2008 Year in Review: Verizon Wireless acquires Alltel for $28.1 billion

The news: On June 5, Verizon announced that it would acquire Alltel [1] for $28.1 billion.

The deal sent ripples through the wireless world because it meant Verizon would pass AT&T Mobility as the nation's No. 1 carrier and would pick up coverage in 57 markets that it did not operate in. It also made sense in a number of ways--Alltel had been a roaming partner with Verizon for years, and both used CDMA technology and Qualcomm's BREW platform for content delivery.

By early October, despite concerns about Alltel's debt, the deal seemed to be on track [2]. Then, a coalition of rural wireless carriers, led by Leap Wireless, petitioned the FCC to deny the deal [3], saying it would reduce competition. A group of public interest groups, under the auspices of the Public Interest Spectrum Trust, urged the FCC to consider rules that would prevent the newly merged company from violating open access rules [4] that apply to wireline ISPs.

The U.S. Department of Justice approved the deal [5] as long as Verizon divested 100 markets in 22 states where the two carriers overlapped. On Nov. 4, after a marathon open meeting, the FCC approved the deal [6], creating a new company with 83.8 million subscribers. The FCC required that Verizon divest from five additional markets, and though some commissioners said they worried about reduced competition, the deal was sealed.    

Why it was significant: Consolidation in the wireless industry had been happening for some time, with Tier 1 carriers gobbling up smaller operators. But Verizon Wireless' decision to acquire carrier Alltel and, in turn, become the largest carrier in the United States, put a whole new spin on the concept of what a wireless behemoth could be. The deal changes the national wireless map and raises questions about how the other major carriers would respond. Would they have to push for acquisitions to keep up? AT&T certainly thought so, as it sought to acquire Centennial [7] in the wake of the deal. It also raises the question of competition. With Sprint bleeding subscribers and T-Mobile USA's footprint not as extensive as its rivals, is the wireless business about to become a two-player game?