Vodafone sees American horizons

Sarin makes one last lunge

Posted in Mobile, 5th June 2008 10:00 GMT

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Verizon, the US mobile operator part-owned by Vodafone, is in talks to take over Alltel, America's fifth largest operator, with a view to snatching the number-one spot from AT&T.

The story was broken by the Wall Street Journal, and Vodafone has confirmed that negotiations are taking place. Verizon apparently values Alltel at $27bn, or just over $2000 per customer, but more interesting is the network itself as Alltel has possibly the most extensive rural network in the US.

Both companies use CDMA technology, and already have roaming agreements, but Alltel also has a lot of debt, and taking on that debt would likely be a big part of any purchase price.

Verizon and Alltel networks do overlap in coverage, and service centres, so they could be synergised out to a cost saving of about a $1bn a year.

Combining the companies would create a customer base of 80.4 million, compared to AT&T's 71.4 million. It has been suggested that AT&T might make a counter-bid for Alltel, but that would attract a lot of regulator scrutiny: even the Verizon deal will need to be approved by the US Department of Justice and the Federal Communications Commission.

It will also create a company in which Vodafone has a significant interest, but not a controlling share or consolidated branding. In general the company has moved out of such deals in the last few years, but getting a US presence has been considered worth it.

If the deal goes through it will provide a suitable high point for Sarin, the Vodafone CEO who will be stepping down in a couple of months. ®

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