Is Alltel A Cellular Takeover Target?

InformationWeek reports that after a strong quarter, Alltel is again at the center of "speculation that it could become a takeover target, particularly by Verizon Wireless." According to the article, Alltel "had revenues from its cellular operations of $1.8 billion for its most recent quarter, a 30 percent increase compared to the same quarter a year ago. It said it added about 165,000 new wireless customers during the quarter and increased its average revenue per user (ARPU) by about four percent. It also recorded a low 1.66 percent "churn rate," which measures the rate at which customers defect to other carriers."

Tole Hart at Gartner said, "It's a well-run, well-executed company. They've spun off their local (wireline) exchange company and they're focused on wireless. That makes them something of a pure play, which makes them an easier takeover target."

Hart noted that "while Alltel operates in 36 states, it covers relatively few large cities, which is where the largest growth is." Verizon has been rumored as a potential acquirer of Alltel since both have CDMA-based networks. Hart said, "If Verizon were looking to cement their position, Alltel would be attractive."

He pointed out that "the two companies already are working together with a comprehensive roaming agreement." Another potential partner is "U.S. Cellular, a Chicago-based company that operates in 25 states."

Hart remarked that "U.S. Cellular also is both a CDMA operator and doesn't have a lot of service overlap with Alltel." Hart added that Alltell is "focusing on their value and growing that value. At the end of the day, if that means somebody is buying them, that's what the market would dictate. But I don't know if that's in their immediate plans."