largest wireless carrier in the US, with over 80 million subscribers, and taking the number one spot from AT&T.
Even if Verizon has confirmed the buyout, a major ratings firm that evaluates companies' financial strength for world credit markets doesn't seem to think that the acquisition is likely to happen. "Considering the size of this deal, it would be surprising that Verizon would enter something with such significant risk that it really threatens to preclude this deal from closing," said Bill Densmore of New York-based Fitch Ratings.
Densmore identified several key factors that might be considered a threat to Verizon. First of all, the company must have enough financial strength to buy the assets it will probably sell later on so that federal regulators approve the deal. Secondly, the acquisition of Alltel contains triggers that may allow Verizon to back out if the company is forced to divest too many subscribers in order to get federal approval.
Up until now, nothing concrete has emerged from continuing talks between Verizon and the Department of Justice, said Verizon's spokeswoman Robin Nicol. "There could be more markets we have to divest. Right now we have no idea," she said. "But even if those numbers increase, we still think we'll be able to reach an agreement with DOJ."