Verizon in late stages of talks to buy Alltel for $28B

Verizon vzis in advanced talks to buy Alltel, the USA's No. 5 wireless carrier, for about $28 billion, according to a person with direct knowledge of the situation.

Such a transaction, if completed, would leave Verizon Wireless with more than 80 million customers, easily eclipsing AT&T to take the No. 1 spot. AT&T has around 71 million subscribers. No. 2 Verizon has 67 million; Alltel has 13 million, many of them in small, rural markets.

Discussions were expected to continue well into Wednesday night, said the source, who declined to be cited by name or affiliation because the proposed transaction is still being negotiated.

Verizon Wireless spokesman Jim Gerace declined to comment. Alltel spokesman Andrew Moreau, via an e-mail sent to USA TODAY, also declined to comment.

Founded in Little Rock in 1943, Alltel today is a $9 billion wireless company with customers in 34 states. Its customer service is considered top-notch, putting it on par with Verizon Wireless, which also ranks high consistently for its customer service.

The two companies also share a common technology: CDMA. AT&T's wireless services are built around the more common GSM standard that is used by 85% of the global wireless users.

A Verizon-Alltel merger would have little impact on consumers, says Jane Zweig, CEO of The Shosteck Group, which tracks the wireless market.

"It's just going to make Verizon a little bigger," she says. Still, such a deal would give Verizon a bigger presence in smaller markets across the USA.

Alltel "has a very good network," Zweig says, enabling it to offer an array of advanced-technology wireless services, including mobile Web access.

Chasing the mobile Web has become a blood sport among the big carriers. As Web-enabled devices such as AT&T's Apple iPhone continue to grow in popularity, so, too, does pressure from consumers for better and faster Web access.

Verizon recently agreed to pay almost $10 billion to acquire a coveted cache of 700-megahertz wireless licenses, formerly owned by TV operators, that can enable superfast mobile data services. AT&T paid more than $6 billion.

Sprint, the No. 3 wireless carrier, has teamed with Clearwire and wireless visionary Craig McCaw to build an advanced wireless data network across the USA. The network is based on WiMax technology, a direct competitor of the next-generation wireless technology favored by Verizon.

Alltel, a merger machine for more than a dozen years, was acquired in November by TPG Capital and GS Capital Partners of Goldman Sachs for $27.5 billion. The purchase price represented a 23% premium over Alltel's then-trading price of $71.50 a share.

Alltel, no longer traded publicly, is a well-run company with a reputation for innovation, Zweig says. "It's one of those sleepers that people never paid much attention to." Now they presumably will, she says.