Alltel Corp. (NYSE: %%AT%%) is courting buyers, and not just Verizon Wireless according to a story Monday in the Wall Street Journal (available here to Wall Street Journal subscribers).
Citing sources "familiar with the matter," the article said Alltel has made overtures in the past few weeks to AT&T and that "the San Antonio-based telecom giant has been willing to entertain the possibility."
The story also said that Verizon, long-considered the most likely buyer, has circled, as well as various private equity firms, but that interest has been "lukewarm."
Alltel spokesman Andy Moreau declined to comment.
Shares of Alltel were trading at $59.88 on Monday after closing at $59.90 on Friday.
Verizon A Good Fit
Donna Jaegers, an analyst at Janco Partners, said "you don't get top dollar for your property if there is only one person at the auction," which is probably why Alltel wants to let Verizon know it has options.
"The point of the leaks is to make sure that other bidders know that there are more people around the table. Part of that leak ... might have been a message to Verizon to say, 'Hey, if you're not interested, we can talk to AT&T, and they might be interested," Jaegers said.
Verizon is considered a good fit for Alltel because both carriers' networks operate on the same CDMA technology.
Cingular Wireless, which recently merged with AT&T, operates its network on GSM technology, which could present hurdles to integration.
But Jaegers pointed out that Alltel is already in the process of deploying a GSM overlay across the most-populated parts of its network. Alltel began the overlay soon after its purchase of Western Wireless.
"If AT&T bought Alltel, they could just expand that strategy and just do a GSM overlay network for all of Alltel and put their new customers on that and just gradually shift people over to GSM," Jaegers said.
Why Sell; Why Now?
Jaegers said there are two timely factors driving Alltel's rush to sell itself.
"First of all, you have a very pro-business antitrust department right now under the Bush administration, so you could probably get this through," she said. "Whereas, if you wait for the next administration, if it is Democratic, then you are going to run into a lot more hurdles."
The second, also mentioned in the WSJ article, is the imminent 700 megahertz auction that, though not yet scheduled by the Federal Communications Commission, is expected to take place in this fall.
"Whoever buys 700 megahertz spectrum overlapping Alltel is going to have one less reason to buy Alltel because then they could over build Alltel with more efficient spectrum," Jaegers said.
If Alltel doesn't succeed in selling itself before the auction, Jaegers said, then it would likely have to invest billions in bidding 700 megahertz spectrum.
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