Verizon-Alltel Merger Nearly Done, U.S. Cellular Next?

The sixth largest cell phone provider has 6.2 million subscribers and uses the same CDMA infrastructure utilized by Verizon and Alltel, making an acquisition relatively easy.

W. David Gardner, Contributor

November 19, 2008

2 Min Read

The Federal Communications Commission this week removed the last hurdle in the path of Verizon Wireless' acquisition of Alltel, raising the possibility that U.S. Cellular may become the next juicy acquisition target.

The FCC has marked five more small markets for divestiture, with U.S. Cellular being one of the last standing major wireless providers in the country.

In adding to its earlier approval of the Verizon-Alltel deal, the FCC told Verizon that it will have 120 days after the deal is closed to divest itself of a total of 105 markets. The divestiture list has gradually grown from the 85 markets Verizon originally suggested to the 105-market final figure, but still far short of the 218 markets that originally had been marked for divestiture consideration.

That leaves U.S. Cellular, the sixth largest cell phone service provider, as the last major provider standing. It has 6.2 million subscribers and it uses the same CDMA infrastructure utilized by Verizon and Alltel, making an acquisition relatively easy. When Verizon and Alltel are merged, their combined assets will make the company the largest cell phone provider in the United States. A total of 45% of Verizon Wireless is owned by Vodafone Group, with Verizon Communications owning the remaining 55% stake. AT&T is currently No. 1 in subscribers, and its GSM-based infrastructure would likely make an acquisition of U.S. Cellular too expensive.

While various investment banking analysts and interests have suggested U.S. Cellular would make a sensible acquisition for Verizon, the Carlson Family, which controls U.S. Cellular through its investment in Telephone and Data Systems hasn't shown any interest in selling out.

Fitch Ratings has suggested that U.S. Cellular would be a likely candidate to pick up much of the wireless business that will be up for grabs in the 105 markets earmarked for divestiture.

The new markets slated by the FCC for divestiture are Lyon, Iowa; Muskegon, Manistee, and Newaygo, Mich.; and Johnson, Tenn.

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