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Content Tagged with vodafone + Verizon
Updated: Confirmed: Verizon Wants Alltel
A statement released today by Vodafone has confirmed that Verizon Wireless is in advanced talks to buy Alltel for about $27 billion. Vodafone and Verizon jointly own Verizon Wireless.
Update: The deal has been confirmed: $28.1 billion — of which $5.9 billion will be for Alltel’s equity and the rest for Alltel’s projected net debt of $22.2 billion. The deal will be concluded by the end of 2008. Ivan Seidenberg, Verizon’s chairman and CEO, was quoted as saying:
“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.”
AllTel went private in the fall of 2007, when private equity investors TPG and Goldman Sachs bought the company for $27.5 billion. The rumors of Verizon and Alltel merging have done the rounds for a while. Some notable things about this deal:
If concluded, it would makeThis makes Verizon the largest mobile company in the U.S., with about 80 million subscribers.- Stifel Nicolaus Telecom Equity Research’s Christopher C. King estimates that the annual cost savings between the two companies will be around $1 billion, with a majority coming from the elimination of roaming charges.
- In comparison with AT&T ($51.10) and Verizon ($52.40), Alltel has an ARPU of $53.64 a month.
- Analysts believe that Verizon can afford the deal, despite having to spend a lot of money on buying the 700 MHz spectrum. Vodafone’s two-line statement doesn’t indicate if Vodafone, which owns 45 percent of Verizon Wireless, will kick in something.
- The deal is part of a wave of consolidation being brought on by a slowing wireless market. UBS Research estimates that wireless subscriber growth in the U.S. decelerated to 8.6 percent in the first quarter of 2008 from 9.2 percent in the fourth quarter of 2007. Wireless penetration is over 84 percent. Wireless has been a big driver of earnings for the likes of Verizon and AT&T.
- Verizon would have to divest about 20 percent to 30 percent of Alltel’s points of presence in order to get the regulatory go-ahead. UBS Research thinks AT&T and T-Mobile might be interested.
- This deal doubles Verizon’s debt to about $42 billion
Ericsson Expects Mass LTE Deployment in 2012
Just when the average consumer was learning to take advantage of the 3G network (while perhaps noticing the limits of the 2.5G Edge network on the iPhone), it’s time to prep for 4G. Verizon and Vodafone are already testing 4G equipment that relies on the Long-Term Evolution standard.
Arun Bhikshesvaran, VP of business strategy and CTO for Ericsson North America, said the equipment maker has launched a trial of its LTE baseband equipment with an unnamed carrier. He expects it will be completed toward the end of the year.
He expects 2008 and 2009 to be the trial and test years for the standard and anticipates 2012 will see widespread deployment. Bhikshesvaran further expects the U.S. and Japanese markets to lead the way, with Europe to follow. Although China Mobile announced an LTE test at Mobile World Congress last week, Bhikshesvaran is uncertain if the Chinese market will skip 3G deployment entirely. India chose not to.
The staggered generations of network will only help Ericsson, which faces a smaller end-user market in the U.S. thanks to carrier consolidation and new competitors from the Chinese. The company’s finances have suffered while waiting for the injection of capital spending that a network upgrade cycle brings, although Bhikshesvaran downplayed the affects of stagnant U.S. growth on the company. “We’ve sold more GSM base stations in the last year than we did in the first three,” he noted.
When it comes to competition, Bhikshesvaran said Ericsson has an advantage from having already spent a lot of time and effort working with the standards boards, but acknowledges that formidable competitors could arise in China.
“We can’t underestimate the skill of the Chinese vendors, and to use the American car industry as an example, we could see something like a Toyota or a Honda arise,” Bhikshesvaran said. “The challenge is how do we want to play in that market? We aren’t sure if we want to be a BMW or a Mercedes-Benz, but not something like Chrysler.”
Bhikshesvaran didn’t give details about how Ericsson would avoid the fate besetting American auto companies, but he said the company would be prudent in the Chinese market. As for the rest of the competition, Bhikshesvaran expects Ericsson’s global customer base to offset a slowdown of 3G equipment sales in many markets and the lag between testing and the sale of 4G equipment.
In addition to the network transitions, Bhikshesvaran is pushing for more data traffic on the cellular network — from navigation devices to multimedia downloads — to drive revenue in saturated markets such as the U.S. However, driving more traffic to data networks might require the carriers to give a little on price, as well as to offer compelling services and content on a mobile handset. I’m not sure that by 2012 they’ll have it right.
