AT&T to buy Alltel for $780 million

IDG News Service - The parent company of Alltel, a mobile telephone network serving rural customers in six states, has agreed to sell the business to AT&T for about $780 million, Atlantic Tele-Network announced Tuesday.

The all-cash transaction will give Alltel customers access to a nationwide 4G mobile network, a larger selection of mobile devices and additional retail locations, said Michael Prior, Atlantic Tele-Networks CEO. Many of the company's employees will benefit from new career opportunities at the larger company, he added.

The deal will give AT&T a larger presence in some rural areas where it did not have a lot of customers, Prior said during a conference call with press and analysts.

Atlantic Tele-Network purchased Alltel from Verizon Wireless for $200 million in a deal that closed in April 2010, and Atlantic Tele-Network spent an additional $85 million to set up Alltel, Prior said.

The sale to AT&T represents a "strong return on our investment," Prior said. "It is clear this is the right time to enter into this strategic transaction."

It has become "increasingly challenging" to operate a stand-alone rural mobile network spread across six states, Prior said. Atlantic Tele-Network believes Alltel is best operated as part of a larger, national network, he said.

Atlantic Tele-Network's Alltel serves 585,000 mobile customers in Georgia, North Carolina, South Carolina, Illinois, Ohio and Idaho, while AT&T has about 106 million mobile customers across the U.S. Alltel had about $350 million in revenue in the first nine months of 2012.

The transaction is subject to approval from the U.S. Department of Justice and the U.S. Federal Communications Commission. The companies expect the deal to be final in the second half of the year.

Atlantic Tele-Network will continue to operate telecom services in the Southwest U.S., New England, rural New York and other locations after selling Alltel. Atlantic Tele-Network will use some of the money for new acquisitions, a possible reduction in debt, and investments in its existing businesses, Prior said.

"We'll put the additional capital to work wisely," Prior said. "We're not going to make acquisitions and investments just because we have the cash to do so."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.