Industry Consolidation Continues: Verizon Wireless to Acquire Alltel

| Jun 9, 2008 | U.S. Wireless Services | Competitive Intelligence Repprt

| Analyst: Bill Ho

Current Perspective: Positive
Vendor Importance: High
Market Impact: Very High

Event Summary

June 5, 2008 – Verizon Wireless moves to acquire Alltel for a transaction total of $28.1 billion of which $22.2 billion will be assuming Alltel’s debt. Once merged Verizon Wireless will number about 80 million subscribers and have a network operating footprint of 290 million POPs covered. The transaction is projected to close at the end of 2008 subject to regulatory proposals.

Analytical Summary

• Current Perspective: Positive on Verizon Wireless’ move to acquire Alltel, because it will become the largest U.S. wireless carrier with 80 million subscribers and a truly national footprint covering 290 million POPs, which will include more rural regions and smaller metros than it had before. As the largest carrier it will not only enjoy bragging rights compared to competitors, but will be able to take advantage of economies of scale, $9 billion in long term cost reductions/synergies and the largest mobile to mobile calling community.

• Vendor Importance: High to Verizon Wireless, because acquiring Alltel is a complementary fit in terms of similar CDMA network technology, postpaid focus and to some extent non-overlapping footprint. As the industry continues to consolidate, this acquisition appears to provide the best fit possible among the remaining players; the two companies already are roaming partners, use the same BREW platform and Alltel had already done a lot of back-end integration due to its own acquisition of Western Wireless so the merger may be less painful than others have been.

• Market Impact: Very high on the wireless services segment, because if and when the acquisition is approved, Verizon Wireless will be the largest U.S. carrier, usurping AT&T and regaining the place it had as number one before Cingular acquired AT&T Wireless. The biggest question may be the disposition of the roaming agreements that Alltel has forged with nearly all carriers. Clearly all CDMA roaming partners want to keep these agreements protected and intact. GSM carriers will want the regulators to either force Verizon Wireless to continue GSM operation or divest those assets (infrastructure and the valuable spectrum) to the GSM operators.

Recommended Competitor Actions

• All carriers that use Alltel for roaming including AT&T, Sprint and T-Mobile should start lobbying regulatory bodies to have those Alltel markets that they roam in to have the spectrum and infrastructure assets divested and transferred to them under the banner of keeping a level competitive playing field.

• U.S. Cellular should be looking to a consolidation strategy with other carriers to keep larger national carriers at bay. Though the carrier will move up to be the nation’s fifth largest carrier, there is a considerable gap between number four T-Mobile at >25M subscribers and U.S. Cellular’s 6M+.

• MetroPCS and Leap should consummate their long awaited union in 2008. As a single entity, the two regional unlimited carriers create scale and a better competitive position against national carriers in light of a very large Verizon Wireless on the horizon.

• Sprint should get assurances from Alltel that it is indeed building out Rev. A markets per the 2006 roaming agreement that included 3G roaming in addition to voice and that a Verizon Wireless merger will not put this key reciprocal arrangement in jeopardy.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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