AT&T Takes Over Verizon Wireless Subs in 79 Areas

By Tara Seals

When rivals swap stuff: AT&T Inc. plans to acquire 1.5 million current subscribers in 79 service areas from Verizon Wireless, along with network assets, for $2.35 billion in cash.

The divestiture is part of the regulatory approvals granted for Verizon’s purchase of Alltel earlier this year. AT&T will acquire licenses, network assets and subscriber accounts, primarily in rural areas across 18 states. Network conversion from Verizon’s CDMA network to AT&T’s GSM technology and transition of the operations to AT&T is expected to take no longer than 12 months from the date the transaction closes in the fourth quarter, AT&T said.

The transaction primarily represents former Alltel assets, but it also includes assets from Verizon Wireless and the former Rural Cellular Corporation. The states represented are: Alabama, Arizona, California, Colorado, Iowa, Kansas, Michigan, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Tennessee, Utah, Virginia and Wyoming.

“Wireless continues to be AT&T’s greatest growth driver, and this transaction will complement our existing network coverage, particularly in rural areas,” said Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets. “The acquisition will add network assets, distribution channels and 850 MHz spectrum in a significant portion of the U.S., enabling even better coverage for AT&T’s subscribers in those areas.

AT&T does expect integration costs for network conversion, amortization of intangible assets and subscriber migration to result in dilution to EPS of approximately $0.06 per share in the first year after closing and to improve thereafter.

The transition will result in an additional planned capital investment of approximately $400 million over 2009 and 2010, the LEC said.