AT&T To Buy Rural Wireless Provider For $2.8 Billion - InformationWeek
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AT&T To Buy Rural Wireless Provider For $2.8 Billion

Dobson, based in Oklahoma City, markets its wireless service under the Cellular One brand.

AT&T on Friday said it planned to buy wireless operator Dobson Communications for $2.8 billion in cash, expanding AT&T's network into rural and suburban areas in 17 states.

Under the agreement, AT&T would pay $13 a share, a nearly 17% premium over the stock's closing price, the company said on Thursday. Including net debt as of the first quarter, the total transaction value is $5.1 billion. The agreement has been approved by Dobson's majority stockholders, but needs regulatory approval. AT&T expected to close the deal by the end of the year.

Dobson, based in Oklahoma City, markets its wireless service under the Cellular One brand. The company provides roaming service to AT&T in most of its coverage area, which comprises 17 states. Dobson has 1.7 million subscribers in a coverage area with 13 million consumers.

AT&T said the areas in which their networks overlap is "limited," and booth companies use the same GSM/Edge technologies, which makes their networks complementary.

The agreement follows last month's purchase of Alltel Corp., a larger rural carrier. A pair of private equity firms bought the company for $26.3 billion.

Randall L. Stephenson, chairman and chief executive of AT&T, said in a statement the rural wireless market was attractive as an area for growth. "Our wireless business is a significant and growing revenue generator and is critical to our future," Stephenson said. "This combination brings two key assets -- Dobson's 1.7 million customers and its strong, compatible network -- to AT&T, delivering both growth and cost savings opportunities."

By acquiring Dobson, AT&T said it expected a significant reduction in annual roaming expenses, and numerous "synergy opportunities" in overhead, operations and other areas. As a result, AT&T expected the net value of these benefits to be $2.5 billion.

Dobson's network covers rural and suburban areas in Alaska, Arizona, Illinois, Kansas, Kentucky, Maryland, Michigan, Minnesota, Missouri, New York, Ohio, Oklahoma, Pennsylvania, Texas, Virginia, West Virginia and Wisconsin. Dobson's 850 MHz spectrum is expected to enhance AT&T's service quality in those markets.

The announcement came on the same day AT&T joined Apple in the nationwide launch of the highly anticipated iPhone, the combination mobile phone and multimedia player designed by Apple. AT&T is the exclusive carrier for the iPhone in the United States.

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