Verizon flirts with Alltel buy

In a move that would create the largest wireless carrier in the country, Verizon Communications Inc. is in discussions to buy wireless provider Alltel Corp., according to two people familiar with the talks.

If the deal goes through, an acquisition would be the biggest telecom deal since AT&T Inc. bought BellSouth Corp. at the end of 2006. Adding Alltel's 13.2 million subscribers to Verizon Wireless' 67.2 million would create a carrier far larger than AT&T Inc., which has 71.4 million customers.

The Wall Street Journal reported that the deal would be worth roughly $27 billion.

Representatives of Verizon Communications Inc. and Alltel had no comment Wednesday. If the deal is completed, the effect on consumers is unclear.

Verizon Chief Executive Officer Ivan Seidenberg has said the company is looking more to wireless as customers scrap land lines.

“All of the U.S. operators are racing to increase their exposure to wireless because it has the best growth prospects of anything in their portfolio,” Craig Moffett, an analyst with Sanford C. Bernstein & Co. in New York, told Bloomberg News.

Shares of Verizon Communications, the controlling parent of Verizon Wireless, dipped after the report, closing down 38 cents, or 1 percent, to $36.98. Verizon Wireless' other parent is Vodafone Group PLC of Britain, with a 45 percent share of the joint venture.

Little Rock, Ark.-based Alltel – the fifth-largest wireless carrier – was a public company until it was bought out by TPG Capital and GS Capital Partners in November for $24.7 billion. It has a wide-ranging network covering parts of 35 states, mainly in the middle of the country.

When the buyout of Alltel was announced last year, some speculated that a bigger rival would eventually purchase the company because Alltel's subscribers are mainly in rural areas and it carries calls for customers of AT&T and Verizon where they lack coverage.

A deal could save Verizon Wireless more than $1 billion per year, according to analyst Christopher King at Stifel Nicolaus. Verizon Wireless now pays hundreds of millions in roaming charges every year to Alltel, he estimated.

King also remarked that Alltel's private-equity owners would likely jump at a chance to sell, since tight credit markets could make it difficult to wrest a profit from the highly leveraged company. He expects a deal would pass regulatory review, but Verizon Wireless may have to divest radio licenses in some areas.

Verizon Wireless uses the same network technology as the majority of Alltel's network. That makes Verizon Wireless a more likely acquirer than AT&T Inc., which uses an incompatible technology. Regulatory scrutiny of an AT&T deal would also be tougher, since AT&T is the largest carrier. The Associated Press and Bloomberg News contributed.