Acquisitions - Verizon Wireless

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One approach to help you with an assignment like this one is to address each question, which you can draw on for your final copy, which needs to be in APA format. This is the approach this response takes. I attached an excellent APA resources.

RESPONSE:

1. What is the reason for acquisition that was used as the logic by your firm in justifying the acquisition? Explain your answer and support it with reasons.

A. Verizon Wireless Acquisition of Alltel

The upheaval in U.S. financial markets is squeezing wireless companies, particularly those eager to sell off major assets like Alltel (NYSE: AT) (http://www.informationweek.com/news/telecom/business/showArticle.jhtml?articleID=211100163). Verizon Communications announced it would buy Alltel for about $28.1 billion, including the assumption of debt, reports The New York Times. It will pay $5.9 billion for the equity of Alltel and assume $22.2 billion in debt. The deal was closed in January, 2009 (http://www.itbusinessedge.com/topics/reader.aspx?oss=42766).

Rationale: This deal would make Verizon the largest wireless operator in the US market. The combined entity would have about 78 million subscribers. Verizon had initially aimed to complete the deal before the end of last year. But it was delayed due to the regulatory review which took a bit longer. The company is paying $5.9 billion for Alltel's privately held equity.
Verizon's rationale was to improve the customer's experience through adding to the customer base. It was also about increasing its market share in the industry. In fact, if consummated, the Verizon takeover of Alltel would remake Verizon Wireless as the nation's largest cell phone service provider. AT&T is currently the largest (http://www.informationweek.com/news/telecom/business/showArticle.jhtml?articleID=211100163).

For example, in a press release, it reports that No. 2 mobile service provider Verizon Wireless has 67 million customers to Alltel's 13 million. The combination will put Verizon ahead of AT&T, which as 71.4 million customers, according to Agence France Presse (see http://afp.google.com/article/ALeqM5gUbVygZXVv8RmjUgB9XxHMoFDHxw). It also will expand Verizon's coverage areas in the Midwest and the South. For example, Vodafone owns 45 percent of Verizon Wireless and Verizon Communications own 55 percent. Stock prices for both companies were down Thursday morning. According to Forbes, Vodafone is worried about dwindling dividends -- in fact, it hasn't seen once since 2005. And the re-leveraging required to buy Alltel could make chances of a dividend for Vodafone even more remote. The deal, along with one in which France Telecom could acquire Swedish and Finnish fixed-line network operator TeliaSonera, has observers predicting a new wave of ever-larger telecom deals, according to a Dow Jones story on CNNMoney.com. Bloomberg, however, reports that TeliaSonera has ...