AT&T Cleared To Buy Centennial

The U.S. Justice Department has approved AT&T's purchase of Centennial Communications, and the deal will add about 1.1 million users to AT&T's subscriber base.

The $944 million deal will mean AT&T's subscriber base will exceed 80 million subscribers, but it still trails Verizon Wireless. Centennial also has large holdings of spectrum in the Midwestern and Southeastern United States, which should boost AT&T's coverage and footprint. Centennial also is a licensee of the 850-MHz spectrum, which AT&T is using to improve its 3G coverage in major metropolitan areas.

The second-largest U.S. mobile operator will have to divest assets in southwestern Mississippi and central Louisiana because of competitive issues, and AT&T said it will sell some of these assets to Verizon. Asset deals among rivals are relatively common in mobile mergers, as Verizon recently sold assets to AT&T in order to complete its acquisition of Alltel.

"This loss of competition likely would result in higher prices, lower quality service, and fewer choices of mobile wireless telecommunications services providers for consumers residing in these areas," the Justice Department said in a statement.

Over 80% of the U.S. market has a cellular phone, and this makes organic subscriber growth tough for the mobile operators. This means carriers are looking at poaching away rivals' subscribers as well as acquisitions for continued growth.

The most likely next mobile acquisition target is U.S. Cellular, which has more than 6 million subscribers. The sixth-largest U.S. cell phone provider is also reportedly facing pressure to sell, and its CDMA network infrastructure could make it an attractive target for Verizon or Sprint Nextel.

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