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Thursday, June 05, 2008
Verizon Wireless Buys Alltell in $28.1B Deal
FOXBusiness
![Verizon Wireless [276]](/images/stories/verizon hq 276.jpg)
Verizon Wireless made a bid to become the nation's largest cell phone company by announcing a $28.1 billion deal to acquire regional carrier Alltell.
Verizon plans to acquire Alltell's equity for $5.9 billion and assume its $22.2 billion in debt. The two sides said they hope to have the deal completed by the end of the year.
Just seven months ago Little, Rock, Ark.-based Alltell was taken private in a leveraged buyout worth $27.5 billion by TPG Capital and a unit of Goldman Sachs (GS).
Alltell is the nation's fifth-largest wireless carrier, with more than 13.2 million subscribers and nearly $9 billion in annual revenues. It also serves 57 mostly rural markets that Verizon Wireless does not serve.
Combined with the 67.2 million customers from Verizon Wireless, the company will now have more than 80 million customers, compared to 71.4 million for rival AT&T (T).
Verizon Wireless is a joint venture between Verizon Communications (VZ) and Vodafone (VOD). Shares of Verizon Communications were up about 5% on the deal even though the stock traded lower after initial reports of a merger broke on Wednesday.
"This is a perfect fit, with Alltel's high-value post-paid customer base, its solid financials, our common network technology, and significant, readily attainable synergies," said Verizon CEO Ivan Seidenberg in a press release.
The deal still faces regulatory approval from both the Federal Communications Commission and the Department of Justice. To receive the green light from the government Verizon may be forced to divest itself of assets in regions where its coverage overlaps that of Alltell's, The Wall Street Journal reported.
Verizon said is sees synergies of $9 billion after integration costs are removed.
The Alltell deal comes just a few months after Verizon Wireless made a $9 billion investment in a radio spectrum at a FCC auction.
Also on Thursday, France Telecom SA (FTE) made an unsolicited offer to buy Sweden-based TeliaSoneraAB (TLSNF) for $42 billion. However, TeliaSonera rebuffed the bid quickly, saying the offer was too low. A deal between the two companies would create the world's fourth-largest telecom.
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Some mutual funds want you to pay for the privilege of them (or your investment adviser) taking your money to invest. It's called a load, and it works like a cover charge to get into a nightclub. Luckily, there are such things as no-load funds. As the name implies, shares of these funds are sold without a fee paid to a broker or investment advisor.
The entire amount you invest in no-load funds goes to work for your returns. On the other hand, with load funds, right off the bat you're charged commission (not to mention other fees incurred over the life of the investment). Let's say, for example, you invest $25,000 into a load fund that charges a 5% commission. This costs you $1,250 off the top, bringing your actual investment down to only $23,750.
The often-cited horse race analogy argues against investing in load funds. Here's the logic behind it: Would you place a bet on a horse that had to start a race 200 yards behind the others? Well, maybe you would if you got a tip from a sketchy, trench coat-clad man in a dark alley. However, under most circumstances, it's not smart to put your money on that handicapped horse.
But some argue that at times that man in the trench coat (aka your broker) knows more about the horses than you do, and has a better shot at picking a winner. Also, sometimes these fees are unavoidable because some funds are available only through investment advisers.
Cost-benefit analysis can help determine when a load fund is worth it (in other words, when it will score you a load) and when it is better to "do it yourself" and avoid the fees. Load-fund fees range depending on share class and can cover a variety of costs, such as paper work and fund management.
