AT&T will buy a large portion of the assets rival Verizon Wireless was required to divest from as a condition of its acquisition of Alltel for $2.35 billion, the company announced late Friday. AT&T also said it was selling certain Centennial Communications assets to Verizon for $240 million.
The deal between the nation's two largest wireless carriers will give AT&T 1.5 million new subscribers in 79 service areas spread across 18 states. Verizon was required to divest from 105 markets as a condition of its $28.1 billion acquisition of Alltel, which closed in early January.
The former Alltel subscribers had used CDMA technology, and will have to be converted to AT&T's GSM-based network. AT&T said that the conversion will take no longer than a year from when the deal closes, and will result in an additional planned capital investment of around $400 million over 2009 and 2010.
Additionally, Verizon will get around 120,000 subscribers in five service areas in Louisiana and Mississippi when the deal to acquire Centennial closes. AT&T bought Centennial for $944 million last November. Both deals require regulatory approval and are expected to close in the fourth quarter of 2009.
AT&T took care not to buy assets in territory where it would have too much market share and clout, and thereby attract the attention of antitrust regulators, according to a report in the Wall Street Journal. The Obama administration has recently signalled that it would be strengthening antitrust regulations in an effort to curb companies form using their dominance in a market to block smaller rivals from getting increased market share.
Verizon will likely have to divest more assets later if the deal goes through. Last month, Verizon had sought a 60-day extension from the FCC to sell the divested assets. An FCC spokesman confirmed to FierceWireless that Verizon had received that extension, until July 8. The previous deadline had been May 9.
It was first reported by the Journal in February that AT&T was bidding on the assets. At the time, the possibility that AT&T could pick up the divested subscribers rankled consumer advocates, who argued that such a move would not be in the interest of customers. Since then, it has been reported that private equity groups including the Blackstone Group, Kohlberg Kravis & Roberts & Co., and the Carlyle Group made bids for the assets.
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