U.S. telecom giant AT&T Inc. (T - Analyst Report) announced that it has closed the acquisition of Alltel’s wireless operations from Atlantic Tele-Networks Inc. (ATNI - Snapshot Report) for $780 million. The deal – announced in Jan 2013 – was completed after the Federal Communication Commission (FCC) gave its nod.
The acquisition gives the telecom behemoth spectrum licenses, retail stores and network assets of Alltel. Additionally, AT&T gained Alltel’s 585,000 subscribers spread across six states, particularly in the South and Midwest U.S.
Moreover, just a couple of months ago, AT&T has decided to acquire the largest prepaid wireless operator in the U.S. – Leap Wireless International Inc. – for $1.2 billion. This deal is currently awaiting regulatory approval. These acquisitions indicate the companies attempt to grow inorganically.
Dallas-based AT&T will immediately start upgrading Alltel’s network to 4G LTE (Long Term Evolution) and plans to shift customers of the latter within its network by mid-2014. Following the network transition, Alltel will be rebranded as AT&T.
However, before the network shift, Alltel’s post-paid customers will get the option to select a free phone, which will be provided by AT&T. Alltel customers selecting a free phone can select from AT&T’s current tariff plans, including shared data plans. Meanwhile Alltel’s prepaid customers will receive special offers post the transition into AT&T.
Notably, Alltel used to operate in 34 U.S. states before it was bought by Verizon Wireless for $28.1 billion in Jan 2009, making it the largest wireless carrier in the U.S. However, in 2010, Verizon sold its business in six states to Atlantic Tele-Networks for around $200 million.
We believe the deal is extremely fruitful for Alltel customers, who will not only gain from AT&T’s expanded network but will also get access to the fastest and most reliable networks within the U.S. AT&T is currently continuing with its 4G LTE network expansion and is now available in almost 400 markets, coming second to archrival Verizon Communications Inc. (VZ - Analyst Report).
On the same note, the transaction will be accretive to AT&T as it will allow the company to improve mobile Internet services in rural areas thus enhancing its performance in these areas. Most importantly, the acquisition will help the company to procure the much needed spectrum, demand for which has increased due to higher proliferation of smartphones and tablets.
AT&T carries a Zacks Rank #3 (Hold).