Under the terms of the agreement, Verizon Wireless will acquire the equity of Alltel for approximately $5.9 billion. Based on Alltel’s projected net debt at closing of $22.2 billion, the aggregate value of the transaction is $28.1 billion.
Verizon Wireless expects to realise synergies with a net present value, after integration costs, of more than $9 billion driven by reduced capital and operating expense savings. Synergies are expected to generate incremental cost savings of $1 billion in the second year after closing.
Why is Verizon (VZ) buying Alltel? In part to save some money it pays when its subscribers roam onto Alltel’s large network. Also, it’s a pretty good deal: TPG and Goldman took Alltel private for $27.5 billion last year, and it’s still growing nicely.
But mostly for its 13 million subscribers and wireless spectrum holdings: With more than 80 million subscribers, the new Verizon Wireless becomes the biggest U.S. carrier, leapfrogging archrival AT&T (T).
Which begs the question: Is No. 3 carrier Sprint Nextel (S) cheap? Sure, it has plenty of problems, like a shrinking customer base and no clear future for its Nextel walkie-talkie system. But its $46 billion enterprise value is just twice what Verizon is paying for Alltel, and it has 54 million subscribers — more than four times Alltel’s base.