Alltel stands strong as rivals gobble spectrum
— -- It's tough enough for David to take on Goliath.
Now imagine Goliath countering David's slingshot with a cannon.
In a recent federal auction of wireless airwaves, AT&T and Verizon combined for $16 billion of the record $19.6 billion in winning bids as they stockpiled more spectrum to improve coverage and turbocharge their broadband services.
"The big guys got bigger," says Stifel Nicolaus analyst Rebecca Arbogast, noting the top two carriers widened their lead in spectrum.
The outcome raises a pointed question: Can a scrappy second-tier carrier survive in an increasingly saturated cellphone market when it's losing ground in the race for airwaves — the most vital building block of a wireless network?
"At a certain price, enhancing our spectrum holdings would have been a reasonable thing to do," says Alltel Chief Operating Officer Jeff Fox. But he adds, "I feel like we're in position to continue to execute our business plan for our customers."
Fox's confidence is borne of Alltel's success in leveraging its underdog status. With 13 million subscribers, Alltel is a hybrid: Its footprint largely encompasses rural and midsize markets, but it also serves cities such as Tampa, Phoenix, Cleveland and Charlotte.
The company has stayed competitive in bigger markets by having innovative calling plans, offbeat advertising that pokes fun at its larger rivals and attentive service that taps deep consumer frustrations with wireless carriers.
Alltel said last week it notched record customer growth in the first quarter. Its churn, customers who quit the service, was 1.8%, behind just Verizon and AT&T. Analysts say tougher terrain lies ahead. Alltel continues to lag behind the major carriers, growing subscribers the past year at about 9% vs. more than 10% for AT&T and Verizon.
